Legislature(2005 - 2006)HOUSE FINANCE 519

02/08/2005 01:30 PM House FINANCE

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01:37:09 PM Start
01:37:18 PM HB79
02:20:27 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Overview: AETNA Health Care Premium
Bills Previously Heard/Scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 8, 2005                                                                                           
                         1:37 p.m.                                                                                              
CALL TO ORDER                                                                                                                 
Co-Chair Meyer called the House Finance Committee meeting to                                                                    
order at 1:37:09 PM.                                                                                                          
MEMBERS PRESENT                                                                                                               
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Eric Croft (via teleconference)                                                                                  
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Carl Moses                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Bruce Weyhrauch                                                                                                  
ALSO PRESENT                                                                                                                  
Laura Glaiser, Director,  Division of Elections, Office of                                                                      
the   Lieutenant  Governor;   Nicole  Salinas,   Accounting                                                                     
Executive, AETNA Life Insurance Company; Mike Wiggins, AETNA                                                                    
Life Insurance Company.                                                                                                         
PRESENT VIA TELECONFERENCE                                                                                                    
Representative Eric Croft                                                                                                       
HB 79     "An Act making a supplemental appropriation for                                                                       
          increased operating costs of the division of                                                                          
        elections; and providing for an effective date."                                                                        
          HB 79 was heard and HELD in Committee for further                                                                     
OVERVIEW - AETNA HEALTH CARE PREMIUM                                                                                            
1:37:18 PM                                                                                                                    
HOUSE BILL NO. 79                                                                                                             
     "An Act making a supplemental appropriation for                                                                            
     increased operating costs of the division of elections;                                                                    
     and providing for an effective date."                                                                                      
 LAURA GLAISER, DIRECTOR, DIVISION OF  ELECTIONS, OFFICE OF                                                                     
 THE LIEUTENANT GOVERNOR, explained the  need for HB  79 by                                                                     
 highlighting examples  of  unanticipated and/or  excessive                                                                     
 costs for the 2004 election.  She provided a handout (copy                                                                     
 on file),  which  lists extra  costs  to  the Division  of                                                                     
 Elections.   Additional personal  services  costs of  $304                                                                     
 thousand were incurred due to  5 initiative petitions, one                                                                     
 recall petition ballot,  and a  record number  of absentee                                                                     
 ballot requests.                                                                                                               
 Ms. Glaiser referred to  a Superior  Court decision, which                                                                     
 mandated that the  Division reprint  ballots for  the 2004                                                                     
 election.  She pointed out that this led to an expenditure                                                                     
 of over $243 thousand for reprint costs. She explained the                                                                     
 Municipality of Anchorage (MOA) election costs of adding two                                                                   
 bond questions onto the general election ballot.                                                                               
 Vice-Chair Stoltze asked if  the MOA  election request was                                                                     
 from the school district or from the city of Anchorage.  Ms.                                                                   
 Glaiser replied that it came through the MOA.                                                                                  
 Ms. Glaiser explained the costs incurred from conducting two                                                                   
 recounts, which totaled over $39 thousand.  She related that                                                                   
 the recount total expenditures exceeded the $750 and $10,000                                                                   
 deposits required by statute.  She listed additional costs                                                                     
 to  the Division  such  as  independent counsel  expenses,                                                                     
 mainframe chargeback costs, expedited printing and freight                                                                     
 costs for forms, increased postage costs, and additional fax                                                                   
 press machine costs.                                                                                                           
 1:44:24 PM                                                                                                                   
 In response to a question from Co-Chair Meyer, Ms. Glaiser                                                                     
 related that  the  Division's net  request  is about  $585                                                                     
 Representative  Hawker  inquired  about  absentee  by-mail                                                                     
 ballots and the  high number  of unreturned ballots.   Ms.                                                                     
 Glaiser explained that one obvious cause of the problem is                                                                     
 the special advanced ballot, which is sent out in advance of                                                                   
 the official  ballot. Two  ballots are  sent  out, one  in                                                                     
 advance, but only one ballot is mailed back in and counted.                                                                    
 Another factor is that the deadline is 7 days prior to the                                                                     
 election, and, due to high numbers  this year, the ballots                                                                     
 could not be processed quickly enough to send out the second                                                                   
 ballot.  She reported that many people might have chosen to                                                                    
 vote in another manner because of this.                                                                                        
 Vice-Chair Stoltze inquired about possible trends in the use                                                                   
 of faxed ballots, such as large numbers from one location,                                                                     
or  use  by institutions.  Ms. Glaiser  replied  that many                                                                      
ballots were sent from military personnel overseas, but many                                                                    
others also  chose to fax  their ballots.   She noted that                                                                      
there were problems with the transmission in fax voting, but                                                                    
also incredible interest. Vice-Chair Stoltze asked if there                                                                     
were organizations that made heavy use of this process.  Ms.                                                                    
Glaiser replied there were not, only individuals.                                                                               
Co-Chair Meyer applauded Ms. Glaiser's hard work in spite of                                                                    
the challenges.  He requested an accounting of the  numbers                                                                     
in the  U.S Senate race recount.   Ms. Glaser replied that                                                                      
there were approximately 800  more votes: 450 for  Knowles,                                                                     
and 350 for  Murkowski.  She suggested that the  additional                                                                     
votes were found by human analysis during the second count                                                                      
when problems  were resolved.   Co-Chair  Meyer termed the                                                                      
recount accurate and good.                                                                                                      
Representative Holm thanked  Ms. Glaser for her  work.  He                                                                      
wondered what the cost of  a recount per district is.  Ms.                                                                      
Glaiser replied  that it  is set  statutorily at  $750 per                                                                      
district.   Representative Holm inquired if  the amount of                                                                      
money requested is close to  the cost.  Ms. Glaser  replied                                                                     
that the  statutes have  not been changed  since the 60's.                                                                      
There is currently a request in SB 66 for an increase in the                                                                    
recount cost  and  deposit required.   Representative Holm                                                                      
asked if the cost of a recount depends on how close the vote                                                                    
is.   Ms. Glaiser explained that it  does not apply to the                                                                      
type of recount the state  is required to pay for when the                                                                      
vote is within 1 percent.                                                                                                       
1:55:10 PM                                                                                                                    
Vice-Chair Stoltze asked if the goal of the Division is to                                                                      
make the costs match the expenses.  Ms. Glaser replied that                                                                     
there is a proposed change in legislation that would result                                                                     
in an increase and would determine what the State's burden                                                                      
in a recount would be.                                                                                                          
Representative Hawker  pointed out that  there is  a level                                                                      
where the race is  so close that the State does not charge                                                                      
the parties.  Ms. Glaser responded that the proposal would                                                                      
not change that situation at all.                                                                                               
Co-Chair Meyer noted that half of the requested money is for                                                                    
personal services.  He asked for information about overtime                                                                     
pay and exempt  status of employees.  Ms. Glaser  explained                                                                     
that overtime is both for  staff that are on board and for                                                                      
temporaries.  It is not a question of exemption, but rather                                                                     
staff  duties  that  determine  whether  overtime  can  be                                                                      
Representative   Croft   reiterated   that   the   proposed                                                                     
legislation would, in certain types of  recounts, determine                                                                     
that costs are as close to the actual expenses as possible,                                                                     
 and are the responsibility of the requester of the recount,                                                                    
 but not when the election is within 1 percent.  Ms. Glaser                                                                     
 Co-Chair Meyer closed public testimony.                                                                                        
 HB 79 was heard and HELD in Committee for further                                                                              
 2:00:52 PM.                                                                                                                  
 OVERVIEW - AETNA HEALTH CARE PREMIUM                                                                                           
The  following  overview was  taken  in  log  note  format.                                                                     
Handouts will be  on file with the  House Finance Committee                                                                     
through  the  24th  Legislative  Session.  After  the  24th                                                                     
Legislative  Session they  will  be  available through  the                                                                     
Legislative Library at 465-3808.                                                                                              
 TIME        SPEAKER         DISCUSSION                                                                                     
 2:01:36 PM NICOLE           Related the history of AETNA's                                                                   
             SALINAS,        relationship with the State of Alaska                                                              
             ACCOUNTING      since the first contract in 1982.  She                                                             
             EXECUTIVE,      explained that there must be a                                                                     
             AETNA LIFE      competitive bid every 5 years, and                                                                 
             INSURANCE       AETNA has been able to come back each                                                              
             COMPANY         time.  She noted that there are 52,000                                                             
                             retired members and 14,000 active                                                                  
 2:03:48 PM Ms. Salinas      Explained aspects of the program and                                                             
                             the types of claims paid.  She reported                                                            
                             that $225 million in medical and                                                                   
                             pharmaceutical claims was paid for                                                                 
                             retirees and $43 million was paid for                                                              
                             active members.  She pointed out that                                                              
                             1.2 million claims are processed                                                                   
                             annually.  The plan is complex and                                                                 
                             benefits are often coordinated under                                                               
                             multiple plans.  AETNA partners with                                                               
                             the Department of Administration to                                                                
                             keep communication open, seek                                                                      
                             improvement, and review performance                                                                
                             guarantees.  She explained the bi-                                                                 
                             weekly benefit calls, and participation                                                            
                             on various boards and committees.                                                                
 2:05:43 PM MIKE WIGGINS,    Clarified a common misconception                                                                 
             AETNA LIFE      regarding AETNA. He explained that when                                                            
             INSURANCE       AETNA insured the State of Alaska from                                                             
             COMPANY         1982 until 1996, it actually set                                                                   
                             premiums and bore the financial risk                                                               
                             for the coverage.  In 1996 the State                                                               
                             went out to bid on a self-funded basis                                                           
                            and it has been self-funded on medical                                                              
                            coverage since 1997.  He explained                                                                  
                            several of the roles that the State                                                                 
                            bears, such as providing monthly lists                                                              
                            of who is eligible for benefits.                                                                    
                            Unlike in 1982 to 1996, the benefits                                                                
                            are determined by the State, and the                                                                
                            Department of Administration writes the                                                             
                            benefit booklets.                                                                                 
2:07:35 PM Mr. Wiggins      Explained that the final level of                                                                 
                            appeals is borne by the State.  AETNA                                                               
                            deals with claims management, case                                                                  
                            management, provider-relations issues,                                                              
                            and data reporting when requested by                                                                
                           the State.                                                                                         
2:09:02 PM Mr. Wiggins      Related that AETNA negotiates provider                                                            
                            discounts.  He provided information                                                                 
                            about the number of AETNA employees who                                                             
                            work in Alaska.                                                                                   
2:09:49 PM Co-Chair         Asked if Alaska is saving money by                                                                
            Chenault        being self-insured.                                                                               
2:10:23 PM Mr. Wiggins      Replied that most plans this size are                                                             
                            self-funded.  He said he has seen no                                                                
                            financial analysis about this issue.                                                              
2:10:58 PM Co-Chair         Inquired about the availability of                                                                
            Chenault        information regarding membership                                                                    
                            satisfaction, polls, and tracking.  Mr.                                                             
                            Wiggins replied that a membership                                                                   
                            satisfaction mail-out has been done,                                                                
                            but not recently.  He explained a new                                                               
                            survey called "First Call First Claim",                                                             
                            which asks about customer satisfaction,                                                             
                            and is readily available to committee                                                               
2:12:11 PM Vice-Chair       Inquired who analyzes mandated coverage                                                           
            Stoltze         costs.  Mr. Wiggins replied that AETNA                                                              
                            has been asked for advice from time to                                                              
                            time about newly mandated benefits, but                                                             
                            it is ultimately the State's role.                                                                  
                            Vice-Chair Stoltze asked if AETNA would                                                             
                            take suggestions for new benefits from                                                              
                            the committee.  Mr. Wiggins replied                                                                 
                            that he is not sure because AETNA has                                                               
                            never worked with the committees                                                                    
2:13:56 PM Co-Chair         Noted that since 1999, healthcare                                                                 
            Chenault        premiums for retirees have increased                                                                
                            nearly 100 percent.  He asked if AETNA                                                              
                            has observed any trends relating to                                                                 
                            that increase.  Mr. Wiggins related                                                                 
                            that pharmacy costs have gone up.  He                                                               
                            explained the difference in                                                                         
                            pharmaceutical costs for retirees under                                                           
                             65 and over 65.  Pharmacy costs for                                                                
                             retirees are about 30 percent of                                                                   
                             overall medical costs.  He also noted                                                              
                             that the population of retirees has                                                                
                             increased by 25 percent, and most are                                                              
                             under the age of 65 and not covered by                                                             
 2:16:28 PM Co-Chair         Asked who is responsible for coverage                                                            
             Chenault        verification for retiree dependents,                                                               
                             AETNA or the State.  He suggested that                                                             
                             there has been some abuse of this                                                                  
 2:17:47 PM Mr. Wiggins      Explained that it is a State issue and                                                           
                             was caused by a difference between the                                                             
                             benefit booklet and the statute.                                                                 
 2:18:14 PM Co-Chair         Referred to an earlier statement by Mr.                                                          
             Chenault        Wiggins and clarified that genetic                                                                 
                             drugs are cheaper.  Mr. Wiggins agreed.                                                          
 2:18:36 PM Representative Requested a prediction about                                                                       
             Joule           pharmaceutical prices in the future.                                                               
                             Mr. Wiggins explained that a Medicare                                                              
                             Reform Bill was passed in 2004 at the                                                              
                             federal level, which may provide some                                                              
                             relief.  He mentioned pending,                                                                     
                             expensive drugs, which will be a factor                                                            
                             in the long term.  Representative Joule                                                            
                             suggested that there might be an                                                                   
                             increase in the cost of prescription                                                               
                             drugs now that the elections are over.                                                           
 2:20:27 PM Representative Requested numbers about self-insurance                                                             
             Croft           costs and whether there has been a cost                                                            
                             savings since 1996.                                                                              
                             The meeting was adjourned at 2:22 PM                                                             

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