Legislature(2017 - 2018)SENATE FINANCE 532
02/23/2017 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Alaska's Reinsurance Program, Implementation of Hb 374 (2016) - Department of Commerce, Community and Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 23, 2017
9:01 a.m.
9:01:01 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Mike Dunleavy
Senator Peter Micciche
Senator Donny Olson
Senator Natasha von Imhof
MEMBERS ABSENT
Senator Anna MacKinnon, Co-Chair
ALSO PRESENT
Chris Hladick, Commissioner, Department of Commerce,
Community, and Economic Development; Lori Wing-Heier,
Director, Division of Insurance, Department of Commerce,
Community and Economic Development.
SUMMARY
ALASKA'S REINSURANCE PROGRAM, IMPLEMENTATION OF HB 374
(2016) - DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT
Co-Chair Hoffman noted that Co-Chair MacKinnon was ill and
would not be present at the meeting.
^ALASKA'S REINSURANCE PROGRAM, IMPLEMENTATION OF HB 374
(2016) - DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT
9:01:57 AM
CHRIS HLADICK, COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT, thanked the committee
for its work on HB 374; he especially thanked Co-Chair
MacKinnon for her leadership on the issue. He explained
that the legislation authorized the reinsurance program,
and gave the Division of Insurance the authority to apply
to the federal government for a 1332 waiver.
9:03:19 AM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
discussed the presentation "Senate Finance - Update On The
Implementation Of HB 374 & Alaska's 1332 Waiver
Application" (copy on file).
Ms. Wing-Heier turned to Slide 2, "The passage of HB 374":
The 29th Legislature passed HB 374 in June of 2016.
This bill:
• created the Alaska Reinsurance Program within the
Alaska Comprehensive Health Insurance Association
(ACHIA)
• created the Alaska comprehensive health insurance
fund
• Appropriated 55 million dollars in insurance premium
tax revenue to the fund
• Authorized the Division of Insurance to apply for a
1332 waiver under the Affordable Care Act
Ms. Wing-Heier explained that HB 374 had been presented to
the legislature as a way to stabilize the market by
recreating ACHIA as a reinsurance pool, rather than a
direct high-risk pool. She said that the guaranteed issue
provision of the Affordable Care Act assured that no one
may be declined coverage due to a pre-existing provision.
She said that previously, the person had to have been
declined insurance on the individual market, and have
certain diagnostic conditions, in order to qualify. The
bill adjusted this by making ACHIA a reinsurance program,
which releasing ACHIA from being a primary insurer.
9:05:51 AM
Ms. Wing-Heier showed Slide 3, "ACHIA":
· ACHIA is a non-profit legal entity incorporated
under Title 21, Chapter 55 on January 1, 1993.
· ACHIA was created to provide Alaskans who were
denied health insurance the opportunity to purchase
coverage.
· ACHIA enrollment declined due to the Affordable
Care Act Guarantee Issue beginning on January 1,
2014.
9:06:33 AM
Senator Micciche queried the definition of "reinsurance".
Ms. Wing-Heier detailed that if an individual in the state,
in the individual market, diagnosed with conditions listed
within the regulations that follow HB 374, insurance would
be purchased from Premera - the only provider in the state.
She continued that Premera would then pay the claims and
then cede the claim to ACHIA. She said that individuals
would never be aware that they were insured under the
program; individuals in the program remained unidentified
and did not know that they were being reinsured by the
state through the program.
9:08:12 AM
Senator Micciche stated that there was a Health Insurance
Portability and Accountability Act (HIPAA) compliant agency
within the state that was dealing with secondary claims. He
asked whether this would be considered managed care.
Ms. Wing-Heier replied that regulations had been adopted
when the bill was enacted. She said that there was a grant
agreement to get the funds to ACHIA, and then there was a
contract between ACHIA (a state entity) and an
administrator. She said that the department worked
diligently to be sure that state funds were handled
carefully.
9:09:37 AM
Ms. Wing-Heier presented Slide 4, "ACHIA":
The eligibility requirements for ACHIA are:
• Alaska Residency
• Medical Eligibility
• notice of rejection from a health insurer in
past 6 months
• received restricted riders that substantially
reduce coverage
• under age 65 and covered by Medicare due to
ESRD
• diagnosis of a defined medical condition
ACHIA enrollment declined due to the Affordable Care
Act Guarantee Issue beginning on January 1, 2014.
Ms. Wing-Heier specified that HB 374 had amended these
requirements.
9:10:22 AM
Ms. Wing-Heier discussed Slide 5, " ACHIA Enrollment":
ACHIA enrollment declined due to the Affordable Care
Act Guarantee Issue beginning on January 1, 2014.
The slide also showed a table depicting enrollment numbers
for the medical portion from 2013 through 2016:
2013
Total Enrollment: 489
Comprehensive Enrollment Only: 421
2014
Total Enrollment: 211
Comprehensive Enrollment Only: 125
2015
Total Enrollment: 145
Comprehensive Enrollment Only: 66
2016
Total Enrollment: 130
Comprehensive Enrollment Only: 49
Ms. Wing-Heier explained that the reason the department
retained ACHIA at all was because the state does not have
Medicare supplement(pharmaceutical)coverage, and that the
coverage existed only through ACHIA.
9:11:48 AM
Ms. Wing-Heier spoke to Slide 6, " Necessity for Alaska
Reinsurance Program":
• The ACA required "guarantee issue" which means that
all Alaskans could purchase health insurance
regardless of health status.
• Insurers could not deny consumers coverage for a
history of or current status of such conditions as
diabetes, cancer, multiple sclerosis or cystic
fibrosis.
• Due to this change in the market, consumers who
previously did not have coverage and many in ACHIA
shifted from the high-risk pool to the individual
insurance pool.
• This shift resulted in significant increases in
costs to insurers and premiums for consumers.
9:12:01 AM
Ms. Wing-Heier moved to Slide 7, " The Alaska Reinsurance
Program":
· The Alaska Reinsurance Program is designed to remove
the highest cost individuals from Alaska's individual
health insurance market in order to reduce costs for
the remainder of the pool.
· Claims received by an insurer for one of the 33
highest cost codes are paid by the insurer, and then
sent to ACHIA to be reimbursed under the Alaska
Reinsurance Program.
Ms. Wing-Heier reiterated that the bill had been designed
to stabilize the individual market; to make a long-tern
solution that provided healthcare insurance to those that
could not get insurance through an employer or another
program. These individuals did not qualify for Medicaid
expansion. She relayed that people were currently paying
penalties, rather than enrolling, because premiums were too
high. She related that tax credits were available for
people with low to moderate income. She stressed that the
program was important for 23,000 Alaskans to purchase
healthcare insurance in the state. If Premera were to leave
the state, there was no back-up plan, and the state did not
have another insurer coming into the state to serve the
individual market.
9:13:45 AM
Senator Micciche asked whether the individuals with the
high-cost conditions were employed would be covered by
their employer instead of ACHIA.
Ms. Wing-Heirer answered in the affirmative.
Co-Chair Hoffman asked whether there had been new entries
into the pool that had come from outside the state.
Ms. Wing-Heier answered in the negative, and elaborated
that the program numbers were down by about 1,000. She
suspected the reduction might be a result of the downturn
in the economy. She added that the fear of an appeal to the
Affordable Care Act, or that enrollees might lose premium
tax credits, could have resulted in the lower numbers.
Co-Chair Hoffman asked whether the advent of lower
enrollments had resulted in lower program costs.
Ms. Wing-Heier responded that it was possible.
9:16:17 AM
Senator Micciche hypothesized that the state could hire the
high-risk individuals and cover their healthcare costs for
a fraction of the price.
Ms. Wing-Heier was not sure that the hypothetical penciled
out. She agreed that the cost of the healthcare would
transfer to another entity.
Ms. Wing-Heier displayed Slide 8, "Alaska Comprehensive
Health Insurance Fund":
• The Alaska Comprehensive Health Insurance Fund was
created within the general fund in 2016.
• Insurance premium tax dollars are deposited in the
fund.
• The Fund is invested by the Treasury division and
earnings are returned to the general fund.
• The Legislature may appropriate money from the fund
to pay for the Alaska Reinsurance Program.
• The fund is set to sunset on June 30, 2018.
Ms. Wing-Heier recapped that most insurers in the state
paid a 2.7 percent tax to the state, $55 million of which
was the basis of the HB 374 fund. The sunset date would
allow the department two years to find other ways to fund
the reinsurance program into the future.
9:18:05 AM
Ms. Wing-Heier turned to Slide 9, "Impact on Insurance
Rates":
• 55 million dollars was appropriated from the Alaska
comprehensive health insurance fund for Fiscal Year
2017.
• Premera, Alaska's sole remaining provider on the
individual market, projected over 40 percent rate
increases for 2017 plans in late spring of 2016.
• Actual rate increases were held to an average of 7.3
percent as a result of the reinsurance program being
created and funded by the legislature.
Ms. Wing-Heier relayed that Moda consumers moving to
Premera experienced higher rates.
9:19:54 AM
Ms. Wing-Heier showed Slide 10, " FY 18 Budget Request
(fiscal/calendar year)":
• Insurance policies operate on a calendar year, not a
fiscal year.
• Section 10 of the Governor's budget includes a
request that the 55 million dollars previously
appropriated for FY17 be repealed and replaced with a
multi-year appropriation to cover the full policy
year.
Ms. Wing-Heier noted that the department was requesting a
six-month grace period to close out claims from 2017.
Ms. Wing-Heier presented Slide 11, " FY 18 Budget Request
(additional appropriation)":
The Governor's budget also includes a request for an
additional multi-year appropriation to fund the Alaska
Reinsurance Program for Calendar Year 2018.
Co-Chair Hoffman inquired whether the grace period request
was in the form of legislation.
Ms. Wing-Heier specified that the request was within the
operating budget. She specified that the additional $55
million was expected to come from FY 18, to be used for
calendar year 2018.
9:21:51 AM
Vice-Chair Bishop queried the balance used in 2017.
Ms. Wing-Heier replied $55 million. She furthered that the
state had not received, or paid, a claim to date.
9:22:20 AM
Senator Dunleavy asked whether additional requests for
funds could be anticipated for the program.
Ms. Wing-Heier replied that there were slides further in
the presentation that would address the question.
Senator von Imhof requested clarification as to whether the
ask was $55 million or $110 million, total.
Ms. Wing-Heier explained the $110 million would be used for
two fiscal periods.
Senator von Imhof asked how much had been used already.
Ms. Wing-Heier reiterated that no claims had been received
from Premera and funds had not been paid out of the ACHIA
fund.
Senator von Imhof probed whether an audit had been
conducted to determine possible future payments.
Ms. Wing-Heier replied that several actuarial studies had
been conducted. She shared that because the claims had
started January 1, Premera had not processed them, or
determined whether the claims were eligibile for the
program. She added that the claims had not been submitted
to the fund for reimbursement. At this point the $55
million was being held.
9:24:31 AM
Ms. Wing-Heier discussed Slide 12, "Patient Protection and
Affordable Care Act":
Section 1332 provides that:
"a State may apply to the Secretary for the waiver of
all or any requirements described in paragraph (2)
with respect to health insurance coverage within that
State beginning on or after January 1, 2017. Such
application shall-
(A) be filed at such time and in such manner as the
Secretary may require;
(B) contain such information as the Secretary may
require, including -
i. a comprehensive description of the State
legislation and program to implement a plan
meeting the requirements for a waiver under this
section; and
ii. A 10-year budget plan for such plan that is
budget neutral for the Federal Government; and
(C) Provide an assurance that the State has enacted
the law described in subsection (b)(2)."
Ms. Wing-Heier noted that the second portion of the bill
allowed the state to apply for a 1332, or "innovation",
waiver. She explained that the waiver would allow the state
creativity when looking at their programs to determine
whether there was a mechanism that would deliver the
Affordable Care Act more efficiently to constituents. She
explained that only Hawaii had applied, and been approved
for the waiver, so far. She relayed that significant
premium tax credits were paid to individuals in Alaska, she
skipped ahead to Slide 18 for further discussion.
9:26:38 AM
Ms. Wing-Heier moved to Slide 18, "Oliver Wyman Actuarial
Report," which showed a data table entitled, "APTCs and
Individual Market Enrollment by Scenario and Year." She
commented that if the state had a rate increase of 7.3, as
opposed to the 42 percent projected by Premera, premiums
would be suppressed. She said that the premium tax credits,
which were based on tax premiums, were lower, and paid by
the federal government. She said that Alaskans of low to
moderate income in the individual market were not being
paid on as much because of HB 374. The modeling on the
slide suggested greater actions would be needed to increase
the affordability of coverage, the reinsurance program
would help bring some much-needed stability to the
individual health insurance market in Alaska.
Ms. Wing-Heier asserted that the department would ask the
federal government to fund the program through the waiver.
She said that the waiver was completed, and that the
federal government was supportive of the program.
9:30:30 AM
Senator Micciche referred to Slide 5, showing the total
ACHIA enrollment. He felt the program would reduce premiums
across the board.
Ms. Wing-Heier answered affirmatively, noting that not only
would premiums be reduced for high-risk individuals, but
everyone in the individual market. She stressed that rated
could not be based on a person's condition.
Senator Micciche wondered whether the actuals were high for
individuals.
Ms. Wing-Heier stated she could provide actual claim
numbers. She said that they were astounding. She warned
that there were not enough people in the program to pay the
cost through 2026.
9:32:44 AM
Senator von Imhof asked whether Premera Blue Cross would
provide data on their profit and loss numbers.
Ms. Wing-Heier answered in the affirmative. She reiterated
that only after the claims were paid would Premera receive
the $55 million.
Senator von Imhof understood that $55 million had been set
aside based on actuarial data. She thought that the request
for more money was premature.
9:34:40 AM
Vice-Chair Bishop asked whether the department had asked
for retroactivity on the $110 million when requesting the
1332 waiver.
Ms. Wing-Heier stated that because that the waiver would
not be effective until 2017, retroactivity was not an
option.
Senator Micciche discussed the five Medicaid reduction
actions being examined by the Department of Health and
Social Services. He asked how the reductions might affect
the services available to high-risk individuals.
Ms. Wing-Heier replied that some of the high-risk
individuals could have migrated to Medicaid expansion in
2017, and dropped the cost of the individual market. She
stated that when the department came before the legislature
with HB 374, in 2016, they had yet to see the impact of
Medicaid expansion. She thought that at this point in time
the expansion had proved positive for the individual
market. She related that the department had reached out to
providers to address the cost of healthcare. She contended
that the problem was complicated and had no simple
solution. She said that the department was working closely
with DHSS on the issue of healthcare.
9:38:04 AM
Senator Micciche understood that a lesser ask in 2018 could
not be expected.
Ms. Wing-Heier responded that approval of the waiver would
result in a significantly smaller ask in 2018.
9:38:37 AM
Senator Dunleavy queried the best-case scenario for funding
in three years' time.
Ms. Wing-Heier commented that the changeability of national
politics would affect the program in ways that could not be
predicted. She expressed that currently the federal
government seemed supportive of the waiver and the
reinsurance program. She furthered that current bills and
proposals to repair the Affordable Care Act supported the
program and the funding of the program, which indicated to
her that the state was going to receive the federal funding
to continue the program.
Senator Dunleavy restated his question that if the bill
were to pass, and funding were to be received, what would
the department request for funding over the next three
years.
Ms. Wing-Heier showed Slide 19, "Five Year Funding
Projection," to address Senator Dunleavy's question. She
said that the Estimated State Funding column on the far
right offered the department's projection.
Senator Dunleavy understood that the state could face an
ask of $55 million every year into the future.
9:40:52 AM
Senator Micciche wondered what was happening in other low-
population states concerning dropping high-risk pool
programs.
Ms. Wing-Heier stated that the other states had not found
solutions and were working on the problem in ways similar
to Alaska. She noted that states were waiting to see what
would happen to the Affordable Care Act on the federal
level, and with Alaska's waiver.
Senator Micciche asked whether other state's rate-payers
had a 40 percent increase, rather than a 7 percent
increase.
Ms. Wing-Heier said that she could supply the rate
increases for every state. She asserted that those
increases had been significant, and that Alaska was not the
only state down to one insurer. She assured the committee
that this was not a problem unique to Alaska.
9:42:53 AM
Senator Micciche asked whether there was a magic number at
which the overall number of people, in the overall
insurance pool, could absorb the insurance costs without
dramatic increases.
Ms. Wing-Heier stated that spreading the cost across a
small pool was difficult, but that this was the work that
presented itself to the state.
9:43:51 AM
Senator Micciche recounted that he had met with Senator
Murkowski the previous day. He had asked about whether an
adjustment factor in the Medicaid reimbursement rates for
certain states with either a low population density, or
lack of connectivity to the road system, had ever been
pursued.
Ms. Wing-Heier thought that the question could be best
answered by Department of Health and Social Services
Commissioner Valerie Davidson. She added that Commissioner
Davidson was working to assure that funding out of
Washington D.C. not be in the form of block grants, and not
be per capita, to address the rural areas of the state.
9:45:26 AM
Senator von Imhof looked at Slide 20, "Current Status":
On January 17, 2017 the Departments of Health & Human
Services and the Department of the Treasury deemed the
application "complete".
"I would note that before the Departments can approve
the waiver as proposed, legislation appropriating the
funds for the ARP, contingent upon approval of the
waiver, must be enacted in Alaska" - Secretary Burwell
Senator von Imhof interpreted the language to say that if
the state did not appropriate, per the request of the
department, the waiver application would be in jeopardy.
Ms. Wing-Heier agreed.
Ms. Wing-Heier addressed Slide 20. She said that the
language came from a letter to Governor Walker that deemed
the application complete, and asked that it be contingent
upon approval that the state provide funding for a five-
year period. She added that the department was working to
craft language acceptable to the legislature.
Co-Chair Hoffman asked when the legislature could expect
the final language.
Ms. Wing-Heier hoped that the language would be in place as
soon as possible.
9:47:19 AM
Vice-Chair Bishop expressed concern for the monthly health
insurance premiums for his constituents. He thought that
the legislation would help in terms of the bigger economic
cost to the state.
9:48:45 AM
Senator Dunleavy asked Ms. Wing-Heier whether the
department had modelled what would happen if the funding
did not come through for the program.
Ms. Wing-Heier replied that the only other option would be
for the state to set up an insurance company, which was not
a viable option. She lamented that the Affordable Care Act
did not offer the state a backup plan if Premera decided
not to cover certain areas. She opined that the state
stepping in was not the most attractive solution, but it
had been the only one available to the department upon
passage of HB 374.
Senator Dunleavy felt that the plan was not sustainable in
the long run.
9:51:22 AM
Senator von Imhof asked to return to Slide 19. She asked
whether the $55 million for FY 18 was necessary in order to
receive the waiver, or would the state need to contribute
the nearly $63 million listed in the estimated state
funding column.
Ms. Wing-Heier specified that the state needed the
contingency to support the five-year waiver. She said that
because this was estimated state funding the department
hoped that the numbers that the state paid in claims would
decrease. She stated that the department was asking for the
$55 million, but that current numbers indicated the nearly
$63 million.
Senator von Imhof understood that funding of approximately
$63 million, over five years, would be sufficient for the
department to receive the waiver.
Ms. Wing-Heier answered affirmatively.
Commissioner Hladick added that legislative language would
also be required.
Senator von Imhof asked what the legislative language might
be.
Ms. Wing-Heier pointed to the contingency language on slide
20:
On January 17, 2017 the Departments of Health & Human
Services and the Department of the Treasury deemed the
application "complete".
"I would note that before the Departments can approve
the waiver as proposed, legislation appropriating the
funds for the ARP, contingent upon approval of the
waiver, must be enacted in Alaska" - Secretary Burwell
9:55:36 AM
AT EASE
9:56:40 AM
RECONVENED
Ms. Wing-Heier moved to Slide 21, " Federal Outreach":
Briefings have been provided to:
• President Trump's transition team
• Senator Murkowski
• Senator Sullivan
• Secretary Price
• Congressman Young
The Division Director has worked to keep the federal
delegation informed of Alaska's efforts, and to garner
support.
Ms. Wing-Heier explained that the department had worked
closely with the entities listed and had received nothing
but positive support.
Co-Chair Hoffman asked whether the administration had asked
Secretary Price, or the congressional delegation, for a
grant to use the program as a demonstrative project for the
nation.
Ms. Wing-Heier thought the idea had been discussed widely,
and knew the governor was speaking to the issue with the
National Governor's Association. She said that Alaska's
process was being closely followed on the national level.
9:58:45 AM
Senator Micciche contended that the department had asked
for 43 percent more than the $62 million required over the
next five years; a $47 million-dollar difference. He
wondered whether the legislature could fund $13 million per
year, or did the department need the five-year funding
commitment.
Ms. Wing-Heier stated that the waiver was a five-year
program, and the federal government was expecting a five-
year commitment.
10:00:09 AM
Ms. Wing-Heier displayed Slide 22, "Next Steps":
• The Governor's FY18 Budget Request includes a $55
million-dollar appropriation to fund the Alaska
Reinsurance Program for Calendar Year 2018.
• DCCED is working with CMS to clarify what language
or action would be deemed responsive to Secretary
Burwell's request.
• DCCED will submit an RPL following federal approval
of the waiver.
Co-Chair Hoffman asked whether the RPL would pertain only
to the State of Alaska.
Ms. Wing-Heier answered in the affirmative.
Commissioner Hladick commented that the department was
working with the legislature through the Affordable Care
Act reforms directed by the federal government. He said a
presentation had been made in a closed-door meeting on the
federal level that had addressed issues specific to Alaska.
He said that the department would continue to work for the
federal government on behalf of the state.
Co-Chair Hoffman thought that the issue would be the topic
of future conversation.
ADJOURNMENT
10:02:33 AM
The meeting was adjourned at 10:02 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 022317 SFC HB374 - Alaska Reinsurance Program.pdf |
SFIN 2/23/2017 9:00:00 AM |