Legislature(1993 - 1994)
03/23/1994 01:35 PM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE
March 23, 1994
1:35 p.m.
MEMBERS PRESENT
Senator Steve Rieger, Chairman
Senator Bert Sharp, Vice-Chairman
Senator Loren Leman
Senator Mike Miller
Senator Jim Duncan
Senator Judy Salo
MEMBERS ABSENT
Senator Johnny Ellis
COMMITTEE CALENDAR
SENATE BILL NO. 270
"An Act creating the Alaska Health Commission; relating to the
delivery, quality, access, and financing of health care; relating
to review and approval of rates and charges of health insurers;
relating to certain civil actions against health care providers and
health insurers; repealing Alaska Rule of Civil Procedure 72.1; and
providing for an effective date."
SENATE BILL NO. 284
"An Act establishing the Alaska Health Insurance Corporation and
requiring licensed health care providers to comply with certain
statutes and regulations relating to the corporation; relating to
disability insurance claims processing and to approval of rates for
disability insurance, including health insurance; and providing for
an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 270 - See Health, Education & Social Services minutes dated
2/9/94, 2/18/94, 3/2/94, 3/9/94, 3/11/94, 3/14/94 and
3/16/94.
SB 284 - See Health, Education & Social Services minutes dated
2/14/94, 2/18/94, 3/2/94, 3/9/94, 3/11/94, 3/14/94 and
3/16/94.
WITNESS REGISTER
David Walsh, Director
Division of Insurance
P.O. Box 110805
Juneau, Alaska 99811
POSITION STATEMENT: Reviewed the fiscal notes.
Joan Brown, Administrative Officer
Division of Insurance
P.O. Box 110805
Juneau, Alaska 99811
POSITION STATEMENT: Reviewed the fiscal notes.
Jay Livey, Deputy Commissioner
Department of Health and Social Services
P.O. Box 110601
Juneau, Alaska 99811-0601
POSITION STATEMENT: Reviewed the fiscal notes.
Thelma Walker, Deputy Director
Division of Insurance
P.O. Box 110805
Juneau, Alaska 99811
POSITION STATEMENT: Reviewed high risk pools and premiums.
ACTION NARRATIVE
TAPE 94-22, SIDE A
Number 005
CHAIRMAN RIEGER called the Senate Health, Education and Social
Services (HESS) Committee to order at 1:35 p.m. He introduced
SB 270 (COMPREHENSIVE HEALTH CARE) and SB 284 (COMPREHENSIVE HEALT ALT
INSURANCE ACT) as the only legislation before the committee.
DAVID WALSH, Director of the Division of Insurance, thanked
everyone working with he and his staff on the fiscal notes. He
noted the presence of staff who were available for questions. He
explained the four documents, the revised insurance portion of the
fiscal notes, before the committee. The new fiscal notes for
SB 284 regarding the Alaska Health Insurance Corporation illustrate
two different alternatives for SB 284: the in-house model and the
contract model. He pointed out that under SB 284, the contract
model is less expensive.
Number 103
Mr. Walsh compared the new fiscal note for SB 284 with the previous
fiscal note when determining that contracting effects the capital
and operating expenditures. He explained that the $500,000 capital
expenditure remains constant for the first three years due to the
assumption that the contract would cost $100,000 a year with a
$400,000 one time a year cost with every additional application.
That one time cost was included for the first three years because
of the time necessary to acquire federal waivers. He stated that
the initial cost is less due to the contractual aspect of the
fiscal note. The capital expenditure for 1998 increases
considerably because SB 284 comes into full affect that year. He
pointed out that the amount for the fiscal year 1998 assumes a
decreasing claim rate comparable to what Medicaid is currently
paying. This amount is merely an estimate for processing claims,
the numbers could increase or decrease. Both fiscal notes have
reduced staff, travel expenses, and other expenses. He said that
he was comfortable with the numbers under the contractual model of
the fiscal note for SB 284; however, the capital expenditure
increase in 1998 is highly speculative because that amount depends
upon decisions of the Corporation.
SENATOR DUNCAN asked if the asterisk noting that the capital
expenditure information was provided by DHSS for capital
expenditures was for the purpose of a main frame. DAVID WALSH did
not think so, but rather thought that the notation was related to
the added costs of processing claims referred to on page 4; the
Medicaid cost times the number of claims.
Number 187
DAVID WALSH explained that the other fiscal note for SB 284 assumes
that claims processing is done in-house by a main frame. The main
difference can be seen in the capital expenditures and its effect
on the operating positions. The initial capital expenditures under
the in-house model are more than the contract model. He explained
that both approaches were presented to allow the committee to
choose which model. He acknowledged the different fundamental
assumptions regarding implementation and service level.
CHAIRMAN RIEGER noted that the fund source for SB 270 was listed as
the General Fund (GF)/Program Receipts from the premium tax. He
asked if the Division of Insurance's or the State of Alaska's
revenue would change. DAVID WALSH stated that the premium tax is
paid regardless of the Division's status. Mr. Walsh explained that
the Division of Insurance collects general fund/program receipts,
which includes the premium tax, and fees. SB 270 would be funded
from the premium tax.
CHAIRMAN RIEGER asked if the Division's fees would change if they
have coverage of disability insurance. DAVID WALSH said that there
would be some increase in fees for the additional positions, but
only a cost recovery amount.
SENATOR DUNCAN asked why the funding source under the Division of
Insurance's portion could not be the same under both bills.
JOAN BROWN, Administrative Officer for the Division of Insurance,
pointed out that SB 270 includes specific language that references
funding through the premium tax. Such language is not present in
SB 284.
SENATOR DUNCAN stated that the specific language Ms. Brown was
referring to does not require that the legislature appropriate
premium taxes as the funding source, the language uses "may." He
expressed the need to be consistent. He noted that some
legislators believe that a premium tax does not cost anything.
DAVID WALSH clarified that a premium tax is money the legislature
already has, if the money was appropriated to another purpose the
item it currently funded would be left without. SENATOR DUNCAN
said that the money would still be general fund money, if the
premium tax money under SB 270 was not used then it could be used
elsewhere. Senator Duncan stated that both bills require general
or premium tax funding. Senator Duncan reiterated the need to be
consistent with the fiscal notes.
CHAIRMAN RIEGER asked if this does not include new fees due to the
regulation of health insurance, then an existing revenue source
would be taking away from other purposes of the general fund. He
agreed with Senator Duncan that both fiscal notes should be funded
through the general fund.
Number 286
SENATOR DUNCAN asked how the public hearing process figures were
arrived at under the contractual fiscal note for SB 284.
DAVID WALSH explained that they went through SB 284 to determine
the number of regulations that would have to be prepared and the
points in the bill referring to public involvement. From that a
chart was made that estimated a reasonable hearing time for the
regulations. He noted their assumptions: only four commissioners
would travel, the teleconference would be held at one site, and the
Legislative Information Office provided the costs.
SENATOR DUNCAN said that Mr. Nizich's fiscal note for SB 270 does
not include any teleconference costs or public involvement costs.
That fiscal note only includes $17,000 for travel costs.
JAY LIVEY, Deputy Commissioner for the Department of Health and
Social Services, referred to the March 23, 1994 fiscal note for
SB 270. He pointed out that $31,500 under Communication was for
teleconference costs. Some of the $17,000 for travel would be used
for commissioners to travel to public hearings.
SENATOR DUNCAN reiterated that under SB 270 the public involvement
process would cost $31,000, but under SB 284 that process would
cost $1 million. DAVID WALSH said that the difference could be
attributed to the lower amount of regulations in SB 270. JAY LIVEY
stated that the teleconference cost under SB 270 assumed there
would be three one hour teleconferences to all sites per month.
Number 358
CHAIRMAN RIEGER inquired of the fiscal process of "defining a range
of potential benefit packages for universal health care coverage
for Alaskans" under SB 270. JAY LIVEY noted that the fiscal note
for SB 270 lists three full-time commissioners and three full-time
research analysts. Mr. Livey envisioned the Commission assigning
a commissioner and a research analyst the task of specifying
potential benefit packages; other specific tasks could be assigned
in the same manner.
SENATOR DUNCAN reiterated the importance of the public involvement
process. He said that SB 270 would have limited public involvement
due to only having three public representatives. He did not
believe that $31,000 for public hearings under SB 270 was enough;
how could there be such a huge gap in the fiscal notes regarding
the public process under these two bills. He suggested that they
review the public process portion of the fiscal note for SB 270.
SENATOR SALO noted that the bills have different focuses. SB 270
focuses on studying the problem which she believed would indicate
a greater expenditure for the public process. She asked if there
was a reason why the public process under SB 284 should be
significantly more.
DAVID WALSH said that the fiscal note was based on the Division of
Insurance's experience. He agreed that there is a disparity, but
who knows what issues would take a longer public hearing.
SENATOR DUNCAN stated that $1 million for the public process under
SB 284 may be correct; however, he disagrees with the $31,000
public process under SB 270.
CHAIRMAN RIEGER asked if under SB 270 there was an honorarium paid
to the members like that under SB 284. JAY LIVEY said no, the
members of the Commission are full-time paid staff, salary.
CHAIRMAN RIEGER inquired of how the defining of potential benefit
packages under SB 270 would occur. JAY LIVEY explained that a
benefit package would be defined then the package would go through
a cost analysis. Mr. Livey envisioned a range of costs for benefit
packages; low, medium, and high. The low cost package would be
catastrophic coverage.
DAVID WALSH agreed that the least expensive package would be a
major medical or a catastrophic plan with a high deductible,
basically a disaster plan. The triggers to get into the plan would
be very high.
CHAIRMAN RIEGER inquired of the monthly premium on such a plan.
DAVID WALSH explained the high risk pool and the small business
employer pool. The small business employer pool does consider
economics.
Number 459
THELMA WALKER, Deputy Director of the Division of Insurance, stated
that the high risk pool has a $1500 deductible. The cost of the
plan depends upon age and geographical area. She explained that
rates are based upon age bands; with the $1500 deductible in the
high risk pool, the rate would be $165 per month for individuals up
to twenty-five years old. The rates would increase with age. She
noted that with a $10,000 deductible, the premium would be less
that $100 per month for up to age twenty-five.
CHAIRMAN RIEGER asked if the adverse selection was eliminated, what
would be a monthly premium estimate for catastrophic coverage of a
statistically average cross-section of the population. THELMA
WALKER clarified that with a spread of the risk, a $10,000
deductible for catastrophic coverage would cost approximately $200
per month. She noted the difference between the average premium
and a premium based upon age bands.
THELMA WALKER clarified that the high risk pool rates are based
upon age bands. The age bands consider age and geographical areas.
The older an individual, the higher the rate. An average would be
higher due to the lack of the age band. She said that an age band
could decrease the amount of the rate versus a pure average.
CHAIRMAN RIEGER explained that he believed that the premium for a
high risk pool would be ten times higher than an average risk pool.
THELMA WALKER agreed that would sometimes be the case. The pool in
Alaska has a maximum percentage in which those rates can increase
over the average increase. Ms. Walker stated that currently, that
is 175 percent with a maximum of 200 percent of the average within
age bands. Ms. Walker explained that they took an average from
five insurers, age banded that and increased the rate by 175
percent in order to determine the high risk pool rates.
CHAIRMAN RIEGER inquired of the other age band rates. THELMA
WALKER said that for age sixty and sixty-four, the rate would be
$642 with a $500 deductible. The rate for the $1500 deductible
would be approximately half of the above.
SENATOR DUNCAN asked if without the limit the premiums would be
higher. THELMA WALKER agreed. SENATOR DUNCAN pointed out that the
limit was artificial, the costs of the high risk pool are shifted
to other consumers. The high risk pool is not allowed to charge
the necessary rate to cover against loses. CHAIRMAN RIEGER
clarified that those loses are shifted to insurers.
DAVID WALSH explained that the assumption of mandatory
participation or full spectrum participation as opposed to adverse
selection, the true cost of those pools are not reflected in the
set premiums. The numbers for the pools are less than the actual
cost would be in order to underwrite the risk.
CHAIRMAN RIEGER asked if these rates were per individual. THELMA
WALKER said yes. CHAIRMAN RIEGER inquired of the numbers for the
small business employer pools. THELMA WALKER stated that those
numbers have not been developed. The benefit packages would be the
same as what is currently offered.
JAY LIVEY noted the obvious limitations to catastrophic policies,
only a few benefit from such policies. The issue of preventive
care and services are lost. There are trade-offs.
Number 544
CHAIRMAN RIEGER noted that the State's insurance plan would be
recognized as the cadillac model of insurance with family coverage.
He did not understand how catastrophic insurance rates per
individual could be half the amount of the State's plan.
SENATOR DUNCAN said that the catastrophic rates are lower because
they are artificial rates. CHAIRMAN RIEGER clarified that his
question was regarding an average statistical cross section.
DAVID WALSH believed that the cost would decrease if there was some
type of mandate. The size of the pool, as in the State policy,
would decrease the cost due to the pools size which would spread
the risk.
SENATOR DUNCAN emphasized the necessity to compare the benefits of
other plans besides the State plan. He inquired of the limit of
last years legislation. THELMA WALKER clarified that there was not
a cap on the small employer pool. Only with increases after a
certain date, there are some renewal caps. Those numbers are being
worked on currently.
CHAIRMAN RIEGER indicated that he thought there was a range around
a center point which was the top end. If that did not cover the
individual, the individual would have to absorb the cost or buy
into the reinsurance pool.
TAPE 94-22, SIDE B
Number 584
CHAIRMAN RIEGER requested a description of a medium plan.
JAY LIVEY described a medium plan as not having too many preventive
services, dental or optometry coverage, with higher deductives and
co-payments.
CHAIRMAN RIEGER asked how much more a medium premium would be than
a catastrophic premium. DAVID WALSH estimated that a medium
premium could quickly get up to $300 per month. A more tailored
plan would soon increase to $350; possibly with family coverage.
SENATOR SALO asked if there were cheaper catastrophic plans on the
current market that are not that expensive, like the Blue Cross
Basic. DAVID WALSH agreed that the Blue Cross Basic was less
expensive. The coverage, although basic, would be more than
catastrophic, but with high triggers.
DAVID WALSH explained that part of the problem with the insurance
costs is related to the high expense of actually using the plan.
SENATOR DUNCAN requested that Mr. Livey review the public
involvement of the fiscal note for SB 270.
CHAIRMAN RIEGER noted the long list of proposals the committee had
reviewed. He did not believe that the cost of any specific benefit
package had been lacking on substantial information or conjecture.
He indicated that a consensus cannot be arrived at without knowing
the cost. He suggested more specific direction to SB 270 regarding
the composition and cost of a benefit package.
SENATOR SALO expressed frustration with the rapidly changing health
care and premium costs. She did not know that the cost would ever
be known with certainty.
CHAIRMAN RIEGER agreed that they would not know with absolute
certainty; however, he would like to have good data.
Number 531
SENATOR DUNCAN stated that the savings should be reviewed along
with the costs. He suggested that most people agree that the
savings would outweigh the costs.
CHAIRMAN RIEGER did not agree with the belief of some that costs
will decrease in the future with health care reform. He asserted
that the 14 percent of the GDP currently going to health care would
probably increase in the future.
SENATOR DUNCAN explained that the goal was to slow down the rate of
increase, not reducing the overall spending.
SENATOR SALO did not seem to think that the public health area was
thoroughly covered. CHAIRMAN RIEGER informed Senator Salo that
DHSS was present at a previous meeting in order to discuss
legislation proposals from Healthy Alaska 2000. There were no
legislative proposals. Chairman Rieger encouraged reviewing
Healthy Alaska 2000 in order to make their own proposals.
SENATOR DUNCAN expressed the need to review some issues
individually not previously reviewed in that manner. He listed the
following issues: universal coverage versus access, a cost control
system, wellness and preventive health care, and long-term care.
He asserted that those issues deserve attention. He clarified
universal coverage under whatever type system should be identified
as a principle giving direction for exploration if universal
coverage is choosen.
CHAIRMAN RIEGER stated that whether or not to have universal
coverage as a principle is hard to know until the cost is known.
SENATOR DUNCAN said that the cost without universal coverage is
known. Senator Duncan discussed cost shifting. Bartlett has
approximately 15-20 percent uncompensated care which would be cost
shifted to others.
Number 446
CHAIRMAN RIEGER indicated that such an argument would be dealt with
under a cost analysis for various proposals.
SENATOR DUNCAN asserted that universal coverage or whatever type
system is an issue worth debating.
SENATOR LEMAN maintained that a universal coverage single payer
system would have greater cost shifting, especially with a
community base. He recognized current cost shifting to cover those
without coverage.
SENATOR SHARP expressed concern with the potential for major cost
shifting from agencies, now bearing part of the health care cost,
to the state of Alaska and then leaving. He suggested addressing
that issue.
SENATOR DUNCAN indicated that universal coverage would be
nationwide in the future. He posed Indian Health Services as an
example of those federal agencies backing out now. SENATOR SHARP
asserted that the total impact of backing away quickly should be
known.
SENATOR SALO explained that when she ponders universal coverage
more than dollars and cost shifting come to mind. She remembered
former students, children, who were not covered. Often they were
from the working poor. She expressed the need to work on universal
coverage for those individuals.
SENATOR SHARP agreed with Senator Salo, but he attributed a portion
of that problem to misplaced priorities without regard to the
income level which would then shift costs to the state.
CHAIRMAN RIEGER believed that Senator Salo had a legitimate
consideration that could be factored in if all the facts were
known. He reiterated that the cost of health reform is missing
most from all the debates.
SENATOR DUNCAN agreed that knowing the cost of health reform was
necessary. He stated that SB 284 would provide the cost under
universal coverage and a specific benefit plan and the Corporation
would present that to the legislature. SB 270 does not provide an
answer to the cost issue; SB 270 has multiple decisions. He noted
that in order to have a consensus, public involvement is essential
which SB 284 includes.
There being no further business before the committee, the meeting
was adjourned at 2:45 p.m.
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