Legislature(2015 - 2016)BELTZ 105 (TSBldg)
01/19/2016 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation by the Division of Economic Development on the Tourism Marketing Program. | |
| Presentation by the Alaska Seafood Marketing Institute | |
| Presentation by the Division of Insurance | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
January 19, 2016
1:29 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Cathy Giessel, Vice Chair
Senator Kevin Meyer
Senator Gary Stevens
Senator Johnny Ellis
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
Presentation by the Division of Economic Development on the
Tourism Marketing Program.
HEARD
Presentation by the Alaska Seafood Marketing Institute
HEARD
Presentation by the Division of Insurance
HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record.
WITNESS REGISTER
CHRIS HLADICK, Commissioner
Department of Commerce, Community and Economic Development
Juneau, Alaska
POSITION STATEMENT: Offered opening remarks and introduced the
presenters.
BRITTENY CIONI-HAYWOOD, Director
Division of Economic Development
Department of Commerce, Community and Economic Development
Juneau, Alaska
POSITION STATEMENT: Delivered a presentation on the Tourism
Marketing Program.
TYSON FICK, Communications Director
Alaska Seafood Marketing Institute
Department of Commerce, Community and Economic Development
Juneau, Alaska
POSITION STATEMENT: Delivered a presentation on the Alaska
Seafood Marketing Institute.
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Delivered a presentation on the state of
the health insurance market in Alaska.
ACTION NARRATIVE
1:29:01 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:29p.m. Present at the call to
order were Senators Ellis, Giessel, Stevens and Chair Costello.
^Presentation by the Division of Economic Development on the
Tourism Marketing Program.
Presentation by the Division of Economic Development on the
Tourism Marketing Program.
1:30:03 PM
CHAIR COSTELLO welcomed Commissioner Chris Hladick and Division
Director Britteny Cioni-Haywood.
1:30:21 PM
CHRIS HLADICK, Commissioner, Department of Commerce, Community
and Economic Development (DCCED), informed the committee that
the department is trying to think outside the box on how it
delivers services and prioritizes essential functions. They are
looking at compromises to protect Alaska's best interests moving
forward toward a fiscally responsible future. He introduced the
presenters and welcomed further discussions throughout the
legislative session.
1:32:09 PM
BRITTENY CIONI-HAYWOOD, Director, Division of Economic
Development, Department of Commerce, Community and Economic
Development (DCCED), reported that the Alaska Tourism Marketing
Program has been efficient in growing tourism year-round. Over
the past four years, winter tourism has increased eight percent
and summer visitation has increased 12 percent. In the summer of
2015 alone, cruise ship passengers increased three percent.
CHAIR COSTELLO stated that the presentations are focused on
programs that help grow the economy.
MS. CIONI-HAYWOOD stated that, on average, domestic visitors
spend $941 and international tourists spend $1,103 per visit.
The Alaska Visitors Industry Report estimates the economic
impact of tourism to be $3.9 billion
SENATOR STEVENS asked if "economic impact" represents more than
just the money that's brought in.
MS. CIONI-HAYWOOD confirmed that it includes direct, indirect,
and induced effects. For example, someone who works in the
tourism industry turns money over in the economy by purchasing
goods and services from other businesses.
CHAIR COSTELLO asked who conducted the study.
1:35:41 PM
MS. CIONI-HAYWOOD replied it was a research-based study by the
McDowell Group. She noted that the division also works with the
Alaska Tourism Marketing Board (ATMB), which Chair Costello
serves on, and the meeting tomorrow will focus on program
metrics and unit costs.
Directing attention to a table of conversion rates, she
explained that for each person responding to the state's tourism
marketing program, 26.3 percent will actually travel to Alaska
within a four-year period.
1:37:19 PM
SENATOR MEYER joined the committee.
MS. CIONI-HAYWOOD relayed that DED gathers information through
the vacation planner and then sends a newsletter to people to
keep visiting Alaska fresh in their mind. People are also
directed to the travel website which is continuously updated.
CHAIR COSTELLO asked who Alaska is competing against to attract
visitors.
MS. CIONI-HAYWOOD explained that competition comes from other
U.S. states and international destinations such as Australia and
New Zealand.
She displayed a graph of the tourism marketing budget since 2004
to illustrate its importance. "If Alaska's tourism message is
not delivered globally and on a consistent basis, we believe the
numbers will decline."
CHAIR COSTELLO asked if the state can expect the current
increase in summer and winter tourism to deteriorate as the
tourism budget drops.
MS. CIONI-HAYWOOD said yes. "Typically we would estimate two to
three years for that to occur because of that timing where we're
still having people who have decided they want to come and
they're actively planning that vacation." If the message isn't
out there, vacationers will eventually select destinations other
than Alaska.
1:40:48 PM
SENATOR STEVENS asked where the tourism marketing dollars come
from in addition to state investment.
MS. CIONI-HAYWOOD replied the money comes from program receipts
and general fund dollars that have been allocated to the fund.
SENATOR STEVENS requested a pie chart that shows where the
moneys come from and the state percentage.
MS. CIONI-HAYWOOD explained that the program receipts vary
annually, but they average $2.7 million per year. Responding to
a further question, she estimated that the total last year was
$10 million, $7 million of which was from the general fund. She
offered to provide exact numbers but further estimated that the
prior general fund allocation was about $15 million.
CHAIR COSTELLO offered her understanding that tourism operators
volunteer the program receipts in order to appear in the
vacation planner.
MS. CIONI-HAYWOOD agreed and added that cooperative marketing
programs with Yukon, British Columbia, and Alberta also bring in
money that is included in the program receipts.
1:42:25 PM
CHAIR COSTELLO asked if low gasoline prices might cause
travelers to take road trips to nearby states instead of flying
to Alaska.
MS. CIONI-HAYWOOD offered her expectation that the decline in
oil prices might also result in lower cost flights. "That might
offset the lack of marketing dollars for a little while but this
is a complex formula that includes global economics, the price
of oil, consumer confidence in addition to the active marketing
the program does," she said.
SENATOR MEYER asked if she had seen any correlation between low
fuel prices and more reasonable cruise ship fares.
MS. CIONI-HAYWOOD answered no but she expects that lower priced
fuel will encourage more people to take a cruise, a plane ride
or drive to Alaska.
SENATOR MEYER asked how DED coordinates marketing efforts with
municipal convention and visitor bureaus.
MS. CIONI-HAYWOOD explained that the state tends to do larger
projects such as television advertising, public relations
working with national journalists that potentially wouldn't be
done through individual visitor centers. She noted that cruise
ships are the only other entity large enough to take on that
national role.
MS. CIONI-HAYWOOD displayed a pie chart showing the tourism
marketing program allocations. She explained that the intent is
to allocate tourism marketing dollars in a broad spectrum, but
domestic consumer advertising accounts for 53 percent of the
budget because most visitors come from the United States. Ten
percent of the budget is allocated to international advertising,
which is an important component because those visitors tend to
spend more and stay longer than domestic visitors.
She informed the committee that the public relations program
sponsors media events on an annual basis to assist about 600
journalists with travel stories to increase global exposure for
Alaska tourism. "They provide very rich content about a wide
range of experiences across the state." The average value of
each article is $91,000, and each dollar invested in public
relations returns an estimated $68 in promotional value. She
explained that the public relations program also works with
broadcasting networks. Last year this included work with PBS.
"The state spent just under $10,000 on this project and allowed
us to reach an audience of over a million people with two
episodes focused on Alaska."
1:48:24 PM
CHAIR COSTELLO asked how the $91,000 per article was calculated
and how many articles were written about Alaska.
MS. CIONI-HAYWOOD explained that it's based on what it would
cost to purchase the same advertising through print or other
media. She offered to follow up with specifics on the number of
articles and other measures.
She said television advertising has been beneficial because it
boosts overall interest in the state. These ads run on national
cable networks and account for $1.53 billion gross impressions,
which means households exposed to the same commercial on
multiple occasions. For every dollar spent on television
advertising the return is $22.54 in visitor spending, she said.
Research on the effectiveness of the state tourism program shows
that 72 percent of those who saw a television commercial
expressed increased interest in traveling to Alaska.
MS. CIONI-HAYWOOD recounted that the direct response advertising
is designed to encourage consumers to take advantage of
requesting a vacation guide or visiting the official website
TravelAlaska.com. These sources consolidate travel information
statewide and allow consumers to view all options and make
travel decisions. The "YOU DON'T WANT TO MISS THIS" campaign was
designed to create a sense of urgency and encourage potential
visitors to move forward with travel plans. The average cost to
generate a consumer response to a magazine, online ad, or direct
mail package is $9.67. The average cost conversion to get that
person to actually travel to Alaska is $30. For every dollar
spent on direct response advertising the return is $114 in
visitor spending.
She relayed that research shows that consumers still use printed
travel brochures as they plan trips. To cater to overseas
markets, the state also prints several foreign language guides
for distribution in Germany, Japan, Korea, and China. The state
tourism website has been translated into five languages. The
cost to produce and distribute each guide ranges from $0.73 to
$0.93.
She continued to say that social media is a relatively small but
influential part of the budget. Alaska tourism is active on
Facebook, Pinterest, YouTube, Twitter and Instagram, and has
connected with more than 2.3 million people through these
venues. More than 973,000 people have viewed YouTube videos
about Alaska and 18.8 million people have been exposed to Alaska
content on Facebook. This translates to about $0.04 per view.
MS. CIONI-HAYWOOD stated that travel trade marketing is
important to many Alaska travelers, especially in international
markets. These visitors rely more heavily on travel agents and
tour operators to book their trips. DED estimates that each
trade show lead costs about $800 and product development tours
cost about $1,370 per participant. The latter marketing consists
basically of one-on-one meetings with people in international
markets, but online training is provided as well. These meetings
boost familiarization and training and are based on the notion
that people sell what they know.
She stated that international marketing boosts the Alaska
visitor portfolio, enabling the state to weather global economic
volatility as well as providing significant growth
opportunities. The International Marketing Program generates
leads for tourism organizations through one-on-one meetings with
tour operators and media. She noted that communities throughout
the state are given a voice in those international markets.
These sales missions cost about $155 to generate a lead and
trade shows costs translate to about $691 per lead. Each of the
distributed foreign language vacation planners costs $2.10. The
top producing international markets are the United Kingdom,
German-speaking Europe, Australia & New Zealand, Japan, South
Korea and China
1:55:36 PM
SENATOR STEVENS asked if the fact that Alaska is a safe travel
destination could be part of the marketing scheme.
MS. CIONI-HAYWOOD agreed it would be a good selling point.
CHAIR COSTELLO asked what challenges she sees in the current,
historic budget environment.
MS. CIONI-HAYWOOD offered her belief that the ATMB and the
program would again work together to prioritize efforts
recognizing that maintaining revenue generating sources such as
the travel planner, joint marketing programs, and websites are
important. Consumer trade shows were cut because they aren't as
beneficial as some of the other elements.
CHAIR COSTELLO asked if there are opportunities to work with the
seafood industry and other areas where the state has reached out
to international markets.
MS. CIONI-HAYWOOD answered yes that is already being done and
combining resources will be more important going forward. She
mentioned coordination with ASMI and the program to promote
things made in the state.
1:58:37 PM
At ease
^Presentation by the Alaska Seafood Marketing Institute
Presentation by the Alaska Seafood Marketing Institute
2:00:29 PM
CHAIR COSTELLO reconvened the meeting and welcomed Mr. Fick.
TYSON FICK, Communications Director, Alaska Seafood Marketing
Institute (ASMI), Department of Commerce, Community and Economic
Development (DCCED), explained that ASMI is a public corporation
that fosters alignment with industry marketing efforts. It has a
governor-appointed board of directors comprised of five
processors, two commercial harvesters, and ex-officio members
from the administration and each house of the legislature. ASMI
markets Alaska seafood generically; they are prohibited from
marketing specific to a region or a particular company.
The ASMI mission is to increase the economic value of Alaska
seafood through collaborative marketing programs, aligning with
industry, and supporting the sustainability efforts of the
state. The focus is on increasing value.
2:02:18 PM
MR. FICK reviewed the FY 2017 proposed budget noting that the
general fund contribution is about one quarter of the total
budget. The request for $3.428 million in general fund match is
down from $4.9 million last year and about half of the total
three years ago. ASMI has 20 full-time exempt employees residing
in Juneau, Kodiak, and Seattle. The .5 percent voluntary
industry tax (SDPR) on ex-vessel value, which is levied across
all species and regions, is estimated to bring $16.495 million.
Federal funds through the Market Access Program account for $4.5
million.
SENATOR STEVENS commented that the budget changed significantly
when ASMI was changed from primarily a fisherman's organization
to one in which the processors play a major role. He highlighted
the difference between the tourism and ASMI general fund budgets
now and before the reorganization when they were relatively
similar.
MR. FICK said the big change occurred in 2003 when the industry
tax was changed to .5 percent across all species and regions.
That was a good change for industry buy-in and stable funding.
He acknowledged that he didn't know much about the tourism
market and its budget but the industries are fundamentally
different and the ex-vessel tax doesn't have a correlation in
tourism.
SENATOR STEVENS expressed hope that the state could stay
involved.
2:06:02 PM
MR. FICK displayed a bar graph showing ex-vessel value and
harvest volume from 2004 to 2014. He noted that over ten years
the same volume of fish now produces $0.7 billion more, which
can be attributed to marketing. He highlighted that the fishing
industry is the largest private sector employer in the state;
that Alaska catches more fish that all other states combined;
and that it would be the 6th largest seafood exporter in the
world if it were a country. However, he said, the playing field
isn't level when the Norwegian Seafood Export Council has a
budget of $60 million, $10 million of which is allocated to
marketing salmon in the U.S.
CHAIR COSTELLO drew a parallel to the tourism marketing efforts
in states such as Hawaii and commented on the importance of
striking a balance.
MR. FICK reviewed Alaska's seafood export markets. ASMI exports
to more than 120 countries. Groundfish accounts for 55 percent
and salmon for 25-33 percent. China is the largest single
trading partner but more product is sold in the U.S. Europe and
Japan combined. The EU and Japan are the largest export markets
accounting for about two-thirds of the value.
He emphasized that global factors dramatically impact value.
Negative factors include the strong dollar versus buyers and
competitors; Russian Pollock certification; competition from
farmed salmon; the Russian embargo and Ukrainian conflict; and
more Atlantic cod. Positive factors include competing surimi
supply; long term demand vs. supply; and the strong Alaska
seafood brand that's been built since ASMI started in 1981.
2:11:09 PM
SENATOR MEYER asked if there is still a labeling requirement for
wild salmon and pen raised Atlantic salmon.
MR. FICK confirmed that it is still required adding that seafood
typically has to be labeled as wild and with the country of
origin. He noted that requirements for GMO labeling shows that
people want to know where their food comes from. "Our story fits
in very well with that and we'll continue to push for always
requiring labeling and some knowledgeable origin or provenance,"
he said.
2:12:47 PM
MR. FICK discussed domestic foodservice marketing. He reported
that Alaska seafood is the second most branded item on menus in
the largest chain restaurants in the country. "We are ahead of
Oreo cookies and behind Angus Beef." He displayed some of the
logos of companies that ASMI's food service program works with
to illustrate that there is a place for every product and that
the same could carry through to the international program.
CHAIR COSTELLO asked where school nutrition would fall.
MR. FICK explained there are programs through food aid,
universities, and public schools.
CHAIR COSTELLO asked where Alaska seafood and school nutrition
fit in.
MR. FICK replied it is part of the institutional foodservice
program. ASMI has programs with genuine Alaska Pollock producers
making sure it is a USDA food and therefore allowed into the
system. There are also programs through the food aid program
getting seafood approved for WIC and foodbanks. They are also
looking at universities and public schools even though they
aren't specifically included in the list of food service
operators.
CHAIR COSTELLO asked if Alaska seafood is served at his
children's school.
MR. FICK answered yes; there are fish sticks that are a Pollock
produce and pink salmon tacos.
CHAIR COSTELLO expressed a desire to expand that program in
schools.
2:15:20 PM
MR. FICK reported that ASMI competes very year for federal grant
funding through the U.S. Department of Agriculture's Market
Access Program. Every year they get about $4.5 million to fund
their international programs. This year ASMI was awarded
additional USDA Emerging Markets Program funds to do a trade
mission to develop new markets in Thailand, Vietnam, Indonesia,
Malaysia, and the Philippines. He noted that media relations is
another metric that is used to promote Alaska seafood. ASMI is
also shifting to digital advertising because that is where the
market is.
CHAIR COSTELLO commented that tourism advertising still uses
print material.
MR. FICK posited that deciding what to have for dinner calls for
a more immediate decision than planning for a trip to Alaska
which is more long-term.
He continued to say that he found the frozen sockeye promotion
very interesting this last year. Following on a huge sockeye run
in Bristol Bay, ASMI put together nearly 5,000 in-store demos of
Alaska sockeye salmon in retail outlets across the country. The
average cost per demo was $54.31 and the year-to-date sales
increase is 56.2 percent. This program was very successful in
moving product and elevating value. ASMI expanded the program to
Japan and ran promotions with food service or retail partners.
They also ran a smoked salmon promotion in Germany and
promotional sales quadrupled reaching $2.3 million in three
months. He noted that the prize winners accompanied a
trade/press mission to Ketchikan, Juneau and Kodiak in August.
The record run of salmon in 2013 combined with the record
poundage in 2015 put a huge strain on the canned salmon market
so ASMI worked with the UK's Tesco and other large retailers to
advertise the product. As a result, sales increased more than
1,000 percent. The value of the sales increased 859 percent over
the time of the promotion.
2:21:23 PM
SENATOR STEVENS commented on a study that recommended canned
salmon as a value food, and asked if less is being produced
today.
MR. FICK confirmed that there has been a move away from canned
salmon, but when there are huge runs the fallback is to put the
fish in cans. Promotions to sell the excess product has been
instrumental in leveling the playing field for the value.
ASMI has worked with major e-commerce sites in China to promote
as many as 12 Alaska species per promotion. This is expanding to
the United Kingdom and is seen more and more in the U.S. with
things like Fresh Direct. The buy-in is low at $5,000 per
promotion and the sales generated range from $1 million to $2.4
million. When Alibaba went public, the CEO touted Alaska seafood
as a great example of opportunities for e-commerce in China.
2:24:35 PM
CHAIR COSTELLO commented there are unique differences between
tourism and seafood marketing but everyone is still eager to
look for areas of co-promotion.
MR. FICK, noting that the Seafood Expo Global in Brussels is the
largest seafood tradeshow in the world, he relayed that ASMI
hosts a pavilion that supports 20 companies from Alaska. In 2015
the $50 million in on-site sales were up 400 percent from 2014.
The projected annual sales for those companies that attended is
$650 million.
SENATOR STEVENS commented that when he attended the Seafood Expo
Global in Brussels he was impressed to see that ASMI's booth was
alongside Norway's.
MR. FICK discussed the Eat Alaska Program. ASMI worked with 20
chefs in Alaska to produce recipes that featured both seafood
and Alaska grown vegetables. This supported local growers,
restaurants, farmers markets and tourism.
CHAIR COSTELLO thanked Mr. Fick for the presentation.
2:28:11 PM
At ease
^Presentation by the Division of Insurance
Presentation by the Division of Insurance
2:31:46 PM
VICE-CHAIR GIESSEL reconvened the meeting and announced the next
presentation would be from the Division of Insurance. She
expressed interest in learning about some of the reasons that
Alaskans have seen such a steep climb in the cost of their
health insurance.
2:32:19 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), stated
that the Division of Insurance is tasked with regulating the
insurance industry to protect consumers. Insurance companies
file rates and the division looks to see that they aren't
excessive, inadequate or unfairly discriminatory. The division
looks at the rates to ensure that they are adequate for the
company to remain solvent. The rate has to make sense for the
exposure, but it can't be excessive for profit or include a
means for medical care that isn't based on historical data. For
the first time the division has three years of data for the
Affordable Care Act (ACA), which will make it possible to known
what to expect in that market in the state of Alaska. Finally,
the division looks to make sure the rates are not unfairly
discriminatory. "You can rate on age, you can rate on location,
but you cannot be unfair in how you are rating. And we do check
those factors," she said.
She clarified that the statute does not allow the division to
disapprove a rate because of the financial impact to the
consumer. "If the rate does double and that's close to what the
rates were this year in the individual market - the 2016 rates -
the impact it has on someone's budget is not a criteria that can
be used. Again, insurance companies need to remain solvent," she
said.
2:36:28 PM
SENATOR STEVENS asked if there can be gender discrimination.
MS. WING-HEIER explained that there are different rating
guidelines depending on the particular insurance product.
SENATOR ELLIS asked if the division conducts a detailed
financial review of an insurance company that requests a rate
increase.
MS. WING-HEIER explained that the division looks at a company's
profitability and what they are returning to shareholders
through both financial and rate examinations. "In the ACA there
are what is known as medical loss ratios so that we can look to
see how much of the premium they are actually spending on
medical care as opposed to other costs that the insurance
company may have," she said.
SENATOR ELLIS asked if it is solely up to her as director to
determine what is reasonable and allowable, because there is
outrage statewide about how little the Division of Insurance
stands up for the consumer. He requested a more detailed look at
how she is making these decisions.
MS. WING-HEIER provided an example of how the division justifies
the rates it approves. If an insurer on the exchange had $60
million in losses over 18 months, the cost of those claims would
be divided by the number of enrollees. "That doesn't allow any
money for adjudicating those claims for processing. That is just
paying the cost of the claim itself. There's no profit, there's
no processing. That is just paying the cost of the claim
itself," she said.
2:40:52 PM
SENATOR ELLIS asked if she and the Walker Administration had any
ideas for statutory or regulatory changes to strike a better
balance between Alaska consumers and the insurance industry.
He recalled that preceding the ACA, federal money was available
to investigate the significantly higher costs for medical care
and procedures in Alaska compared to other states. Former
insurance director Linda Hall turned the money down so the study
was never done. He asked if she would accept those federal
dollars and conduct an investigation if they were still
available.
MS. WING-HEIER stated that the division has struggled to figure
out how to get providers to the table, and looked hard at what
Rhode Island has done in that regard trying to justify the cost
of the medical services that are passed on to the consumer. The
division has also looked at trade practices and restraint of
trade, the impact it would have on the small medical community
in Alaska, and whether it would stifle growth. She said she
didn't know that she had the answer on where to draw the line or
who should draw it, but to her knowledge there are no federal
dollars available to investigate the cost of healthcare and
medical procedures in Alaska.
SENATOR ELLIS responded "I guess we missed that opportunity for
the research and study to figure out why we're so out of whack
compared to other jurisdictions on the cost of healthcare. We're
a captive audience, apparently."
2:45:46 PM
SENATOR GIESSEL disclosed that she is a healthcare provider who
is particularly appalled with the cost of specialty care in
Alaska. She referenced an APRN article that cited two large
th
orthopedic practices in a discussion about the 80 percentile
rule. Those practices have since merged and like many others now
th
have little competition. She asked how the 80 percentile rule
plays into that issue in terms of healthcare costs.
MS. WING-HEIER explained that the 80th percentile rule was
established about 15 years ago in response to complaints from
consumers who had insurance but still received a large bill
after the procedure or service was performed. The resolution was
to establish the 80th percentile rule as a threshold for what
insurance companies would pay. Now there are negotiated rates
for in network services and most people are happy with the
negotiated rate of their providers. It's a preferred rate and
there's generally no bill due. However, anyone who goes out of
network is subject to what the physician charges and the
th
insurance company is only going to pay that 80 percentile.
Providers that are among the "only game in town" have learned
th
that they can set the 80 percentile and get what they want. The
fees have gone up and it's now appearing in the rates. The
th
question now is whether the 80 percentile has outlived its
usefulness. The division doesn't want to undo the rule if it's
going to do harm to consumers, but if it's going to bring down
rates then it should be eliminated. "We're looking at it to say
what would the claims be paid at out of network if it wasn't the
th
80 percentile."
SENATOR GIESSEL asked who is doing the research.
MS. WING-HEIER replied it is being done in-house working with
insurers and the broker community - the Alaska Association of
Health Underwriters.
2:50:55 PM
SENATOR GIESSEL asked when she anticipates a conclusion to the
study.
MS. WING-HEIER replied she would like to see it done before the
2017 rates are set in late August or early September 2016.
SENATOR GIESSEL asked if the chair would keep in touch with the
director to track this research and distribute the conclusion to
the committee.
CHAIR COSTELLO agreed.
2:52:08 PM
MS. WING-HEIER displayed a chart of the progression of the ACA
plan requirements and noted that some key dates are coming up.
She recapped that President Obama signed the Affordable Care Act
on March 23, 2010 and the first enrollment was January 1, 2014.
In late 2013 certain employers were allowed to keep their
insurance plan because of problems with the exchange. There
became grandfathered and non-grandfathered plans.
Health Insurance Plans written prior to March 23, 2010
are considered grandfathered and not subject to all of
the ACA criteria.
Health Insurance Plans written after March 23, 2010
and before January 1, 2014 are considered non-
grandfathered and must be rewritten to comply with ACA
as of January 1, 2014. This requirement was amended by
the original transition and the extended transition
which allows these plans to remain as-is until October
2016 provided insurers will renew.
Health Insurance Plans written after January 1, 2014
must be ACA compliant. Individual market non-
grandfathered plans will sunset in Alaska on December
31, 2016. Small market non-grandfathered plans may
continue until June 30th, 2017 or TBD Continuous
changes and updates as needed/recommended by states
and others.
CHAIR COSTELLO warned that the committee would adjourn in just
five minutes.
MS. WING-HEIER displayed the different insurers for 2014 and
2015 to illustrate that Alaska is a small market.
She displayed slide 7 showing the numbers of grandfathered, non-
grandfathered and the ACAs that are QHP - Qualified Health Plan
(compliant). She noted that Aetna and Assurant have left Alaska.
For 2016, those plans have rolled into the Premera and Moda
markets. She again highlighted the small group numbers.
2:56:02 PM
MS. WING-HEIER reviewed the ten potential premium drivers in
2017: 1) healthcare costs and utilization; 2) Changes to
Essential Health Benefits and the CMS Actuarial Value
Calculator; 3) Additional data - 3 years; 4) Continued
migrations; 5) Insurers merging and exiting markets; 6) Ongoing
uncertainty with court cases and the 2016 elections; 7)
Transitional Reinsurance; 8) Risk Corridor; 9) Risk Adjustment;
and 10) Changes in fees and taxes.
She displayed the potential cost drivers for Alaska: 1) Cost of
healthcare is amongst the highest in the nation; 2) Limited
providers and challenges with provider networks; 3) Individual
market remains at 20,000 - 22,000 and may have settled; 4)
National cost drivers do impact Alaska - we are not immune;
She reviewed the potential cost drivers looking forward: 1) CMS
has issued over 100 revisions for the 2017 plan year. 2) Medical
trends - increasing at 10 percent or more; 3) Reinsurance and
risk corridor; 4) Transitional or non-grandfathered plans will
enter the market increasing enrollees; 5) Mergers and
acquisitions of insurers will tighten the market even further.
2:59:30 PM
MS. WING-HEIER reviewed The Three Rs, Risk Adjustment,
Reinsurance, and Risk Corridor:
Risk Adjustment transfers money among insurers to
adjust for the possibility that some insurers may get
more or less than their proportionate share of costly
enrollees. Risk Adjustment is only:
· Applied to the individual and small group market; and
· The only permanent program to help stabilize the
costs of the ACA.
Reinsurance is one of the taxes associated with the
ACA and is applied against health insurance policies
and employer group health plans. Proceeds are used to
provide the individual market plans with additional
subsidies for higher-cost enrollees. The program
sunsets in 2016
· Attachment point in 2014 is $45,000 but will
increase to $70,000 in 2015.
· Coinsurance decreases from 80 percent in 2014 to 50
percent in 2015.
Risk Corridor provides a range for profits or losses
for insurance on the FFM. If an insurer has higher
than expected profits, the federal government will
"claw back" some of the premiums. Conversely, if an
insurer has higher than expected losses, the federal
government will pay the insurer additional subsidies
to offset those losses. This program sunsets in 2016
MS. WING-HEIER said the latter two sunset in 2016 which will
almost certainly influence rates in 2017. Focusing on the Risk
Corridor, she explained that the insurance companies that lost
money and expected to get some of it back received just 12.5
percent of what they anticipated. That led to insurance
companies and co-ops (none in Alaska) becoming insolvent. The
amount that they will be paid going forward remains to be seen
but it will likely have an impact on the rates.
MS. WING-HEIER said the division is looking at a Section 1332
Innovation Waiver much like Colorado, Minnesota, Hawaii, and
Massachusetts once the market stabilizes. This waiver would
allow the state to withdraw from the ACA if it could provide the
same benefits to consumers without any additional cost to the
federal government.
3:01:38 PM
Other solutions include a possible reinsurance program
administered by ACHIA; regional exchanges; and combining the
individual and small group markets to spread the risk among more
enrollees.
3:02:16 PM
SENATOR STEVENS asked if there is a similar shortage of property
and casualty insurers in Alaska.
MS. WING-HEIER replied that market and the rates are relatively
stable. "All things being equal, we're pleased with the fee
status of the property and casualty market," she said.
CHAIR COSTELLO thanked the presenters.
3:03:53 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 3:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2016.01.19 - Sen. L&C - Div. CBPL Presentation.pdf |
SL&C 1/19/2016 1:30:00 PM |
|
| 2016.01.19 - Sen. L&C - ASMI Presentation.pdf |
SL&C 1/19/2016 1:30:00 PM |
|
| 2016.01.19 - Sen. L&C - Div. of Econ. Dev. Tourism Marketing Presentation.pdf |
SL&C 1/19/2016 1:30:00 PM |
|
| 2016.01.19 - Sen. L&C - Division of Insurance Presentation.pdf |
SL&C 1/19/2016 1:30:00 PM |
|
| FY17 OMB Performance Indicators - ASMI.pdf |
SL&C 1/19/2016 1:30:00 PM |
|
| 2016.01.19 - Sen. L&C - REVISED - Div. CBPL Presentation.pdf |
SL&C 1/19/2016 1:30:00 PM |