Legislature(2013 - 2014)ANCH ATWOOD BLDG
10/17/2013 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| State of Alaska Employee Health Plans | |
| Universal Space Standards | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE STATE AFFAIRS STANDING COMMITTEE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
Anchorage, Alaska
October 17, 2013
9:20 a.m.
MEMBERS PRESENT
SENATE STATE AFFAIRS
Senator Fred Dyson, Chair
Senator Cathy Giessel, Vice Chair
SENATE LABOR AND COMMERCE
Senator Mike Dunleavy, Chair
Senator Donald Olson
MEMBERS ABSENT
SENATE STATE AFFAIRS
Senator John Coghill
Senator Bert Stedman
Senator Bill Wielechowski
SENATE LABOR AND COMMERCE
Senator Peter Micciche, Vice Chair
Senator Bert Stedman
Senator Johnny Ellis
COMMITTEE CALENDAR
Presentation: State of Alaska Employee Health Plans
- HEARD
Presentation: Universal Space Standards
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record.
WITNESS REGISTER
MIKE BARNHILL, Deputy Commissioner
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Delivered a presentation on State of Alaska
Employee Health Plans.
CURTIS THAYER, Deputy Commissioner
Department of Administration (DOA)
Anchorage, Alaska
POSITION STATEMENT: Delivered an overview of universal space
standards (USS).
ACTION NARRATIVE
9:20:17 AM
CHAIR FRED DYSON called the joint meeting of the Senate State
Affairs Standing Committee and the Senate Labor and Commerce
Standing Committee to order at 9:20 a.m. Present at the call to
order were Senators Dunleavy, Giessel, Olson, and Dyson.
^State of Alaska Employee Health Plans
State of Alaska Employee Health Plans
9:21:07 AM
CHAIR DYSON announced the first order of business to come before
the committees is a presentation on the State of Alaska employee
health plans. He asked Ms. Keller to introduce herself.
VALETTE KELLER, Program Coordinator* Division of General
Services* Department of Administration (DOA), introduced
herself.
9:21:21 AM
MIKE BARNHILL, Deputy Commissioner, Department of Administration
(DOA), delivered a presentation on active employee health plans.
He stated that DOA is currently transitioning from HealthSmart
to AETNA as the third-party administrator of health insurance
claims for both active and retired employees. This will go into
full effect on January 1, 2014. He discussed the statutory
requirement and skyrocketing cost of providing health care, and
expressed concern that the trajectory of cost growth is
unsustainable.
MR. BARNHILL explained that the State of Alaska delivers health
care to 16,500-17,000 active fulltime employees through five
different plans. He reported that the AlaskaCare Health Plan is
administered by the Department of Administration; it delivers
health care to approximately 6,600 employees and their
dependents for a total covered life population of about 17,000
people.
He reviewed the following table:
AlaskaCare Health Plan Union Health Plans
Employees: 6,600 Employees: 9,900
Exempt/PX (Court and Leg) 2,511 General Gov't (ASEA) 7,760
Supervisory 2,282 Labor, Trades & Crafts 1,558
Correctional Officers 881 Public Safety (PSEA) 497
Inland Boatmen's Union 561 Masters, Mates & Pilots 93
Confidential Employees 180
Marine Engineer 92
AVTEC 36
Mr. Edgecumbe Teachers 28
9:27:10 AM
CHAIR DYSON asked if the state contributions to the union health
plans are in addition to dues.
MR. BARNHILL answered yes.
CHAIR DYSON inquired about the state contribution.
MR. BARNHILL explained that the State of Alaska negotiates a
calculation for computing how much it will contribute for each
employee in all the plans. Historically, the calculation has
been tied to the cost of the premium for the AlaskaCare economy
plan and the preventive dental plan. That combined amount
generally is the state's monthly contribution for every employee
in the Union Health Plans, but it has been affected by
collective bargaining. For example, the ASEA collective
bargaining agreement at one time added the cost of a leave day
to the calculation, but DOA negotiated that out in the last
negotiating cycle.
The Union Health Plans deliver care to approximately 9,900
employees and their dependents for a total covered population of
about 30,000.
9:29:03 AM
MR. BARNHILL said the AlaskaCare Plan Design offers three tiers
of health insurance: economy, standard, and premium. Each tier
has a different cost structure; this refers to the deductible
and the maximum out of pocket that an employee has to pay.
Generally, the higher the deductible the lower the premium will
be. Coinsurance is the amount the health plan will pay for an
allowable cost once the deductible is satisfied. He reviewed the
following table:
Active Plan
Economy Standard Premium
Deductible $500 person $300 person $300 person
$1,000 family $600 family $600 family
Coinsurance 70% 80% 90%
Out of Pocket Max/Year
After Deductible
$2,000/person $1,200/person $350/person
Premium/Mo $1,335 $1,482 $2,028
Out of Pocket Max $0 $147 $693
Lifetime Maximum Unlimited
Preventive Care Covered 100% with in-network providers
Dependents Covered up to age 26
MR. BARNHILL said that the current monthly premium for the
Economy Plan is $1,335. That figure is used to compute the
benefit credit that's contributed for medical coverage to all
State of Alaska employees. When the benefit credit is applied to
the premium, zero is deducted from the pay check of an employee
who elected the economy plan. Other features of the plan are
unlimited lifetime maximum, preventive care that is covered at
100 percent, and coverage for dependents to age 26. The last
two, relatively new, features comply with provisions of The
Affordable Care Act. Preventive Care isn't required immediately
but DOA elected to do so.
He explained that AlaskaCare is a grandfather plan under the
Affordable Care Act and relatively little change can be made to
its structure without risk of losing that status. Because all
plans will eventually become non-grandfather plans, DOA opted to
step towards that incrementally by immediately covering
preventive.
MR. BARNHILL described the Economy Plan as fairly rich compared
to similar plans nationally, and warned that the $500 deductible
is becoming rare.
9:33:49 AM
MR. BARNHILL reviewed the Standard and Premium plans. The
deductibles were raised to $300 on July 1, but won't go into
full effect until January 1, 2014 when the plans transition from
a fiscal year to a calendar year. The Standard Plan has 80
percent coinsurance, and the annual out-of-pocket maximum is
$1,200 per person after the deductible is met. The monthly
premium is $1,482, and when the $1,335 benefit credit is applied
the monthly out of pocket expense to the employee $147. The
Lifetime Maximum, Preventive Care, and Dependent coverage are
the same as for the Economy Plan.
He cautioned that this is a highly superficial snapshot of the
AlaskaCare Plan that shows just some of its elements. He offered
to provide a complete comparison if any member was interested in
the full details.
MR. BARNHILL reviewed the AlaskaCare Premium Plan. The
coinsurance is 90 percent, the annual out-of-pocket maximum is
$350 per person after the deductible is met, the monthly premium
is $2,028, and the monthly out-of pocket expense to the employee
is $693. He highlighted that these plans, the Premium in
particular, are becoming extinct in both the public and private
sphere as employers shift costs to employees. He opined that
Alaska is behind that curve, because it's been blessed with
bountiful oil revenues.
SENATOR GIESSEL asked about in-network providers versus PPOs.
MR. BARNHILL explained that in the Lower 48 there are more
providers, more competition, and more willingness to enter into
PPO agreements. In Alaska there are fewer providers and they're
more resistant to entering into PPO agreements, so there has
been less opportunity historically in Alaska to engage in that
fundamental agreement to send volume in exchange for
preferential pricing.
9:40:33 AM
SENATOR OLSON asked if the state pays travel costs associated
with out-of-state medical care.
MR. BARNHILL replied the AlaskaCare Plan pays for travel for
certain surgical procedures, but not for diagnostic procedures.
SENATOR OLSON asked for the justification.
MR. BARNHILL explained that the rationale is availability.
Historically, some surgical procedures aren't available in
Alaska, but most diagnostic procedures are performed here. He
acknowledged the concern that some diagnostic procedures
performed in-state cost multiples of the cost to perform the
same procedure out-of-state. He cited the cost of a colonoscopy
as an example.
9:42:49 AM
SENATOR OLSON asked if DOA is projecting an increase or decrease
in travel costs in five years for people going out-of-state for
less expensive procedures.
MR. BARNHILL predicted that there would be a marginal increase.
He added that the hope is that the Alaska market will become
more competitive over time, so that the prices in Anchorage and
Seattle become roughly comparable.
CHAIR DYSON asked him to discuss medevac costs.
MR. BARNHILL explained that emergency care is covered under the
provisions of all State of Alaska employee policies. The costs
are extraordinarily high and can be in the high tens of
thousands of dollars.
CHAIR DYSON asked how coinsurance works.
MR. DARNHILL explained that coinsurance is the amount the plan
will pay, after the deductible is satisfied, on the allowable
cost of the care provided. For example, if the coinsurance is 80
percent and $1,000 in allowable cost remains after the
deductible is satisfied, the plan pays $800 and the employee
pays $200. Once the employee reaches the annual out-of-pocket
maximum for the year, the plan pays any remaining costs for that
plan year.
CHAIR DYSON commented that he always thought that coinsurance
meant that a person had double coverage.
MR. BARNHILL clarified that is coordination of insurance and
there are provisions for determining which insurance company
pays for what.
CHAIR DYSON assumed that coordination of insurance would apply
to people covered under VA health care and the Indian Health
Service.
MR. BARNHILL agreed that a variety of plans are available and
coordination provisions cover all of that.
CHAIR DYSON asked which insurance would be prime if someone is
covered under three federal plans.
MR. BARNHILL said he didn't know, but his understanding is that
the Indian Health Service would be the payer of last resort.
9:47:13 AM
SENATOR DUNLEAVY asked if providers prefer people to travel out
of state for a colonoscopy.
MR. BARNHILL answered no, the AlaskaCare Plan doesn't cover that
and he didn't recall the specifics of the ASEA Health Trust
Plan.
SENATOR DUNLEAVY said he asked because there are costs in
addition to the flight.
MR. BARNHILL stated that the language in the AlaskaCare Plan
says the coverage for the surgical procedure, the flights and
per diem are to be equal to or less than the cost of the
procedure within Alaska. He said it's difficult to administer
because it's difficult to know in advance what the cost of the
procedure will be.
9:48:51 AM
MR. BARNHILL reviewed the following ASEA Health Trust Plans,
which cover about 8,000 State of Alaska employees:
Active Plan
Plan A Plan B Plan C Plan D
E'ee + Family E'ee Only Supplemental Low Option
Deductible $250/person $250/person None $5,000/person
$500 family $10,000/family
Coinsurance 80% 80% 20% 100%
60% non-PPO 60% non-PPO 80% non-PPO
Out of Pocket $1,000/person $1,000/person
Max/Year after deduct after deductible None
$2,000 non-PPO $2,000 non-PPO None
Premium/Mo $1,530 $1,425 $1,360 $1,365
E'ee Out of
Pocket/Mo $195 $90 $25 $30
Lifetime Max Unlimited Unlimited $10,000/year Unlimited
Preventive Covered at 100% with no deductible at in-network
Care providers and 80% non-PPO
Dependents Covered up to age 26
Plan A is a family coverage plan that is similar to the
AlaskaCare Standard Plan. The deductible is $250/person and
$500/family, and the coinsurance is 80 percent for PPOs
(preferred provider organizations) and 60 percent for non-PPOs.
He explained that when the state enters into a preferred
provider organizational agreement with a provider, it agrees to
deliver volume in exchange for a discount. The state secures
volume by telling employees that they will be reimbursed 80
percent if they stay in-network and only 60 percent if they go
out-of-network. AlaskaCare has that but only for hospitals in
Anchorage. The employee monthly out of pocket deduction is $195
versus the AlaskaCare Standard Plan out of pocket deduction of
$147.
Plan B offers coverage for employees only, and that isn't
available in AlaskaCare. He said the existence of this plan
creates some hiccups in personnel administration. A single
employee who is in the general governmental unit has $90
deducted from their paycheck. When they are promoted to a
supervisory position they move into a supervisory unit under
AlaskaCare. The AlaskaCare Standard Plan is the most similar to
Plan B but an employee who selects that plan will see their
monthly deduction increase from $90 to $147. That lack of
alignment between the plans affects employees' willingness to be
promoted from the GGU to the supervisory unit.
He noted that the ASEA Health Trust doesn't publish the monthly
premiums. He calculated these estimates by adding the $90 out of
pocket deduction and the $1,335 benefit credit that the State of
Alaska pays for each ASEA Health Trust employee.
MR. BARNHILL said there is some concern about the sustainability
of Plan B going forward because it may be taxed as a Cadillac
plan under the Affordable Care Act. The definition of a Cadillac
plan is one where the premiums in 2018 cost in excess of $10,200
for a self-only plan. $1,425 times 12 exceeds that threshold.
The Cadillac tax is 40 percent of the excess over the $10,200
and it's billed to the employer, so all plans are trying to
avoid it.
Plan C is a supplemental plan that is designed for those who
have other insurance coverage. It only provides 20 percent
coinsurance and is capped at $10,000 per year.
Plan D is called a high deductible health plan, with one
important exception. The deductible is $5,000/person and
$10,000/family with 100 percent coverage thereafter.
CHAIR DYSON asked if Plan D is associated with a health savings
account.
MR. BARNHILL said no, and that's why relatively few people elect
Plan D. He explained that high deductible health plans started
when employers said they couldn't sustain health insurance costs
that were increasing at 7-9 percent a year. The solution was to
shift the cost to the employee, which creates moral problems
with employees. Over time, these high deductible plans have been
married with health savings accounts where the employer
contributes some amount up front into a savings account that the
employee can use to defray the costs that are subject to the
deductible.
He highlighted that public plans began to adopt high deductible
health plans, and they were rebranded Consumer Driven Health
Plans (CDHPs). The employer contributes about 50 percent of the
deductible. He noted that the State of Indiana has had
considerable success with this.
CHAIR DYSON noted that they're pretax dollars.
MR. BARNHILL said the advantage of these accounts is that they
roll forward, they're portable, and the employee can contribute
a certain amount. Another phenomenon with CDHPS is that
employees become more engaged in how much their health care is
costing, and that helps control price growth.
9:58:11 AM
CHAIR DYSON asked if the state is trying to make information
about costs and services available to employees online.
MR. BARNHILL said yes; it's a movement nationally to increase
price transparency. The Centers for Medicaid and Medicare
Services (CMS) recently disclosed pricing at hospitals
nationwide, which helps create price competition.
CHAIR DYSON asked if the cost information includes what the
discount is for those that have volume discounts.
MR. BARNHILL replied he didn't know if the commercially
available tools show the charged cost or the incurred cost.
CHAIR DYSON said it's ultimately an important question because
the discounts for volume are large. He questioned whether they
were as high as 30 percent.
MR. BARNHILL said the discount can range from 6 percent to 50
percent, so it is an important question.
SENATOR OLSON asked how the retiree plan compares to the active
plans.
10:02:48 AM
MR. BARNHILL said the AlaskaCare Retiree Plan covers all public
employee retirees. In addition to State of Alaska employees it
includes the 159 municipal entities that are members of PERS and
all 60 Teacher Retirement System (TRS) school districts. About
41,000 retirees and a total population of 65,000 are covered. It
is somewhat different from the active plan; the deductible is
$150, it does not cover dependents to age 26, and it does not
cover preventive care. There has been pushback on those two
omissions but DOA is reluctant to add coverage without an offset
to the cost structure. This will be discussed more fully this
fall.
He suggested that a theme in the Affordable Care Act is that
individuals should pay some reasonable amount towards health
care, and Alaska is behind the curve. When people have skin in
the game, they pay closer attention to health costs and that
helps to control prices.
10:06:32 AM
CHAIR DYSON asked if any state insurance or bargaining units
allow employees to opt out.
MR. BARNHILL said not AlaskaCare; by statute the state has to
provide health insurance to all full time and part time
employees. He offered his belief that no ASEA employees are
allowed to completely opt out. In the past some school districts
have allowed employees to opt out if they can demonstrate they
have other coverage.
10:08:37 AM
CHAIR DUNLEAVY referenced the benefit credit illustration on
slide 5, and asked what incentive the union health care plans
have to contain premium costs outside of relating the dollar
amount of the state benefit credit.
MR. BARNHILL discussed slide 5, which shows historically what
has happened to the benefit credit. In FY01 the state
contribution per employee per month was $515 and in FY14 the
benefit credit is $1,389. The 7-9 percent increase that the
state pays per year is cause for concern because it's
unsustainable, he said. He acknowledged that for the ASEA Health
Trust Plan there is no incentive to restrain the growth of the
benefit credit. Their incentive is to maximize the growth of the
credit in order to keep the plan fully funded and with healthy
reserves. Any more than that would go to improving benefits and
reducing deductibles. The state and the union want all employees
to have high quality health care, but how the costs are
structured creates some perverse results. That is something that
needs to be adjusted, he said.
10:11:47 AM
MR. BARNHILL directed attention to slide 9 to discuss
utilization of services. The chart shows that one percent of any
group of members in a plan will incur [29.3] percent of the plan
costs and five percent will incur 50-60 percent of the plan
costs. He opined that this is the biggest issue facing the
country today, and the Affordable Care Act does not directly
change this.
This year the country will expend $2.9 trillion in health care
costs, and Alaska residents will spend $8.4 billion. Nationally
costs have been increasing 4-5 percent and the Centers for
Medicare and Medicaid Services predict that cost growth will
rise to 6 percent with the Affordable Care Act. He reiterated
that five percent of the people in the country are incurring 50
percent of the costs. That is roughly $100,000 per year per
claimant in that category.
SENATOR DUNLEAVY asked if the costs associated with that group
are behavior driven.
MR. BARNHILL agreed that some are behavior driven, but most are
not. Some are genetic predispositions and some are just bad
luck. For example, AlaskaCare currently has a spike in end stage
renal disease claims; one member in the plan last year incurred
$2 million in claims.
10:15:06 AM
MR. BARNHILL reviewed a chart of unit cost of services for
Washington state versus Anchorage, and the percentage that were
Medicare.
Procedure WA; %Medicare Anchorage; %Medicare
Total Hip Arthroplasty $5,409; 305.2% $12,155; 685.9%
Fragment Kidney Stone $2,120; 183.6% $8,200; 710.1%
Sinus Endoscopy/Surgery $871; 235.4% $2,620; 708.1%
Inject Spine L/S (CD) $683; 312.4% $1,260; 576.3%
Umbil Hernia Reduce>5yr $1,229; 232.1% $3,385; 639.4%
He directed attention to AlaskaCare goals going forward:
Provide high-quality health care at a reasonable and fiscally
sustainable cost.
· Contract with high value-add vendor partners.
o On January 1, 2014 AlaskaCare will transition to
its new health care partners. AETNA has a large
Lower 48 discount provider network that provides
substantially more value that will help the
retiree health plan. ModaHealth is a large dental
network that has a substantial presence in
Alaska.
· Increase member engagement.
o The State of Indiana provides a model for a consumer-
driven health plan (CDHP).
· Support evidence-based medicine and promote data-driven
decision making.
o A recent study suggests that a large percentage of
health care lacks a rational evidence basis.
o AETNA has a library of evidence-based clinical policy
bulletins for deciding whether care is evidence-based
or not. National studies show that some providers will
provide care that is contraindicated. The goal is to
ensure that AlaskaCare members are not exposed to that
kind of care delivery.
· Collaborate with providers to transform the Alaska health
care market.
· Look for opportunities to scale.
10:17:40 AM
CHAIR DYSON commented on physician allegations that carriers
sometimes won't pay for a prescription or medical care when it
might be the best alternative.
MR. BARNHILL clarified that he wasn't suggesting that large,
disruptive changes would be made on January 1, but things like
better pharmacy management should be explored. He noted that in
the next five years there will be a large influx of new FDA
approved specialty drugs that are very expensive, and the state
wants to get a handle on those.
10:19:59 AM
SENATOR OLSON asked for an example of contraindicated treatment
that actually did harm.
MR. BARNHILL offered to provide the national study that he
referenced.
MR. BARNHILL continued to discuss the AlaskaCare goals going
forward.
· Collaborate with providers to transform the Alaska health
care market.
o Improve access to contracting physicians and
providers.
o Improve predictability and performance of contracts.
o Address egregious charges and rates for targeted high
volume procedures.
o Identify and engage delivery system partners committed
to designing transformative solutions.
o Encourage deliver system investment in integrated care
deliver. The patient centered medical home (PCMH) is a
coordinated care model as opposed to silo care. The
PCMH model also has integrated pricing. The
accountable care organization (ACO) is another cost
management model that's being explored.
CHAIR DUNLEAVY referenced the statement that volume reduces
costs, and asked if he anticipates that entities such as
boroughs and municipalities will want to be part of this
concept.
10:23:26 AM
MR. BARNHILL replied scale is extremely important and fragmented
volume impacts everything. The AlaskaCare Active Plan has about
17,000 covered lives and the four union health plans have 30,000
some covered lives. Both pay a third-party administrator and
receive pricing scales adjusted to their volume. He said he'd
argue that pricing would be less for 47,000 covered lives.
He noted that other state plans and retirement plans have
achieved economies of scale by covering state, hospital, and
school district employees. The benefits they're paying are
fractions of what Alaska is paying. A recent Kaiser Family
Foundation survey found that the lowest cost health plan under
the exchanges is in Pennsylvania; for a 27-year-old who gets
equivalent to the AlaskaCare Standard Plan, the cost per month
is $134. Those plans are affordable because there's scale and
competition in those markets. Alaska doesn't have scale and
competition; the State of Alaska is paying a benefit credit of
$1,389/month, which is extraordinary on a nationwide spectrum.
MR. BARNHILL said opportunities to scale would decrease
fragmentation in health care delivery, provide an opportunity to
save costs, and eliminate the somewhat counterproductive
equation where one plan offers a certain type of coverage that
another doesn't. For example, the ASEA Health Trust Plan
provides $5,000 worth of hearing aid coverage over three years,
whereas the AlaskaCare Plan provides $800 worth of hearing aid
coverage over a three year period.
By comparison, the State of Texas has a statute that requires
that everyone have access to the same health plan. That means
that the president of a state university has the exact same
access to a health care plan as a janitor in a state hospital.
He suggested that it's an interesting policy question whether
access to health care should be a product of relative advantage
at the bargaining table or a matter of equal access to all
public employees. He expressed concern that in Alaska access to
health care is in some respects a function of bargaining
leverage.
10:29:43 AM
MR. BARNHILL reviewed the things the State of Alaska is watching
regarding the delivery of health care.
· Onsite clinics. The State of Montana and HCCMCA are
exploring this option.
· Centers of Excellence. This is a product of the volume for
discount medical equation with a quality component built
in.
· Narrow networks. This is difficult to achieve in Alaska
because of the relatively few providers.
· Reference pricing. This is also known as B schedule pricing
and is similar to what Medicaid and Medicare does. It's a
way of doing cost management. He noted that the California
public employee system is exploring this cost management
tool.
· Private exchanges. Insurance carriers and actuarial firms
are developing private exchanges and encouraging private
firms and corporations to outsource all health care
administration to them as a third party entity. Walgreens
and IBM have recently done this, and these will probably be
very popular in the future. Whether they will come into
public places is unclear.
· Consumerism and transparency tools. There are a variety of
tools on the market for increasing price transparency for
members so that they're informed consumers.
· Impact of public plans on health care market. The state is
spending a great deal of time on this with the important
goal of delivering high quality health care to all
employees at a reasonable and sustainable cost.
10:34:33 AM
SENATOR GIESSEL commented that it's frustrating to be discussing
how to pay for health care when it's the lifestyle choices that
people have made that account for more than 70 percent of
chronic disease problems. It's also frustrating that since about
2009 there has been a Health Care Commission whose main charge
is to come up with a health care plan for the state and they
don't seem to be making any headway. She said it would be
interesting to hear what the Health Care Commission is doing,
but she didn't know if there was a solution to the disparity of
costs between the Pacific Northwest and Alaska because the
Alaska market is small and has little competition.
MR. BARNHILL agreed that solving the health care problems
probably isn't feasible, but it is feasible to work on them
responsibly. He highlighted that the state has done a number of
things in the last few years to address lifestyle choices such
as the new wellness program and preventive care. He acknowledged
that these may or may not pay off.
CHAIR DYSON asked if there is an estimate of potential savings
if all public employees are covered under the same plan.
MR. BARNHILL said no, but there would certainly be savings in
administration and the volume discount savings are a product of
negotiating ability.
CHAIR DYSON asked if there are examples nationally of private
employers consolidating their unions to get volume discounts.
MR. BARNHILL said he didn't have that information, but private
employers have indicated they are going to address rising costs
by going to a private exchange, shifting the cost to employees,
or stop providing health insurance altogether. He noted that the
National Council of State Legislatures (NCSL) has a health care
webpage that provides a description of the public plans in all
50 states.
10:40:07 AM
CHAIR DUNLEAVY commented that if it's not possible to get
control over the root drivers of cost, the only viable solution
is to shift cost. He asked where the resistance will come from
this year and next, if the state goes through the process of
shifting costs.
MR. BARNHILL replied everyone that has a share in the payment of
medical costs has an interest in this. He clarified that he
isn't suggesting that cost shifting is the sole solution, but
the state is going to explore some modest cost shifting as well
as cost controls. State and local governments in Alaska pay more
than 30 percent of health care. That's almost double the
national average and it's not sustainable. He concluded that as
employees are given more skin in the game they're going to help
control prices, and that's a good dynamic.
CHAIR DYSON thanked Mr. Barnhill for the valuable, clear and
concise presentation.
10:45:25 AM
CHAIR DYSON called an at-ease.
^Universal Space Standards
Universal Space Standards
CHAIR DYSON reconvened the meeting and welcomed Mr. Thayer.
10:53:29 AM
CURTIS THAYER, Deputy Commissioner, Department of Administration
(DOA), stated that the presentation will cover the work that's
been done over the last 10 months to implement universal space
standards (USS) in executive branch offices. Following the
presentation there will be a tour of renovations in the Robert
B. Atwood Building.
MR. THAYER explained that DOA manages 17 buildings in the Public
Building Fund (PBF). This is about 1.6 million square feet of
office space with an annual cost to the state of approximately
$21 million. The DOA also administers 255 leases with about 4
million square feet of office space and an annual cost of $50
million. Combined this is about $70 million annually, and the
state decided to look for cost savings.
MR. THAYER reviewed the real estate portfolio under the
Department of Administration, Division of General Services (DGS)
management. He highlighted that the Linny Pacillo Parking Garage
and Office with 369,000 square feet, the Robert B. Atwood
Building with 338,000 square feet, the State Office Building &
Parking Structure in Juneau with 287,850 square feet, and the
Geological Materials Center Building with 100,908 square feet
are the four largest buildings in the portfolio.
MR. THAYER said the cost of lease space has been driving the
conversation in recent times. In FY01 DOA managed about 1
million square feet of office lease with a total annual cost of
$21 million. In FY13 the total square footage had grown to 1.4
million, but the total annual lease cost is almost double at
$36.7 million.
MR. THAYER compared the cost per square foot for private lease
versus state lease. In Juneau, the most expensive private lease
is $2.86 per square foot versus the state office building which
is $2.06 per square foot. In Anchorage, the most expensive
private lease is $3.75 per square foot versus the state owned
Atwood Building that costs $1.56 per square foot. In Nome, the
most expensive private lease is $3.00 per square foot versus the
Nome State Office Building which costs $2.50 per square foot. In
Fairbanks, the most expensive private lease is $2.63 per square
foot versus the state lease which is $2.39 per square foot.
He said the state government is too large to collapse the
private leases into the state owned buildings, but the
comparison does give perspective for securing new leases and
additions to leases in the private market. He noted that in the
past agencies have asked for additional space, and there has
never been a rationale applied to determine need or what how the
space will be used. He said the 10-month review has uncovered
things that required corrective action.
10:59:07 AM
CHAIR DYSON asked if there are bargains in the private sector,
because there's a perception that there is a surplus of class A
office space available.
MR. THAYER acknowledged that there are bargains, but most new
state leases are for 20 years. State leases are very lucrative
and landlords generally work to maintain the relationship.
MR. THAYER reviewed the advantages of the new space standards.
He said that lease cost savings usually result in operating
budget savings. There is enhanced collaboration between teams
and better access to natural light. The new standards provide
equitable treatment of space, including the reduction of private
offices, and the new open concept improves air quality and
ventilation and more balanced heating and cooling. Private
conversation spaces and functional break rooms have been
increased. Finally, the new system furniture is ergonomically
correct to enhance employee health and fitness.
11:02:49 AM
SENATOR GIESSEL asked how private conversations of a very
sensitive nature will be accommodated.
MR. THAYER explained that part of the analysis is a meeting with
the commissioner's office to find out about special needs within
the department, because it's not a "one size fits all" approach.
For example, there are no plans currently to have universal
space standards for the Department of Public Safety.
MR. THAYER discussed the measures DOA has taken to communicate
with stakeholders. In 2011 the state hired the architectural and
interior design firm ECI/Hyer to look at space standards, and in
2012 the Governor's Office issued a policy to agencies on new
universal space standards. DOA developed an outreach to agency
leadership, administrative services directors, procurement
staff, and employees on the new standards. There have been site
visits with agency leadership and staff at the Douglas Island
building, the Nome State Office Building, The Atwood Building,
the State Library, Archives and Museum (SLAM), and the State
Office Building in Juneau. There have been workshops for
procurement and facilities staff, and tours of redesigned spaces
that are open to anybody in state government.
11:08:16 AM
CHAIR DYSON asked if representatives from the bargaining units
are included in the process.
MR. THAYER answered yes.
MR. THAYER reviewed some of the questions that have come up
about the new space standards.
· Noise and privacy. There is a learning curve for all
employees, but employees are encouraged to communicate
respectfully, use private booths for personal phone calls,
and use headphones when needed.
· Confidential information. The clean desk policy envisions
that employees lock up all confidential information when
they're not at their desk and log off their computer.
Additionally, agencies group people according to the work
they do.
· Configuring the workstation. There are several options for
agencies to pick from. The option to personalize the
workstation is up to the department.
CHAIR DYSON suggested he conserve time by hitting the high
points and answering questions.
11:12:26 AM
MR. THAYER stated that DOA looked at six ways to fund the
project: departmental operating funds; cost amortization within
the monthly lease payment; savings realized in the reduction of
leased space; state line of credit at 3 percent over a 10 year
term; major building renovation capital funding; and federal
funds.
MR. THAYER explained that the potential impact of USS is
reviewed through a rigorous analysis and managed on a case-by-
case basis. DOA works with affected agencies on a fiscal
analysis that looks for a return on the investment in 10 years
or 20 years. The analysis includes looking at the mission of the
agency, public interface, needs of the employees, parking
capacity, and current lease terms. If there is no return on the
investment, status quo is maintained or partial implementation
is considered.
He provided an example where DOA/DGS estimates a 10 year overall
savings of $50 million within 10 years and projected 20 year
savings in excess of $156 million with the implementation of
USS. Cost savings will come from more efficient heating, cooling
and ventilation and reductions in personal appliances. He noted
a survey of the Atwood Building showed almost 200 refrigerators
not in break rooms, 67 microwaves, 3 toasters, and 2 George
Foreman Grills plugged in at personal workstations.
MR. THAYER reviewed current implementations at the Atwood
Building. The 4th floor started and finished with 97
workstations, but the two private offices were removed. Before
the remodel there were 75 personal appliances and after there
are 8 appliances in the café. The employees have access to
natural light and a fully equipped café. The project fund source
was primarily federal.
CHAIR DYSON said he assumes that all commissioners are being
moved to interior offices.
MR. THAYER replied there are exceptions.
SENATOR OLSON questioned the federal funding.
MR. THAYER explained that this was the Office of Child Services
and they applied for and received a federal grant to pay for the
remodel.
SENATOR OLSON asked the total cost of the 4th floor remodel.
MR. THAYER answered that the average cost of a cubicle is about
$5,500, so the total is about $300,000. He noted that before USS
was adopted, the state spent up to $14,000 per cubicle.
He displayed before and after photos of the Atwood 4th floor and
reviewed the remodel of the 18th floor. Workstations from three
floors and a private lease were consolidated to this floor.
There were 23 workstations and 19 private offices before and 43
workstations and 8 private offices after. The new space has two
conference rooms, one file room, centralized mail room, and
employee telephone booths. All 37 personal appliances were
removed. The project funding source was primarily agency funds
and they're saving $67,000 per year.
The 7th floor of the State Office Building in Juneau was also
remodeled. They eliminated 4 of the 5 private offices, increased
the size of the conference room, made natural light available to
all 31 staff members, and made the customer service area more
inviting.
11:21:38 AM
MR. THAYER said plans for implementation in the near term
include the Atwood Building, Douglas Island Building, Nome State
Office Building, State Library, Archives and Museum, and the 8th
floor of the State Office Building in Juneau. Plans for
implementation over the long term include other Public Building
Fund buildings, state-owned office buildings, facilities with
expiring leases, building remodels, and agency needs. The
general timeline for USS implementation is in excess of 10
years.
MR. THAYER explained that there would not be a tour of the Linny
Pacillo Parking Garage today because the floor was being poured.
The cost to build out this 15,000 square foot space is about
$290,000 as opposed to more than $600,000 in the private sector.
The Permanent Fund Dividend Corporation and Child Support
Services will occupy the space, and the Department of Motor
Vehicles is next door. The public will be able to park in the
garage and do business with three state agencies, which will be
very convenient. Employee training spaces that are currently at
Ship Creek will be moved to the space that the PFD Corporation
and CSS vacate in the Atwood Building.
MR. THAYER discussed the scheduled update to the Nome State
Office Building. Construction is scheduled to start January 2014
and should be complete in April 2015. The project budget is
$11.6 million, and it is fully funded by the legislature. The
remodel will add two new agencies to the building for a total of
eight, a café, two conference rooms, and an ADA public restroom.
He noted that due to the preference of a member of the
legislature, the building will be green in color.
11:26:47 AM
MR. THAYER reported that the legislature fully funded the $18.2
million Douglas Island Building update. Construction will start
in April 2014 and is expected to be complete in August 2015. Two
agencies occupied the building before and the remodel will make
room for a third agency. New amenities include two cafes, three
larger conference rooms and increased parking.
MR. THAYER explained that the state purchased the 101,000 square
foot Sam's Club building in July 2013 and it will become the new
Geologic Materials Center. The legislature fully funded the
$24.5 million project, construction will start next month and
occupancy is projected in July 2014.
MR. THAYER highlighted that the "Space Standards" webpage,
www.doa.alaska.gov/dgs, is available for employees and others to
review. It contains the Space Standards Quick Guide, Space
Standards Manual, Space Standards Analysis Report, and Space
Standards Frequently Asked Questions. He concluded the
presentation and gave directions for the tour.
11:31:21 AM
There being no further business to come before the committees,
the joint meeting of the Senate State Affairs Committee and the
Senate Labor and Commerce Committee adjourned at 11:31 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Agenda - Senate Labor State Affairs Joint Hearing - Oct 17 2013.pdf |
SSTA 10/17/2013 9:00:00 AM |
Joint Senate State Affairs and Labor & Commerce Committee |
| SLC Oct 17 2013.pdf |
SSTA 10/17/2013 9:00:00 AM |
Joint Senate State Affairs and Labor & Commerce Committee |
| DOA-USS_SenLaborCommerceStateAff(Oct17-2013) Updated 14Oct13.pdf |
SSTA 10/17/2013 9:00:00 AM |
Joint Senate State Affairs and Labor & Commerce Committee |