HB 267-SHORT-TERM HEALTH CARE INSURANCE    3:48:20 PM VICE CHAIR SPOHNHOLZ announced that the next order of business would be HOUSE BILL NO. 267, "An Act relating to short-term health care insurance; and providing for an effective date." 3:48:26 PM REPRESENTATIVE DRUMMOND moved to adopt the committee substitute (CS) for HB 267, Version 31-LS1521\S, Marx, 3/10/20, as the working document. VICE CHAIR SPOHNHOLZ objected for discussion purposes. 3:48:50 PM REPRESENTATIVE ZULKOSKY, as prime sponsor of HB 267, introduced the CS for HB 267, Version S, as follows: This legislation seeks to enact consumer protections for Alaskans insured by short-term limited duration (STLD) health insurance plans. This bill, from our perspective, is narrow and seeks to remedy the lack of protections in Alaska related to short-term health insurance. In the last two years, many states have enacted similar protections for consumers. This legislation seeks to bring similar standards to Alaska and ensure that Alaskans are no longer put at undue risk for significant financial hardship posed by these plans. REPRESENTATIVE ZULKOSKY added that Version S reflected changes suggested by the Division of Insurance, [Department of Commerce, Community & Economic Development (DCCED)]. The proposed legislation had a zero fiscal note offering the opportunity to protect consumers at no cost to the State of Alaska. 3:50:32 PM JULIA BUSCHMANN, Staff, Representative Tiffany Zulkosky, Alaska State Legislature, on behalf of Representative Zulkosky, prime sponsor of HB 267, presented Version S, with the use of a PowerPoint presentation. She began with slide 2, entitled "Short-Term Limited Duration Health Insurance," which read: ? Intended to fill a temporary gap in health coverage. ? Prior to October 2018, STLD plans were permitted for a maximum of 90 days. ? STLD plans offer lower premiums and are advertised as an affordable alternative to plans that, while more expensive, offer comprehensive essential coverage. ? The fine print: These plans do not meet federal qualifications for minimum essential coverage. ? They do not provide coverage for the Essential Health Benefits, the 10 categories of health care that federal law deems essential. ? They are able to charge more for those with pre-existing conditions. ? They can deny an individual's enrollment in a health plan due to their health status, age, gender, or other factors that may affect the purchaser's use of insurance. MS. BUSCHMANN added that STLD plans, also referred to as "short- term plans" or "short-term insurance," were defined by the federal government as insurance coverage with an expiration date of less than 12 months - a definition in place for nearly 20 years. In 2016, STLDs were redefined as lasting up to 90 days with no renewals. She said Alaska statutes currently lacked consumer protections for individuals with short-term plans; short-term insurance was not required by statute to cover services that were otherwise mandated by health insurance, such as infant hearing screening, telemedicine, diabetes equipment, mammograms, and screenings for colorectal, prostate, and cervical cancers. The plans could exclude coverage for entire categories of benefits, charge higher premiums based on health status, exclude coverage for preexisting conditions, and impose annual limits. They had significantly higher out-of-pocket cost-sharing than other plans available on the individual market. She concluded that while the plans were sold as individual health coverage, they very often did not cover consumers. 3:52:37 PM MS. BUSCHMANN turned to slide 3, entitled "Federal Rule-Making Finalized in October 2018," which read: ? The final rule amended the definition of short-term limited duration insurance: ? Lengthening plan duration to 364 days ? Increasing renewal options to permit a total coverage period of 36 months ? Possible impacts noted in the federal rule: ? "Reduced access to some services and providers for some consumers who switch from available individual market plans and possibly reduced  choice for individuals remaining in the individual market risk pools." ? "Potential increase in out-of-pocket costs for some consumers, possibly leading to financial  hardship." ? "Potential increase in uncompensated care by hospitals." MS. BUSCHMANN referred to the graph on slide 4, entitled "Estimated Costs Between Plans six months following diagnosis," to point out the high out-of-pocket costs to the consumer associated with the new rule. The estimates on the graph showed the differences in costs between Affordable Care Act (ACA) [the U.S. comprehensive health care reform law enacted in March 2010], compliant plans, and STLD plans. She explained that the graph demonstrated the possible cost for an individual with a six-month plan, the possible cost for an individual with a three-month plan including costs from loss of coverage, and the risk of allowing plans that did not cover preexisting conditions. If an individual's three-month plan ended and was renewed while the person still required [medical] treatment, short-term plans could exclude coverage for services associated with a condition through medical underwriting. She gave an example: If the individual's preexisting condition was high blood pressure, and the person had a stroke as a result, the insurer could refuse to pay for any treatment related to the stroke, even if at the time the person had short-term insurance. 3:54:15 PM MS. BUSCHMANN moved on to slide 5, entitled "Prevalence of State Regulations January 2020," which illustrated by way of a map that 32 states and the District of Columbia had regulated the STLD plans: in 8 states STLD plans were banned or precluded based on longstanding requirements; some states had chosen to limit plan duration to 90 days or six months; other states had opted for a full year including renewals. She referred to the handout in the committee packet entitled "Duration and renewals of 2019 Short Term Medical plans by state," for greater detail on state policies. She relayed that on slide 5, states were categorized by permitted length of plan duration, but she suggested that there were other policy areas in which states could enact consumer protections. MS. BUSCHMANN referred to slide 6, entitled "State-level policies that have since been enacted," which read: ? Limit initial plan duration ? Limit number of renewals ? Limit maximum duration ? Limited availability ? Coverage for pre-existing conditions ? Some states have opted to require coverage for pre- existing conditions only upon plan renewal ? Coverage for essential health benefits ? Required notice to the consumer specifying that STLD plans do not qualify as providing minimum essential coverage MS. BUSCHMANN relayed that it was possible to limit the availability of the plans: some states didn't allow them to be purchased during the open enrollment period - the period when people could purchase plans on the federal marketplace - or during an individual special enrollment period; Maine required that short-term plans be purchased in person, and there were no short-term plans being sold in Maine currently. MS. BUSCHMANN continued by saying states had required short-term plans covered certain services: Indiana required short-term plans cover emergency services; the District of Columbia requires that plans cover services sought in the prior 12 months, if related to a preexisting condition. Some states require that the insurer provide a notice to the consumer relaying that it might medically underwrite the policy and not cover certain services that do not qualify as minimum essential coverage. 3:56:07 PM MS. BUSCHMANN turned to slide 7, entitled "Features of HB 267," which read: ? Defined Duration: The initial term may not be more than 90 days, which conforms with the duration of STLD plans currently sold in Alaska. ? Limited Renewal: An individual can renew an STLD plan once. ? Required Coverage for Essential Health Benefits and Pre-Existing Conditions: A plan must cover the ten essential health benefits and services related to a pre-existing condition. ? Limited Availability: STLD plans may only be sold outside of the federal marketplace's open enrollment period or an individual's special enrollment period. MS. BUSCHMANN added that the provision under the last bullet on the slide is important because it required that a person would not be purchasing inherently temporary insurance - a short-term plan - when he/she had the opportunity to purchase longer-term insurance that provides comprehensive coverage. MS. BUSCHMANN moved on to slide 8, entitled "Summary of Changes for Proposed CS HB 267," which read in part: ? Limited Renewal: An individual can renew an STLD plan twice. ? Required Coverage for Emergency Services: A plan must, at a minimum, cover ambulatory, emergency, hospitalization, and laboratory services. ? Protections for Pre-Existing Conditions: A plan must provide coverage for services associated with pre- existing conditions if an individual renews their plan. 3:57:30 PM VICE CHAIR SPOHNHOLZ referred to the third bullet on the slide and asked what the reasoning was for that provision. 3:57:56 PM REPRESENTATIVE ZULKOSKY explained Director [Lori] Wing-Heier, [Division of Insurance, DCCED] had relayed some Alaskans reported they lost [health insurance] coverage or had high medical bills, because at the end of 90 days, their policies had to be underwritten; any new medical conditions identified in the initial 90-day window were excluded from coverage. For example, an Alaskan had a leg injury during the initial 90-day period; when the individual had surgery on the leg during a different 90-day period, he/she was told it was a preexisting condition and the cost would not be reimbursed. The consumer was then responsible for the entirety of the coverage being denied. MS. BUSCHMANN continued with slide 8, which read in part: ? Increase in the Cost-Sharing Provision: A plan can allow up to $10,000 for self-only coverage and up to $19,500 for family coverage. MS. BUSCHMANN explained that the cost-sharing was increased to reflect that lower premium plans tend to have higher cost- sharing. 3:59:15 PM REPRESENTATIVE ZULKOSKY drew the committee's attention to the handout in the committee packet describing the STLD plans offered in Alaska. MS. BUSCHMANN reported there were two insurance companies allowed to issue plans in Alaska - Moda Health and Independence American Insurance Company (IAIC). The plans on the handout were those of IAIC. 3:59:47 PM REPRESENTATIVE ZULKOSKY referred to the plans on the handout - offered in Juneau, Bethel, and Anchorage. She pointed out the disparity between the premiums for a female and those for a male, even though pre-natal care and prescriptions drugs were not covered. She relayed that a female paying for a STLD plan is paying $132 per month for the least expensive option, or just over $1,500 per year; the deductible is $10,000; the coinsurance rate is 50 percent after the deductible is paid. She said, "Essentially while this is being marketed and sold in Alaska as being a health care coverage option, it's essentially not really covering Alaskans who are paying several thousand dollars a year to receive this coverage." She stated that with the understanding that there are Alaskans who may experience a gap in insurance coverage and need a short-term plan until they could purchase more comprehensive coverage, the intent of the proposed legislation was to put parameters around these plans to ensure Alaskans are not exposed to an undue cost burden. 4:01:51 PM VICE CHAIR SPOHNHOLZ asked why the insurance cost more for women, considering the typical additional coverages for women like reproductive health care were not covered under the plans. 4:02:27 PM SARAH LUECK, Policy Analyst, Center on Budget and Policy Priorities, offered her belief that younger women tended to seek more health care. She acknowledged that without maternity coverage and prescription drug coverage, it was difficult to understand the disparity between women and men regarding cost. She said the higher rates for women reflected practices of the private insurance market before ACA and opined that the short- term plans adopted these practices because they can do so. VICE CHAIR SPOHNHOLZ asserted any woman would maintain the reason young women use health care more than men is because they are using birth control to prevent pregnancies or because they are pregnant; therefore, if those services are not covered, it makes no sense that health care would cost more. 4:04:20 PM MS. LUECK relayed that having observed the changes in the short- term plans and the development of the market over the past couple years as the federal rules have changed, she has heard of situations in which people have been harmed under these plans - with expensive claims not covered. She explained the consumer may understand the plan was not as good as private individual market insurance; however, the surprises for the consumer were not just with benefits not being covered, but with the preexisting exclusions, for which the insurers had a great deal of latitude. There have been cases in which claims were not covered due to some health condition in the person's past that is not readily recognized by the person to be associated with the present claim. The result is a "bait-and-switch" situation for the consumer in which the person has an expensive and unexpected catastrophic incident occur and discovers that the "catastrophic" insurance does not cover it. MS. LUECK offered that the data available from the National Association of Insurance Commissioners (NAIC) shows that many of the plans are popular nationwide; they have a medical loss ratio (MLR) of about 40-50 percent. The MLR is a measure of the percentage of the premiums that a health plan spends on medical claims. In the regular individual insurance market, there is a requirement for insurers not only to cover essential health benefits (EHB) and preexisting conditions, and to rate men and women the same, but to spend a minimum portion of the money collected from consumers on actual medical care - 80 percent. The short-term market insurers are not under the 80 percent requirement and, therefore, spend much less. MS. LUECK concluded, "People may feel, when they buy a short- term plan, that they're getting a good deal or that it's better than nothing." If they are healthy and young, they may be able to find a plan that costs a few hundred dollars per month; however, it may be too much of an expense for the protection they are getting and the risk of financial harm. 4:08:19 PM VICE CHAIR SPOHNHOLZ asked for clarification of MLR. She expressed her understanding that it is the amount of funds paid as premium that are used to pay for care. MS. LUECK answered, "Exactly." She explained that it is the portion of the premiums of the entire group of consumers that is used for medical care. She stated that the rest of the money is used by the insurer for overhead, administrative costs, chief executive officer (CEO) salary, and profit. She further stated that in the regular individual insurance market, the companies were required to spend 80 percent of the premiums on medical care and quality improvement; the remaining 20 percent could be used for overhead, CEO salary, and profit. She maintained that this requirement incentivized companies to not price the insurance plans too high. MS. LUECK continued by describing the short-term plans - without the 80 percent requirement: Administrative costs were not limited as much. Short-term plans permitted underwriting, which the regular individual insurance market did not permit. Underwriting is an expensive service; it involves looking into the medical records of a consumer, examining medical histories, speaking with physicians, and determining if the consumer was honest and fully disclosed medical conditions upon application. She said that medical underwriting involved a broker and broker commission. The result is that the short-term plans are much more expensive than the ACA plans. 4:11:03 PM REPRESENTATIVE ZULKOSKY confirmed for Vice Chair Spohnholz that Moda and IAIC are the two insurance companies that offered the short-term plans, and Moda is just now getting into the market. She relayed there was an interest among insurance companies to expand into the short-term insurance market in Alaska, which is why it was important to establish consumer protections. VICE CHAIR SPOHNHOLZ asked whether the proposed legislation provided a limit for the MLR. REPRESENTATIVE ZULKOSKY answered that there is not currently an MLR [limit]; however, there is precedence in other states and would be considered for Alaska. 4:12:28 PM VICE CHAIR SPOHNHOLZ asked for comment on the proper role of the short-term plan and the array of options for health care in Alaska. LORI WING-HEIER, Director, Anchorage Office, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), answered short-term plans did not offer very good coverage. She maintained there was a need for short- term plans in the event of a "gap" in coverage. She pointed out that currently many people were suddenly without jobs due to COVID-19 [a novel coronavirus disease]. She mentioned the U.S. Consolidated Omnibus Reconciliation Act (COBRA) was an option for some people but is extremely expensive. She offered other reasons for suddenly losing health insurance - a divorce or the death of a spouse. She maintained that the short-term plan provided a stopgap measure until a person could determine his/her next step - employee benefits, the individual insurance market, [U.S. Centers for Medicare and Medicaid Services (CMS), U.S. Department of Health and Social Services (HSS)] health insurance programs ("Medicaid") and ("Medicare"), or something else. VICE CHAIR SPOHNHOLZ offered her understanding that in the regular insurance market, Alaska managed the MLR; she asked whether there were other states that managed the MLR proportions. MS. WING-HEIER answered that the MLR [of 80 percent] was a provision of ACA; all states in that market must comply. She mentioned that in August 2019, Primera [Blue Cross] sent checks to its consumers, because it had not met the 80 percent MLR and, therefore, was required to refund the money. She added that all insurers must do the same under the ACA for the individual and small group markets. VICE CHAIR SPOHNHOLZ asked whether any states had limited the MLR on short-term limited plans. MS. WING-HEIER replied, "Not that I'm aware of." She offered to provide that information. REPRESENTATIVE ZULKOSKY offered to provide a document to committee members showing all state-level actions on STLD plans in a side-by-side comparison. She said there were MLR restrictions in the following states: Delaware at 60 percent; Kansas at 60 percent; Maine at 50 percent; North Dakota at 55 percent; and Vermont at 80 percent. VICE CHAIR SPOHNHOLZ expressed that it was troubling that 50 percent of a person's premium for a short-term plan was not being spent on health care; a 50 percent profit on health care was excessive. She mentioned the rate differentials between women and men were concerning, as the plans did not cover reproductive health care. She asked for comment on that issue. 4:17:02 PM MS. WING-HEIER replied that she shared that concern; however, the actuarial data indicated that young women are more expensive in terms of health care. VICE CHAIR SPOHNHOLZ asked whether the expense difference is due to health care providers giving young women an annual exam and inoculations. MS. WING-HEIER said that could very well be. VICE CHAIR SPOHNHOLZ related an anecdote: She saw her health care provider more frequently than her husband because she was responsible for the reproductive health care for her family. With an annual exam, she received inoculations and preventative care; but to save money, her husband did not. 4:18:20 PM REPRESENTATIVE TARR asked whether establishing an MLR restriction would create an administrative burden. MS. WING-HEIER said it would for plans that are underwritten. She described the increased administrative burden: There are no questions about preexisting conditions on an ACA plan application, but there are on the short-term plan applications. For processing claims, the short-term plan application would be reviewed more thoroughly to determine whether there was a preexisting condition that disqualified the claim. 4:19:44 PM The committee took a brief at-ease. [Vice Chair Spohnholz returned the gavel to Chair Zulkosky.] 4:19:54 PM REPRESENTATIVE SPOHNHOLZ removed her objection to Version S. There being no further objection, Version S was adopted as the working document. CHAIR ZULKOSKY indicated that HB 267 would be held over.