HOUSE BILL NO. 21 "An Act relating to group insurance coverage and self- insurance coverage for school district employees, employees of the University of Alaska, and employees of other governmental units in the state; and providing for an effective date." 2:34:58 PM Co-Chair Foster invited the sponsor and her staff to introduce the bill. REPRESENTATIVE SARAH VANCE, SPONSOR, introduced HB 21. She offered a PowerPoint presentation "HB 21; School Healthcare Consolidation," dated May 8, 2023 (copy on file). School districts were experiencing challenges in recruiting and retaining teachers and staff, which was an issue compounded by the rising costs of health care. She had attended a local school board meeting in her district at which she heard the teacher representative for health insurance plead with school board members to hold an emergency meeting to discuss what could be done to better recruit and retain teachers. The rising costs of health care and premiums for families were forcing teachers to leave the state or the profession. She recommended the introduction of HB 21 after attending the meeting. Representative Vance advanced to slide 2 and explained that the bill had been offered and heard in prior legislatures, but only as a requirement that all school districts consolidate. She indicated that HB 21 was different in that it supported local control and was completely optional for schools. She moved to slide 2 and relayed that according to an Institute of Social and Economic Research (ISER) study from 2019, there were three aspects of public education costs in Alaska that set it apart from other states: small schools, health care, and energy. Representative Vance continued to slide 3. Alaska had the highest per-capita health care costs in the nation which negatively impacted private and public sectors of the economy. The high costs put downward pressure on wages which made it difficult for schools to offer nationally competitive salaries to teachers in Alaska. Her goal was to ease the financial burden on school districts and give the state more leverage to negotiate with health care providers. She moved to slide 5 and relayed that the bill would amend current statute to allow the option for school districts, the universities, and governmental units such as cities and boroughs to participate in AlaskaCare. The aforementioned entities would have the choice to opt into the pool and enable the Department of Administration (DOA) to negotiate a better cost of health care. Representative Vance continued to slide 5. She explained that the main benefit of consolidation was that it would save money. By expanding the number of participants in a health care pool, the potential for savings increased. Most of the state's school districts were small and carried the cost burden alone. Several school districts had responded to the proposed consolidation and reported possible savings of about $7 million per year. This would allow for some districts to not only close their budget gap but provide better health care to participants. The Mat-Su school district had reported that if all district employees' bargaining units were to be consolidated, the district could save up to $7 million. The savings would be about $3,000 per employee and would equate to a $125 increase in the Base Student Allocation (BSA). If all districts chose to consolidate, the savings would be about $200 million per year. The bill would also provide more health care options. Some districts were facing challenges in finding affordable health care options due to high-use numbers and the bill would expand options to offset high-use. An additional benefit would be that the bill would reduce the burden on staff and allow schools to focus on providing quality education. Representative Vance advanced to slide 6 and concluded that the bill was intended to reduce education costs and better serve the needs of Alaskans. 2:40:59 PM Representative Vance offered to review the sectional analysis (copy on file). Co-Chair Foster replied that he would like to hear the sectional analysis. Representative Vance relayed that she would provide some highlights of the sectional. She indicated that the one change made by the House Labor and Commerce Committee was Section 9: Section 9. Authorizes the Department of Administration to investigate the potential costs of any interested school district, local government, or the University of Alaska, and share that report with the Legislature before the Commissioner approves their admission into AlaskaCare Representative Vance continued by highlighting Section 3 of the sectional: Section 3. Allows the Commissioner of Administration to expend from the public education fund (AS 14.17.300) to the group health and life benefits fund (AS 39.30.095) a total of $100,000,000 or less as needed to pay claims submitted by school district employees who are covered by a policy of self- insurance provided by the state; and, requires the Commissioner of Administration to repay the public education fund, over a period of 10 years, the full amount of the commissioner's expenditures from the public education fund Representative Vance explained that Section 3 had been a particular topic of interest and she deferred to the will of the committee on whether to include it in the bill. She relayed that Sections 4 through 6 contained the majority of the content of the bill. She stated that Section 4 allowed schools districts and the university to be part of the state health care plan. The other sections [Section 5 and Section 6] gave the board of regents, universities, and the Regional Educational Attendance Area (REAA) the legislative authority to optionally participate in the plans. Section 10 authorized DOA to provide group medical insurance to school employees, school district employees, and other governmental employees by means of self-insurance. If it was not beneficial for an entire unit to opt into the pool, DOA could determine that the unit would benefit more through a policy of self-insurance. She emphasized that there were options depending on the cost and the health care provider. Representative Vance continued on Section 12 and explained that it ensured that the bill was applicable to collective bargaining agreements and other contracts that would become legally binding on or after the effective date of Sections 1 through 8. Section 13 would require self-insured school districts to transfer the closing balance of their self- funded insurance reserve account after enrollment in a health care plan administered by the state. It would require that the amounts be applied to offset reimbursements owed by the school district. She continued that Section 14 noted that the bill would not automatically go into effect and would allow for a one-year transition period to adopt regulations and gauge interest in consolidation. It would allow DOA to see the cost and benefits and any required further analysis. Co-Chair Foster invited questions from the committee. 2:45:21 PM Representative Stapp expressed his appreciation to Representative Vance for bringing forward the bill. He asked about the actuarial analysis of the impact on AlaskaCare. He thought that small and high-risk groups would flow into the AlaskaCare plan, and he thought it was unlikely that larger entities like the Anchorage School District would consolidate due to the nature of cost. He understood that the last time the state looked at the plan was in 2014 and he thought it would be good to look at it again. He asked if the sponsor or a representative from the Division of Retirement and Benefits (DRB) wanted to comment on the potential influx of a high-risk population into the plan. Representative Vance responded that she had spoken with DOA and it was not planning on doing actuarial analysis of the bill until it reached the House Finance Committee. She noted that representatives from DRB were available for questions. Representative Stapp asked if someone could provide comments on the overall impact of the bill and of the influx of high-risk individuals on the overall plan. AJAY DESAI, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION (via teleconference), responded that DRB had not done any actuarial analysis yet. The division had only determined initial operational costs based on the initial analysis of the bill, which had been submitted to the legislature. Representative Stapp asked for more information on the method of actuarial analysis. He opined that an actuarial analysis was a key ingredient when determining the viability of the long-term impact of the bill. Co-Chair Foster asked Mr. Desai at what point the actuarial analysis would occur. Mr. Desai deferred the question to his colleague. 2:49:04 PM ANDREA MUECA, HEALTH OPERATIONS MANAGER, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, JUNEAU (via teleconference), responded that the division was planning on testing three scenarios when it conducted the actuarial analysis: a neutral cost impact, a reduced cost impact, and an increased cost impact. Depending on who joins the plan, it was unclear whether the state would save money, lose money, or be financially unaffected. She relayed that the division would get updated analysis within three weeks. Co-Chair Foster noted that part of the reason for the delay was that the cost for the actuarial analysis was substantial. He asked what Ms. Mueca for the expected cost. Ms. Mueca responded that the request would cost around $30,000. Representative Stapp understood that there was a similar analysis conducted in 2014 for the Senate that had a cost of about $200,000. He asked if Ms. Mueca was sure she could do a thorough analysis for $30,000. Ms. Mueca responded that she was not familiar with the 2014 analysis and she would have to look through the study for updated information. She thought the turnaround would be quicker if the division could follow a template for the analysis. Co-Chair Foster thought he saw an email recently that suggested a range of $150,000 to $200,000. Representative Vance commented that the progress of the bill was at the will of the finance committee. Representative Hannan understood that there were two districts represented in the packet of letter of support for the bill (copy on file). She noted that some districts had more than one insurance plan because there were different bargaining units represented by different individuals. She wondered if Representative Vance had received direct communication from other school districts indicating interest in consolidation. She was generally a "huge fan" of universal healthcare, but she also had served on her health plan's trust and understood that teachers were typically expensive to insure. The most expensive periods of time in a person's life were childbearing years and the years proceeding retirement, and many teachers were young women. She asked if the sponsor had heard from the 51 other districts in the state and wondered if other districts were interested in joining the plan. Representative Vance responded that she had emailed all the districts asking for their interest and input and she had heard back from Ketchikan, Kenai Peninsula, and Mat-Su. The districts as a whole had been quiet and she was unsure if districts were still deliberating. The Mat-Su and Kenai Peninsula districts were some of the larger districts and had indicated that they wanted the health care option to be available. Representative Hannan commented that the letter of support from Mat-Su was not in her packet and she would like to see the letter. She was unsure if the Mat-Su district had more than one unit represented in the plan or whether the plan was unified. Representative Vance responded that she would provide the information to the committee. She recalled that Mat-Su had four bargaining units and it was a conversation to see whether some or all wanted to join the plan. She anticipated that each school district or unit would come to DOA and have a conversation about their needs and determine whether the plan would save money while providing the same level of health care, or whether it would be more costly. Co-Chair Foster noted that there was a representative from DOA available for questions. He asked if DOA could comment on the actuarial analysis. 2:56:04 PM KEN TRUITT, LEGISLATIVE LIAISON, DEPARTMENT OF ADMINISTRATION, (via teleconference), responded that DOA would begin an actuarial study when it was requested by the finance committee. It could not begin the analysis until it was formally requested. Co-Chair Foster asked if Mr. Truitt could provide more information about the cost. Mr. Truitt responded that the cost was estimated to be around $30,000. Representative Ortiz asked what went into determining the costs in the fiscal note [by DOA with Control Code vwuQl] of about $350 million per year [he later corrected the number to $350,000]. He asked how the fiscal note was determined. Mr. Truitt responded that the question would be better answered by Ms. Mueca. Ms. Mueca responded that the fiscal note totals had to do with the requirements for staffing. She explained that DRB would need three full-time employees, actuaries, and legal counsel in order to conduct the study. Representative Ortiz noted that he meant to say that the fiscal note totaled $350,000 not $350 million. Representative Galvin commented that the concept of the bill could be a "game changer" for education. She noted that her questions were similar to Representative Hannan's and wanted to know how many districts had indicated interest in the plan. She wondered if districts could help each other if many were interested in the plan. She thought the bill could help the state support its children. 3:00:47 PM Representative Stapp asked what the current per employee per year cost was for AlaskaCare. Ms. Mueca responded that the average per employee per month cost was around $1,734. She would have to calculate the numbers to provide the annual cost. Representative Stapp commented that it was about $20,000 per year based on Ms. Mueca's response. There was a Haight Law Group study [from 2014] that showed a cost of $18,446 per employee per year for insurance. He understood that the goal of the bill was to bring about savings and that some school districts would choose to consolidate to save money. He thought some groups or districts could drive the cost of AlaskaCare up. He reiterated that he did not understand how the actuarial analysis could be conducted for $30,000. Ms. Mueca responded that there was already a starting point for the actuarial analysis which was the reason why DRB was quoted $30,000 for the analysis. She could provide any additional information about the analysis if Representative Stapp would like. Representative Stapp asked for a list of the information that the division was going to examine. He thought that the actuaries would want to look at the employee costs, the deductibles, and other factors. Ms. Mueca would follow up with the information. 3:03:57 PM Representative Coulombe relayed that she assumed the university supported the bill. She asked if her assumption was correct. Representative Vance responded that the university was neutral on the bill and adding the university to the plan was not a necessity. When she introduced a version of the bill four years prior, her school district did not need the plan; however, the district desperately needed the bill four years later. She thought the change spoke to the importance of having health care options for the future because many municipalities that do not currently need the option might need it in future years. Representative Coulombe asked if DOA would help small school districts decide whether it was prudent for the districts to join the plan. Representative Vance responded that Section 9 addressed the issue. She explained it was a requirement that there be a report detailing the potential costs before the commissioner authorized acceptance of the units. Representative Coulombe asked if the prior versions of the bill that mandated participation were driven by Representative Stapp's earlier point that the plan could be overwhelmed by high-needs groups. She asked for Representative Vance's opinion on whether participation should be mandatory. Representative Vance responded that there had been a conversation about mandatory participation in 2014. She stated her understanding that some districts wanted to maintain local control and opposed the idea of forceful consolidation. She added that AEA also opposed making participation in the plan mandatory. Representative Coulombe liked that participation was voluntary. 3:07:27 PM Co-Chair Johnson asked if the information requested by Representative Stapp could be provided to all members. She wondered how many districts had a blind health care trust. She understood that Mat-Su did not. Representative Vance was uncertain of the number. The Mat- Su district had given great support to the bill because it could save $7 million per year. The district was the first to reach out to her office in support of the legislation because it estimated a $3,000 savings per employee per paycheck. Co-Chair Johnson commented that the bill had potential. She understood that some contracts had higher levels of transparency than others. She hoped transparency would be increased if the bill were to pass. Representative Vance noted that the AlaskaCare 2020 active employees premiums chart (copy on file) as provided by DOA was included in member's packets. She highlighted that she was offering the bill as a tool for the legislature to draw on to examine cost-reducing methods and to make the most of the state's dollars while providing excellent health care to Alaskans. She argued that the state indirectly paid for health care in one form or another through the BSA. She would let the committee determine which entities should be included in the plan but her goal was to put all school districts on equal footing. There were some small districts that needed help and larger ones that did not. The bill was meant to look to the future and recruit and retain teachers by providing great health care. HB 21 was HEARD and HELD in committee for further consideration. 3:11:04 PM AT EASE 3:16:42 PM RECONVENED