SB 110-SCHOOL/UNIVERSITY EMPLOYEE HEALTH INSUR  4:39:28 PM CHAIR TOBIN announced the consideration of SENATE BILL NO. 110 "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." 4:39:34 PM SENATOR SHELLEY HUGHES, District M, Alaska State Legislature, Juneau, Alaska, said a crucial, often overlooked method exists to bolster classroom funding without requiring additional financial allocation. The potential impact could significantly enhance resources for student instruction. The essence of SB 110 lies in granting school districts the choice to participate in AlaskaCare, the state's employee health care plan. The rationale behind this choice is rooted in the substantial savings it could offer to districts compared to their existing health plans. She stated the Mat-Su borough roughly estimated that it could save $7 million by opting for AlaskaCare. They are grappling with annual premium increases of roughly $3.3 million. To put this into perspective, $3.3 million equates to the funding required for 33 teaching positions. Therefore, with the potential for $7 million in savings, there is the potential to preserve 65 teaching positions. These savings could be instrumental in freeing up funds for classroom instruction, which aligns with the shared goal of enhancing student education. SB 110 aims to create a statutory framework that would give schools and local governments the option to participate in the health care pooling system. By entering the pool, districts might benefit from economies of scale and improved healthcare cost negotiations, a critical necessity given Alaska's status as the state with the highest insurance premiums in the nation. Furthermore, Alaska faces increasing healthcare spending and bears the highest out-of-pocket costs for healthcare among its residents. SENATOR HUGHES requested SB 110 proceed so school districts are empowered to decide whether participating in the pool aligns with their interests. She opined that SB 110 could lead to substantial cost savings, which districts could then invest in students' educational experiences. 4:44:03 PM GABY GONZALEZ, Staff, Senator Shelley Hughes, Alaska State Legislature, Juneau, Alaska, provided a presentation titled "SB 110 State Health Insurance Pooling Option." She turned to slide 2: [Original punctuation provided.] ISER Research Summary No. 2019-4 • "Alaska has the highest per capita healthcare costs in the US (Passini, Frazier, & Guettabi, 2018), which negatively affects private and public sectors of our economy. Healthcare costs are a part of teacher compensation. Alaska unadjusted per-pupil spending on teacher salaries is 14th in the nation - but after adjusted to US cost-of-living, the amount is 23 percent below the national average. Similarly, Alaska's unadjusted per-pupil spending on educator's employee benefits is 64 percent above the US average - but after adjusted is only 9 percent above the US average. • While the challenge of high healthcare costs is not  unique to education, in a fixed budget scenario these  costs put downward pressure on wages, making it more  difficult for Alaska districts to offer teachers a  nationally competitive salary.  4:44:54 PM MS. GONZALEZ turned to slide 3 and said the graph is from ISER 2018. ISER collected the data from the Centers for Medicare and Medicaid Services (CMS), between 1991 - 2014. CMS published data on personal health care spending for the US and individual states. The graph shows that costs began to skyrocket in the early 2000s. Health insurance pooling provides the following benefits: [Original punctuation provided.] Save Money  • Eases the downward pressure on districts and local government budgets. More Healthcare Options  • Expands healthcare options. Reduced Staff Burden  • Schools can focus on providing a quality education. • Local governments can focus on public services. 4:46:00 PM MS. GONZALEZ turned to slide 4 and said the graphs show more of the data collection that ISER assembled. It shows Alaska's healthcare spending amounts. In 1991, spending was $1.5 billion. In 2014, the amount increased to $8.2 billion. MS. GONZALEZ turned to slide 5 and said the Department of Administration provided the following information: [Original punctuation provided.] The AlaskaCare employee plan's current average per- employee-per-month claims and administrative cost is $1734 ($20,808 per year). • The current per-employee-per-month employer contribution is $1,685. It will increase to $1,793 in FY24. • The monthly employee contribution ("employee premium") varies as follows: 2023 ACTIVE EMPLOYEE PREMIUMS  For AVTECTA - AK Vocational Teachers (TA), APEA - Confidential (KK), APEA - Supervisory (SS), ACOA - Correctional Officers (GC), TEAME - Mt. Edgecumbe Teachers (TM), MEBA - Marine Engineers (BB) Employees not covered by collective bargaining (Exempt) Plan Employee Only Employee   & Family Standard Medical Plan $125 $303 Economy Medical Plan $63 $167 Consumer Choice Medical Plan $25 $71 Standard Dental Plan $37 $102 Economy Dental Plan $0 $0 Managed Vision $15 $40 4:46:43 PM SENATOR HUGHES said the amount districts currently spend is unknown. However, based on Mat-Su, even at $1,793, it would be a savings. She opined that Mat-Su's healthcare spending is approximately $41 million annually. She said any reduction would benefit classrooms. SENATOR HUGHES stated she was unaware there would be invited testimony and listed the names of individuals she asked to testify publicly. 4:48:10 PM MS. GONZALEZ read the following sectional analysis for SB 110: [Original punctuation provided.] SB 110 Sectional Analysis    Section 1 AS 14.08.101 Page 1, Line 5 through Page  2, Line 29 Adds to powers of regional school boards the power to establish and maintain school district participation in a policy of group insurance, selected by the State of Alaska, that provides medical insurance. Section 2 AS 14.14.090 Page 2, Line 30 through  Page 4, Line 13  Adds to the duties of a regional school board the duty, when the board's school district participates in a policy of group insurance elected by the State of Alaska that provides medical insurance, to determine and disperse to district employees and administrative officers the amounts necessary to cover the district's portion of the cost of that participation. Section 3 AS 14.17.300 Page 4, Line 14 through  Line 27 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. Section 4 AS 14 Page 4, Line 28 through Page 5,  Line 31 4. (a) Allows school districts to participate in a policy of insurance that provides medical insurance coverage to state employees and to school district employees. (b) Requires participating school districts to contribute to the group health and life benefits fund (AS 39.30.095) based on rates set by the commissioner of administration. (c) Requires participating school districts to reimburse the state for procuring excess loss insurance if the state provides insurance benefits to school district employees under a policy of self-insurance. (d) Requires participating school districts to reimburse, over a period not to exceed 10 years, the department of administration's cost of paying insurance claims by school district employees for the first four months school district employees are covered by a policy of self-insurance provided by the state of Alaska. (e) Allows a participating school district to require its employees to pay some or all of the money that this bill section would require the school district to pay to the state. (f) Defines "school employee" and "school employer" for purposes of the bill section. Section 5 AS 14.40.170(b) Page 6, Line 1 through  Line 15 Allows the Board of Regents of the University of Alaska to establish and maintain university participation in a policy of group insurance, selected by the State of Alaska, that provides medical insurance for university employees. Section 6 AS 39.30.090(a) Page 6, Line 16 through  Page 8, Line 30  Clarifies that when an employee of a participating governmental unit is covered by a group insurance policy obtained by the Department of Administration the employee spouse and dependent children are also covered. Section 7 AS 39.30.090(b)(2) Page 8, Line 31  through Page 9, Line 3  Adds to the University of Alaska to the definition of governmental unit applicable to section 6 of the bill. Section 8 AS 39.30.090(b) Page 9, Line 4 through  Line 6  Add the definition of school district to AS 39.30.090, which is amended by section 6 and 7 of the bill. Section 9 AS 39.30.091 Page 9, Line 7 through Line  15  Authorizes the Department of Administration to provide group medical care insurance coverage to school district employees and employees of other governmental unit by means of self-insurance.   Section 10 AS 39.30.091 Page 9, Line 16 through  Line 20 Requires the Department of Administration to procure excess loss insurance in connection with providing group medical insurance coverage to employees of governmental units other than the state, and allows the department to allocate the cost with the excess loss insurance across all of those governmental units. Section 11 The Uncodified law of the State of Alaska  Page 9, Line 21 through Line 25 Make sections 1- 8 and section 10 of the bill applicable to collective bargaining agreements and other contracts that become legally binding on or after the effective date of those bill sections. Section 12 The Uncodified law of the State of Alaska  Page 9, Line 26 through Page 10, Line 4  Require certain self-insured school districts to transfer the closing balance of their self-funded insurance reserve account soon after they enroll in a health care plan administered by the state, and requires that when transferred by a school district these amounts will be applied to offset reimbursements owed by that school district under AS 14.20.127(d), a provision proposed in section 4 the bill.   Section 13 The Uncodified law of the State of Alaska   Page 10, Line 5 through Line 9 Authorizes the commissioner of administration to adopt regulations necessary to implement the changes made by the bill, to take effect on or after the effective date of the changes made by the bill. Section 14 The Uncodified law of the State of Alaska   Page 10, Line 10  Make sections 12 and 13 of the bill effective immediately, subject to the restrictions set forth in those bill sections. Section 15 Page 10, Line 11 Makes the bill's provisions effective date July 1, 2024, except as provided in bill section 14. 4:53:17 PM CHAIR TOBIN opened invited testimony on SB 110. 4:53:30 PM SENATOR HUGHES asked to make a quick comment and said the University of Alaska is not interested in participating. The Department of Administration proposes needing three positions, an investment of $300,000. However, if all the schools were to join the pool, the savings could unofficially be $200 million. She stated her belief that not all the districts are interested, but the savings would be sizable and pay for the new positions. 4:54:21 PM CHAIR TOBIN asked if the pool was open to other governmental units, such as municipalities. SENATOR HUGHES replied yes. 4:54:36 PM LISA PARADY, Executive Director, Alaska Council of School Administrators, Juneau, Alaska, said she regularly meets with superintendents to discuss legislative matters and recently sought their input on SB 110. She said there was substantial interest in the proposed option. Ms. Parady emphasized the Alaska Council of School Administrators' position on the importance of providing health insurance to employees for staff retention and recruitment. They also encouraged solutions to address the state's long-term, rising healthcare and health insurance costs, which SB 110 aims to explore. The association supports various mechanisms to decrease healthcare expenses, particularly for essential workers, as controlling these costs would benefit the recruitment and retention of effective educators and school staff. MS. PARADY provided context saying there was a survey conducted in April of the previous year where 38 school districts responded. Of these, 36 reported increases in healthcare costs from FY 17 to FY 22 with many projecting further increases in FY 23. She cited examples of two rural districts. One experienced a jump of 64.7 percent, while the other jumped 78.42 percent. She also verified increases in places like Petersburg (15 percent increase) and Haines (22 percent increase), demonstrating that these cost challenges were not limited to remote districts. 4:58:29 PM MS. PARDY highlighted that healthcare cost concerns were not restricted to rural areas, pointing out a 10.8 percent increase in Anchorage. She stressed the importance of addressing this issue as it significantly impacts public education budgets and diverts funds from classrooms to cover healthcare expenses. She urged the committee to provide school districts with options to address these rising costs so districts can direct needed resources to classrooms. 4:59:58 PM SENATOR KIEHL asked whether any Alaska school district maintains a self-insurance pool. 5:00:46 PM MS. PARDY replied some districts maintain pools and she would provide the names of the districts to the committee. 5:00:56 PM RANDY TRANI, Superintendent, Mat-Su Borough School District, Palmer, Alaska, said there is a significant opportunity to provide districts with an option or a chance to participate in a healthcare mechanism that could result in substantial cost savings. He pointed out that the Mat-Su Borough School District's healthcare expenditure amounted to approximately $41 million, the largest expense after salaries. He further stated that if the four unions hypothetically negotiate and take advantage of the AlaskaCare option, there could be a potential savings of about $5 million for the district and $2 million for the employees, totaling approximately $7 million in savings. The district's savings alone could potentially increase the base student allocation (BSA) by $135 to $140. He stated that pooling has been a priority for the board for the past three years and has consistently been presented to the legislature. He emphasized that the Mat-Su Borough School District strongly supports this opportunity and would encourage other districts to explore it as a viable possibility. 5:02:59 PM SENATOR BJORKMAN asked how many lives are covered by the Mat-Su Borough School District's plan. MR. TRANI replied that there are approximately 2,400 employees within all four unions. The lives covered would be more than three times that amount. SENATOR BJORKMAN inquired about the total cost of the plan per employee. MR. TRANI replied there are many bargaining units. The district pays approximately $ 2,000 monthly for the largest bargaining group, equating to $24,000 annually. The amount that employees pay varies depending on which plan employees opt for. It ranges from $ 4,000 to $ 6,000 per year for the district's largest bargaining unit. SENATOR BJORKMAN stated that there are often initiation costs when a smaller pool of employees joins a larger pool. The initiation costs cover risk reduction, stock loss, and insurance. He asked whether the district anticipated an initiation fee for joining AlaskaCare or whether the state would absorb the cost. MR. TRANI said he did not know the answer. The Mat-Su School District supports SB 110 because it offers an option that has not been available. Since the district does not have the option, it has not spent resources examining the details of the option. He stated there could be an initiation fee but he does not know if SB 110 addresses it. SENATOR BJORKMAN asked about the current total cost of the plan per employee for AlaskaCare. MR. TRANI offered his understanding that the cost for the state is a little over $1,700 per month per employee. Employees may add options. He added that he has heard that employee costs may increase to $1,790 per month per employee. 5:05:35 PM CHAIR TOBIN held SB 110 in committee.