SB 48-STATE HEALTH INSURANCE CHAIRMAN MILLER called the Senate Health, Education and Social Services (HESS) Committee to order at 1:32 p.m. and announced that SB 48 would be the first order of business, with Senator Jerry Mackie speaking on the bill. CHAIRMAN MILLER noted a proposed committee substitute in the packets, and SENATOR MACKIE stated that all of his testimony would address the draft CS. CHAIRMAN MILLER asked for a motion to adopt CSSB 48(HES). SENATOR PEARCE so moved, and without objection it was adopted. Number 019 SENATOR MACKIE thanked the committee for hearing the bill, and stated that Marianne Burke and others would comment on the details of the legislation. He introduced the bill at the request of the Board of Directors of The Comprehensive Health Insurance Association(CHIA). The association makes individual health insurance available to residents who are high risks or are federally-defined eligible individuals. The directors represent the principle providers of health insurance in Alaska. He said the legislation has the support of the Division of Insurance. The CHIA was created by statute, with copies in the committee packets. The legislation amends AS 21.55 to (1) allow the board greater flexibility to design more cost-effective health insurance plans for individuals eligible for coverage under the CHIA plan; (2) increase the number of potential administrators of the CHIA by eliminating the requirement that the administrator be an insurer; (3) allow greater flexibility in evaluating an administrator and in setting the terms of the administrative contract; (4) simplify administration by decreasing the number of declinations required for eligibility; (5) make technical corrections relating to the determination of premium rates, terminology, premium payment modes, board member terms and voting at board meetings; and (6) give the director of insurance a more effective and appropriate mechanism to enforce the requirement that members pay their share of the CHIA assessments on a timely basis. SENATOR MACKIE continued, saying the legislation will allow the board to manage CHIA in a more cost-effective and efficient manner. It also is particularly important in light of the new federal requirements, and the use of CHIA as the mechanism to guarantee portability of health insurance coverage to federally eligible individuals. He pointed out the zero fiscal note from the Division of Insurance and a detailed sectional analysis in the packets. Number 065 SENATOR ELTON questioned why in Section 7 100% for medical can be paid, but only 50% for the treatment of mental and nervous conditions when some mental conditions like schizophrenia and bipolar need continuous medication. SENATOR MACKIE deferred to Ms. Burke for an answer. CHAIRMAN MILLER asked Senator Mackie if any groups are opposed to the bill. SENATOR MACKIE replied there are none. A lot of these are technical changes. CHAIRMAN MILLER invited the on-line witnesses to testify. Number 100 MR. CECIL VYKERK, Executive Vice President and Chief Actuary for Mutual of Omaha insurance companies, Omaha Nebraska, stated he's been involved with the CHIA board since its inception in 1992. The legislation in Alaska passed in 1992 and they began insuring the first policyholders in 1993. The board is composed of five insurer representatives that currently include Blue Cross Alaska, Aetna, and Mutual of Omaha; and two consumer representatives from Wasilla, including Sandra Cole who is on-line today. MR. VYKERK continued, it's a very important plan for Alaskans who are unable to purchase health insurance through the private market due to preexisting conditions and other factors. It's also important to meet the requirements of the HIP legislation passed by the federal government several years ago. A group that included the Division of Insurance worked hard to make the legislation successful. The bill is largely a collection of technical adjustments to make it easier to manage the pool in a cost- efficient manner. Number 141 MS. SANDRA COLE, Public Representative on CHIA, stated she has been on the board for two years. She spoke to the changes in the bill, noting the one vote for the public advocates. She asserted that to change the $200 deductible to a $500 minimum is not a problem for the public. She said there is a need to keep the premiums at the current high insurance rates in Alaska. In order for people to afford this program, which many including herself cannot, there must be changes in other areas to decrease the cost of the program. She discussed hospitalization, competition, and language changes including the use of age as a definition for premiums and the elimination of vague wording such as "excessive" and "inadequate" which are impossible to define. MS. COLE said in summary that the program is vital to the people of Alaska. Number 209 CHAIRMAN MILLER announced to the Close Up students present in the audience that the committee is considering SB 48. SENATOR WILKEN asked where the students were from. They each stood and introduced themselves, and they were all from Akiak and Akiachuk. SENATOR KELLY stated that he is unsure what the bill does, and he wondered if it creates a board which develops policy with money appropriated in the bill passed by the legislature last year. Number 232 MS. MARIANNE BURKE, Director, Division of Insurance, stated this company was created by the legislature in 1993, separate from state government without state subsidy. She said it is critical for the many people who cannot get health insurance, no matter the cost, and gives them a chance to participate in the cost of their own insurance. The board only collects about 20% of the total cost, the remainder of the cost being assessed against the writers of insurance in the state. As a condition for doing business in the state, the insurance writers agree to assist in funding this mechanism. Without it, most of these people would be on Medicaid. They aren't paying much, but for many it's a point of pride and personal dignity that they are participating. They include people with incurable or terminal diseases such as AIDS, cancer, or hemophilia who cannot get insurance. It is not a perfect program, but it provides the care and allows individuals to participate, and it spreads the cost over all the insureds in the state of Alaska. SENATOR KELLY stated that it creates a catastrophic policy, and he asked about the deductibles. MS. BURKE replied there are a variety of deductibles ranging from $500 to $10,000 which the individual selects according to what he can afford to pay. It is also geared to age. There is no other underwriting. She clarified that the individual pays a premium but it only covers about 20% of the total cost incurred. The CHIA is the insurance company, funded in part by the premiums and in part by the writers of insurance in Alaska. SENATOR KELLY asked if the cost spread to the insurance companies is an equal distribution. MS. BURKE answered that it is based on the pro-rata share of the premiums they write on any health policy in the state. The company writing more premiums than any other would get the biggest share of the assessment. SENATOR KELLY asked how much this is going to cost and how much each company is going to be assessed. MS. BURKE responded since the inception of CHIA in 1993, approximately $7 million has been assessed. In 1993, $250.0 was assessed for seed money. Originally there were very few participants. The assessment is always made based on the cost of the plan which is monitored by the board. Within its statutory constraints the board tries to control those costs, like hiring a case manager to help negotiate discounts with the hospitals. The assessments have been as high as $1.5 million, and currently Blue Cross is the largest writer in the state, covering about 38% of that. Back when the state was insured, Blue Cross and Aetna covered roughly 70% of the cost. Number 311 SENATOR KELLY discussed Senator Murkowski's Medicaid bill that passed last year, with millions accruing to the state to cover people at 200% of the poverty level, depending on the number of children. If you made in excess of $37,000, you were eligible for Medicaid. He asked if that provision makes this legislation obsolete. MS. BURKE replied no, because it was specifically directed at uninsured children. They may be uninsured for many reasons, but seldom because they can't be insured because of a medical condition. This plan, on the other hand, is set up for individuals -not families or groups - who have a medical condition that precludes them from buying a policy on the open market. They are two separate programs. SENATOR MACKIE clarified that the legislature in 1992 determined that insurance companies, as part of doing business here, contribute back to those folks who cannot get insurance for medical conditions, to take care of catastrophic illnesses. SENATOR ELTON asked why in the existing language in Section 7 there is a differentiation between physical health and mental health, with only 50% coverage of mental health disorders which may be physically based. MS. BURKE replied that she cannot explain that. It was written back when it was the norm in writing and structuring a policy, and the coverage has not been changed since that time. SENATOR ELTON noted that Representative Gary Davis and Senator Torgerson have some recommendations for the Mental Health Parity Task Force. CHAIRMAN MILLER also noted that the bill has a referral to Labor & Commerce after it leaves HESS. MS. BURKE stated that the division supports the bill. The board is charged with running the plan as cost-effectively as they can and it's to their advantage to do so because their companies foot the bill. Right now the board pays the highest administrative cost in the country. Only one company has been willing to act as administrator. If the division can help them have more choices in that area to lower the cost of the plan, more people will benefit from it. SENATOR WILKEN moved CSSB 48(HES) out with individual recommendations and the attached zero fiscal note. CHAIRMAN MILLER asked for objection, and hearing none, CSSB 48(HES) passed from committee with individual recommendations.