SENATE LABOR AND COMMERCE COMMITTEE January 9, 1996 1:30 P.M. MEMBERS PRESENT Senator Tim Kelly, Chairman Senator John Torgerson, Vice Chairman Senator Mike Miller Senator Jim Duncan Senator Judy Salo MEMBERS ABSENT None COMMITTEE CALENDAR SENATE BILL NO. 178 "An Act relating to small employer health insurance." PREVIOUS SENATE COMMITTEE ACTION SB 178 - No previous action to record. WITNESS REGISTER Senator Steve Reiger State Capitol Bldg. Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of SB 178. Joe Heueisen, Vice President Life and Group Benefits Shattuck and Grummett 301 Seward St. Juneau, AK 99801 POSITION STATEMENT: Supported SB 178. Gordon Evans Health Insurance Association of America 318 4th Street Juneau, AK 99801 POSITION STATEMENT: Supported SB 178. Sherman Ernouf, Legislative Aide Senator Tim Kelly State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 178. Marianne Burke, Director Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, AK 99811-0805 POSITION STATEMENT: Neutral position on SB 178. ACTION NARRATIVE TAPE 96-1, SIDE A Number 001 SL&C - 1/9/96 SB 178 SMALL EMPLOYER HEALTH INSURANCE CHAIRMAN KELLY called the Senate Labor and Commerce Committee meeting to order at 1:30 p.m. and announced SB 178 to be up for consideration. SENATOR REIGER, sponsor, explained that in 1973 legislation he sponsored legislation created an association of insurers to transact small business health insurance and required those insurers to join the association as a condition of doing business in Alaska. The legislation allows a member of the association to reinsure health coverage of a small employer and required them to offer small employers at least two health benefit plans. SENATOR REIGER said that the measure successfully increased the availability of health insurance to small groups. Because of that success there is only one change this bill makes. It increases the size of an employer from 2 - 25 people to 2 - 50 people. Number 40 SENATOR KELLY noted that there were letters supporting SB 178 from Baldwin Financial Concepts, Lincoln Financial Group, Souther Alaska Life Underwriters Association, Hagan Insurance, and David Frasier and Associates. Number 66 JOE HEUEISEN, Vice President, Life and Group Benefits, Shattuck and Grummett, said he deals specifically with small employer groups and employee benefits and life insurance. He endorsed SB 178, because when the statute came into being, it literally opened up the market for them. It has been a god-send for groups of 2 - 25. SENATOR TORGERSON asked how much of a market increase there would be with SB 178. MR. HEUEISEN replied he thought it would affect several hundred employers. Number 92 SENATOR SALO asked how the premiums compare for people in small markets to people in large group health insurance. MR. HEUEISEN answered that the only difference was the small group market doesn't quite have the latitude on some of the benefits, but they are able to maintain adequate coverage with realistic deductibles in the same price category as the large groups. Number 108 SENATOR DUNCAN asked how many groups he had signed up for the small employer pool. MR. HEUEISEN answered that he hadn't signed anyone up, because the law "gets the attention of the providers who were skimming before...." Now they have to take these people. He explained that it has changed the insurance provider's attitude about they types of risks they are willing to write. SENATOR KELLY asked if health insurance companies are covering more small businesses, because of this pooling concept. MR. HEUEISEN said that was correct. Number 162 SENATOR DUNCAN noted that every study he had seen recently indicated that we are seeing a decrease in employer based insurance coverage and he asked if Blue Cross would testify. SHERMAN ERNOUF said they had just spoken informally. SENATOR DUNCAN asked why stop at 50 if the law is having the impact MR. HEUEISEN says its having. MR. HEUEISEN said he thought it was because of the insurance providers rating system classifies over a 100 employees and over as an experience rated case; under that number is not an experience rated case. SENATOR KELLY commented that this legislation increases the availability of the small insurance market. GORDON EVANS, Health Insurance Association of America, supported SB 178. He added that this bill, if enacted, would make Alaska the 18th state that goes up to 50 employees. Most of the other states are still at 25. MR. EVANS said that a Task Force study indicated that the original law could affect about 85% of private small businesses in Alaska. He recalled there was an indication that that would go up to 90% or 92% of employers in Alaska if the number were raised to 50. NUMBER 200 SENATOR SALO asked if he would support raising the number to 100. MR. EVANS replied that he wouldn't, because you are then getting out of the small employer definition and getting into the large employer definition. SENATOR SALO said she was concerned that there would be a gap of people who would remain uninsured. MR. EVANS said the other 8% would include companies like Carr's. SENATOR KELLY commented that there is no reason an employee in 50 - 100 range is not receiving insurance today if the employer decides to give it to them. MR. EVANS said that was correct; that it hits the employers who weren't able to get insurance before, because of exclusions and other conditions. SENATOR DUNCAN commented that one of the reasons the small businesses don't have insurance is not just because of pre-existing condition exclusions, it's because they just can't afford it. He thought SB 178 was a good faith attempt to try to increase accessibility for small employers to have insurance for their employees, but he said they have seen only one coded in October and maybe two. So he didn't think it had very much impact. He thought the cost of the insurance was the real problem. He also wanted to see data that supports the theory that the insurance providers provided more coverage. Number 302 SENATOR REIGER explained that now, as a condition of doing business in Alaska, you must say yes to an employer who applies for insurance, but the way to keep from taking an unacceptably high risk is to buy reinsurance for a 50% premium for the entire group, over what they charge, or five times the ordinary premium for an individual. SENATOR KELLY asked if there was any opposition to the bill. MR. ERNOUF said there was no opposition. MARIANNE BURKE, Director, Division of Insurance, said they are neutral on this bill. She said that two employers have gone into the reinsurance pool, because of high health risk within their business. This does not mean there was a limited number of employers. It could mean there are a lot of healthy groups of employees in the 2 - 25 person range that should have been given insurance all along. Now they have it and the two who are in the pool are the high risk ones. SENATOR DUNCAN asked if she had statistics on how many employers in the 2 - 25 group have purchased insurance since the bill became effective. MS. BURKE replied that they are in the process of putting out a questionnaire to the providers who would have signed up new employers. Normally they do not get data on the size of the companies being insured. SENATOR DUNCAN said he didn't think going to 50 was a bad idea. He didn't want to sell this as the idea to getting small employers insured in this state, because it's really the cost of insurance that is prohibitively high. Number 351 SENATOR TORGERSON moved to pass SB 178 from committee with individual recommendations. There were no objections and it was so ordered. SENATOR KELLY adjourned the meeting at 1:55 p.m.