Legislature(2015 - 2016)BILL RAY CENTER 208

05/26/2016 08:30 AM House FINANCE

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08:37:45 AM Start
08:38:27 AM HB374
10:16:14 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Open Public Testimony TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 374                                                                                                            
     "An  Act   relating  to   a  reinsurance   program  for                                                                    
     residents who  are high  risks and  insurer assessments                                                                    
     to  cover   the  costs  of  the   reinsurance  program;                                                                    
     relating  to application  for state  innovation waivers                                                                    
     for health  care insurance; relating to  definitions of                                                                    
     'residents  who are  high risks'  and 'covered  lives';                                                                    
     and providing for an effective date."                                                                                      
8:38:27 AM                                                                                                                    
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for  HB  374, Work  Draft  (29-GH2126\E).  There                                                                    
being NO OBJECTION, it was so ordered.                                                                                          
Co-Chair Thompson indicated he would  not be moving the bill                                                                    
out in the current meeting.                                                                                                     
8:39:33 AM                                                                                                                    
FRED  PARADY, DEPUTY  COMMISSIONER, DEPARTMENT  OF COMMERCE,                                                                    
COMMUNITY, AND ECONOMIC DEVELOPMENT, introduced himself.                                                                        
LORI   WING-HEIER,   DIRECTOR,    DIVISION   OF   INSURANCE,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
introduced himself.                                                                                                             
Mr. Parady relayed that the  bill before the committee was a                                                                    
simple fix for a complex problem.                                                                                               
Representative Gattis asked how the situation arose.                                                                            
Ms. Wing-Heier  responded that Alaska  was not alone  in the                                                                    
issue. The Affordable  Care Act had a  presented some unique                                                                    
challenges to  the insured market.  She explained  that some                                                                    
very sick  people had entered  the market with  high claims.                                                                    
The insurers paid out claims  that had exceeded the premiums                                                                    
that  had come  in.  She  stated that,  in  some cases,  the                                                                    
insurers  had  paid   out  up  to  $1.20   for  every  $1.00                                                                    
collected. She  shared that AETNA and  Assurant left Alaska,                                                                    
which left only  two carriers in the state.  She shared that                                                                    
MODA had recently  given notice that they would  pull out of                                                                    
the individual market  in 2017, leaving only  one carrier in                                                                    
the state. In some states,  carriers had announced that they                                                                    
would not  write in all  areas of the particular  state. She                                                                    
shared that Premera  had declared that they  would not write                                                                    
in the eastern  part of the state. Alaska would  not have an                                                                    
insurance company for the citizens  of Alaska if Premera had                                                                    
given similar  notice to Alaska.  She stressed  that Premera                                                                    
could declare that they would  not cover Alaska, which would                                                                    
result in no back up for insurance.                                                                                             
8:43:50 AM                                                                                                                    
Representative Gattis wondered  whether the people addressed                                                                    
in  the bill  were not  covered before  the Affordable  Care                                                                    
Ms.  Wing-Heier replied  that there  were some  who had  not                                                                    
purchased  insurance, but  the  Alaska Comprehensive  Health                                                                    
Insurance  Association (ACHIA)  was already  in place.  Some                                                                    
people could  not afford  the ACHIA  premiums, so  they were                                                                    
uninsured. Upon  adoption of the Affordable  Care Act, those                                                                    
people bought  insurance, because some people  qualified for                                                                    
subsidies for  their premiums. She explained  that ACHIA was                                                                    
limited to  very specific conditions that  allowed access to                                                                    
ACHIA.  She stressed  that, under  the Affordable  Care Act,                                                                    
insurance was guaranteed issue.                                                                                                 
Co-Chair Thompson wanted to move through the presentation.                                                                      
Representative  Gara shared  that he  had been  advised that                                                                    
the state  could pool with  other states, which may  help to                                                                    
drive the cost of insurance down.                                                                                               
Ms. Wing-Heier stated that currently  the option to pool was                                                                    
not possible.                                                                                                                   
Co-Chair  Thompson  acknowledged Representative  Pruitt  had                                                                    
joined the meeting.                                                                                                             
Ms.  Wing-Heier  introduced   the  PowerPoint  Presentation:                                                                    
"Department    of   Commerce,    Community   and    Economic                                                                    
Development: HB 374 -  Reinsurance Program; Health Insurance                                                                    
Waivers." She advanced to slide 2: "Division of Insurance":                                                                     
   The mission of the Division of Insurance is to regulate                                                                      
   the insurance industry to protect Alaskan consumers.                                                                         
     · The division has a statutory responsibility to                                                                           
        review and approve rules, forms and rates based on                                                                      
        an analysis of whether they are excessive,                                                                              
        inadequate, or unfairly discriminatory.                                                                                 
     ·  The division  does not  have statutory  authority to                                                                    
        deny rates because of the financial impact to the                                                                       
8:48:54 AM                                                                                                                    
Ms. Wing-Heier reviewed the timeline on slide 3: "Timeline                                                                      
- Update":                                                                                                                      
   · September 2014 - Premera's average increase 37.2                                                                           
     percent. Moda's average increase was 27.4 percent                                                                          
   · August 2015 - Premera's average increase was 38.7                                                                          
     percent. Moda's average rate increase was 39.6 percent                                                                     
   · October 1, 2015 - Letter received that the 2014 risk                                                                       
     corridor  payments   will  be  paid  at   12.6  percent                                                                    
   · May 2, 2016 - Moda announces exit from Alaska's                                                                            
     individual market beginning January 1st, 2017                                                                              
   · January 1, 2017 - State of Alaska has one insurer in                                                                       
     the individual market  on/off the federally facilitated                                                                    
     exchange, impacting 23,000+ Alaskans                                                                                       
Ms. Wing-Heier scrolled to slide 4: "ADN to Governing;                                                                          
Alaska made the News…":                                                                                                         
     Health  and  Human  Services:  Another  Health  Insurer                                                                    
     Abandons Alaska. by Laurel Andrews                                                                                         
     Moda  Health will  exit  Alaska's individual  insurance                                                                    
     market  next   year,  the  company   announced  Monday,                                                                    
     leaving  only  one  health insurance  provider  in  the                                                                    
     state's  market  that,  so far,  has  been  defined  by                                                                    
     drastic  annual rate  increases for  consumers and  big                                                                    
     losses for insurance companies.                                                                                            
     Moda  will  focus on  its  other  group and  individual                                                                    
     plans  in the  state,  it  said in  a  release. It  may                                                                    
     consider  returning  in  the  future  but  "the  market                                                                    
     requires   significant   reform    in   order   to   be                                                                    
     sustainable," the company said.                                                                                            
     The exit  applies only to  Moda's 14,000  customers who                                                                    
     have   health  insurance   plans   on  the   individual                                                                    
     marketplace.  The company's  other  medical and  dental                                                                    
     plans  are not  affected by  the decision,  the company                                                                    
     "Obviously this  is not good news,"  Alaska Division of                                                                    
     Insurance  Director  Lori  Wing-Heier  said  after  the                                                                    
Ms. Wing-Heier looked at slide 5: "Even the Wall Street                                                                         
     By Anna Wilde Mathews and Stephanie Armour                                                                                 
     May 15, 2016 7:47 p.m. ET                                                                                                  
     Health-insurance  customers  in  a  growing  number  of                                                                    
     mostly  rural  regions  will have  just  one  insurer's                                                                    
     plans  to  choose from  on  the  Affordable Care  Act's                                                                    
     exchanges  next year,  as some  companies  pull out  of                                                                    
     unprofitable markets.                                                                                                      
     The entire  states of Alaska  and Alabama  are expected                                                                    
     to have only one insurer  on the health law's signature                                                                    
     online  marketplaces  next  year,  according  to  state                                                                    
     regulators. The  same is expected  to be true  in parts                                                                    
     of   several   other    states,   including   Kentucky,                                                                    
     Tennessee,  Mississippi,  Arizona and  Oklahoma,  state                                                                    
     regulators said.                                                                                                           
Ms.  Wing-Heier  advanced  to  slide  6:  "Washington."  The                                                                    
companies  were  losing money  at  least  in the  individual                                                                    
market.  The  state had lost three insurers  in the previous                                                                    
two years.                                                                                                                      
8:52:06 AM                                                                                                                    
Ms. Wing-Heier discussed slide 7: "Three R's":                                                                                  
   · Risk Adjustment transfers money among insurers to                                                                          
     adjust for  the possibility that some  insurers may get                                                                    
     more or  less than their proportionate  share of costly                                                                    
     enrollees. Risk Adjustment is only:                                                                                        
        · Applied to the individual and small group market;                                                                     
        · Permanent program to help stabilize the costs of                                                                      
          the ACA                                                                                                               
   · Reinsurance is one of the taxes associated with the                                                                        
     ACA and  is applied  against health  insurance policies                                                                    
     and employer  group health plans. Proceeds  are used to                                                                    
     provide  the individual  market  plans with  additional                                                                    
     subsidies  for   higher-cost  enrollees.   The  program                                                                    
     sunsets in 2016                                                                                                            
        · Attachment point in 2014 is $45,000 but will                                                                          
          increase to $70,000 in 2015                                                                                           
        · Coinsurance decreases from 80 percent in 2014 to                                                                      
          50 percent in 2015                                                                                                    
   · Risk Corridor provides a range for profits or losses                                                                       
     for  insurance on  the FFM.  If an  insurer has  higher                                                                    
     than  expected  profits,  the federal  government  will                                                                    
     "claw  back" some  of the  premiums. Conversely,  if an                                                                    
     insurer has  higher than  expected losses,  the federal                                                                    
     government  will pay  the insurer  additional subsidies                                                                    
     to offset those losses. This program sunsets in 2016.                                                                      
Ms. Wing-Heier moved to slide 8: "We are working to keep                                                                        
the market solvent."                                                                                                            
     Premera  gets more  time to  file rates  as fix  awaits                                                                    
     special session                                                                                                            
     By DJ Summers, Alaska Journal of Commerce                                                                                  
     Posted: Wed, 05/11/2016 - 4:42pm                                                                                           
     Addressing Alaska's broken  individual health insurance                                                                    
     market  will  likely  have to  take  place  in  special                                                                    
     session  of the  Legislature, and  in the  meantime the                                                                    
     state's  last provider  has been  given  extra time  to                                                                    
     calculate its rate increase for 2017.                                                                                      
     Premera   Blue   Cross   -  Alaska's   sole   remaining                                                                    
     individual  insurance  provider  following  the  May  1                                                                    
     announcement  by  Moda  Health  that  will  depart  the                                                                    
     market  in 2017  -  says  it will  stay  in the  Alaska                                                                    
     market next year.                                                                                                          
     "Premera  is committed  to the  Alaska market  and will                                                                    
     continue  to  offer  individual  coverage  to  Alaskans                                                                    
     through   the   federal  marketplace,'   said   Premera                                                                    
     spokesperson Melanie Coon in a statement.                                                                                  
     Premera was due  to release a rate schedule  on May 11,                                                                    
     but the circumstances will push  that date back to this                                                                    
     summer, Coon  said. Because Moda dropped  from Alaska's                                                                    
     market,  Premera, which  covers  10,000  people in  the                                                                    
     state,  has  a  new  deadline  to  renew  premium  rate                                                                    
     estimates to include the rates Moda charged its 14,000                                                                     
     "We've requested form the (Division of Insurance)                                                                          
     Moda's number so we can kind of sharpen our pencils,"                                                                      
     said Coon. "We have until July.                                                                                            
8:55:39 AM                                                                                                                    
Co-Chair  Neuman  queried  an  explanation  of  the  state's                                                                    
approval  of   the  rate  schedule.  He   wanted  to  better                                                                    
understand how much  companies had been making  or losing in                                                                    
Ms.  Wing-Heier explained  that it  was fairly  complex. She                                                                    
stated  that there  was an  actuarial  memorandum; the  past                                                                    
losses;   the  population   served;   medical  trends;   the                                                                    
anticipated demographic losses;  expected pharmaceutical and                                                                    
medical  trends.  She stated  that  the  division relied  on                                                                    
historic data  and cost projections.  She stated  that there                                                                    
was also an examination of  profit, but over the most recent                                                                    
two years, the profits were less than 2 percent.                                                                                
Co-Chair Thompson asked about money returned to consumers.                                                                      
Ms.  Wing-Heier  answered that  they  wrote  checks back  to                                                                    
Co-Chair  Neuman  queried  the  underlying  reason  for  the                                                                    
insurance companies  leaving the state. He  queried the cost                                                                    
of medical services.                                                                                                            
Ms.  Wing-Heier agreed  that  the cost  of  health care  was                                                                    
sometimes four times as much as  it was in the lower 48. She                                                                    
stressed that the cost, in  the aggregate, was spread across                                                                    
23,000  people. She  explained that  within that  population                                                                    
there  were very  sick people.  She stated  that there  were                                                                    
$239 million in claims in the first six months.                                                                                 
9:00:58 AM                                                                                                                    
Co-Chair  Neuman had  spoken to  several  doctors trying  to                                                                    
figure out  the problem. He thought  the current legislation                                                                    
was just a  "Band-Aid" to the problem. He  wanted to address                                                                    
the  underlying  problem,  and   queried  ways  to  fix  the                                                                    
problem. He  stated that  there was  money in  the operating                                                                    
budget to  pay back the  cost of pursuing a  medical degree,                                                                    
in order to promote more  medical personnel to the state. He                                                                    
remarked  that because  of  various  issues caused  doctors'                                                                    
costs to increase.                                                                                                              
Ms. Wing-Heier  agreed with Co-Chair Neuman.  She understood                                                                    
that the  cost of health  care must  be address it,  but she                                                                    
did  not know  where to  begin  to address  that issue.  She                                                                    
stated that there were various  stakeholders that may assist                                                                    
in examining  the issue in  a holistic manner.  She stressed                                                                    
that the problem was not  only in the individual market; but                                                                    
included  the state  employees,  worker's compensation,  and                                                                    
other health  care programs. She  asserted that the  cost of                                                                    
health  care impacted  everyone. She  felt that  health care                                                                    
costs  in the  state  must  be under  control,  in order  to                                                                    
enhance  economic development.  She stated  that the  reason                                                                    
for the  1332 Waiver was to  examine what could be  done, to                                                                    
offer a solution.                                                                                                               
Co-Chair  Neuman  remarked  that  the  issue  effected  many                                                                    
Alaskans with or without insurance.                                                                                             
9:04:36 AM                                                                                                                    
Representative Wilson  felt that  the legislation was  a way                                                                    
of backfilling for the federal government.                                                                                      
Ms.  Wing-Heier answered  that she  did not  believe it  was                                                                    
backfilling for the federal government.  She felt that every                                                                    
state would be involved in  that process, should that be the                                                                    
Representative  Munoz  wondered  whether ACHIA  had  covered                                                                    
high risk Alaskans.                                                                                                             
Ms. Wing-Heier responded that ACHIA  existed for one primary                                                                    
reason, but  she did not  know why  the small pool  were not                                                                    
terminated  from ACHIA.  She stressed  that  Alaska did  not                                                                    
have a market  for high cost medications,  but was available                                                                    
through  ACHIA. There  were individuals  in ACHIA  who could                                                                    
only access medication through ACHIA.                                                                                           
9:08:43 AM                                                                                                                    
Representative Munoz wondered how many  of the 23,000 in the                                                                    
individual  market would  need  to shift  to ACHIA,  because                                                                    
they may not find coverage.                                                                                                     
Ms. Wing-Heier  replied that the claims  were examined based                                                                    
on  the   most  costly   condition  among  all   the  23,000                                                                    
individuals. She explained that there  was a top 10, top 20,                                                                    
top  30,  and   top  40.  She  shared  that   there  was  an                                                                    
examination  of how  all  those claims  would  be seeded  to                                                                    
ACHIA. She stated  that the top 20 was  somewhere around $55                                                                    
million. The first ten claims  was 495 people; and the first                                                                    
40 diseases was 874 people.                                                                                                     
9:10:51 AM                                                                                                                    
Vice-Chair  Saddler queried  any  provisions in  SB 74  that                                                                    
would address Medicaid expansion.                                                                                               
Ms.  Wing-Heier  replied  that   the  private  sector  could                                                                    
provide  a   fee  for  service.   She  explained   that  the                                                                    
difference between the Affordable  Care Act and the Medicaid                                                                    
expansion was about the level of income.                                                                                        
Vice-Chair  Saddler  wondered  whether  insurance  companies                                                                    
should  stop operating  in Alaska,  if they  were unable  to                                                                    
make a profit.                                                                                                                  
Mr. Parady agreed. He stressed  that no insurance company in                                                                    
Alaska left  23,000 individual Alaskans with  no health care                                                                    
coverage and  no other  option available.  He felt  that the                                                                    
bill should  be considered "triage",  in order to  provide a                                                                    
near-term fix  to ensure  that the state  did not  have zero                                                                    
Ms.  Wing-Heier thought  it was  worth mentioning  she would                                                                    
expect to see changes to  the Affordable Care Act, which may                                                                    
alleviate some of the current issues.                                                                                           
9:15:13 AM                                                                                                                    
Representative  Gara  stated  that  he  had  urged  previous                                                                    
finance committee  chairs to work  towards a plan  to reduce                                                                    
high  medical costs.  He wondered  whether the  division had                                                                    
the statutory authority to regulate  the provider charges to                                                                    
Ms. Wing-Heier responded that the  division did not have the                                                                    
authority in  statute to tell  the provider what  to charge,                                                                    
unless it was so excessive that it became fraud.                                                                                
Representative Gara had two examples  of fraud. His wife was                                                                    
a  physical  therapist. He  remarked  that  there were  some                                                                    
physician-owned practices who  pay their physical therapists                                                                    
based on number of patients  and number of visits. He stated                                                                    
that  the  payment  structure   provided  an  incentive  for                                                                    
physical therapists  to provide unnecessary care  to receive                                                                    
the bonuses. He  wondered if that type of  practice could be                                                                    
Ms.  Wing-Heier  responded  that  that may  fall  under  the                                                                    
unfair trade practices statute.                                                                                                 
Representative  Gara  wanted  to   prevent  the  issue  from                                                                    
occurring  in  the  first place.  He  wondered  whether  the                                                                    
division have the power to prevent that type of practice.                                                                       
Ms. Wing-Heier agreed to examine that issue.                                                                                    
Representative  Gara shared  that  some physicians  purchase                                                                    
diagnostic equipment in  order to make their  money from the                                                                    
diagnostic  services.   He  asserted   that  there   was  an                                                                    
incentive to  use the  diagnostic equipment  more frequently                                                                    
than necessary to pay off the high cost of the equipment.                                                                       
9:18:38 AM                                                                                                                    
Representative Guttenberg  commented that  many legislatures                                                                    
had been tracking the issue  for several years. He mentioned                                                                    
kicking  the  can  down  the  road.  He  remarked  that  the                                                                    
Division had  the opportunity to  look at a  bigger picture.                                                                    
He wondered how the bill addressed the cost disparity.                                                                          
Ms. Wing-Heier  replied that  it could  not be  addressed at                                                                    
this point.  She explained that the  insurance companies did                                                                    
managed care,  but there were  no fee schedules  in statute.                                                                    
She remarked  that when an  employee or individual  enters a                                                                    
network,   the  insurance   company  would   have  preferred                                                                    
provider  arrangements with  the intent  to negotiate  a fee                                                                    
with  the provider.  She stressed  that the  negotiation was                                                                    
between the  insurer and the  provider. She shared  that the                                                                    
division  did not  get involved  in  those discussions.  She                                                                    
shared that  the division  would be  involved if  the claims                                                                    
were not paid. She stated that,  in the waiver, if there was                                                                    
an  opportunity to  examine network  adequacy and  to ensure                                                                    
that the  provider agreements were reaching  more physicians                                                                    
to  reach  more physicians  while  reducing  the rates.  She                                                                    
stressed that, currently, the  division had no participation                                                                    
in the agreements.                                                                                                              
Representative Guttenberg wondered  whether the division was                                                                    
aware  of   the  insurance   industries  across   the  board                                                                    
participation in price of care.                                                                                                 
Ms.  Wing-Heier replied  that the  payments were  customary,                                                                    
which set  the rate  for what positions  were being  paid in                                                                    
Representative Guttenberg  stated that  people did  not shop                                                                    
for medical  treatment. He  remarked that  sometimes doctors                                                                    
did not know the cost of treatment.                                                                                             
Ms. Wing-Heier  replied that the  issue of  transparency was                                                                    
an issue in health care.                                                                                                        
9:25:24 AM                                                                                                                    
Representative Guttenberg  referred to  the 1332  waiver. He                                                                    
wondered if  the waiver allowed  for the crossing  the state                                                                    
Ms. Wing-Heier replied that the  waiver allowed one to apply                                                                    
to   the  federal   government.  She   explained  that   the                                                                    
application required legislative  approval or authority. She                                                                    
stressed  that the  state was  not currently  moving forward                                                                    
with the innovation waiver, but  was moving forward with the                                                                    
application  process.  She  stressed that  the  process  was                                                                    
taking the Affordable Care Act to the state level.                                                                              
9:30:02 AM                                                                                                                    
Co-Chair  Neuman   thought  it   had  been   an  interesting                                                                    
discussion.   He  stated  that  what he  had  not heard  any                                                                    
discussion on was  reviewing regulations.  He  did expect to                                                                    
see  some  changes  in regulations.  He  was  adamant  about                                                                    
regulation  reform. He  thought the  state's own  government                                                                    
was the higher driver of costs.                                                                                                 
Mr. Parady  stated that within  the Department  of Commerce,                                                                    
Community  and Economic  Development  (DCCED)  there was  an                                                                    
attempt to streamline medical licensing.                                                                                        
Ms.  Wing-Heier stated  that the  division had  communicated                                                                    
that  the  deadline  would  be July  15,  depending  on  the                                                                    
legislative decision on the reinsurance bill. She stressed                                                                      
that should it be passed and funded, the rates should                                                                           
reflect the decision on the reinsurance for 2017.                                                                               
Ms. Wing-Heier turned to slide 9: "2017 Rate Filings":                                                                          
   · Premera must file rates with DOI by 7/15/16                                                                                
   · Rates must be approved 8/23/16                                                                                             
   · Open enrollment begins 11/1/16                                                                                             
   · Is then effective 1/1/17                                                                                                   
   · In order to include the reinsurance program in the                                                                         
     2017 rate  filings, the  insurer must  have a  two week                                                                    
     notice of the amount (if any) appropriated under HB374                                                                     
Ms. Wing-Heier advanced to slide 10: "Section 1332                                                                              
Innovation Waiver":                                                                                                             
     Alaska should explore a  Section 1332 Innovation Waiver                                                                    
     to allow  the state  to withdraw from  the ACA  if, and                                                                    
     subject  to many  provisions, the  state could  provide                                                                    
     the same  benefits to consumers without  any additional                                                                    
     cost  to  the  federal   government.  States  that  are                                                                    
     working on 1332:                                                                                                           
        · Colorado                                                                                                              
        · Minnesota                                                                                                             
        · Hawaii                                                                                                                
        · Massachusetts                                                                                                         
Ms. Wing-Heier scrolled to slide 11: "Section 1332                                                                              
Innovation Waiver."                                                                                                             
   · Provide coverage at least as comprehensive as under                                                                        
     the ACA                                                                                                                    
   · Provide coverage and protection against excessive out-                                                                     
     of-pocket expenditures  at least as affordable  as that                                                                    
     provided under the ACA                                                                                                     
   · Cover a number of residents comparable to the number                                                                       
     who would be covered under the ACA                                                                                         
   · Not increase the federal deficit                                                                                           
   · Must be authorized by the State Legislature                                                                                
   · Developed through a public process                                                                                         
   · A state that is granted an innovation waiver that                                                                          
     restricts access  to premium tax  credits, cost-sharing                                                                    
     reduction  premiums or  the small  employer tax  credit                                                                    
     can be  paid the amounts  that would have been  paid to                                                                    
     its residents under these programs to finance its                                                                          
     waiver program                                                                                                             
9:35:28 AM                                                                                                                    
Representative Wilson relayed that  she was lost. She looked                                                                    
at the  "Claim Sheet"  (copy on file).  She wondered  if the                                                                    
state came up short of $111,000 per person.                                                                                     
Ms. Wing-Heier replied in the affirmative.                                                                                      
Representative Wilson  looked at  CC Set  2, and  noted that                                                                    
there  were 58  million  claims removed,  and 495  claimants                                                                    
removed.  She  stated that  the  company  lost $111,000  per                                                                    
person. She surmised  that the bill was intended  to make up                                                                    
the $58 million.                                                                                                                
Ms. Wing-Heier replied in the affirmative.                                                                                      
Representative  Wilson wondered  whether  the state's  costs                                                                    
were similar,  and wondered whether  any of the  people were                                                                    
ever in the system.                                                                                                             
Ms. Wing-Heier did not know who was in the system.                                                                              
Mr. Parady  furthered that the  conditions covered  in ACHIA                                                                    
were more  limited than  the current  considered conditions.                                                                    
The overlying issue was that  the high cost individuals were                                                                    
driving rate  increases across the individual  segment at 35                                                                    
to 40 percent a year.                                                                                                           
Representative  Wilson felt  that the  issue was  because of                                                                    
the federal government. She wondered  if the legislation was                                                                    
a lawsuit to regain some costs.                                                                                                 
Mr. Parady  stated that he  would not characterize  the bill                                                                    
as  a "clean  up" of  the Affordable  Care Act.  He stressed                                                                    
that  the  20,000  people  in  the  individual  market  were                                                                    
Alaskans.  He  stated  that  there  was  a  prior  statutory                                                                    
mechanism  to  partially  deal with  high  cost  individuals                                                                    
known  as   ACHIA.  The  Affordable  Care   Act's  universal                                                                    
coverage  provision resulted  in more  people in  the market                                                                    
and were driving  the cost of the entire  group. He remarked                                                                    
the high  cost drivers  in that group  were 500  Alaskans in                                                                    
the market of  20,000 Alaskans. He stressed  that the intent                                                                    
was to  ensure that  the insurance  coverage for  that group                                                                    
would not "crater."                                                                                                             
9:39:32 AM                                                                                                                    
Representative  Wilson wanted  to know  the exact  amount of                                                                    
money requested. She wondered how  many people would be left                                                                    
without medical coverage, should the legislation not pass.                                                                      
Mr. Parady explained that the  number on the fiscal note was                                                                    
$55 million,  which roughly matched the  495 individuals. He                                                                    
stressed that the $55 million  was spread across only 23,000                                                                    
Alaskans,  which drove  the premium  increase  of the  third                                                                    
year  of  35  to  40  percent.  He  stated  that  the  rough                                                                    
calculation would cut the rate  of increase by one-half. The                                                                    
appropriation would  also help  to stabilize the  market, so                                                                    
the losses  would not continue  resulting in  zero carriers.                                                                    
He  remarked  that  the  bill  was  an  initial  measure  to                                                                    
stabilize  Alaska's  individual   market  for  Alaskans.  He                                                                    
stressed that the root of  the bill was individuals who were                                                                    
paying premiums that were greater than their mortgages.                                                                         
Representative   Wilson  commented   that   she  was   still                                                                    
completely confused.                                                                                                            
Representative  Gara wondered  if  every other  state had  a                                                                    
provider tax.                                                                                                                   
Ms. Wing-Heier replied in the affirmative.                                                                                      
Representative  Gara wondered  whether Alaska  was the  only                                                                    
state that did not have a provider tax.                                                                                         
Ms. Wing-Heier  replied that  she did  not know,  but stated                                                                    
that most state's had a provider tax.                                                                                           
Representative  Gara noted  that there  were many  providers                                                                    
who  did  not  make  a  lot   of  money.  He  asked  if  the                                                                    
administration had  considered a  provider tax.  He believed                                                                    
those with the most money were being asked the least.                                                                           
Ms.  Wing-Heier  replied  in  the  negative;  they  had  not                                                                    
discussed a provider tax.                                                                                                       
Vice-Chair  Saddler  stated  that   the  bill  envisioned  a                                                                    
healthcare authority.  He wondered what would  happen in the                                                                    
short-term if the  bill was not passed. He  surmised that if                                                                    
a new  provision was not in  place by July 1  there would be                                                                    
another year of significant rate increases.                                                                                     
Ms. Wing-Heier agreed  that if the legislation  did not pass                                                                    
there would  be another year of  significant rate increases.                                                                    
She  had no  reason  to  expect that  2017  would not  bring                                                                    
another high increase.                                                                                                          
Vice-Chair Saddler wondered how many.                                                                                           
Ms. Wing-Heier replied not many.  She could not imagine that                                                                    
in  2018  there  would  be insurance  throughout  the  state                                                                    
unless something was done.                                                                                                      
9:45:29 AM                                                                                                                    
Vice-Chair   Saddler  wondered   whether  individuals   with                                                                    
chronic conditions attracted to  Alaska to take advantage of                                                                    
the state's insurance program.                                                                                                  
Ms. Wing-Heier replied in the negative.                                                                                         
Co-Chair Thompson  wondered what would occur  should Premera                                                                    
decide to not offer coverage in the rural area.                                                                                 
Ms. Wing-Heier replied that the  state would not have to set                                                                    
up  an exchange,  she asked  how  the state  would ask  many                                                                    
Alaskans to  have no  medical coverage.  She stated  that it                                                                    
would cost around $200 million to set up an exchange.                                                                           
Co-Chair  Thompson asked  if  the funds  go  to the  general                                                                    
Mr. Parady stated that he was correct.                                                                                          
Co-Chair  Thompson remarked  that this  was the  reason that                                                                    
the  bill  would  not  be   leaving  the  current  committee                                                                    
9:52:55 AM                                                                                                                    
Representative Edgmon referred to Section  3 of the bill. He                                                                    
noted  that it  was  difficult to  not  draw some  parallels                                                                    
between  the legislation  and SB  74. He  remarked that  the                                                                    
issue  overlaid   a  number  of  state   agencies,  and  had                                                                    
statewide impacts  as a whole.  He wondered if  the director                                                                    
was  listed because  of  current statute.  He  asked if  the                                                                    
commissioner should be in charge of the decisions.                                                                              
Ms.  Wing-Heier referred  to Title  21 and  relayed that  it                                                                    
referred to the director.                                                                                                       
Representative Edgmon surmised that  the division was likely                                                                    
to have to come back to the legislature.                                                                                        
Mr.  Parady commented  that the  Director  of Insurance  did                                                                    
have authority. He noted that  the Commissioner of Insurance                                                                    
was elected in several other states.                                                                                            
Representative Edgmon wondered how  the reporting worked for                                                                    
the division.                                                                                                                   
Ms.  Wing-Heier  stated  that   the  Division  of  Insurance                                                                    
provided an annual report to legislators every year.                                                                            
Representative  Edgmon  asked why  the  issue  had not  been                                                                    
brought forward sooner.                                                                                                         
Mr. Parady  stated that he  thought it  had to do  with Moda                                                                    
bowing out.                                                                                                                     
Co-Chair Thompson  was shocked  that there was  previously a                                                                    
zero fiscal  note, and suddenly  would tap the  general fund                                                                    
by $55 million.                                                                                                                 
Mr. Parady  replied that  the bill  language stated  that it                                                                    
"may  appropriate", and  acknowledged that  the bill  had no                                                                    
effect until appropriation.                                                                                                     
Representative Edgmon  queried the  definition of  high risk                                                                    
residents. He  wondered if that  definition was tied  to the                                                                    
Affordable Care Act's definition.                                                                                               
Ms. Wing-Heier replied  that it was done to  comply with the                                                                    
guaranteed issue  provision of  the Affordable Care  Act, so                                                                    
anyone could seed claims to ACHIA.                                                                                              
Representative  Edgmon  wondered   whether  medical  reasons                                                                    
included behavioral health issues.                                                                                              
Ms. Wing-Heier replied in the affirmative.                                                                                      
9:58:57 AM                                                                                                                    
Representative Guttenberg  referred to  SB 74 in  Section 6,                                                                    
which dealt with efficiencies that  Department of Health and                                                                    
Social  Services (DHSS)  was  supposed  to present  planning                                                                    
efforts  to  coordinate  driving costs  downward,  and  herd                                                                    
efficiencies  across all  entities involved  with delivering                                                                    
services. He stressed that the  problem with the rising cost                                                                    
of delivering health  care was the largest  component in the                                                                    
budget. He queried a cabinet level focus on the issue.                                                                          
Mr. Parady  responded in the affirmative.  He explained that                                                                    
the  Health  Care  Authority included  the  commissioner  of                                                                    
Administration, the commissioner of  the Department of Labor                                                                    
and  Workforce Development;  the commissioner  of Department                                                                    
of Commerce, Community and Economic  Development; and was at                                                                    
the highest levels of the administration.                                                                                       
Representative  Guttenberg wondered  if  the bill  initiated                                                                    
those meetings.                                                                                                                 
Mr.  Parady  replied  that  those  meetings  had  previously                                                                    
occurred, were  ongoing, and were melding  under the current                                                                    
Representative Munoz  referred to  the premium  tax receipts                                                                    
referred to  in the  fiscal note.  She wondered  whether the                                                                    
tax receipts  were on private  policies, and if  so, whether                                                                    
it was the 23,000 individual policies.                                                                                          
Mr. Parady responded  in the negative. He  explained that it                                                                    
would be across all lines of insurance.                                                                                         
Vice-Chair  Saddler  asked if  ACHIA  was  working from  the                                                                    
actuary stand point.                                                                                                            
Ms. Wing-Heier  replied that ACHIA was  working, except that                                                                    
it did  not extend to everyone.  There was a limited  set of                                                                    
people who qualified for ACHIA.                                                                                                 
Vice-Chair  Saddler remarked  that giving  individual market                                                                    
dynamic distortion.  He felt that  the financial  impacts of                                                                    
the Affordable Care Act were expensive.                                                                                         
Representative Wilson  looked at the "Claims  Data" (copy on                                                                    
file). She  looked at  CC Set  4, and  wondered why  the $78                                                                    
million was not on the fiscal note.                                                                                             
Mr. Parady  looked at CC set  2, and remarked that  the bill                                                                    
would take  the 20  highest cost drivers,  and seed  them to                                                                    
ACHIA. He stated that the  appropriation would require ACHIA                                                                    
to pay  those costs. He  remarked that the effect  would not                                                                    
require them in  the rate filing, because they  would not be                                                                    
paid  by   the  insurance   company.  He  stated   that  the                                                                    
definition   of  the   appropriation   was   given  by   the                                                                    
legislature, which  would limit  the costs that  were seeded                                                                    
to ACHIA.                                                                                                                       
10:05:43 AM                                                                                                                   
Representative Wilson  surmised that it  would be a  loss to                                                                    
insurance companies. She asserted  that the $20 million loss                                                                    
would still allow  the insurance companies to  break even or                                                                    
experience a gain with the removal of the group.                                                                                
Mr. Parady responded that there  was a two-pronged approach.                                                                    
He explained that  there was an appropriation  to lessen the                                                                    
rate increase,  but there will  be a rate filing  that would                                                                    
reflect rates that were not  excessive and must be adequate.                                                                    
He  noted   the  40  percent  rate   increase  three  years,                                                                    
resulting in  an over double  over three years.  He remarked                                                                    
that the rate increase would  moderate, but the people would                                                                    
have their coverage.                                                                                                            
Ms. Wing-Heier  indicated that people would  continue to get                                                                    
insurance,  and everyone  paid the  same rate  regardless of                                                                    
level of sickness.  She stated that the  sick person's claim                                                                    
go  out, and  hopeful  slow  the rate  of  increase of  both                                                                    
Representative  Wilson wondered  what  would  happen to  the                                                                    
people who were not a part of the 23,000.                                                                                       
Ms.  Wing-Heier stated  that those  individuals  were not  a                                                                    
part of the discussion.                                                                                                         
Representative  Wilson understood  that it  was not  part of                                                                    
the discussion but  that was her concern.  She remarked that                                                                    
some  of   her  constituents'  premiums  had   increased  so                                                                    
significantly that they chose not  to pay for insurance. She                                                                    
stressed  that there  was a  portion of  the population  who                                                                    
would not be helped by the legislation.                                                                                         
Ms.  Wing-Heier replied  that  insurance  had an  individual                                                                    
market,  small  group, and  large  group.  The small  group,                                                                    
which  was rated,  did not  see  the rate  increases of  the                                                                    
individual  market. She  stressed that  the small  group was                                                                    
performing  fairly  well.  She  shared that  the  rates  had                                                                    
increased,  but  had  not   increased  like  the  individual                                                                    
market. She shared  that she had not seen the  three time 40                                                                    
percent rate increases. She stressed  that the group was not                                                                    
in  a  "death spiral."  She  remarked  that there  was  also                                                                    
competition in  the small group;  and it was a  larger pool.                                                                    
She reiterated that the individual  market was in the "death                                                                    
Representative  Wilson  queried  the  difference  between  a                                                                    
small group and an individual market.                                                                                           
Ms. Wing-Heier  explained that  a small  group was  under 50                                                                    
employees. The individual market had no employee sponsor.                                                                       
Co-Chair Thompson still did not  understand why the bill was                                                                    
being brought  forward with  a $55  million fiscal  note. He                                                                    
wondered why  the issue was  not addressed in  the budgeting                                                                    
Mr. Parady  replied that the  original version of  the bill,                                                                    
there  was  a contemplation  of  a  per person,  per  member                                                                    
charge of $20, which would have  spread the cost over a wide                                                                    
range  of  Alaskans. That  proposal  would  have funded  the                                                                    
amount.  He  stated  the provision  encountered  resistance,                                                                    
because there would be a  budgetary increase to some groups.                                                                    
He stressed  that removing  the funding  mechanism defaulted                                                                    
to   an  appropriation   approach.  He   remarked  that   an                                                                    
alternative  may   be  an  insurance  tax,   or  legislative                                                                    
Co-Chair Neuman stated that if Alaska  was going to set up a                                                                    
high risk pool.                                                                                                                 
Mr. Parady  answered that the  Affordable Care  Act required                                                                    
providers to offer coverage to  every American, there was no                                                                    
10:13:06 AM                                                                                                                   
Co-Chair Neuman wondered if there  was an analysis regarding                                                                    
an increased  financial risk to  the state by  the insurance                                                                    
companies' desire to drop the higher costs further.                                                                             
Ms. Wing-Heier  replied that  the state  would only  pick up                                                                    
the appropriation  actuarially. She  shared that the  top 20                                                                    
was approximately $55 million.                                                                                                  
Representative  Gara   felt  that  any  problem   with  bill                                                                    
introduction should  be addressed.  He wondered  whether the                                                                    
administration would  be amendable  to add the  survivors of                                                                    
first responders' legislation into the bill.                                                                                    
Co-Chair  Thompson  replied that  he  did  not believe  that                                                                    
would occur in the committee.                                                                                                   
Representative Gara  stressed that  he was  a member  of the                                                                    
committee, and wanted that particular legislation.                                                                              
Co-Chair Thompson set aside the bill.                                                                                           
HB  374  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  Thompson reviewed  the  agenda  for the  following                                                                    
day. He relayed  that the meeting was recessed to  a call of                                                                    
the chair [Note: the meeting never reconvened].                                                                                 

Document Name Date/Time Subjects
HB 374 CS WORKDRAFT FIN vE.pdf HFIN 5/26/2016 8:30:00 AM
HB 374
HB374 ver E - Sectional Analysis.pdf HFIN 5/26/2016 8:30:00 AM
HB 374
HB374 Transmittal Letter.pdf HFIN 5/26/2016 8:30:00 AM
HB 374
HB374 Supporting Documents - Power Point Presentation.pdf HFIN 5/26/2016 8:30:00 AM
HB 374
HB374 Supporting Documents - Claims Data.pdf HFIN 5/26/2016 8:30:00 AM
HB 374
HB 374 NEW FN DCCED 5-25-16.pdf HFIN 5/26/2016 8:30:00 AM
HB 374