Legislature(2003 - 2004)

04/24/2003 03:01 PM House HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 10-GROUP HEALTH INSURANCE FOR PRIVATE GROUPS                                                                               
CHAIR WILSON announced  that the next order of  business would be                                                               
HOUSE  BILL NO.  10, "An  Act  amending the  definition of  group                                                               
health insurance,  and allowing the Department  of Administration                                                               
to obtain  a policy  or policies of  group health  care insurance                                                               
for    employers   that    are   small    businesses,   nonprofit                                                               
organizations,   special   services   organizations,   or   small                                                               
associations  for  insurance  purposes;   and  providing  for  an                                                               
effective  date."   Chair Wilson  asked Representative  Heinze to                                                               
come  forward  and  speak  to  the changes  in  the  most  recent                                                               
committee substitute (CS).                                                                                                      
Number 1561                                                                                                                     
REPRESENTATIVE  SEATON  moved  to adopt  the  proposed  committee                                                               
substitute (CS)  for HB 10,  Version 23-LS0030\U,  Ford, 4/22/03,                                                               
as a work draft.  There  being no objection, Version U was before                                                               
the committee.                                                                                                                  
REPRESENTATIVE   CHERYLL   HEINZE,  Alaska   State   Legislature,                                                               
sponsor, explained  this is  an Act  which would  allow employers                                                               
and  self-insuring  individuals  to   pool  for  the  purpose  of                                                               
providing group  health insurance.  The  goal of this bill  is to                                                               
find a way to provide more  affordable health insurance.  In this                                                               
version the state  has no involvement and there is  a zero fiscal                                                               
note.   This  bill allows  any group  of any  size and  any self-                                                               
employed  individual to  associate for  the purpose  of obtaining                                                               
health insurance.  Nonprofits fit  under this description and are                                                               
allowed  to associate  with any  other group  for the  purpose of                                                               
obtaining health  insurance.  The  Mental Health  Trust Authority                                                               
has  indicated a  commitment  to fund  and  assist nonprofits  in                                                               
their efforts to find affordable health insurance.                                                                              
CHAIR  WILSON asked  if Representative  Heinze would  clarify her                                                               
statement   about  nonprofits   and  the   Mental  Health   Trust                                                               
REPRESENTATIVE HEINZE  responded that nonprofits are  included in                                                               
this  bill.   The  president of  the The  Foraker  Group is  very                                                               
interested in helping nonprofits in  pooling insurance.  The bill                                                               
allows   nonprofits,   large   and   small   organizations,   and                                                               
individuals to pool to obtain affordable medical insurance.                                                                     
Number 1347                                                                                                                     
HELEN BEDDER, M.D., Staff to  Representative Heinze, Alaska State                                                               
Legislature,  told the  committee  that the  initial  bill had  a                                                               
large fiscal  note and  it had  the Department  of Administration                                                               
administering   a   health   insurance  policy   which   included                                                               
nonprofits and small groups defined as 2 to 50 people.                                                                          
CHAIR WILSON commented that is  amazing, since she recalled there                                                               
was a zero fiscal note on last year's bill.                                                                                     
DR. BEDDER responded that the fiscal  note last year was the same                                                               
as the one  on the initial bill  this year.  She went  on to tell                                                               
the committee  that the  insurance industry  did not  support the                                                               
original   bill.       Representative   Rokeberg    worked   with                                                               
Representative Heinze  and with  the insurance companies  to come                                                               
up with  a solution  that would  be palatable  to everyone.   The                                                               
version  that  was  adopted  by  the  House  Labor  and  Commerce                                                               
Standing Committee went back to  square one and allowed any group                                                               
to pool  for the purposes  of obtaining health insurance  with no                                                               
limit  on size.    That  was all-inclusive  and  did not  exclude                                                               
nonprofits in  any way.   It allowed  any group to  associate for                                                               
the purpose of health insurance.                                                                                                
Number 1243                                                                                                                     
DR. BEDDER  pointed out that a  lot of people were  interested in                                                               
including self-employed  individuals.  Dr. Bedder  said that [the                                                               
sponsor]  worked   hard  with  Katie  Campbell   [Filings  Review                                                               
Supervisor] of  the Division of  Insurance who helped  write some                                                               
language  that  allowed  inclusion of  self-employed  individuals                                                               
while avoiding the pitfall that  prevented their inclusion in the                                                               
first  place.   The  initial problem  with  including the  single                                                               
self-employed person with  the groups was the fear  that a single                                                               
individual who  may not  be able to  afford insurance  because of                                                               
high risk  would want  to join  the pool that  had a  pretty good                                                               
deal going  with their  insurance rates.   That  individual would                                                               
then  cause  the rates  for  the  group  to  go up  because  that                                                               
individual would be a high-risk person.   The thought was that if                                                               
the individual  was not a  high-risk individual, then  the person                                                               
would  get insurance  on his/her  own  and not  be interested  in                                                               
going in the pool.  That has been  a very big concern for all the                                                               
insurance companies and the Division of Insurance for the state.                                                                
Number 1156                                                                                                                     
DR.  BEDDER  told  the  committee that  the  version  before  the                                                               
committee   now   [Version   U]   provides   that   self-employed                                                               
individuals are added, but the  insurer may restrict the coverage                                                               
offered to  the self-employed individual.   She pointed  out that                                                               
insurance companies are not allowed  to do that generally, but in                                                               
this   instance  the   insurance  companies   can  analyze   that                                                               
individual differently than they  analyze the individuals who are                                                               
members of a  group.  If that person is  a particularly high risk                                                               
individual, they  may still join,  however, they may have  to pay                                                               
an extra premium in order to do so.   She said there are a lot of                                                               
self-employed  people  who have  no  particular  health risk  and                                                               
those people would be able to  join and be allowed the reasonable                                                               
rates that  any other  group would  have.   However, if  there is                                                               
someone with  a high risk,  it does  not drag everyone  else into                                                               
the higher premiums.                                                                                                            
Number 1125                                                                                                                     
REPRESENTATIVE  SEATON asked  what the  benefit is  of joining  a                                                               
group over  an individual  plan if an  individual will  be paying                                                               
for  individual   coverage  based   on  that   individual's  risk                                                               
DR.  BEDDER replied  that  if  a person  is  an individual  self-                                                               
employed person,  as she  was and many  constituents are,  who do                                                               
not  particularly  have  a  high-risk  problem,  they  and  their                                                               
families can  join a group.   For instance, the  individual might                                                               
join the local Chamber of Commerce  in town and pool to get lower                                                               
rates, just as  large companies now pool.  The  change is for the                                                               
people who happen  to be high risk who are  self-employed who try                                                               
to get a  lower rate consistent with the group's  lower rate, but                                                               
by doing  so, raise everyone  else's rates.   It would  raise the                                                               
rates of the group  enough so the group would fail.   This is the                                                               
feeling of the entire industry.                                                                                                 
Number 1035                                                                                                                     
REPRESENTATIVE SEATON  restated his concern that  what will occur                                                               
is that there  will be a group plan, but  the insurance companies                                                               
will be able  to identify the healthy people in  the group, those                                                               
not at high risk, and they  will be covered under the group plan.                                                               
Although those  high-risk people  can be a  member of  the group,                                                               
they have to pay a higher rate.                                                                                                 
Number 1015                                                                                                                     
DR. BEDDER  responded that is  not the correct assumption.   This                                                               
only  applies to  a single  self-employed  person.   It does  not                                                               
apply to  a group.   The insurer cannot  pick and choose  whom he                                                               
will insure and charge different rates.  That is not allowed.                                                                   
REPRESENTATIVE   HEINZE  asked   if   Representative  Seaton   is                                                               
inquiring about the individual who wants to join a pool.                                                                        
DR.  BEDDER, in  response  to  Representative Seaton,  reiterated                                                               
that  insurance   companies  are  not  allowed   to  restrict  or                                                               
condition  the rates  of a  group.   If,  however, an  individual                                                               
self-employed person  wants to join  a group, that person  can be                                                               
scrutinized as  an individual.   But the  group that  has formed,                                                               
for  instance, a  group  of fishermen,  the  individuals of  that                                                               
group  have  to  be  treated  the  same  way.    They  cannot  be                                                               
individually scrutinized.                                                                                                       
Number 0840                                                                                                                     
REPRESENTATIVE  CISSNA  asked  Katie   Campbell  to  confirm  her                                                               
explanation if  she is correct.   What may be confusing,  is that                                                               
there is a  discussion going on about  different eligible groups.                                                               
One of the groups is small business,  which is defined as 2 to 50                                                               
people; a second group, including  nonprofits, is also defined as                                                               
2  to   50  people,   and  the   third  group   is  self-employed                                                               
individuals.  The self-employed  individual is always one person,                                                               
and  never more  than  one person  and  the self-employed  single                                                               
person's medical  history may  be scrutinized.   Since  there are                                                               
huge numbers  of self-employed  individuals in  this state  and a                                                               
certain number  of those  people are  sick, if  [this legislation                                                               
would allow] a high-risk [self-employed]  individual a way to get                                                               
health insurance  by paying a higher  premium.  She asked  if her                                                               
comments clarified Representative Seaton's question.                                                                            
Number 0709                                                                                                                     
REPRESENTATIVE SEATON  replied no.  He  related his understanding                                                               
that this  bill would allow  a group of 50  self-employed people,                                                               
to form an association to get  insurance.  However, the bill also                                                               
seems to allow  the medical history of  each self-employed person                                                               
to be screened  to determine whether they can be  a member of the                                                               
group.   If one of the  50 is not healthy,  the insurance company                                                               
can take the individual at a higher premium.                                                                                    
MS.  CAMPBELL responded  that the  insurance  company could  also                                                               
decline to  cover these  high-risk self-employed  individuals, as                                                               
is the  case in the individual  market right now.   The insurance                                                               
company will  look at these  individuals as it does  when writing                                                               
an  individual policy.    The insurance  company  will say,  this                                                               
individual  will not  be covered  and  must go  to the  high-risk                                                               
pool,  or the  insurance company  will cover  the individual  and                                                               
restrict the insurance policy.   Realistically speak it is not as                                                               
likely an  event for  the self-employed, as  those that  may join                                                               
with other  employers and  become part of  a bigger  pool because                                                               
there  would  be  no  real  advantage unless  they  could  get  a                                                               
different   type  of   benefit  plan.     These   [self-employed]                                                               
individuals could  get coverage  right now for  fairly reasonable                                                               
rates if they are healthy.                                                                                                      
Number 0608                                                                                                                     
REPRESENTATIVE  SEATON commented  that this  bill allows  a self-                                                               
employed individual to go to a  union that has a group policy and                                                               
apply to become  part of the union's group insurance  if they are                                                               
healthy enough for the insurance company to allow them in.                                                                      
MS.  CAMPBELL responded  that she  would not  use a  union as  an                                                               
example.    However,  a  business  group  in  Anchorage  with  50                                                               
[employees]  and some  individuals  who  are self-employed  could                                                               
form an association,  set up some rules on how  they are going to                                                               
operate, and the  insurance company would look at that.   In this                                                               
case,  all of  the self-employed  people will  need to  provide a                                                               
health statement  because it is  important to know if  they could                                                               
be in the pool.   The reason why this would  be important is that                                                               
everyone who  is high-risk  would be running  to join  this pool,                                                               
which  would  ruin  the  pool.   Right  now  individuals  can  be                                                               
declined and sent to the high-risk pool.                                                                                        
REPRESENTATIVE SEATON  said he does  not understand  the language                                                               
on  page 3,  line 24,  where it  says "the  association shall  be                                                               
maintained in  good faith for  the benefit of persons  other than                                                               
the  association or  its officers  or trustees."   Representative                                                               
Seaton  said  he  understood  this language  to  imply  that  the                                                               
association  is  being  maintained  for some  other  reason  than                                                               
health  care for  the  benefit  of the  persons  involved in  the                                                               
Number 0460                                                                                                                     
MS. CAMPBELL  explained that the  goal with that provision  is to                                                               
ensure that  those who  have formed the  association and  who are                                                               
doing the  administration do not  collect all the money  and run.                                                               
Those premiums  will be sent  on to the health  insurance company                                                               
and pay  the health insurance for  the benefit of the  members of                                                               
the association, not the association itself.                                                                                    
CHAIR WILSON  asked if anyone has  reviewed the constitutionality                                                               
of  this bill.   She  questioned how  a pool  can be  set up  and                                                               
anyone  in the  state can  join the  pool, unless  the individual                                                               
happens to  be self-employed.   If the  individual happens  to be                                                               
self-employed, the insurance company can "stick it to" them.                                                                    
Number 0370                                                                                                                     
MS. CAMPBELL  responded that insurance companies  can just refuse                                                               
to cover a self-employed person, which is the case now.                                                                         
CHAIR WILSON asked if insurance companies single out self-                                                                      
employed individuals.                                                                                                           
MS. CAMPBELL responded that is correct.                                                                                         
Number 0370                                                                                                                     
REPRESENTATIVE WOLF  said as  a retired  contractor he  could not                                                               
get  insurance  for  his  family, partly  because  he  was  self-                                                               
employed and  partly because he  has a  special needs son.   This                                                               
bill would  allow nonprofits  and employers  to join  together to                                                               
develop a pool.  This bill makes sense, he said.                                                                                
CHAIR WILSON  stated that if  an individual is  self-employed and                                                               
happened to  be healthy,  this bill would  be helpful.   However,                                                               
this bill will not assist  [self-employed] individuals who are in                                                               
a high-risk category.                                                                                                           
REPRESENTATIVE  SEATON  commented that  if  he  is not  mistaken,                                                               
those individuals who  are not healthy can go  into the high-risk                                                               
pool.  This  plan would not help them, but  with the amendment in                                                               
the other bill  [HB 270] it means that the  maximum that could be                                                               
charged to  those high-risk individuals  would be 150  percent of                                                               
what the average healthy person would be charged.                                                                               
CHAIR WILSON commented that the people  who will be kicked out of                                                               
these pools  would be picked up  in the other insurance  bill [HB
Number 0239                                                                                                                     
REPRESENTATIVE HEINZE told the committee  before January when she                                                               
was sworn in as a legislator, she  had been on a search for years                                                               
to find  insurance coverage  for herself because  she is  a self-                                                               
employed individual.   It took years to find it  and although the                                                               
policy  covered almost  nothing, the  premiums are  around $1,000                                                               
per month.   In the  case of  a serious hospitalization  it would                                                               
have been  okay, but  nothing else  was covered.   Representative                                                               
Heinze commented that  if this insurance had  been available, she                                                               
would have  jumped at it.   It never  would have been  $1,000 per                                                               
month for a healthy individual in this pool.                                                                                    
Number 0169                                                                                                                     
REPRESENTATIVE CISSNA  said that  one of the  sad things  is that                                                               
there will be  people left out of  this bill too.   There will be                                                               
people who  will not  be able to  afford the  insurance premiums,                                                               
just as there  are many people who have COBRA,  cannot afford it.                                                               
It is  a significant  number of  people.   She said  she believes                                                               
this is  an incremental fix  and she would  like to see  a bigger                                                               
fix, but  an incremental fix  may be all  that can be  done right                                                               
now.  This is the only thing on  the plate or even comes close to                                                               
dealing  with a  problem for  a lot  of people  that really  need                                                               
Number 0048                                                                                                                     
REPRESENTATIVE CISSNA  said her  understanding, according  to the                                                               
Division of  Insurance, is  that the  term employee  and employer                                                               
can  fit in  the nonprofit  category.   Although this  does cover                                                               
nonprofits, someone  in the insurance industry  suggested that if                                                               
the legislature  inserted the term  "nonprofit" as has  been done                                                               
with  the self-employed,  it would  be helpful.   Therefore,  she                                                               
indicated that  a conceptual amendment inserting  the words "non-                                                               
profit organizations" into the title  could be added.  Therefore,                                                               
the title would read:  "An  Act relating to pooling by employers,                                                               
self-employed  individuals,  and   non-profit  organizations  for                                                               
purpose of group  health insurance".  However,  the definition of                                                               
nonprofit  in the  bill  is the  language that  came  out of  the                                                               
original bill.                                                                                                                  
TAPE 03-37, SIDE A                                                                                                            
Number 0019                                                                                                                     
REPRESENTATIVE  CISSNA  said  that  language  may  be  too  broad                                                               
because  it included  that nonprofit  organizations means  clubs,                                                               
societies, exclusively for  charitable, religious, scientific, or                                                               
educational purposes for the promotion  of social welfare and has                                                               
received an  exemption for the  payment of federal  income taxes.                                                               
That is  what the original bill  included.  She said  she did not                                                               
believe a definition needs to be included in the bill.                                                                          
Number 0061                                                                                                                     
REPRESENTATIVE  WOLF  commented  that  the  title  says  "An  Act                                                               
relating to  pooling by employers", and  a nonprofit organization                                                               
is an employer.                                                                                                                 
REPRESENTATIVE  CISSNA agreed,  but  said that  according to  her                                                               
sources in  the insurance industry,  placing the language  in the                                                               
bill will ensure that there is no misconception.                                                                                
Number 0107                                                                                                                     
CHAIR WILSON announced that CSHB  10 would be held until Tuesday.                                                               
She asked Representatives Cissna and  Wolf to work on this aspect                                                               
of the bill and bring an amendment back to the committee.                                                                       
Number 0172                                                                                                                     
BENJAMIN BROWN,  Alaska State Chamber  of Commerce,  testified in                                                               
support  of  CSHB  10.     He  told  the  committee  the  chamber                                                               
membership   is  comprised   of  700   small  businesses,   large                                                               
businesses, and  35 local chambers  of commerce.  Every  year the                                                               
chamber asks the  members to provide a list  of their legislative                                                               
priorities for  the coming  year.  Based  on that,  a legislative                                                               
conference is  held in November where  the legislative committee,                                                               
board of  directors, and  other members  of the  organization get                                                               
together and determine  the top priorities.   This bill addresses                                                               
two of  the chamber's six main  priorities.  One of  which is the                                                               
provision  of  affordable health  insurance  for  Alaskans.   The                                                               
chamber  urged  the  legislature   to  work  with  the  insurance                                                               
industry to  devise alternatives  to the continued  escalation of                                                               
health insurance costs.   This bill could not be  a neater fit to                                                               
the chamber's  priority.  The  earlier piece of  legislation that                                                               
the committee  looked at, HB  195, dealt with individuals.   This                                                               
bill tries  to deal  with small businesses  and nonprofits.   Mr.                                                               
Brown said that  Representative Rokeberg, over the  course of his                                                               
career, has  worked hard on these  issues.  Once the  pooling was                                                               
applied to  large businesses and  shown to be successful,  it has                                                               
been   trickling  down   and  getting   to  smaller   groups  and                                                               
individuals.   The individuals are  not the  primary constituency                                                               
of the state  chamber, but small businesses are  a very important                                                               
Number 0285                                                                                                                     
MR.  BROWN said  that the  second  priority of  the Alaska  State                                                               
Chamber of Commerce  is protecting Alaska's fiscal  future.  This                                                               
version  of the  bill  is  supported by  the  chamber because  it                                                               
eliminates the role  of the state and removes the  state from any                                                               
fiscal  note  or fiscal  impact.    It  is  important not  to  be                                                               
burdening  the state  with  costs at  a time  when  the state  is                                                               
trying  to cut  costs.    Mr. Brown  summarized  his comments  by                                                               
saying that  the Alaska State  Chamber of Commerce  supports this                                                               
legislation and  asks the members  to work on the  legislation to                                                               
make it as effective as it can be.                                                                                              
REPRESENTATIVE WOLF pointed out  that any nonprofit organizations                                                               
may use  health insurance as  an incentive to bring  employees on                                                               
board.  There are 5,000 nonprofits  in the state of Alaska.  Many                                                               
nonprofits come to the  state to ask for money.   He said this is                                                               
an  opportunity to  lower that  request by  lowering the  cost of                                                               
health insurance.                                                                                                               
Number 0420                                                                                                                     
DELISA  CULPEPPER, Deputy  Director, Alaska  Mental Health  Trust                                                               
Authority, testified  via teleconference  in support of  CSHB 10.                                                               
She told the committee that  they support any efforts the members                                                               
make to  assist nonprofit  organizations in  obtaining affordable                                                               
health  insurance.   Many of  their beneficiaries  are served  by                                                               
these  nonprofits which  have  professionals  and direct  service                                                               
staff that need  health insurance.  It enhances  stability in the                                                               
workplace  and it  is especially  difficult in  rural Alaska.   A                                                               
bill  that would  allow  pooling may  be the  only  way to  lower                                                               
insurance premiums.   She  asked the committee  to move  the bill                                                               
Number 0528                                                                                                                     
REPRESENTATIVE  HEINZE   commented  that   Representative  Cissna                                                               
believes  that  an intent  line  could  be  added to  the  second                                                               
paragraph of the bill which clarifies [the nonprofit issue].                                                                    
CHAIR  WILSON stated  that HB  10 would  be held  until the  next                                                               

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