Legislature(2003 - 2004)

02/24/2003 03:15 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB  10-GROUP HEALTH INSURANCE FOR PRIVATE GROUPS                                                                              
Number 0050                                                                                                                     
CHAIR ANDERSON  announced that the  only 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."                                                                                                                
The committee took an at-ease from 3:17 to 3:18 p.m.                                                                            
Number 0078                                                                                                                     
REPRESENTATIVE CHERYLL  HEINZE, Alaska State Legislature,  as one                                                               
of  two joint  sponsors of  HB 10,  testified that  HB 10  allows                                                               
small businesses,  nonprofits, and others  groups to join  a pool                                                               
for a  health insurance plan.   The Department  of Administration                                                               
would obtain  the policy, and  then employers would  purchase the                                                               
insurance  through  the  private  plan.    The  legislation  also                                                               
permits  the recovery  of the  initial  cost for  setting up  the                                                               
group.  She  said the cost recovery would be  spread over a five-                                                               
year  period,  and  the  Alaska  Mental  Health  Trust  Authority                                                               
("Mental Health Trust") would provide the upfront money.                                                                        
Number 0170                                                                                                                     
REPRESENTATIVE ROKEBERG, the second  joint sponsor, noted a small                                                               
change  in the  committee substitute  (CS) in  the members'  bill                                                               
Number 0197                                                                                                                     
REPRESENTATIVE ROKEBERG  moved to  adopt the  proposed CS  for HB
10,  Version  23-LS0030\I,  Craver,  2/12/03, as  a  work  draft.                                                               
There being no objection, Version I was before the committee.                                                                   
Number 0243                                                                                                                     
REPRESENTATIVE ROKEBERG explained that  the proposed CS contained                                                               
a  new  sentence   on  page  5,  lines  4-6,   which  read:  "The                                                               
commissioner shall distribute  the administrative costs recovered                                                               
pro  rata  to  any  funds,  including  the  mental  health  trust                                                               
settlement income account, from  which initial funding was made."                                                               
He said this is the only change  in the proposed CS and was added                                                               
at the request  of the Mental Health Trust to  clarify the source                                                               
of the [start-up] funds for  this legislation.  He suggested that                                                               
Guy   Bell,  Director,   Division  of   Retirement  &   Benefits,                                                               
Department of  Administration, can  explain his  division's costs                                                               
and the amount the Mental Health Trust would contribute.                                                                        
Number 0369                                                                                                                     
REPRESENTATIVE GATTO asked  why the state is  getting involved in                                                               
insurance  for   private  businesses  when  the   private  sector                                                               
provides this product.                                                                                                          
Number 0407                                                                                                                     
HELEN  BETTER,  M.D.,  Staff to  Representative  Cheryll  Heinze,                                                               
Alaska  State Legislature,  explained that  HB 10  is based  on a                                                               
model, which  assembles an insurance  plan for  small businesses.                                                               
Currently, Alaska law allows political  subdivisions to work with                                                               
the state in  developing an insurance plan similar to  the one in                                                               
this bill.  Political subdivisions  such as Kotzebue and Nome are                                                               
using a health insurance plan  that is administered by the state.                                                               
She said it's  important for the [State of Alaska  to be involved                                                               
as  an  organizer]  because  it has  been  impossible  for  small                                                               
businesses  to  gain  health  insurance  on  their  own.    State                                                               
government  can create  [a program]  and spread  the cost  over a                                                               
large  group of  people.    She said  even  if  the state  cannot                                                               
significantly lower the cost of the  insurance, it may be able to                                                               
arrange better options for the small businesses and nonprofits.                                                                 
Number 0545                                                                                                                     
REPRESENTATIVE   ROKEBERG    commended   Representative   Gatto's                                                               
question and explained  the rationale behind HB 10.   He reported                                                               
that there  are precedents for  this bill in Alaska  statutes and                                                               
elsewhere;  Alaska has  a  small group  provision  in its  health                                                               
insurance   statutes.     It's   challenging   for  these   small                                                               
enterprises,  particularly  nonprofit   organizations  that  have                                                               
difficulty  finding insurance  coverage, to  form a  larger pool.                                                               
Last year the  legislature passed a bill  enabling MEWA (Multiple                                                               
Employers  Welfare Associations);  MEWA  is  a federal  provision                                                               
that allow groups  or businesses with certain  affinities to form                                                               
self-insurance with lower than normal  solvency requirements.  He                                                               
stated  that  trade  organizations throughout  the  country  pool                                                               
together for insurance purposes.                                                                                                
REPRESENTATIVE ROKEBERG said  HB 10 has two goals:   to lower the                                                               
cost  of monthly  premiums and  to  expand the  options that  are                                                               
available to  these folks.   There  could be  an economy  plan, a                                                               
Chevy plan, and  perhaps a Cadillac plan.  A  very small group or                                                               
an individual business or nonprofit  organization cannot get this                                                               
type of coverage.                                                                                                               
Number 0750                                                                                                                     
REPRESENTATIVE  ROKEBERG cautioned  people against  expecting too                                                               
much from  HB 10.  He  said the legislature and  everyone in this                                                               
country  wants  to  find  the  magic  solution  to  lower  health                                                               
insurance  premiums.    He  declared  that  health  costs  are  a                                                               
continually  growing  part  of an  individual's  budget  and  the                                                               
country's gross  domestic product.   If the legislature  can help                                                               
citizens lower  these costs, this  is a  small step forward.   He                                                               
said the Mental Health Trust  agreed to fund the start-up because                                                               
of the  large number  of nonprofit  organizations with  whom they                                                               
deal that are unable to obtain insurance at a reasonable rate.                                                                  
Number 0835                                                                                                                     
REPRESENTATIVE  ROKEBERG   returned  to   Representative  Gatto's                                                               
question.  He explained that HB  10 does not involve the state in                                                               
the insurance business.   In this case, the state  would invite a                                                               
group of different [enterprises] to  form a pool; the state would                                                               
be merely the  conduit.  The state would develop  the bid process                                                               
that would go  out to private insurance underwriters.   The state                                                               
would not  underwrite nor pay for  the insurance.  House  Bill 10                                                               
would  not expand  the state  health insurance  program to  other                                                               
folks.   Once this  program gets established,  it would  be self-                                                               
financed and operated almost entirely by the private sector.                                                                    
Representative Cissna joined the committee.                                                                                     
Number 0894                                                                                                                     
REPRESENTATIVE  HEINZE reiterated  that  the  state, through  the                                                               
Mental Health  Trust, would fund  the upfront costs,  which would                                                               
be paid back.  This is a big helping hand, she said.                                                                            
REPRESENTATIVE  GATTO observed  that  if the  state  is merely  a                                                               
conduit for  gathering people together, that  role is unnecessary                                                               
because individuals  can do that  themselves.  He said  the state                                                               
has a  poor record  of taking  on projects  to help  others; many                                                               
such projects  ended in  a deficit.   He said  the bill  goes way                                                               
beyond gathering the names of  interested individuals and letting                                                               
someone bid on the service.                                                                                                     
REPRESENTATIVE HEINZE explained that the  project is not quite so                                                               
simplistic, that  the state doesn't  just gather the names.   The                                                               
state  would  prepare the  project  for  bid,  and then  the  two                                                               
companies in Alaska that underwrite  small group health insurance                                                               
policies would bid on it.                                                                                                       
Number 1063                                                                                                                     
DR. BETTER explained  that someone has to develop the  plan.  The                                                               
state  would  develop  the  plan  as it  did  for  the  political                                                               
subdivisions.  The  state would design a plan that  works for the                                                               
insurance companies  and works for  the individuals in  the pool,                                                               
and then it would come up with  a cost.  Insurance plans can vary                                                               
from  minimal   to  extensive  coverage;  they   are  not  simple                                                               
documents.   When  an individual  seeks  insurance, an  insurance                                                               
agent  or broker  would lay  out  potential plans,  and then  the                                                               
individual would make a decision.   No one is currently providing                                                               
this service [to  business and nonprofits as a  group].  Agencies                                                               
like United  Way have not  been able  to assemble a  large enough                                                               
pool.    She   said  that's  why  the   sponsors  included  small                                                               
businesses and other associations in this bill.                                                                                 
REPRESENTATIVE GATTO  cautioned that the state  would be actively                                                               
approaching  insurance companies,  getting bids,  and signing  up                                                               
individuals at different  levels of risk.  He  recalled the Delta                                                               
Barley projects  and the Mt.  McKinley Dairy Farms, in  which the                                                               
state lost  its investment.   He  said he  is concerned  that the                                                               
state won't [recoup its money].                                                                                                 
Number 1245                                                                                                                     
REPRESENTATIVE  ROKEBERG said  he  shares Representative  Gatto's                                                               
concerns about  government adventures in private  enterprise.  He                                                               
said  the legislature's  real power  is derived  from the  purse.                                                               
The state would  venture $42,900, less than the cost  of one door                                                               
in one [grain] silo.  The  additional $89,900 would come from the                                                               
Mental  Health Trust,  which  is  not general  fund  money.   The                                                               
provisions  of the  bill allow  for the  recoupment of  all these                                                               
funds, in the underwriting cost  of the third-party administrator                                                               
or the insurance  underwriter.  The words  "may obtain insurance"                                                               
allows  the  department  to avoid  entering  into  any  insurance                                                               
contracts.  He  said the sponsors do not intend  to get the State                                                               
of Alaska into  the insurance market anymore than  it already is,                                                               
for   example,  providing   the  structure   for  the   political                                                               
subdivisions  to  operate  their  insurance  plans.    There  are                                                               
provisions in  the insurance  statutes now  that allow  groups to                                                               
get  together to  do some  of their  own underwriting  and become                                                               
self-insured.   However, that  rarely happens.   As  indicated in                                                               
past public  testimony, a  large number of  people in  this state                                                               
are  interested in  joining a  pool.   Combining nonprofits  with                                                               
some  small  businesses  creates  a  bigger  base  and  hopefully                                                               
realizes some economies not possible otherwise.                                                                                 
REPRESENTATIVE ROKEBERG  cautioned that  this committee  needs to                                                               
be  concerned  about the  bill's  impact  on the  small  business                                                               
insurance group market.   He stressed that this  is no socialized                                                               
medicine  plan  in sheep's  clothing  because  with $42,000,  the                                                               
legislature cannot do a lot of damage.                                                                                          
Number 1390                                                                                                                     
REPRESENTATIVE CRAWFORD  declared that  he supports HB  10, which                                                               
he characterized  as a  great first step.   He  expressed concern                                                               
that it leaves  single-person companies out of the  equation.  He                                                               
asked why the  legislation only addresses companies with  2 to 50                                                               
REPRESENTATIVE  HEINZE answered  that HB  10 uses  the definition                                                               
for small business  in AS 21.54.500, which is at  least 2 but not                                                               
more than 50 employees.                                                                                                         
DR. BEDDER said  that the definition [in HB  10] is traditionally                                                               
used throughout the  United States.  A single  individual who has                                                               
not  been able  to obtain  affordable health  insurance would  be                                                               
interested in joining  this plan because there would  be no limit                                                               
on  pre-existing  illnesses  or   conditions.    Therefore,  this                                                               
feature would draw persons  with particularly difficult insurance                                                               
issues,  which would  create  a higher  risk  pool, resulting  in                                                               
higher premiums.                                                                                                                
REPRESENTATIVE CRAWFORD noted that the  state already has a high-                                                               
risk pool, the Alaska  Comprehensive Health Insurance Association                                                               
(ACHIA).  He suggested that  the bill direct those [single-person                                                               
businesses] with  serious pre-existing conditions into  the ACHIA                                                               
pool while  the other [entities]  would come in under  this pool.                                                               
He  cautioned that  leaving out  single operators  without health                                                               
problems excludes a large segment of the population.                                                                            
Number 1568                                                                                                                     
REPRESENTATIVE  HEINZE  warned  about  the  need  to  [develop  a                                                               
suitable  plan on  which  insurance companies  would  bid].   The                                                               
Alaska [insurance market] is unique  because of the state's small                                                               
[population], she said.                                                                                                         
REPRESENTATIVE  ROKEBERG pointed  out that  individuals can  join                                                               
the ACHIA  pool [for health  insurance coverage] and it  was thus                                                               
not  necessary to  include individual  businesspersons in  HB 10.                                                               
He  noted  his  proposed  amendment that  narrows  the  scope  of                                                               
eligibility  for  the  pool.    Narrowing  the  risk  pool  would                                                               
encourage health  insurance underwriters  to enter the  market in                                                               
Alaska,  not leave  it.   Currently,  the state  has three  major                                                               
underwriters that carry  more than 52 percent of the  market.  He                                                               
explained that the  small business policies amount  to 55 percent                                                               
of the  market.   Representative Rokeberg echoed  the need  to be                                                               
sensitive about Alaska's market condition.   If HB 10 is expanded                                                               
and made  open-ended, [the  State of]  Alaska would  be competing                                                               
against the  industry.   He cautioned  that if  [the legislature]                                                               
isn't careful  with this  bill, the  state will  [end up  with] a                                                               
single insurance underwriter.                                                                                                   
REPRESENTATIVE CRAWFORD said he  understood [the market problem],                                                               
but asked if  [healthy single proprietors] could  be brought into                                                               
this pool.   He  reiterated his  concern about  excluding healthy                                                               
single proprietors.                                                                                                             
REPRESENTATIVE  ROKEBERG noted  that  going  into the  individual                                                               
market would  almost certainly impact the  number of underwriters                                                               
writing  business in  the state.    He explained  that the  fifty                                                               
underwriters in the state that  do write low-premium policies are                                                               
the  ones  writing  individual  policies.   Expanding  HB  10  to                                                               
individual business people would risk  running 50 insurers out of                                                               
the state at one time, he warned.                                                                                               
Number 1847                                                                                                                     
CHAIR ANDERSON directed attention  to the sponsor statement which                                                               
reads,  "The intent  of this  bill is  to provide  quality health                                                               
insurance  by  creating  a  large  pool  of  covered  lives,  and                                                               
generate more choice of coverage not  a lower cost."  However, he                                                               
noted that document  also includes the following  sentence:  "The                                                               
entities  described in  this legislation  often cannot  afford to                                                               
provide employees  with adequate health insurance  coverage."  He                                                               
asked  if the  purpose of  HB 10  is to  lower costs,  offer more                                                               
choice, or both.                                                                                                                
REPRESENTATIVE HEINZE  answered "probably  both."   She expressed                                                               
hope that more  accessible and more affordable  coverage could be                                                               
provided to small businesses through this legislation.                                                                          
CHAIR ANDERSON said that one  of his constituents from the Alaska                                                               
Association  of Health  Underwriters has  expressed some  salient                                                               
concerns in a letter.  He quoted the letter as follows:                                                                         
     Entities  that  are   already  experiencing  affordable                                                                    
     rates  in the  private market  due to  low loss  ratios                                                                    
     will not be  interested in joining the  pool.  However,                                                                    
     unhealthy  small  employer   groups  with  bad  medical                                                                    
     experience and high claims could  flock to a state plan                                                                    
     with low  rates.  These groups  might initially benefit                                                                    
     from lower  rates, but eventually  the state  pool will                                                                    
     be forced to  react to the bad  claims experienced from                                                                    
     these groups and increase premiums.   Other states that                                                                    
     have implemented  such pools have found  that rates for                                                                    
     smaller  businesses did  not drop  over time.   Instead                                                                    
     they  have  remained  the  same   or  higher  than  the                                                                    
     traditional small group market.                                                                                            
REPRESENTATIVE ROKEBERG  said that he agreed  with that analysis.                                                               
He  said  that  HB  10  doesn't  specify  a  higher  standard  or                                                               
threshold and thus runs the  risk [described in the above quote].                                                               
Bringing   nonprofits  and   small   businesses  together   would                                                               
hopefully  spread the  risk to  a  larger covered  life pool,  he                                                               
CHAIR ANDERSON  remarked that Representative  Rokeberg's proposed                                                               
amendment covers  some of  the concerns  expressed in  the letter                                                               
from the Alaska Association of Health Underwriters.                                                                             
REPRESENTATIVE ROKEBERG agreed.                                                                                                 
Number 2044                                                                                                                     
MARIE DARLIN, Coordinator, Capital  City Task Force, AARP Alaska,                                                               
noted that  the committee's bill  packet should include  a letter                                                               
of  support for  HB 10.    She said  ARRP's main  concern is  for                                                               
nonprofit agencies  that are  having difficulties  offering their                                                               
employees health  insurance, which is necessary  to retain staff.                                                               
She  said  the  letter  also conveyed  AARP's  concern  for  many                                                               
citizens who don't have health insurance at all.                                                                                
REPRESENTATIVE DAHLSTROM asked whether  nonprofits such as Native                                                               
associations, which  may be eligible under  other programs, could                                                               
be covered under this plan also.                                                                                                
REPRESENTATIVE  ROKEBERG   said  that  he  would   research  that                                                               
Number 2138                                                                                                                     
BOB  TAYLOR,  Acting  Executive Director,  Alaska  Commission  on                                                               
Aging,    Division   of    Senior    Services,   Department    of                                                               
Administration,  announced support  for this  legislation.   When                                                               
the commission wrote  a state plan covering  the years 2003-2007,                                                               
staff held  a series  of hearings throughout  Alaska in  order to                                                               
obtain public comment on key issues  to senior citizens.  He said                                                               
there was  a lot of  public comment  related to this  state plan,                                                               
and  workforce  issues  came  up  repeatedly.    The  state  plan                                                               
advocates  for  systems  and strategies  that  will  help  senior                                                               
citizens  stay  in  their  communities   and  homes  as  long  as                                                               
possible.   This aging-in-place system  is composed of  many home                                                               
and  community  services such  as  adult  day care  and  personal                                                               
services.  He  said the Commission on Aging  strongly supports HB
10  to the  extent that  it  would provide  health insurance  for                                                               
those nonprofits and small businesses.                                                                                          
Number 2250                                                                                                                     
KEVIN  MURPHY, President,  Substance Abuse  Directors Association                                                               
of  Alaska (SADA),  noted that  SADA represents  approximately 44                                                               
programs across  the state.  He  announced that SADA is  in favor                                                               
of  HB  10, although  SADA  had  hoped  it would  make  available                                                               
insurance for many  of SADA's members who  can't currently afford                                                               
health insurance.   He said  that he hoped  the passage of  HB 10                                                               
would stem the flow of personnel from the field.                                                                                
Number 2310                                                                                                                     
PAMELA  LaBOLLE,  President,  Alaska State  Chamber  of  Commerce                                                               
(ASCC), testified  in support  of HB  10.   She related  that the                                                               
[inability  to assess  health insurance]  has been  a significant                                                               
problem for  small businesses.   She informed the  committee that                                                               
ASCC is a  nonprofit and until three years ago,  ASCC was covered                                                               
through  the  American  Chamber   of  Commerce  executives  in  a                                                               
nationwide  pool  for  which  John   Hancock  was  the  provider.                                                               
However, John  Hancock pulled  out of Alaska,  and ASCC  has been                                                               
searching for  comparable and  affordable insurance.   Currently,                                                               
ASCC  has  a  policy  with   a  high  deductible.    Ms.  LaBolle                                                               
emphasized that  ASCC is just  one example.   She noted  that she                                                               
has a  professional position  to fill, and  there have  been some                                                               
interested  candidates.   Although ASCC  is competitive  with its                                                               
salary, the health insurance is not competitive.                                                                                
TAPE 03-12, SIDE B                                                                                                            
Number 2365                                                                                                                     
MS.  LaBOLLE  indicated  that  the   lack  of  accessible  health                                                               
insurance for  small employers  eliminates them  from competition                                                               
in  the job  market.   This  situation is  common throughout  the                                                               
state, she  said.  [Having  health insurance available  for small                                                               
businesses] is one of ASCC's top priorities, she added.                                                                         
Number 2342                                                                                                                     
REPRESENTATIVE ROKEBERG mentioned his  concern with the impact of                                                               
HB 10  on the competitive  marketplace.   Representative Rokeberg                                                               
expressed concern that  without an amendment, the  state may lose                                                               
one or more of its major underwriters.                                                                                          
MS.  LaBOLLE  agreed  that  Alaska  is a  small  pool  for  these                                                               
national  companies.   She  noted  that  a recent  Department  of                                                               
Health & Social Services survey  showed that the costs of medical                                                               
services in  Alaska is  25 percent higher  than elsewhere  in the                                                               
nation.   For those  reasons, Alaska is  not an  attractive place                                                               
for insurance companies  to do business.   Because [ASCC] doesn't                                                               
want  to run  anyone  else out  of the  state,  she suggested  an                                                               
exemption [from  certain mandates]  for insurance  companies that                                                               
offer coverage to businesses up to  a certain size.  She observed                                                               
that  although mandates  are important,  one must  review whether                                                               
those mandates are cutting Alaska out of the insurance market.                                                                  
Number 2230                                                                                                                     
GUY   BELL,  Director,   Division  of   Retirement  &   Benefits,                                                               
Department  of Administration,  informed the  committee that  the                                                               
division  would  run the  program  HB  10  were  to pass.    This                                                               
legislation would  allow the commissioner, through  the division,                                                               
to  obtain  fully  insured health  insurance  policies  to  cover                                                               
qualified entities.  He said  that qualified entities are defined                                                               
as  Alaska  small   businesses  that  employ  2   -  50  eligible                                                               
employees, Alaska  nonprofit organizations,  sole proprietorships                                                               
or  corporations that  operate childcare  facilities, residential                                                               
childcare facilities,  foster homes, assisted  living facilities,                                                               
or provide adult daycare or home care services.                                                                                 
MR. BELL  explained that under  HB 10, the commissioner  would be                                                               
given quite a bit of discretion  in designing policies.  No state                                                               
subsidy would be  involved.  Only seed money  would be available,                                                               
and it  would be used  to work with interested  groups developing                                                               
the plans.   He  explained that the  division envisioned  using a                                                               
benefits  consultant who  would  work with  focus groups  through                                                               
surveys in  order to  develop plan design  options and  a request                                                               
for proposals  (RFP).  The  division would choose the  best price                                                               
bid  from those  products offered;  most likely,  he said,  there                                                               
would be multiple policies.                                                                                                     
Number 2125                                                                                                                     
MR. BELL  advised that the  most likely  types of plans  would be                                                               
"first dollar"  plans, policies in  which [the plan]  would cover                                                               
up to  a certain amount  of medical expenses and  nothing beyond,                                                               
with the understanding that these  nonprofits and others would be                                                               
able   to   obtain   catastrophic  coverage   elsewhere.      The                                                               
catastrophic or major medical plan  could be chosen and thus [the                                                               
plan] wouldn't cover  the first $5,000 in claims  but would cover                                                               
the  costs  beyond  that.    He   said  there  could  also  be  a                                                               
comprehensive  policy,   similar  to  a  standard   plan  with  a                                                               
deductible and co-pay requirement.                                                                                              
MR.  BELL explained  once those  plans were  in place,  qualified                                                               
entities would be  allowed to come to the  commissioner and apply                                                               
to  participate.   Once the  authorization was  given, the  group                                                               
would be passed on to  the insurance company, which would provide                                                               
the  entire service.   At  that point,  the service,  the premium                                                               
collection,  and the  liability  would  be in  the  hands of  the                                                               
insurance company.  He noted  that [HB 10] includes a requirement                                                               
that the cost of implementation  be recovered, and the division's                                                               
plan maintenance would be paid through the plan premiums.                                                                       
Number 2067                                                                                                                     
REPRESENTATIVE GATTO asked about pooling.                                                                                       
MR. BELL commented that the state  may have some role in creating                                                               
a  pool, and  it could  use  that economy  of scale  to make  the                                                               
insurance available  and perhaps  more affordable.   He  said the                                                               
philosophical  question  is  how   that  pooling  arrangement  is                                                               
developed --  whether by the  insurance company or by  the state.                                                               
Mr. Bell suggested  that the idea behind HB 10  is that value can                                                               
be added by the state setting up this pool.                                                                                     
Number 2017                                                                                                                     
REPRESENTATIVE GUTTENBERG  applauded the sponsors  of HB 10.   He                                                               
pointed  out  that  the  bill   involves  private  industry,  the                                                               
insurance underwriters, and  the state.  He pointed  out that the                                                               
fiscal note  shows the cost for  hiring a consultant; no  pool of                                                               
[state] money  would be set up.   He asked why  this market isn't                                                               
more attractive  to underwriters.   He noted that the  pool would                                                               
have  many  high-risk  people  in   it,  causing  the  [insurance                                                               
companies] to pull  out.  Representative Guttenberg  said that he                                                               
was trying to [identify the  advantages] of the private sector or                                                               
the state [developing such a pool].                                                                                             
Number 1929                                                                                                                     
MR.  BELL  answered   that  part  of  the   answer  involves  the                                                               
division's  flexibility  in  working  with  the  groups  on  plan                                                               
design.  He  said that other states have  developed plans similar                                                               
to that  proposed in HB 10,  and they have reviewed  some unusual                                                               
and creative plan designs.  There  is no guarantee that this pool                                                               
will be successful, he said; one  must be realistic in what might                                                               
be achieved.   He  said that medical  insurance is  becoming more                                                               
costly and  less available,  and HB  10 is  an effort  to address                                                               
that.  The question  is whether HB 10 is worth  a small amount of                                                               
seed  money and  some effort  to  see if  this pool  can work  in                                                               
REPRESENTATIVE ROKEBERG  stressed that  in the private  sector an                                                               
individual or  very small  company cannot  buy insurance  that is                                                               
[comparable to  large group  health insurance].   He  related his                                                               
own  experience  10 years  ago  in  the private  sector,  seeking                                                               
individual insurance  coverage.  He  was paying a  premium, after                                                               
the age of 50,  of over $800 a month for a  no-frills plan with a                                                               
$5,000 deductible.   He received less coverage then  than he does                                                               
now  as a  legislator, and  it cost  more 10  years ago  than his                                                               
current coverage.   He credited these factors to  the large group                                                               
discount.    He  explained  that with  large  groups,  there  are                                                               
various methodologies  available to  drive costs  down.   He said                                                               
the point of HB 10 is to  provide a pool for small businesses and                                                               
nonprofit  organizations, giving  them access  to the  lower cost                                                               
plans that have more options.                                                                                                   
Number 1755                                                                                                                     
REPRESENTATIVE GATTO stated that in  a large group plan, everyone                                                               
is included:  the  healthy and young, and a few  of the older and                                                               
sick.   However, if such  a group  is reduced to  individuals, he                                                               
predicted  [problems  would  arise].   In  the  example  of  auto                                                               
insurance,  high-risk individuals  with driving  violations would                                                               
be  attracted to  the pool.    When that  happens, the  insurance                                                               
company  would  seek  balance  with  good  drivers,  however,  he                                                               
questioned  whether   good  drivers  would  join   the  pool  and                                                               
voluntarily pay a higher premium.   Representative Gatto asked if                                                               
the state, with  passage of HB 10, would be  part of the program.                                                               
He said  if the state  has nothing at  risk, then the  plan won't                                                               
REPRESENTATIVE  CRAWFORD  said   that  Representative  Rokeberg's                                                               
story  is a  perfect example  of  why this  [bill] is  necessary.                                                               
This  pooling  would  have allowed  Representative  Rokeberg  and                                                               
others  to pool  for  affordable  health care.    He refuted  the                                                               
notion that only unhealthy individuals  would enter the pool.  He                                                               
stressed  that health  care  insurance in  the  U.S. is  obtained                                                               
through employers  and thus there needs  to be a group  for small                                                               
employers  and nonprofits  in  order for  the  overall system  to                                                               
work.  Otherwise, many people are left [without insurance].                                                                     
Number 1557                                                                                                                     
REPRESENTATIVE HEINZE related that she  is paying almost $1,000 a                                                               
month for  insurance.   There are  hundreds of  individuals doing                                                               
the same, she said.  The point  of HB 10 is [to provide coverage]                                                               
with minimal risk.                                                                                                              
REPRESENTATIVE ROKEBERG turned to the fiscal note.                                                                              
MR. BELL  explained that the first  year of costs is  higher than                                                               
subsequent years, due  to implementation issues.   The total cost                                                               
is estimated  at $132,800.   He noted  that last year  the Mental                                                               
Health Trust  had offered to  contribute $89,900 to  [implement a                                                               
similar bill which did not pass the legislature].                                                                               
REPRESENTATIVE ROKEBERG addressed  Representative Gatto's concern                                                               
about the  lack of an  exit strategy  if the plan  isn't working.                                                               
He asked  if the department would  favor an exit strategy  in the                                                               
MR.  BELL  answered that  an  exit  strategy would  be  addressed                                                               
through the contract  and the RFP.  The  department would consult                                                               
with the  attorney general's office  to insure that  the contract                                                               
protected the  state and allowed for  an exit strategy.   He said                                                               
he wasn't sure whether the language  in the legislation has to be                                                               
modified to accomplish that.                                                                                                    
REPRESENTATIVE ROKEBERG  asked if  intent language  could include                                                               
[an exit strategy].                                                                                                             
MR. BELL said that sounds reasonable.                                                                                           
Number 1282                                                                                                                     
DUSTY  SILVA   informed  the  committee  that   although  she  is                                                               
testifying  on  her  own  behalf,  she  works  in  the  insurance                                                               
industry  and is  a member  of the  Alaska Association  of Health                                                               
Underwriters.  Ms.  Silva said that she has  reviewed the state's                                                               
health benefit  program, which covers 5,500  state employees, not                                                               
including  their dependents.    The state's  premium  plan has  a                                                               
monthly  rate of  $1,102  and  the economy  plan  costs $716  per                                                               
month.   [Given the size  of those  premiums under a  large group                                                               
plan], she questioned how this bill would work.                                                                                 
REPRESENTATIVE HEINZE responded that  other states have been very                                                               
successful [with  this type of  pool], although  she acknowledged                                                               
that  some  states  have  not.   The  Health  Insurance  Plan  of                                                               
California  has  done  this  [and been  successful]  as  has  the                                                               
Connecticut Business and Industry  Association.  She related that                                                               
HB  10 would  not  offer  lower premiums  but  would rather  make                                                               
insurance available for people to purchase.                                                                                     
MS. SILVA said  that small employers can  purchase insurance, but                                                               
the  rates   are  based  on   the  demographics  of   the  group.                                                               
Therefore, a younger healthier group  would have lower rates than                                                               
a group  with older  and unhealthy  individuals.   Therefore, the                                                               
healthy people in  the pool subsidize the premiums  for those who                                                               
are  not so  healthy.   She asked  if HB  10 is  trying to  lower                                                               
REPRESENTATIVE  HEINZE said  she hoped  that the  rates would  be                                                               
lowered  through this  pool.   However, the  main reason  for the                                                               
legislation  is  to  offer  something to  people  who  can't  get                                                               
insurance now.                                                                                                                  
MS. SILVA  said that  she reviewed  the California  [pool], which                                                               
she discovered offered subsidies to the employers as well.                                                                      
REPRESENTATIVE HEINZE offered to research that model.                                                                           
Number 1037                                                                                                                     
REPRESENTATIVE GUTTENBERG  asked whether  HB 10 would  prevent an                                                               
underwriter  who carries  an  employer  with high-risk  employees                                                               
from dropping that employer.                                                                                                    
MS. SILVA replied  no and pointed out that such  an action cannot                                                               
be done now.                                                                                                                    
Number 0963                                                                                                                     
MARY RAYMOND informed  the committee that she  is the coordinator                                                               
of a  small assisted-living home.   She applauded the  efforts to                                                               
offer health  insurance.   She said that  offering this  to small                                                               
businesses and  nonprofits doesn't necessarily mean  that it will                                                               
[enroll employees  who are]  old and  sick.   She cited  a report                                                               
that the U.S.  Department of Health & [Human]  Services will fund                                                               
three to five states for 10  years to cover virtually everyone in                                                               
the state, if the state proposes a good plan.                                                                                   
Number 0731                                                                                                                     
JAMES FISHER, Kenai Peninsula Food  Bank; Soldotna Senior Center,                                                               
informed  the  committee that  both  of  these groups  need  help                                                               
offering their employees group health  insurance at an affordable                                                               
cost.  He  pointed out that lack of such  health benefit coverage                                                               
leaves  the   supervisors  with  a  nagging   concern  for  their                                                               
employees.    He  said  the  lack of  such  health  insurance  is                                                               
considered by some  people to be exploitation of  employees.  Mr.                                                               
Fisher urged the legislature to craft an appropriate solution.                                                                  
Number 0660                                                                                                                     
JEFF  JESSEE,  Executive  Director, Alaska  Mental  Health  Trust                                                               
Authority (AMHTA), applauded the  efforts of the bill's sponsors.                                                               
He  said that  at this  point, the  trustees have  not officially                                                               
authorized  trust income  to be  used for  this legislation.   He                                                               
explained that  the trustees want  the current  administration to                                                               
evaluate this issue  and this legislation.  He  noted that during                                                               
Governor   Murkowski's  campaign,   he   identified  the   health                                                               
insurance crisis  as an important  issue on which he  intended to                                                               
take  action.   Mr.  Jessee  noted  that  he has  encouraged  the                                                               
administration to  create a group  to review this issue  and this                                                               
legislation.    Mr.  Jessee  said  that  the  trustees  are  very                                                               
supportive of  the legislation's  intent and want  to be  part of                                                               
any solution addressing  these issues.  However, no  one wants to                                                               
raise expectations beyond what is  reasonable or to take an undue                                                               
risk with trust resources.                                                                                                      
REPRESENTATIVE  ROKEBERG asked  whether the  trustees would  fund                                                               
100 percent of the fiscal note if the governor blessed HB 10.                                                                   
MR.  JESSEE  said that  he  could  not  speak for  the  trustees,                                                               
although he  related his belief  that the trustees would  be more                                                               
interested in  a sharing of  the contribution and thus  the risk.                                                               
However,  he said  he  wouldn't  rule out  a  different level  of                                                               
contribution,  particularly  with   the  state's  current  fiscal                                                               
REPRESENTATIVE ROKEBERG  reminded Mr. Jessee that  a general fund                                                               
fiscal  note  might  have  a   negative  impact  [on  the  bill's                                                               
passage].  He  said the [pool] could  be set up like a  loan.  He                                                               
requested   Mr.   Jessee's   help  in   avoiding   general   fund                                                               
MR. JESSEE  mentioned that the  trust is  prepared to do  what it                                                               
can  to  see  that  legislation   accomplishing  these  goals  is                                                               
Number 0321                                                                                                                     
BOB HAGEN  said he  was testifying  on his own  behalf but  is an                                                               
independent  insurance  agent.    Mr. Hagen  noted  that  he  has                                                               
studied health insurance purchasing  cooperatives such as the one                                                               
proposed [in  HB 10].  Mr.  Hagen said that he  is convinced that                                                               
purchasing pools will  not do any good.  He  said several studies                                                               
have shown  that purchasing pools  have had a negative  impact on                                                               
the insurance rates in the states  that have tried this.  None of                                                               
the  studies found  that the  purchasing  cooperative rates  were                                                               
lower than  those on the  open market  nor did they  increase the                                                               
availability of insurance.   He pointed out that  since the early                                                               
1990s, groups  have been guaranteed access  regardless of whether                                                               
they are purchasing cooperatives.   However, he acknowledged that                                                               
purchasing  cooperatives have  increased  choice  in states  with                                                               
health  maintenance   organizations  (HMOs).    For   example  in                                                               
California,  the cooperative  premiums  are  about eight  percent                                                               
higher than those  on the general market;  but this [arrangement]                                                               
is  moderately successful  because  it offers  choice.   However,                                                               
this scenario  isn't applicable in  Alaska [because there  are no                                                               
HMOs], he said.                                                                                                                 
Number 0178                                                                                                                     
MR. HAGEN  stated that it's not  true that large group  rates are                                                               
always lower  than small group rates.   If one reviews  the plans                                                               
of   the  State   of  Alaska   and  NEA-AK   [National  Education                                                               
Association  -  Alaska], one  will  find  that the  per  contract                                                               
charges are  higher than  many of  the rates  in the  small group                                                               
markets.   Mr. Hagen pointed  out that  80-90 percent of  a group                                                               
premium goes to pay claims, and  pooling doesn't reduce that.  He                                                               
explained that  by combining 100  three-person groups,  there are                                                               
still 100 groups  not one 300-person group.   The availability of                                                               
nondiscriminatory rates is already guaranteed  by AS 21.56 [Small                                                               
Employer  Health Insurance],  and  the Division  of Insurance  is                                                               
doing a  good job enforcing  it, he opined.   He advised  that if                                                               
the legislature doesn't  think the division is doing  a good job,                                                               
then it should  look there rather than  creating legislation that                                                               
may add  complexity to the regulatory  job.  Mr. Hagen  said that                                                               
it is instructive  to review the profit margins  of the companies                                                               
that write [policies] in Alaska:   Blue Cross has a profit margin                                                               
of 1.2 percent, and AETNA shows profit returns of 3-4 percent.                                                                  
TAPE 03-13, SIDE A                                                                                                            
Number 0010                                                                                                                     
STEPHEN CONN applauded  HB 10 and informed the  committee that he                                                               
could not  have worked  as the executive  director of  the Alaska                                                               
Public Interest Research Group (AkPIRG)  had he not had access to                                                               
the benefits  of the teacher  retirement system.  He  pointed out                                                               
that  everyone  knows people  who  struggle  with paying  medical                                                               
bills and  prescriptions.  He  added that the  state [population]                                                               
is aging.  Mr.  Conn described HB 10 as a  perfect example of the                                                               
state  trying  to do  new  things  and experiment  with  possible                                                               
solutions.  He acknowledged that  some of the state's experiments                                                               
have  succeeded while  others have  not.   Mr. Conn  related that                                                               
AkPIRG and the  Alaska Injured Workers Alliance are  in dire need                                                               
of  health insurance  benefits  in order  to  attract and  retain                                                               
employees.  Mr. Conn concluded by noting his support for HB 10.                                                                 
Number 0240                                                                                                                     
JUDY  MILLER informed  the committee  that she  is interested  in                                                               
developing a  sole proprietorship [business], but  she noted that                                                               
she cannot obtain  health insurance.  She  indicated that without                                                               
legislation such  as HB 10,  she will  probably have to  work for                                                               
someone else  to obtain health  insurance.  She predicted  that a                                                               
lot  of  private  businesses  could [thrive]  in  this  state  if                                                               
something  like HB  10  were  offered.   Ms.  Miller related  her                                                               
belief that  she would  be a desirable  candidate for  this pool.                                                               
Furthermore, she  noted her willingness to  [pay higher premiums]                                                               
to  support older  people or  people with  problems who  would be                                                               
joining this pool.                                                                                                              
REPRESENTATIVE ROKEBERG  pointed out that those  sole proprietors                                                               
who qualify  as a nonprofit  under the criteria specified  in the                                                               
bill would qualify [for this pool].                                                                                             
Number 0536                                                                                                                     
REPRESENTATIVE ROKEBERG  noted that  in a market  share breakdown                                                               
from the  Division of Insurance,  Premera Blue Cross  has covered                                                               
lives of 13,369 or 55.9 percent of the small group market.                                                                      
KATIE  CAMPBELL, Life  & Health  Actuary, Division  of Insurance,                                                               
Department of Community &  Economic Development (DCED), confirmed                                                               
that number.                                                                                                                    
REPRESENTATIVE  ROKEBERG, citing  the  same  source, stated  that                                                               
Principal  Life  has 4,900  covered  lives,  AETNA 2,100  covered                                                               
lives, United  Health Care  2,400 covered  lives, and  Trust Mark                                                               
Insurance 1,500 covered lives.   Those are the top five providers                                                               
in  the state,  he added.   The  remaining small  group providers                                                               
amount to about 24,793 covered lives.                                                                                           
Number 0607                                                                                                                     
MS. CAMPBELL confirmed  those numbers.  However,  she pointed out                                                               
that those numbers  are provided by the insurance  companies on a                                                               
voluntary basis and there is no  way to audit the data on covered                                                               
REPRESENTATIVE  ROKEBERG asked  about the  validity of  the chief                                                               
criticism of  HB 10 that  it could  push underwriters out  of the                                                               
MS. CAMPBELL said it's a  possibility because without the ability                                                               
[by current underwriters]  to reduce the premiums,  there will be                                                               
people who are already insured who will move [into this pool].                                                                  
REPRESENTATIVE ROKEBERG related that  one of the underwriters for                                                               
the State  of Alaska had  warned that if it  did not win  the bid                                                               
under HB  10, it  might leave  the [Alaska] market.   Due  to the                                                               
current language  in the bill and  the size of the  market share,                                                               
Representative Rokeberg said  he believes there is  some merit to                                                               
the concern.                                                                                                                    
Number 0780                                                                                                                     
MS.  CAMPBELL informed  the committee  that about  two years  ago                                                               
both Employers Health  and Guardian Life pulled out  of the small                                                               
group market  in the state.   At the  time, they were  the second                                                               
and fourth  largest insurers  in the state.   The  companies said                                                               
that they  couldn't make a profit  in Alaska.  Ms.  Campbell said                                                               
she believes  that there is  potential for shifting  [of insurers                                                               
out of  the Alaska market] with  HB 10, and shifting  is probably                                                               
the  largest  concern.    In  this case,  the  pool  wouldn't  be                                                               
operating under the same rules  that the insurance companies have                                                               
in  terms  of  deciding  who  will be  insured  under  the  pool.                                                               
Therefore, there  will be people  coming into this pool  that the                                                               
insurance companies will  underwrite, or rate up,  or perhaps not                                                               
even  write  at all,  and  thus  it would  be  expected  to be  a                                                               
somewhat higher risk [pool].                                                                                                    
REPRESENTATIVE ROKEBERG requested that  Ms. Campbell speak to the                                                               
problem  the state  has in  attracting  [insurance companies]  to                                                               
write health insurance in the state.   He also requested that she                                                               
speak to the impact of HB 10 on that market entry.                                                                              
Number 0875                                                                                                                     
MS. CAMPBELL pointed out that  the entire population of Alaska is                                                               
like a  small city in California;  thus Alaska is a  really small                                                               
base  for insurance  company  operations.   Therefore,  insurance                                                               
companies need  to sell enough  business to cover fixed  costs of                                                               
operating  in Alaska.    With  regard to  size,  Alaska isn't  an                                                               
attractive  market.    Also,  providing  coverage  in  the  rural                                                               
communities  has its  own complications.   Ms.  Campbell informed                                                               
the committee  that there  was a  U.S. General  Accounting Office                                                               
(GAO) report that illustrated that  Alaska isn't unusual in terms                                                               
of the  number of  insurers or concentration  of insurers  in the                                                               
small group market.                                                                                                             
Number 0950                                                                                                                     
REPRESENTATIVE ROKEBERG turned attention  to an amendment labeled                                                               
23-LS003\I.1, Craver, 2/24/03, which read:                                                                                      
     Page 3, following line 10:                                                                                                 
          Insert a new subsection to read:                                                                                      
          "(e)  The department shall limit the coverage of                                                                      
     businesses as defined  in this section to  a maximum of                                                                    
     6,000 covered lives, subject to the following:                                                                             
               (1)  the division of insurance shall adjust                                                                      
     the limitation of coverage every  two years so that the                                                                    
     limitation  is  the  number  of  lives  in  the  market                                                                    
     represented by  businesses multiplied by  the estimated                                                                    
     percentage of  uninsured in  that group;  lives covered                                                                    
     by a  policy issued  to a  business under  this section                                                                    
     shall  be   included  in   estimating  the   number  of                                                                    
     uninsured; and                                                                                                             
               (2)      any   employees   of   an   employer                                                                    
     participating  in group  coverage as  a business  under                                                                    
     this  section may  be  added to  coverage  at any  time                                                                    
     regardless of  the maximum number of  covered lives set                                                                    
     by  the  limitation  of   coverage  established  by  or                                                                    
     determined under this subsection."                                                                                         
     Reletter the following subsections accordingly.                                                                            
REPRESENTATIVE  ROKEBERG  said that  he  reviewed  the base  line                                                               
number  of  24,793,  [the  number   of  lives  covered  by  other                                                               
insurance companies,  as described earlier].   He noted  that the                                                               
insurance companies are  curiously absent from this  meeting.  He                                                               
explained that  from conversations  with various insurers,  he is                                                               
concerned that if  the size of this pool  isn't restricted, there                                                               
is the  risk of running  an insurance  company out of  the state.                                                               
Therefore,  [his  amendment]  proposes  a formula  based  on  the                                                               
information he  has obtained  about the  small group  market from                                                               
the Division of Insurance.  He  said that the formula is based on                                                               
the assumption  of 25,000 covered  lives in the market,  which is                                                               
then multiplied by the presumed  19 percent of uninsured citizens                                                               
in the  state.  The  formula uses a  number that he  derived from                                                               
his  business experience,  20 percent,  as a  share of  the small                                                               
group market  that would apply  to this legislation.   Therefore,                                                               
the formula is as follows:   "25,000 times 19 percent equals Y; Y                                                               
is 20 percent of the market; Y equals 6,000 lives."                                                                             
REPRESENTATIVE ROKEBERG stated that  the amendment specifies that                                                               
the department shall  set the limit of coverage  of businesses to                                                               
the maximum of  6,000 covered lives.  However, he  said he didn't                                                               
believe  that the  drafter [of  the  amendment] had  accomplished                                                               
that.  He explained that the  formula specifies the extent of the                                                               
small   business  portion.     Therefore,   there  would   be  no                                                               
restriction  on the  nonprofits as  qualified entities,  only the                                                               
small business portion.   He said he hoped that  this would leave                                                               
80 percent  of the  small business  market available  for private                                                               
sector underwriting and allay fears  [about harming the insurance                                                               
REPRESENTATIVE ROKEBERG described his amendment as conceptual.                                                                  
Number 1280                                                                                                                     
REPRESENTATIVE CRAWFORD  related his  anecdotal belief  that more                                                               
small  business  employees  are  uninsured  than  large  business                                                               
employees.  He said that  until he sees the [division's] numbers,                                                               
he would have  to dispute Representative Rokeberg's  formula.  He                                                               
reiterated the  need for HB 10  to help those who  aren't covered                                                               
by  health  insurance.   However,  [this  amendment]  limits  the                                                               
number of people covered.                                                                                                       
REPRESENTATIVE ROKEBERG said that  HB 10 could cover 6,000-12,000                                                               
people  in  nonprofit entities  for  a  total of  18,000  covered                                                               
lives.   He said he is  trying to find a  balance between meeting                                                               
the  needs of  people without  risking the  insurance underwriter                                                               
market in the  state.  Without an amendment such  as the proposed                                                               
conceptual amendment, the  chances of HB 10 passing  are slim, he                                                               
REPRESENTATIVE  CRAWFORD expressed  the  desire  to revisit  [the                                                               
issue of limiting the number of  people covered] if the market is                                                               
realigned to the  point that an insurance company pulls  out.  He                                                               
noted his  preference not to place  limits before it is  known if                                                               
the market realigns.                                                                                                            
REPRESENTATIVE  ROKEBERG remarked  that this  bill isn't  a pilot                                                               
program  with  [room for]  experimentation.    He noted  that  he                                                               
wanted to  include this amendment in  a CS in order  to smoke out                                                               
the  insurance  companies  so  that  they  would  talk  with  the                                                               
[House Bill 10 was held over.]                                                                                                  

Document Name Date/Time Subjects