Legislature(2003 - 2004)
04/11/2003 03:25 PM House L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 10-GROUP HEALTH INSURANCE FOR PRIVATE GROUPS Number 1853 CHAIR ANDERSON announced that the final 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." Number 1847 REPRESENTATIVE ROKEBERG moved to adopt the proposed committee substitute (CS), Version 23-LS0030\Q, Ford, 4/11/03, as a work draft. There being no objection, Version Q was before the committee. CHAIR ANDERSON said this is a great bill and announced that he would cosponsor it. REPRESENTATIVE ROKEBERG, prime sponsor along with Representative Heinze, told members the bill allows nonprofit organizations and others who qualify to pool together for group insurance. Explaining reasons for the changes in Version Q, he said this had the [Alaska Mental Health Trust Authority ("Mental Health Trust")] provide some $91,000 to help "organize the state, which would go out with an RFP [request for proposals] to the private sector to get the private sector involved to try to put that group together." He also pointed out that the Division of Retirement & Benefits, Department of Administration, had provided a fiscal note [for the original bill] for some $40,000 [for 2004] to participate in this. He said the bill was generating some negative reaction in the insurance community, including major underwriter and independent companies; concern about the growing fiscal note; and concern that people's expectations [wouldn't be met]. REPRESENTATIVE ROKEBERG explained that he and Representative Heinze want to allow people to group together without restrictions to form "critical-mass, larger pools," which could drive down the cost of insurance and would allow people to get together [for insurance purposes] who are currently restricted from doing so under state law. Therefore, he explained, it had dawned on him to "break down the barriers to getting affiliated affinity groups together" by making it a more open process, changing state law to allow even insurance underwriters to form their own groups, rather than have the state involved in the process of forming groups. REPRESENTATIVE ROKEBERG reported that he'd discussed this with the Mental Health Trust, which is very supportive of the concept, particularly on behalf of nonprofit organizations; he said Mr. Jessee [executive director of the Mental Health Trust] had expressed concern early on, but thought it was a great idea to open the process up and make it nonspecific, allowing nonprofits to work on their own together. He said [the Mental Health Trust] still would do the financing, and offered his understanding that the private insurance industry currently is working with the Foraker Group in Anchorage, through the Rasmuson Foundation, on trying to form a nonprofit group. He added that [the Mental Health Trust] is willing to put up at least $45,000 to underwrite this activity, and it wouldn't have to go through the state budget. Number 1631 REPRESENTATIVE ROKEBERG, calling Version Q the "light version of the bill," specified that the intention is to allow groups to come together, break these barriers down, and form pools or groups basically on their own, in conjunction with underwriters. He pointed out that there are plans in the state that allow associations to self-insure, but explained that he hadn't wanted to do that with this bill because it requires the Division of Insurance to address issues of solvency and managing the group. This bill, instead, keeps it simple and lets the private sector "group together and do what they want." REPRESENTATIVE ROKEBERG pointed out that Version Q "comes up slightly short" because it doesn't include individuals. Noting that there are some technical issues, he said he'd keep working on it to try to allow individuals to join the group. He requested that members get some clarification from Ms. Campbell [of the Division of Insurance] and then move the bill from committee. He characterized it as a "breakthrough kind of thing" and questioned the need for artificial barriers. In response to a member with regard to whether any barriers remain, he said there are some in the bill right now; he mentioned the need for constitutional bylaws and said he wasn't happy about that. He asked Ms. Campbell to address that. Number 1544 CHAIR ANDERSON observed that there are a lot of cosponsors. REPRESENTATIVE ROKEBERG concurred, saying he'd circulate a memorandum to inform them that the nature of the bill has been changed. He surmised that people who didn't like the bill before would like it now, and that those who liked before still should. He said he didn't see any downside. Number 1519 REPRESENTATIVE GATTO recalled earlier committee discussion and his own question about what business the state has getting involved in this; he mentioned potential lawsuits and so forth. He said that as he reads Version Q, however, it appears the question no longer needs to be asked. He sought assurance that the state is out of the picture. REPRESENTATIVE ROKEBERG responded: Representative Gatto's concerns, while I don't 100 percent agree with, totally, his concerns from the prior version, I think they had a lot of validity. And by trying to make this bill simpler, with more general applicability, ... and doing it totally outside the bounds of state government and just lowering barriers to pooling and aggregation, I think that's the intention of the bill, and I think I can ... answer in the affirmative. Number 1421 REPRESENTATIVE CRAWFORD remarked that one reason he believes what Representative Rokeberg is doing [with the new concept in Version Q] is so laudable is that it wasn't being done before. Agreeing with the need to remove barriers, he said he hadn't had a chance to read through [Version Q] yet, but indicated he wholeheartedly agreed with the concept and offered to help get it moving in any way he could. Number 1360 REPRESENTATIVE GUTTENBERG highlighted the idea of removing the obstacles as a new approach and letting the market take over, suggesting it might just do it. He indicated the desire to hear from people about it. REPRESENTATIVE ROKEBERG emphasized that he doesn't want nonprofit organizations to feel "we're turning our back on them"; on the contrary, the desire is to put something workable together. He suggested this bill is a prototype allowing [nonprofits] to do things they weren't able to do before, in conjunction with the private sector and groups like [the Mental Health Trust] and the Foraker Group that will step up and be the conduit, which the state would have been under the former bill version. Number 1203 REPRESENTATIVE CRAWFORD asked Representative Rokeberg how he envisions this happening. For example, will nonprofits call a 1-800 phone number and express the desire to be part of this, get together a group of nonprofits and small businesses, and then ask for bids? REPRESENTATIVE ROKEBERG replied: Well, frankly, there's already the move underway ... with the Foraker Group for nonprofits, ... working with a specific underwriter. And unfortunately, because of ... the timing and everything else, I would have them to testify today, but ... this bill has got two other referrals, so I wanted to get it moving. And I will be getting further backup and getting them involved. I just want to make sure that the nonprofit community understands that, and that this process is already underway, because I think we've got at least two organizations, the Foraker Group and [the Mental Health Trust], willing to take up ... this issue. REPRESENTATIVE ROKEBERG noted the presence of Ms. LaBolle of the Alaska State Chamber of Commerce, and suggested that other groups which might have been restricted by law before would now be able to move forward along these lines. Number 1100 REPRESENTATIVE ROKEBERG asked Ms. Campbell to explain why individuals couldn't be included. He also referred to the Alaska State Chamber of Commerce and asked why the barriers for group affiliation existed before and yet can be lowered now. He indicated he would be working with Ms. Campbell on these issues. Number 1069 KATIE CAMPBELL, Life and Health Actuary, Division of Insurance, Department of Community and Economic Development, with regard to adding individuals to the plan, explained: It's because ... of the way that our market in Alaska is set up. Right now, there is no "guarantee issue" in our individual market unless you go to [a] high- risk pool. So if you allow an individual now who is, ... say, less than healthy to come into this association - and remember, it's formed for insurance purposes, so if it's to their advantage and they think they can get a better rate there, obviously they will, as opposed to going into the high-risk pool - you end up with a lot of high-risk people in your association plan, and ... that causes the association plan to fail. The rates ... will skyrocket, and it won't serve the purpose that was intended. REPRESENTATIVE ROKEBERG asked whether a combination of the prior bill and this one could serve the individual market better, and whether there is any way to finesse that [guarantee] issue program for this new category. MS. CAMPBELL answered, "I think that if you try to combine them into this association plan on a guarantee basis - so if they come in and they're guaranteed coverage - you're going to run into the problem where that association plan won't be viable." REPRESENTATIVE ROKEBERG asked, "What if you don't guarantee the coverage for individuals - could you do that?" MS. CAMPBELL responded: You could certainly set it up so that they could become part of the association and be underwritten much like they underwrite in the market, and then you end up back in the same place where, well, they could just buy the coverage out in the market. ... I think the individual rates are generally a little bit less expensive because they'd be paying 100 percent of their premium, whether they buy through the association or through the individual market. REPRESENTATIVE ROKEBERG suggested that it is a matter of public education, then, with regard to what is available. Number 0935 MS. CAMPBELL responded to Representative Rokeberg's earlier question relating to barriers for group affiliation: I think primarily that the reason that they have been excluded ... can be summed up, I think, in the conditions that are placed around this ... in this particular version of the draft, that you have this problem in a voluntary market where people are going to select against one or the other, depending on what their risk is. And so, what happens right now is, the insurance companies ... are very cautious about writing association plans if they cannot, in some way, predict the risk of that group. And so, you really look for stability in the association. If everybody can move in and out and ... they're allowing a lot more unhealthy people in or -- you know, it's really about being able ... to predict the risk ... and to offer the coverage at a reasonable rate. MS. CAMPBELL offered her understanding with respect to the Alaska State Chamber of Commerce that it is a legitimate association that could get bids from insurance companies. She said that wasn't restricted before, as long as the association was formed for a purpose other than insurance, had a constitution and bylaws, and was a bona fide association. She reiterated that insurance companies are very hesitant when they don't feel that the rules surrounding the membership and so forth allow them to predict the cost. Number 0790 REPRESENTATIVE GUTTENBERG recalled that one concern with the former bill version related to the possibility, if someone didn't get the bid, then other people would move out of the market. He asked Ms. Campbell to explain how that wouldn't happen under [Version Q]. MS. CAMPBELL replied: This is allowing ... groups of people to form. It's not one great big, huge pool. So, presumably, if you're going to form an association, ... you could be in a community and you could say, "Oh, I want to provide insurance coverage to my employees," and you could be all different businesses, and you could say, "OK, well, all of us in this area want to form an association." And you could do that. It's just a portion of the market. ... I think the way that it was set up before, it was ... more global. REPRESENTATIVE GUTTENBERG suggested there would be a tendency to form as large a pool as possible for a single group. MS. CAMPBELL said it would certainly be allowed, and agreed that the larger the group, probably the better. Number 0735 MS. CAMPBELL, in response to a question from Representative Crawford, explained that under the small-employer laws, "issue" is guaranteed if a firm has 2-50 employees. On the other hand, insurance companies can require that full-time employees participate [as a condition of providing coverage]. For example, a person may be covered under a spouse's plan and therefore not want coverage, but if that person didn't participate, the company wouldn't meet the insurer's rules that say a certain percentage of employees must participate. That is to avoid the selection problem, she noted, where higher-risk people are the only ones who end up insured in an employer plan. Number 0650 REPRESENTATIVE DAHLSTROM moved [to report from committee] CSHB 10 [Version 23-LS0030\Q, Ford, 4/11/03] with individual recommendations and the accompanying zero fiscal note. There being no objection, CSHB 10(L&C) was reported from the House Labor and Commerce Standing Committee.