Legislature(2003 - 2004)

04/11/2003 03:25 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 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                                                               
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                                                               
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.                                                                                          

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