Legislature(2015 - 2016)

04/16/2016 01:54 PM House L&C

Download Mp3. <- Right click and save file as

Audio Topic
01:54:48 PM Start
01:55:00 PM HB374
02:31:42 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
        HB 374-REINSURANCE PROGRAM; HEALTH INS. WAIVERS                                                                     
1:55:00 PM                                                                                                                    
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE BILL  NO. 374,  "An Act relating  to a  reinsurance program                                                               
for  residents who  are  high risks  and  insurer assessments  to                                                               
cover  the   costs  of  the  reinsurance   program;  relating  to                                                               
application  for   state  innovation  waivers  for   health  care                                                               
insurance;  relating to  definitions of  'residents who  are high                                                               
risks'  and  'covered  lives'; and  providing  for  an  effective                                                               
1:55:25 PM                                                                                                                    
REPRESENTATIVE  HUGHES  moved  to adopt  the  proposed  committee                                                               
substitute for HB 374, Version  29-GH2126\H, Wallace, 4/15/16, as                                                               
the working document.                                                                                                           
1:55:33 PM                                                                                                                    
CHAIR OLSON objected for discussion purposes.                                                                                   
1:56:11 PM                                                                                                                    
LORI   WING-HEIER,  Director,   Anchorage  Office,   Division  of                                                               
Insurance,   Department  of   Commerce,   Community  &   Economic                                                               
Development, informed  the committee  that the  individual market                                                               
for health care in Alaska is  in somewhat of a crisis because the                                                               
state only has  two individual insurers, Premera  and Moda Health                                                               
(Moda), and  Moda is severely  financially stressed.   This year,                                                               
the  division of  insurance removed  Moda from  the exchange  and                                                               
suspended its  certificate of authority.   Both Moda  and Premera                                                               
insurance  companies have  suffered  significant  losses and  the                                                               
division  is concerned  that the  state  could lose  one or  both                                                               
insurers, as Aetna and Assurant  insurance companies have already                                                               
withdrawn from  the individual  market in the  state in  the last                                                               
year.    Although other  states  are  facing  this issue,  it  is                                                               
especially  crucial  in Alaska.    Ms.  Wing-Heier explained  the                                                               
proposed committee substitute  for HB 374 changes  the funding in                                                               
that instead of  an assessment made back  to consumers, insurers,                                                               
and self-insurers, Version  H takes the premium  tax collected by                                                               
the state  on all insurance,  which is generally 2.7  percent, or                                                               
approximately  $60 million  per year,  and gives  the legislature                                                               
authority to appropriate  the tax to fund  a reinsurance program.                                                               
She pointed out  that almost everyone in the state  pays a tax on                                                               
either   vehicle,  homeowners,   commercial,  medical,   or  life                                                               
insurance, and this  is the most equitable way  to distribute the                                                               
cost of reinsurance.                                                                                                            
REPRESENTATIVE LEDOUX  surmised the  state is  already collecting                                                               
2.7 percent on insurance.                                                                                                       
MS. WING-HEIER said  yes.  In further  response to Representative                                                               
LeDoux, she agreed  that the money is being moved  from one place                                                               
to another.                                                                                                                     
REPRESENTATIVE LEDOUX noted that  the Alaska Comprehensive Health                                                               
Insurance  Association (ACHIA)  provides coverage  for those  who                                                               
have  been denied  coverage; however,  she pointed  out that  the                                                               
Patient Protection  and Affordable Care Act  (PPACA) prevents the                                                               
denial  of  insurance, and  questioned  whether  ACHIA was  still                                                               
MS. WING-HEIER  explained that some  remain in the  ACHIA program                                                               
who  are buying  prescription drugs  that they  cannot afford  or                                                               
can't  get because  there is  not a  market in  Alaska, thus  the                                                               
program has not been deactivated.                                                                                               
REPRESENTATIVE LEDOUX  inquired as to insurance  coverage for the                                                               
aforementioned population under PPACA coverage.                                                                                 
2:01:00 PM                                                                                                                    
MS. WING-HEIER stated that those  affected by the proposed CS for                                                               
HB 374 would  still purchase their insurance  through Premera and                                                               
Moda, and  "behind the  scenes, Premera and  Moda would  cede the                                                               
claims to ACHIA  where the claims would be  administered .... ...                                                               
The claims and the premium would  go to ACHIA, but your eye would                                                               
still think we're insured with Premera or Moda."                                                                                
REPRESENTATIVE LEDOUX asked how many  people are affected and for                                                               
the cost.                                                                                                                       
MS. WING-HEIER  said there  are 23,000  people in  the individual                                                               
market; the number of high risk is estimated at 300.                                                                            
REPRESENTATIVE   LEDOUX  inquired   as  to   the  cost   for  the                                                               
aforementioned 300 people.                                                                                                      
MS. WING-HEIER said the legislature  must determine the amount it                                                               
would  appropriate,  and  in  order   to  stabilize  the  market,                                                               
approximately  $55 million  would need  to be  appropriated.   In                                                               
further response  to Representative LeDoux, she  pointed out that                                                               
a small number  are generating claims that cause the  pool to pay                                                               
out more than is collected.                                                                                                     
2:03:35 PM                                                                                                                    
REPRESENTATIVE  COLVER restated  that 300  people are  causing an                                                               
overrun of $55 million.                                                                                                         
MS. WING-HEIER stressed  that the number of high  risk insured is                                                               
an  estimate.   In November  2015,  the division  took data  from                                                               
Premera, Moda, and Assurant, and  an independent actuary arranged                                                               
claims  by cost  to  find  the highest  claim  codes for  certain                                                               
conditions.  The  data indicated that treatment of  the "top ten"                                                               
diseases resulted  in about  $25 million  removed from  the pool.                                                               
Thus to get  to a 15 percent to 18  percent stabilization factor,                                                               
not   necessarily   a   rate  reduction,   the   division   needs                                                               
approximately $55 million in a reinsurance fund.                                                                                
REPRESENTATIVE COLVER  concluded that without a  solution, 23,000                                                               
individual policy-holders  in Alaska  may have huge  increases in                                                               
their insurance premiums.                                                                                                       
MS. WING-HEIER  stressed that her  biggest concern is to  keep an                                                               
insurance market in the state.                                                                                                  
2:06:43 PM                                                                                                                    
REPRESENTATIVE COLVER said:                                                                                                     
       It's your opinion that our individual policies in                                                                        
      Alaska through the Affordable Health Care Act would                                                                       
     collapse without us taking some action here.                                                                               
MS. WING-HEIER said yes.                                                                                                        
REPRESENTATIVE  LEDOUX   inquired  as  to  the   consequences  of                                                               
eliminating ACHIA.                                                                                                              
MS. WING-HEIER stated  that ACHIA has a few  participants who pay                                                               
premiums,  and  also insures  a  number  of individuals  who  are                                                               
unable to  get prescription coverage from  another source because                                                               
they need high-risk  drugs.  These individuals would  not be able                                                               
to  afford  their prescriptions;  those  who  need major  medical                                                               
coverage could apply to PPACA.                                                                                                  
REPRESENTATIVE LEDOUX  suggested that ACHIA may  just cover those                                                               
who  need coverage  for drugs,  because  "it just  seems like  an                                                               
awful lot of money for a relatively few people."                                                                                
MS.  WING-HEIER  restated that  currently  ACHIA  is covering  "a                                                               
handful" of  people who are  very sick,  and who are  causing the                                                               
claims  to be  askew.   The intent  is to  cede the  claims to  a                                                               
reinsurance pool run through the authority of ACHIA.                                                                            
REPRESENTATIVE  LEDOUX said  it would  make more  sense to  "cede                                                               
those people to the Affordable Care Act."                                                                                       
MS.  WING-HEIER  explained that  the  insured  in question  would                                                               
still go back into the  reinsurance pool, and ACHIA, because they                                                               
qualify for the certain conditions  quantified under the study by                                                               
the actuaries.                                                                                                                  
2:09:56 PM                                                                                                                    
REPRESENTATIVE   HUGHES  expressed   her  understanding   of  the                                                               
situation,  and  asked how  the  proposed  CS addresses  concerns                                                               
brought forward in opposition to HB 374.                                                                                        
MS. WING-HEIER  said that  currently ACHIA  is funded  through an                                                               
assessment  to   the  insurance  companies,  and   the  insurance                                                               
companies are required  to repay ACHIA for its  losses each year.                                                               
The original  bill sought  to change the  allocation and  to have                                                               
everyone pay the same; in  addition, stop-loss carriers and self-                                                               
insured would have  to pay more.  Instead, the  proposed CS funds                                                               
reinsurance from the premium tax that all already pay.                                                                          
REPRESENTATIVE  KITO stated  his understanding  of the  situation                                                               
and Ms. Wing-Heier agreed.                                                                                                      
CHAIR  OLSON asked  whether  the division  is  operating under  a                                                               
MS.  WING-HEIER  said  no.    The  bill  gives  the  director  of                                                               
insurance  the  authority to  apply  for  a PPACA  Section  1332:                                                               
Waiver for  State Innovation, which  is a long public  process to                                                               
apply  to the  Centers  for Medicare  and  Medicaid to  determine                                                               
whether the state  can participate more successfully  as a state-                                                               
regulated program,  as opposed to a  federally-regulated program.                                                               
A waiver  allows the  state to  apply under  certain "guardrails"                                                               
for 95 percent  to 97 percent of the federal  tax credits paid as                                                               
premium  subsidies.   There are  certain criteria  to obtain  the                                                               
waiver, such  as legislative  authority is  needed to  apply, and                                                               
the division seeks to explore this possibility.                                                                                 
CHAIR OLSON asked, "If we don't do  it, are we going to be forced                                                               
into  opening  up  an  exchange,  or  being  responsible  for  an                                                               
MS. WING-HEIER said no.                                                                                                         
REPRESENTATIVE COLVER  observed that small states  are suffering,                                                               
and a provision is needed in  PPACA so that smaller states in the                                                               
western region  could join an  area-wide pool and spread  out the                                                               
risk for carriers.                                                                                                              
MS.   WING-HEIER  advised   that  previous   regulations  prevent                                                               
insurance from being sold across state lines.                                                                                   
REPRESENTATIVE  COLVER stated  that those  living in  states with                                                               
larger  populations would  be outraged  at the  premiums paid  by                                                               
those in smaller states.                                                                                                        
2:17:53 PM                                                                                                                    
MS.  WING-HEIER advised  that in  Alaska a  married couple  50-60                                                               
years of  age making $80,000  will pay $40,000 under  the current                                                               
rate structure of PPACA.                                                                                                        
REPRESENTATIVE   LEDOUX  asked   whether   the  law   restricting                                                               
insurance  from being  sold  across state  lines  was federal  or                                                               
state law.                                                                                                                      
MS.  WING-HEIER  answered federal  law,  affecting  all types  of                                                               
insurance.  She added that  the proposed committee substitute for                                                               
HB 374 is important to all Alaskans.  She remarked:                                                                             
     But the bottom  line is we've got  23,000 Alaskans that                                                                    
     are  not going  to  have health  insurance, the  bottom                                                                    
     line  is   if  we  don't  do   something  about  health                                                                    
     insurance, if we  don't do something about  the cost of                                                                    
     health  care,   we're  not  going  to   jumpstart  this                                                                    
     economy.   The cost of  uncompensated care is  going to                                                                    
     impact all of us when we  go see our doctor, when we go                                                                    
     to the hospital.  This is  just a start of something we                                                                    
     have  to   do,  something  that  should   be  addressed                                                                    
     seriously, and we ask for  your support in getting this                                                                    
     bill out of committee.                                                                                                     
CHAIR OLSON observed  that the bill would slow  down increases on                                                               
all policies.                                                                                                                   
MS. WING-HEIER said yes.                                                                                                        
REPRESENTATIVE  LEDOUX questioned  whether someone  who moves  to                                                               
Alaska must cancel their health care policy.                                                                                    
MS.  WING-HEIER  responded that  they  would  have to  buy  their                                                               
insurance here because they are a resident of Alaska.                                                                           
REPRESENTATIVE  KITO  expressed  his interest  in  expanding  the                                                               
insurance  pool to  other states  because smaller  states do  not                                                               
have  a  population  sufficient   to  amortize  costs  for  those                                                               
individuals with significant health care  issues.  He stated that                                                               
the  bill creates  an opportunity  for insurers  "to keep  things                                                               
going for  a little while longer,  until hopefully we can  find a                                                               
bigger solution."                                                                                                               
MS. WING-HEIER provided the following sectional analysis:                                                                       
     Section  1: allows  the legislature  to appropriate  an                                                                    
     amount  to  be  determined   to  fund  the  reinsurance                                                                    
     Section  2:   gives  the  director  of   insurance  the                                                                    
     authority  to apply  for  the  Section 1332  Innovation                                                                    
     Section 3: allows for an effective date.                                                                                   
CHAIR  OLSON advised  that the  legislature is  "involved in  the                                                               
process all the way through."                                                                                                   
REPRESENTATIVE  COLVER   asked  whether  an  amendment   will  be                                                               
CHAIR OLSON  said an  issue will  be addressed  when the  bill is                                                               
held in the House Finance Committee.                                                                                            
MS. WING-HEIER discussed an amendment which was not offered.                                                                    
2:23:13 PM                                                                                                                    
CHAIR  OLSON  removed  his objection  to  adopting  the  proposed                                                               
committee  substitute  for  HB  374.    There  being  no  further                                                               
objection, Version H was before the committee.                                                                                  
CHAIR OLSON opened public testimony.                                                                                            
2:23:41 PM                                                                                                                    
BARBARA  HUFF-TUCKNESS,  Director, Governmental  and  Legislative                                                               
Affairs, Teamsters  Local 959, stated her  organization's support                                                               
for  the committee  substitute  for  HB 374.    She informed  the                                                               
committee that PPACA is a  very complicated and frustrating issue                                                               
for  employers  and unions;  in  fact,  benefit plans  for  union                                                               
members  are  currently being  downgraded,  which  is counter  to                                                               
protecting benefits for employees.                                                                                              
CHAIR OLSON  asked what effect  the original version of  the bill                                                               
would have had on Teamsters Local 959.                                                                                          
MS. HUFF-TUCKNESS  said the  bill would  have cost  the Teamster-                                                               
Employer Health and Welfare Plan over $1.2 million.                                                                             
2:26:06 PM                                                                                                                    
DAVE  JONES, Assistant  Superintendent,  Kenai Peninsula  Borough                                                               
School  District,   informed  the   committee  he  is   the  plan                                                               
administrator for  the Kenai Peninsula Borough  School District's                                                               
(KPBSD) self-funded health care plan.   He said HB 374 would have                                                               
added  significant  cost  to KPBSD's  health  care  plan  without                                                               
further  benefits  to  its members.    The  committee  substitute                                                               
addresses  his  concerns,  and   he  expressed  support  for  the                                                               
committee substitute  for HB 374.    In response to  Chair Olson,                                                               
he said  the original  bill would  have cost  KPBSD approximately                                                               
2:27:34 PM                                                                                                                    
The committee took a brief at ease.                                                                                             
REPRESENTATIVE COLVER noted  that HB 374 would  have affected all                                                               
self-insured  plans  including  those  of  school  districts  and                                                               
municipalities,  as  pointed out  during  public  testimony.   He                                                               
expressed his support for the committee substitute.                                                                             
MS.  WING-HEIER said  that the  committee substitute  fiscal note                                                               
remains zero related to the  division of insurance.  However, the                                                               
revenues  are  indeterminate,  and  would be  based  on  what  is                                                               
appropriated by the legislature for the program.                                                                                
2:30:56 PM                                                                                                                    
CHAIR OLSON,  after ascertaining no  one else wished  to testify,                                                               
closed public testimony.                                                                                                        
2:31:18 PM                                                                                                                    
REPRESENTATIVE HUGHES  moved to  report the  committee substitute                                                               
for  HB  374,  Version  29-GH2126\H,  Wallace,  4/15/16,  out  of                                                               
committee with individual  recommendations and forthcoming fiscal                                                               
notes.  There being no  objection, CSHB 374(L&C) was reported out                                                               
of the House Labor and Commerce Standing Committee.                                                                             

Document Name Date/Time Subjects