Legislature(2015 - 2016)BELTZ 105 (TSBldg)

03/29/2016 01:30 PM Senate LABOR & COMMERCE

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01:32:43 PM Start
01:33:12 PM Confirmation Hearings
02:11:18 PM SB206
02:42:01 PM SB55
03:36:06 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Consideration of Governor's Appointees: TELECONFERENCED
Alaska Gasline Development Corporation Board of
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
-- Public Testimony --
        SB 206-REINSURANCE PROGRAM; HEALTH INS. WAIVERS                                                                     
2:11:18 PM                                                                                                                    
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration of SB 206.                                                                                                        
2:12:00 PM                                                                                                                    
LORI WING-HEIER  Director, Division  of Insurance,  Department of                                                               
Commerce, Community  and Economic Development  (DCCED), discussed                                                               
the  two parts  of SB  206.  The bill  is designed  to allow  the                                                               
director  of  insurance to  establish  a  reinsurance program  to                                                               
address the high-cost  claims that were once  part, or considered                                                               
part, of  the Alaska  Comprehensive Health  Insurance Association                                                               
(ACHIA). This  was prior to  the Affordable Care Act  (ACA) being                                                               
implemented. The  bill expressly  establishes a  reinsurance pool                                                               
for high-risk  claims to go  into ACHIA and be  reinsured through                                                               
ACHIA -  Chapter 55 of  Title 21. It  will operate much  like the                                                               
Children's Reinsurance Pool of 2013.                                                                                            
MS. WING-HEIER  continued to say that  SB 206 also says  that the                                                               
50  percent  tax credit  would  no  longer  be allowed  for  this                                                               
particular insurance program.                                                                                                   
The other  part of the bill  allows the director of  insurance to                                                               
apply  to the  Centers for  Medicare  and Medicaid  (CMS) for  an                                                               
innovation  waiver. This  is  a Section  1332  waiver to  provide                                                               
insurance   under   ACA   in  individual,   small   group,   and,                                                               
potentially,  the   large  group  markets  in   Alaska.  Enabling                                                               
legislation is required to begin the process.                                                                                   
She provided background  on why this is needed.  She stressed the                                                               
high cost of the individual market  in Alaska which has seen a 40                                                               
percent increase  in the  past two years  from Premera  and Moda.                                                               
Early indications  are that rate  increases will be more  than 25                                                               
percent. In addition,  the risk assessment and  the risk corridor                                                               
will sunset in 2016 under  the federal program. Reinsurance alone                                                               
paid over $19  million to Premera and $13 million  to Moda. Those                                                               
costs need to be reabsorbed somehow.                                                                                            
She  provided  examples  of  the 40  percent  rate  increases  to                                                               
consumers. In 2014,  a 45-year-old was paying about  $486 a month                                                               
for  a gold  plan;  the same  membership in  2017  will be  about                                                               
$1,300 a month.                                                                                                                 
2:16:36 PM                                                                                                                    
CHAIR COSTELLO  asked if the federal  reinsurance program expires                                                               
or sunsets.                                                                                                                     
MS. WING-HEIER  said it expires  at the  end of 2016.  ACHIA will                                                               
replace it in  some way. It won't reduce rates,  but will provide                                                               
stability. Provider losses are substantial  and the rates must be                                                               
CHAIR  COSTELLO  asked her  to  explain  the higher-risk  medical                                                               
MS. WING-HEIER  said they would  take the most  costly conditions                                                               
out of  the individual market  and spread  them out to  ACHIA. It                                                               
will be a reinsurance pool.                                                                                                     
2:19:09 PM                                                                                                                    
SENATOR ELLIS asked,  should this legislation pass, will  it be a                                                               
negotiation  point, or  will  the state  just  hope that  private                                                               
insurers don't  increase rates  as much as  25 percent.  He asked                                                               
what the terms of negotiation might be.                                                                                         
MS.  WING-HEIER said  she could  not  make commitments  regarding                                                               
rates, but  the state  will always negotiate  and the  rates will                                                               
still not  be enough to cover  all the claims in  the pool. There                                                               
is a lot of uncertainty in the markets.                                                                                         
SENATOR ELLIS  commented that he  doesn't know what the  state is                                                               
getting for  this kind  of cost, even  though he  understands the                                                               
administration's need to take action to protect consumers.                                                                      
MS. WING-HEIER  explained if the  state continues on  the current                                                               
path, the  rates will likely  increase and the  individual market                                                               
will  go into  a death  spiral.  The intent  of the  ACA was  for                                                               
people  to be  able to  afford  insurance. Alaska  is faced  with                                                               
incredibly high  costs for  health care  resulting in  high costs                                                               
for insurance. The idea is to  spread the top 10 percent of high-                                                               
cost claims over the reinsurance pool.                                                                                          
She pointed  out that the  state could also consider  the Chapter                                                               
1332 waiver for a long-term  solution. The reinsurance plan is an                                                               
immediate answer.                                                                                                               
SENATOR ELLIS said "or a portion thereof."                                                                                      
CHAIR COSTELLO  said her  understanding is  this bill  would make                                                               
the rate increase less egregious.                                                                                               
MS. WING-HEIER said that's correct.                                                                                             
CHAIR COSTELLO offered her understanding  that the second part of                                                               
the  bill  provides a  longer-term  solution.  She asked  if  the                                                               
division would return  to the legislature in order  to pursue the                                                               
MS. WING-HEIER said yes.                                                                                                        
2:23:18 PM                                                                                                                    
CHAIR COSTELLO opened public testimony.                                                                                         
2:23:30 PM                                                                                                                    
SHEELA TALLMAN,  Legislative Policy  Manager, Premera  Blue Cross                                                               
Blue  Shield of  Alaska,  testified  in support  of  SB 206.  She                                                               
provided  the history  of Premera  in Alaska  since 1952  and its                                                               
coverage. She  commented on  the changes in  the market  that are                                                               
impacting  Premera's individual  plan  premiums.  She noted  that                                                               
Premera  has  experienced a  number  of  new high-cost  enrollees                                                               
after the health  reform in 2014. In 2014, Premera  had losses of                                                               
about  $13  million in  the  individual  market and  sought  rate                                                               
increases of almost  40 percent for 2015 and 2016  to account for                                                               
the high risk individuals.                                                                                                      
Premera is  taking in, on average,  $713 per member per  month in                                                               
premium and  paying out $913  per member per month.  There aren't                                                               
enough  ratepayers  to  offset  the   high  costs,  nor  are  the                                                               
subsidies some receive.                                                                                                         
MS. TALLMAN stated that Premera  supports the reinsurance program                                                               
and  the innovation  waiver. The  program  helps address  premium                                                               
increases, but  also helps provide  some stability to  the market                                                               
and may attract new competitors.                                                                                                
2:29:27 PM                                                                                                                    
SENATOR  ELLIS asked  about  the timeframe  on  the waiver  going                                                               
MS. TALLMAN said the states can  begin applying for the waiver in                                                               
SENATOR ELLIS  asked what  other states have  a similar  issue of                                                               
rising healthcare costs and setting up a reinsurance approach.                                                                  
MS.  TALLMAN  said Oregon  has  addressed  the matter  and  other                                                               
states will follow.                                                                                                             
SENATOR ELLIS  asked if  Premera will  commit to  an amount  of a                                                               
less-than-40-percent  increase in  premiums  if this  legislation                                                               
MS. TALLMAN said  she can't make a  specific commitment regarding                                                               
rates, but  would be committed  to working  on rule making  for a                                                               
balanced assessment across the market.                                                                                          
2:32:57 PM                                                                                                                    
SENATOR  ELLIS said  the state  is  being asked  in a  relatively                                                               
short timeframe to  take an affirmative action. He  is willing to                                                               
entertain  the request,  but would  like  insurance companies  to                                                               
commit as well and form a partnership.                                                                                          
CHAIR COSTELLO said  she appreciates the remarks and  is aware of                                                               
the situation that it brings.                                                                                                   
MS.  TALLMAN  said  Premera  is committed  to  working  with  the                                                               
division on the actual program  that would be implemented via the                                                               
rule making and has  been doing so for the last  year. There is a                                                               
lot of uncertainty now regarding the market.                                                                                    
2:35:16 PM                                                                                                                    
ALBERT   FOGLE,  Alaska   Association  of   Health  Underwriters,                                                               
testified in support  of SB 206. He described the  bill as a tool                                                               
to help with the survival  of the individual marketplace. It will                                                               
help   stabilize  the   market  and   smooth  out   premiums  for                                                               
individuals and  families going  forward. It  isn't the  fault of                                                               
the carriers, but the geography of Alaska and its unique market.                                                                
He  highlighted  that  ACA limits  premiums  a  health  insurance                                                               
carrier  can  charge.  They  are  allowed  just  20  percent  for                                                               
administrative costs.                                                                                                           
2:38:27 PM                                                                                                                    
KRAIG ANDERSON,  Senior Vice President and  Actuary, Moda Health,                                                               
testified in support  of SB 206. He described  Moda's business in                                                               
Alaska  since 2007.  Moda offers  policies  both on  and off  the                                                               
exchanges  and is  one of  two providers.  They are  committed to                                                               
policyholders in Alaska.  He echoed comments made  by Ms. Tallman                                                               
regarding the market  and how the bill would help.  He noted they                                                               
have submitted  detailed claims data  to model the impact  of the                                                               
ACHIA program.                                                                                                                  
CHAIR  COSTELLO  closed  public  testimony and  held  SB  206  in                                                               

Document Name Date/Time Subjects
Gasline Development - Cruz #1.pdf SL&C 3/29/2016 1:30:00 PM
Gasline Development- Hopkins #1.pdf SL&C 3/29/2016 1:30:00 PM
Gasline Development- Merrick #1.pdf SL&C 3/29/2016 1:30:00 PM
Alaska Gasline Development Corporation Factsheet.pdf SL&C 3/29/2016 1:30:00 PM
1 - Alaska Gasline Development Corporation Roster.pdf SL&C 3/29/2016 1:30:00 PM
SB 206.PDF SL&C 3/29/2016 1:30:00 PM
SB 206
SB 206 - Fiscal Note.pdf SL&C 3/29/2016 1:30:00 PM
SB 206
2016.03.28 Division of Insurance - Reinsurance White Paper.pdf SL&C 3/29/2016 1:30:00 PM
2016.03.28 - Premera Reinsurance White Paper.pdf SL&C 3/29/2016 1:30:00 PM
SB 55 - Association of Eye Surgeons - SB 55 Surgeries List.pdf SL&C 3/29/2016 1:30:00 PM
SB 55
SB 55 - Opposition Article - Alaska should leave eye surgery to the surgeons.pdf SL&C 3/29/2016 1:30:00 PM
SB 55
SB 55 - Opposition - ASPS Comments - Scope Optometric - AK SB55 - 03-21-16.pdf SL&C 3/29/2016 1:30:00 PM
SB 55
SB 55 - Opposition Letter - Dr. Korshin.pdf SL&C 3/29/2016 1:30:00 PM
SB 55
SB 55 - Support Background Document - AOA Malpractice Fact Sheet.pdf SL&C 3/29/2016 1:30:00 PM
SB 55
SB 55 - Support Letter - AOA.pdf SL&C 3/29/2016 1:30:00 PM
SB 55
SB 55 - Support Letter - Dr. Karpik.pdf SL&C 3/29/2016 1:30:00 PM
SB 55
SB 206 - RWJ Foundation - Innovation Waivers 1.pdf SL&C 3/29/2016 1:30:00 PM
SB 206
SB 206 - RWJ Foundation - Innovation Waivers 2.pdf SL&C 3/29/2016 1:30:00 PM
SB 206
SB 206 - RWJ Foundation - Innovation Waivers 3.pdf SL&C 3/29/2016 1:30:00 PM
SB 206
SB 206 - Hearing Request.pdf SL&C 3/29/2016 1:30:00 PM
SB 206
SB 206 - Sectional Analysis.pdf SL&C 3/29/2016 1:30:00 PM
SB 206
SB 206 - Support Letter - AAHU.pdf SL&C 3/29/2016 1:30:00 PM
SB 206
SB 206.PDF SL&C 3/29/2016 1:30:00 PM
SB 206