Legislature(2015 - 2016)BELTZ 105 (TSBldg)
03/29/2016 01:30 PM Senate LABOR & COMMERCE
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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 adequate. CHAIR COSTELLO asked her to explain the higher-risk medical conditions. 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 waiver. 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 forward. MS. TALLMAN said the states can begin applying for the waiver in 2017. 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 passes. 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 committee.