Call to Order and Roll Call
The 1st meeting of the Interim Joint Committee on Banking and Insurance was held on Tuesday, August 24, 2010, at 10:00 AM, in Room 149 of the Capitol Annex. Representative Jeff Greer, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative Jeff Greer, Co-Chair; Senators Julian M. Carroll, Julie Denton, Gerald A. Neal, Dorsey Ridley, John Schickel, Dan "Malano" Seum, and Brandon Smith; Representatives Dwight D. Butler, James R. Comer Jr., Ron Crimm, Robert R. Damron, Mike Denham, Ted Edmonds, Tim Firkins, Jim Gooch Jr., Mike Harmon, Dennis Horlander, Brent Housman, Dennis Keene, Adam Koenig, Brad Montell, Sannie Overly, Jody Richards, Arnold Simpson, Kevin Sinnette, Wilson Stone, John Tilley, Ken Upchurch, and David Watkins.
Guests: Sharon Clark, Commissioner, Bill Nold, Director, Life and Health, and D J Wasson, Legislative Liaison, with the Department of Insurance.
LRC Staff: Rhonda Franklin, Jens Fugal, Emily Bottoms, and Jamie Griffin. Representative Jimmie Lee attended at the Chairman Greer’s request.
Discussion of Health Care Reform
Sharon Clark, Commissioner, Department of Insurance, gave the committee an overview of the Patient Protection and Affordable Care Act (PPACA) (Pub. L. 111-148), the federal health insurance reform and state implementation. Commissioner Clark stated that implementation will be coordinated through the Governor’s Office. The Department of Insurance has formed seven working teams within the department and divided the federal legislation into seven areas: High Risk Pool; Insurer Oversight; Grants; Public Relations and Consumer Assistance; Administrative Support; Exchanges; and Legislation and Regulations. The U.S. Department of Health and Human Services issued a decision timeline for a temporary high risk pool operation of April 30, 2010. The Department of Insurance provided the necessary information to the Governor’s Office on April 9th. On April 29, 2010, Kentucky expressed its interest to Health and Human Services in operating a high risk pool, but identified several area needing additional information assurances. On May 10, 2010, Kentucky received the solicitation for state operation of the risk pool. Commissioner Clark stated that with continued concerns the Department recommended to the Governor on May 17, 2010, that Kentucky opt for the operation of the temporary high risk pool by the federal government. The federal government operates the Pre-Existing Condition Insurance Plan (PCIP) in Kentucky, administered by the Government Employees Health Association (GEHA). It was operational July 1, 2010; members will transition to the exchange in January 2014. To be eligible for the plan, a person must be a United States citizen or national of the United States or lawfully present in the United States, uninsured for at least 6 months or have had a problem getting insurance due to a pre-existing condition. Rates must be set at the standard market rate and adjusted community rating with maximum variation for age of 4:1. The coverage will have no pre-existing condition exclusions; cover at least 65% of total allowed costs and the out-of-pocket limit no greater than the limit for high deductible plans. If people like the health plan they currently have, they can keep it. Grandfathered plans can raise premiums to reasonably keep pace with health care costs, make some changes in benefits, increase deductibles and other out-of-pocket costs within limits and continue to enroll new employees and new family members.
Commissioner Clark pointed out the immediate market reforms that will apply to all plans: rate review and medical loss ratios; prohibition on lifetime benefit limits; allowance of restricted annual limits for essential benefits; prohibition on rescissions; extension of dependent coverage until age 26; and uniform explanation of coverage documents and standardized definitions. Market reforms that will apply to new plans that are not grandfathered in will include: coverage of preventive health services without cost sharing; internal and external appeal processes; coverage for emergency services at in-network cost-sharing levels with no prior authorization; selection of primary care provider of choice; prohibition on requiring referral for obstetrical or gynecological care; and health plan disclosure and transparency requirements. There are still major issues pending guidance from Federal Health and Human Services such as the rate review process; medical loss ratio; and uniform explanation of coverage documents and standardized definitions.
Kentucky was awarded a $1 million dollar Premium Review Grant on August 16, 2010, and must send an acceptance letter by September 13, 2010. A total of $250 million dollars will be distributed over 5 years to assist in the rate review activities. Kentucky has proposed several ways to use the grant funds, such as increase in categories of data required to be filed, increase in the amount of data, development of publications to explain the rate review process and also to conduct surveys and hold open meetings for consumers. About $30 million dollars in grants will be available to states to establish and operate offices of health insurance consumer assistance or health insurance ombudsman programs. Commissioner Clark stated that $1 million dollars in grant funds will be available to states for planning and activities related to establishment of an exchange program. The Department of Insurance and the Cabinet for Family Services are working collaboratively on a grant application at this time with a due date of September 1, 2010. She stated that www.healthcare.gov is a web site through which individuals and small businesses may identify affordable health insurance coverage. The Department of Insurance will be hiring 8 additional staff in order to implement these programs. Positions will be Federally Funded Time Limited positions and the filling of the positions will be based upon grant awards to Kentucky. The agent’s role across the state is critical in this process and the Department of Insurance will be available to agents for any questions that may arise. Commissioner Clark stated that D J Wasson, Legislative Liaison for the Department of Insurance, has compared Kentucky’s existing laws and administrative regulations with the consumer protections in the federal health insurance laws and the Department of Insurance will be making recommendations for legislative changes needed in the 2011 Regular Session to conform Kentucky’s specific insurance laws to the federal provisions.
In response to a question from Senator Buford, who asked if the current Kentucky mandates will remain in place or are they in jeopardy, Bill Nold, Director, Life and Health Division, Department of Insurance, stated that the federal plan has not defined mandates yet, but, that it is possible they will add to existing Kentucky mandates, and Kentucky could go beyond the federal mandate listing, but, would be responsible for the cost.
In response to a question from Senator Buford, who asked how the 8 new Federally Funded Time Limited positions would be funded and when they would terminate those positions, Commissioner Sharon Clark stated that the position will be funded by grant money and when the grant money is depleted the positions will end.
In response to a question from Representative Brad Montell, who asked if the private insurance companies will survive this change, Bill Nold stated that he feels they will survive and still make money.
Representative Bob Damron stated that he believes the General Assembly will be able to pass the legislation that the Department of Insurance needs to comply with the new federal legislation in the 2011 Regular Session. Commissioner Sharon Clark stated that she only wants what is best for the citizens of Kentucky.
Representative Jimmie Lee stated that he was very glad to be invited by Representative Jeff Greer, Chairman, to today’s meeting. He stated that he feels that it is extremely important for the legislation to be passed in the 2011 Regular Session in order for the framework to be in place to move forward.
Representative Jeff Greer stated that he feels the committee will do everything possible to give the citizens of Kentucky the best choice of coverage and affordability.