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Minutes for SB32 - Committee on Financial Institutions and Insurance
Short Title
Exempting certain non-insurance healthcare benefits from the commissioner's jurisdiction.
Minutes Content for Tue, Jan 29, 2019
Chairman Olson opened the hearing on SB 32 - Exempting certain non-insurance health benefits from the commissioner's jurisdiction. He called for a Revisor of Statutes overview of the bill. Eileen Ma provided the overview. She pointed out that the benefit product defined by this bill was unique because it represented a health care benefit plan that would not be classified as "insurance" or an "association plan." She also noted that it would not be subject to the jurisdiction of the Kansas Insurance Department or the Affordable Care Act (ACA). (Attachment 3)
Chairman Olson called for proponent testimony on the bill.
Proponent Terry Holdren explained that the primary mission of the bill was to allow or authorize the 100 year old not-for profit Kansas Farm Bureau to enable its members to continue to live and work in rural Kansas. He indicated that the bill would provide highly competitive and affordable healthcare benefit plan options. He cited that his membership was comprised of over 30,000 members residing in all 105 Kansas counties that were directly engaged in agricultural operation and practice. He referenced that according to a recent national survey that 65% of farming families agreed that the cost of healthcare benefits represented the most significant threat to their staying on their farms, ranches and related small businesses. In minds of these farming families this concern exceeded the availability of government farm subsidies, credit or any other concern related to the agricultural industry. He estimated that his members today spend thirty to forty percent of their annual income maintaining healthcare coverage for their families. He cited the following breakdown of the type of healthcare Kansans have today:
- 53% have employer group coverage
- 31% have government provided medicaid or medicare
- 8% have individual non-group market coverage
- 8% have no form of healthcare benefits
He pointed out that this bill would allow the Kansas Farm Bureau to attract individuals and families from the latter 16% listed above. He further explained that typically his membership does not qualify for Affordable Care Act (ACA) subsidies because their average incomes exceed the 400% of poverty level. He emphasized that since 2008 individual healthcare premiums have increased by 176% across Kansas and over 215% for family coverage. He asserted that current healthcare plan offerings do not meet the needs of thousands of rural Kansans or small businesses. But void actually encourages unhealthy decisions and hurts rural healthcare providers and hospitals that are in desperate need of more consumers who possess healthcare benefits plans. He asserted that the passage of the bill would provide competition and interject innovation into the Kansas healthcare market place. He explained that his organization seeks the authority for the KFB to offer affordable and accessible healthcare plan coverage to its members. And what he said is needed here is a statutory exemption from the jurisdiction of the Kansas Insurance Department that would allow applicants to be individually rated, but once they are accepted they can't be cancelled as long as premiums are kept current. He described the KFB plan that would be modeled after other state plans in Iowa and Tennessee. He speculated that costs could be expected to be thirty percent or more under the cost of currently available Affordable Care Act compliant plans. He also clarified that the bill would not add another association health plan if passed.
Mr. Holdren made reference to an amendment that would clarify the ACA exemption and insure that the KFB plan would only pay one premium tax. That it would authorize KFB to use reinsurance and other affilitations to secure long-term financial soundness of the overall program.
He concluded with the following points:
- Participation of ACA plans is declining.
- Rates in Marketplace Exchanges are generally expected to continue to increase, while deductibles also increase.
- KFB believes that this plan would be a viable option for approximately 1.5% of the Kansas population that represents healthcare benefit coverage for an estimated 40,000 Kansans.
Proponent Michelle Hubert who is responsible for increasing services offered to KFB membership cited that her one hundred year old non-profit service organization has an army of agents and service providers to support the state-wide effort to introduce and deliver a new healthcare benefit plan. She emphasized that farmers and ranchers have a very unique set of risk management needs. She asserted that while the KFB offers a broad range of services to its membership, she pointed out that a large gap exists today in the access to affordable healthcare benefits by rural families and small businesses. (Attachment 5)
Proponent Marieta Hauser explained that she and her husband work a family farm just outside of Ulysses, Kansas. She indicated that her family has worked with three different healthcare benefit insurance providers who have since stopped serving the Kansas market. At that point she indicated that her family considered an ACA Marketplace option that after considering premiums and deductibles represented an annual cost of about $40,000. She continued that because of the high risks in farming her family felt compelled to pursue the short-term healthcare market for a period, but finally sought a longer-term option by engaging in a medishare concept solution. She pleaded with the committee to seriously consider advancing an option tailored and suited for the agricultural community.
Proponent Tim Franklin explained that his family returned to rural Kansas to grow wheat and corn on a fourth generation farm. He said that initially the family was covered by a group healthcare insurance policy that was both adequate and affordable. He claimed that in 2017 the ACA altered the definition of a "sole proprietor" that required family employees and thus disqualified his family for the group coverage. He explained that his parents operated a separate family farm and in effect, the group policy option disappeared. He summarized his family's growing frustrations with constant increases in annual premiums, while actual coverage declined as follows (approximate costs):
2011 - $5,800
2012 - $5,600
2013 - $6,000
2014 - $10,000 (family plan)
2015 - $10,000
2016 - $12,000 (last full year on the group plan)
2017 - $10,000 (for eight months)
2018 - $19,000
2019 - $24,000 (family of five)
He concluded by saying that in addition to the rising costs and declining coverage, the difficulty in finding an accessible in-network provider is very high. He pleaded with the members of the committee to consider allowing the proposed option to enable thousands of Kansans to stay on or return to their generational family farms. (Attachment 7)
Proponent Sara Schmidt stated that her family returned to a sixth generation farm in 2009. She indicated that prior to the implementation of the ACA a plan healthcare benefit plan cost her family about $6,300 per year and allowed her family to use mostly local providers in Johnson County and Manhattan, Kansas. Upon implementation of the ACA her family became disqualified from the plan and it moved to a bronze level ACA healthcare benefits insurance policy that increased costs by over 87% to almost $12,000. According to her account the family no longer had access to local providers. In search for a plan that might be within the family's budget, it moved to a short-term eleven (11) month plan for basic catastrophic coverage for $2,400 for the period. However, subsequent changes in federal regulations forced the family into an option of a three month (non-consecutive policy periods) healthcare benefits plan. At this point the family's two best options for basic care included an ACA Marketplace option that equaled the family's mortgage payment with greatly reduced options and local provider access or a direct purchase option with a cost of $18,000 annually. She indicated that the family decided to move to a cost-sharing program. (Attachment 8)
Proponent Josh Roe reported that currently declining net farm incomes have not been seen since the farm crisis of the 1980's. He also claimed that during the last five years the cost of healthcare benefit insurance plans has quadrupled. He stated that his member families have seen annual healthcare insurance plans with premiums as high as $20,000 before a similar level of deductible goes into effect. He warned the committee that many times this is the difference from having net disposable income and having to borrow to cover basic living expenses. He urged the committee to support the bill.
During committee comments and questions conferees established the following points:
- There are currently three current healthcare benefit insurance providers in Kansas (Blue Cross Blue Shield of Kansas/Blue Cross Blue Shield of Kansas City; Medica and Aetna).
- The KFB estimates that the maximum impact of this measure if passed to be approximately 1.5% of the entire Kansas market that equates into approximately 40,000 Kansas consumers. Proponents stated that this would have negligible impact on current provider revenues.
- Concern was raised about the proposed bill not providing guaranteed issue especially for pre-existing conditions and the possibility that the process of individualized rating could exclude even one family member from a plan.
Written Only Proponent:
Jason Watkins, Wichita Regional Chamber of Commerce (Attachment 10)
Chairman Olson called for opponent testimony on the bill:
Opponent Noah Tabor stated his organization's support for innovation toward innovative, affordable and quality access to healthcare benefits for Kansans. He stressed the need for regulatory over-site to insure organizational solvency, stability, and adequate consumer protections. He indicated that it supported association plans like the Nebraska Farm Bureau (NFB) that partners with Medica that provides guarantee issue, support for existing conditions, while providing a robust set of services at a significantly reduced cost (estimated to be 25% lower than other market options). He compared a typical cost of a Nebraska ACA marketplace plan (average $26,000) with similar benefits of and NFB healthcare benefits plan ($19,000). He expressed concerns with the KFB plan in terms of its lack of over-site and the potential destabilization of not being required to accept any pre-existing condition. He expressed his organization's desire to work with Kansas to develop solutions that include what he termed "fundamental protections for consumers." He concluded his testimony with the question, "What about the farmer with cancer?"
Opponent Courtney Eiterich (for Kari Rinker testimony) confessed that she is a victim of a regressive disease affecting her nervous system. She shared that for years she enjoyed excellent insurance as an engineer for General Motors and an Auto Workers Union Member. She separated from full-time employment to have children as a stay at home mother. She indicated that for her particular situation an ACA healthcare benefit insurance was a "god-send." She expressed concern regarding the bill proposal's exemption from ACA requrements and Kansas Insurance over-site that could have a destabilizing effect on the market and make it more expensive for people with pre-existing conditions like herself. She estimated that her medication costs alone come to about $1,400 per month and has personally spent over $250,000 on healthcare costs during the last ten years. She expressed a concern about "caps." She concluded her testimony questioning whether the proposed plan would accept her and if it did, she questioned what it would cost.
Opponent Brad Smoot stated that his organization agreed that since the ACA implementation the cost of healthcare benefit insurance is unreasonably too much. Directing his comments to the bill proposal at hand, he stated that "the whole concept is unfair." He listed his concerns with the plan:
- it can reject or accept anyone
- it can accept or reject anyone
- it proposes to remove 40,000 healthy lives out of the risk pool
- it does not state providers or benefits that will be covered
- it leaves open questions of over-site and financial solvency
- it does not regulate time it is required to pay providers
Chairman Olson halted testimony in the middle of Brad Smoot's testimony and assured him that he would be allowed to finish during the next meeting.
Written Only Opponent Testimony:
Dana Bacon, Luekemia and Lymphoma Society (Attachment 14)
Chairman Olson suspended the hearing on the bill to be continued during the next scheduled meeting.
