Senate Majority Caucus Room
State Capitol, Boise, Idaho
Tuesday, July 29, 2003
The meeting was called to order at 9:00 a.m. by Cochairman Senator Dean Cameron. Other
Task Force members present were: Senators Joe Stegner, John Goedde, Fred Kennedy,
Cochairman Representative Bill Deal, Representatives Max Black, Margaret Henbest, Gary
Collins and Kathie Garrett. Senator Sheila Sorensen was excused.
Others present included: Mike Brassey, St. Luke's Regional Medical Center; Laren Walker,
AmeriBen Solutions; Tim Olson, Regence BlueShield; Hyatt Erstad, Idaho High Risk Pool
Chairman; Mary Hartung, Joan Krosch and Phyllis Stephenson, Department of Insurance;
Kathleen Allyn, Idaho Department of Health and Welfare; Steve Millard, Idaho Hospital
Association; Andrea Mihm, Sullivan and Reberger; Jack Jones, AARP/Area 3 Aging Agency;
Toni Lawson, St. Alphonsus; Kate Vanden Broek, Idaho Planning Grant; Steve Tobiason, Idaho
Association of Health Professionals; Dawn Justice, IACI; Woody Richards, Moffatt Thomas;
Robert Seehusen, Idaho Medical Association; Ken McClure, Givens Pursley; and John
Summerton, Northwestern Group Marketing Services/Small Employer Benefit Specialist. Staff
members present were Caralee Lambert and Toni Hobbs.
After introductions, Senator Cameron commented that one of the duties of this Task Force is to
monitor the high risk reinsurance pool. He introduce Mr. Laren Walker, Ameriben Solutions,
to discuss the financial status of the pool. Mr. Walker began his comments by stating that
compared to other state programs, Idaho's plan works very well. The board of directors takes a
very active role in the plan's operation. Compared to the four other states that Ameriben
administers, Idaho's is the best. Mr. Walker distributed a balance sheet for the Idaho Individual
High Risk Pool as of April 30, 2003 that included a comparison to 2002.
In response to a question from Senator Stegner, Mr. Walker explained that the high risk pool
deals specifically with individual policies. The purpose of the program was to help control costs
and to provide access to individuals who would otherwise not be able to afford insurance. The
reinsurance side is a mechanism to help the insurance companies cover some of this risk. The
high risk pool is a mandatory product that insurance companies must offer and then they must
reinsure those risks through this pool. The money for the pool comes from money the insurance
companies pay that is left over after claims and administrative costs. State premium tax dollars
of 1/4 of the excess over $45 million are also put into this pool. If these funds did not cover the
full expense of the program, there could be an assessment to all insurance carriers doing business
in the state of Idaho.
Mr. Hyatt Erstad, chairman of the high risk pool, added that one of the reasons this program is
unique is that the legislature had a reinsurance mechanism set up originally for individuals and
small employers so that no one in Idaho could be turned down for insurance coverage. Two
years ago, the high risk pool was established. If an individual goes to a carrier for individual
insurance coverage and is declined, either by being denied coverage or by having premiums that
would be too high, these individuals must be offered the coverage offered by the high risk pool.
Senator Cameron said that Idaho is one of many states that have established high risk pools.
Idaho's is somewhat unique because it is used as a reinsurance mechanism together with
mandating the four standard products. Idaho is also unique because it establishes a set funding
source. Many states that have high risk pools are subject to appropriation. This causes people to
be able to be insured one year when there was an appropriation and the next year, if there is no
appropriation, there is no coverage. Idaho's system has worked much better in the long run.
In response to a question by Representative Black, Ms. Joan Krosch, Department of
Insurance, explained that they are working with a national high risk organization that ranks the
high risk pools of all states in order to get Idaho included in a nationwide composite.
Mr. Walker returned to the discussion of the balance sheet. He explained the following:
On June 30, 2003, the fund received $3.6 million from the premium tax dollars that is not
reflected on the balance sheet. This compares to $1.4 million in 2001 and $2.3 million in
premium tax dollars.
The number of claims that have been paid are:
From this 2003 amount, it is estimated that there would be $2.5 million paid in claims for the
He called the Task Force's attention to the premiums collected and the fact that they are going
up. In 2003 (through April), $601,000 has been collected and for 2002, that amount was only
The ending fund balance for April 2003 shows a deficit of $292,171. This amount is the amount
of premium tax dollars year to date that will be needed to make up the difference between claims
paid and premiums coming in from insurance companies.
In response to a question from Representative Henbest, Mr. Walker said there are 1,443 lives
currently covered in this plan.
Representative Black asked whether there is any guarantee that an individual who is declined
regular coverage will be aware of the high risk pool. Mr. Erstad answered that carriers are
mandated to inform applicants of the high risk products and they are audited annually to make
sure this is done. Senator Cameron stated that the two major carriers publish the rates of the
four high risk products along with their other product rates. He added that there is some concern
by the carriers that the board is holding those high risk rates too low compared to what they have
to charge borderline high risk people. These rates are set actuarially and this has been reviewed
recently. The board believes that the high risk rates are actuarially sound and the claims
utilization so far has proven that to be true. This could change in the future. Senator Cameron
outlined the four high risk products and stated that these products are comparable to street
products. They range in deductibles from $500 up to $2,000, with different co-insurances and
prescription drug coverage. He added that he would provide a copy of the rate sheet for the Task
In response to a question from Senator Stegner, Mr. Hyatt commented that these products are
very complete products. Depending on where the premium is that the applicant wants, the
benefits available are an average of the benefit design. To compare these products to the street
products would be very difficult because of the many choices available in street products
coupled with the seven different rate bands. There would be too many variables involved for this
to be accurate. The high risk products are designed to be right in the middle range of the entire
Senator Goedde asked if a family applies for insurance coverage and one member is turned
down as high risk, is the rest of the family offered a standard product with the individual going
to the high risk pool? Senator Cameron said each company handles this differently but that is
basically how it works. There is no law requiring carriers or agents to inform clients of these
Representative Henbest asked if, due to the growth in claims compared to the tax dollars
available, there is concern that this program might not work. Mr. Walker stated that because of
the nature of the pool and the fact that high risk individuals are involved with a $1 million
maximum on several of the products, it seems that the program is safe. Based on the past two
years, the money available is adequate to support the program. In a worst case scenario, there is
a line of credit in place for the short term. In the long term, an assessment to the insurance
carriers would be used to pay back that line of credit. Mr. Erstad agreed with Mr. Walker. He
added that the actuary committee works very closely with the carriers and looks at what is
coming in to the program very carefully. They have been very cautiously optimistic and as long
as premium tax revenues continue to keep pace with the pool growth, it should be successful.
Stabilization of claims would also be helpful.
Senator Cameron clarified that the precursor to the high risk pool was called Individual Market
Reform. It offered some reinsurance to the carriers, operated with a line of credit, and an
assessment was made to the carriers to pay off that line of credit each year. With this new
program, so far the premium tax and premiums collected from the carriers have been enough to
cover the costs and the line of credit has not been needed. There is no way to predict what will
happen in the future but at this time the program is running in the black.
Representative Black asked if the small group insurance pool makes assessments to insurance
carriers also. Senator Cameron said the small group product is being run in a similar manner to
how the individual product was under the reinsurance mechanism. There has been talk of
expanding the high risk pool to small employers. In response to another question from
Representative Black, Mr. Walker stated that the assessment ranges from $200,000 to
Senator Goedde commented that the premium tax money that is used included total premium
tax such as property and casualty insurance as well as health insurance. He cautioned that most
of the increases have occurred in the property and casualty area and he does not think that will
Senator Stegner suggested that in his opinion the program seems to very successful and that this
committee should be very proud of what they have created. Mr. Erstad added that the reality of
the high risk pool is that it allows people who have used up their lifetime maximum benefits in
other plans to still have coverage. It also allows people who are declined coverage or whose
premiums are too high to have coverage. In other words, it makes a program available to every
Idahoan who wants to take the time to make application for it. This is a very proactive idea that
more people need to be made aware of. Mr. Walker added that the program runs very well and
there is good cooperation administratively between the carriers and the department.
Representative Black stated that at various conferences that he has attended and whenever
Idaho's plan is described, it generates a lot interest and questions from other states.
Senator Cameron commented that there were a number of federal funds made available for
states to use for their high risk pool programs. He asked if Idaho has applied or received any of
those funds. Joan Krosch answered that the Department of Insurance has been instructed by the
board to make application for these funds. This application must be in by September 30, 2003,
and they are in the process of completing that grant request. Mr. Erstad added that part of the
reason Idaho has not applied for these funds is due to the fact that the federal government does
not want the state's high risk plans to have preexisting condition requirements attached. Under
Idaho's plan, someone who applies for insurance after being diagnosed with a disease such as
cancer would be considered to have a preexisting condition and there would be a waiting period
for coverage. Under the initial federal government program, that preexisting condition clause
would have had to be removed. This time, they think the state will be able to maintain the
preexisting condition clause. If an individual has existing coverage and has used up their
maximum benefits, they still qualify for the high risk pool without a waiting period. The
preexisting clause is only in effect if someone has not had coverage and wants insurance because
they have been diagnosed with a disease. Also, it is still not certain that the federal government
will accept Idaho's application.
Representative Henbest asked if the Task Force still wants information regarding management
of the high risk population. Senator Cameron clarified that there had been discussion that if the
state implemented some sort of disease management program within the high risk pool, perhaps
the high risk pool would be eligible for millennium fund money. Due to the state of the
millennium fund, he is not sure how important this is currently. He asked that the board discuss
the importance of this at their next meeting and to let the Task Force know what is decided.
Kathleen Allyn, Department of Health and Welfare, was introduced to discuss the status of the
Access Card implementation. She explained that in 1997, Idaho implemented the Children's
Health Insurance Program (CHIP) as an extension of the Medicaid program. There was a choice
at that time to make it an expansion of the Medicaid program or a separate stand-alone program.
The main difference was in the federal funding. With the Medicaid program, the funding is
roughly 30% state general funds and 70% federal funds. With the CHIP program, it is an
enhanced match that is closer to 20% state, 80% federal. She stated that the access card program
is really in its infancy and they are still in the process of making sure they understand what the
House Bill 376, passed in the 2003 session, established the Access Card program. Ms. Allyn
distributed a chart explaining the program. She stated that the existing CHIP program covers
children from 100% of the poverty limit to 133%. The new portion (CHIP Plan B) is thought to
be a separate program, not a Medicaid expansion. This plan covers from 150% of the poverty
limit to 185%. Simultaneous to this plan there is to be a Children's Access Card program. This
gives the option to participants in both CHIP Plans A and B to get a premium subsidy to
purchase private insurance. This part of the program is to be implemented by July 1, 2004.
By July 1, 2005, there is to be a Small Business Health Insurance Pilot Program. This will be
limited to 1,000 adults who are employees of small businesses (2 to 50 employees). This will
work like the Access Card program, allowing a premium subsidy to purchase health insurance.
This includes the expectation that the employer will be contributing at least 50% of the premium
Ms. Allyn explained that there is a very distinct relationship among the various entities that are
participating in the development of this plan. The Department of Health and Welfare is leading
the development of the CHIP Plan B and the Access card plan. The potential for private
insurance components gives the Department a real opportunity to partner with the private sector
and with the Department of Insurance.
The legislation calls for three advisory boards:
These boards are to work with the Department of Health and Welfare and will also provide
advice to the High Risk Reinsurance Pool Board, which in turn will recommend rules to the
Department in terms of the private insurance products. External partners include the Idaho
Planning Grant Group and the Department of Insurance.
Ms. Allyn stated that with the number of advisory boards required, they would like the Chip
Plan B Advisory Board and the Children's Access Card Advisory Board to be combined and will
talk to the legislature about that. The membership requirements are exactly the same and this
would simplify the process administratively.
The funding for these programs is 1/4 of all premium tax receipts over $55 million with a cap of
$1.2 million on the adult pilot program. There is also a minimum of a 70-30 match from the
federal government. Ms. Allyn said they are anticipating closer to an 80-20 match.
Under the current CHIP Plan A, there are approximately 11,000 children insured and the average
expenditure is about $118 per month. For CHIP Plan B, they are suggesting developing a
package that would cost no more than $100 per month.
Senator Cameron added that in order to address the Access Card Plan, the state has to apply to
the federal government for permission. Ms. Allyn clarified that they are carefully studying
which type of application to make and at this time it appears to be a HIPPA waiver. They are
just beginning the process of developing the draft.
Senator Goedde asked if there is an upper limit to the premium tax requirement of 1/4 of the
amount over $45 million for the high risk pool and 1/4 of the amount over $55 million for the
CHIP plan. Senator Cameron said there has been some discussion of placing limits on these but
nothing has been finalized. Senator Goedde cautioned the need to realize that any amount of
premium tax that is taken away from the general fund will probably result in a tax increase
Senator Cameron asked the members for ideas or issues they would like to see discussed for
future meetings. In the past, they have tried to have any health care related issue funneled
through this Task Force to help alleviate some of the work load of the Business Committees and
the Health and Welfare Committees during the regular legislative session. This Task Force has
more time to look at the issues and study any unintended consequences that may result from
Senator Stegner suggested two items.
1. Evaluating the effectiveness of the expanded rate bands and consideration of whether they
should be allowed to expire at the end of next year.
2. Examination of the premium taxes on insurance. Due to the fact that the Task Force used
some of the premium tax to fund the high risk pool, this is an area that the Task Force should
Senator Stegner added that there is currently a study taking place looking at the two- tiered
premium tax system for Idaho. Currently, the number of assets a company has in the state
decides what premium tax rate they are charged. Due to the retaliatory laws of our state and
other states and because the state of Idaho is being sued over this, Senator Stegner feels that a
new system should be looked at that levels the premium taxes charged to insurance companies.
One of his objectives for this would be to ensure that the commitment is made by the legislature
to fund both the high risk reinsurance pool and the access card program.
Senator Stegner continued by stating that the concept that is being considered would lower the
highest premium tax rate down to the lowest level over a period of several years, eliminating the
need for the company to have investments in the state of Idaho. In essence this would create one
of the lowest premium tax rates in the region. This would make Idaho insurance companies more
competitive outside of Idaho due to the elimination of a retaliatory tax being charged. This
would also encourage insurance companies to do business in Idaho and help bring more
competition to the consumers of the state. Finally, it would also take care of the lawsuit
involving the two-tiered premium tax system.
Representative Black said that he would like to look at long term care. In his opinion, this is an
area that is gathering a lot of interest across the nation.
Representative Henbest agreed with Senator Stegner's suggestions and added the following
1. Prescription drug costs, including assisting people who are not Medicaid eligible but have
2. Follow up from the Heinz Foundation. Their report should be completed in September and
she will contact them to give the Task Force an update at that time.
3. Obesity and a study of the cost ramifications that it has for the nation as well as Idaho. She
would like to discuss what type of possibilities exist to try to manage this disease.
4. She asked the High Risk Pool Board to discuss whether they want to look at disease
management in the future.
Representative Collins stated that from a business standpoint, there have been significant rate
increases in health insurance premiums for healthy individuals. He suggested having the
insurance companies, the Department of Insurance and hospitals give a presentation regarding
the causes and possible solutions in this area. He added that the PPO concept seems to be
holding to moderate increases and asked if there was any interest in discussing that.
Senator Goedde agreed with Senator Stegner about studying the rate band issue. He added the
following items for discussion:
1. Costs to various counties of indigent care and the catastrophic fund that is available through the state to fund above the counties deductible.
2. How health care and mental health care for the jail population is handled.
3. The issue of mental health problems for indigents.
Senator Stegner added that another question regarding mental health and indigents that needs to
be answered is the question of whether these costs qualify under the catastrophic fund. Senator
Cameron commented that there has been some discussion of making the catastrophic fund
qualified for a federal match to help the state leverage what is being spent. He stated that it
would be appropriate to have a report from the counties in this area.
Senator Kennedy suggested that any change or reduction in the way the premium tax is levied
be coordinated with the Sales Tax Task Force that is meeting this summer. Senator Cameron
agreed. He added that the duty of this Task Force is to make sure that enough premium tax is
collected to fund the high risk reinsurance pool and the access card program.
Representative Deal added that he would like to look at mental health issues beyond simple
Mr. Bob Seehusen, Idaho Medical Association, stated that a discussion of the current mental
health delivery system in rural areas is a possible future agenda item.
Mr. Tim Olson, Regence Blue Shield, suggested having the Employers Health Coalition speak
to the Task Force for informational purposes.
Ms. Toni Lawson, St. Alphonsus Hospital, offered to set up a tour of the hospital for Task Force
Mr. John Summerton, Northwest Group Marketing Services, suggested the following:
1. Requiring disclosure from insurance companies regarding trending and components justifying rate increases.
2. Adjusting the renewal notice requirement to two months for small businesses.
3. The issue of doctors in PPOs who start seeing a patient and then pull out of the PPO but still perform the surgery as an out-of-network physician.
4. Require "certificate of need" for certain medical services such as MRIs.
5. Address the problem of rate levels not being readily given to insurance brokers.
6. Look into "true HMOs" (law currently provides that if an HMO is offered some out-of-network options must also be offered).
7. Employers want to know what their loss ratios are so they can review claims versus
Mr. Bob Seehusen stated that the issue of prompt pay is an important one to his organization.
He feels that claims should be paid to providers or patients in the same time frame as premiums
are due. Legislation has been passed in 47 states to make this a statutory requirement.
With no further business, the meeting was adjourned at 11:45 a.m.