April AAHU Legislative Update Program April 21, 2006

1. April AAHU Legislative Update Program April 21, 2006 Presented by Michael A. Wardrip LUTCF, GAHU Director of State Governmental Affairs Contact info: email: willing@adelphia.net Phone: 678-880-0986 Cellphone: 678-697-6213

2. This program will contain a general report on final legislative action in the 2005-2006 term, followed by discussion of a couple of major focus items for GAHU.The first section will take an hour, followed by a break for AAHU business, and the conclusion of the presentation. If you have interest or want to make input today in our legislative programs going forward, you will want to stay for the second half.

3. Significant bills passed by both houses in 2006 *We don’t have reliable info on which have been signed, not signed or vetoed by the Governor.

4. HB 246 Prescription drug orders; electronic transmission; amend provisions This bill is most significant because it settles Kaiser's mail order pharmacy issue. The bill is narrowly drawn so it only applies to Kaiser. It is the result of a three year campaign. Perhaps after a few years of successful operation, the rest of the industry can formulate their strongest arguments for why this program will need to be expanded.

5. HB 425 Insurers; permit food and refreshments under certain circumstancesClarifies what is permitted during group sales presentations where meals/refreshments are concerned. Previous versions appeared to make buying a client a meal illegal. This specifically allows that.

6. HB 1178 Prescription drugs; unused; medically indigent persons; establish programThis establishes a program whereby unused prescriptions are properly reused for the benefit of an indigent patient.A controversial element is added in Section 2A allowing a pharmacist to file an objection to dispensing of medications designed to terminate a pregnancy. It does not however allow an objection to dispensing birth control medications.The bill also makes loans more available for physicians attempting to establish practices in underserved areas of the state and allows military personnel not to be counted for purposes of determining a county’s “rural” status.

7. HB 1257 Insurance; certain change of address filings; exempt from feeThis bill was sent to conference so the HSA tax break bill could be added, giving incentives for people to buy them. It would have made the HDHP premium exempt from state income tax and state premium tax. For unknown reasons, the bill could not move out of conference and pass with the HDHP tax exemptions on it, so they were stripped.

8. Here is a summary of the sections of the bill:Sections 1 through 5 contain a feature that deals with reimbursement for ambulance providers which was the product of an agreement between and insurers and a group representing the ambulance providers.Section 6 provides that an agent’s change of address filing will be done without a fee if submitted electronically.Section 7 allows the Commissioner to waive the exam requirements for an applicant for a Counselor’s License based on the applicant́s experience and qualifications and pursuant to a regulation adopted by the Commissioner.Section 8 requires that the address of the principal location of an insurance agency be maintained by the Commissioner.

9. HB 1304 Life insurance; proceeds; provisionsThe bill protects proceeds of life insurance policies from attachment unless assigned to a creditor

10. HB 1371 The Pharmacy Audit Bill of Rights; enact This issue was battled out between insurers, PBMs and the pharmacists. The bill establishes the parameters for pharmacy audits, how they are to be conducted and terms for recoupment by PBMs and insurers.

11. HB 1372 State health benefit plans; termination of coverage; provisions Many departments were not submitting premiums on a timely basis to DCH. This bill establishes cancellation procedures for these departments.

12. HB 1451 Long-term Care Partnership Program; revise certain definitionsA major program that will open new LTC markets with incentives for individuals to buy LTC coverageLast year we passed state LTCP legislation under HB 643.On February 1, 2006, Congress passed and the President signed the 2005 Deficit Reduction Act which expands state-sponsored LTCP programs. As a result, we looked back at our own bill and determined we needed to make significant changes to comply with federal definitions and anticipate regulations that will be promulgated by HHS.The second section of this program contains more detailed information on implementation of Georgia’s LTCP program.

13. HB 1456 Accident and sickness policy; age of dependent; provisions This is a bill with significant language on qualifying events for individual health insurance and with renewal options.Section 1 allows individuals to switch policies at any renewal, to a comparable product offered by their insurer with more limited benefits; to a product with higher deductibles; or to any optional higher deductibles under the existing policy. If such change is elected in the 60 day required period after notice of renewal but before renewal date, they are not subject to new preexisting conditions exclusions that did not apply to the original coverage.Section 2 allows dependents that “age out” of their parents or guardians’ coverage to elect a comparable plan from the insurer without regard to health status.

14. HB 1484 Personal insurance; insurable interest; clarify circumstances This clarifies the Code with respect to insurable interests of trusts and other financial agreements and planning vehicles. It is to offset some recent cases eroding confidence in trusts in other states.

15. SB 306 Hospital/Nursing Home Liens; change notice/filing provision; effect of release This is fairly broad legislation dealing with medical liens.It establishes standards as to timeliness with respect to efforts by the operator of a hospital, nursing home, physician practice, or provider of traumatic burn care medical practice to perfect a lien against a patient and/or anyone else liable for medical expenses due such providers.

16. SB 384 Interstate Insurance Product Regulation Compact; enact; regulate designated insurance products; create commissionWhen 26 states or enough states to make up 40% of the market for Life, LTC and Disability join, this will be a clearinghouse for product filings, etc.This will be especially important for nationally promulgated regulations that will govern Qualified LTC Partnership Program policies.

17. Major focus bills for GAHU during the 2006 session • Georgia Assignment Pool Underwriting Authority (HB 1359) • Georgia Long Term Care Partnership Program (HB 1451)

18. Georgia Assignment Pool Underwriting Authority (HB 1359)

19. Final legislative status report • HB 1359 advanced as far as HB 320 had in the 2005 session, but did not make it out of the Senate Rules Committee to pass on the Senate floor, which would have been an almost certain outcome if it had come out. • Opposition organized after the bill moved out of House Insurance Committee, but was not able to stop it before it was voted on the House floor and pass with a 123-35 margin. On the other hand, the opponents were able to use a flanking maneuver and advanced to work the Senate while we were still focused on getting the bill out of the House. • They also managed to recruit powerful business entities such as the GA Chamber and NFIB to oppose the bill, which made it a real hot potato, and ultimately led to its defeat.

20. The greatest controversy on HB 1359 was its funding mechanism, which was virtually identical to the one in the original version of HB 320 when it was offered in the beginning of the 2005 session. • Various options have been examined which would have been far less controversial in some respects, but a consensus could not be established among the Commission members on them. • They included appropriations funding, Premium Tax earmarking and offsets against assessments in the event the General Assembly failed to appropriate the needed funds to run the program.

21. When things looked grim after a meeting of the bill’s sponsors with a committee room full of opponents, a bill was drafted at Rep. Ron Forster’s request that removed the assessment language and focused on establishing the board in order to do administrative work and apply for federal startup funding. • This version of the bill was taken directly to the Governor by the bill sponsors with no extra time to spare to get a bill on the final Senate Rules Calendar for the 39th legislative day. The Governor did not object to moving the bill and a special meeting of the Insurance & Labor Committee was called in order to pass HB 1359. • Our sponsors went to Rules three times, but ultimately there was to be only one real shot to get the bill on the calendar. Efforts were made to attach the bill when it failed to move out of Senate Rules, but these options ran out as time ran out before the close of legislative business on the 40th day.

22. The health insurance industry, with one exception (Assurant) either sat this one out or worked the opposition. • Insurers with any substantial exposure to the self-insured market were hard pressed to offend their self-insured clients when the heat went up. On the other hand, we have not pressed the carriers to adopt a cogent policy on how they propose to address the uninsurable issue. They may have commented to the Commission, but that is not their own statement of intent. Any campaign on the issue must involve their participation and support. Otherwise it would fail again.

23. We have not made the plight of medically uninsurable individuals enough of a constituent issue for legislators. • With a major election coming right around the corner, the opportunity exists to develop a communications campaign to accomplish this. • In 2004, we launched our first ever candidate survey. • We were pleased with a 30% response rate from 514 candidates for House and Senate seats and that helped us establish a base of support for our legislative agenda when the GOP took the House and solidified its hold on the Senate. • Friends who had indicated support for our issues were suddenly thrust into leadership positions in the House to match relationships we have developed over years in the Senate.

24. We can rely on sentiment favoring a solution to the uninsurable issue. The question is, what is the opinion of legislators regarding how to pay for it? • You as our members in the individual market are the engine for the constituent concerns for your clients who cannot obtain coverage. • We do not have to worry about violating a client’s HIPAA privacy rights if they voluntarily contact their legislators after rejection for coverage. • It is up to us to design the communication program that makes this happen. • With lots of corporate layoffs and premiums escalating in the group market, you will have lots of opportunities to direct individual clients to their legislators or candidates running in their districts.

25. How do we participate in the debate about how to pay for the pool? • It is a certainty that we should not lead the discussion on funding, but we should definitely voice our concerns if policymakers head in a direction to repeat battles we have already fought and lost. • When we worked on the bill that stripped out the assessment language, I asked GAHU to adopt a policy position not advocating any funding approach. • Up to that time we were going along with the approach that had been advocated by the Commission’s members and endorsed by the House sponsors, despite anyone’s claims to the contrary. • When the controversy intensified, there was no unity, and that led to the bill that called for a public process in this interim to determine how to go forward on funding.

26. The downside to the current posture is continued destabilization of the market with no official process toward a solution, along with loss of the opportunity to capitalize on the federal startup grants. • Real suffering is happening among those we cannot insure. • On the other hand, the dangers of setting up the program without funding are quite understandable given the overwhelming sentiment against allowing the program to become a state funded entitlement. We know with certainty what won’t work politically and have had alternatives brought up that are intriguing.

27. The most cogent argument against the approach in HB 1359 before the Committee substitute is the fact employers who do not offer benefits would bear no responsibility, along with large self-insured/self-administered plans. That is the argument that stuck with the broadest base in the business community and it has to be addressed if progress will ever be made on this issue. • One proposal is an impact fee on businesses that do not offer employee benefits, because they will be the most likely to impact the system and generate assignments before and after employees leave. ERISA issues have to be addressed, and there of course will be those who will fight this for their interests as a “new tax”.

28. The political landscape and prospects for the future • While much attention focused on the drama of opposing forces on HB 1359, that bill is dead. It is time to move on and have serious discussion on how the issue might be resolved in the future despite the failure of HB 1359. Ultimately HB 1359 became radioactive enough that I joked on the last day that if they turned out all the lights in the Capitol after dark there would still be an eerie glow from the half-life embers of that bill. • What needs to be discussed now is how the issue of covering uninsurables is to be debated and what are the elements of a successful campaign to that end. Let’s evaluate some issues:

29. Is there the political will for a solution in the 2007-2008 term? • Yes is the answer if we accept the sentiments of the Governor’s Office. • Of course there is an election ahead and the outcome is not certain. If there is no major upset in ’06, the leadership structure among the Constitutional Officers and House and Senate will not dramatically change in a way that affects our access and influence. Regardless of the outcome though, support for a solution has been building over a period of several years and is not so easily sidelined by one legislative defeat. • Many major issues have remained unresolved for years before an answer is seen and no answer ever seems to be a final answer. We have folks already pledged to move the issue again. We can step back and cheer them on and help them in their mission.

30. Who would need to be on board for a plan to pass? • It’s obvious the insurers need to be involved, but we also need to reach out more proactively to the business community and not, as was pointed out above, get ourselves into a position of running into a wall defending a funding mechanism that is not of our choosing. This means somebody needs to lead the discussion of finding solutions that a broad base of interests can support. Senate Insurance & Labor Chairman Hudgens put it pretty plainly when he said everyone says this idea is a great one and something that ought to be done, but they all say somebody besides my clients or interests needs to pay for it.

31. Ralph’s language suggests an approach of asking for support with his premise established, and following that premise with the question “Well now, how do you propose this ought to be paid for?” • It is obvious polling and reaching out to various groups is very labor intensive, but the work has to be done, just like in a political campaign. • We’ve narrowly lost a couple of campaigns, but the fact is we have not yet fielded an adequate team for a sustained campaign needed to pass major legislation.

32. Back to team building, I was approached by the GA Hospital Association due to the concern of one of their members that we had missed the startup grants authorized by the 2005 Deficit Reduction Act. • I assured them that the operational grants program is still in place for federal support. • Their concerns show plainly we need to do a much better job of recruiting support from medical providers and the groups that represent them. • Just like a grassroots campaign based on health insurance denials, a campaign can be developed to recruit physicians and hospitals affected by uncompensated care costs tied to uninsurable individuals not eligible for public sector health plans. We should get involved in the policy development process for these groups now.

33. In addition, we need to continue efforts to educate employers on the costs they pay in insurance, medical care and the price in general of doing business as a result of the lack of a solution for the medically uninsurable issue. • Small employers especially need to be aware how unstable the small group market is because of the migration of uninsurables into that market as a result of unavailability of coverage for medically uninsurable individuals. • The basic steps of involving big business have begun, even if it was engaging in battle over legislation. They now know there are leaders in the House and Senate and the Governor’s Office that have expressed the political will to pass legislation on the issue.

34. Only time will tell if this time next year we will have passed legislation to solve the plight of uninsurable individuals. What role will you play?

35. Georgia Long Term Care Partnership Program (HB 1451) • Review of the 2005 Deficit Reduction Act • How did the federal act affect LTCP? • How will the program function? • How will it benefit consumers and what are the rules? • When to expect the program to become effective and the regulatory steps ahead

36. Georgia Long Term Care Partnership Program (HB 1451) • The point of this segment is to explain recent changes brought about by passage of the federal Deficit Reduction Act of 2005. • We passed state enabling legislation for Georgia Long Term Care Partnership Program last year, so the good news in this is the changes we had to make mean the program will now be a reality instead of something speculative.

37. Review of the 2005 Deficit Reduction Act and how that leads us to HB 1451 • Let’s take a look at the federal language • From the Congressional Record • From a “clean” copy of the LTCP language in the Act

38. Now let’s take a look at HB 1451

39. How did the federal act affect LTCP? • The intent is not to create any dramatic new changes to LTC insurance, other than to open up opportunities and incentives for individuals and companies to purchase long term care coverage. • For us, there is the potential to open up a whole new market for LTC coverage. • There are some unintentional impacts we need to guard against…

40. New anti-discrimination language will likely lead to a need for us to introduce more legislation in the 2007 session to update Georgia’s LTC Code to comply with the 2000 NAIC Model Act, and move DOI to promulgate new LTC regulations that are consistent with those adopted per LTCP requirements. • We’ve already drafted the new language and were ready to add it to HB 1451, but our guidance from “experts” was divided and our sponsor, Rep. Donna Sheldon was concerned a sweeping new amendment would complicate our chances of successfully passing H 1451.

41. We have time to act and move at a deliberate speed. • Abel Ortiz, the Governor’s Health Policy Advisor, told me the feds liked our bill, but we were ahead of them. HHS has not begun to promulgate new rules for LTCP, so much work lies ahead on the federal and state levels.

42. How will the program function? • As is evident from reading the language in the legislation, the program will provide asset disregard to the extent dollar for dollar a person uses his or her own qualified LTC coverage to pay their own LTC expenses. • This means not only will an individual not have to spend down to near nothing to qualify for Medicaid benefits, • They will also be able to protect the assets they were allowed to retain against estate recovery.

43. How will it benefit consumers and what are the rules? • In the existing four states with LTCP programs, tens of thousands of people have applied for LTCP participating coverage. • Several thousand claims have been filed. • Tens of millions of dollars of benefits have been paid and these dollars have been paid by insurers under LTCP policies, rather than by Medicaid. • In all four states combined, only about 100 LTCP program participants have ever gone on Medicaid.

44. The insured must be a resident of the state when the LTCP plan was purchased. • HHS rules will allow for exchanges, but the person must have been a resident of the state when the first plan was purchased. • As a result there will be no “grandfathering” of existing polices as was the case with HIPAA, but exchanges will be allowed to LTCP participating plans. (I’m sure some of your ears perked up on that!)

45. The policy is a qualified long-term care insurance policy (as defined in section 7702B(b) of the Internal Revenue Code of 1986) issued not earlier than the effective date of the State plan amendment. This means the plan must be tax-qualified! • The policy meets the model regulations and the requirements of the model Act This is that tricky area that will require new legislation next year. Georgia’s LTC law is 17 years old and predates the 2000 NAIC Model Act. On the other hand, the model regs that will be adopted by HHS will comply with the Model Act for LTCP participating plans and the Commissioner is granted authority to certify that LTCP participating plans comply with the federal regulations.

46. If the LTCP insured is under the age of 61, they must purchase compound inflation protection in their LTCP policy. • If they are between 61 and 75, they must purchase some type of inflation protection, but compound inflation guard is not mandated. • If they are 76 or older, they may, but are not required to purchase inflation protection.

47. Special training will be required for agents selling qualified LTCP program coverage. • The training will cover public and private LTC coverages and be coordinated by DOI and DCH. • LTCP insurers will be required to meet extensive reporting requirements to both DOI and HHS • HHS, in consultation with NAIC, LTC carriers, LTC consumer groups and the states with experience in LTCP, will promulgate rules for reporting requirements. • They will also develop standards for a central reporting data set for all the states with LTCP programs.

48. A National Clearinghouse for Long Term Care Information will be established by HHS with the following duties, to: (i) educate consumers with respect to the availability and limitations of coverage for long-term care under the Medicaid program and provide contact information for obtaining State-specific information on long-term care coverage, including eligibility and estate recovery requirements under State Medicaid programs; (ii) provide objective information to assist consumers with the decisionmaking process for determining whether to purchase long-term care insurance or to pursue other private market alternatives for purchasing long-term care and provide contact information for additional objective resources on planning for long-term care needs; and (iii) maintain a list of States with State long-term care insurance partnerships under the Medicaid program that provide reciprocal recognition of long-term care insurance policies issued under such partnerships.

49. The new Georgia LTCP legislation requires that DCH file a new Medicaid plan amendment providing asset disregard for LTCP program participants within 180 days of the effective date of HB 1451. • The date on which the LTCP program takes effect can be no earlier than that date, but it can be later. • HHS will promulgate national standards for reciprocation among LTCP program states. • This will allow for a person to purchase LTCP participating coverage in another state and still have asset disregard protection in a new state if they move and benefits paid in one state will be treated the same in all states under reciprocal agreements.

50. When to expect the program to become effective and the regulatory steps ahead • With an effective date of 7-1-2006, HB 1451 will provide for startup of the LTCP program around the first of 2007 or mid-year. • We will need to capitalize on the goodwill experienced so far by this popular program to get the Governor’s Office, DOI, DCH, DHR, the LTC insurers, LTC consumer advocate groups and the agent community on the same dance card to work with HHS, NAIC and other national entities and get Georgia and many other states up and running with LTCP programs. • I will actively recruit a few folks in the LTC market to assist in this project.