PUBLIC HEARING: SB 6

 

TAPES 135-138, A-B

 

SENATE REVENUE COMMITTEE

JUNE 3, 2003   1:00 PM   STATE CAPITOL BUILDING

 

Members Present:                        Senator Ryan Deckert, Chair

                                                Senator Ted Ferrioli, Vice Chair

                                                Senator Tony Corcoran

                                                Senator Charlie Ringo

                                                Senator Bruce Starr

 

Members Excused:                      Senator Lenn Hannon

 

Witnesses Present:                        James Sager, Education Policy Advisor, Governor’s Office

                                                Chris Dudley, Oregon School Board Association

                                                Mike Gray, Oregon School Board Association

                                                Tricia Bosak, Oregon Education Association

                                                Steve Carlson, Watson Wyatt Company

                                                Joann Waller, Oregon Education Association

                                                Mike Shirtcliff, Advantage Dental Plan

                                                Janet McIntire, Salem-Keizer Association of Classified Employees

                                                Trish Parks, Beaverton Education Association

                                                Richard Schwarz, American Federation of Teachers - Oregon

                                                Michael Dembrow, Portland Community College Faculty Federation

                                                Patty O’Sullivan, Portland Public Schools

                                                Tricia Smith, Oregon School Employees Association

                                                Andrea Henderson, Oregon Community College Association

                                                Jerry Donnelly, Portland Community College

                                                Chuck Bennett, Confederation of Oregon School Administrators

                                                Cindy Robert, Pacific Source Inc.

                                                Peggy Annett, Health Insurance Association of America                       

 

Staff Present:                            Paul Warner, Legislative Revenue Office

                                                Steve Meyer, Legislative Revenue Office

                                                Mazen Malik, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Tara Lantz, Committee Assistant

 

TAPE 135, SIDE A

 

003

Chair Deckert

Calls meeting to order at 1:21 pm.

 

 

 

012

Lizbeth Martin-Mahar

Discusses the revenue impact on state income tax revenue from the new federal tax package (Exhibit 1).

 

 

 

062

Sen. Corcoran

Asks how the federal government was able to cut out working parent tax credits.

 

 

 

066

Martin-Mahar

Responds that the families that earn between $10,000 and $25,000 don’t make enough tax liability in order to warrant a $400 credit. Continues discussion on revenue impact.

 

Clarifying questions and answers interspersed.

 

 

 

116

Martin-Mahar

Discusses revenue impact on state income tax revenue from the new Multnomah County local income tax (Exhibit 2).

 

 

 

193

Paul Warner

Adds that this will be a part of the close of session forecast.

 

OPENS PUBLIC HEARING ON SB 6

 

207

Steve Meyer

Explains SB 6 which establishes an Educators Benefit Board with 10 members appointed by the Governor. Refer to staff measure summary (Exhibit 3).

 

 

 

265

James Sager

Testifies in support of SB 6 because it will help control the runaway costs of health insurance premiums. Outlines the bill and discusses the reasoning behind it. Refer to written testimony (Exhibit 4).

 

 

 

384

Sen. Corcoran

Asks if consideration was given to local governments and special districts to have them involved in some sort of pooling as well.

 

 

 

406

Sager

Responds negatively.

 

 

 

412

Sen. Starr

Asks how many members are covered by PEBB.

 

413

Sager

Responds around 60,000.

 

TAPE 136, SIDE A

 

001

Sen. Starr

Asks how many teachers and employees would be covered in this program.

 

 

 

002

Sager

Responds around 80,000.

 

 

 

005

Sen. Starr

Asks how many are currently covered in the OSBA Trust.

 

 

 

006

Sager

Responds about 40% of k-12 employees are in the OSBA program and the rest are in other programs.

 

 

 

024

Chris Dudley

Testifies in opposition to SB 6 because the cost savings are overstated and the current options are adequate. Refer to written testimony (Exhibit 5).

 

 

 

057

Sen. Deckert

Asks if there are savings, just not as great as claimed by the proponents.

 

 

 

061

Dudley

Responds that OSBA has a better administrative rate and more efficient program than PEBB.

 

 

 

071

Sen. Deckert

Asks why their premiums are higher.

 

 

 

072

Dudley

Responds that their premiums are lower and that they have several plans.

 

 

 

115

Sen. Corcoran

Asks if the bill doesn’t save $65 million does it still save $23 million in savings.

 

 

 

117

Dudley

Responds that there would be savings if all the districts went to OSBA. Discusses bargaining and caps on premiums. States that none of the cost drivers are dealt with in the bill.

 

 

 

141

Sen. Deckert

Disagrees with Dudley because by one district agreeing to a higher figure there would never be savings.

 

 

 

152

Dudley

States that in a lot of cases districts have been responsible in setting up cost sharing arrangements with their employees and that experimentation locally with the school district or through a trust is going to be more rapid and more effective than running it through a state bureaucracy. Discusses PEBB’s operating costs.

 

 

 

173

Sen. Corcoran

Asks if PEBB’s operating costs are $2 million.

 

 

 

176

Dudley

Responds affirmatively.

 

 

 

181

Sen. Corcoran

Asks for clarification on the revenues coming into OSBA.

 

 

 

189

Dudley

Responds that OSBA gets a royalty for being a sponsor. Discusses systems in other states.

 

 

 

216

Sen. Deckert

States that 5 other states have relationships like the one with OSBA and 45 others have a variety of different systems.

 

 

 

219

Dudley

Responds that 26 states have some insurance facility and that there are 5 states with relationships like OSBA.

 

 

 

230

Sen. Corcoran

Asks if OSEA and OEA trusts provide health insurance for administrators.

 

 

 

232

Dudley

Responds affirmatively.

 

 

 

233

Sen. Corcoran

Asks if PEBB, OSEA, or OEA get a royalty.

 

 

 

234

Dudley

Responds that he doesn’t know.

 

Discussion follows on PEBB’s operating revenue.

 

 

 

250

Dudley

States that OSBA’s royalties constitute 50% of their operating revenues.

 

 

 

268

Mike Gray

Discusses calculation that concluded that PEBB was a better deal than OSBA that OSBA doesn’t agree with.

 

Discussion follows.

 

 

 

348

Sen. Deckert

Asks if Dudley thinks that state employees are in the drivers seat the way PEBB is right now.

 

 

 

351

Dudley

Responds negatively but states that PEBB was so poorly designed that they have had to clean themselves up in order to get an underwriter.

 

Discussion follows.

 

TAPE 135, SIDE B

 

003

Sen. Starr

Asks how many school districts currently have caps.

 

 

 

004

Dudley

Responds that in a recent salary and benefits survey report done by OSBA 88 percent had caps.

 

 

 

010

Sen. Starr

Asks how many with caps are members of the OSBA Trust.

 

 

 

012

Dudley

Responds most of them.

 

 

 

013

Sen. Starr

States that it seems that caps are the place to find savings and asks how this bill would save money for districts that already have caps.

 

 

 

016

Dudley

Responds that the cap protects the district’s budget and shifts cost onto the employee.

 

 

 

048

Sen. Starr

States that it seems to him that the way to save costs is by capping and asks why they shouldn’t require all districts to have a cap like PEBB.

 

 

 

052

Dudley

Responds that it may drive the wrong kind of decision on a district by district basis.

 

 

 

077

Sen. Starr

Suggests using a cap that is already in place in some districts.

 

Discussion follows.

 

 

 

084

Sen. Deckert

Asks how many employees PEBB has.

 

 

 

086

Dudley

Responds 14 today.

 

 

 

089

Sen. Deckert

Asks how many employees administer health plans for the school districts.

 

 

 

097

Dudley

Responds that for half the school districts there are zero because OSBA pays Regent’s to administer the plans.

 

Discussion follows.

 

 

 

119

Sen. Corcoran

States that capping is just a cost shifter and that he is confused on how that would make workers make more demands on their plans.

 

 

 

136

Dudley

Responds that employees are involved in those decisions now.

 

 

 

151

Sen. Ringo

Asks if OSBA believes that Portland Public School costs are out of control.

 

 

 

156

Dudley

Responds affirmatively.

 

Discussion follows.

 

 

 

220

Tricia Bosak

Testifies in support of SB 6 because health insurance costs have increased dramatically and that the employees should be able to have a say in their plans and choices and should be able to bargain locally over who pays.

 

 

 

253

Steve Carlson

Discusses the current cost situation in Oregon, projected cost increases, and the effects of those increases on employees and employers. Discusses statewide pooling and the projected savings through pooling. Refer to written testimony (Exhibit 6). 

 

 

 

386

Sen. Deckert

Asks how many administrators would be saved under this bill.

 

 

 

390

Carlson

Responds that the figures are probably greater than 40.

 

 

 

405

Sen. Starr

States that everyone has varying numbers and asks where these people are and how money is going to be saved.

 

Discussion follows.

 

TAPE 136, SIDE B

 

015

Sen. Starr

States that they need to have real numbers to work with in order to accurately judge whether money will be saved.

 

 

 

027

Sen. Corcoran

States that the number is going to be very difficult to find and that he is convinced that the pooled structure is a lot more efficient administratively.

 

 

 

038

Carlson

Discusses future cost savings from SB 6.

 

 

 

050

Joann Waller

Testifies in support of SB 6 because districts cannot afford the rising costs of health insurance. Refer to written testimony (Exhibit 7).

 

 

 

100

Sen. Deckert

Asks if sticking all the districts in the OSBA pool would achieve the cost savings projected in SB 6.

 

 

 

105

Waller

Responds that it would create a monopoly where nobody has a say in what is done.

 

 

 

151

Sen. Corcoran

Asks if OEA receives a royalty from their health insurance plan.

 

 

 

156

Waller

Responds negatively.

 

 

 

161

Sen. Corcoran

Asks how many staff OEA employs.

 

 

 

164

Waller

Responds about 30 staff people.

 

 

 

180

 

Sen. Deckert leaves.

 

 

 

183

Mike Shirtcliff

Discusses the Advantage Dental Plan, Inc. and testifies in opposition to SB 6 because it prevents small businesses from being considered in the bidding process. Refer to written testimony (Exhibit 8).

 

 

 

233

Sen. Corcoran

Asks what teacher’s union Shirtcliff was referring to.

 

 

 

236

Shirtcliff

Responds the Oregon Education Association.

 

 

 

243

Sen. Corcoran

Asks if Advantage pays royalties to OSBA.

 

 

 

246

Shirtcliff

Responds that they pay commissions to brokers to work with school districts.

 

 

 

250

Sen. Corcoran

Asks where in the bill it prohibits small companies from bidding on future work.

 

 

 

252

Shirtcliff

Responds that a small company like his can work locally with school boards on contracts but that his company is not big enough to handle 80,000 people.

 

 

 

262

Sen. Corcoran

Asks if under SB 6 there is a possibility to have more than one carrier.

 

 

 

271

Shirtcliff

Responds that the bill makes it difficult for that to happen.

 

 

 

295

Janet McIntire

Testifies in favor of SB 6 because it would help in creating solutions that allow school district employees to have a fair and affordable benefit package. Refer to written testimony (Exhibit 9).

 

 

 

346

Trish Parks

Testifies in support of SB 6 because Beaverton has seen an increase in cost despite educating employees on usage and cannot keep up with the rising costs.

 

TAPE 137, SIDE A

 

009

Richard Schwarz

Testifies in support of SB 6 because it would encourage a solution to provide adequate and affordable health care coverage for school employees. Refer to written testimony (Exhibit 10).

 

 

 

053

Michael Dembrow

Testifies in support of SB 6 because it is important that community colleges are able to join the insurance pool or opt out depending on what is best for the district. States that part-time employees are currently unable to purchase insurance and that a pooling would be beneficial.

 

 

 

107

Sen. Ferrioli

Asks how they currently put out health insurance.

 

 

 

110

Dembrow

Responds that they provide health insurance for full-time employees through OSBA and part-time employees are given money from a pool of private money which is divvied up between them.

 

 

 

117

Sen. Ferrioli

Asks if this proposal would allow one purchaser to make the market.

 

 

 

134

Dembrow

Responds that the OSBA is already a large group and have limited packages.

 

Discussion follows.

 

 

 

151

Patty O’Sullivan

Proposes an amendment (Exhibit 11) which would allow Portland Public Schools to remain a trust as long as they met the parameters of the premium level within the pool so that Portland would be treated like everyone else.  

 

 

 

206

Sen. Ferrioli

Asks if the chair was aware if the amendment was being offered.

 

 

 

212

O’Sullivan

Responds affirmatively and points out the amendment needs to be changed because it inadvertently put community colleges in it.

 

 

 

219

Sen. Ferrioli

Asks if the effect of the amendment is to add Portland Public Schools into the bill.

 

 

 

220

O’Sullivan

Responds that it would add all six groups that have trusts or are self-insured into the bill.

 

 

 

225

Sen. Starr

Asks if this allows Portland’s trust to continue but would allow them to retain all the benefits afforded to the members of the group.

 

 

 

227

O’Sullivan

Responds affirmatively.

 

 

 

242

Sen. Starr

Asks how much compensation Portland Public School’s teachers receive compared to the average in the state or neighboring states.

 

 

 

247

O’Sullivan

Responds that she doesn’t know but will get it for him.

 

 

 

253

Sen. Ferrioli

Asks how many providers they currently have.

 

 

 

254

O’Sullivan

Responds that there are several.

 

 

 

259

Sen. Ferrioli

Asks if the vision for the group is to have one provider or a large variety of providers.

 

 

 

261

O’Sullivan

Responds that she doesn’t know.

 

 

 

267

Sen. Ferrioli

Expresses concern that the group will create a demand in one or two carriers and limit the diversity of the market.

 

Discussion follows.

 

 

 

320

Tricia Smith

Testifies in support of SB 6 because it would provide an opportunity to reduce costs. Refer to written testimony (Exhibit 12).

 

Questions and answers interspersed.

 

 

 

415

Andrea Henderson

Expresses concern with SB 6 of increased costs because many of the colleges would have an increased cost with a plan similar to PEBB and because it would broaden the number of people required to be covered.

 

TAPE 138, SIDE A

 

021

Jerry Donnelly

Testifies against SB 6 because it would decrease the viability of the OSBA trust and would negatively impact the bargaining climate. Discusses current plans offered.

 

 

 

122

Chuck Bennett

Expresses concern for SB 6 because there is no data that indicates savings are going to occur and recommends that a study be done before making such a sweeping change.

 

 

 

172

Sen. Ferrioli

Agrees with Bennett that there needs to be data and asks if this would create a monopoly in the insurance industry.

 

 

 

191

Bennett

Responds that there aren’t a lot of carriers right now and that with pools of 100,000 it would be difficult to find underwriters.

 

 

 

217

 Cindy Robert

Testifies against SB 6 because as a small insurance company, this would not work for Pacific Source. States that the proponents have not proven that this will cut costs, create efficiency, or improve quality.

 

 

 

282

Peggy Annett

Testifies against SB 6 because the assumption that expanding the pool will decrease costs is false.

 

 

 

334

Sen. Ferrioli

Asks how they have they determined what the point of diminishing return is.

 

 

 

340

Sager

Responds that he doesn’t know what the exact numbers are but there are thresholds. Recognizes that there are numerous districts out there that are facing costs that they shouldn’t have to face and references PEBB as an example of a successful program.

 

 

 

371

Sen. Ferrioli

Asks if there are competitors out there that would want to write this size of a business.

 

 

 

378

Sager

Responds that PEBB hasn’t had a problem finding people to bid and doesn’t think they will run into that problem and that the bill doesn’t specify that it has to be one carrier.

 

 

 

396

Sen. Ferrioli

Asks if they aggregate all of the demand into one or two carriers how it will distort the market.

 

 

 

420

Sager

Asks if the state pooling has diminished competitiveness.

 

TAPE 137, SIDE B

 

021

Sen. Ferrioli

States that some carriers are going to be displaced and he’s curious as to what’s going to happen to them and what’s going to happen to the market.

 

 

 

040

Sager

Responds that there are already large carriers and if they wanted to monopolize the market that would be their strategy. Points out that PEBB has not caused a decrease in competition.

 

 

 

054

Sen. Ferrioli

States that he has seen the expansion of HMO’s and a rapid curve of development and expansion and then a collapse as it reached their diminishing returns. Expresses concern that the same thing will happen here.

 

 

 

067

Sen. Ferrioli

Adjourns meeting at 4:08 pm.

 

 

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant

 

Exhibit Summary:

  1. Lizbeth Martin-Mahar, Major Components of Growth Tax Relief Act of 2003, 4pp.
  2. Lizbeth Martin-Mahar, Revenue Impact on State Income Tax from Multnomah County Tax, 2pp.
  3. SB 6, Steve Meyer, Staff Measure Summary, 1p.
  4. SB 6, James Sager, Written Testimony, 5pp.
  5. SB 6, Sen. Corcoran, Trust Committee Action Hold Down Premium Rate Increases, 2pp.
  6. SB 6, Chris Dudley, Written Testimony, 5pp.
  7. SB 6, Steve Carlson, Written Testimony, 6pp.
  8. SB 6, Joann Waller, Written Testimony, 2pp.
  9. SB 6, Mike Shirtcliff, Written Testimony, 8pp.
  10. SB 6, Janet McIntire, Written Testimony, 2pp.
  11. SB 6, Richard Schwarz, Written Testimony, 2pp.
  12. SB 6, Patty O’Sullivan, Proposed SB 6-4 Amendments, 1p.
  13. SB 6, Tricia Smith, Written Testimony, 1p.
  14. HB 2379 B, Mazen Malik, Proposed HB 2379-B9 Amendments, 19pp.
  15. HB 2379 B, Mazen Malik, Staff Measure Summary, 1p.
  16. HB 2379 B, Mazen Malik, Revenue Impact Statement, 2pp.