SB 37: "An Act relating to collective negotiation by physicians with health benefit plans; and to health benefit plan contracts with individual competing physicians."

00 SENATE BILL NO. 37 01 "An Act relating to collective negotiation by physicians with health benefit plans; and to 02 health benefit plan contracts with individual competing physicians." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 23 is amended by adding a new chapter to read: 05 Chapter 50. Collective Negotiation by Physicians. 06 Sec. 23.50.010. Legislative findings. (a) The legislature finds that permitting 07 competing physicians to engage in collective negotiation of certain terms and 08 conditions of contracts with a health benefit plan will benefit competition, so long as 09 the physicians do not engage in an express or implied threat of retaliatory collective 10 action, including boycotts or strikes. 11 (b) The legislature finds that permitting physicians to engage in collective 12 negotiations over fee-related terms may, in some circumstances, yield anti-competitive 13 effects. There are, however, instances in which a health benefit plan dominates the 14 market to the degree that fair negotiations between physicians and the health benefit

01 plan are not possible in the absence of joint action on behalf of the physicians. In 02 those circumstances, the health benefit plan can virtually dictate the terms of the 03 contracts that it offers to physicians. 04 (c) The legislature finds that it is appropriate and necessary to authorize 05 collective negotiations between competing physicians and health benefit plans on fee- 06 related and other issues when the imbalances in bargaining capacity described in this 07 section exist. 08 Sec. 23.50.020. Collective action by physicians. (a) Competing physicians 09 may meet and communicate in order to collectively negotiate with a health benefit 10 plan concerning any of the contract terms and conditions described in this subsection. 11 Competing physicians may not engage in a boycott related to these terms and 12 conditions. Competing physicians may meet and communicate concerning 13 (1) clinical practice guidelines and coverage criteria; 14 (2) the respective liability of physicians and the health benefit plan for 15 the treatment or lack of treatment of insured or enrolled persons; 16 (3) administrative procedures, including methods and timing of the 17 payment of services to physicians; 18 (4) procedures for the resolution of disputes between the health benefit 19 plan and physicians; 20 (5) patient referral procedures; 21 (6) the formulation and application of reimbursement methodology; 22 (7) quality assurance programs; 23 (8) health service utilization review procedures; and 24 (9) criteria to be used by health benefit plans for the selection and 25 termination of physicians, including whether to engage in selective contracting. 26 (b) Except as provided in (c) of this section, competing physicians may not 27 meet and communicate for the purpose of collectively negotiating the following terms 28 and conditions with a health benefit plan: 29 (1) the fees or prices for services, including fees or prices arrived at by 30 applying any reimbursement methodology procedures; 31 (2) the conversion factor in a resource-based relative value scale

01 reimbursement methodology or similar methodologies; 02 (3) the amount of any discount on the price of services to be rendered 03 by the physicians; 04 (4) the dollar amount for capitation or fixed payment for each person 05 covered by the health benefit plan for health services rendered by physicians to a 06 health benefit plan's insureds, beneficiaries, or enrollees; or 07 (5) the inclusion or alteration of terms and conditions to the extent that 08 they are prohibited or required by law; however, this paragraph does not limit 09 physician rights to collectively petition the government for a change in the law. 10 (c) Competing physicians within the service area of a health benefit plan may 11 collectively negotiate with a health benefit plan the terms and conditions of contracts 12 described in (b) of this section if the health benefit plan has substantial market power. 13 If the attorney general receives notice under (f) of this section that an authorized third 14 party intends to negotiate with a health benefit plan, the attorney general shall provide 15 written notice of the intended negotiation to the health benefit plan. A health benefit 16 plan is rebuttably presumed to have substantial market power. 17 (d) A health benefit plan may rebut the presumption of substantial market 18 power described under (c) of this section by providing proof satisfactory to the 19 attorney general that the health benefit plan's market share does not exceed 15 percent 20 (1) as measured by the number of covered lives at the end of the most 21 recently completed calendar year or by the actual number of consumers of prepaid 22 comprehensive health services at the end of the most recently completed calendar 23 quarter divided by the total population of the geographic service area as of the most 24 recent census; or 25 (2) within a particular geographic service area when its market 26 segments are added together for all types of health insurance insureds, beneficiaries, or 27 enrollees and for Medicare and Medicaid beneficiaries. 28 (e) In exercising the collective rights granted by (a) and (c) of this section, 29 (1) physicians may communicate with each other with respect to the 30 contractual terms and conditions to be negotiated with a health benefit plan; 31 (2) physicians may communicate with an authorized third party

01 regarding the terms and conditions of contracts allowed under this section; 02 (3) the authorized third party is the sole party authorized to negotiate 03 with a health benefit plan on behalf of a defined group of physicians; 04 (4) physicians can be bound by the terms and conditions negotiated by 05 the authorized third party that represents their interests; 06 (5) a health benefit plan communicating or negotiating with the 07 authorized third party may contract with, or offer different contract terms and 08 conditions to, individual competing physicians; 09 (6) an authorized third party may not represent more than 30 percent of 10 the market of practicing physicians for the provision of services in the geographic 11 service area or proposed geographic service area, if the health benefit plan has less 12 than a five percent market share as determined by the number of covered lives as 13 reported by the director of insurance for the most recently completed calendar year or 14 by the actual number of consumers of prepaid comprehensive health services; 15 (7) the attorney general may limit the percentage of practicing 16 physicians represented by an authorized third party; however, the limitation may not 17 be less than 30 percent of the market of practicing physicians in the geographic service 18 area or proposed geographic service area; when determining whether to impose a 19 limitation described under this paragraph, the attorney general shall consider the 20 provisions described under (h), (i), and (j) of this section; this paragraph does not 21 apply if the market of practicing physicians in the geographic service area or proposed 22 geographic service area consists of 40 or fewer individuals; and 23 (8) the authorized third party shall comply with the provisions of (f) of 24 this section. 25 (f) A person acting or proposing to act as an authorized third party under this 26 section shall, 27 (1) before engaging in collective negotiations with a health benefit 28 plan, 29 (A) file with the attorney general the information that identifies 30 the authorized third party, the authorized third party's plan of operation, and 31 the authorized third party's procedures to ensure compliance with this section;

01 (B) furnish to the attorney general, for the attorney general's 02 approval, a brief report that identifies the proposed subject matter of the 03 negotiations or discussions with a health benefit plan and that contains an 04 explanation of the efficiencies or benefits that are expected to be achieved 05 through the collective negotiations; the attorney general may not approve the 06 report if the proposed negotiations exceed the authority granted in this chapter 07 and, if they do, shall enter an order prohibiting the collective negotiations from 08 proceeding; the authorized third party shall provide supplemental information 09 to the attorney general as new information becomes available that indicates 10 that the subject matter of negotiations with the health benefit plan has changed 11 or will change; 12 (2) within 14 days after receiving a health benefit plan's decision to 13 decline to negotiate or to terminate negotiations, or within 14 days after requesting 14 negotiations with a health benefit plan that fails to respond within that time, report to 15 the attorney general that negotiations have ended or have been declined; 16 (3) before reporting the results of negotiations with a health benefit 17 plan and before giving physicians an evaluation of any offer made by a health benefit 18 plan, provide to the attorney general, for the attorney general's approval, a copy of all 19 communications to be made to physicians related to the negotiations, discussions, and 20 health benefit plan offers. 21 (g) The attorney general shall either approve or disapprove the contract that 22 was the subject of the collective negotiation within 30 days after receiving the reports 23 required under (f) of this section. If the contract is disapproved, the attorney general 24 shall furnish a written explanation of any deficiencies along with a statement of 25 specific remedial measures that would correct any identified deficiencies. An 26 authorized third party who fails to obtain the attorney general's approval is considered 27 to be acting outside the authority of this section. 28 (h) The attorney general shall approve a collective negotiation if 29 (1) the competitive and other benefits of the contract terms outweigh 30 any anticompetitive effects; and 31 (2) the contract terms are consistent with other applicable laws and

01 regulations. 02 (i) The competitive and other benefits of joint negotiations or negotiated 03 provider contract terms may include 04 (1) restoration of the competitive balance in the market for health care 05 services; 06 (2) protections for access to quality patient care; 07 (3) promotion of health care infrastructure and medical advancement; 08 or 09 (4) improved communications between health care providers and 10 health care insurers. 11 (j) When weighing the anticompetitive effects of contract terms, the attorney 12 general may consider whether the terms 13 (1) provide for excessive payments; or 14 (2) contribute to the escalation of the cost of providing health care 15 services. 16 (k) This section does not authorize competing physicians to act in concert in 17 response to a report issued by an authorized third party related to the authorized third 18 party's discussion or negotiations with a health benefit plan. The authorized third 19 party shall advise the physicians of the provisions of this subsection and shall warn 20 them of the potential for legal action against those who violate state or federal anti- 21 trust laws by exceeding the authority granted under this section. 22 (l) A contract allowed under this section may not exceed a term of five years. 23 (m) The documents relating to a collective negotiation described under this 24 section that are in the possession of the Department of Law are confidential and not 25 open to public inspection. 26 (n) In this section, 27 (1) "covered lives" means the total number of individuals who are 28 entitled to benefits under the health benefit plan; 29 (2) "geographic service area" means the geographic area of the 30 physicians seeking to jointly negotiate. 31 Sec. 23.50.030. Fee for registration of authorized third parties. (a) The

01 attorney general shall adopt regulations that establish the amount and manner of 02 payment of a registration fee for authorized third parties. The attorney general shall 03 establish the fee level so that the total amount of fees collected from authorized third 04 parties approximately equals the actual regulatory costs for the oversight of joint 05 negotiations between physicians and health benefit plans. The attorney general shall 06 annually review the fee level to determine whether the regulatory costs are 07 approximately equal to fee collections. If the review indicates that the fee collections 08 and regulatory costs are not approximately equal, the attorney general shall calculate 09 fee adjustments and adopt regulations under this subsection to implement the 10 adjustments. In January of each year, the attorney general shall report on the fee level 11 and revisions for the previous year under this subsection to the office of management 12 and budget. 13 (b) In this section, "regulatory costs" means costs of the Department of Law 14 that are attributable to oversight of joint negotiations between physicians and health 15 benefit plans. 16 Sec. 23.50.040. Regulations. The attorney general may adopt regulations 17 necessary to implement this chapter. 18 Sec. 23.50.099. Definitions. In this chapter, 19 (1) "authorized third party" means a person authorized by the 20 physicians to negotiate on their behalf with a health benefit plan under this chapter; 21 (2) "health benefit plan" has the meaning given in AS 21.54.500. 22 * Sec. 2. AS 45.50.572 is amended by adding a new subsection to read: 23 (k) AS 45.50.562 - 45.50.596 do not forbid the existence or operation of 24 organizations of physicians acting in accordance with AS 23.50, or forbid or restrain 25 members of those organizations from lawfully carrying out the legitimate objectives of 26 them; nor are these organizations or members illegal combinations or conspiracies in 27 restraint of trade under the provisions of AS 45.50.562 - 45.50.596. 28 * Sec. 3. AS 23.50.010, 23.50.020, 23.50.030, 23.50.040, 23.50.099; and AS 45.50.572(k) 29 are repealed July 1, 2006.