Legislature(1999 - 2000)

04/12/2000 01:55 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE BILL NO. 211                                                                                                            
                                                                                                                                
     An Act relating to liability  for providing managed care                                                                   
     services,  to  regulation   of  managed  care  insurance                                                                   
     plans, and  to patient  rights and prohibited  practices                                                                   
     under health  insurance; and providing for  an effective                                                                   
     date.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  NORMAN  ROKEBERG  stated that  patients  need                                                                   
assurance that the  quality of their health care  will not be                                                                   
compromised  as  managed  care   expands.  CS  HB  2II  (L&C)                                                                   
requires  managed  care  entities  to  provide  a  reasonable                                                                   
standard of  health care,  and holds  them civilly  liable if                                                                   
they do not.  It also establishes requirements  for contracts                                                                   
between  managed   care  entities   and  their  health   care                                                                   
providers,  patients  and  their group  managed  care  plans,                                                                   
health  care insurers  and  the insured,  providing  patients                                                                   
with the following:                                                                                                             
                                                                                                                                
  • Access to emergency room services;                                                                                          
  • Availability of medical services or adequate referral                                                                       
     options;                                                                                                                   
  • Full disclosure of treatment options;                                                                                       
  • Choice of health care providers, including specialists;                                                                     
  • Clear descriptions of covered items and services,                                                                           
     benefits,     procedures,     compensation      methods,                                                                   
     availability    (and   exclusions)    of    prescription                                                                   
     medications  and  the  availability  of  translation  or                                                                   
     interpreter services;                                                                                                      
  • A point-of-service plan option;                                                                                             
  • Follow-through of preapproved payment;                                                                                      
  • Quick utilization review decisions;                                                                                         
  • Opportunity    for   appeals   of    utilization   review                                                                   
     decisions; and                                                                                                             
  • Added protection from denial, reduction, or termination                                                                     
     of payment for health care services.                                                                                       
                                                                                                                                
Representative   Rokeberg  noted   that   in  addition,   the                                                                   
legislation would  provide health care providers  the freedom                                                                   
to  share  all  testing  and  treatment  options  with  their                                                                   
patients,  and would  let them  advocate  for their  patients                                                                   
without  the risk  of being  penalized or  terminated by  the                                                                   
managed  care entity they  contract with.  It also  prohibits                                                                   
contracts  between  managed  care entities  and  health  care                                                                   
providers  from including  "hold  harmless"  clauses for  the                                                                   
managed care entity or financial  incentives for providers to                                                                   
withhold medically necessary services.                                                                                          
                                                                                                                                
Representative  Rokeberg  noted  that while  the  legislation                                                                   
streamlines the  health care system, managed  care might also                                                                   
increase   the  vulnerability   of   patients  and   doctors,                                                                   
resulting  in a  lower quality  of care.  The legislation  is                                                                   
necessary  to ensure  continued  quality health  care in  the                                                                   
face of a growing managed care industry.                                                                                        
                                                                                                                                
Representative  Rokeberg   continued  his  analysis   of  the                                                                   
legislation before Committee members.                                                                                           
                                                                                                                                
·  Section  2:  Imposes  civil  liability   on  managed  care                                                                   
   entities for certain  health care acts. Creates  a defense                                                                   
   to the civil action and certain exclusions to liability.                                                                     
·  Section  3:  Imposes  certain  provisions   that  must  be                                                                   
   included in a contract between a  health care provider and                                                                   
   a managed care  entity. Specifies that  certain provisions                                                                   
   cannot be  included in  a contract  between a health  care                                                                   
   provider  and   a  managed   care  entity.  Prohibits   an                                                                   
   indemnification clause  in a  contract between  a provider                                                                   
   and a  managed care  entity. Requires  that group  managed                                                                   
   care plans  include certain  contract provisions.  Imposes                                                                   
   certain requirements  regarding a  covered persons  choice                                                                   
   of  a  health  care  provider,   including  a  non-network                                                                   
   option, continuing  treatment  by a  health care  provider                                                                   
   whose contract  is  terminated,  and notification  when  a                                                                   
   provider contract is terminated for  cause. Specifies that                                                                   
   medical and  financial  information  concerning a  covered                                                                   
   person  or  applicant  is  confidential.   Establishes  an                                                                   
   external appeals  mechanism  for covered  persons. Adds  a                                                                   
   provision regarding religious non-medical providers.                                                                         
·  Section  4:  Makes  a violation  of  AS  21.07  an  unfair                                                                   
   insurance trade practice.                                                                                                    
·  Section 5: Prohibits  a health care insurer  from limiting                                                                   
   information on care or treatment.  Requires that treatment                                                                   
   decisions are  made  by a  licensed  health care  provider                                                                   
   trained  in  the area  in  question  and  that  denial  of                                                                   
   coverage occurs only after consultation.                                                                                     
                                                                                                                                
Representative  Rokeberg  spoke  to the  handout  distributed                                                                   
addressing  the federal Employee  Retirement Income  Security                                                                   
Act (ERISA) which was passed in  1974.  [Copy on File].  That                                                                   
piece of federal  law regulates employee pension  and welfare                                                                   
plans.                                                                                                                          
                                                                                                                                
Co-Chair Therriault  noted that the letters  from the medical                                                                   
association  had  been drafted  to  the  "M" version  of  the                                                                   
legislation.    He  asked the  differences  between  the  two                                                                   
versions.    Representative  Rokeberg pointed  out  that  the                                                                   
April 12   letter from the  Alaska State Medical  Association                                                                   
(ASMA) addressed the "W" version.  [Copy on File].                                                                              
                                                                                                                                
COLLEEN SAVOIE,  (TESTIFIED VIA TELECONFERENCE),  HEALTH CARE                                                                   
CONSULTANT, BRADY & COMPANY, ANCHORAGE,  noted three areas of                                                                   
concern with the  proposed legislation. She commented  on the                                                                   
conflict with  ERISA.  Ms. Savoie suggested  placing language                                                                   
in  the  bill  which  would  clarify  that  ERISA  supercedes                                                                   
language contained  in the  bill.   That action could  remove                                                                   
all conflict.   She  added that  there are  several items  of                                                                   
concern regarding  conflict resolution  such as removing  the                                                                   
fiduciary responsibility  from the  planned fiduciary.   Such                                                                   
an example  would be the  controversy over medical  necessity                                                                   
language which should be included  in the plan and decided by                                                                   
the plan's fiduciary.   Ms. Savoie pointed out  that language                                                                   
had been included  in several versions of HB  211 and defined                                                                   
by the medical community.                                                                                                       
                                                                                                                                
Ms. Savoie  noted, an additional  concern that the  bill does                                                                   
not protect client  participants.  The bill  is a "physicians                                                                   
advocate"  bill.   She emphasized  that in  the end, it  will                                                                   
have  an  adverse  affect  on all  the  participants.    This                                                                   
legislation  was not  requested  by the  Alaskan public,  but                                                                 
instead   it   was   drafted   by   the   Alaskan   physician                                                                   
organizations.   Ms. Savoie stated that members  and families                                                                   
belonging to the organizations  represented by her, do oppose                                                                   
the passage of HB 211 many of  which are labor organizations.                                                                   
                                                                                                                                
Ms. Savoie continued,  the third area of concern  is that the                                                                   
legislation would  be detrimental  and costly to  health care                                                                   
plan sponsors  and the  participants.   She pointed  out that                                                                   
health care  costs in  Alaska are the  highest in  the nation                                                                   
and  that these  costs  will continue  to  increase over  the                                                                   
years.    The   costs  will  be  passed  down   to  the  plan                                                                   
participants.   Ms.   Savoie   stressed   that  it   is   the                                                                   
"physicians" who  will be receiving the additional  income if                                                                   
the bill passes.                                                                                                                
                                                                                                                                
JIM  JORDAN,   (TESTIFIED   VIA  TELECONFERENCE),   EXECUTIVE                                                                   
DIRECTOR,   ALASKA   STATE   MEDICAL    ASSOCIATION   (ASMA),                                                                   
ANCHORAGE,  advised that  the proposed  version does  contain                                                                   
protection for the  Alaska clients.  He voiced  opposition to                                                                   
comments  made by  the previous  speaker.   Mr. Jordan  added                                                                   
that ASMA feels that the ERISA  pre-emption of various states                                                                   
regulating "quality  of care" issues, has  been significantly                                                                   
narrowed through  recent court  decisions and it  is expected                                                                   
that the National  Patients Bill of Rights will  address that                                                                   
issue.   Mr. Jordan  noted that  the current  version of  the                                                                   
bill  would provide  an important  patient  protection.   The                                                                   
issues  of  liability  and  medical   necessity  need  to  be                                                                   
addressed by the Legislature during the next session.                                                                           
                                                                                                                                
Representative  Rokeberg  requested  Mr. Jordan  explain  the                                                                   
importance of  inclusion of  ERISA in the  bill.   Mr. Jordan                                                                   
replied  that  there  is  a  question  as  to  how  ERISA  is                                                                   
currently  constructed  and  how  far  the State  can  go  in                                                                   
regulating that.   He noted that this is a  complex issue and                                                                   
up until the  last couple of years, the courts  have narrowly                                                                   
interpreted ERISA.  In recent  years, there have been several                                                                   
court  cases that  have moved  away from that  decision.   At                                                                   
this time, it  is important to determine the  quality of care                                                                   
issues versus quantity.  The court  has specified that in the                                                                   
decisions  regarding  the quality  of  care,  the State  will                                                                   
regulate.     That  area  would   still  be  dependent   upon                                                                   
interpretations made  by the court.   There are  three issues                                                                   
in  the midst  of the  debate.   The  first  two are  medical                                                                   
necessity and  liability and the  third deals with  the ERISA                                                                   
concerns,   expected   to  be   clarified   through   federal                                                                   
legislation.                                                                                                                    
                                                                                                                                
Vice Chair  Bunde inquired what  would happen if  a situation                                                                   
was  not an  emergency,  and how  then  would  the appeal  be                                                                   
addressed.    Representative Rokeberg  replied that there are                                                                   
two tracks of response.   The first is the 24-hour  track and                                                                   
the second would be eighteen-days to appeal.                                                                                    
                                                                                                                                
Vice Chair  Bunde voiced  concern with  the payment  and that                                                                   
itemizing the  qualifications of the appeal process  would be                                                                   
paid for by  the participants.  He questioned  how the appeal                                                                   
would come  to resolution.   Representative Rokeberg  replied                                                                   
that  it would  be  through  a  third party  external  review                                                                   
system.  Representative  Rokeberg advised that  it would cost                                                                   
nothing.       In   response    to   Representative    Bunde,                                                                   
Representative  Rokeberg stated  that if  the person  did not                                                                   
like the appeal,  that person could go to court,  which would                                                                   
create an arbitration situation.                                                                                                
                                                                                                                                
Representative Rokeberg stated  that the legislation provides                                                                   
for  truly independent  review  and  judgement  which is  the                                                                   
centerpiece  of   the  legislation.    Representative   Bunde                                                                   
clarified  that   the  last  review   would  rest   with  the                                                                   
independent third party before it goes to court.                                                                                
                                                                                                                                
(TAPE CHANGE, HFC 00 - 113, Side 2).                                                                                          
                                                                                                                                
Representative  Rokeberg pointed out  the letter  included in                                                                   
member's packets  from Blue Cross  and Blue Shield  of Alaska                                                                   
indicating their support of the bill.  [Copy on File].                                                                          
                                                                                                                                
JOHN CYR,  PRESIDENT, NATIONAL  EDUCATION ASSOCIATION  (NEA),                                                                   
PRESIDENT OF NEA-ALASKA HEALTH  TRUST, JUNEAU, noted that NEA                                                                   
Health  Trust insures  the health of  about 15,000  Alaskans,                                                                   
and is an ERISA trust.  He voiced  concern when he heard that                                                                   
the  ERISA  trust  interpretation  would be  decided  by  the                                                                   
court.   He asked what this  would cost the NEA  Health Trust                                                                   
down the road in  legal fees.  If a person  were insured with                                                                   
the NEA Alaska Health Trust, there  exists only a question of                                                                   
whether or  not the  procedure you need  would be  covered in                                                                   
the  health plan.   There  is  an appeals  procedure that  is                                                                   
built into  that process.   He stated  that the main  concern                                                                   
now is if a service is covered or not.                                                                                          
                                                                                                                                
Mr. Cyr  requested that language  be added to the  bill which                                                                   
clearly  states that  ERISA trusts  are not  covered by  this                                                                   
bill.  He emphasized that by litigating  some sections of the                                                                   
bill  would mean  that  ultimately,  NEA members  would  bear                                                                   
those costs.                                                                                                                    
                                                                                                                                
Additionally,  Mr. Cyr  asked what  the proposed  legislation                                                                   
would do  to health  care costs.   At  this time, the  school                                                                   
districts across  the State are looking at  a 15-20% increase                                                                   
to health care  costs across the board.  As  an employer, the                                                                   
cost of health  went up 44% last year.  Small  businesses can                                                                   
not afford any future raises in the health care costs.                                                                          
                                                                                                                                
Co-Chair Therriault  asked if ERISA indicated  that State law                                                                   
does not apply,  would there need to be language  added which                                                                   
clarifies that State  law does not apply to  the federal law.                                                                   
Mr. Cyr commented  that he did not believe  so until previous                                                                   
testimony  regarding  the  courts being  the  final  decision                                                                   
making body.  Co-Chair Therriault  advised that the Committee                                                                   
would hold the bill to determine if that concern was valid.                                                                     
                                                                                                                                
Representative  Rokeberg stated that  the testimony  from Mr.                                                                   
Jordan  indicates  that the  line  of cases  has  to do  with                                                                   
quantity and quality.  Only if  it were a quality care issue,                                                                   
would case law come down.  He  emphasized that the bill would                                                                   
not apply to Mr. Cyr's organization.                                                                                            
                                                                                                                                
Representative  J. Davies questioned  how removing  the ERISA                                                                   
concern  would  "hurt"  the bill.    Representative  Rokeberg                                                                   
stated that  it was a  quality of care  issue, and  should be                                                                   
applicable.    Representative  J. Davies  stated  that  could                                                                   
exclude   an  entire   section   of  actions   of   quantity.                                                                   
Representative   Rokeberg   replied   that   would   not   be                                                                   
appropriate;   he  noted that  there  are a  large number  of                                                                   
people that would not be affected by the bill.                                                                                  
                                                                                                                                
Mr. Cyr reiterated that NEA Health  Trust does not oppose the                                                                   
bill,  however, they  currently  have an  ERISA trust,  which                                                                   
insures about 15,000 Alaskans.   He stated that he would like                                                                   
to see continue  in the future.   If the passage of  the bill                                                                   
meant that health care costs would  increase for members that                                                                   
are insured, then NEA would oppose the legislation.                                                                             
                                                                                                                                
Co-Chair  Therriault clarified  that the  risk of  litigation                                                                   
which  NEA  is fearful  of,  is  regarding whether  they  are                                                                   
included in the bill or not.   Representative J. Davies asked                                                                   
if Mr.  Cyr understood the  distinction between  quantity and                                                                   
quality  and if  it would  be appropriate  to State  regulate                                                                   
that.                                                                                                                           
                                                                                                                                
Mr. Cyr  replied that  if it  is the  quality of health  care                                                                   
that is the issue,  and NEA is not a "player",  then it would                                                                   
not  be a  concern.   If there  is a  question regarding  the                                                                   
quality  of the  service that  NEA provides,  he pointed  out                                                                   
that  there already  exists a  major  appeals process  within                                                                   
their system.                                                                                                                   
                                                                                                                                
Co-Chair  Therriault asked  the services  that NEA  provides.                                                                   
Mr.  Cyr replied  that NEA  serves  all the  teachers in  the                                                                   
Anchorage  area   school  district  and  all   the  outlining                                                                   
districts.   NEA is self-insured  and pays health  care costs                                                                   
for all their  covered employees.  The issues  of quality are                                                                   
the timeliness of return, and  are handled internally.  Those                                                                   
issues are covered under ERISA  and it is preferred that they                                                                   
stay that  way.  When  the Health  Trust was established,  it                                                                   
was set up under that set of guidelines.                                                                                        
                                                                                                                                
Representative  J. Davies stated  that he did  not understand                                                                   
the  difference  between  quality  and  quantity.    Mr.  Cyr                                                                   
stressed   that   under   ERISA,   there   is   a   fiduciary                                                                   
responsibility to  their membership to have  enough financial                                                                   
savings and insurance to meet their medical needs.                                                                              
                                                                                                                                
Representative  Rokeberg  noted that  a  definition of  ERISA                                                                   
does exist.  He stressed that  NEA is exempt because they are                                                                   
self-insured.    It  is  only those  ERISA  groups  that  are                                                                   
currently  covered  by  insurance  companies  that  would  be                                                                   
impacted  by  this  bill.  The   potential  impact  may  have                                                                   
provisions  at the federal  level which  would effect  ERISA.                                                                   
Representative Rokeberg requested  Mr. Jordan to provide case                                                                   
examples.                                                                                                                       
                                                                                                                                
Mr.  Jordan stated  that there  had been  an extensive  legal                                                                   
analysis  provided  to  the  Chair  of  the  House  Judiciary                                                                   
Committee.  He spoke to the quantity  versus quality concerns                                                                   
voiced by Representative  J. Davies.  When the  court makes a                                                                   
determination of the privacy of  regulation of the regulatory                                                                   
authority that would be a mandated  benefit such as the State                                                                   
mandating  that there be  coverage for  diabetes, would  be a                                                                   
quantity  type issue.   It  appears that  would be  preempted                                                                   
from having the State regulate the interests.                                                                                   
                                                                                                                                
Mr. Jordan continued,  the quality concern is  more difficult                                                                   
to explain.   He stated that  the definition assumes  that an                                                                   
item would  need to be covered  under the health plan.   That                                                                   
could have  to do  with a particular  service that  a patient                                                                   
might want that  the health plan determines  is not medically                                                                   
necessary.   It is  the type  of discussion  of what  is "not                                                                   
medically  necessary",  which  is a  quality  issue  concern.                                                                   
This area  is where the court  would decide whether  to allow                                                                   
more  regulatory  authority.   Mr.  Jordan noted  that  these                                                                   
types  of  cases are  being  brought  forward by  the  people                                                                   
enrolled under  these plans.   He  acknowledged that  this is                                                                   
one  of  the  key  issues  being  discussed  on  the  federal                                                                   
legislation level.   Currently,  the ERISA plan  participants                                                                   
are  not  necessarily  covered  because  of  the  ERISA  pre-                                                                   
exemption  language.   Federal  law does  have priority  over                                                                   
State law.                                                                                                                      
                                                                                                                                
Representative  J.  Davies  asked  further  clarification  of                                                                   
"medical necessity".   He questioned the consequences  of not                                                                   
being   able  to   come  to   an   agreement  in   Committee.                                                                   
Representative Rokeberg replied  that a common law definition                                                                   
of medical necessity has been  used since statehood.  Medical                                                                   
necessity  is either  defined  or indicated  in all  provided                                                                   
contracts.  Whether it is fully  defined or not is the issue.                                                                   
The medical profession wishes  to redefine it and are working                                                                   
their  way  around   the  system.    They  believe   this  is                                                                   
justifiable.  He  assumed that the issue is how  to have cost                                                                   
containment  and place constraints  on them.   Every  plan is                                                                   
different  and the  standards will  be different.   He  noted                                                                   
that the review  process created in the bill,  uses the terms                                                                   
medical necessity  and sets  out the  scope of the  contract.                                                                   
Additionally,  it  will  determine   the  perimeters  of  the                                                                   
external review board definition.                                                                                               
                                                                                                                                
Representative   J.  Davies  summarized   comments   made  by                                                                   
Representative Rokeberg,  pointing out that it  is determined                                                                   
in the external review process  and then ultimately in court.                                                                   
Representative Rokeberg agreed.                                                                                                 
                                                                                                                                
Vice Chair  Bunde asked  if cost was  a factor considered  in                                                                   
the medical judgement.  Representative  Rokeberg replied that                                                                   
sometimes cost  should be  a factor and  that being  aware of                                                                   
cost makes all providers more sensitive to that concern.                                                                        
                                                                                                                                
Representative J. Davies asked  if the bill touched the issue                                                                   
of whether  the doctors were aware  of these costs  and their                                                                   
interest in  that.   He suggested that  the decision  for the                                                                   
medical group  to prescribe  would mean  more money  in their                                                                   
pockets.  Representative  Rokeberg exclaimed that  there is a                                                                   
prohibition to giving incentives.                                                                                               
                                                                                                                                
HB 211 was HELD in Committee for further consideration.                                                                         
                                                                                                                                
(TAPE CHANGE, HFC 00 - 114, Side 1).                                                                                          
                                                                                                                                

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