Legislature(1999 - 2000)
04/12/2000 01:55 PM House FIN
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* first hearing in first committee of referral
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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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