Legislature(2007 - 2008)HOUSE FINANCE 519

04/25/2007 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 04:00 pm --
Heard & Held
Moved CSHB 228(L&C) Out of Committee
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
Presentation: Mega Project Financing by
Frederic Rich, Sullivan & Cromwell LLP
= Previously Scheduled under Legislative
Budget & Audit Committee
HOUSE BILL NO. 228                                                                                                            
     An Act relating to fees for certain medical treatment                                                                      
     and service under the Alaska Workers' Compensation Act;                                                                    
     and providing for an effective date.                                                                                       
DEREK  MILLER,  STAFF, REPRESENTATIVE  MIKE  KELLY,  commented                                                                  
that in 2005, the  Alaska Legislature passed SB  130, a rework                                                                  
of  the  Workers  Compensation  statutes.    As  part  of  the                                                                  
rework,  medical   payments  were  frozen  at   the  2004  fee                                                                  
schedule  so that a  review could  be done  of the  underlying                                                                  
reasons for premium  increases.  The review was  to be jointly                                                                  
done by a special  Workers Compensation Legislative  taskforce                                                                  
in  concert   with  the  Department   of  Labor  &   Workforce                                                                  
Development  Medical Review Committee.   The taskforce  was to                                                                  
develop recommendations  to moderate program increases  in the                                                                  
future.    As part  of  the  conditions  of the  medical  rate                                                                  
freeze, the  taskforce was to  have completed their  review by                                                                  
February of  2006; the rate freeze  would sunset in  August of                                                                  
2007 (to be replaced by a new fee schedule).                                                                                    
The  taskforce  did not  complete  the  report by  that  time;                                                                  
consequently,  the  State  is faced  with  the sunset  of  the                                                                  
medical  rate freeze  in August 2007.   There  is no plan  for                                                                  
the post rate freeze sunset period.                                                                                             
Mr. Miller  pointed out  that under HB  228, the medical  rate                                                                  
freeze  would  be  extended   two  years  to  allow  time  for                                                                  
recommendations  to be  developed.   It  implements an  annual                                                                  
rate increases  based on the Consumer Price Index  (CPI).   He                                                                  
added that  the bill is not meant  to be a long-term  fix, but                                                                  
rather  a   stop-gap  measure,   extending  the  medical   fee                                                                  
schedule, adjusting  it for inflation.  The bill  is supported                                                                  
1:50:30 PM                                                                                                                    
Representative  Crawford remembered  when price controls  were                                                                  
put   in  place   to  lessen   inflation   during  the   Nixon                                                                  
Administration,  which  did not  accomplish  the  intent.   He                                                                  
voiced  concern  that  the  legislation  does  not  allow  the                                                                  
market  place precedence.   He  stressed  the importance  that                                                                  
injured workers  receive the  care they  need.  He  questioned                                                                  
the time table.                                                                                                                 
Mr.  Miller  explained  that the  Division  of  Insurance  has                                                                  
indicated  that if the  measure is not  adopted, medical  care                                                                  
costs   will  increase   related   to   workers   compensation                                                                  
insurance.   The March 1timeline   places it in the  middle of                                                                  
the legislative session in order for long-term discussion.                                                                      
Representative  Gara acknowledged  the need  to raise  medical                                                                  
treatment  compensation  rates as  costs  keep increasing;  he                                                                  
asked  if compensation  rates  for certain  injuries had  been                                                                  
1:55:25 PM                                                                                                                    
Vice   Chair  Stoltze   asked   about  restrictions   &   need                                                                  
constraints  to  important  services.    Representative  Kelly                                                                  
said  it was  not  addressed;  the bill  only  recognizes  the                                                                  
sunset and absent  that, rates will be frozen.   The bill does                                                                  
not attempt to fix the system.                                                                                                  
1:57:38 PM                                                                                                                    
LINDA HALL,  DIRECTOR,  DIVISION OF  INSURANCE, DEPARTMENT  OF                                                                  
COMMERCE, COMMUNITY  AND ECONOMIC DEVELOPMENT,  voiced support                                                                  
for the  bill and offered  to answer  questions regarding  the                                                                  
impact to insurance.                                                                                                            
Representative  Crawford questioned  the timing of  the rates.                                                                  
Ms. Hall did  not know why those  dates had been chosen.   The                                                                  
Division  makes their rates  effective  the beginning  of each                                                                  
calendar  year with  the process  beginning in  April or  May,                                                                  
2007.   Any data  received by  them would  be included  in the                                                                  
rate  making process.   She  indicated concern  with the  mid-                                                                  
term rates.                                                                                                                     
1:59:55 PM                                                                                                                    
ROD BETIT,  PRESIDENT,  ALASKA STATE HOSPITAL  & NURSING  HOME                                                                  
ASSOCIATION   (ASHNHA),   ANCHORAGE,    noted   that   ASHNHA,                                                                  
requested  the proposed  legislation  in an  attempt to  "fix"                                                                  
this  problem.   The  work  of the  task  force has  not  been                                                                  
complete  and with a  rate freeze sunset  in August,  hospital                                                                  
and physicians  would get paid on what they had  billed, which                                                                  
would result  in insurers paying  out more than intended.   No                                                                  
one  wants  to  see that  happen.    HB  228  addresses  these                                                                  
Representative  Gara  asked  if  the  medical  cost  inflation                                                                  
adjustment  would be retroactive  to the  time it was  frozen.                                                                  
Mr.  Betit  replied  it would  be  prospective  for  the  next                                                                  
eighteen months.                                                                                                                
Representative  Crawford  inquired  about  the  difference  in                                                                  
rate structure.   Mr.  Betit explained  that hospital  members                                                                  
follow the  Consumer Price Index  (CPI) closely.  At  the time                                                                  
the freeze was  put in place, the hospital charges  were being                                                                  
discounted by workers'  compensation; he anticipated  it would                                                                  
be in the 25% discount range.                                                                                                   
Representative  Crawford thought that the rate  was higher; he                                                                  
worried about the  final disparity.  Mr. Betit  commented that                                                                  
the  bill  only  impacts the  medical  claims  of  an  injured                                                                  
worker, not all  medical claims; no one is happy  with it as a                                                                  
permanent  solution.   Long-term  reimbursement  needs  to  be                                                                  
made through negotiation.                                                                                                       
2:04:33 PM                                                                                                                    
Representative  Gara asked  if the frozen  rates would  create                                                                  
risk  for those  not receiving  treatment with  fees too  low.                                                                  
Mr.  Betit  said  no; the  providers  will  continue  to  give                                                                  
Representative  Gara pointed out  that they would  be charging                                                                  
less  than the  workers  comp arena  to private  patients  and                                                                  
asked  if costs  would  be passed  to  other consumers.    Mr.                                                                  
Betit  explained   that  the  same  charge  is   made  to  all                                                                  
patients.    There  are  different  reimbursement   agreements                                                                  
reached with  different payers;  each hospital offers  charity                                                                  
policies, some of which are passed to other payers.                                                                             
Representative   Gara  reiterated  his  query   regarding  the                                                                  
workers  comp rate being  lower than  customarily charged  and                                                                  
causing a  rate increase to others.   Mr. Betit reiterated  it                                                                  
was not passed on.                                                                                                              
2:07:32 PM                                                                                                                    
GEORGE   RHYNEER,   CARDIOLOGIST,    ALASKA   PHYSICIANS   AND                                                                  
SURGEONS,  ANCHORAGE, testified  in support  of HB 228,  as it                                                                  
provides  the Legislature  time  to  more fully  evaluate  the                                                                  
real cost  of workers' compensation.   He noted that  the cost                                                                  
of  medical  care  continued  to  rise  due  to  technological                                                                  
advances.   Physicians want to  determine a solution  for cost                                                                  
effectiveness and that HB 228 allows that to happen.                                                                            
2:10:19 PM                                                                                                                    
SALLY STUVEK, (TESTIFIED  VIA TELECONFERENCE),  HUMAN RESOURCE                                                                  
DIRECTOR, FAIRBANKS  NORTH STAR BOROUGH, FAIRBANKS,  testified                                                                  
that   the  Fairbanks   North   Star  Borough   supports   the                                                                  
legislation, which  provides stability in establishing  costs.                                                                  
The  adjustment  appears reasonable  as  the rates  have  been                                                                  
frozen since 2004.   She requested that consideration  be made                                                                  
for March 2009,  when the bill again sunsets,  there then be a                                                                  
process  in place  to  address these  concerns.   A  long-term                                                                  
solution would  be the best.   It is  also an important  issue                                                                  
for providers.                                                                                                                  
MICHAEL  HINCHEN,  (TESTIFIED  VIA  TELECONFERENCE),   GENERAL                                                                  
MANAGER, ALASKA  TIMBER INSURANCE  (ATI) EXCHANGE,  PORTLAND &                                                                  
KETCHIKAN,  stated   that  he  represents  a   small  workers'                                                                  
compensation insurance  company, formed in 1980.   The company                                                                  
is  owned by  the  policy  holders,  who are  concerned  about                                                                  
rising medical costs.  [remaining testimony inaudible].                                                                         
2:16:28 PM                                                                                                                    
PAUL LISANKIE,  DIRECTOR, DIVISION  OF WORKERS'  COMPENSATION,                                                                  
DEPARTMENT  OF LABOR & WORKFORCE  DEVELOPMENT, responded  to a                                                                  
query  by Representative  Gara,  explaining that  it would  be                                                                  
lump   sum  payments   associated   with   permanent   partial                                                                  
impairments,  not  indexed.   Representative  Gara  asked  the                                                                  
last time  they were  updated.   Mr. Lisankie  thought it  was                                                                  
2000  & offered  to check  the precise  date.   Representative                                                                  
Gara  said he  was concerned  that  injured  people are  being                                                                  
2:18:16 PM                                                                                                                    
PUBLIC TESTIMONY CLOSED                                                                                                       
Representative  Gara asked if workers compensation  rates were                                                                  
updated,  does that  affect all  rates.   Ms. Hall  emphasized                                                                  
that benefits  in any one time  period are aggregated  for the                                                                  
amount  that  the system  costs  by  a three  year  look-back,                                                                  
trending  for  current and  projected  costs.   There  are  no                                                                  
single  items,  creating  a  huge cost.    Alaska  is  already                                                                  
number one  in the  country for premium  costs for  employers.                                                                  
Representative  Gara noted that he would speak  to the sponsor                                                                  
regarding his concerns.                                                                                                         
Co-Chair Meyer referenced the two zero notes.                                                                                   
Representative  Gara  pointed   out  the  two  CPI  rates  for                                                                  
medical  services,  the  one  used is  the  Medical  Care  CPI                                                                  
index; the  other is  the Medical Care  Services Component,  a                                                                  
percent  higher.   Representative  Kelly  agreed, noting  that                                                                  
the one chosen caused the "least consternation".                                                                                
2:22:58 PM                                                                                                                    
Vice Chair  Stoltze MOVED  to REPORT  CS HB  228 (L&C)  out of                                                                  
Committee  with   individual  recommendations   and  with  the                                                                  
accompanying fiscal  notes.  There being NO OBJECTION,  it was                                                                  
so ordered.                                                                                                                     
CS HB  228 (L&C)  was reported  out of Committee  with  a "do"                                                                  
recommendation  and with zero notes #1 & #2 by  the Department                                                                  
of  Administration   and  Department  of  Labor   &  Workforce                                                                  
2:24:20 PM                                                                                                                    

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