Legislature(1999 - 2000)

03/31/2000 01:22 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 211 - HEALTH CARE INSURANCE                                                                                                  
                                                                                                                                
CHAIRMAN KOTT announced the first order of business would be 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."                                                                                           
                                                                                                                                
The committee stood at ease from 1:24 p.m. to 1:25 p.m. in order to                                                             
determine which proposed committee substitute to take up.                                                                       
                                                                                                                                
Number 0163                                                                                                                     
                                                                                                                                
REPRESENTATIVE NORMAN ROKEBERG made a motion to adopt the proposed                                                              
committee substitute for HB 211, version 1-LS0472\N, Ford, 3/30/00,                                                             
as a work draft.  There being no objection, Version N was before                                                                
the committee.                                                                                                                  
                                                                                                                                
[THE RECORD REFLECTS THAT THE COMMITTEE WOULD ALSO BE DISCUSSING                                                                
CSHB 211(L&C), VERSION 1-LS0472\K.]                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG, sponsor of the bill, started by giving                                                                 
some background on HB 211.  He and his staff, as well as various                                                                
people throughout the state and country, have been working on the                                                               
bill for about one and a half years.  It is a major piece of                                                                    
legislation.  There were four hearings in the House Labor and                                                                   
Commerce (L&C) Committee, some held during the interim; after                                                                   
moving out of that committee, the bill generated a renewed interest                                                             
and therefore a new committee substitute.                                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG called HB 211 the Alaska Patients' Bill of                                                              
Rights.  He said he does not want to duplicate but dovetail the                                                                 
Alaska Statutes with a federal law that is in a conference                                                                      
committee on Capitol Hill right now, which will have a major impact                                                             
on ERISA-[Employee Retirement and Income Security Act] covered                                                                  
health insurance groups that are not necessarily covered by state                                                               
law.  He believes that it would be appropriate to have the benefit                                                              
of the legislation, and it would be consistent in relation to the                                                               
regulatory schemes for the non-ERISA and ERISA groups in the state.                                                             
In addition, he noted, state legislation and case law have not been                                                             
applicable to ERISA groups, and there is a growing trend of cases                                                               
which seem to indicate that the fate of issues in relation to                                                                   
health care may be against ERISA groups.  Therefore, in order to                                                                
keep the primacy of state insurance regulatory proceedings, he                                                                  
thinks there needs to be legislation in this area.                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG explained that the bill would establish a                                                               
lay standard for payment and access to emergency room services;                                                                 
would provide for the full disclosure of treatment options and                                                                  
choice of health care providers; would provide for a PPO [Preferred                                                             
Provider Organizations] plan to have a point-of-service option,                                                                 
which would give the right-of-choice for a physician on the part of                                                             
a subscriber to a medical plan; would provide for a statutory                                                                   
requirement for the procedures to revolve around an in-house, pre-                                                              
approval process; and would provide for tight standards in terms of                                                             
responses and level of review.  He noted that a level of review                                                                 
could be a peer review or a standard of educational background,                                                                 
which is controversial.  The bill would also provide for an outside                                                             
grievance procedure, if the internal review mechanism is denied, by                                                             
mandating that each health insurance company operating in the state                                                             
have an outside third-party utilization review to make a final                                                                  
judgment.  If there is disagreement with the final judgment, there                                                              
is mediation and ultimately the court system.  He noted that the                                                                
third-party review has to be with a peer specializing in the malady                                                             
from which the patient is suffering.                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG noted that there are two contentious issues                                                             
in relation to the bill.  One is in regard to liability.  The                                                                   
initial drafts of the bill contained a duty on the parts of the                                                                 
health care provider and insurance entity to perform certain steps,                                                             
thereby raising the level of liability and causing action if there                                                              
is a breech of those duties.  This is really important,                                                                         
particularly in the Lower 48, where there are health maintenance                                                                
organizations [HMOs] and where there have been denials of benefits                                                              
and actual suffering as a result of the failure to receive services                                                             
in a timely fashion or at all.                                                                                                  
                                                                                                                                
Number 0715                                                                                                                     
                                                                                                                                
REPRESENTATIVE ERIC CROFT asked Representative Rokeberg whether the                                                             
bill precludes "it."                                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG replied, "No."  It establishes a new set of                                                             
duties, which would give rise to a new set of actions.  In theory,                                                              
he said, it raises the ability to make a cause of action against a                                                              
managed care entity.                                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG further stated the other area of major                                                                  
conflict is related to a statutory definition of "medical                                                                       
necessity."  It comes about because health care providers wish to                                                               
have a statutory definition to give them the right to make                                                                      
decisions on what is truly necessary for the care of a patient.                                                                 
The insurance companies by and large want to be in a position for                                                               
maximum flexibility to make judgments on what is necessary and what                                                             
is not necessary.  This is a major point of contention and merits                                                               
consideration of this committee and this legislature.  The                                                                      
insurance companies are opposed to including it, while the health                                                               
care providers are in favor of it.  He has an amendment that                                                                    
provides for a default definition in the event that there is a                                                                  
contractual definition.  He is not sure, however, that the                                                                      
definition would work practically.                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG further stated that Version N contains a                                                                
number of amendments provided by a summit held recently in Juneau                                                               
consisting of the parties involved.  Based on recommendations by                                                                
Blue Cross Blue Shield of Alaska, the liability and medical                                                                     
necessity sections have been deleted to help move the legislation                                                               
along.  He said he is still waiting for input from the Alaska State                                                             
Medical Association, but, by and large, Version N reflects most of                                                              
what came out of the summit.  He would like to see the bill pass                                                                
this year because of the federal legislation, even though there are                                                             
conflicting reports from Capitol Hill on whether or not it will                                                                 
come down.  He believes that it will, however.  In response to                                                                  
discussion about putting the bill into a subcommittee, he said he                                                               
would be happy to do so with a date-certain in order to save the                                                                
committee's time and to take up any amendments.                                                                                 
                                                                                                                                
Number 1102                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN noted that the bill has created some heat for                                                              
two different groups.  He asked Representative Rokeberg whether the                                                             
changes from Version K to Version N were mutually agreed to.                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG replied, "No."  The majority of the                                                                     
amendments adopted are a reflection of what was discussed at the                                                                
summit, but there are some that don't reflect what was discussed at                                                             
the summit.  He reiterated that he is still waiting for feedback                                                                
from the Alaska State Medical Association.  The two primary issues                                                              
of liability and medical necessity are not in Version N.                                                                        
                                                                                                                                
Number 1197                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN indicated that he is concerned because despite                                                             
the efforts of the sponsor and the summit there is still                                                                        
disagreement.  He would support putting the bill into a                                                                         
subcommittee.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG replied that if the bill is brought back by                                                             
Wednesday [April 5, 2000], he doesn't have a problem with putting                                                               
the bill into a subcommittee.                                                                                                   
                                                                                                                                
Number 1237                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT concurred with Representative Green's assessment of                                                               
the bill, especially given that it would require a vote of more                                                                 
than a simple majority to pass because it changes a rule of                                                                     
appellate procedure.  In other words, it would require consensus.                                                               
                                                                                                                                
Number 1262                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed out that the court rule change is                                                               
out of the bill if the liability provisions are kept out.                                                                       
                                                                                                                                
REPRESENTATIVE CROFT asked Chairman Kott whether he plans to take                                                               
testimony and then refer the bill to a subcommittee.                                                                            
                                                                                                                                
CHAIRMAN KOTT replied, "Yes, that is the intent."                                                                               
                                                                                                                                
Number 1300                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked Representative Rokeberg how he intends                                                               
to dovetail this bill with a federal bill that hasn't passed yet.                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG replied the idea is to keep the topics the                                                              
same in order to maintain primacy.  He doesn't expect the language                                                              
to be the same.                                                                                                                 
                                                                                                                                
REPRESENTATIVE CROFT stated that Congress is trying to work out                                                                 
major differences in their legislation in a conference committee.                                                               
He asked how the state can establish liability when Congress                                                                    
doesn't know what they are going to do yet.                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG suggested omitting the issue and amending                                                               
the statutes next year.                                                                                                         
                                                                                                                                
CHAIRMAN KOTT opened the meeting to public testimony.                                                                           
                                                                                                                                
Number 1407                                                                                                                     
                                                                                                                                
JACK C. McRAE, Senior Vice President, Blue Cross Blue Shield of                                                                 
Alaska - A Premera Health Plan [BCBS of AK], testified via                                                                      
teleconference from an off-net site in Seattle, Washington.  The                                                                
BCBS of AK fully supports HB 211 as currently drafted with the                                                                  
liability and medical necessity language removed.  The medical                                                                  
necessity issue is so volatile that the issue has not been taken on                                                             
at the federal level.  It is an issue that almost every legislature                                                             
has set aside and has dealt with it as a contract issue between the                                                             
medical community and insurance carriers.  In reference to the                                                                  
issue of liability, the bill - as drafted - would impact the non-                                                               
ERISA clients who already have a cause of action for liability, and                                                             
the BCBS of AK is opposed to creating another cause of action for                                                               
liability.                                                                                                                      
                                                                                                                                
MR. McRAE further stated that BCBS of AK supports the bill [Version                                                             
N] and the concept of a patients bill of rights.  They are                                                                      
comfortable with the external review; the prudent lay person in                                                                 
emergency rooms, and a variety of other parts of the bill.  He                                                                  
recognizes that small changes would probably be made, as with any                                                               
piece of legislation, but the BCBS of AK supports Version N and                                                                 
would support it through the process.                                                                                           
                                                                                                                                
Number 1511                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked Mr. McRae to explain to the committee                                                             
members why BCBS of AK rejected the language in the original                                                                    
version of the bill in relation to medical necessity.  The                                                                      
definition, he noted, came from the American Medial Association.                                                                
                                                                                                                                
MR. McRAE replied that there is a lot of confusion related to                                                                   
medical necessity.  BCBS of AK feels that they have to have some                                                                
say in what medical necessity consists of, which is why they put                                                                
language in their contracts; in turn, some providers sign the                                                                   
contracts and some don't sign the contracts.  For example, there                                                                
are differing opinions of providers on what is cosmetic surgery; in                                                             
that way, BCBS of AK needs to be involved to communicate to their                                                               
medical directors what they feel is cosmetic surgery and what is                                                                
not.  Another example is experimental and investigative medicine                                                                
when a specific procedure hasn't been approved by the FDA [Food and                                                             
Drug Administration].  In that way, for some cases BCBS of AK needs                                                             
to step in and have some authority over the medical necessity.  He                                                              
further stated that there have been a large number of studies                                                                   
conducted on patients bill of rights.  There is legislation in                                                                  
almost every state which does not include language on medical                                                                   
necessity because of the volatility surrounding the issue.  He also                                                             
noted that the federal legislation is being assessed.  The cost in                                                              
relation to medical necessity is also substantial.  He cited a                                                                  
figure in upwards of 6 percent.  The goal of BCBS of AK, he said,                                                               
is to ensure that health care dollars are going to the subscriber                                                               
that needs the service, and to try and keep the cost-drivers out of                                                             
legislation, which is what they are trying to do here.                                                                          
                                                                                                                                
Number 1634                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked Mr. McRae how many other states have                                                                        
implemented a patients bill of rights.                                                                                          
                                                                                                                                
MR. McRAE replied he doesn't have that information in front of him;                                                             
he would provide it to the committee later.  He does know that the                                                              
state of Washington passed legislation this year.                                                                               
                                                                                                                                
CHAIRMAN KOTT asked Mr. McRae whether the state of Washington                                                                   
included or excluded medical necessity.                                                                                         
                                                                                                                                
MR. McRAE replied that they excluded it.                                                                                        
                                                                                                                                
Number 1660                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked Mr. McRae whether the state of Washington                                                                   
included or excluded liability.                                                                                                 
                                                                                                                                
MR. McRAE replied they included a form of liability.  He explained                                                              
that the insurance industry in the state of Washington has almost                                                               
come to a halt this year to the point that an individual cannot buy                                                             
a policy.  As a result, over 40 insurance companies have left the                                                               
state because of statutes passed starting in 1993.  In that regard,                                                             
a lot of trade-offs were made in the legislative session this year                                                              
in relation to the different issues surrounding a patients bill of                                                              
rights, and in relation to the opening up of the individual                                                                     
insurance market.                                                                                                               
                                                                                                                                
Number 1700                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked Mr. McRae whether medical insurance                                                                  
companies are limited in their amount of profits or premiums that                                                               
they can charge.                                                                                                                
                                                                                                                                
MR. McRAE replied that BCBS of AK submits their rates to the                                                                    
Division of Insurance [Department of Community and Economic                                                                     
Development] for evaluation in relation to being actuarially sound,                                                             
which means that the costs and rates are justified in relation to                                                               
the services rendered.  There is a check and balance in the system.                                                             
He noted that rates have gone up because health care costs and                                                                  
utilization costs have gone up and are going up, and BCBS of AK                                                                 
doesn't see that trend stopping.                                                                                                
                                                                                                                                
Number 1751                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN stated that common carrier pipelines have an                                                               
upper limit in the amount that they can make, and they are                                                                      
regulated.  He asked Mr. McRae whether the insurance industry has                                                               
an upper limit or whether the industry is approved as actuarially                                                               
sound.                                                                                                                          
                                                                                                                                
MR. McRAE replied that he isn't aware of anything in statute that                                                               
places a limit on returns.                                                                                                      
                                                                                                                                
Number 1797                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked Mr. McRae whether he has a disposition                                                               
to say what the broad range might be in grouping all the insurance                                                              
companies together.                                                                                                             
                                                                                                                                
MR. McRAE replied that he has no idea.  He couldn't even take a                                                                 
guess, and he has no idea where that number would come from.                                                                    
                                                                                                                                
Number 1805                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked Mr. McRae whether liability would                                                                    
automatically increase premiums or whether it would just decrease                                                               
profits.                                                                                                                        
                                                                                                                                
MR. McRAE replied that when BCBS of AK submits regulations for                                                                  
actuarial approval that are not realistic the Department of                                                                     
Community & Economic Development responds accordingly.  In that                                                                 
way, the BCBS of AK would not just decrease their profits, but                                                                  
instead any increase in medical cost and utilization is built in to                                                             
the price structure that is given to the Division of Insurance.  As                                                             
a result, profits would not change, but prices would increase in                                                                
the state.                                                                                                                      
                                                                                                                                
Number 1847                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that, according to his                                                                           
understanding, under statute the BCBS of AK is a non-profit                                                                     
organization.                                                                                                                   
                                                                                                                                
MR. McRAE answered that the BCBS of AK is a non-profit organization                                                             
in Alaska and Washington.  In fact, all of the BCBS associations                                                                
are non-profit.  There are no stockholders and any capital that is                                                              
reserved is for future claims.                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG asked Mr. McRae whether "any capital" is                                                                
profit.                                                                                                                         
                                                                                                                                
MR. McRAE replied that any funds that BCBS of AK holds above the                                                                
premium charged minus the medical expenses incurred are reserves                                                                
held for future medical expenses.                                                                                               
                                                                                                                                
REPRESENTATIVE GREEN noted that it is the same as margins for a                                                                 
cooperative electric company.                                                                                                   
                                                                                                                                
Number 1888                                                                                                                     
                                                                                                                                
REPRESENTATIVE BETH KERTTULA asked Mr. McRae to provide a copy of                                                               
a contract, so that the committee members can take a look at the                                                                
definitions used.                                                                                                               
                                                                                                                                
MR. McRAE replied, "Sure."  He requested clarification as to                                                                    
whether Representative Kerttula is interested in mainly the medical                                                             
necessity language.                                                                                                             
                                                                                                                                
REPRESENTATIVE KERTTULA said that is what she is most interested                                                                
in, but it probably would be helpful to the committee members to                                                                
see a copy of a contract.                                                                                                       
                                                                                                                                
Number 1943                                                                                                                     
                                                                                                                                
MIKE D. WIGGINS, Vice President of National Accounts, Aetna U.S.                                                                
Healthcare, testified via teleconference from an off-net site in                                                                
Seattle, Washington.  He is also the account manager for the Alaska                                                             
Care Health Plan.  He said Version N is the result of compromise                                                                
from a number of different factions in the state.  The bill, in its                                                             
current form, addresses many complex issues including patient                                                                   
provider protection, a patient's right to choose a provider,                                                                    
confidentiality of a patient's medical information, and a patient's                                                             
right to have complex medical issues reviewed externally to                                                                     
carriers.  The bill also preserves the tools necessary for                                                                      
insurance companies to help them manage the rapidly increasing cost                                                             
of medical services today.                                                                                                      
                                                                                                                                
Number 2002                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA asked Mr. Wiggins whether he likes the                                                                  
bill.                                                                                                                           
                                                                                                                                
MR. WIGGINS replied that it is a bill they think that they can live                                                             
with.  There have been a lot of compromises made, and they didn't                                                               
always get their way.                                                                                                           
                                                                                                                                
Number 2030                                                                                                                     
                                                                                                                                
JIM JORDAN, Executive Director, Alaska State Medical Association,                                                               
testified via teleconference from an off-net site in Anchorage.                                                                 
The physician community is concerned with the issues of medical                                                                 
necessity and accountability of the managed care entities that make                                                             
medical decisions.  In relation to the issue of medical necessity,                                                              
the physician community thinks that it boils down to a policy                                                                   
decision in relation to who would practice medicine - the physician                                                             
or some insurance company.  The physician community feels that the                                                              
definition developed by the American Medical Association is                                                                     
appropriate because it turns the whole arena of medical necessity                                                               
in terms of what is prudent health care.  In relation to the issue                                                              
of accountability or liability and it being a cost-driver, a number                                                             
of estimates associated with the federal legislation and the                                                                    
legislation enacted in the state of Texas, which the language in                                                                
Version K was based on, indicate that the costs are not that high.                                                              
He noted that in the state of Texas there have been five lawsuits                                                               
to date since 1997, a jurisdiction that is much larger than Alaska.                                                             
Some may say it is too early to tell, but the state of Texas has a                                                              
two year statute of limitations just like Alaska.  He doesn't see                                                               
the issue of accountability/liability as being a cost-driver.                                                                   
                                                                                                                                
MR. JORDAN further stated, in relation to comments made on other                                                                
causes of actions, that it is his understanding that the cause of                                                               
actions that may be available in state courts currently for                                                                     
decisions made by insurance companies are contractual in nature as                                                              
opposed to tort.  He's been told by counsel that the differences                                                                
between action in tort and action in contract could be the subject                                                              
of a law review, which indicates that there are substantial                                                                     
differences.                                                                                                                    
                                                                                                                                
Number 2198                                                                                                                     
                                                                                                                                
MR. JORDAN further stated, in relation to ERISA, that                                                                           
Representative Rokeberg had indicated there is a change in the                                                                  
legal environment in relation to the ability of a state to regulate                                                             
this area.  It currently assumes that, if a person is involved in                                                               
a plan, ERISA would preempt state regulations.  The result of that                                                              
is that any litigation brought forward in regard to a medical                                                                   
decision made by an insurance company is (indisc.).  The only                                                                   
recompense that would be available is the amount of the denied                                                                  
service, and frankly, he said, that just doesn't seem fit or a just                                                             
manner in which to compensate a person who is injured in such a                                                                 
manner.                                                                                                                         
                                                                                                                                
Number 2249                                                                                                                     
                                                                                                                                
MR. JORDAN further stated, in relation to the summit, that yes,                                                                 
there was agreement in some of the areas.  However, there appears                                                               
to be some material changes in Version N, which he just received                                                                
this morning, as the result of wordsmithing as Representative                                                                   
Rokeberg mentioned earlier.  Granted, there are areas where there                                                               
was agreement, but there are numerous other areas of issue in                                                                   
addition to the liability and medical necessity issues, which                                                                   
warrant subcommittee treatment.                                                                                                 
                                                                                                                                
Number 2285                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT noted that the written testimony committee members                                                                
have from the Alaska State Medical Association is dated March 17,                                                               
2000, and is signed by Dr. Peter Lawrason.  He is assuming that the                                                             
comments in the letter were directed at Version K, the version                                                                  
passed out of the House L&C Committee.                                                                                          
                                                                                                                                
MR. JORDAN replied that is correct.  The Alaska State Medical                                                                   
Association continues to support Version K, as opposed to Version                                                               
N.                                                                                                                              
                                                                                                                                
Number 2313                                                                                                                     
                                                                                                                                
REPRESENTATIVE LISA MURKOWSKI asked Mr. Jordan whether Version N is                                                             
a starting point in that the two sides are in agreement but the                                                                 
differences between liability and medical necessity need to be                                                                  
hashed out.  She also asked Mr. Jordan whether the Alaska State                                                                 
Medical Association does not support Version N.                                                                                 
                                                                                                                                
MR. JORDAN replied that the Alaska State Medical Association does                                                               
not support Version N, and there appear to be other areas of                                                                    
concern in Version N that need to be discussed at length.  He added                                                             
that the issue of including or not including medical necessity                                                                  
works its way back through Version N in a number of ways.  As                                                                   
mentioned earlier, the federal legislation does not include a                                                                   
definition of medical necessity, which allows for an external                                                                   
review entity to go outside the four corners of a contract.  He                                                                 
noted that one reason why the medical community feels so strongly                                                               
about the definition of medical necessity is to try and provide                                                                 
some consistency.                                                                                                               
                                                                                                                                
Number 2407                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT commented that he had heard Mr. Jordan indicated that                                                             
the "word smith" changes made to Version N might have some                                                                      
materialistic effects.  He isn't sure if that is true, however.                                                                 
                                                                                                                                
Number 2413                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that he has not received a response                                                              
from the Alaska State Medical Association in relation to Version N,                                                             
exclusive of the two areas of contention - liability and medical                                                                
necessity.  He noted that a lot of Version N represents agreements                                                              
arrived at during the summit, but that might not be true for                                                                    
everything in the bill.                                                                                                         
                                                                                                                                
Number 2438                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked where in Version N it limits the                                                                     
definition of medical necessity in a contract.                                                                                  
                                                                                                                                
MR. JORDAN answered that the concept of Version N allows for the                                                                
provisions of a contract to be entertained and reviewed by an                                                                   
external appeal agency.  It does not allow for this to go outside                                                               
the four corners of a contract.                                                                                                 
                                                                                                                                
REPRESENTATIVE CROFT stated then a person can only complain to an                                                               
external appeal tribunal in relation to not meeting a contract.  In                                                             
that way, a person cannot complain that a contract is unfair                                                                    
because it didn't allow for medical necessity.                                                                                  
                                                                                                                                
MR. JORDAN replied, "Yes, that is correct."                                                                                     
                                                                                                                                
TAPE 00-43, SIDE B                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked Mr. Jordan whether going outside a                                                                
contract on utilization review is linked to the definition of                                                                   
medical necessity.                                                                                                              
                                                                                                                                
MR. JORDAN replied that federal legislation does not define medical                                                             
necessity and allows for an external agency to go outside the                                                                   
contractual definition of medical necessity.  Version N only allows                                                             
for an external appeal agency to look inside the contract in regard                                                             
to the definition of medical necessity, and is bound by it.                                                                     
                                                                                                                                
Number 0074                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked Mr. Jordan whether the Alaska State                                                                  
Medical Association agrees with Version K.  He further asked:  Is                                                               
that why they don't agree with Version N?                                                                                       
                                                                                                                                
MR. JORDAN replied, "Yes."                                                                                                      
                                                                                                                                
Number 0106                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked Mr. Jordan whether the following                                                                     
provisions tie it to the plan rather than to an objective                                                                       
definition of medical necessity:                                                                                                
                                                                                                                                
     ... a fair, de novo determination based on coverage                                                                        
     provided by the plan and by applying terms as defined by                                                                   
     the plan ... [page 8, lines 6-7, of Version N]                                                                             
                                                                                                                                
     ... an external appeal agency shall determine whether the                                                                  
     managed care entity's decision is (A) in accordance with                                                                   
     the medical needs of the patient involved, as determined                                                                   
     by the managed care entity, ... [page 8, lines 10-12, of                                                                   
     Version N]                                                                                                                 
                                                                                                                                
MR. JORDAN replied, "Yes."                                                                                                      
                                                                                                                                
Number 0140                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed out that the paragraphs                                                                         
Representative Croft is referring to were written assuming that                                                                 
medical necessity would either be in or out.  For the external                                                                  
review language, he thinks, it was assumed that it was in.  In                                                                  
trying to interpret what Mr. Jordan said, going outside a contract                                                              
in relation to an external review at the federal level is allowed,                                                              
but because this bill included medical necessity that type of                                                                   
language wasn't needed.  There is some wordsmithing in the bill                                                                 
that committee members may find objectionable.                                                                                  
                                                                                                                                
Number 0200                                                                                                                     
                                                                                                                                
MIKE HAUGEN, Representative, Alaska Physicians & Surgeons, Inc.,                                                                
testified via teleconference from an off-net site in Anchorage.                                                                 
The group, he said, is oppose to some of the changes made in                                                                    
Version N.  [He did not expand on which changes.]                                                                               
                                                                                                                                
Number 0214                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked Mr. Haugen to provide a list of the                                                                  
wordsmithing changes and/or technical changes that might cause                                                                  
problems in addition to the medical necessity and liability issues.                                                             
                                                                                                                                
MR. HAUGEN replied that Version K [page 3, Section 21.07.010]                                                                   
provides for patient and health care provider protection.  In that                                                              
way, physicians know what's expected of them to prevent "fighting"                                                              
over whether a service is medically necessary versus what is                                                                    
covered under a plan.  He noted that it has been indicated that the                                                             
section is fixable and they are amenable to a shorter version that                                                              
would provide for those services that would be excluded from a                                                                  
plan.  The net result would be the same; that being, what is                                                                    
expected from a physician.                                                                                                      
                                                                                                                                
CHAIRMAN KOTT asked Mr. Haugen to provide a written, detailed                                                                   
analysis to the committee the areas of concern other than the                                                                   
liability and medical necessity issues.                                                                                         
                                                                                                                                
MR. HAUGEN indicated that he would do so.                                                                                       
                                                                                                                                
Number 0311                                                                                                                     
                                                                                                                                
GORDON E. EVANS, Representative/Lobbyist, Health Insurance                                                                      
Association of America, came before the committee to testify.  He                                                               
said the association agrees with Version N.  In response to Mr.                                                                 
Jordan's earlier comments in relation to Version N, Mr. Evans said                                                              
it is important to take a look at all of the language in the                                                                    
paragraphs because they take into consideration a definition of                                                                 
medical necessity.  He specifically referred to paragraph (4) and                                                               
the subparagraphs starting on page 8, line 29, of Version N.  The                                                               
association believes that a government definition of medical                                                                    
necessity would undermine utilization management and increase costs                                                             
by turning over coverage determinations based on medical necessity                                                              
solely to the treating physicians who have both economic and non-                                                               
economic incentives to inflate reimbursements.                                                                                  
                                                                                                                                
MR. EVANS further noted that defining medical necessity would                                                                   
eliminate the utilization review process - a process that is                                                                    
fundamental to managed care.  He explained that for most contracts                                                              
medical necessity is referred to but not defined, and the                                                                       
definition in Version K is far too broad.  It should be consistent                                                              
with the best practices and guidelines of the appropriate medical                                                               
societies, but it doesn't have to be defined, which is what                                                                     
paragraphs (3) and (4) under the external appeal process refer to                                                               
[page 8, starting on line 19, of Version N].  The representatives                                                               
of the medical society, he said in conclusion, are only doing what                                                              
they usually accuse the insurance industry of doing - cherry                                                                    
picking.                                                                                                                        
                                                                                                                                
Number 0417                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said this whole issue is really not a                                                                      
disagreement about Version K and Version N or a disagreement                                                                    
between physicians and insurance companies; it is really a question                                                             
of how to define the policy.  It seems that there is agreement on                                                               
the external appeal process in that it is not limited to the                                                                    
policy, but there is disagreement on defining the extra "bid."  Is                                                              
that right?                                                                                                                     
                                                                                                                                
MR. EVANS replied that that is exactly what subparagraph (D) does                                                               
[page 8, line 28, of Version N].  It says that the plan has to be                                                               
taken into consideration, but it also says that the external appeal                                                             
agency may take into consideration other evidence that goes outside                                                             
the plan, as defined in Version N.                                                                                              
                                                                                                                                
Number 0450                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked Mr. Evans whether the definition of                                                                  
medical necessity in Version K is from the American Medical                                                                     
Association.  He further asked Mr. Evans what the problems are with                                                             
the definition.  The definition of medical necessity in Version K                                                               
reads as follows:                                                                                                               
                                                                                                                                
     "medical necessity" means those health care services or                                                                    
     products that a prudent physician would provide to a                                                                       
     patient for the purpose of preventing, diagnosing, or                                                                      
     treating an illness, injury, disease, or its symptoms in                                                                   
     a manner that is (A) consistent with generally accepted                                                                    
     standards of medical practice; (B) clinically appropriate                                                                  
     in terms of type, frequency, extent, site, and duration;                                                                   
     and (C) not primarily for the convenience of the patient,                                                                  
     physician, or other health care provider; [Page 16,                                                                        
     starting on line 30, of Version K]                                                                                         
                                                                                                                                
MR. EVANS replied that subparagraph (A) is the main problem with                                                                
the definition.  The Health Insurance Association of America would                                                              
prefer the following language from South Carolina:                                                                              
                                                                                                                                
     Consistent with the most appropriate practice guidelines,                                                                  
     which may include generally accepted practice guidelines,                                                                  
     evidence-based practice guidelines or any other practice                                                                   
     guidelines developed by the federal government, national                                                                   
     or professional medical societies, boards and                                                                              
     associations.                                                                                                              
                                                                                                                                
MR. EVANS noted that the above language does not limit the                                                                      
definition to just the generally accepted standards of medical                                                                  
practice, which is what the physicians want.  Otherwise, they think                                                             
that people are telling them how to practice medicine when it is                                                                
fair to say that not all physicians practice medicine the same.                                                                 
                                                                                                                                
Number 0558                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that it is well recognized that the                                                              
American Medical Association's definition of medical necessity does                                                             
not allow for an insurer to put a sideboard on it, which is                                                                     
necessary in a managed care type of situation.  This bill, he said,                                                             
is about managed care entities; it is not about fee-for-service.                                                                
The idea is to give the best quality and most affordable health                                                                 
care available in a plan.  The ultimate balancing act and goal is                                                               
to be cognizant of the cost-drivers, while at the same time ensure                                                              
quality care.  He commented that he'd like to see a little bit of                                                               
a sideboard in relation to the definition of medical necessity.                                                                 
                                                                                                                                
Number 0664                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked Mr. Evans whether the language from South                                                                   
Carolina was agreed to by all parties during the summit.                                                                        
                                                                                                                                
MR. EVANS replied that the language was not brought up at the                                                                   
summit.  He just received the definition today.  He was told that                                                               
it comes from the National Association of Insurance Commissioners                                                               
external review model Act.                                                                                                      
                                                                                                                                
Number 0694                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked Mr. Jordan and Mr. Haugen whether the                                                                
language from South Carolina is acceptable.                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG replied, "No."  It may be acceptable, but                                                               
it is only part of the issue.                                                                                                   
                                                                                                                                
REPRESENTATIVE GREEN stated that the language from South Carolina                                                               
only deals with subparagraph (A) in relation to the generally                                                                   
accepted standards of medical practice.                                                                                         
                                                                                                                                
Number 0692                                                                                                                     
                                                                                                                                
MR. JORDAN responded that he'd like to see the totality of the                                                                  
language in context.                                                                                                            
                                                                                                                                
CHAIRMAN KOTT indicated that the committee would provide a copy of                                                              
the language from South Carolina to Mr. Haugen and Mr. Jordan for                                                               
their review.                                                                                                                   
                                                                                                                                
Number 0825                                                                                                                     
                                                                                                                                
MR. EVANS clarified that the Health Insurance Association of                                                                    
America does not want any reference to medical necessity or                                                                     
liability in the bill.                                                                                                          
                                                                                                                                
Number 0860                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT closed the meeting to public testimony.                                                                           
                                                                                                                                
CHAIRMAN KOTT assigned HB 211 to a subcommittee consisting of                                                                   
Representatives Green, Murkowski and Croft in order to "iron out"                                                               
some of the differences and unintended consequences.  He also asked                                                             
that Representative Rokeberg participate by presenting the                                                                      
amendments.  He noted that he had to exclude himself from the                                                                   
subcommittee because staff [Lesil McGuire] has advised him of a                                                                 
possible conflict of interest.  Ms. McGuire's father is a physician                                                             
and there may be some ethical issues in that regard.                                                                            
                                                                                                                                
Number 0932                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI remarked that she does not object to                                                                   
serving on the subcommittee, but it is important to recognize that                                                              
the "magic bullet" will have to come from the physicians and                                                                    
insurers.  Unless they are committed to participate in the process,                                                             
she's not sure that the subcommittee will be able to report a                                                                   
solution.                                                                                                                       
                                                                                                                                
Number 0969                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT stated that he hopes that the parties can come                                                                    
together and work out an arrangement.  He asked that Mr. Jordan and                                                             
Mr. Haugen provide written comments to the committee on the areas                                                               
of concern, other than that related to medical necessity and                                                                    
liability, by Monday, April 2, 2000,.                                                                                           
                                                                                                                                
MR. JORDAN indicated that he would do so.                                                                                       
                                                                                                                                
CHAIRMAN KOTT reminded Mr. McRae to provide the committee with a                                                                
copy of a contract.                                                                                                             
                                                                                                                                
MR. McRAE indicated that he would do so.                                                                                        
                                                                                                                                
CHAIRMAN KOTT sent HB 211 to a subcommittee and asked that the                                                                  
subcommittee members report back to the full committee by                                                                       
Wednesday, April 5, 2000.                                                                                                       

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