Legislature(2001 - 2002)

04/23/2001 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 37-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE                                                                               
CHAIR MURKOWSKI  announced that the  committee would  consider CS                                                               
FOR  SENATE BILL  NO.  37(FIN), "An  Act  relating to  collective                                                               
negotiation by  competing physicians  with health  benefit plans,                                                               
to  health   benefit  plan  contracts,  to   the  application  of                                                               
antitrust laws  to agreements involving  providers and  groups of                                                               
providers affected by collective  negotiations, and to the effect                                                               
of   the   collective   negotiation  provisions   on   healthcare                                                               
CHAIR MURKOWSKI called  for an at-ease at 3:27 p.m.   The meeting                                                               
was called back to order at 3:28 p.m.                                                                                           
Number 0234                                                                                                                     
DAVE  JOHNSON,  Pediatrician,  Alaska State  Medical  Association                                                               
(ASMA), came  forth and stated  that [ASMA] would  appreciate the                                                               
committee's  support  for  SB  37.   [The  Alaska  State  Medical                                                               
Association] believes the bill is  important and is balanced with                                                               
many safeguards.                                                                                                                
REPRESENTATIVE  CRAWFORD  asked Dr.  Johnson  what  he feels  the                                                               
reason  for  this bill  is.    He  asked  whether the  system  is                                                               
presently breaking  down, or  whether this  is something  for the                                                               
DR. JOHNSON  answered that he  thinks this is filling  a pressing                                                               
need.   He stated  that the  insurance industry  is consolidating                                                               
and  will continue  to  do  so.   In  small  communities such  as                                                               
Ketchikan, switching  from one insurance  company to  another can                                                               
quickly  involve a  large percentage  of an  employer's practice.                                                               
He  said  physicians  are barraged  with  things  from  insurance                                                               
companies, asking them  to sign agreements.  Right  now, with the                                                               
way legislation and the antitrust  issues stand, physicians can't                                                               
discuss the facts  of situations like that with  each other; they                                                               
are very "gun  shy" about the Federal Trade Commission.   He said                                                               
he thinks  that having  an explicit  and regulated  process would                                                               
give  individual  physicians  the  opportunity  to  talk  amongst                                                               
themselves and  then collectively  with insurance  companies with                                                               
state oversight.                                                                                                                
Number 0547                                                                                                                     
REPRESENTATIVE  HALCRO  stated  that some  physicians  bill  [the                                                               
patients']  insurance   for  them,  while  others   require  that                                                               
[patients] pay  at the time of  service.  He referred  to page 2,                                                               
AS   23.50.020, and asked Dr.  Johnson whether the intent  of the                                                               
bill  is for  physicians  to get  together  and discuss  pricing,                                                               
reimbursement, policies, and claim disputes.                                                                                    
DR. JOHNSON  responded that the list  of things on page  2, lines                                                               
15 through  27, addresses  some of  the issues.   A  common thing                                                               
physicians  discuss  is what  the  definitions  are of  "standard                                                               
medical practice"  and of "reasonable  and prudent person."   For                                                               
example, he  said he  had [a  patient] who  went to  the hospital                                                               
with chest pains.   Fortunately, she didn't have  a heart attack;                                                               
however, the  insurance company  said it  was not  reasonable and                                                               
prudent to  go to the  emergency room  for chest pains,  and that                                                               
she should have waited and gone  to the office another day.  With                                                               
the issue of clinical guidelines  - whether something is standard                                                               
medical  practice  or  experimental  -  the  insurance  companies                                                               
choose  their definitions  of those  things.   For administrative                                                               
procedures,  insurance  companies  try  to  set  it  up  so  [the                                                               
patient] be  make referred to  one physician but not  to another.                                                               
If there are economic issues  and fees, insurance companies right                                                               
now do  that on  a "take it  or leave [it]  basis."   This [bill]                                                               
would give [physicians] the opportunity  to talk about fees after                                                               
nonfee  issues have  been addressed  in  a voluntary  negotiation                                                               
REPRESENTATIVE   HALCRO  asked   what  would   happen  to   those                                                               
physicians who don't  bill insurance carriers on  behalf of their                                                               
patients.   For  example, if  patients pay  a physician  cash for                                                               
their  visits,   that  physician   would  still  be   allowed  to                                                               
[participate  in the  negotiations]  although  they really  don't                                                               
affect the physician.                                                                                                           
DR.   JOHNSON   explained   that   there  are   two   levels   of                                                               
participating.  A  physician can simply sign up as  a courtesy to                                                               
patients and agree to provide billing  services as part of his or                                                               
her  service.   Physicians are  already required  to do  that for                                                               
Medicare  and  Medicaid  patients.   Some  offices  will  provide                                                               
billing services  for all insurance  companies, others  will bill                                                               
for  primary but  not for  secondary,  and others  will bill  for                                                               
primary and  secondary.  That is  different from signing up  as a                                                               
special  deal.   Insurance companies  come and  say, "We  provide                                                               
insurance for 5,000 people in your  community, and if you sign up                                                               
with us, then you'll be on  our list as a preferred provider, and                                                               
we'll encourage people to go to  you."  In exchange for that, the                                                               
insurance  companies  have requirements  of  the  providers.   An                                                               
individual physician,  he said, may  agree to be  a participating                                                               
provider or  not, but  that's a  separate issue  beyond providing                                                               
billing services.                                                                                                               
DR.  JOHNSON remarked  that he  thinks Representative  Halcro was                                                               
talking  about  when  somebody  chooses  to  be  a  participating                                                               
physician with an insurance company.   The good news with that is                                                               
[the insurance company] will promise  prompt payment and minimize                                                               
the  paperwork;  the  bad  news  is  they  typically  ask  for  a                                                               
discount, ask  that [the physician]  accept their fee  as payment                                                               
in full,  and bind [the physician]  to an agreement for  a finite                                                               
period  of time,  often  in  excess of  the  time the  [insurance                                                               
company] is  bound to [the  physician].  In those  situations, he                                                               
said, it  seems to  be fairer  for the physicians  to be  able to                                                               
talk with one another before talking with the insurance company.                                                                
Number 1010                                                                                                                     
REPRESENTATIVE HALCRO  stated that  it is his  understanding that                                                               
this bill  allows for physicians to  sit down in a  room and say,                                                               
"XYZ Insurance  came to me  and gave me  a proposal, and  I don't                                                               
think  the  terms are  that  good.   What  do  you  think?"   The                                                               
physicians can then say, "We're not  going to take this from XYZ;                                                               
we'll make them come back to us with a better offer."                                                                           
DR. JOHNSON  responded that that's  not the bottom  line, because                                                               
the bill  limits the  percentage of  physicians in  the community                                                               
that can get together.                                                                                                          
REPRESENTATIVE HALCRO referred to page  3, line 21, which defines                                                               
that this can only be done  with a company that has market power.                                                               
Blue Cross,  he said, is the  only one with any  market power; it                                                               
has 54  percent of  the market, followed  by its  next competitor                                                               
which has 5.3 percent.  Basically,  he said, this is only talking                                                               
about one provider.                                                                                                             
DR. JOHNSON  clarified that the numbers  Representative Halcro is                                                               
providing are  statewide numbers.   A single major employer  in a                                                               
small  community may  have  more  market power  than  that.   For                                                               
example,  in Ketchikan,  with several  major  employers, a  shift                                                               
from  one insurer  to another  can give  an individual  insurance                                                               
company a substantial market share.                                                                                             
REPRESENTATIVE HALCRO remarked that market power is not defined.                                                                
DR. JOHNSON  replied that he  thinks it  is because it  says [the                                                               
insurer]  is  presumed to  have  market  [power].   That  can  be                                                               
disproved  if [the  insurer]  has  less than  15  percent of  the                                                               
market [share] in that area.                                                                                                    
REPRESENTATIVE HALCRO  asked Dr.  Johnson whether he  is defining                                                               
market power as market power in individual communities.                                                                         
DR. JOHNSON answered, yes.                                                                                                      
Number 1226                                                                                                                     
CHAIR MURKOWSKI stated  that it is her understanding  that it was                                                               
not  necessarily  in  individual communities  but  in  geographic                                                               
service areas.   She  asked whether  a "geographic  service area"                                                               
can be defined as the whole state, a community, or the Interior.                                                                
DR. JOHNSON  responded that if  he were paying  a fee to  a third                                                               
party to negotiate, he would not  be interested if an insurer was                                                               
not providing services to his  practice.  The practical effect of                                                               
the process's being financially  self-sustaining is that it would                                                               
prevent people  from attempting  to "muscle"  outside areas.   He                                                               
noted right now the insurance  companies have that power and that                                                               
CHAIR MURKOWSKI remarked that it's  probably easier, for example,                                                               
in  the  Ketchikan  area,  while  it might  be  more  "muddy"  in                                                               
Southcentral [Alaska] where there is road access.                                                                               
REPRESENTATIVE  CRAWFORD  stated  that  in  his  trade,  when  he                                                               
negotiates  an  agreement  he does  "pattern  bargaining."    For                                                               
example, his  company may  only sign a  contract with  four steel                                                               
erectors, but every  steel erector gets the same deal.   He asked                                                               
Dr. Johnson, when [a physician]  signs this agreement with his or                                                               
her major  insurer, whether all  the other smaller  entities that                                                               
come  into his  or  her office  would  be able  to  get the  same                                                               
Number 1474                                                                                                                     
DR. JOHNSON responded that as it  stands right now, the answer is                                                               
no.    He  said  he  does not  sign  side  deals  with  insurance                                                               
companies.   He explained  that if  he signs  up for  the federal                                                               
Medicare  program, Medicare  allows 41  percent of  his bill  and                                                               
pays 34 percent; he collects 7  percent from the patient.  That's                                                               
true whether the patient is  "a multimillionaire on a cruise ship                                                               
or indigent  Aunt Tilly (ph)  that I've  known and taken  care of                                                               
for the whole time I've been  in Ketchikan."  Medicaid, the state                                                               
federal   partnership,  has   another   fee   schedule  that   is                                                               
substantially higher than  Medicare's.  He stated  that the third                                                               
level  of  billing  he  does  in  his  office  is  the  same  for                                                               
everybody.  He added that there  is a possibility under this bill                                                               
that the  physicians will get together  and agree on a  side deal                                                               
with an  insurance company.   As  it is now,  he can't  ask other                                                               
physicians in  Ketchikan what  they are doing  because that  is a                                                               
violation of antitrust [laws].                                                                                                  
REPRESENTATIVE  CRAWFORD commented  that he  didn't realize  that                                                               
this is not a collective bargaining bill.                                                                                       
DR. JOHNSON stated that it's  a collective bargaining bill with a                                                               
lot  of constraints.   It  exempts  independent plans  supervised                                                               
under ERISA (Employee Retirement and  Income Security Act) and is                                                               
a voluntary process on both sides.                                                                                              
REPRESENTATIVE  CRAWFORD  asked  whether  this  would  allow  for                                                               
[physicians] to negotiate with somebody collectively.                                                                           
DR. JOHNSON answered that it would.                                                                                             
REPRESENTATIVE  CRAWFORD asked  Dr.  Johnson with  whom he  would                                                               
DR.  JOHNSON  responded that  he  would  [negotiate] with  health                                                               
benefit plans that  have a 15 percent or greater  market share in                                                               
a defined area.                                                                                                                 
REPRESENTATIVE  CRAWFORD  asked Dr.  Johnson,  if  he decided  to                                                               
negotiate collectively  with some  insurer, whether  those people                                                               
not covered  under Medicare  or Medicaid  would be  covered under                                                               
the "pattern," or would have to negotiate with him on their own.                                                                
DR.  JOHNSON  answered  that this  doesn't  disturb  the  current                                                               
situation in  which each  one "stands alone."   This  would allow                                                               
negotiation  with plans  that have  a  significant market  share.                                                               
Most plans,  he stated,  will have a  clause in  their agreements                                                               
whereby the  [physician] will provide services  on the [insurance                                                               
company's] behalf at [the physician's] lowest rate.                                                                             
Number 1669                                                                                                                     
REPRESENTATIVE PETE  KELLY, Alaska State Legislature,  sponsor of                                                               
SB  37, came  forth and  addressed some  of the  previously asked                                                               
questions.   He stated  that what  constitutes a  geographic area                                                               
will  be determined  by  the attorney  general.   If  a group  of                                                               
physicians wants to get together, and  only 30 percent of them in                                                               
that market  can get together  under a  plan like this,  they can                                                               
approach the attorney  general once they have decided  on a third                                                               
party  to  represent  them.    At that  point,  they  fall  under                                                               
oversight of the  Office of the Attorney General.   The specifics                                                               
of what a market is will be  the scope of the agreement, and some                                                               
of  the  discussions  of  the  fees will  be  determined  by  the                                                               
attorney  general.   He noted  that the  insurance company  could                                                               
veto the whole  idea from the beginning, because  nothing in this                                                               
bill is mandatory.  If [the  physicians] do get together and they                                                               
agree on  the conditions, the  attorney general could  still veto                                                               
the  negotiation.   He  added  that this  bill  doesn't apply  to                                                               
Medicaid and Medicare.                                                                                                          
REPRESENTATIVE  ROKEBERG stated  that in  the bill  it defines  a                                                               
"geographic  area"  as  consisting  of  40  or  fewer  practicing                                                               
physicians.   He asked whether  Juneau, Anchorage,  and Fairbanks                                                               
would be the only communities that would qualify.                                                                               
SENATOR KELLY answered  that there probably would  not be others,                                                               
but  that would  be  determined  by the  Office  of the  Attorney                                                               
General when defining  what a geographic area is.   He added that                                                               
because  this is  voluntary,  any community  in  the state  could                                                               
participate.   However, he said, "What  we don't want to  have is                                                               
for  100 percent  of the  physicians in  Anchorage under  a group                                                               
negotiating  with  an insurance  company.    That, to  me,  gives                                                               
market  power  too far  the  other  way."    In response  to  the                                                               
question  about collective  bargaining,  he said  this  is not  a                                                               
collective  bargaining agreement;  this is  strictly the  ability                                                               
for negotiations within  the terms of the  State Action Doctrine.                                                               
The [U.S.] Supreme  Court realized there would be  cases in which                                                               
the  antitrust provisions  wouldn't  work well;  rather than  let                                                               
them get out of hand on  a case-by-case basis, however, [the U.S.                                                               
Supreme Court] made sure there was state oversight.                                                                             
REPRESENTATIVE  CRAWFORD  asked,  if a  large  insurance  company                                                               
negotiates  with   the  doctors   in  Ketchikan  but   there  are                                                               
individuals  who are  not covered  under that  insurance company,                                                               
whether  the  agreement would  set  a  "pattern" for  individuals                                                               
without insurance.                                                                                                              
SENATOR KELLY responded that nothing  in the bill creates that or                                                               
requires that.   In the  overall question of  people negotiating,                                                               
there may be changes in demand, but that would be indirect.                                                                     
REPRESENTATIVE   CRAWFORD  stated   that  with   [his  company's]                                                               
collective  bargaining agreements,  he is  required under  law to                                                               
offer the  same agreement to  any other contractor that  wants to                                                               
use his [union] workers.                                                                                                        
DR. JOHNSON  remarked that  Representative Crawford  is mistaking                                                               
this for a collective bargaining agreement.                                                                                     
REPRESENTATIVE CRAWFORD  replied that it seems  like a collective                                                               
bargaining agreement to him.                                                                                                    
Number 1920                                                                                                                     
CHAIR MURKOWSKI  referred to the  article, "Insurance  Gap Causes                                                               
Big  Shift  in  Health  Cost," from  the  Anchorage  Daily  News.                                                           
According  to  the  article,  when   there  are  agreements,  the                                                               
uninsured  pay the  most and  patients with  insurance plans  are                                                               
charged the least.  She said:                                                                                                   
     The comment  is that  you've got these  agreements that                                                                    
     are being made  to keep the health cost  down, which is                                                                    
     what we're  all trying to  do. ... As a  consequence of                                                                    
     the  agreements  that are  made  in  an effort  to  ...                                                                    
     maintain a  steady flow of  patients, the  doctors find                                                                    
     themselves  scrambling  to  maintain their  cash  flow.                                                                    
     They  have to  then  charge the  patients  ... who  are                                                                    
     uninsured   perhaps  at   a  higher   level  than   the                                                                    
     negotiated agreement that they  have with their insured                                                                    
CHAIR MURKOWSKI asked Representative Crawford  if that is what he                                                               
is referring to when he speaks of "pattern."                                                                                    
REPRESENTATIVE CRAWFORD answered, yes.                                                                                          
CHAIR  MURKOWSKI  stated that  she  wonders  how the  bill  would                                                               
affect the gap between the insured and the uninsured.                                                                           
Number 1998                                                                                                                     
REPRESENTATIVE  HALCRO  asked  Senator   Kelly,  if  one  of  the                                                               
conditions is that the geographic  service area consists of 40 or                                                               
fewer  physicians,  whether  there  are  communities  that  would                                                               
qualify other than Anchorage, Fairbanks, and Juneau.                                                                            
SENATOR KELLY  reiterated that this  is voluntary and  limits the                                                               
number of people in an area who can come together to negotiate.                                                                 
REPRESENTATIVE MEYER  stated that  his concern  is to  keep costs                                                               
down for his  constituents.  He remarked that some  of the fiscal                                                               
notes  seem high  - the  one  from the  administration being  the                                                               
highest - and asked Senator Kelly whether he agreed with them.                                                                  
SENATOR   KELLY  responded   that   the  fiscal   note  for   the                                                               
administration should  be zeroed  out.   He explained  that there                                                               
were some  problems with the  fiscal notes in the  Senate Finance                                                               
Committee,  because some  of the  assumptions were  "ridiculous."                                                               
He remarked  that there  is a  great deal  of opposition  to this                                                               
bill with the  administration.  Since it has  never been properly                                                               
explained, he thinks the costs  associated with it probably don't                                                               
make sense.                                                                                                                     
REPRESENTATIVE MEYER  asked Senator Kelly whether  he agrees that                                                               
the  employees' costs  would  be  anywhere from  $35  to $88  per                                                               
SENATOR KELLY replied that  Representative Meyer's question deals                                                               
with self-insurance, which the bill does not address.                                                                           
REPRESENTATIVE   ROKEBERG   asked    Senator   Kelly   what   his                                                               
understanding is of ERISA versus  non-ERISA coverage plans in the                                                               
state.   He also asked whether  this bill would not  affect ERISA                                                               
plans in Alaska.                                                                                                                
Number 2160                                                                                                                     
SENATOR  KELLY  responded   that  self-insured  was  specifically                                                               
exempted  [from the  bill], and  95 percent  of ERISA  deals with                                                               
self-insurance.   He remarked  that [this  does not  effect ERISA                                                               
plans in Alaska],  and referred to page 8, line  24, of the bill,                                                               
which reads:                                                                                                                    
     (2) "health benefit plan" has the meaning given in AS                                                                      
     21.54.500, but does not include a health benefit plan                                                                      
     that is a self-insured health benefit plan.                                                                                
REPRESENTATIVE ROKEBERG  asked if  Senator Kelly has  an estimate                                                               
on how many people this would cover who aren't on ERISA.                                                                        
SENATOR KELLY answered that it is currently about 10 percent.                                                                   
REPRESENTATIVE  ROKEBERG  remarked   that  according  to  Senator                                                               
Kelly's testimony,  this will  only cover  a small  percentage of                                                               
the people in the state.                                                                                                        
SENATOR  KELLY responded  that  with  removing the  self-insured,                                                               
that would be correct.                                                                                                          
REPRESENTATIVE  ROKEBERG asked,  if  this  were implemented,  and                                                               
those  positions in  a larger  market  entered into  negotiations                                                               
with Blue  Cross - which  would in  essence increase fees  - what                                                               
the impact would be by setting a pricing pattern.                                                                               
SENATOR KELLY replied  that he doesn't think  this would increase                                                               
costs because  it is voluntary.   If  the office of  the Attorney                                                               
General sees that  it is getting to be a  problem with fees going                                                               
up, the attorney general could veto that.                                                                                       
REPRESENTATIVE  ROKEBERG asked  Senator Kelly  why he  introduced                                                               
the bill if fees are not going to be increased.                                                                                 
Number 2241                                                                                                                     
SENATOR KELLY  responded that there  may be an  insurance company                                                               
that  requires a  certain procedure.   For  example, Dr.  Johnson                                                               
spoke  about a  patient  who  had chest  pains  and  went to  the                                                               
emergency room.   The  insurance company didn't  want to  pay for                                                               
that.   These kind  of issues,  he said,  are probably  the major                                                               
portion of what  will be discussed in the negotiation.   He added                                                               
that  there  must   be  an  agreement  before   prices  are  even                                                               
REPRESENTATIVE  ROKEBERG remarked  that  he  thinks those  issues                                                               
were  covered  in  House  Bill [211]  last  year,  including  the                                                               
ability  to enter  into the  contract negotiations,  exclusive of                                                               
the fee issue.                                                                                                                  
JIM JORDAN, Executive Director,  Alaska State Medical Association                                                               
(ASMA), stated, "some [issues] but not all."                                                                                    
REPRESENTATIVE  HAYES remarked  that  it seems  to  him that  the                                                               
State Action  Doctrine is the  linchpin of this legislation.   He                                                               
asked Senator Kelly  whether he heard from  Legislative Legal and                                                               
Research  Services  or  from any  other  competing  interests  on                                                               
whether the  State Action Doctrine  will "hold water"  if someone                                                               
decided to take this to court for antitrust [violations].                                                                       
SENATOR  KELLY  responded  that the  State  Action  Doctrine  was                                                               
created  by  the  U.S.  Supreme   Court,  and  this  follows  the                                                               
directives  that were  given.    He stated  that  there has  been                                                               
opinion from the AMA (American  Medical Association), and through                                                               
the process there  have been legal opinions on  specific parts of                                                               
the bill, but not the entire bill.                                                                                              
Number 2359                                                                                                                     
CHAIR MURKOWSKI  stated that she  noticed there were a  couple of                                                               
letters to  the FTC (Federal  Trade Commission) in  the committee                                                               
packets from Texas  and Washington, D.C.  She  asked whether that                                                               
is something that is done when  seeking an exemption to the State                                                               
Action Doctrine.                                                                                                                
MR.  JORDAN responded  to previous  questions.   In reference  to                                                               
Representative  Crawford's remarks  about collective  bargaining,                                                               
he said he does not believe  this bill deals with that situation.                                                               
A  major  difference  is that  Representative  Crawford,  in  his                                                               
collective bargaining  situation, falls under the  National Labor                                                               
Relations  Act and  has  the  ability to  strike.    There is  no                                                               
ability to  strike or to  engage in any  type of boycott  in this                                                               
TAPE 01-65, SIDE B                                                                                                              
Number 2470                                                                                                                     
MR. JORDAN continued, stating that,  as Chair Murkowski mentioned                                                               
earlier, Texas and  Washington, D.C., are two  entities that have                                                               
had  experience with  this.   He said  there have  been no  court                                                               
cases having  to do with ERISA  preemption with such a  law.  The                                                               
first "cut" in looking at  whether ERISA preempts the application                                                               
of  state  law is  whether  or  not  the  state law  impacts  the                                                               
employee  benefit plan.   Decisions  along those  lines have  not                                                               
been made involving the State Action Doctrine.                                                                                  
MR. JORDAN explained  that as in most  antitrust situations, what                                                               
the law  says is  not determinant; it's  what the  facts actually                                                               
present as to whether or not  there are violations in the federal                                                               
or state  antitrust laws.  The  bill was patterned after  the AMA                                                               
model,  which was  put together  by  the AMA's  legal staff  with                                                               
counsel  from  an  outside firm  that  specializes  in  antitrust                                                               
issues;  their feeling  is that  it "passes  muster."   He stated                                                               
that  there are  two  basic  tests that  any  law providing  this                                                               
exemption  must  pass.    First,   there  has  to  be  a  clearly                                                               
articulated  policy by  the state,  and second,  there has  to be                                                               
active state oversight.   He added that the bill  that was passed                                                               
in Washington, D.C., was modeled by the AMA.                                                                                    
CHAIR MURKOWSKI asked whether there  is any requirement to get an                                                               
advisory opinion in advance from the FTC.                                                                                       
MR.  JORDAN  responded that  physicians  entering  into this  are                                                               
making a large "leap of faith"  because they are depending on the                                                               
state to  provide sufficient and  active oversight.  The  FTC can                                                               
come  in with  "20-20  hindsight" and  say  the oversight  wasn't                                                               
provided, thereby putting those  physicians at risk for violation                                                               
of federal antitrust laws.                                                                                                      
Number 2249                                                                                                                     
CHAIR  MURKOWSKI  remarked  that  the letters  provided  to  [the                                                               
committee]  were  apparently  submitted   to  the  FTC  prior  to                                                               
implementation of their  legislation.  She said  she wasn't clear                                                               
whether that was a requirement or not.                                                                                          
MR. JORDAN responded that it is  his understanding that it is not                                                               
a requirement; however, it is probably advisable.                                                                               
CHAIR  MURKOWSKI  asked  Mr.  Jordan   if  he  could  comment  on                                                               
Representative Rokeberg's  concern about House Bill  211, and how                                                               
this does or doesn't tie in.                                                                                                    
MR. JORDAN replied  that there were items in House  Bill 211 that                                                               
dealt with certain physician services  provisions; however, it by                                                               
no means  was an  exhaustive "laundry list"  of those  areas that                                                               
could be part of such an agreement.                                                                                             
REPRESENTATIVE HALCRO stated  that last year when  House Bill 211                                                               
was in  the committee  he had  some huge concerns.   He  said his                                                               
biggest concern  was that  he didn't think  the bill  was needed;                                                               
however, House Bill 211 passed  and those rule changes don't take                                                               
effect  until July  1  [2001].   He  said it  seems  to him  that                                                               
without  giving enough  time  to see  how they  play  out in  the                                                               
market, [the legislature]  is looking for more rule  changes.  He                                                               
explained that federal  legislation H.R. 1304 was  opposed by the                                                               
Federal  Trade  Commission,  which  issued  a  report  saying  it                                                               
thought such an exemption would  be "bad medicine" for consumers.                                                               
The  FTC  also  felt  that both  health  insurance  and  provider                                                               
markets need  to function competitively.   Another area discussed                                                               
was the  rationale that there  wasn't the desired ability  of the                                                               
antitrust  exemption.   He  stated  that  there is  a  tremendous                                                               
amount of concern on whether this  is needed and what the overall                                                               
effect on the marketplace will be.                                                                                              
Number 2102                                                                                                                     
REPRESENTATIVE HALCRO remarked that he  had asked Mr. Jordan what                                                               
the genesis of  this bill was, and Mr. Jordan  had commented that                                                               
a couple  of doctors in  Fairbanks got together,  somebody tipped                                                               
off the FTC,  and [the doctors] got in trouble  for talking about                                                               
these things.  Representative Halcro  said it appears to him that                                                               
it was more elaborate than that.   According to the FTC web site,                                                               
there were  86 physicians,  and the director  of FTC's  Bureau of                                                               
Competition said, "AHN [Alaska  Healthcare Network, Inc.] members                                                               
engaged in  a conspiracy to  set prices  and hamper the  entry of                                                               
managed  care  plans  into the  Fairbanks  market,  resulting  in                                                               
higher  prices  and  limited  choices  for  physician  services."                                                               
Representative Halcro asked  where the need is for  this piece of                                                               
MR.   JORDAN  responded   that  the   ASMA's  interest   in  this                                                               
legislation  as  well  as  in other  types  of  legislation  that                                                               
provide for  a physician-friendly environment  is that  they feel                                                               
there needs to  be a friendly environment to deal  with what is a                                                               
looming problem  with the physician  workforce in Alaska.   Right                                                               
now, in  excess of 51  percent of  physicians in Alaska  are over                                                               
the  age  of  51.    Dr.  Sam  Cullison,  an  AMA  delegate  from                                                               
Washington State, put together some  statistics having to do with                                                               
physician workforces in the  Pacific Northwest, including Alaska.                                                               
The number  of physicians  in Alaska  per 100,000  population was                                                               
about  170; compares  with  the  national average  of  282.   Mr.                                                               
Jordan noted  that in  Alaska there is  no medical  school, there                                                               
are 10 slots  per year in the WAMI  (Washington, Alaska, Montana,                                                               
Idaho  Medical  Education  Program)  program, and  there  is  one                                                               
residency program.   Nationally, 70 percent  of physicians coming                                                               
out  of  training  practice  in  the area  where  they  do  their                                                               
Number 1801                                                                                                                     
MICHAEL   HAUGEN,  Executive   Director,   Alaska  Physicians   &                                                               
Surgeons, Inc.,  came forth and  added that  he just read  in the                                                               
AMA newsletter  that even Canada  has a higher per  capita number                                                               
of physicians  than Alaska.  He  stated that it is  important for                                                               
Alaska to  maintain as positive  an atmosphere for  physicians as                                                               
possible, and he  thinks this bill will do that.   In response to                                                               
Representative Halcro's  question concerning  the [need  for this                                                               
legislation],  he  stated  that   this  bill  really  relates  to                                                               
contracts between  doctors and insurance companies,  and isn't an                                                               
issue the  public may  be aware  of.  He  added that  between the                                                               
ASMA  and [Alaska  Physicians  & Surgeons,  Inc.]  this is  their                                                               
number one  priority.   There is an  enormous amount  of paranoia                                                               
after what happened  in Fairbanks.  He stated that  he thinks the                                                               
question  to   ask  is,   "At  what   point  is   this  insurance                                                               
consolidation going  to be enough  so that effectively we  have a                                                               
single  paired system,  and at  that point  how [do]  the doctors                                                               
advocate for their patients?"                                                                                                   
MR. HAUGEN stated:                                                                                                              
     We just feel that ...  all [the doctors] really want is                                                                    
     the  opportunity to  get together  and discuss  some of                                                                    
     these  nonfee-related  terms  as  well  as  [potential]                                                                    
     fees.  And  when I talk about fees,  I'm really talking                                                                    
     about  maybe  just holding  the  line  on what  they're                                                                    
     currently getting.   There's  a constant desire  on the                                                                    
     part  of  the  insurance companies  [to]  ratchet  down                                                                    
     costs.  So,  we may not be talking  about fee increases                                                                    
     or  cost increases  from the  physician standpoint;  we                                                                    
     may simply  be trying  to tread  water. ...  Again, the                                                                    
     attorney general has absolute authority to say no.                                                                         
REPRESENTATIVE  HALCRO  referenced   a  newspaper  article  dated                                                               
August  1,  2000,  from  the Juneau  Empire  that  discusses  the                                                             
healthcare needs expanding to meet the need in Alaska.  He read:                                                                
     More  doctors  are practicing  in  Alaska  now than  in                                                                    
     previous  years.    The   number  of  licensed  medical                                                                    
     doctors in  Alaska grew from  1,419 active  licenses in                                                                    
     fiscal [year] '95 to 1,810  in fiscal [year] 1999.  One                                                                    
     of the reasons for that  is that people are fleeing the                                                                    
     managed care system in [the]  Lower 48.  Doctors moving                                                                    
     to  Alaska  prefer   the  fee-for-service  rather  than                                                                    
     managed care procedures.                                                                                                   
REPRESENTATIVE HALCRO said  this was his argument  last year with                                                               
House Bill 211.  The argument  for both bills is that doctors are                                                               
at a disadvantage  in the marketplace, yet all of  the facts seem                                                               
to point in the other direction.                                                                                                
Number 1689                                                                                                                     
MR.  JORDAN responded  that the  numbers [Representative   Halcro                                                               
quoted]  probably   came  from   the  Division   of  Occupational                                                               
Licensing,  while the  numbers from  Dr. Cullison  came from  the                                                               
Alaska  State  Medical  Association's  database.    He  said  the                                                               
database, from the  end of December 2000,  shows 1,036 physicians                                                               
practicing  in Alaska,  up from  1,024  from December  1999.   He                                                               
added  that  he  thinks  some  of  the  number  of  "managed-care                                                               
refugees" has gotten smaller.                                                                                                   
REPRESENTATIVE ROKEBERG asked Mr.  Jordan whether his estimate of                                                               
the  number of  doctors  includes whose  with  the Indian  Health                                                               
Service or Public Health Service.                                                                                               
MR.  JORDAN   answered  that   [the  numbers]   indicate  private                                                               
REPRESENTATIVE ROKEBERG  referred to  his earlier  question about                                                               
the impacts on  non-ERISA people.  He stated that  he has come to                                                               
the conclusion  that Alaska probably  has the smallest  amount of                                                               
uninsured people in  the country.  He added that  if this bill is                                                               
implemented it will  set a pricing pattern.  He  remarked that he                                                               
would  have more  comfort with  this legislation  if a  year were                                                               
given to implement House Bill 211.                                                                                              
Number 1437                                                                                                                     
MR.  JORDAN responded  that  this will  only  impact the  insured                                                               
plans.   He stated  that he  expects, down  the road,  that there                                                               
will  be further  delineation in  the  courts having  to do  with                                                               
ERISA preemption.  That will  clarify whether or not self-insured                                                               
plans, without  being preempted by  ERISA, will be impacted  by a                                                               
bill like this.  He remarked  that the courts have been moving in                                                               
the   direction  of   giving  the   states,  as   well  as   some                                                               
administrative  agencies,  more  authority  in that  area.    For                                                               
example, the  Department of Labor  came up with a  new definition                                                               
of multiple  employer welfare associations  (MEWAs).  He  said he                                                               
has  heard  it theorized  that  61  percent  of the  Fortune  500                                                               
companies will be  included as a MEWA.  The  significance is that                                                               
MEWAs are  subject to state  regulations.   As to the  timing, he                                                               
stated  that realistically  it  will take  a  year following  the                                                               
effective date  of the bill  for regulations  to be drafted.   He                                                               
added that  it will probably  be another  year before a  group of                                                               
physicians get together to negotiate.                                                                                           
REPRESENTATIVE  ROKEBERG asked  what the  latest word  is on  the                                                               
federal  Patients Bill  of  Rights, and  any  possible impact  or                                                               
expansion of the state's ability  to enforce regulations on these                                                               
MR. JORDAN answered  that the only information he has  is that it                                                               
is embroiled in presidential politics.                                                                                          
REPRESENTATIVE  ROKEBERG  commented  that  he  recalls  that  the                                                               
committee is very adroit at  providing delayed effective dates on                                                               
legislation, with  the ability  to write  the regulations  in the                                                               
Number 1277                                                                                                                     
REPRESENTATIVE HAYES asked,  if SB 37 passes and  the doctors use                                                               
it without  an advisory opinion from  the FTC, and then  the bill                                                               
is ruled unconstitutional,  whether there are any  safety nets in                                                               
the legislation  that would cover,  for example, the  doctors who                                                               
were "crucified"  in Fairbanks.   He stated  that only  the three                                                               
geographical areas   [Anchorage,  Juneau, and Fairbanks]  can use                                                               
this bill, and  it seems as if only one  insurance company can be                                                               
a player - Blue Cross.  He  asked what other carriers would be in                                                               
play.   He remarked that he  is curious about the  statement that                                                               
[Alaska]  is not  competitive.   He  said it  sounds  as if  this                                                               
legislation has  only been  done in one  state and  one district.                                                               
He  asked, if  no other  states have  done this,  what is  making                                                               
[Alaska]  so noncompetitive  that  this  legislation alone  would                                                               
make [Alaska] as competitive as other states.                                                                                   
MR. JORDAN  answered, first,  that there  is no  safety net.   He                                                               
stated that keeping in mind that  it is the physicians who are at                                                               
risk  when  entering  into  this,   presumably,  they  will  have                                                               
appropriate legal help.   Second, it may or may  not be true that                                                               
this would impact only one  insurance company, and he thinks that                                                               
will depend on the particular location.   He added that he thinks                                                               
the  Matanuska-Susitna  area  is   the  fourth  geographic  area.                                                               
Third, he clarified  that Texas is the only place  where this has                                                               
been  implemented.    He  stated  that it  is  his  feeling  that                                                               
[Alaska]  needs to  be "out  front" about  this and  other issues                                                               
involving a physician-friendly environment.                                                                                     
REPRESENTATIVE HAYES asked, if this  legislation passes, is ruled                                                               
to be unconstitutional,  and there is no safety  net for doctors,                                                               
how  being  "out  front"  would  make  [Alaska]  more  physician-                                                               
friendly, without an advisory opinion from the FTC.                                                                             
Number 1017                                                                                                                     
MR. HAUGEN  responded that currently,  he thinks  physicians feel                                                               
that  because  of what  happened  in  Fairbanks and  the  general                                                               
climate of  not being  able to  talk with each  other, this  is a                                                               
relatively unfriendly state.   He stated that  the physicians [at                                                               
the ASMA]  feel that if  they are allowed  to talk to  each other                                                               
about  these contracts  without  the threat  of  being sued,  the                                                               
general environment for healthcare in  Alaska will improve.  [The                                                               
doctors]  are  willing to  take  the  risk that  the  implemented                                                               
regulations may be found  in violation of the law.   It is in the                                                               
physicians'  vested interest  to make  sure the  attorney general                                                               
writes the  regulations so  that they are  protected.   He stated                                                               
that  he  suspects   that  the  ASMA's  legal   counsel  will  be                                                               
submitting  substantial input  to  the attorney  general on  what                                                               
should constitute  adequate state oversight.   He added  that the                                                               
probable  future  head  of  the   U.S.  Department  of  Justice's                                                               
antitrust  division  was instrumental  in  writing  one of  these                                                               
bills, and President Bush signed one of these bills.                                                                            
REPRESENTATIVE HAYES stated that it  seems to him that the vested                                                               
interest of  the doctors  would be to  have the  advisory opinion                                                               
MR. HAUGEN  emphasized that  the AMA's  legal counsel,  the Texas                                                               
Medical Association's legal counsel,  the probable future head of                                                               
the antitrust  division of  the U.S.  Department if  Justice, and                                                               
the  ASMA's  legal counsel  have  reviewed  this.   The  attorney                                                               
general of  the State of  Alaska gets to write  these regulations                                                               
and  can seek  whatever  counsel  is needed.    He remarked  that                                                               
Representative Halcro  referred to an article  that outlined what                                                               
happened in Fairbanks, and stated  that after the anonymous phone                                                               
call was submitted to the FTC,  the group of doctors "were off to                                                               
the legal races."  After six  figures in legal fees, they decided                                                               
to "throw in the towel."   He said he believes the consent decree                                                               
on  the  wording  is  boilerplate  and is  the  minimum  the  FTC                                                               
requires to get off of a potential defendant's "back."                                                                          
CHAIR  MURKOWSKI stated  that she  would  like to  hear how  this                                                               
would also benefit the consumer.                                                                                                
Number 0680                                                                                                                     
MR. HAUGEN  answered that he  thinks its most direct  benefit for                                                               
consumers is  that it will allow  physicians as a group  to go to                                                               
an   insurance  carrier   and  start   to   identify  where   the                                                               
inefficiencies in the system are.   He stated that members of his                                                               
board see  incredible duplication  of services that  are required                                                               
because the  doctors' ability  to communicate  amongst themselves                                                               
to identify these overuses of  services is limited.  Many members                                                               
have said that  there are better, cheaper ways of  doing this for                                                               
the patients.   Another example,  he said, is  medical necessity,                                                               
an issue that  can only be discussed between a  carrier and small                                                               
groups of  physicians.  If  the carrier has  a firm idea  of what                                                               
medical  necessity is,  there is  very  little a  doctor can  do;                                                               
that's  a patient-centered  issue of  whether a  service will  be                                                               
covered or not.  He noted that this refers to nonfee issues.                                                                    
CHAIR MURKOWSKI stated that she thinks  it is easier to grasp the                                                               
benefits to  the consumer when  talking about  the nonfee-related                                                               
issues.   However,  when  the discussion  is  about the  specific                                                               
fees,  she  said  she  does   not  understand  how  the  consumer                                                               
MR.  HAUGEN explained  that  he was  told  through the  executive                                                               
director of  the group  [of physicians]  in Fairbanks  that their                                                               
legal  counsel,  Mr.  Doug  Ross   (ph),  was  told  by  the  FTC                                                               
investigators that  the FTC's  opinion regarding  the distinction                                                               
between  nonfee- and  fee-related  issues was  moot.   The  FTC's                                                               
position  was  that  if  a  nonfee-related  item  in  a  contract                                                               
affected costs,  it was effectively  a price issue.   The feeling                                                               
when drafting  this bill was if  the FTC was going  to come after                                                               
[the  physicians]  about  nonfee-  or  fee-related  issues,  both                                                               
should be included.                                                                                                             
CHAIR MURKOWSKI commented that that  raises an interesting point,                                                               
because as  it is set up  now, the nonfee-related issues  have to                                                               
be resolved  before addressing the fee-related  issues.  However,                                                               
according to Mr. Haugen, there  is probably a logical tie-in with                                                               
almost  all  the  nonfee-related   issues  that  will  have  some                                                               
influence on the fees ultimately.                                                                                               
MR. HAUGEN remarked that it may  not relate to fees directly, but                                                               
it may relate  to costs.  For example, if  "medical necessity" is                                                               
defined liberally, there  may be many more  procedures an insurer                                                               
would have to include under a plan.                                                                                             
Number 0494                                                                                                                     
SENATOR KELLY  referred to the  statement by Mr. Haugen  that the                                                               
FTC had said the difference between  fees and terms was moot, and                                                               
stated that  that is  the most "crying"  public benefit  he could                                                               
think of.   At  that point,  physicians could  not advocate  as a                                                               
group  with any  kind of  market power  for their  patients.   He                                                               
expressed that that is the essence of this bill.                                                                                
REPRESENTATIVE  HALCRO remarked  that  this  is addressing  those                                                               
healthcare  providers  that cover  non-ERISA  plans,  which is  a                                                               
relatively small  portion of  the insurance pool.   He  said this                                                               
reminds of  him of two  years ago  when the Mental  Health Parity                                                               
Task Force  gave a presentation  and stated that  the legislature                                                               
should  require that  all policies  have mental  health coverage.                                                               
They  were   just  talking  about  non-ERISA,   which  are  small                                                               
employers  that are  struggling  to provide  health coverage  for                                                               
their  employees.    He  remarked that  if  his  carrier's  costs                                                               
increase, he will have to absorb those cost.                                                                                    
MR. HAUGEN  responded that the  State of  Alaska has no  power to                                                               
affect ERISA plans.  That automatically shrinks the pool.                                                                       
MR.  JORDAN stated  that he  thinks one  of the  hopes is  that a                                                               
couple  of things  will happen:   one,  that there  will be  more                                                               
federal  court  cases allowing  state  regulation  to impact  the                                                               
areas that are thought to be  hands off, and two, that there will                                                               
be groups of self-insured people who may want to negotiate.                                                                     
TAPE 01-66, SIDE A                                                                                                              
Number 0018                                                                                                                     
LAURA  WALDEN  testified  via teleconference  on  behalf  of  the                                                               
Nulain Sisterhood, and  stated that she is a consumer  as well as                                                               
an advocate for  patients.  She remarked that she  sees this bill                                                               
as being  very destructive as  far as the consumer  is concerned.                                                               
If  doctors can  set  the  fee scales,  which  the consumers  are                                                               
already having  a problem  meeting, that puts  those fees  out of                                                               
the  reach of  the consumers.   She  stated that  she thinks  the                                                               
legislature  should take  a good  look at  how this  is going  to                                                               
affect  people who  do not  have insurance.   She  suggested that                                                               
[the committee]  not look at  this bill,  but at why  the doctors                                                               
have to be  on a contract, which interferes  with the physicians'                                                               
giving proper  care to  the patients.   The  insurance companies,                                                               
she said, are already dictating to  the doctor what he or she can                                                               
and cannot do.                                                                                                                  
CLYDE  "ED" SNIFFEN,  Assistant Attorney  General, Fair  Business                                                               
Practices  Section,  Civil  Division (Anchorage),  Department  of                                                               
Law,  testified   via  teleconference.     He  stated   that  the                                                               
Department of  Law still has  serious concerns  with SB 37  for a                                                               
variety of reasons.  The State  Action Doctrine has always been a                                                               
concern.    He  explained  that  the  State  Action  Doctrine  is                                                               
something that has been set by  the U.S. Supreme Court, and there                                                               
are cases starting in the  early '80s defining what that doctrine                                                               
needs to  do in order  to insulate state activity  from antitrust                                                               
scrutiny.    He  stated  that  there  are  two  elements  to  the                                                               
doctrine.   One,  there needs  to  be a  clearly expressed  state                                                               
policy favoring  the type of  anticompetitive behavior,  and two,                                                               
there needs to be active state  supervision over the process.  He                                                               
remarked that  it is this  second reason that [the  Department of                                                               
Law] thinks is missing from SB 37.                                                                                              
MR.  SNIFFEN explained  how  SB 37  would work  in  reality.   He                                                               
remarked that  on page 2, line  10, it allows 100  percent of the                                                               
physicians in  any area  to get together  and talk  about things;                                                               
there is no 30 percent  restriction on the ability of physicians,                                                               
by  themselves, to  get together  and talk.   The  only time  the                                                               
state has  an opportunity to  come into  the process is  after an                                                               
authorized third-party  representative has  been selected  by the                                                               
physician.   The  third-party representative  is not  required to                                                               
give very much  information to the attorney  general before those                                                               
negotiations are required  to proceed.  The  attorney general, he                                                               
said,  can  only  stop  those  negotiations  under  very  limited                                                               
circumstances, which are set  out on page 5, lines 23  to 29.  He                                                               
stated  that the  level  of active  state  supervision that  [the                                                               
Department of  Law] believes the  State Action  Doctrine requires                                                               
isn't present in the bill.                                                                                                      
MR. SNIFFEN  remarked that with  the price negotiations  the role                                                               
of the  attorney general is  reduced to reviewing  contracts that                                                               
have  been proposed.   There  is no  involvement of  the attorney                                                               
general  in the  negotiation process  itself.   He remarked  that                                                               
[the Department of Law] is  sympathetic with the doctors, if they                                                               
really don't have the kinds  of negotiating power that they would                                                               
like to have with the  insurance companies, but this bill clearly                                                               
brings  the balance  way over  to the  other side,  to the  point                                                               
where perhaps the insurance companies are at a disadvantage.                                                                    
Number 0813                                                                                                                     
MR. SNIFFEN,  in response to  comments made earlier,  stated that                                                               
he  doesn't think  there was  any testimony  about how  this bill                                                               
will  correct any  perceived  flaws in  the  system.   Currently,                                                               
physicians  can negotiate  with  insurance  companies and  health                                                               
benefit plans  on an  individual basis.   He remarked  that there                                                               
are also  opportunities under different  models that the  FTC has                                                               
recognized  for clinically  integrated  enterprises to  negotiate                                                               
collectively.  Another  problem [the Department of  Law] has with                                                               
the bill  is the notion  that there is substantial  market power.                                                               
When an insurance  company has a 15 percent share  of the market,                                                               
this presumption doesn't seem to be  based on reality.  He stated                                                               
that market  power is a  very complicated thing and  requires the                                                               
analysis of many  different factors.  He remarked that  he is not                                                               
sure  that this  bill allows  the attorney  general to  make that                                                               
initial determination.  If it does, if should be clarified.                                                                     
MR.  SNIFFEN   continued,  stating  that  the   definition  of  a                                                               
geographic  area in  this  bill  is fairly  vague,  and could  be                                                               
tightened up so  that it is clearer.  Finally,  he commented that                                                               
ERISA  is not  preempted  by this  bill.   He  said  he read  the                                                               
definition of  "health benefit  plan" in the  bill, and  the bill                                                               
does exclude self-insured  plans, which might take care  of a lot                                                               
of the ERISA plans, but there  are other ERISA plans that may not                                                               
be self-insured that  could also be subject to  the definition of                                                               
"health benefit plan."   He stated that there  was some testimony                                                               
about how the State Action  Doctrine could perhaps exempt some of                                                               
the  ERISA issues;  however, preemption  is not  the same  as the                                                               
State Action Doctrine.                                                                                                          
CHAIR  MURKOWSKI   asked  Mr.  Sniffen  whether   he  deals  with                                                               
antitrust issues on a general basis.                                                                                            
MR. SNIFFEN answered, yes.                                                                                                      
Number 0976                                                                                                                     
CHAIR MURKOWSKI asked whether going to  the FTC with the shell of                                                               
SB 37 in advance of enactment is appropriate or generally done.                                                                 
MR. SNIFFEN responded  that it is something  that [the Department                                                               
of Law]  would have liked  to have done in  this case.   He noted                                                               
that [the  department] did submit  information with  some written                                                               
comments on the  FTC's position on the Texas  and the Washington,                                                               
D.C., legislation, and  the FTC did testify  against those bills.                                                               
The  attorney general  in Texas  testified  strongly against  the                                                               
Texas legislation.                                                                                                              
CHAIR  MURKOWSKI stated  that she  has  looked at  what has  been                                                               
presented in terms of what  constitutes active state supervision,                                                               
and it  sounds as if in  order to meet the  requirements of that,                                                               
more  involvement is  better.   She  asked Mr.  Sniffen how  [the                                                               
committee]  can   make  it   so  that   there  is   active  state                                                               
MR.  SNIFFEN  responded  that   [the  department]  submitted  the                                                               
statutes and  regulations from  Washington [State],  because [the                                                               
department] thinks  the process Washington has  established comes                                                               
closest to  satisfying the State  Action Doctrine.   He explained                                                               
how the  process works  in Alaska right  now with  the Regulatory                                                               
Commission of Alaska.   There are utilities  with monopoly power,                                                               
but  that power  is offset  by  regulatory review  of prices  and                                                               
contracts  through  a  commission  that has  hearings  and  takes                                                               
testimony.     Washington  has  a   system  that   doesn't  allow                                                               
negotiations  of price  terms at  all.   As for  non-price terms,                                                               
there  is a  system in  place  that goes  through the  Washington                                                               
Department  of  Health,  which  works  with  the  Office  of  the                                                               
Attorney General to receive and review applications.                                                                            
REPRESENTATIVE  HALCRO  asked Mr.  Sniffen  whether  he has  been                                                               
involved with following the bill on the Senate side.                                                                            
MR. Sniffen answered that he has.                                                                                               
REPRESENTATIVE HALCRO stated  that in a letter  of opposition [in                                                               
the committee  packets], a lady  wrote that the version  from the                                                               
[Senate]  Labor  and Commerce  Standing  Committee  was far  more                                                               
acceptable  to  her.   That  version,  in  addition to  a  sunset                                                               
clause,  had language  that provided  for review  and comment  by                                                               
interested parties.   It  also stated  that the  attorney general                                                               
must include a  review of any harm to  consumers or non-physician                                                               
providers that  might be  contained in any  contract.   He stated                                                               
that  is seems  to him  that  the version  that came  out of  the                                                               
Senate Labor  and Commerce  Standing Committee  had a  little bit                                                               
more  consumer protection.   He  asked  Mr. Sniffen  if he  could                                                               
speak to that.                                                                                                                  
Number 1261                                                                                                                     
MR. SNIFFEN responded that he  thinks the Senate version did have                                                               
some  provisions that  allowed  for review  of  the contracts  by                                                               
interested parties.   Those provisions  were changed  somewhat in                                                               
the Senate Finance Committee.                                                                                                   
REPRESENTATIVE HALCRO  asked if  there has ever  been a  point in                                                               
time in this  bill's process when the Department of  Law had felt                                                               
it would be acceptable.                                                                                                         
MR. SNIFFEN answered that there hasn't.                                                                                         
CHAIR MURKOWSKI  stated that one  of the protections  the sponsor                                                               
is asserting is that this would  not allow for a group of doctors                                                               
to strike  or engage  in a  boycott.   She said  as she  read the                                                               
bill, it does indicate, with  regard to the non-price terms, that                                                               
competing physicians may not engage  in a boycott [subsection (a)                                                               
on  page  2];  it  doesn't  say anything  about  strikes.    That                                                               
language is  not included  anywhere else in  the bill.   However,                                                               
she  said  she   reads  subsection  (a)  as   being  specific  to                                                               
subsection  (a) only.  She remarked  that she  does not  have the                                                               
assurance  that the  provision that  competing physicians  cannot                                                               
compete in a boycott or strike is included in the price terms.                                                                  
MR.  SNIFFEN remarked  that there  is not  a similar  restriction                                                               
under  the price  section, page  3, line  18, subsection  (d), as                                                               
there is  in the non-price  section.   He stated that  it remains                                                               
one of [the department's] main concerns.                                                                                        
Number 1422                                                                                                                     
CHAIR MURKOWSKI asked  whether or not this has  been addressed at                                                               
some point, and  what the purpose was for not  having the boycott                                                               
or strike language in the price terms area.                                                                                     
MR.  SNIFFEN responded  that  he doesn't  know  why they  weren't                                                               
REPRESENTATIVE HALCRO asked  Mr. Sniffen if he  was familiar with                                                               
the FTC's action on the position in Fairbanks.                                                                                  
MR. SNIFFEN answered that he was not that familiar with it.                                                                     
REPRESENTATIVE HALCRO stated  that one of the  complaints the FTC                                                               
alleged   was  that   through  certain   actions  these   doctors                                                               
"succeeded blocking  the entry of  several health plans  into the                                                               
Fairbanks area  and substantially  delayed others."   He remarked                                                               
that  basically,  through  their  actions,  it  was  a  de  facto                                                               
MR. SNIFFEN responded that that is what he understood as well.                                                                  
Number 1740                                                                                                                     
BOB  LOHR,   Director,  Division  of  Insurance,   Department  of                                                               
Community    and    Economic     Development,    testified    via                                                               
teleconference.   He stated  that the  division has  two concerns                                                               
with SB 37.  The first is the  cost to Alaskans and the second is                                                               
the  impact on  the  insurance  market.   In  terms  of the  cost                                                               
concerns, he said  all of the studies  regarding legislation like                                                               
SB  37  predict  an  increase  in  the  cost  of  healthcare  and                                                               
therefore  of  health insurance,  if  physicians  are allowed  to                                                               
collectively  negotiate.     Increased  costs  would   mean  more                                                               
uninsured  Alaskans  and  reduced  benefits for  others.    Small                                                               
employers and individuals are particularly vulnerable.                                                                          
MR. LOHR  explained, in  terms of  the insurance  market concern,                                                               
that this legislation  was developed in response  to managed care                                                               
organizations, primarily HMOs  [health maintenance organizations]                                                               
and healthcare providers  in the Lower 48.  Alaska  does not have                                                               
any HMOs  at this  time, and  the number  of health  insurers and                                                               
their  market shares  have remained  relatively  stable over  the                                                               
past  six years.    He  stated that  with  the  exception of  the                                                               
entrance  and then  exit of  employers' health  [plans], the  big                                                               
players  in  1994  are  still  the  big  players  in  the  health                                                               
insurance market  today.  The  health insurance market  in Alaska                                                               
is small, which makes it difficult  for new insurers to come into                                                               
the market  and operate profitably.   He remarked that  there has                                                               
been testimony  in other  committees as well  as today  that this                                                               
might  attract additional  insurers to  the market;  however, the                                                               
insurers that  [the division]  has talked  to have  not indicated                                                               
that would be  the case.  They have other  barriers to entry into                                                               
the  Alaska  market such  as  its  small  size and  its  relative                                                               
remoteness.   He  concluded that  the division  believes that  if                                                               
this bill  accomplishes what its  supporters seek  to accomplish,                                                               
it  will increase  the  cost of  health  insurance, increase  the                                                               
number  of uninsured  Alaskans,  and hurt  an already  vulnerable                                                               
health insurance market.                                                                                                        
MR. LOHR  added that he thinks  the remark made about  the number                                                               
of doctors per  100,000 being substantially lower  in Alaska than                                                               
in other  markets is a  concern from the  point of view  of cost,                                                               
because basic economics  suggest that a shortage  of supply would                                                               
inflate the  cost and  the price  of the  physician services.   A                                                               
proposal to allow increased fees  to be negotiated probably seems                                                               
to go the  wrong direction from the point of  view of that market                                                               
Number 1740                                                                                                                     
REPRESENTATIVE ROKEBERG  asked what  the latest  count is  on the                                                               
number  of non-ERISA-covered  individuals in  terms of  the total                                                               
insurance market in Alaska.                                                                                                     
KATIE CAMPBELL,  Life and Health Actuary,  Division of Insurance,                                                               
Department of Community and Economic  Development, came forth and                                                               
responded  that  [the  division]   has  the  most  recent  health                                                               
insurance  survey, but  it does  not survey  to find  out who  is                                                               
self-funded.  She added that  [the division] has worked with [the                                                               
Department  of  Health &  Social  Services]  on portions  of  its                                                               
report based on federal surveys.                                                                                                
REPRESENTATIVE ROKEBERG  stated that  he would guess  [the number                                                               
of  non-ERISA-covered  individuals]  is  probably  less  than  20                                                               
percent but could be more than 5 or 10 percent.                                                                                 
MR.  LOHR  remarked  that  he  believes 10  percent  would  be  a                                                               
ballpark figure.                                                                                                                
Number 1825                                                                                                                     
CHAIR  MURKOWSKI  stated that  she  read  a figure  of  somewhere                                                               
between 15 to 30 percent increase  in the cost of insurance.  She                                                               
asked if those were Alaska's figures.                                                                                           
MR. LOHR  responded that  there has  not been  a study  of Alaska                                                               
specifically.  However, the figure  in the national study looking                                                               
at H.R.  1304 came up  with a range  of cost increases  between 5                                                               
and 13 percent.                                                                                                                 
REPRESENTATIVE  HAYES  asked  Mr.   Lohr  if  he  foresees  other                                                               
insurance carriers, other  than Blue Cross, that  would fall into                                                               
this percentage market share of 15 percent in any community.                                                                    
MR. LOHR  referred to page  8, lines 24  and 25, and  stated that                                                               
with the choice  of definition for "health benefit  plan", it may                                                               
effectively be  that neither Aetna  nor Blue Cross is  covered by                                                               
the provisions of this bill.                                                                                                    
REPRESENTATIVE ROKEBERG asked whether  that is because Blue Cross                                                               
is nonprofit and regulated under a different statute.                                                                           
Number 1965                                                                                                                     
MS. CAMPBELL  responded that it  has to do  with the fact  that a                                                               
"health benefit plan" under chapter  54 of [Alaska's] statutes is                                                               
defined  as  an  "employee  welfare benefit  plan",  which  is  a                                                               
specific employer plan  and not an insurance company.   She added                                                               
that Blue Cross is under a different statute.                                                                                   
REPRESENTATIVE  ROKEBERG   stated  that   that  was   his  point;                                                               
therefore, it is not even covered by this bill.                                                                                 
MS. CAMPBELL responded that the  "health benefit plan" definition                                                               
doesn't reference an insurance company either.                                                                                  
REPRESENTATIVE  HALCRO asked  how  it would  be  determined on  a                                                               
community-by-community  basis  who  has the  majority  of  market                                                               
MR. LOHR  answered that  "geographic service  area" is  a defined                                                               
term in  the bill, and it  seems to focus on  the geographic area                                                               
of the physician.                                                                                                               
REPRESENTATIVE HALCRO  asked whether [the division]  collects the                                                               
information by geographic areas.                                                                                                
MS. CAMPBELL answered no, for  insurance companies it is just the                                                               
total premium for the state.   Therefore, it would be information                                                               
[the division] would have to collect.                                                                                           
Number 2102                                                                                                                     
REPRESENTATIVE  ROKEBERG commented  that it  has taken  six years                                                               
and "we" still  can't figure out how many people  are insured and                                                               
uninsured  in the  state, and  now the  Division of  Insurance is                                                               
supposed to figure who has 15  percent market share in a regional                                                               
area.  He stated that it's a real "jump shift."                                                                                 
REPRESENTATIVE  HAYES  asked  whether   [the  division]  has  any                                                               
suggestions to make this bill doable.                                                                                           
MR. LOHR responded that he  thinks Representative Rokeberg hit on                                                               
a point  that this is  a bill that  needs some time  to determine                                                               
its actual need and whether it  will be effective.  He added that                                                               
no plan has yet been approved  under Texas; as a result, there is                                                               
no track record.                                                                                                                
CHAIR MURKOWSKI referred to her  earlier question about boycotts.                                                               
She  stated that  in subsection  (a) on  page 2,  it states  that                                                               
[physicians] can't  engage in a  boycott for nonprice  terms, but                                                               
that same provision  is absent when discussing price  terms.  She                                                               
asked  Kristopher Knauss,  staff to  Senator Kelly,  if that  has                                                               
been a  subject of  discussion in  other committee  hearings, and                                                               
whether it is absent for a reason.                                                                                              
KRISTOPHER  KNAUSS, Staff  to Senator  Pete  Kelly, Alaska  State                                                               
Legislature,  responded that  it  is his  understanding that  the                                                               
sponsor's intent  was to keep it  throughout the bill.   The fees                                                               
were taken  out by the Senate  Finance Committee.  He  added that                                                               
this  discussion [on  boycotts] has  not come  up throughout  the                                                               
committee discussions on the Senate side.                                                                                       
REPRESENTATIVE HAYES  asked why  the fees were  taken out  in the                                                               
Senate Finance Committee.                                                                                                       
MR.  KNAUSS explained  that the  fees have  been restructured  so                                                               
that both  parties have to come  together to meet on  the service                                                               
issues.   Once those are  agreed upon  by both parties,  they can                                                               
then negotiate specifically  on fees.  Basically,  the process is                                                               
REPRESENTATIVE HALCRO asked what  the reasoning was behind taking                                                               
out the sunset clause.                                                                                                          
MR. KNAUSS responded  that he thinks Senator  Kelly's thought was                                                               
that since  there were  so many  safeguards added  throughout the                                                               
legislative process,  some of the insurance  companies would wait                                                               
the five years out and not engage in any negotiations.                                                                          
[SB 37 was held over.]                                                                                                          

Document Name Date/Time Subjects