Legislature(2001 - 2002)

03/22/2002 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 first order  of business would                                                              
be  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 health                                                              
care providers."                                                                                                                
                                                                                                                                
CHAIR MURKOWSKI  reminded the  committee that  when this  bill was                                                              
before  the committee  [last  session]  there were  concerns  that                                                              
resulted  in the  committee requesting  an  advisory opinion  from                                                              
the Federal Trade  Commission (FTC), which was  issued in January.                                                              
In  response  to  the FTC's  advisory  opinion,  the  sponsor  has                                                              
drafted  a   committee  substitute   (CS),  Version   22-LS0323\X,                                                              
Bannister, 3/15/02.   Chair Murkowski informed the  committee that                                                              
testimony at today's  hearing would be by invitation  only because                                                              
there has already  been fairly extensive public  testimony.  Chair                                                              
Murkowski passed the gavel to Representative Halcro.                                                                            
                                                                                                                                
Number 0260                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  moved   to  adopt  Version  22-LS0323\X,                                                              
Bannister,  3/15/02, as  the  working document.    There being  no                                                              
objection, Version X was before the committee.                                                                                  
                                                                                                                                
Number 0271                                                                                                                     
                                                                                                                                
SENATOR PETE  KELLY, Alaska  State Legislature,  testified  as the                                                              
sponsor of SB 37.   Senator Kelly announced that  he would address                                                              
some of the objections  to the bill and the things  that have been                                                              
done in response  to those objections.  He reminded  the committee                                                              
that  a group  of  physicians in  Fairbanks  came  together as  an                                                              
association in order  to collectively negotiate with  an insurance                                                              
company to obtain  [that insurance company's] business.   However,                                                              
the FTC  became involved.   Through  that process  it was  learned                                                              
that  although  the federal  government  requires  that  antitrust                                                              
provisions be  applied in  a blanket way,  the U.S.  Supreme Court                                                              
determined  such [a  blanket  application]  wouldn't always  work.                                                              
The court  decided that there would  be times when there  could be                                                              
a  buyer-seller  situation in  which  large companies  could  have                                                              
such market power  that they could impose  a "take-it-or-leave-it"                                                              
scenario when negotiating  business.  Therefore,  the U.S. Supreme                                                              
Court determined  that a  state action  doctrine could  be created                                                              
in  those situations  because there  needed to  be protection  for                                                              
these smaller  organizations.   The court  said that active  state                                                              
oversight from a  state entity was necessary, which  is what SB 37                                                              
provides.   This legislation  allows physicians  to come  together                                                              
to  negotiate  with   these  huge  corporations  and   not  be  in                                                              
violation  of antitrust  provisions.   Senator  Kelly  highlighted                                                              
that one of the  most important reasons for this  [legislation] is                                                              
quality of care.   In the past, insurance companies  have required                                                              
that the  discussion of  some of the  higher cost alternatives  to                                                              
health  care not  be discussed  with patients.   Furthermore,  the                                                              
insurance companies  wouldn't pay  for those alternatives  either.                                                              
Therefore, the  physicians wanted to  be able to come  together to                                                              
discuss  this   collectively  and   have  some  market   power  in                                                              
opposition to these  large insurance companies.  He  noted that in                                                              
the last few  years insurance companies have decreased  from about                                                              
18 major  insurance  companies to  about 6 due  to mergers,  which                                                              
have  resulted in  the  insurance  companies gaining  more  market                                                              
share.   Senator Kelly  characterized the  situation in  Alaska as                                                              
one in  which large corporations  were dealing unfairly  with some                                                              
of the  smaller contractors.   The  protection anticipated  by the                                                              
U.S.  Supreme  Court   is  the  existence  of   the  state  action                                                              
doctrine.                                                                                                                       
                                                                                                                                
Number 0505                                                                                                                     
                                                                                                                                
SENATOR KELLY said  that one of the early problems  with SB 37 was                                                              
the  fear   that  [implementing]   something  like  this   in  the                                                              
competitive market  might result in  an increase in prices.   That                                                              
fear  is the  reason the  legislation  is voluntary.   There  were                                                              
also concerns with  regard to boycotts and retribution,  which has                                                              
been  addressed  in  the  bill.    The  unions  didn't  want  some                                                              
provisions of  the bill and thus  those were deleted.   The nurses                                                              
didn't  want some  of the  provisions of  the bill  and those  too                                                              
were deleted.   The provisions that remain are  the structure that                                                              
has the least  impact on as  many groups as possible,  while still                                                              
allowing  the physicians  to  negotiate with  some  of these  huge                                                              
corporations that  are currently operating  in Alaska on  a "take-                                                              
it-or-leave-it" basis.   Senator Kelly  referred to a  document in                                                              
the  committee  packet  [entitled  "Senate  Bill 37  How  does  it                                                              
work?"].   The  document illustrates  the times  when the  process                                                              
ends.   The  process allows  the  physicians to  come together  to                                                              
have discussions without fear of the FTC.                                                                                       
                                                                                                                                
SENATOR  KELLY remarked  that  he wasn't  surprised  that the  FTC                                                              
disapproves of this  because the FTC's charge is to  carry out the                                                              
provisions of antitrust  laws.  He characterized  the situation as                                                              
a turf [war].   Senator Kelly reiterated that this  all comes down                                                              
to the  quality of  care provisions.   "Physicians should  be able                                                              
to  walk  across  the  hall and  begin  to  discuss  with  another                                                              
physician  how they  are going to  react to  an insurance  company                                                              
that is  in the market  and requiring the  quality of  care issues                                                              
to be  ... under a  'gag order' or  they're just saying  we're ...                                                              
not going  to give  any money for  those higher cost  alternatives                                                              
at  all,"  he  said.    He  then   requested  that  the  technical                                                              
questions be  directed to Mr.  Haugen, Executive  Director, Alaska                                                              
Physicians & Surgeons, Incorporated.                                                                                            
                                                                                                                                
Number 0812                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD  said he  understood that the  process can                                                              
be  stopped.     However,  he  questioned  with   whom  one  would                                                              
negotiate once the process is stopped.                                                                                          
                                                                                                                                
SENATOR KELLY  answered that one  would be entering  the situation                                                              
that  exists today  unless the  physicians  re-apply and  re-enter                                                              
negotiations from the beginning of the process.                                                                                 
                                                                                                                                
REPRESENTATIVE  CRAWFORD pointed  out  that if  iron workers,  for                                                              
example, ended  negotiations with  their employers,  the employers                                                              
could  negotiate with  another group  of iron  workers.   However,                                                              
the physicians  are the only group  that provide medical  care and                                                              
thus those  are the  only people  with whom  the negotiations  can                                                              
take place.                                                                                                                     
                                                                                                                                
SENATOR  KELLY   clarified  that   if  the  [physicians   and  the                                                              
insurance  companies] failed  to  come to  an  agreement and  they                                                              
were  no  longer   under  the  provisions  of   the  state  action                                                              
doctrine,  the [insurance  companies]  would  then be  negotiating                                                              
with individual [physicians]  rather than a collective  group.  He                                                              
reiterated   that  the   process   could  begin   again  if   [the                                                              
physicians] re-apply.                                                                                                           
                                                                                                                                
Number 0981                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MEYER  asked  if  Senator Kelly  agreed  with  the                                                              
fiscal notes, which seem a bit steep.                                                                                           
                                                                                                                                
SENATOR KELLY responded  that the original $7 million  fiscal note                                                              
was  indefensible.   He  pointed  out  that  the fiscal  note  was                                                              
reduced  because the  original  fiscal note  was  wrong and  there                                                              
have been some changes to the bill.                                                                                             
                                                                                                                                
REPRESENTATIVE MEYER  inquired as to  how this bill will  help his                                                              
constituents.                                                                                                                   
                                                                                                                                
SENATOR KELLY  mentioned that he  didn't believe  this legislation                                                              
would  impact rates.   Senator Kelly  posed a  situation in  which                                                              
the physicians in  the state are under a "gag"  order as discussed                                                              
earlier.  As  a single physician, the single  physician has almost                                                              
no market power  to negotiate with insurance companies.   However,                                                              
that can  possibly be overcome if  physicians are allowed  to come                                                              
together as  a group  [and negotiate], and  these quality  of care                                                              
issues relate directly to anyone's constituents.                                                                                
                                                                                                                                
REPRESENTATIVE  MEYER related  his understanding  that [under  the                                                              
gag  order scenario]  a  physician  may be  reluctant  to do  some                                                              
additional testing  because the  insurance company wouldn't  cover                                                              
it.                                                                                                                             
                                                                                                                                
SENATOR KELLY agreed.                                                                                                           
                                                                                                                                
Number 1172                                                                                                                     
                                                                                                                                
VICE  CHAIR   HALCRO  turned  to   the  issue  of   improving  the                                                              
availability  of care  and lowering  the cost.   He then  directed                                                              
attention  to the  FTC's response  on  page 3,  which says  "These                                                              
widespread  effects  are not  simply  theoretical  possibilities."                                                              
In fact,  there are  cases that  the FTC  has evaluated  how costs                                                              
have tended to  increase when these type of bargaining  rights are                                                              
implemented.   The FTC  response also  mentions the Alaska  Health                                                            
Network,  Inc. case.    Vice Chair  Halcro  asked whether  Senator                                                            
Kelly felt  that the  fact that participation  in this  process is                                                              
voluntary mutes  the agreements with  regard to consumer  harm and                                                              
the  FTC's comment,  "Such legislation  would  not likely  improve                                                              
the quality of care."                                                                                                           
                                                                                                                                
SENATOR KELLY replied  yes.  He then directed attention  to page 7                                                              
of  the FTC's  response, which  says,  "Moreover, even  collective                                                              
bargaining  over  other,  more clearly  'non-price'  issues  in  a                                                              
health  plan  contract  can  have  a  substantial  effect  on  the                                                              
ultimate costs  paid by  consumers."   He interpreted  the opinion                                                              
of the  FTC to  be that  quality of  care and  price are the  same                                                              
thing.   Therefore, it's  impossible for  the physicians  who want                                                              
to  negotiate only  in regard  to the  quality of  care issues  to                                                              
ever separate  the issues and  thus those fee-related  issues have                                                              
to be included in the state action doctrine.                                                                                    
                                                                                                                                
Number 1297                                                                                                                     
                                                                                                                                
REPRESENTATIVE   KOTT  inquired   as   to   which  companies   the                                                              
physicians  would be  able  to make  arrangements  with were  this                                                              
bill to pass.                                                                                                                   
                                                                                                                                
SENATOR KELLY  answered, "Blue  Cross, essentially."   He  said he                                                              
wasn't  sure  that  Aetna  would be  involved,  and  therefore  he                                                              
deferred  to  Mr.  Haugen  with  regard  to  Aetna.    In  further                                                              
response  to Representative  Kott,  Senator  Kelly specified  that                                                              
Washington, Texas,  and New Jersey  have similar provisions  to SB
37.    He noted  that  there  is legislation  pending  in  several                                                              
states.    Furthermore,  similar  federal  legislation  [has  been                                                              
introduced].                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOTT asked  if there  is a track  record that  one                                                              
could  review  in  order  to determine  whether  the  delivery  of                                                              
health care has increased and costs remained stable.                                                                            
                                                                                                                                
SENATOR KELLY  responded that  in Texas there  has been  no impact                                                              
because Texas hasn't successfully had negotiations.                                                                             
                                                                                                                                
Number 1389                                                                                                                     
                                                                                                                                
JOHN  DUDDY, Orthopedic  Surgeon; Member,  Anchorage Physicians  &                                                              
Surgeons Association,  said that he would inform  the committee of                                                              
the  reasons why  physicians  wholeheartedly support  SB  37.   He                                                              
characterized  this matter  as a  larger  issue than  the need  to                                                              
negotiate.    Mr.   Duddy  expressed  concern  that   health  care                                                              
providers  are coming  together  and almost  becoming  monopolies.                                                              
He predicted  the same would occur  in Alaska.  Over the  last few                                                              
years  the number  of major  insurers  has decreased.   Mr.  Duddy                                                              
informed  the  committee that  one  of  the  reasons he  moved  to                                                              
Alaska almost  three years  ago was  related to  the lack  of pre-                                                              
authorization that  [was required].  However, that's  beginning to                                                              
happen  here  now.     Mr.  Duddy  mentioned  problems   that  are                                                              
occurring  in  the Lower  48  such  as  the problems  with  health                                                              
maintenance  organizations  (HMOs), the  limitation  of care,  the                                                              
early retirement  of physicians, and physicians not  accepting new                                                              
patients.    With  the [decrease]  in  the  number  of  providers,                                                              
recruitment  of  new physicians  is  difficult.   According  to  a                                                              
Kaiser  study,  Alaska  is  49th  for the  number  of  per  capita                                                              
physicians and  he predicted that  the situation is going  to only                                                              
get  worse.    This  legislation   may  [allow]  dialogue  between                                                              
physicians and  health care providers.   Mr. Duddy said  he didn't                                                              
believe  that SB  37  would increase  medical  costs, however,  he                                                              
felt  that it  would actually  decrease medical  costs because  of                                                              
the less expensive alternatives that are available.                                                                             
                                                                                                                                
MR.  DUDDY informed  the  committee that  some  of his  colleagues                                                              
have attempted to  communicate with the insurance  companies on an                                                              
individual  basis or  an  individual group  basis  with regard  to                                                              
defining  physical   therapy  and   other  aspects   of  medicine.                                                              
However,  were Mr.  Duddy to so  with other  local physicians,  it                                                              
would be  an antitrust  violation.   This legislation  should help                                                              
eliminate the aforementioned problem.                                                                                           
                                                                                                                                
Number 1544                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES  related   his  belief  that  this  type  of                                                              
legislation  has  been  implemented  in  states  that  have  HMOs.                                                              
Since Alaska  doesn't have HMOs,  how would this  legislation aide                                                              
physicians, he asked.                                                                                                           
                                                                                                                                
MR. DUDDY  emphasized, "We  don't have  HMOs yet,  we will."   The                                                              
trend  is toward  [HMOs] as  insurance companies  are starting  to                                                              
dictate  the practice  of medicine.   He  said that  in his  three                                                              
years  here,  he  has  noticed  that  the  things  requiring  pre-                                                              
authorization  [have increased],  which is  how [HMOs] started  in                                                              
the Lower 48.   "We're trying to be pro-active,"  he said.  Alaska                                                              
has quality physicians and that must be maintained, he said.                                                                    
                                                                                                                                
REPRESENTATIVE HAYES  said that although he didn't  have a problem                                                              
with  physicians  negotiating  with insurance  companies,  he  was                                                              
concerned  with the  pricing  element  in SB  37.   He  questioned                                                              
whether  physicians would  remain supportive  of the  bill if  the                                                              
pricing element was eliminated.                                                                                                 
                                                                                                                                
MR. DUDDY replied that he didn't know.                                                                                          
                                                                                                                                
[Vice Chair Halcro returned the gavel to Chair Murkowski.]                                                                      
                                                                                                                                
Number 1649                                                                                                                     
                                                                                                                                
MICHAEL   HAUGEN,   Executive  Director,   Alaska   Physicians   &                                                              
Surgeons,  Inc.,  explained  that   the  distinction  between  fee                                                              
negotiations   and  non-fee   negotiations  is   addressed  as   a                                                              
bifurcated process  in the bill.  The bifurcated  process requires                                                              
a  two-step  approval by  both  the  insurance companies  and  the                                                              
physicians  to  proceed to  prices.    Mr. Haugen  specified  that                                                              
including   fee  negotiations   is  important   because  the   FTC                                                              
historically, as  expressed in its advisory response,  hasn't made                                                              
much distinction  between fees  and the  potential to  raise costs                                                              
of  medical care  in non-fee  related issues  such as  alternative                                                              
treatments.   The physicians face a  bit of a dilemma  if the fees                                                              
are eliminated because  it exposes physicians to  another level of                                                              
potential liability.   He  posed a  situation in which  physicians                                                              
discuss the  best practice/protocol  for a particular  disease and                                                              
the protocol  happened  to be more  expensive.   If the  insurance                                                              
company  decided that  it didn't  like the  way these  discussions                                                              
were going, then  the insurance company could notify  the FTC who,                                                              
if  so inclined,  could  say  such  discussions do  impact  costs.                                                              
Therefore, this  may have to be  litigated in court,  he remarked.                                                              
Mr. Haugen  explained that the desire  was to make this  as simple                                                              
as possible by  including a blanket statement that  both costs and                                                              
fee  negotiations  would be  protected  under  the rubric  of  the                                                              
state action document.                                                                                                          
                                                                                                                                
Number 1752                                                                                                                     
                                                                                                                                
TED  CRUZ,  Director,   Office  of  Policy  Planning,   Bureau  of                                                              
Competition,  Federal  Trade  Commission  (Commission),  testified                                                              
via  teleconference.   Mr. Cruz  explained that  the FTC  response                                                              
attempts to broadly  address policy issues that  are implicated by                                                              
the legislation and  access the likely legal risks  the physicians                                                              
would face  were they to engage  in collective negotiations  under                                                              
this legislation.  Mr. Cruz provided the following testimony:                                                                   
                                                                                                                                
     The  Commission  has  historically  opposed  legislation                                                                   
     seeking  to allow  physician  collective bargaining  and                                                                   
     it's  opposed   it  as  official  Commission   testimony                                                                   
     before  the United  States  Congress concerning  federal                                                                   
     legislation.   And it has  opposed it in staff  comments                                                                   
     submitted to  a number of jurisdictions  that considered                                                                   
     similar legislation.                                                                                                       
                                                                                                                                
     Two points,  I think are quite  relevant.  The  first is                                                                   
     that  it has  been the  judgment of  the Commission  and                                                                   
     the   experience  of   the   Commission  that   allowing                                                                   
     physicians   to    collectively   bargain    will   harm                                                                   
     consumers.   In  particular  it will  harm consumers  by                                                                   
     facilitating  price  fixing, which  is  likely to  raise                                                                   
     the cost of  insurance for consumers, raise  the out-of-                                                                   
     pocket  expenses  and co-payments  that  consumers  will                                                                   
     have  to  pay at  their  doctors,  raise the  costs  for                                                                   
     senior   citizens  participating   in  Medicare   health                                                                   
     plans,  raise  the  cost  for   governments  paying  for                                                                   
     insurance, and  also for paying for the uninsured.   So,                                                                   
     all  of  that,   as  was  referenced  earlier   in  this                                                                   
     discussion,  is  not  simply  the judgment  of  the  FTC                                                                   
     based upon theoretical  principles but rather  it is the                                                                   
     actual  practice  we  have   discovered  when  examining                                                                   
     instances  when doctors have  attempted to  collectively                                                                   
     bargain.     The  result  has  consistently   been  that                                                                   
     consumers have paid higher prices.                                                                                         
                                                                                                                                
     The second  point that  I'd like to  make is that  we do                                                                   
     not believe  that such legislation is likely  to improve                                                                   
     quality of  care.  Typically  on legislation  seeking to                                                                   
     authorize  physician collective  bargaining, quality  of                                                                   
     care  is  a  principle  argument  that  is  advanced  in                                                                   
     favor.    Several  observations are  relevant.    First,                                                                   
     historically,   when   physicians    have   collectively                                                                   
     bargained they  have tended to collectively  bargain not                                                                   
     over  quality of  care but  over price.   Quite  simply,                                                                   
     they  have  behaved  in their  economic  best  interest.                                                                   
     The  example  that the  Commission  has used  before  is                                                                   
     that  one does not  expect that  the United  Autoworkers                                                                   
     collectively bargaining  are going to ensure  safe cars.                                                                   
     And, instead,  government relies on other  mechanisms to                                                                   
     address  quality  of care.    One expects,  rather,  the                                                                   
     United  Autoworkers  address  the  financial  incentives                                                                   
     and welfare of their members.                                                                                              
                                                                                                                                
Number 1929                                                                                                                     
                                                                                                                                
     The [third]  point that  I think  is highly relevant  to                                                                   
     the discussion  is collective bargaining  (indisc.) care                                                                   
     issues  is  already  legal   under  the  antitrust  law.                                                                   
     There's  been  considerable   discussion  of  that  this                                                                   
     afternoon,   and   I   believe,    unfortunately,   some                                                                   
     misunderstanding of  a passage in the letter  we sent to                                                                   
     you  on  page  7  where  we  discuss  terms  other  than                                                                   
     "price"  terms that  could  have a  significant  impact.                                                                   
     That  paragraph on  page  7, I'd  like  to observe  that                                                                   
     what  we  were  discussing   there  was  [reimbursement]                                                                   
     methodology.   Although  not a direct  price term,  it's                                                                   
     obviously  closely related  and in  particular is not  a                                                                   
     term  that is addressing  quality of  care, rather  it's                                                                   
     addressing financial  reimbursement.  So, in  our letter                                                                   
     we discuss at  considerable length beginning  on page 5,                                                                   
     the current  state of the  law, which allows  physicians                                                                   
     to deal  collectively with  quality of  care.  In  fact,                                                                   
     we have observed  that the Federal Trade  Commission has                                                                   
     never  once  brought  a  case   against  physicians  for                                                                   
     collectively  bargaining over  quality  of care  issues.                                                                   
     The concern has  been not quality of care,  which is the                                                                   
     justification  that is  frequently  advanced in  support                                                                   
     of this  legislation,  but rather what  has happened  in                                                                   
     actual   practice,  which   is   that  physicians   have                                                                   
     historically  bargained seeking  to increase prices  and                                                                   
     the result has been higher prices paid by consumers.                                                                       
                                                                                                                                
     The [fourth]  and final point I would make  very briefly                                                                   
     is   that  in   our  judgment,   the   aspect  of   this                                                                   
     legislation  rendering collective bargaining  voluntary,                                                                   
     we  do not  believe  will correct  this  problem.   Very                                                                   
     briefly,  the  physicians collectively  bargaining  over                                                                   
     price:   the  question  of  whether an  increased  price                                                                   
     will be passed  on to consumers is one that  as a matter                                                                   
     of  economics tends  upon the  relative elasticity's  of                                                                   
     supply and demand  vis-à-vis the health plan  and vis-à-                                                                   
     vis  consumers.    And  where  the  incidents  of  those                                                                   
     increased  prices  fall  depends   upon  the  particular                                                                   
     market conditions.   The fact  that here it's  voluntary                                                                   
     for health plans  would suggest that health  plans would                                                                   
     be most likely  to agree to collective bargaining  for a                                                                   
     physician  where  they  themselves would  not  bear  the                                                                   
     brunt  of the  higher cost  but  rather where  consumers                                                                   
     would  pay the higher  cost ....   The voluntary  aspect                                                                   
     does not address  the principle concerns raised  by this                                                                   
     bill.                                                                                                                      
                                                                                                                                
     I would,  finally, note that  as currently drafted,  the                                                                   
     staff  of the  Federal  Trade Commission  expressed  the                                                                   
     concern that  physicians would  remain liable under  the                                                                   
     antitrust law  because there's a substantial  likelihood                                                                   
     that  the active supervision  provided  for in the  bill                                                                   
     would not be sufficient to immunize that conduct.                                                                          
                                                                                                                                
Number 2064                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  related his understanding then  that in the                                                              
case  in which  the  market is  underserved  or  there isn't  much                                                              
competition,   those   carriers    could   agree   to   collective                                                              
negotiations  and agree  to pay  the costs knowing  full well  the                                                              
costs could be passed to the consumers.                                                                                         
                                                                                                                                
MR. CRUZ agreed that such could be a possible outcome.                                                                          
                                                                                                                                
CHAIR MURKOWSKI pointed out that the FTC's letter to the                                                                        
committee is signed by Mr. Cruz and [Joseph Simmons] Director                                                                   
[of the  Bureau of Competition].   However,  page 1 of  the letter                                                              
contains  a  footnote  specifying  that  the  FTC  authorized  the                                                              
Office of  Policy Planning to submit  the comments.  She  asked if                                                              
the  statement  that  this  [letter]   was  approved  by  all  FTC                                                              
commissioners is accurate.                                                                                                      
                                                                                                                                
MR.  CRUZ replied  yes.   He  explained that  the  letter was  the                                                              
position  of the  Office  of Policy  Planning  and  the Bureau  of                                                              
Competition.    However,  before   the  letter  was  sent  it  was                                                              
submitted  to  the  full  FTC  who,   after  a  number  of  edits,                                                              
unanimously voted the letter out.                                                                                               
                                                                                                                                
REPRESENTATIVE HAYES  asked if eliminating the  pricing provisions                                                              
in the bill would alleviate some of the concerns Mr. Cruz sees.                                                                 
                                                                                                                                
MR.  CRUZ  answered  that  it  would   improve  it  substantially.                                                              
However,  then the  question becomes  in regard  to what the  bill                                                              
would  actually   accomplish  because   the  current   law  allows                                                              
collective bargaining on the subject of quality of care.                                                                        
                                                                                                                                
Number 2183                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO asked  if there  have been  cases in  which                                                              
the  market   conditions  dictate  that  allowing   physicians  to                                                              
collectively  bargain   would  actually  work.     Or,  does  this                                                              
application  consistently   not  work   to  the  benefit   of  the                                                              
consumer, he asked.                                                                                                             
                                                                                                                                
MR. CRUZ  said that  it depends  upon what  the FTC was  precisely                                                              
addressing,  which  is  why  [the  response  letter]  attempts  to                                                              
bifurcate between  the broader  questions of  policy and  the more                                                              
narrow questions  of the  legal risks  to physicians acting  under                                                              
particular legislation.   On the  broader question of  policy, the                                                              
FTC has  had a long-standing  view that  as a matter  of principle                                                              
and experience,  physician collective  bargaining is likely  to be                                                              
detrimental to  consumers.   The FTC has  not endeavored,  on this                                                              
bill or  others, to  examine the  particular characteristics  of a                                                              
market  in a given  state.   However, given  the FTC's  experience                                                              
with physician collective  bargaining in various  contexts and the                                                              
markets  response to  that collective  bargaining,  the FTC  views                                                              
such  bargaining  as likely  harming  consumers and  resulting  in                                                              
high prices.                                                                                                                    
                                                                                                                                
CHAIR MURKOWSKI  returned to  the point of  the legal risk  to the                                                              
physicians.   She  pointed out  that  the final  paragraph of  the                                                              
FTC's  letter   makes  reference   to  the   fact  that   if  this                                                              
legislation  fails to provide  for the  level of supervision  that                                                              
would  be   required  under   the  state   action  doctrine,   the                                                              
liability/risk   would  remain   with  the   physicians.     Chair                                                              
Murkowski expressed  the need to be clear that  if the legislature                                                              
were to  pass something,  regardless of  certain protections  that                                                              
the legislature could  put in place, the FTC  remains the ultimate                                                              
enforcer.                                                                                                                       
                                                                                                                                
MR. CRUZ  pointed out that  these matters of individual  physician                                                              
liability under  the antitrust  law are likely  to be  resolved in                                                              
the courts.  He  further pointed out that even if  the FTC decided                                                              
that  particular  conduct  didn't  violate an  antitrust  law  and                                                              
didn't merit an  investigation, it would insulate  physicians from                                                              
private liability.   He noted that  antitrust laws are  subject to                                                              
enforcement  by state  and federal  enforcers as  well as  private                                                              
litigators.   The state  action doctrine  operates as  an immunity                                                              
to liability,  but it's  an immunity  that's conferred  only when,                                                              
under U.S.  Supreme Court language,  "the state has  and exercises                                                              
the  ultimate  authority  over   the  challenged  anti-competitive                                                              
conduct   and  engages   in   a  'pointed   re-examination'   that                                                              
effectively makes the  conduct the state's own."   In the judgment                                                              
of the  Bureau of Competition and  the Office of  Policy Planning,                                                              
that's  unlikely   to  be  satisfied  under  the   terms  of  this                                                              
legislation.     Therefore,  physicians  engaging   in  collective                                                              
bargaining  could face  significant  liability  for violating  the                                                              
antitrust laws under this legislation.                                                                                          
                                                                                                                                
TAPE 02-41, SIDE B                                                                                                              
                                                                                                                                
SENATOR KELLY clarified  that the term "collective  bargaining" is                                                              
a  legal  term  that  deals  with  negotiations  under  employment                                                              
agreements  with  unions.    However,  [this  matter]  deals  with                                                              
collective negotiations.                                                                                                        
                                                                                                                                
REPRESENTATIVE  KOTT  asked  if  Mr. Cruz  could  comment  on  any                                                              
pending federal legislation.                                                                                                    
                                                                                                                                
MR. CRUZ answered  that he was aware of legislation  that has been                                                              
introduced, but he  wasn't aware that it had moved  at the federal                                                              
level.                                                                                                                          
                                                                                                                                
Number 2336                                                                                                                     
                                                                                                                                
ED SNIFFEN,  Assistant Attorney  General, Fair Business  Practices                                                              
Section,   Civil   Division  (Anchorage),   Department   of   Law,                                                              
testified  via teleconference.    He  confirmed that  he  reviewed                                                              
Version X  this morning and  the comments  in his March  19, 2002,                                                              
letter   are   still   applicable.     Mr.   Sniffen   noted   the                                                              
[department's]  concurrence with the  FTC's conclusions  in regard                                                              
to the  problems  that SB 37  faces.   Mr. Sniffen  said that  the                                                              
department still  has significant concerns with [Version  X].  For                                                              
instance, the  state action doctrine  is still of concern  for the                                                              
reasons expressed by  the FTC.  He explained that  there were five                                                              
amendments, one of  which added a sentence requiring  the attorney                                                              
general to request  more written communication during  the process                                                              
of review.   Three of  the amendments   were merely  word changes.                                                              
One of  those word  changes was  changing the  length of  time the                                                              
attorney  general has  to review  information from  30 days  to 60                                                              
days,  which  the  department  still   doesn't  believe  to  be  a                                                              
sufficient  amount of  time.   There  were also  changes from  the                                                              
discretionary word  "may" to "must".   The final amendment  was to                                                              
modify  the definition  of  "health benefit  plan"  the impact  of                                                              
which the  Division of Insurance  will discuss.   Those amendments                                                              
do nothing  to fix the  problems with regard  to the  state action                                                              
doctrine.   Mr. Sniffen said,  "We still  don't see how  this bill                                                              
can rise to the  level of the Supreme Court's  enunciation of that                                                              
test for  the reasons  expressed by  Mr. Cruz of  the FTC."   With                                                              
regard to  earlier comments that  there is similar  legislation in                                                              
other  states,  Mr.  Sniffen  stressed  that  none  of  those  are                                                              
exactly  like  SB  37.   For  instance,  Washington's  legislation                                                              
doesn't  allow price  negotiations.    The Texas  legislation  has                                                              
very  restrictive  language  with  regard  to  the  percentage  of                                                              
physicians  from  specific  specialties  who are  allowed  to  get                                                              
together and negotiate  provisions that aren't included  in SB 37.                                                              
Therefore, Mr.  Sniffen cautioned the  committee in regard  to the                                                              
comments that there is similar legislation in other states.                                                                     
                                                                                                                                
Number 2194                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI  related  her   understanding  of  Mr.  Sniffen's                                                              
letter that Washington's  legislation was amended such  that it is                                                              
a  study  bill   establishing  a  joint  selection   committee  on                                                              
collective negotiations.   However,  Chair Murkowski said  she had                                                              
understood that  Washington already  had its legislation  in place                                                              
and it  doesn't include discussions  regarding price  terms, which                                                              
varies from SB 37.                                                                                                              
                                                                                                                                
MR.  SNIFFEN clarified  that Washington  does have  in place  some                                                              
provisions  allowing  physician  negotiations on  non-price  terms                                                              
under  very  restrictive  control.     This  year  the  Washington                                                              
Medical  Association  attempted   to  introduce  legislation  that                                                              
would  allow  the  negotiation  of  price  terms  and  that  bill,                                                              
Washington  HB  2360,  was  converted  into a  study  bill.    The                                                              
committee should  have a copy of  that bill.  He pointed  out that                                                              
the Washington attorney  general made comments to  the effect that                                                              
the  information provided  by the  Washington Medical  Association                                                              
differed  dramatically   from  the  information   the  [Washington                                                              
attorney  general]   had  with  respect  to  the   need  for  this                                                              
legislation in Washington.                                                                                                      
                                                                                                                                
MR.  SNIFFEN,  in   response  to  Chair  Murkowski,   agreed  that                                                              
amending  SB  37 such  that  references  to  the price  terms  are                                                              
eliminated  would  render  the   legislation  meaningless  because                                                              
physicians  can already  negotiate  on [quality  of care  issues].                                                              
Mr. Sniffen cautioned  analogies between SB 37  and the Washington                                                              
legislation even  if the price provision  was taken out  of SB 37.                                                              
Washington's  regulations controlling  physician negotiations  are                                                              
quite different, even on non-price terms, than those in SB 37.                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG  related his understanding  that when this                                                              
legislature passed  the "Patient's Bill of Rights"  provisions for                                                              
noneconomic negotiations were included.                                                                                         
                                                                                                                                
MR. SNIFFEN said that he wasn't familiar with that.                                                                             
                                                                                                                                
CHAIR  MURKOWSKI   agreed   that  there   was  reference   to  the                                                              
noneconomic terms.                                                                                                              
                                                                                                                                
Number 2006                                                                                                                     
                                                                                                                                
MIKE   WIGGINS,   Vice  President,   National   Accounts,   Aetna,                                                              
testified  via teleconference.    He informed  the committee  that                                                              
his  current  position is  the  overall  account manager  for  the                                                              
State   of   Alaska's   self-funded  medical   plan   that   Aetna                                                              
administers.  Mr.  Wiggins announced that [Aetna]  remains opposed                                                              
to  SB 37,  even  in its  most  recent version,  Version  X.   Mr.                                                              
Wiggins disagreed  with the  findings that  this legislation  will                                                              
benefit  competition.    He  explained  that  the  competition  in                                                              
Alaska is  limited to Alaska's small  market and the high  cost of                                                              
medical care.   Collective  negotiations  by physicians will  only                                                              
result in  higher costs  of health insurance  and doesn't  offer a                                                              
meaningful  prospect for  cost reductions  to insurance  companies                                                              
and their  [members].  He  said he believes  this to be  true even                                                              
when fees aren't  negotiated because negotiation  of non-fee items                                                              
have  a direct  relation to  cost.   Mr.  Wiggins noted  continued                                                              
disagreement  with the  contention that  insurance companies  have                                                              
substantial market  power in Alaska because the  only company that                                                              
may hold  a large share  of Alaska's  privately insured  market is                                                              
Blue Cross.   However, the  bill is written  such that  the market                                                              
power is  determined to  be 15 percent  of the geographical  area,                                                              
which  is in most  cases an  individual community.   He  explained                                                              
that  although  Aetna   only  has  5.3  percent   of  the  private                                                              
insurance  market   in  Alaska,  there  are   probably  individual                                                              
markets in  Alaska in which  Aetna holds  15 percent of  the local                                                              
market.  That  [can] hardly be considered market  power given that                                                              
there are  over 20  health insurance  companies doing  business in                                                              
Alaska.   Mr.  Wiggins said,  "One likely  effect of  the bill  in                                                              
this area of  health insurance where the premiums  are the highest                                                              
is  on  the individual  and  the  small  group market,  where  the                                                              
ability to afford  health care insurance is probably  the lowest."                                                              
He pointed  out that  at least  two bills  seeking ways  to reduce                                                              
the  cost  of  health  insurance  for those  employed    by  small                                                              
businesses and nonprofits  have been introduced this  session.  He                                                              
highlighted  that large  insurers are  generally self-insured  and                                                              
won't  be  subject  to  this  legislation.    In  conclusion,  Mr.                                                              
Wiggins strongly  urged the committee to consider  the FTC letters                                                              
and the  opposition to SB  37 from the  Department of Law  and the                                                              
Division  of Insurance.   He also  urged the  committee to  review                                                              
the regulations adopted by Texas on this subject.                                                                               
                                                                                                                                
Number 1867                                                                                                                     
                                                                                                                                
REPRESENTATIVE HAYES  asked if Mr. Haugen had any  response to the                                                              
5:0 vote of the FTC on the letter sent to the committee.                                                                        
                                                                                                                                
MR.  HAUGEN related  his  feeling  that the  federal  government's                                                              
views  on antitrust  issues are  a bit conflicted.   For  example,                                                              
President  George W.  Bush supports  this type  of legislation  as                                                              
[evidenced] in  his signing  it [when he  was governor]  in Texas.                                                              
Furthermore, President  Bush appointed Charles Rivers  (ph) as the                                                              
Chief Enforcer  of Antitrusts in  the U.S. Department  of Justice.                                                              
Mr. Rivers  wrote the version  of the physicians  negotiation bill                                                              
that Washington,  D.C., implemented.  However, the  FTC's position                                                              
is clear.                                                                                                                       
                                                                                                                                
REPRESENTATIVE HAYES  pointed out that this bill  was heard almost                                                              
a  year ago.    He  asked if  during  that  time, Mr.  Haugen  has                                                              
attempted to  get confirmation from  another group in  the federal                                                              
government  to support the  claim that  the federal government  is                                                              
conflicted on this issue.                                                                                                       
                                                                                                                                
MR. HAUGEN  replied  no, but  said that  as one who  has read  the                                                              
Texas opinion and  the FTC opinion, and observed  President Bush's                                                              
actions  on  this  matter,  he has  concluded  that  [the  federal                                                              
government] is conflicted.                                                                                                      
                                                                                                                                
number 1758                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MEYER asked if  the Texas law  is similar  [to the                                                              
legislation before the committee].                                                                                              
                                                                                                                                
MR. HAUGEN  answered that as  far as he  knew, the  Texas version,                                                              
the New Jersey  version, and Alaska's  version are all  based on a                                                              
model  produced   by  the  American  Medical   Association  (AMA).                                                              
Although  all the bills  were changed  in various  ways, they  all                                                              
utilize the same  basic premise of the U.S. Supreme  Court's state                                                              
action  doctrine  mechanism  which  allows the  state  to  oversee                                                              
physician negotiations.                                                                                                         
                                                                                                                                
REPRESENTATIVE  MEYER asked  whether the  consumer benefited  from                                                              
the legislation in New Jersey and Texas.                                                                                        
                                                                                                                                
MR.  HAUGEN   pointed  out  that   New  Jersey  just   passed  its                                                              
legislation,  while  Texas  passed  its  legislation  about  three                                                              
years.  Mr. Haugen  explained that there is a  rule-making process                                                              
to  implement such  a bill,  for  which he  believes the  attorney                                                              
general  in Texas  was  responsible.   From  what he  understands,                                                              
that  process  became  so  onerous that  physicians  said  it  was                                                              
unworkable.   Therefore,  the physicians  returned to the  [Texas]                                                              
legislature and  requested that  the legislature specify  what was                                                              
necessary  to make  the  negotiations move  forward.   Mr.  Haugen                                                              
said that to  his knowledge the clarification  legislation passed.                                                              
Mr. Haugen informed  the committee that there was  one instance in                                                              
which  the physicians  approached  Blue Cross  in  Texas and  Blue                                                              
Cross refused [to negotiate].                                                                                                   
                                                                                                                                
CHAIR MURKOWSKI  announced that  the fiscal  note for  [Version X]                                                              
had  just  arrived.    She turned  the  legislation  over  to  the                                                              
committee for discussion.                                                                                                       
                                                                                                                                
Number 1631                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES  moved the  following  conceptual  amendment                                                              
[Amendment 1]:                                                                                                                  
                                                                                                                                
     Page 2                                                                                                                     
          Delete lines 28-31 through page 3, lines 1-11                                                                         
                                                                                                                                
     Renumber accordingly.                                                                                                      
                                                                                                                                
REPRESENTATIVE  HAYES  said  he  is very  uncomfortable  with  the                                                              
price  aspect of  this  legislation, and  therefore  he wanted  to                                                              
eliminate all the pricing negotiation mechanisms.                                                                               
                                                                                                                                
REPRESENTATIVE HALCRO objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  HAYES reiterated his  concern with allowing  price                                                              
negotiations  in  this legislation.    He  noted his  belief  that                                                              
allowing  price  negotiations  could  ultimately  hurt  consumers.                                                              
Therefore, adoption  of [conceptual  Amendment 1] would  alleviate                                                              
some of his concerns.                                                                                                           
                                                                                                                                
REPRESENTATIVE    HALCRO   recalled    earlier   testimony    that                                                              
elimination  of the  pricing negotiations  would basically  render                                                              
this  legislation   moot.     Therefore,  he  questioned   whether                                                              
Representative Hayes  assumed that upon adoption  of his amendment                                                              
the  legislation would  remain  in committee  since  it no  longer                                                              
serves any purpose.                                                                                                             
                                                                                                                                
REPRESENTATIVE  HAYES said  that he didn't  believe his  amendment                                                              
would  render the  legislation moot.    Rather, he  felt that  the                                                              
legislation would  provide physicians  with more latitude  to know                                                              
that they  can have  [collective] discussions  on matters  outside                                                              
of price.                                                                                                                       
                                                                                                                                
REPRESENTATIVE HALCRO  highlighted that the FTC  already testified                                                              
that  physicians already  have  substantial  negotiating power  to                                                              
discuss quality of care.                                                                                                        
                                                                                                                                
Number 1408                                                                                                                     
                                                                                                                                
SENATOR   KELLY  agreed   with  Representative   Hayes  that   the                                                              
legislation  wouldn't   be  left   moot  [with  the   adoption  of                                                              
conceptual Amendment  1].   He related his  belief that  the FTC's                                                              
discussion on  that point may have  been a bit overzealous,  as he                                                              
believes much  of the testimony was.   He explained that  the bill                                                              
wouldn't be  moot [with  the adoption  of conceptual Amendment  1]                                                              
because when  physicians came together  to negotiate  before, they                                                              
operated  outside the  protections  of the  state action  doctrine                                                              
and  were  "zapped"  on  their   discussion  over  and  above  the                                                              
discussions  of price because  the [FTC]  said they were  related.                                                              
At least  with the state  action doctrine,  the terms of  care and                                                              
non-price  issues   can  fall  under  a  state   action  doctrine.                                                              
Although [the FTC's  testimony] was that physicians  can negotiate                                                              
non-price  items and  not fall  under  the sanctions  of the  FTC,                                                              
Senator  Kelly  pointed  out  that  the  physicians  in  Fairbanks                                                              
didn't find  that to be the  case.  Therefore, [with  the adoption                                                              
of conceptual  Amendment 1]  at least a  state action  doctrine is                                                              
created for  the non-price  issues that  the FTC  has said  can be                                                              
considered price issues.                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said   that  he  was  a  bit  distressed                                                              
because the testimony  has been that there is  nothing prohibiting                                                              
[collective physician  negotiations for  quality of  care issues].                                                              
He  recalled  that  passage  of   the  Patient's  Bill  of  Rights                                                              
included substantial  statutory language to allow  for noneconomic                                                              
discussions.   Whether this  legislation,  expands that power,  he                                                              
said he wasn't certain.  He requested Mr. Haugen's opinion.                                                                     
                                                                                                                                
MR. HAUGEN  said he  didn't recall  that specific language  [being                                                              
included in  the Patient's  Bill of Rights].   "You can  write all                                                              
kinds of  great language in state  law to protect  physicians, but                                                              
outside  of the  rubric of  the  state action  doctrine it  really                                                              
doesn't mean that  much; the federal government can  still come in                                                              
and  get the  doctors,"  he explained.    In  further response  to                                                              
Representative  Rokeberg,  Mr. Haugen  specified  that  physicians                                                              
have always been able to enter into individual negotiations.                                                                    
                                                                                                                                
SENATOR  KELLY pointed  out that  the state  oversight is  lacking                                                              
when a statute  is written because the U.S. Supreme  Court doesn't                                                              
recognize that.                                                                                                                 
                                                                                                                                
Number 1180                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  asked whether  adoption of [conceptual  Amendment                                                              
1] would take care of the references to price negotiations.                                                                     
                                                                                                                                
MR.  SNIFFEN  answered  that  to   remove  all  the  price-related                                                              
provisions  of the bill  would require  removal of subsection  (d)                                                              
[on page 3  of Version X] as  well as other references  to prices.                                                              
He said that  the legislation would  have to be reviewed  in order                                                              
to eliminate  all the price-related  provisions of the bill.   Mr.                                                              
Sniffen questioned  whether the legislation still  has any utility                                                              
once those  provisions are  removed.   He suggested that  [without                                                              
the  pricing  provisions],  the   bill  will  create  a  level  of                                                              
bureaucracy that  the physicians would  have to go  through before                                                              
negotiating non-price  terms.  Why would one want  to implement an                                                              
expensive  oversight   provision  to  allow  something   that  can                                                              
already be done, he asked.                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI  surmised then  that deletion  of the  price terms                                                              
would eliminate the  need for the bill because  [the Department of                                                              
Law]  holds the  opinion  that  physicians can  already  negotiate                                                              
terms.                                                                                                                          
                                                                                                                                
MR. SNIFFEN agreed.                                                                                                             
                                                                                                                                
CHAIR  MURKOWSKI  posed  a situation  in  which  [physicians]  are                                                              
negotiating  quality of  care issues  that  ultimately impact  the                                                              
price and asked  if such would be a discussion of  quality of care                                                              
or price.   She pointed  out that ultimately  quality of  care can                                                              
impact price.                                                                                                                   
                                                                                                                                
MR.  SNIFFEN agreed  that  some  quality of  care  issues have  an                                                              
impact on  price, and therefore he  guessed that it would  have to                                                              
be addressed  on a case-by-case  basis with regard  to down-stream                                                              
pricing issues.                                                                                                                 
                                                                                                                                
CHAIR  MURKOWSKI questioned,  then,  whether there  would be  some                                                              
merit  to legislation  establishing  the procedure  [a  physician]                                                              
would  need to  go  through in  negotiating  the  quality of  care                                                              
terms in order to provide protection to the physicians.                                                                         
                                                                                                                                
MR.  SNIFFEN said  that  if there  were  legislation allowing  the                                                              
negotiation  of non-price  terms,  the legislation  would have  to                                                              
define  those  terms.   One  would  have  to carefully  craft  the                                                              
definition  for quality  of care.    If a  system is  going to  be                                                              
established  to  protect  price-related quality  of  care  issues,                                                              
then one  faces the  same problems  that occur  when price  issues                                                              
are kept in the bill, he said.                                                                                                  
                                                                                                                                
Number 0905                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  asked if Mr. Sniffen knows of  any cases in                                                              
Alaska  in  which  physicians have  been  scolded  for  discussing                                                              
quality of care issues.                                                                                                         
                                                                                                                                
MR.  SNIFFEN replied  no.   He  only knew  of  the Fairbanks  case                                                              
mentioned earlier.   In the Fairbanks  case, he recalled  that the                                                              
FTC  determined that  the quality  of care  issues discussed  were                                                              
connected  to the  price-related  terms such  that they  warranted                                                              
review.                                                                                                                         
                                                                                                                                
SENATOR  KELLY   explained  that   in  the  Fairbanks   case,  the                                                              
physicians  were originally  sanctioned  because of  price-related                                                              
issues.  However,  through the process it was  determined that the                                                              
quality  of  care  was  linked   to  the  price.    Senator  Kelly                                                              
emphasized, "You  have to  have the protection  of the  quality of                                                              
care or else the  FTC, who is not in the business  of allowing any                                                              
encroachment on the  antitrust provisions, is going  to take every                                                              
opportunity to stop  ... these negotiations when they  can."  If a                                                              
state action  doctrine isn't created,  [physicians] won't  ever be                                                              
able to  survive an  overzealous  FTC board who  doesn't want  any                                                              
encroachment on  the antitrust provisions  because [the  FTC] will                                                              
always be able to link price and quality of care.                                                                               
                                                                                                                                
CHAIR  MURKOWSKI expressed  some  confusion  because she  recalled                                                              
that initially eliminating  the pricing terms seemed  to eliminate                                                              
some  of the  major concerns.   However,  if quality  of care  and                                                              
pricing are  so connected,  would there ever  be a safe  zone, she                                                              
asked.                                                                                                                          
                                                                                                                                
SENATOR  KELLY said  he thinks  there is  safe zone.   The FTC  is                                                              
mainly concerned  with physicians who discuss the  actual price of                                                              
the  contract  with   the  insurance  companies,   which  is  what                                                              
conceptual  Amendment 1  would  address.   However,  the issue  of                                                              
potential  impacts  to  cost  because  of quality  of  care  is  a                                                              
different  matter.   Perhaps,  price and  costs  are being  mixed.                                                              
Still,  the FTC  has  found it  sufficient  to send  "Nasty-Grams"                                                              
over  cost  issues.     Senator  Kelly  related   that  conceptual                                                              
Amendment  1  [would  eliminate]  price  fixing  [while  allowing]                                                              
costs related to  quality of care to be protected  under the state                                                              
action doctrine.                                                                                                                
                                                                                                                                
Number 0655                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD  announced that  is opposed to  the intent                                                              
of  SB   37  because  he  believes   that  physicians  are   in  a                                                              
monopolistic   position   in   certain   areas   of   the   state.                                                              
Representative  Crawford  explained, "If  we  were  to amend  this                                                              
out, it  wouldn't be a  problem for me.   My problem lies  in that                                                              
if this is  allowed to stay alive,  it can be amended  again."  He                                                              
foresaw  this  as  being  a  major   contention  in  a  conference                                                              
committee.                                                                                                                      
                                                                                                                                
SENATOR KELLY highlighted that anything can be amended.                                                                         
                                                                                                                                
REPRESENTATIVE  CRAWFORD  reiterated that  he  is  opposed to  the                                                              
spirit of this legislation whether amended or not.                                                                              
                                                                                                                                
SENATOR KELLY said  that he didn't object to  conceptual Amendment                                                              
1.   Senator Kelly  charged that this  legislation allows  for the                                                              
physicians  to  have  some  market  power,  bargaining  power,  to                                                              
include  some of  those [alternative  procedures] in  the care  of                                                              
their patients.  He viewed that as valuable.                                                                                    
                                                                                                                                
REPRESENTATIVE  MEYER  recalled  testimony that  were  [conceptual                                                              
Amendment 1  adopted there would  be increases in]  the associated                                                              
bureaucracy and costs.                                                                                                          
                                                                                                                                
SENATOR KELLY  predicted that  the Department  of Law and  the FTC                                                              
would  oppose  this legislation  were  it  whittled "down  to  the                                                              
draft number."   He related his  belief that the bill  would still                                                              
work  with the  [adoption  of conceptual  Amendment  1].   If  the                                                              
physicians  feel   that  the   bureaucracy  is  problematic,   the                                                              
physicians have the option not to negotiate.                                                                                    
                                                                                                                                
REPRESENTATIVE  MEYER  surmised  then that  even  with  conceptual                                                              
Amendment 1 the legislation would still meet the intent.                                                                        
                                                                                                                                
SENATOR  KELLY  said,   "With  one  exception."     He  noted  his                                                              
disagreement   with  Mr.   Sniffen  about   the  need  to   delete                                                              
subsection (d).                                                                                                                 
                                                                                                                                
Number 0332                                                                                                                     
                                                                                                                                
A  roll call  vote  was taken.   Representatives  Kott,  Rokeberg,                                                              
Hayes, Meyer, and  Murkowski voted for the adoption  of conceptual                                                              
Amendment 1.   Representative Crawford voted against  the adoption                                                              
of  conceptual Amendment  1.   Therefore,  conceptual Amendment  1                                                              
was adopted by a vote of 5:1.                                                                                                   
                                                                                                                                
CHAIR MURKOWSKI  turned to an amendment  from the sponsor  that is                                                              
included in  the committee  packet.   The amendment [Amendment  2]                                                              
reads as follows:                                                                                                               
                                                                                                                                
     On page 8, line 28;                                                                                                        
        After "health benefit plan" delete through line                                                                         
     29.                                                                                                                        
                                                                                                                                
     Insert;                                                                                                                    
                                                                                                                                
          "means a health care insurer as defined in AS                                                                         
     21.54.500(17) but  does not include a  multiple employer                                                                   
     welfare arrangement  or any self insured  health benefit                                                                   
     plan."                                                                                                                     
                                                                                                                                
     [Punctuation provided.]                                                                                                    
                                                                                                                                
SENATOR KELLY indicated  that the amendment was  [proposed] by the                                                              
Alaska  Medical  Association  who  would be  better  qualified  to                                                              
address the amendment.                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG related  his belief  that this  amendment                                                              
attempts to  overcome the [Department  of Law's] objection  to the                                                              
Employee  Retirement  and  Income  Security Act  of  1974  (ERISA)                                                              
stuff.                                                                                                                          
                                                                                                                                
Number 0124                                                                                                                     
                                                                                                                                
SENATOR KELLY  clarified that the intent  of the bill was  what is                                                              
included  in  the amendment  and  it  was  an oversight  that  the                                                              
"health benefit plan" was left in.                                                                                              
                                                                                                                                
REPRESENTATIVE   ROKEBERG  surmised  that   [the  intent   of  the                                                              
amendment  is   to]  only  include   Blue  Cross   and  commercial                                                              
insurers, which is typical of any health care mandate.                                                                          
                                                                                                                                
SENATOR KELLY  stated that  the intent of  [the amendment]  was to                                                              
overcome ERISA problems.                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  remarked   that  this  amendment  merely                                                              
cleans up the legislation.                                                                                                      
                                                                                                                                
SENATOR  KELLY  said  his  understanding  was that  there  was  no                                                              
intention to impact the ERISA law.                                                                                              
                                                                                                                                
REPRESENTATIVE  ROKEBERG   related  his  understanding   that  the                                                              
Multi-Employer  Welfare  Arrangement   (MEWA)  is  something  that                                                              
states often try to regulate, but that ERISA wants to avoid.                                                                    
                                                                                                                                
TAPE 02-42, SIDE A                                                                                                              
                                                                                                                                
CHAIR MURKOWSKI  pointed out that  the memo from  Terry Bannister,                                                              
Attorney,  Legislative   Legal  Counsel,  Legislative   Legal  and                                                              
Research  Services,  Legislative  Affairs  Agency,  says  that  it                                                              
doesn't  matter whether  "health  benefit plan"  is replaced  with                                                              
"health care  insurer" because it  won't eliminate  the preemption                                                              
issue.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG agreed.   In  regard to  how this  change                                                              
would help,  Representative Rokeberg  explained that it  would add                                                              
MEWA that is a disputed area under ERISA.                                                                                       
                                                                                                                                
Number 0158                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG moved Amendment  2 as specified  earlier.                                                              
There being no objection, Amendment 2 was adopted.                                                                              
                                                                                                                                
Number 0158                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  moved to report HCS CSSB  37, Version 22-                                                              
LS0323\X,  Bannister, 3/15/02,  as amended  out of committee  with                                                              
individual recommendations and the accompanying fiscal notes.                                                                   
                                                                                                                                
REPRESENTATIVE HALCRO  objected.   He recalled the  grave concerns                                                              
the committee  had  when this legislation  was  heard a year  ago.                                                              
He reminded committee  members that the FTC letter  details why it                                                              
opposes this  type of  legislation.   Furthermore, testimony  from                                                              
the  Department of  Law  outlines  that some  of  the states  with                                                              
similar  legislation have  far more  controls  and oversight  than                                                              
the State of  Alaska will have.  Representative  Halcro identified                                                              
his  main  concern:   the  legislation  hasn't  been shown  to  be                                                              
necessary.    Representative  Halcro  directed  attention  to  the                                                              
information from  the FTC's website  with regard to  the Fairbanks                                                              
case against  the Alaska  Health Care  Network.  That  information                                                              
seems  to   illustrate  that  the   infractions  were   more  than                                                              
physicians   wandering  from   the  path   of  quality  of   care.                                                              
Representative  Halcro  related  his  belief  that  the  FTC  [was                                                              
justified]  in regard to  the complaints  levied in the  Fairbanks                                                              
case.    Overall,  Representative  Halcro said  he  believes  that                                                              
Alaska's health  care market is  fragile with very  few suppliers.                                                              
He said  that he couldn't  see this legislation  improving, rather                                                              
he  could only  predict  that  it  would worsen.    Representative                                                              
Halcro  noted his  consistent opposition  to  this legislation  as                                                              
well  as his  belief  that  the  legislation shouldn't  leave  the                                                              
committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE MEYER  said that  with the adoption  of [conceptual                                                              
Amendment  1],  the  legislation  has  the  potential  to  improve                                                              
health care overall.                                                                                                            
                                                                                                                                
CHAIR MURKOWSKI  commented  that conceptual  Amendment 1  has made                                                              
the legislation  more palatable.   She noted her concern  with the                                                              
communication   from  the   physicians   who   stated  that   this                                                              
legislation  is necessary  in  order to  level  the playing  field                                                              
with  these  large  insurance  companies.    She  said  that  this                                                              
legislation  may level  the playing  field  between the  insurance                                                              
companies and the  physicians, but the concern was  with regard to                                                              
the impact  on the consumer.   Chair Murkowski announced  that she                                                              
is  willing to  entertain  this  legislation because  the  pricing                                                              
reference has  been eliminated,  and if  the measure continues  in                                                              
that direction she  announced that she may ultimately  support the                                                              
legislation.   She  mentioned  that she  agreed  with the  sponsor                                                              
that a  physician could innocently  begin discussions  with regard                                                              
to  matters   of  quality  of   care,  but  those   matters  could                                                              
ultimately impact price.                                                                                                        
                                                                                                                                
REPRESENTATIVE  HALCRO reminded  the  committee of  the FTC's  and                                                              
the Department  of Law's  testimony that  eliminating the  pricing                                                              
references  results in  the legislation  serving no  purpose.   He                                                              
asked if  Senator Kelly  supported keeping  the pricing  reference                                                              
out of the legislation  or would he be supportive  of inserting it                                                              
back in the legislation.                                                                                                        
                                                                                                                                
SENATOR KELLY answered,  "I would probably support it.   ...  That                                                              
doesn't  mean that  I  wouldn't  necessarily consider  putting  it                                                              
back in."                                                                                                                       
                                                                                                                                
A roll  call  vote was  taken.   Representatives Rokeberg,  Hayes,                                                              
Meyer,  and Murkowski  voted for  reporting HCS  CSSB 37,  Version                                                              
22-LS0323\X,      Bannister,     3/15/02,     from      committee.                                                              
Representatives  Crawford and Halcro  voted against  reporting HCS                                                              
CSSB  37,  Version 22-LS0323\X,  Bannister,  3/15/02,  as  amended                                                              
from committee.   Therefore, HCS CSSB 37(L&C) was  reported out of                                                              
the  House Labor  and Commerce  Standing  Committee by  a vote  of                                                              
4:2.                                                                                                                            
                                                                                                                                

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