Legislature(2001 - 2002)

03/28/2001 06:06 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     CS FOR SENATE BILL NO. 37(L&C)                                                                                             
     "An Act relating  to collective negotiation by  physicians with                                                            
     health  benefit plans,  to health benefit  plan contracts  with                                                            
     individual  competing physicians,  to the application  of state                                                            
     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                                                            
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Co-Chair Kelly  drew attention to the proposed committee  substitute                                                            
Version  "B",  which was  introduced,  but  not adopted  during  the                                                            
previous  hearing. He  pointed out  that a provision  regarding  the                                                            
exemption  of nurses  was inadvertently  omitted  in this  committee                                                            
substitute,  which a proposed amendment  would reinsert.  He pointed                                                            
out  that this  amendment  reflects  an agreement  with  the  nurses                                                            
Senator Wilken  moved for adoption of CS SB 37 22-LS0323\B,  3/27/01                                                            
as a working draft.                                                                                                             
Without objection it was ADOPTED.                                                                                               
Amendment #1: This amendment  adds a new subsection on page 7, lines                                                            
15-19  of  the  committee  substitute  to  Section  1.  Chapter  50.                                                            
Collective Negotiation by Physicians. Sec. 23.50.020 as follows.                                                                
          (p) Nothing in this section shall be construed as                                                                     
     exempting  from  the  application  of the  antitrust  laws  the                                                            
     conduct  of providers  or  negotiations or  agreements  between                                                            
     providers  and a health benefit  plan if the purpose  or effect                                                            
     of the conduct, negotiations,  or agreements would be, directly                                                            
     or  indirectly,   to  exclude,   limit  the  participation   or                                                            
     reimbursement  of, or otherwise limit the scope  of services to                                                            
     be provided  by separate or competing classes  of providers who                                                            
     practice   or  seek  to  practice  within  the   scope  of  the                                                            
     occupational licenses held by the providers.                                                                               
Senator Wilken moved for adoption.                                                                                              
There was no objection and the amendment was ADOPTED.                                                                           
Amendment #2: This conceptual  amendment deletes Section 3, the July                                                            
1, 2006 sunset  date, from page 8, lines 30 and 31  of the committee                                                            
Co-Chair  Kelly moved for  adoption. He explained  this sunset  date                                                            
was inserted  in the  bill as a  result of  concerns over  increased                                                            
health care  costs. He assured that  most of the concerns  have been                                                            
addressed, such  as making the negotiations voluntary,  establishing                                                            
veto provisions  for both the carriers  and providers, that  "soften                                                            
the impact" of a worse  case scenario. He surmised that the need for                                                            
the sunset  is therefore  no longer  necessary and  warned that  the                                                            
insurance corporations  would wait  for the sunset date rather  than                                                            
participate in negotiations.                                                                                                    
The amendment was ADOPTED without objection.                                                                                    
Co-Chair  Kelly addressed  the Department  of Administration  fiscal                                                            
note that describes  possible impacts to the state  employees' self-                                                            
insurance plan.  He noted that the committee substitute  Version "B"                                                            
eliminates self-insured  plans from the negotiation requirements and                                                            
therefore,  there  would  be  no fiscal  impact  to  the  state.  He                                                            
recommended  the  Committee   adopt  a  zero  fiscal  note  for  the                                                            
Department of Administration.                                                                                                   
Senator Green asked the impact of the provision regarding self-                                                                 
insured plans.                                                                                                                  
Co-Chair  Kelly explained  that the state,  municipalities  and most                                                            
labor  organizations   would  not  be  required   to  abide  by  the                                                            
negotiation  requirements   established  in  this  legislation.   He                                                            
clarified  that physicians  would  not have  the  protection of  the                                                            
state action doctrine  if they entered into negotiations  with self-                                                            
insured organizations.                                                                                                          
Senator Green wanted to  know the segment of the population effected                                                            
by the removal of the self-insured from the legislation.                                                                        
Co-Chair Kelly did not know.                                                                                                    
Senator Wilken moved to  adopt a zero fiscal note for the Department                                                            
of Administration.                                                                                                              
Co-Chair Kelly  clarified for Senator Austerman that  the new fiscal                                                            
note would  delete reference  to a  potential $3.5  million to  $9.1                                                            
million increase to the state.                                                                                                  
Senator  Austerman  assumed that  health maintenance  organizations                                                             
(HMO) and similar organizations are not self-insured.                                                                           
Co-Chair Kelly  pointed out that there are no HMOs  operating in the                                                            
state, but there are preferred provider organizations.                                                                          
Senator   Austerman  asked   if  any  of   the  preferred   provider                                                            
organizations are self-insured.                                                                                                 
Co-Chair Kelly answered they are not.                                                                                           
Senator Hoffman asked about  the second paragraph of the fiscal note                                                            
analysis regarding  any increased  costs that would be borne  by the                                                            
employee, and  asked if the removal  of the self-insured  portion of                                                            
the bill would eliminate this.                                                                                                  
Co-Chair  Kelly responded  that the matter  was irrelevant  with the                                                            
proposed zero fiscal note.                                                                                                      
Senator Austerman  commented that the expenses shown  on the current                                                            
fiscal  note were  estimates and  that there  is no  way to know  if                                                            
health care costs would increase or not.                                                                                        
Senator Green  expressed that she  did not understand the  reasoning                                                            
behind  the  legislation.  She  judged  the  sponsor's  legislative                                                             
findings  to be questionable  and she did  not agree with them.  She                                                            
asserted  that there would  be a fiscal  impact as  a result  of the                                                            
bill.  She cited from the  findings, "There are however instances in                                                            
which a health benefit  plan dominates the market to the degree that                                                            
fair negotiations…" She  wondered how many people remained available                                                            
to  participate  in  the  negotiations  when  the  self-insured  are                                                            
removed  from the process.  She recalled  discussions regarding  the                                                            
impact  on the  Comprehensive Health  Insurance  Association  (CHIA)                                                            
caused by  changing health  care coverage for  state employees  to a                                                            
self-insured system.  She stressed that this action  removed a large                                                            
segment  of the population  from  private insurance  plans. She  was                                                            
concerned that  this legislation targets the small  group remaining.                                                            
Co-Chair Kelly  directed the discussion  to the motion on  the table                                                            
to adopt a fiscal note.                                                                                                         
There was no objection  and a zero fiscal note for the Department of                                                            
Administration was adopted.                                                                                                     
Senator Green  stressed that if a  fiscal note applies to  the state                                                            
and its  employees only,  it could be claimed  that the legislation                                                             
would have  an indeterminate  fiscal  impact, but  that it does  not                                                            
give assurance  to those with private insurance that  there would be                                                            
no cost  increase.   He requested  the Department  of Community  and                                                            
Economic Development address this concern.                                                                                      
Co-Chair Kelly did not  agree that the consumer costs would increase                                                            
an estimated 15 to 20 percent  as a result of this legislation. This                                                            
he explained  is because the program  is "completely voluntary".  He                                                            
stressed that  the insurance companies could decline  to participate                                                            
in  negotiations  and  the  physicians  would  have  no retaliation                                                             
options nor  could they  refuse patients  covered by that  insurance                                                            
Senator Green  expressed her concerns were based on  the size of the                                                            
pool of participants that are not self-insured.                                                                                 
[Note:  teleconference   connection  is  very  poor.   Much  of  the                                                            
testimony is inaudible.]                                                                                                        
BOB LOHR, Director,  Division of Insurance, Department  of Community                                                            
and  Economic   Development,  testified   via  teleconference   from                                                            
Anchorage that once the  self-insured participants are excluded from                                                            
the bill,  the number of  people covered  by this legislation  would                                                            
Mr. Lohr noted  that if physician  fees were negotiated at  a higher                                                            
rate, the increase could  result in a rise in the cost of insurance.                                                            
Senator Green wanted a percentage figure.                                                                                       
Mr. Lohr estimated "ten-percent  of the total published." [Continued                                                            
testimony inaudible.]                                                                                                           
Senator Green  asked if it is typical  that the remaining  privately                                                            
insured participates attempt to enter a self-insured pool.                                                                      
Mr. Lohr replied  there would be an  economic incentive to  increase                                                            
the volume  of  members in  an insurance  plan for  the purposes  of                                                            
negotiations.  He indicated that plan  administrators would  look to                                                            
do  this  or   possibly  reduce  benefits   or  eliminate   coverage                                                            
Senator Green asked about the impact on CHIA.                                                                                   
Mr.  Lohr explained  that  CHIA is  based on  the  number of  health                                                            
insurers  participating  in the market  and that  percentage of  the                                                            
total market.  He said  the assessment to fund CHIA is determined by                                                            
the board of  directors for CHIA.  [Additional comments inaudible.]                                                             
Co-Chair  Kelly  reiterated  earlier assumptions  that  health  care                                                            
prices would  increase because  of negotiated  prices. He  countered                                                            
that this legislation provides  either side with veto power and that                                                            
insurance  companies could  refuse to negotiate  fees. He  remarked,                                                            
"This constant  talk about prices being raised, I  think is uncalled                                                            
for.  It doesn't  follow  what is  in the  bill."  He admitted  that                                                            
quality of care  issues are a different matter, such  as determining                                                            
what procedures  constitute emergency services. He  noted that there                                                            
could be price increases in this area.                                                                                          
AT EASE 6:28 PM / 6:29 PM                                                                                                       
Senator Wilken  offered a motion to  report from Committee  CS SB 37                                                            
22-LS0323\B  as amended with forthcoming  zero fiscal note  from the                                                            
Department of  Administration, Division of Retirement  and Benefits.                                                            
Without objection, the bill MOVED from Committee.                                                                               

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