Legislature(1993 - 1994)
03/30/1994 01:41 PM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CHAIRMAN RIEGER introduced SB 367 (HEALTH CARE REFORM COMMITTEES) as the next order of business before the committee. GORDAN EVANS, representing the Health Insurance Agency of America (HIAA), said that he would be speaking to section 7 of SB 367. This section applies to the review and approval of premium rates and rating factors. The proposed amendment would change the mandatory prior approval of rates to a file and use approach. He suggested that the amendment should have additional language applying to AS 21.86 and 21.87. He informed the committee that the National Association of Insurance Commissioners' statistics show that eight states, including Alaska, do not make any provisions for filing or approval of health insurance premiums or rates. Nine states, mostly in the east and the south, require prior approval as this bill would. The file and use system is used in thirty-two states. Only one state requires use and file system. He said that the proposed amendment would place Alaska in with the majority of states requiring the file and use system. He pointed out that this amendment was approved in the House in the Governor's health care legislation. He stated that Commissioner Usera had indicated that the change they were seeking would still require filing of rates. This would decrease costs related to rate review, allow collection of data in an aggregate form, and place the review in the Division of Insurance. SENATOR LEMAN asked if nine states have prior approval. GORDAN EVANS said yes. CHAIRMAN RIEGER inquired as to the other portion of Mr. Evan's suggestion regarding what the Division of Insurance does. GORDAN EVANS clarified that a rate or rating factor must be filed with the director and a rate not yet filed cannot be used. The division is not given the ability to disapprove a rate. He reiterated the need to add similar language to AS 21.86 and 21.87. Number 372 DAVID WALSH, Director of the Division of Insurance, stated that for many years the division has wanted rate authority for health rates. In theory, he preferred prior approval. He acknowledged that prior approval could have problems if a regulatory authority does not do its job, a company could wait anywhere from 30 days up to 180 days. He said that such long waiting does not happen in Alaska. Consumers would best be protected with a prior approval statute. He thought that the amendment would be better than nothing; however, the Division of Insurance prefers prior approval. CHAIRMAN RIEGER asked what the difference was between prior approval and file and use with a deemer clause. DAVID WALSH said that they were similar. From a management perspective, prior approval is less likely to let something slip through; the division must make an affirmative decision. Mr. Walsh reiterated that the timeliness issue should not be a problem in Alaska. Prior approval provides quicker scrutiny. RICK URION, Alaska Employer's Coalition, stated that the Alaska Employer's Coalition is a group of Alaska employers who provide health insurance for their employees, both union and non-union. He indicated that the increasing cost of health care could be contributed to high tech medicine and increased utilization. He questioned the need to develop an entirely new system since most people are being served by the current health care system. He supported any reforms making health care more efficient, easier to obtain, and less costly. Increased governmental control would not produce any of those. He opposed the single payer system, employer mandates, and a community rating system. He supported: (1) allowing employers to put together their own health care plans, which are successful in serving many Alaskans; (2) expanding access to cover high risk individuals such as those with pre-existing conditions; (3) eliminating the waiting period; (4) pooling and subsidizing systems for those unable to afford coverage; (5) requiring health care providers to list their fees; and (6) malpractice reforms allowing health care providers to work in an atmosphere that does not necessitate wasteful, defensive medicine or expensive legal fees. Mr. Urion appreciated the efforts to address some of the problems. He liked the proposed method of obtaining data in SB 367. He said that they have a problem with section 11 on page 13 regarding the required provisions of the coordination of benefits. He opposed double dipping and did not see such language here, but 100 percent coverage is mandated under two policies. He preferred the option of allowing maximum coverage of the dominant policy. He did not oppose 100 percent coverage, but he did not want that to be mandated. He approved of the health care advisory committee and expressed the desire to participate in that committee; however, the direction of the committee is limited. He implied that the committee was heading in the direction of a single payer system due to the large pool with mandatory participation, community rating, and employer mandates. He expressed the need to take care of those who are not covered with little effect on those who are covered. Number 453 CHAIRMAN RIEGER noted that SB 201 did have a limit of 100 percent so as to eliminate someone profiting from having two claims. He did not believe it would be good policy to have total reimbursement for any claim in excess of 80 percent. He was open regarding the coordination of benefits. RICK URION said if an employer is buying those policies, then they could say that nothing would cover more than the dominant policy no matter how you split it between the two policies. SENATOR SHARP explained that he maintained two policies from a previous employer due to a pre-existing condition. With the premiums he paid, he expected 100 percent paid on his claims. He believed that if the individual pays one of the premiums, then receiving 100 percent would be acceptable. RICK URION agreed. Mr. Urion said that if someone else pays the premium, then there is a problem. SENATOR SALO did not understand why there would be a problem when they are receiving two premiums. RICK URION clarified that the insurance companies are getting the premiums. SENATOR SALO felt that if an individual pays two premiums, then it would seem to be appropriate to have more coverage than the dominant policy. RICK URION said that he would assume that the premium would be less if the coverage does not exceed the dominant policy. SENATOR LEMAN concluded that it would be better to allow the employer the option to choose the 100 percent coverage and pay the additional amount or the employer could choose the dominant policy which could result in cost savings. SENATOR SALO asked if under the current state health insurance, an individual can choose not to take the health insurance. She noted her personal experience when she was appointed to the House; she was told that she had to take the state's health insurance. SENATOR SHARP said that he had been told the same. SENATOR SALO suggested that should be changed. Number 502 CHAIRMAN RIEGER inquired as to Mr. Urion's comment regarding the nature of the committee. RICK URION explained that on page 19, line 23 creates a mandatory system for everyone and page 4, line 20 refers to community rating. Mr. Urion also pointed out that page 20, line 27 specifies that the premium payment would be paid by a payroll deduction, employer contribution, or a combination of both which seems to indicate an employer mandate. CHAIRMAN RIEGER stated that SB 367 attempts to reveal a representation of mandatory participation, but not mandating participation. This would provide information that would allow better informed decisions. Chairman Rieger addressed single rating. He pointed out the exception to single rating on page 20, lines 10 and 11. This allows rates to vary dependent upon individual responsibility. He agreed that it could be administered through the payroll system if one was employed; however, the bill does not specify that the employer or the employee would pay. Chairman Rieger concluded that SB 367 attempts to set some guidelines while not writing the health care bill. RICK URION said that he did not oppose revealing what may occur, but it had made him nervous. SENATOR LEMAN inquired as to where the support for subsidies would come. RICK URION explained that support for subsidies should come from a broad base community. Mr. Urion opposed an employer mandate. DAVID WALSH stated that Commissioner Usera had informed him that the administration had not taken a position on SB 367. He noted that the Division of Insurance's fiscal note was not complete. There are other components such as the committee, the public involvement process and others that are being done in the fiscal note for DHSS. He explained that many of the numbers in SB 367 were taken from portions of SB 367 which mirror portions of previous bills. He pointed out that the capital expenditure figure represents a direct transfer of the contracted out services for the functions contained in this fiscal note. The Division of Insurance's portion is reasonable, accurate, and reflects the functions SB 367 places in the Division of Insurance. He felt that the coordination of benefits was an important goal. He related an example regarding double dipping. TAPE 94-24, SIDE B Mr. Walsh commented that SB 367 and SB 201 would provide all the legal tools necessary to solve the problem of double dipping. Number 584 CHAIRMAN RIEGER asked if there was something in SB 201 that was not present in SB 367. DAVID WALSH said no. SENATOR ELLIS inquired of the missing portions of the fiscal note of the administration besides the Governor's office submission. DAVID WALSH indicated that a data collection portion of the fiscal note was being worked on by DHSS. SENATOR ELLIS clarified that two portions of the fiscal note are coming. CHAIRMAN RIEGER noted that there was also a fiscal note from the Department of Revenue. SENATOR ELLIS asked Mr. Walsh to explain the $100,000 cost for legal representation regarding the federal waiver process. DAVID WALSH stated that there would be a number of stages and waivers no matter the type of health reform that takes effect. Mr. Walsh said that he had heard two different federal views on the waiver issue: one view is that the waivers would be automatic, while another view is that it would be similar to the Medicare supplement regulations with federal mandates. The $100,000 amount is an estimate and a very speculative amount since the waiver process has not been decided. SENATOR ELLIS asked which portion of SB 367 requires the federal waivers. DAVID WALSH explained that anything that the state does would require a series of federal waivers depending upon the position at the federal level. There would also be a federal oversight role which would review each time the state adds a new service or changes the program in order to assure fulfillment of the federal requirements. He reiterated that without any federal guidelines, the process and its cost are only guesses. SENATOR LEMAN inquired as to Mr. Walsh's reaction to removing the option of an employer to provide up to the maximum of the dominant plan. DAVID WALSH stated that it would be a policy call that the legislature and the Governor should decide how far the mandates go and if there should be exceptions. Personally, Mr. Walsh said that there must be strong triggers within the system in order to assure participation. He expressed concern "that the more wiggle room there is in terms of participation, the greater the opportunity for mischief." CHAIRMAN RIEGER asked for a clarification on the data collection portion of the fiscal note regarding DHSS. DAVID WALSH said that he had been incorrect, it was not data collection. Number 520 REED STOOPS, AETNA representative, concurred with Mr. Evans' testimony on rate regulations in section 7; he also preferred the file and use system over the prior approval system. He pointed out that a prior approval system would create problems: there are no time limits on the rate approval, the Norman & Roberts study illustrates that prior approval in other states resulted in less competition of insurers, and rate regulations for insurers is not effective in decreasing health costs because most money received through premiums goes back to providers. SB 367 does not address regulating provider rates. He indicated that they support the adopted House version. Mr. Stoops stated that pages 19 and 20 appear to charge the advisory committee with pricing a pool on the assumption that all Alaskans would be in the same pool. Perhaps, that is only for the purpose of pricing, but they prefer that the advisory committee be charged with reviewing those now insured for pricing. He suggested that subsection (d), paragraph (1) on page 19 be clarified. If the intention of that section is to put everyone in a single pool, then they recommend that the pool be limited. Mr. Stoops appreciated the committee allowing written testimony by Mr. Steve LeBrun on SB 201 be submitted at this hearing. He expressed concern with the provision of SB 201 which would change the coordination of benefits, therefore, requiring that a 100 percent claim be paid when two policies cover the same claim. He agreed that an employer should have the option to choose the 100 percent plan or the less restrictive model. The 100 percent option is clearly more expensive. He suggested a comparison by the Division of Insurance regarding the current regulations to the new regulations provided under SB 201; this would provide a better idea of the reasoning behind the suggested changes to the system. SENATOR ELLIS asked if rate approval in other states had ever lead to withdrawal of AETNA. REED STOOPS said that he would provide that information at the next hearing. SENATOR LEMAN asked what would be the general difference in cost between a 100 percent coverage policy or a dominant policy coverage if section 11 was adopted. STEVE LEBRUN thought that it would not have a significant impact. Perhaps, a couple percent of the total health care. Mr. LeBrun noted that when an employer pays benefits, any lesser payments made on a secondary plan would be reflected in their claim experience resulting in adjusted rates. A plan requiring contributions would provide information to the individual so that they would know if the additional coverage was worth the contribution. CHAIRMAN RIEGER asked if a couple percent would be around $5 to $10. STEVE LEBRUN agreed with that estimate. An average family premium with $500 would be around the $10 or $20 range. SENATOR LEMAN asked if an employee would be allowed to pay the additional cost for the added coverage if the coordination of benefits was not mandated. STEVE LEBRUN said that it would create administrative complexity to offer those dual options. Mr. LeBrun felt that it should be done on an "either or" basis at the employer policy level. CHAIRMAN RIEGER informed the committee that staff was inquiring of the Division of Insurance's explanation of the difference between statutory provisions in SB 367 and current regulations. He encouraged the committee to think about the policy issues. He noted the presence of amendments to SB 367. Number 390 SENATOR LEMAN offered the first amendment. AMENDMENT 1 Page 19, line 26: Delete "prematernal" Insert "prenatal" Page 19, line 29: Delete "prematernal" Insert "prenatal" Page 19, line 30: Delete "prematernal" Insert "prenatal" SENATOR LEMAN moved Amendment 1. SENATOR ELLIS objected. SENATOR ELLIS inquired as to the intentions or implications of the change. SENATOR LEMAN said that he had never seen the term "prematernal" nor had others in the medical profession, no one could explain that term. After discussing it with Chairman Rieger, they agreed that it was meant to mean "prenatal" which resulted in the change. CHAIRMAN RIEGER agreed that the intention was to use the term "prenatal." SENATOR ELLIS requested that the drafter be asked why the term "prematernal" was used instead of "prenatal." SENATOR LEMAN withdrew Amendment 1 with the consent of the committee. He offered Amendment 2 following the offering of Amendment 1. AMENDMENT 2 Page 19, after line 27: Insert a new paragraph to read" "(3) health care services that may not be covered include elective abortions;" DR. RODMAN WILSON stated that overall SB 367 is a great improvement over the Administration's bills, SB 270 or HB 414. SB 367 needs some improvements. He noted that he had sent the committee a list of suggestions to SB 367. He discussed aspects of SB 367 which he felt were commendable. He recommended reviewing the price listing of providers; hospitals are not covered. He suggested that the provider be required to submit their prices to the Department of Commerce and Economic Development which could act as a restraint on the providers. He commended the section on health care data collection as well as the cigarette tax. He requested that the committee review the advisory committee. The advisory committee seems weak and its functions are not well worded. He suggested that a subcommittee could do those functions. Number 297 BONNIE NELSON, Alaska Public Interest Research Group (AKPIRG), said that SB 367 was an incremental step forward which clearly specifies what would be studied. The definitions of the benefits package is one of the most important items as well as single pooling. She supported mandatory participation and community rating which should be the most cost effective while providing the best quality and equality of health care. The majority of people would pay less as well as the employers. She expressed the importance of eliminating the pre-existing conditions clause which SB 367 addresses. She indicated opposition to experience ratings and the Tort Reform portions of the bill. She blamed the high liability insurance rates on outside insurance companies; therefore, reform that reviews that issue should be looked over. SENATOR ELLIS asked if Ms. Nelson had a comment on the make-up of the advisory committee in the office of the Governor contained in SB 367. BONNIE NELSON stated that AKPIRG was opposed to having provider expert control. The make-up of the advisory committee should be of reasonable and intelligent people such as architects and accountants. Health care providers and malpractice attorneys would not be neutral, they would have a conflict of interest. Ms. Nelson did not oppose a retired industry worker, a retired nurse or physician, who would not have a monetary gain. Ms. Nelson supported rate approval within the Division of Insurance, but she expressed the need for more public involvement in that process. Rate approval of health care providers in hospitals is also necessary. Ms. Nelson felt that there would be greater individual choice with more government regulations rather than outside insurance industries. AKPIRG supports neutral negotiations between providers and consumers and policy-makers. DENNY DEGROSS agreed with Dr. Wilson that SB 367 is a step forward from the Governor's bill. He expressed concerns with SB 367: organizations would not be able to respond in a timely manner, and the location of the data gathering and manipulation functions. He discussed the resulting problems when Environmental Health was taken out of DHSS. He was concerned with moving the data portion of the bill out of DHSS, the state's primary protection for public health. Most industrial countries have a better ratio of dollars spent in their health system to health status than does the U.S. He indicated that the U.S., unlike those countries, separates medicine and public health. He suggested more emphasis on public health in SB 367. Number 119 DARYL NELSON related his own personal experience with these issues. He did not believe that insurance companies should make choices for him regarding the care he received. He expressed concern with the Tort Reform statements of this bill. A large amount of parents with children who are effected, did not or will not know about the law. He did not believe that Tort Reform would help the majority of the people with health care. CHARLES MCKEE noted that he was presenting information given to him by a security officer in the United States Airforce. He said that the information referred to line 25 on page 10, line 21 on page 8, line 17 on page 10, and page 18. TAPE 94-25, SIDE A CHARLES MCKEE said that the committee was not aware of the crimes of counterfeiting, forgery, and accepting claims as well as actuaries making appropriations to doctors and the medical community. Number 036 CHAIRMAN RIEGER closed the public hearing on SB 367 after inquiring of others desiring to testify. He informed the committee that the definition of "prematernal" was more open ended, going back prior to motherhood. "Prenatal" generally deals with the period from conception to delivery. He said that the drafter explained that "prematernal" was used due to its presence in earlier drafts. Chairman Rieger stated that "prenatal" was the intention in the wording of the bill. SENATOR LEMAN moved to adopt Amendment 1. Hearing no objection, Amendment 1 was adopted. Senator Leman said that he would offer Amendment 2 at the next hearing of SB 367. CHAIRMAN RIEGER noted the presence of two more amendments in the committee's packets and suggested that there may be other amendments. He held SB 367 until Wednesday, April 6, 1994.
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