01/21/1998 09:00 AM Senate HES

                                                                               
          SB 197 - REGULATING HEALTH MAINTENANCE ORGS.                         
                                                                               
CHAIRMAN WILKEN called the Senate Health, Education and Social                 
Services (HESS) Committee to order at 9:05 a.m.  Present were                  
Senators Green, Leman, and Ellis.  Senator Ward arrived at 9:07                
a.m.  The Chairman announced the committee would first continue                
taking public testimony on SB 197, and then take up SB 146.                    
                                                                               
QUINN MCKENNA, Operations Manager for Managed Health Physician                 
Integration and Business Development for Providence Health System              
in Alaska, testified via teleconference.  Mr. McKenna raised two               
concerns with SB 197.  The first was the provision mandating                   
coverage for chiropractic services, because any change to the way              
HMOs function may inhibit their ability to control costs. Last year            
health care inflation nationwide was 1.9 percent, a dramatic                   
decrease from the spiraling double-digit inflation of prior years.             
That decrease is attributable to the tools used by managed care                
plans: the ability to define benefit packages; to control and offer            
networks volume in exchange for price discounts; and the ability to            
control who is in and out of the network with regard to quality.               
Consumers currently have the choice of getting services from a                 
managed care plan or a traditional indemnity insurance plan with a             
free choice of providers.  If HMOs are mandated to look more like              
traditional indemnity plans, the price differential will change.               
                                                                               
MR. MCKENNA'S second concern was a lack of clarifying language in              
Section 3 which specifically prohibits HMOs from reimbursing                   
physicians for denying or delaying coverage.  Federal regulations,             
known as STARK 2 (ph), address this issue and agree with the                   
language in Section 3, but make it clear that a physician can be               
reimbursed for developing clinical pathways for a group of                     
patients.  This provision allows HMO providers to treat all                    
patients in the same manner, but disallows singling out one patient            
for a different level of care.  This is a second tool used by HMOs             
to control health care costs nationwide.                                       
                                                                               
There being no questions of the witness, and no further testimony,             
SENATOR GREEN moved SB 197 out of committee with individual                    
recommendations and accompanying fiscal notes. SENATOR LEMAN                   
objected for the purpose of making a brief statement.                          
                                                                               
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SENATOR LEMAN stated that other providers have expressed interest              
in having protections similar to those offered to chiropractors in             
Section 2 and asked Senator Donley why no other providers are                  
included in the bill.  Senator Leman said he would like to see that            
issue addressed before the bill reaches the Senate floor and then              
removed his objection to the motion.                                           
                                                                               
SENATOR ELLIS stated although he is a co-sponsor of SB 197 and                 
supports it in its current form, he believes this is the                       
appropriate committee to address the concerns raised by Providence             
Hospital staff.                                                                
                                                                               
SENATOR DONLEY responded that he worked on this legislation with               
various interest groups over a four-month period last year, and                
introduced it last session so that everyone would have notice of it            
and could provide feedback during the interim.  During that time he            
worked with the Alaska Medical Association and developed a formula             
that addresses some of Mr. McKenna's concerns and he added SB 197              
contains provisions for cost containment of chiropractic services.             
He empathized with other groups who want similar protections,  but             
said the Legislature is in the second year of this session, and                
addressing those concerns at this time could prevent action on this            
bill, achieving nothing.  He stated he is willing to work with                 
those groups but felt it is not the right policy call to use this              
piece of legislation as the vehicle to address those groups'                   
concerns at this time.                                                         
                                                                               
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SENATOR ELLIS asked about the new issue raised by Providence staff             
regarding physician compensation and the ability of groups of                  
physicians in various specialties to establish clinical protocols.             
He and Senator Duncan talked to many physicians who generally                  
wanted no reform.  However, the national trend has been to develop             
protocols to determine what kind of practices and care within a                
certain scope would be compensated by third party payers and HMOs.             
The national trend was prompted by genuine concern about patient               
care and because the establishment of protocols could limit those              
practitioners from liability.  Senator Ellis said Mr. McKenna is               
concerned that the language in SB 197 could be misconstrued to                 
preclude innovation by other specialities.                                     
                                                                               
SENATOR DONLEY said that the language in SB 197 was taken from                 
other states that used the initiative process to deal with abuses              
by HMOs in those states.  The situation had become serious enough              
that people forced the issue via the ballot.  SENATOR DONLEY                   
thought the picture painted by the previous witness was not                    
entirely accurate.  He did not believe the language contained in SB
 prohibits appropriate clinical protocols; the language could be            
interpreted that way but the chance of it prohibiting legitimate               
cost containment procedures is very, very slim.                                
                                                                               
SENATOR ELLIS asked who will decide appropriate protocols.  SENATOR            
DONLEY answered the Division of Insurance regulates those matters,             
and will have to resolve questions as they come up over time.  To              
write a bill that specifies those concerns would require 40 pages              
and it would be obsolete within six months.                                    
                                                                               
SENATOR ELLIS did not think the bill should include specific                   
clinical protocols, but should specify who would arbitrate and what            
protocols are appropriate.  SENATOR DONLEY thought the Division of             
Insurance would be able to address the problems through its hearing            
process, and noted any action on the division's part would be                  
initiated by consumer complaints.                                              
                                                                               
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SENATOR ELLIS thought most people would agree that a peer review               
panel of chiropractors can decide reasonable clinical protocols for            
that scope of practice, and that other specialties could do the                
same for their own practices. He noted the Division of Insurance               
would be conducting passive enforcement, rather than active                    
enforcement, if it only takes action when consumers complain.                  
                                                                               
SENATOR DONLEY commented it would be important that peer reviews               
occur independently of HMOs.                                                   
                                                                               
SENATOR ELLIS suggested getting model language from other states to            
clarify the intent of the bill.  He expressed concern that the                 
Division of Insurance may not be adequately staffed and have the               
appropriate level of expertise to determine whether clinical                   
protocols and the related cost aspect are in the public's best                 
interest.  SENATOR DONLEY said the highest complaint response                  
activity within the Division of Insurance is with health insurance,            
therefore they do have staff specifically trained in that field.               
                                                                               
SENATOR ELLIS asked if that is the one area they are currently                 
prohibited by state law from knowing what the insurance companies              
are doing.  SENATOR DONLEY answered the only thing they are                    
prohibited from knowing is rate review, but they do regulate the               
administration of the insurance process to ensure that the                     
companies are treating people fairly.  SENATOR ELLIS said in a very            
important aspect they are blind.  SENATOR DONLEY agreed that a gap             
exists in that area.                                                           
                                                                               
There being no further objection, CHAIRMAN WILKEN announced the                
motion to pass SB 197 to the next committee of referral with                   
individual recommendations passed.