Legislature(1999 - 2000)
02/23/2000 01:35 PM Senate HES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 256-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE
SENATOR WILKEN moved to adopt the proposed committee substitute for
SB 256 (Version G) as the working document of the committee. There
being no objection, the motion carried.
JEFF DAVIS, Executive Director of Blue Cross Blue Shield of Alaska,
made the following comments. From Blue Cross's perspective, the
intent of SB 256 is to address inequities in bargaining power
between physicians and insurers - however, Blue Cross's experience
suggests that inequities are not the case in Alaska. Blue Cross
began talking with Alaskan physicians in 1989 about potential
agreements. Approximately 1,750 licensed physicians practice in
Alaska. After 11 years of work, Blue Cross has agreements with
approximately 700 physicians, which shows that Blue Cross does not
have extraordinary market power in Alaska. Aetna, the largest
insurer in the State, has made repeated attempts to negotiate
contracts with physicians and, according to an Aetna source, as of
yesterday Aetna has contracts with approximately 100 physicians.
Blue Cross understands that, amongst the other insurers in the
State, some may have a handful of contracts but most have none at
all.
MR. DAVIS repeated that Blue Cross does not have extraordinary
market power in Alaska because it has been unable to convince any
physicians in many specialties to join. He pointed out that Blue
Cross has made numerous attempts to make easier interactions
between physicians and Blue Cross members. Many physicians prefer
to collect full payment upfront from the patient. Physicians
agreed to bill Blue Cross directly and, in exchange, Blue Cross
agreed to pay physicians directly. Many members appreciate that
part of the agreement. Physicians also agreed to be credentialled
by Blue Cross. That process is done using national committee for
quality assurance criteria. The point of the credentialling
process is to give Blue Cross members additional confidence in the
physicians who are part of the network. Physicians also agreed to
cooperate with Blue Cross's care management program. That program
focuses on the appropriate setting of care for a particular member.
MR. DAVIS noted that physicians also agreed to refer members to
network providers, a point that was discussed by the committee at
a previous hearing. He provided verbatim language from a standard
Blue Cross contract which speaks only to hospitals and reads:
The provider agrees to arrange for admission of preferred
enrollees only to preferred hospitals provided that one is
available locally and, in the professional judgement of the
provider, admission to that preferred hospital will adequately
provide the enrollee's medical care needs.
MR. DAVIS said the decision as to where the patient's needs will
best be met is left to the physician.
MR. DAVIS stated the contracts also contain a 30 day termination
clause for the protection of both parties. If at any time a
physician says the agreement is not working, the physician can
terminate the agreement, and vice versa. In his five years of
experience, only one physician terminated because he did not want
to fill out the credentialling paperwork.
MR. DAVIS noted that Blue Cross is regulated by the Division of
Insurance with respect to how it determines usual, customary and
reasonable fees. Alaska statute requires Blue Cross to use Alaska
data, adjust the data by region, and review it every six months.
When Blue Cross looks at the data, it looks at each procedure code,
known as a CPT 4 code. All charges in the 12 month sample are
examined to determine, what physicians in Alaska have charged and
where the 90th percentile lies. The contract says that if the
physician's charge is less than the 90th percentile, then the
entire charge is covered. If the charge is above the 90th
percentile, the physician agrees to accept the 90th percentile and
the member will not be billed for the additional amount. The
contract results in members being protected from amounts over the
usual, customary and reasonable fee.
MR. DAVIS explained that Blue Cross identifies physicians who it
wants to have a discussion with in several ways: through member
requests, because of a gap identified in the network, or because
physicians contact Blue Cross. Blue Cross usually makes contact by
phone or in person. Blue Cross recently went through a push to
recruit. Since last October, Blue Cross has contacted about 140
physicians. Of those, 33 declined immediately, 91 requested more
information and are engaged in ongoing discussions with Blue Cross,
and 15 have reached agreements.
Regarding concerns raised about the federal employee program at the
last meeting, MR. DAVIS said of the 105,000 Blue Cross members,
35,000 are federal employees. The rules for the federal employee
program are set by the federal office of personnel management in
Baltimore.
SENATOR WILKEN asked if Blue Cross has a "hole" and has no contract
with a surgeon, how much Blue Cross reimburses.
MR. DAVIS said the terms of payment are dictated by the member's
contract with Blue Cross. The member's contract could say that
Blue Cross may pay 80 percent up to the allowable limit. The
difference is if there is a contract, the member is not responsible
for the amount over. If there is no contract, the balance is
between the member and the physician.
SENATOR ELTON asked if Bartlett Memorial Hospital is a preferred
hospital.
MR. DAVIS said it is.
JERRY REINWAND, a lobbyist for Blue Cross, commented that Blue
Cross has been unable to analyze what costs, if any, SB 191 will
have on subscribers. Blue Cross is concerned about the rise in the
medical consumer price index versus other consumer price indexes.
Any changes that have the potential to impact the price of health
care are of concern to Blue Cross. At Monday's meeting, a
testifier made the statement that physicians are having a very
difficult time with insurers, a statement which Blue Cross finds
befuddling.
MR. JIM JORDAN, Executive Director of the Alaska State Medical
Association, explained the amendments made in the proposed
committee substitute. First, the scope of the bill was increased
to go beyond insurance plans. That change was made through the
inclusion of intent language and by changing "health care insurer"
to "health benefit plan." Two other changes were made. Blue Cross
was concerned that only when negotiations involve fee related items
does the mechanism kick in whereby the criteria for the substantial
market share has to have been met by the insurer. Blue Cross is
concerned about how the number of folks covered will be determined.
That can take a great deal of work by a state agency. One of the
amendments provides for a rebuttable presumption so that when a
group of physicians, represented by an authorized third party,
requests of the Commissioner of the Department of Labor that the
process begin, the other party would be notified and given an
opportunity to rebut that presumption if it chooses to do so. The
last change adds a new section on page 10, AS 23.50.040, that
allows a health benefit plan to initiate the negotiation process by
making a request of the Commissioner when the health benefit plan
wishes to discuss fee related items with a group of physicians when
they do not have a substantial market share. This allows health
benefit plans to initiate the process and voluntarily ask the
commissioner to provide oversight and allow negotiations under the
state action doctrine exceptions.
SENATOR ELTON asked if physicians will be able to collectively
negotiate fees with the state about the state's self insurance
plan.
MR. JORDAN said it will and said he discussed that topic at length
with the drafter who created the mechanism.
SENATOR ELTON asked about the fiscal note.
CHAIRMAN MILLER pointed out the bill will be reviewed by the Senate
Finance Committee.
SENATOR ELTON asked whether the 30 percent requirement on page 8
pertains to the physicians in a particular specialty and whether it
only kicks in if the health benefit plan has more than five percent
of the local market.
MR. JORDAN said not quite. He indicated it means that an
authorized third party may not represent more than 30 percent,
however, an authorized party may represent more than 30 percent if
the health benefit plan has more than five percent of the market
share in a particular area. The reason that provision was included
is because of concern for rural areas where there may be very few
physicians.
SENATOR ELTON asked what the effect is of this provision on small
health care plans that do not have more than five percent of the
market share in a local community but where another health plan may
have more than five percent. He expressed concern that a small
insurer, who has less than five percent, may be driven out of the
market.
MR. JORDAN said that is why the bill was changed to allow for
voluntary participation. There are circumstances in which a small
insurer may not have that market share but can ask for oversight
under AS 23.50.040 (page 10, lines 8-10).
SENATOR ELTON said the bill essentially says a small health care
plan either conforms or disappears because the market threshhold
would be difficult for them to meet.
MR. JORDAN said that is correct but he does not see how they would
disappear because they would be allowed to voluntarily enter into
negotiations.
SENATOR WILKEN asked who authored the document entitled, "Response
to Comments by Gordon Evans" in committee members' packets.
MR. JORDAN said he wrote it.
MR. MIKE HAUGEN, representing Alaska Physicians and Surgeons,
stated that, in his opinion, Blue Cross is not the issue. The
issue is freedom of communication between doctors to discuss
patient protection and physician issues and managed care contracts.
Without the protections offered by this bill, physicians are
effectively gagged from discussing terms of contracts among
themselves, and not just the financial aspects. If the contracts
were about the financial aspects only, they would be one-half page
long. A typical contract is 15 to 20 pages. While it is true that
Blue Cross has negotiated term changes with some of the 700
contracts, many physicians have told him that because of Blue
Cross's large footprint in Alaska, they have to sign the contract
as is because they cannot afford to lose that much business. The
physicians in Fairbanks have incurred huge legal fees and had to
undergo one year of FTC scrutiny because of an anonymous complaint
phoned into the FTC. Under the current messenger model it is too
easy for a party with an axe to grind to notify the FTC and claim
that doctors are trying to boycott or price fix. SB 256 requires
state oversight to ensure that physicians are not boycotting or
price fixing. Again, the process is voluntary on everyone's part.
SENATOR PETE KELLY moved CSSB 256(HESS) with its accompanying
fiscal note to the next committee of referral.
SENATOR ELTON objected and said that intellectually, he does not
have a problem with people getting together and bargaining as a
group and that he will vote to move it on but he is very interested
to see what the Finance Committee finds.
SENATOR KELLY thought Senator Elton's concerns are valid and will
create a change, but he remarked the entire health care industry is
changing by quantum leaps. Alaska's doctors are quite isolated and
many of them are attached to a few health care plans, so they are
at a disadvantage to city doctors in other states. Other states
are choosing to go with this model as well.
CHAIRMAN MILLER agreed that both comments are valid and that the
legislature needs to know what all of the ramifications of the bill
will be. He noted that since less than 80 days are left in this
session, it is time to move the bill on so that some of the
questions can be answered by the Finance Committee.
CHAIRMAN MILLER announced that with no further objection, CSSB
256(HES) moved from committee.
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