Legislature(2001 - 2002)

01/22/2001 01:30 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB  37-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE                                                                   
                                                                                                                                
MR. KRISTOPHER KNAUSS, legislative aide to Senator Pete Kelly, read                                                             
the following sponsor statement.                                                                                                
                                                                                                                                
     Senate  Bill  37 levels  the playing  field  for Alaska's                                                                  
     patients and the physicians  who care for them.  It allows                                                                 
     independent,  competing  physicians to  jointly negotiate                                                                  
     contract  provisions  with  insurance  companies  without                                                                  
     violating  federal anti-trust laws.  However,  it includes                                                                 
     a clearly  established  process to be  followed for  these                                                                 
     joint  negotiations  to occur  and involves  active  state                                                                 
     oversight  as required  for a state  action doctrine.   By                                                                 
     allowing  joint negotiations  to  occur, a  more fair  and                                                                 
     equitable   negotiation   process  between   doctors   and                                                                 
     insurance  companies is created and doctors are  given the                                                                 
     ability to better protect their patients.                                                                                  
                                                                                                                                
     SB 37 is not a union-creating  device. It is not mandatory                                                                 
     for either  the doctor or an  insurance company to engage                                                                  
     in these negotiations.                                                                                                     
                                                                                                                                
     SB 37  is needed because health  management organizations                                                                  
     (HMOs) do not yet exist  in Alaska, it is likely that they                                                                 
     will be established  here in the future.  Currently  there                                                                 
     are  preferred  provider organization  (PPO)  plans  that,                                                                 
     while  not  as  restrictive   as HMOs,   can limit   which                                                                 
     specialists  a  doctor  may refer  a  patient to,  or  the                                                                 
     treatments  a doctor  may prescribe.   SB  37 would  allow                                                                 
     doctors to  negotiate with insurers on these limitations.                                                                  
                                                                                                                                
     Currently  patients  have no  advocates other  than  their                                                                 
     doctors.   By  allowing  doctors  to discuss  and jointly                                                                  
     negotiate   definitions  such   as  "medical  necessity,"                                                                  
     patients  can receive better  care.  Physicians could  use                                                                 
     their own judgment in determining  medical emergencies and                                                                 
     would not  be required to rely on the insurance  company's                                                                 
     interpretation of undefined contract terms.                                                                                
                                                                                                                                
     For  example, if a patient  visits the  doctor to have  an                                                                 
     injured  knee examined, the doctor  may recommend an  MRI.                                                                 
     Next  the doctor must  contact the  insurance company  for                                                                 
     approval.  If the insurance  company does not approve this                                                                 
     treatment,  but instead  recommends physical  therapy  for                                                                 
     two weeks, the doctor must  relay that to the patient.  In                                                                 
     order for  the insurance company to pay for the  patient's                                                                 
     care, the doctor must follow  the insurance company's idea                                                                 
     of good  medicine, one that is  based on the bottom  line.                                                                 
     If  doctors  could   negotiate  contractual  terms,   that                                                                 
     patient could receive the  MRI and the course of treatment                                                                 
     could  follow the doctor's recommendations,  not costs  to                                                                 
     the insurer.                                                                                                               
                                                                                                                                
MR. KNAUSS  introduced Mr. Mike Haugen,  Executive Director  for the                                                            
Alaska Physicians  and Surgeons,  and said  that Mr. Haugen  will be                                                            
able to  answer any technical  questions  the committee members  may                                                            
have.  Mr.  Knauss commented that  SB 37 was originally SB  256 from                                                            
last year's session.   SB 256 passed the Senate and  ran out of time                                                            
in the House.                                                                                                                   
                                                                                                                                
Number 249                                                                                                                      
                                                                                                                                
SENATOR COWDERY asked if  other states have implemented this type of                                                            
program.                                                                                                                        
                                                                                                                                
MR. KNAUSS  responded that the states  of Texas and Washington  have                                                            
implemented this type of program.                                                                                               
                                                                                                                                
SENATOR  COWDERY asked  if there  have  been any  major problems  in                                                            
Texas and Washington.                                                                                                           
                                                                                                                                
MR. KNAUSS responded that there have been no major problems.                                                                    
                                                                                                                                
Number 307                                                                                                                      
                                                                                                                                
SENATOR  THERRIAULT   asked  if  SB   37  was  drafted  from   model                                                            
legislation.                                                                                                                    
                                                                                                                                
MR. KNAUSS  responded that it was  drafted after the Texas  statute,                                                            
but SB 37 is more detailed than the Texas version.                                                                              
                                                                                                                                
SENATOR THERRIAULT  said that he has  talked with Darren  Whitehurst                                                            
who is  staff to  Texas Senator  Harris.   Mr.  Whitehurst has  been                                                            
working with  the Texas attorney general  (AG) on implementation  of                                                            
their statute.   Mr. Whitehurst indicated  there have been  a lot of                                                            
problems  with the proposed  "reg"  packages.  One  problem is  that                                                            
groups that  have been formed  have the right  to negotiate,  but in                                                            
getting together groups  of doctors to put the groups together, they                                                            
still  ran  afoul of  either  the  Texas or  the  federal  antitrust                                                            
statutes.   Senator Therriault asked  if this potential problem  has                                                            
been dealt with in the language of SB 37.                                                                                       
                                                                                                                                
Number 422                                                                                                                      
                                                                                                                                
MR. MIKE HAUGEN, Alaska  Physicians and Surgeons (APS), responded by                                                            
saying that this is a new  issue that he has not heard of before and                                                            
he will  look  into the  problem.   He said  he finds  the  question                                                            
interesting  because at what  point does a  protection under  a bill                                                            
like this engage if you  are simply trying to get a group of doctors                                                            
to decide whether or not they are going to negotiate.                                                                           
                                                                                                                                
MR.  HAUGEN indicated  he  has submitted  written  testimony to  the                                                            
committee.                                                                                                                      
                                                                                                                                
Number 472                                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR asked if  Alaska could amend or change federal anti-                                                            
trust requirements if Alaska  law states that it is no longer within                                                            
the area of control of antitrust.                                                                                               
                                                                                                                                
MR.  HAUGEN responded  that  under  the state  action  doctrine  the                                                            
Supreme Court  set out an exemption from the federal  antitrust laws                                                            
that effectively  gave states the authority to create  an exemption.                                                            
This is what APS is asking the State of Alaska to do.                                                                           
                                                                                                                                
CHAIRMAN  TAYLOR  asked if  the  primary  purpose of  SB  37 was  to                                                            
bargain  for or  gather together  plans,  as opposed  to fixing  the                                                            
price for any given service.                                                                                                    
                                                                                                                                
MR. HAUGEN  said it could be for both,  depending on whether  or not                                                            
the carrier  has what is  deemed substantial  market power.   Alaska                                                            
has two large carriers,  Aetna and Blue Cross.  The percentage rules                                                            
would deem  both carriers to have  substantial market power.   Under                                                            
these  guidelines,  a  group  of  physicians  would  be  allowed  to                                                            
negotiate fees,  provided that the carrier and physicians  wanted to                                                            
negotiate and the AG approved  the negotiations.  In other words, it                                                            
is completely voluntary, even the fee component.                                                                                
                                                                                                                                
CHAIRMAN TAYLOR  said he thought fees were not authorized  in SB 37.                                                            
                                                                                                                                
MR.  HAUGEN said  that fees  are authorized  provided  that  certain                                                            
requirements are met.                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR  requested a copy  of the federal law that  provides                                                            
for  the  exemption,  because  Mr. Haugen  has  indicated  that  the                                                            
federal government has  modified the definition of antitrust so that                                                            
doctors can negotiate for price.                                                                                                
                                                                                                                                
MR. HAUGEN commented that  this is a question that the committee may                                                            
want to raise with Mr.  Jordan of the state medical association.  To                                                            
Mr.   Haugen's  knowledge,   lawyers   for  the   American   Medical                                                            
Association  have reviewed this and  their conclusion is  that Texas                                                            
does comply.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR  said that he would  like to be well briefed  on the                                                            
antitrust aspects, both  state and federal, of this amendment before                                                            
moving forward with the bill.                                                                                                   
                                                                                                                                
Number 823                                                                                                                      
                                                                                                                                
MR. HAUGEN  continued by  saying that he  represents 165  physicians                                                            
from Anchorage  in an independent practice association  (IPA) called                                                            
Alaska  Physicians and  Surgeons (APS).   APS is  one of the  groups                                                            
that will potentially do contracting.                                                                                           
                                                                                                                                
MR. HAUGEN  said  APS strongly  disagrees  with some  of the  issues                                                            
brought up  by the AG's office.   APS feels  that a bill like  SB 37                                                            
will promote  competition.  It is  prohibitively expensive  for most                                                            
small carriers  to put much effort  into Alaska given the  dominance                                                            
of Aetna and Blue  Cross.  If small carriers had the  assurance they                                                            
would be dealing  with a large group  of doctors when negotiating  a                                                            
contract,  they  would  be much  more  likely  to invest  the  money                                                            
required to market  a new plan in Alaska.  This will  give consumers                                                            
additional choices and promote competition.                                                                                     
                                                                                                                                
MR. HAUGEN  said SB 37  is a voluntary bill.   Physicians,  carriers                                                            
and the AG have to agree  not only on the contractual terms but also                                                            
on the fees  that are negotiated.   The AG  can simply say no  if it                                                            
were felt  that the  doctors  have gotten  out of line  or the  fees                                                            
negotiated  would harm consumers.   This is a mechanism that  allows                                                            
physicians  to discuss contract issues  and patient advocacy  issues                                                            
with carriers  without the  threat of the  Federal Trade  Commission                                                            
(FTC) coming in and investigating them.                                                                                         
                                                                                                                                
MR. HAUGEN  stated  that APS  is strongly  in favor  of SB 37,  even                                                            
though it is not a perfect bill.                                                                                                
                                                                                                                                
Number 952                                                                                                                      
                                                                                                                                
SENATOR  THERRIAULT  referred  to a  letter  submitted  by the  AG's                                                            
office which  says SB 37 needs to  clarify whether negotiations  are                                                            
voluntary  or not.  The letter  points to  sections C and D,  saying                                                            
that  the  language  implies  that  all  health  benefit  plans  are                                                            
required to negotiate with  the authorized third party unless it can                                                            
prove  that it  does not  have substantial  market  power.   Senator                                                            
Therriault asked if there  is somewhere in SB 37 that clearly states                                                            
negotiations are voluntary on both sides.                                                                                       
                                                                                                                                
Number 1001                                                                                                                     
                                                                                                                                
MR. HAUGEN  responded that  this is clearly  stated on page  5, line                                                            
12, section 2:                                                                                                                  
                                                                                                                                
     (2) within 14 days after receiving a health benefit plan's                                                                 
decision to  decline to negotiate  or to terminate negotiations,  or                                                            
within 14 days  after requesting negotiations with  a health benefit                                                            
plan that fails to respond  within that time, report to the attorney                                                            
general that negotiations have ended or have been declined;                                                                     
                                                                                                                                
SENATOR THERRIAULT read from SB 37, page 3, subsection (e):                                                                     
                                                                                                                                
     (e) In exercising the collective rights granted by (a) and (c)                                                             
of this section,                                                                                                                
          (1) physicians may communicate with each other with                                                                   
respect to  the contractual  terms and conditions  to be  negotiated                                                            
with a health benefit plan;                                                                                                     
          (2) physicians may communicate with an authorized third                                                               
party regarding the terms  and conditions of contracts allowed under                                                            
this section;                                                                                                                   
                                                                                                                                
SENATOR THERRIAULT then  asked if this is the section where language                                                            
would be added  to clearly state that physicians could  get together                                                            
to form groups.                                                                                                                 
                                                                                                                                
MR. HAUGEN thought this would be the correct section.                                                                           
                                                                                                                                
Number 1071                                                                                                                     
                                                                                                                                
SENATOR  ELLIS   asked  about  the   earlier  reference   to  "model                                                            
legislation"  and whether this was  modeled after the Texas  statute                                                            
or a national organization  recommending model legislation to states                                                            
all across the country.                                                                                                         
                                                                                                                                
SENATOR  THERRIAULT  said  that this  is  what  he was  alluding  to                                                            
[indisc.].                                                                                                                      
                                                                                                                                
SENATOR ELLIS  commented that  right now he  is not in the  frame of                                                            
mind for Texas to be a model for Alaska.                                                                                        
                                                                                                                                
Number 1024                                                                                                                     
                                                                                                                                
SENATOR THERRIAULT  wondered if a doctor thought her  patient needed                                                            
an MRI  would she  be able  to pursue  whatever  course she  thought                                                            
necessary or would  she have to go through an insurance  company for                                                            
approval.                                                                                                                       
                                                                                                                                
MR. HAUGEN  said this  would be  considered  preauthorization  for a                                                            
procedure and preauthorization  can be negotiated.  Preauthorization                                                            
may make  a lot of sense  for an expensive  procedure but a  routine                                                            
procedure could have a different standard.                                                                                      
                                                                                                                                
Number 1184                                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR asked how doctors set fees.                                                                                     
                                                                                                                                
MR.  HAUGEN said  this is  a very  big question.    Setting fees  in                                                            
medicine is different from  setting fees in other businesses - it is                                                            
not what the market  will bear.  A given price can  be charged for a                                                            
procedure but ultimately  what is paid is what the insurance carrier                                                            
is  willing to  pay.   This  is  a case-by-case  proposition  for  a                                                            
physician.                                                                                                                      
                                                                                                                                
CHAIRMAN  TAYLOR commented  that he  does not  necessarily want  big                                                            
insurance companies  negotiating with APS for the  level of coverage                                                            
a patient will receive.                                                                                                         
                                                                                                                                
Number 1558                                                                                                                     
                                                                                                                                
MR. DAVE WILLIAMS, Division  of Medical Assistance (DMA), Department                                                            
of Health and Social Services,  said he would be happy to answer any                                                            
questions.                                                                                                                      
                                                                                                                                
SENATOR THERRIAULT asked if DMA has taken a position on SB 37.                                                                  
                                                                                                                                
MR. WILLIAMS replied that  he had only read the bill an hour ago and                                                            
DMA does not yet have a position.                                                                                               
                                                                                                                                
Number 1581                                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR asked if he had any concerns with SB 37.                                                                        
                                                                                                                                
MR. WILLIAMS  responded that  he did have  a question regarding  the                                                            
definition  of a health benefit  plan:  Is  Medicaid a part  of this                                                            
plan?  Medical  Assistance would also want to negotiate  - they have                                                            
that ability now.                                                                                                               
                                                                                                                                
Number 1651                                                                                                                     
                                                                                                                                
SENATOR THERRIAULT  asked during a  negotiation, which is  the group                                                            
negotiating?                                                                                                                    
                                                                                                                                
MR. WILLIAMS  answered that  rates are set  during public  meetings;                                                            
negotiations are  not with any group in particular.   DMA listens to                                                            
the group  concerns,  thinks about  what is right,  what covers  the                                                            
Medicaid population, and what insures access to the services.                                                                   
                                                                                                                                
Number 1799                                                                                                                     
                                                                                                                                
MS. KATIE  CAMPBELL,  life and health  actuary for  the Division  of                                                            
Insurance (DI),  Department of Community  and Economic Development,                                                             
commented that  SB 37 is geared toward  a managed care market  where                                                            
HMOs  are  actually  negotiating  fees.   In  Alaska  fees  are  not                                                            
negotiated.  Insurance  companies collect bill data  from physicians                                                            
and statistics  are run on  that data.  It  is then determined  what                                                            
percentile  of billed charges will  cover most of the charges.   For                                                            
example, if the price range  is $1,000 to $4,000, at some point most                                                            
of the physicians  are covered 100 percent.  Alaska  regulations say                                                            
that databases  have to  be updated  every six  months for the  most                                                            
recent charges.   Fees for  a service are  not negotiated;  fees are                                                            
paid based on what most physicians are charging for a service.                                                                  
                                                                                                                                
CHAIRMAN  TAYLOR asked what  happens if physician  A charges  $1,000                                                            
for a certain  procedure, the overall  state average is $1,500,  and                                                            
another physician charges $2,000.                                                                                               
                                                                                                                                
MS. CAMPBELL  replied  the insurer  would  pay up to  what ever  the                                                            
reimbursement  level is set at.  For  example, if there are  20 MRIs                                                            
ranging from $1,000  to $3,000 and the fee for 15  of the procedures                                                            
is under $1,800 and the  reimbursement level is set at $1,800, "they                                                            
will pay up to  the $1,800 or the $1,500."  The insurer  will pay up                                                            
to the average.   Therefore, 80 or 90 percent of the  billed charges                                                            
will be covered 100 percent.                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR asked what happens to the remainder.                                                                            
                                                                                                                                
MS. CAMPBELL answered it  will be "balanced billed" - charged to the                                                            
insured -  or it will be  written off because  it is under  contract                                                            
with the insurance  company that they agree not to  bill beyond that                                                            
charge if they are under contract with the provider.                                                                            
                                                                                                                                
Number 2003                                                                                                                     
                                                                                                                                
SENATOR  THERRIAULT clarified  that under  contract they will  agree                                                            
not to charge  what they normally  would have, they will  reduce the                                                            
charge or  they will preserve  their right  to bill the patient  for                                                            
the extra amount.                                                                                                               
                                                                                                                                
Number 1950                                                                                                                     
                                                                                                                                
MS. CAMPBELL  said it is  common under contract  with the  providers                                                            
that they will not bill  their patients beyond what is determined to                                                            
be usual,  customary and  reasonable.  If  there is a contract  with                                                            
the  provider,  the provider  will  not  charge  the excess  to  the                                                            
insured.    Otherwise,  the provider  has  the  option to  bill  the                                                            
insured directly.   This is how the  insured market works  in Alaska                                                            
because  Alaska does  not have  HMOs or  an organization  that  sets                                                            
fees.   This  legislation  is based  on national  legislation  where                                                            
there is more managed care.                                                                                                     
                                                                                                                                
Number 2003                                                                                                                     
                                                                                                                                
SENATOR  THERRIAULT asked  for Ms.  Campbell's  comments on  limited                                                            
providers and whether this  proposal will give Alaska the ability to                                                            
attract competition for insurance coverage.                                                                                     
                                                                                                                                
MS. CAMPBELL responded  that it is questionable as to whether or not                                                            
this legislation  will draw  competition to  Alaska.  The market  in                                                            
Alaska  is vulnerable  because there  is a large  federal and  state                                                            
population that is not  insured, high fixed costs for operating, and                                                            
a small population.                                                                                                             
                                                                                                                                
Number 2071                                                                                                                     
                                                                                                                                
MS. CAMPBELL commented  that DI's primary concern  with SB 37 is the                                                            
potential  impact on  the  consumer.   Negotiations  will result  in                                                            
higher fees.  All studies  on antitrust have projected some level of                                                            
increase for  health care.  Even small  increases in cost  result in                                                            
more uninsured.   Small employers are already struggling  with large                                                            
costs  of health  care  and many  have  been dropping  coverage  and                                                            
reducing benefits.                                                                                                              
                                                                                                                                
Number 2176                                                                                                                     
                                                                                                                                
MR.  ED SNIFFEN,  Fair Business  Practices  Division  (FBP) for  the                                                            
Department of  Law, said he is responsible for a lot  of the state's                                                            
antitrust  review and  enforcement,  and he has  submitted  detailed                                                            
comments to the committee.                                                                                                      
                                                                                                                                
MR. SNIFFEN  said FBP has  some legal and  policy concerns  about SB
37.   The  policy concerns  are  whether  or not  there  has been  a                                                            
demonstrated need for this  type of legislation.  The legal concerns                                                            
deal with the potential antitrust impact the bill might have.                                                                   
                                                                                                                                
MR.  SNIFFEN  added  that  there  is  a  national   policy  favoring                                                            
competition and disfavoring  negotiated agreements among competitors                                                            
in a  market place.  The exception  comes in the  form of the  state                                                            
action immunity  doctrine.  The doctrine  says that competition  can                                                            
be replaced with  a well regulated and thought out  plan to supplant                                                            
what competition otherwise  takes care of.  In this particular case,                                                            
FBP does  not believe  that SB 37,  in its  current form,  addresses                                                            
these concerns  because there is no  provision that allows  for this                                                            
type  of  detailed  and  interactive  state   participation  in  the                                                            
negotiations  with physicians.   FBP does not  believe the  FTC will                                                            
agree that SB 37 meets the state action immunity doctrine.                                                                      
                                                                                                                                
MR. SNIFFEN said  there is no provision that allows  the AG's office                                                            
to  review and  approve  the proposed  negotiations  in determining                                                             
whether negotiations are  within the authority of SB 37.  SB 37 does                                                            
not require  a third  party representative  to provide  the AG  with                                                            
detailed  information for  making any type  of determination  on the                                                            
price or cost  that is being negotiated.  SB 37 imposes  substantial                                                            
responsibility on the AG  to review and approve negotiated contracts                                                            
only after  a third party representative  has submitted them  within                                                            
30 days.                                                                                                                        
                                                                                                                                
MR. SNIFFEN said there  are other provisions of the bill that do not                                                            
implicate the  level of state involvement  that will be required  to                                                            
get around the state action immunity defense.                                                                                   
                                                                                                                                
Number 2320                                                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR asked if  FBP has prepared  amendments to  overcome                                                            
these difficulties.                                                                                                             
                                                                                                                                
MR. SNIFFEN  replied he did not know  what amendments could  be made                                                            
to overcome  these concerns.   It has been  suggested that  if there                                                            
were no price related provisions,  SB 37 could be structured so that                                                            
nonprice terms  could be negotiated  without antitrust infractions.                                                             
Nonprice  terms  can  have a  significant  impact  on  price  terms,                                                            
depending  on  what  the  terms are,  what  they  require,  and  how                                                            
specific  they get.  Even  if price terms  were removed there  would                                                            
still be significant antitrust concerns.                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR asked if he has reviewed the Texas law.                                                                         
                                                                                                                                
SIDE B                                                                                                                          
                                                                                                                                
MR. SNIFFEN answered that  he has not reviewed it in any detail, but                                                            
he understands  that the Texas law  deals with HMOs that  are not in                                                            
Alaska.  Texas  is having some difficulty  implementing regulations                                                             
to carry  out the law but  he does not have  any information  on the                                                            
details.                                                                                                                        
                                                                                                                                
MR.  SNIFFEN  said  Washington  law is  limited  to  nonprice  terms                                                            
without  the ability  to  negotiate  for  price terms.    Washington                                                            
regulations  allow for significant  involvement with the  Department                                                            
of Health.   The regulations require  certain protest procedures  to                                                            
occur for submission  of detailed  information.  There is  an appeal                                                            
process  where hearing  officers take  testimony.   The state  has a                                                            
detailed and active involvement in the process.                                                                                 
                                                                                                                                
CHAIRMAN  TAYLOR asked if  it was true that  insurance companies  do                                                            
not have to adhere to antitrust laws.                                                                                           
                                                                                                                                
MR. SNIFFEN said that he  does not know if that is true as a general                                                            
statement.   He  does know  that there  are some  exceptions in  the                                                            
antitrust law  for certain insurance entities that  are regulated by                                                            
the state.   Under certain provisions  of the Employment  Retirement                                                            
Income  Security Act  of 1974 (ERISA),  any state  law dealing  with                                                            
employee benefits  are preempted by  ERISA.  He does not  know if SB
37 would have  some of these problems as well.  But  there have been                                                            
some  judicial  decisions  that have  narrowed  the scope  of  those                                                            
limitations.                                                                                                                    
                                                                                                                                
SENATOR COWDREY asked about the problems other states have had.                                                                 
                                                                                                                                
MR.  SNIFFEN  responded  that  his  understanding   from  the  Texas                                                            
Assistant  Attorney  General is  that there  have  been problems  in                                                            
drafting the  regulations and they  were not able to finish  them as                                                            
soon  as they  wanted.   He does  not know  if these  problems  were                                                            
insurmountable  but they were more  than anticipated.  He  will find                                                            
out more details  on this and submit his findings  to the committee.                                                            
                                                                                                                                
SENATOR COWDERY  asked if the antitrust issue would  not be the same                                                            
in all states that have similar laws.                                                                                           
                                                                                                                                
MR.  SNIFFEN  replied   yes,  because  this  is  a  federal   issue.                                                            
Washington  dealt with their law by  excluding some price  terms and                                                            
provided for significant  state involvement.  The  jury is still out                                                            
on whether or not the Texas law will pass FTC muster.                                                                           
                                                                                                                                
SENATOR COWDERY  asked how long the  Texas and Washington  laws have                                                            
been in effect.                                                                                                                 
                                                                                                                                
MR. SNIFFEN  said the Texas  law passed in  late 1999 or early  2000                                                            
and Washington's law has been in effect since 1996.                                                                             
                                                                                                                                
SENATOR  COWDERY commented  that  he would  like to  know how  other                                                            
states have solved their antitrust problems.                                                                                    
                                                                                                                                
CHAIRMAN  TAYLOR read from  the State Action  Doctrine and  asked if                                                            
this is the definition FBP is working with:                                                                                     
                                                                                                                                
     In  general, the  state action  doctrine  states that  the                                                                 
     antitrust  actions  do not  apply to  actions  by a  state                                                                 
     operating  its sovereign capacity,  or to private conduct                                                                  
     compelled or approved by the state.                                                                                        
                                                                                                                                
MR. SNIFFEN  said that was  the start of the  definition but  it has                                                            
been refined through  a number of cases.  The letter  he sent to the                                                            
committee  contains a  number of  these cases.   The  U. S.  Supreme                                                            
Court has  defined and refined  what the test  is, which means  that                                                            
Alaska  needs to  undertake  a level  of  involvement  that is  very                                                            
active  before it  can  supplant this  type  of competition  to  get                                                            
around the antitrust law.                                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR said he  would like it if  Alaska's physicians  and                                                            
care  providers had  at least  some  opportunity  to negotiate  with                                                            
large carriers.   The  committee needs  to know  the level of  state                                                            
intervention  or  action that  must  be in  the legislation  to  get                                                            
within the  Parker Doctrine of acting  within sovereign capacity  or                                                            
approving  the private conduct  of others so  that state or  federal                                                            
antitrust laws are not violated.                                                                                                
                                                                                                                                
MS. LAURA SARCONE,  Alaska Chapter of the American  College of Nurse                                                            
Midwives (ACACNM),  said she is testifying  in opposition  to SB 37.                                                            
She read the following statement:                                                                                               
                                                                                                                                
     SB 37 will  give broad antitrust immunity to negotiations                                                                  
     between  individuals,  competing  physicians,  and health                                                                  
     benefit  plans.   This  bill will  protect  price fixing,                                                                  
     drive  up health care costs,  and let physicians obstruct                                                                  
     opportunities  for advanced nurse practitioners  and nurse                                                                 
     midwives  to participate  as providers  in health benefit                                                                  
     plans.                                                                                                                     
                                                                                                                                
     Advanced  nurse practitioners  are health  care providers                                                                  
     who increase  access, improve  outcomes, lower costs,  and                                                                 
     increase  satisfaction  rates.   Their scope  of practice                                                                  
     under  Alaska law  recognizes  the value  of the services                                                                  
     they  provide  to the  citizens of  our vast  and diverse                                                                  
     state.                                                                                                                     
                                                                                                                                
     SB 37 gives physicians leverage  to legally establish some                                                                 
     of  the more  onerous anticompetitive  practices  such  as                                                                 
     price fixing.  While at  the same time eliminating options                                                                 
     for the public  or individual providers to challenge  such                                                                 
     conduct  and  practice.   Consumers,  employers,  and  the                                                                 
     state and federal government  as purchasers of health care                                                                 
     will be stripped  of any remedy for higher prices.   State                                                                 
     and  federal antitrust  law  enforcement will  be barred.                                                                  
     Physicians  can  already form  physician  only individual                                                                  
     practice  associations  or IPAs and negotiate  as a  group                                                                 
     with health benefit plans.                                                                                                 
                                                                                                                                
     SB 37 will allow physicians  to form cartels and negotiate                                                                 
     with  health   benefit  plans.    The  special  antitrust                                                                  
     protections  afforded  physicians  by  this bill  are  not                                                                 
     available to any other self-employed professionals.                                                                        
                                                                                                                                
     ACACNM  believes the  immunity  proposed in  this bill  is                                                                 
     unnecessary.  Antitrust  law  already  provides  a remedy                                                                  
     against anticompetitive  abuses by health benefit plans in                                                                 
     their  dealings with  health  care providers.   State  and                                                                 
     federal laws and initiatives  can address the practices of                                                                 
     health  benefit plans.  Permitting  provider cartels  will                                                                 
     not  solve problems it  will only create  new ones.   This                                                                 
     bill  will  be  particularly  harmful  to  advanced  nurse                                                                 
     practitioners and certified  nurse midwives whose expanded                                                                 
     role in health care has  often been opposed by physicians.                                                                 
      Advanced   nurse  practitioners   and   certified   nurse                                                                 
     midwives  are health care providers  who increase access,                                                                  
     improve outcomes,  lower costs, and increase satisfaction                                                                  
     rates.                                                                                                                     
                                                                                                                                
     In 1998 over 1400 Alaskan  mothers chose a certified nurse                                                                 
     midwife  to  attend   the  birth  of  their  baby.    That                                                                 
     represents  16.7  percent   of all  vaginal   births  that                                                                 
     occurred  in the state that year.   It has been said  that                                                                 
     this  bill does not  and cannot impact  other contractual                                                                  
     relationships  such  as  one  between  an  advanced  nurse                                                                 
     practitioner and a health  benefit plan.  But I would like                                                                 
     to  outline  one  scenario  of what  could  happen.    For                                                                 
     instance, after negotiating  a behind closed door contract                                                                 
     with  a group  of physicians,  a health  benefit plan  may                                                                 
     elect  not to renew or not to  enter into a contract  with                                                                 
     an  advanced  nurse  practitioner.    The  advanced  nurse                                                                 
     practitioner   may  believe   that  some  aspect  of   the                                                                 
     physician   contract   has   influenced   this  decision,                                                                  
     effectively  serving as a restraint  of trade.  But  under                                                                 
     SB 37,  the advanced nurse practitioner  has no recourse.                                                                  
     Alaskans insured by that  health plan have lost the option                                                                 
     to choose nurse practitioner or nurse midwifery care.                                                                      
                                                                                                                                
     SB  37  legislates  away  important  trade  and  practice                                                                  
     protections  that advanced nurse  practitioners and  other                                                                 
     nonphysician   providers  currently  enjoy.    Some   have                                                                 
     suggested  that advanced nurse practitioners could  create                                                                 
     their   own  bill,   allowing  them   to  also  negotiate                                                                  
     collectively  with health benefit  plans.  The reality  of                                                                 
     the health care market place  is that health benefit plans                                                                 
     must negotiate  with physicians.  They need physicians  in                                                                 
     order to conduct their business  and offer a full range of                                                                 
     medical   services.  They  do  not  need  advanced   nurse                                                                 
     practitioners   in   the  same   way.     Advanced   nurse                                                                 
     practitioners   will  never  have  the  market   share  or                                                                 
     bargaining  power  of physicians.   We  want  to care  for                                                                 
     patients  and  do business  in  the marketplace  with  the                                                                 
     anti-trust  laws protection. We do not need or  want to be                                                                 
     protected from antitrust laws.                                                                                             
                                                                                                                                
     In conclusion, advanced  nurse practitioners and certified                                                                 
     nurse  midwives  are health  care providers  who increase                                                                  
     access,  improve  outcomes,   lower costs,   and increase                                                                  
     satisfaction  rates.  Consumers  in Alaska want to choose                                                                  
     the health  care provider who best meets their  needs.  SB
     37 will both limit choice  and increase costs and Alaskans                                                                 
     deserve better than this.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR  asked if it is Ms. Sarcone's belief  that insurance                                                            
companies are constrained by antitrust law.                                                                                     
                                                                                                                                
MS.  SARCONE replied  that  she  said physicians  can  already  form                                                            
independent practice associations.   They can negotiate through this                                                            
system.  Ms. Sarcone deferred to Mr. Sniffen on this question.                                                                  
                                                                                                                                
MR.  SNIFFEN  responded  by  saying  that  insurance  companies  are                                                            
constrained by some antitrust  concerns but there are exemptions for                                                            
certain insurance  companies  that are regulated  by the state.   He                                                            
will furnish  the committee with a  more detailed answer  at a later                                                            
date.                                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR  commented that he thought insurance  companies were                                                            
exempt  under state and  federal law.   If they  are constrained  by                                                            
antitrust, what is to prevent  Aetna and Blue Cross from agreeing to                                                            
make their plans  the same.  Is there anything that  would constrain                                                            
them from doing this?                                                                                                           
                                                                                                                                
MR. SNIFFEN replied  that the McCarren-Ferguson Act  says there is a                                                            
statutory  exemption for  certain types of  insurance entities  from                                                            
the Sherman, Clayton  and FTC Acts, which are the  primary acts that                                                            
comprise  the antitrust  laws.   The activity  that would  otherwise                                                            
violate  the  antitrust  law  has to  be  part of  the  business  of                                                            
insurance, authorized  and regulated by the state.   It will then be                                                            
immune from  attack.  What  might prevent  insurance companies  from                                                            
doing  this could  be state regulation,  which  has supplanted  this                                                            
type of antitrust behavior.                                                                                                     
                                                                                                                                
MR. JIM  JORDAN, Executive  Director  for the  Alaska State  Medical                                                            
Association (ASMA),  said that ASMA has provided the  committee with                                                            
written  testimony.  MR.  JORDAN said  he would  like to respond  to                                                            
some of the earlier testimony and questions.                                                                                    
                                                                                                                                
MR. JORDAN said the language  in SB 37 is modeled after the American                                                            
Medical  Association's   (AMA)  model  language,  as  is  the  Texas                                                            
language.    This language  has  been  "Alaskanized."   SB  37  also                                                            
includes  provisions   that  are  not  in  the  AMA  model.    These                                                            
provisions  have to do with definitive  areas the AG will  review in                                                            
making  a decision as  to whether  or not a  particular negotiation                                                             
falls within the parameters of the law.                                                                                         
                                                                                                                                
CHAIRMAN  TAYLOR  asked if  ASMA has  gone to  the  AG's office  for                                                            
agreement.                                                                                                                      
                                                                                                                                
MR. JORDAN  replied  that the  issue with  the AG's  office is  what                                                            
constitutes sufficient  state oversight in order to  qualify for the                                                            
state action  exception.  The language  dealing with the  parameters                                                            
in establishing  what the  levels of review  are in regards  to what                                                            
they should contain  are taken from Pennsylvania's  act, which is in                                                            
process.   It was  attempting to  provide a checklist  of the  items                                                            
that will  satisfy that standard.   This will  not preclude  the FTC                                                            
from  looking  at any  negotiations  that  will  take place  in  the                                                            
future.                                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR  asked him to comment on the testimony  given by Ms.                                                            
Sarcone.                                                                                                                        
                                                                                                                                
MR. JORDAN  said the AG has the act  of oversight that will  look at                                                            
these questions.   "In  25.30.20, sub  I," one  of the concerns  was                                                            
dealing  with  access  - dealing  with  protections  for  access  to                                                            
quality patient  care.  There are  protections in the oversight  the                                                            
AG can give.   There is a prohibition from the physicians,  in their                                                            
activity involving  negotiations,  from involving themselves  in any                                                            
activity that will involve a boycott.                                                                                           
                                                                                                                                
CHAIRMAN  TAYLOR reflected  that a  boycott would  not be needed  to                                                            
actually  draw  up a  plan that  favors  physician  deliveries  over                                                            
midwife deliveries.  It  would not take a boycott, just an amendment                                                            
to the plan.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR  announced that SB 37 would be discussed  again at a                                                            
later date.                                                                                                                     

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