03/23/1998 03:21 PM House L&C
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 23, 1998
3:21 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Gene Kubina
MEMBERS ABSENT
Representative Tom Brice
Representative Bill Hudson
COMMITTEE CALENDAR
HOUSE BILL NO. 300
"An Act relating to health insurance; and providing for an
effective date."
- HEARD AND HELD
CONFIRMATION HEARINGS FOR BOARDS AND COMMISSIONS
- SCHEDULED BUT NOT HEARD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 300
SHORT TITLE: ALASKA PATIENTS' BILL OF RIGHTS
SPONSOR(S): REPRESENTATIVES(S) BUNDE, James
Jrn-Date Jrn-Page Action
01/12/98 2023 (H) PREFILE RELEASED 1/2/98
01/12/98 2023 (H) READ THE FIRST TIME - REFERRAL(S)
01/12/98 2023 (H) HES, LABOR & COMMERCE
02/19/98 (H) HES AT 3:00 PM CAPITOL 106
02/19/98 (H) MINUTE(HES)
02/24/98 (H) HES AT 3:00 PM CAPITOL 106
02/24/98 (H) MINUTE(HES)
02/25/98 2423 (H) HES RPT CS(HES) NT 1DP 2DNP 2NR
02/25/98 2423 (H) DP: BUNDE; DNP: PORTER, VEZEY;
02/25/98 2423 (H) NR: DYSON, GREEN
02/25/98 2423 (H) ZERO FISCAL NOTE (DCED)
02/25/98 2423 (H) REFERRED TO L&C
03/20/98 (H) L&C AT 3:15 PM CAPITOL 17
03/20/98 (H) MINUTE(L&C)
03/23/98 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JIM JORDAN
Alaska State Medical Association
4107 Lurel Street
Anchorage, Alaska 99508
Telephone: (907) 562-0304
POSITION STATEMENT: Was available to answer questions on HB 300.
ED BURGAN, Employee Benefits Consultant
Brady and Company
P.O. Box 107502
Anchorage, Alaska 99510
Telephone: (907) 276-5617
POSITION STATEMENT: Testified on HB 300.
ROSMARIE KALAMARIDES, Administrator
Alaska Teamster Employer Welfare Trust
520 East 34th Avenue, Suite 107
Anchorage, Alaska 99503
Telephone: (907) 565-8310
POSITION STATEMENT: Testified against HB 300.
REPRESENTATIVE CON BUNDE
Alaska State Legislature
Capitol Building, Room 104
Juneau, Alaska 99801
Telephone: (907) 465-4843
POSITION STATEMENT: Sponsor of HB 300.
JACK McRAE
Blue Cross of Washington and Alaska
Address not provided
Telephone: (425) 670-5630
POSITION STATEMENT: Testified in HB 300.
JEFF DAVIS, Executive Director
Alaska Market
Blue Cross Blue Shield of Alaska
2550 Denali, Suite 600
Anchorage, Alaska
Telephone: (907) 258-5065
POSITION STATEMENT: Testified on HB 300.
CHARLIE MILLER, Lobbyist
Alaska Regional Hospital
P.O. Box 102286
Anchorage, Alaska 99510
Telephone: (907) 463-5062
POSITION STATEMENT: Testified on HB 300.
GORDON EVANS, Lobbyist
Health Insurance Association of America
211 4th Street, Suite 305
Juneau, Alaska 99801
Telephone: (907) 586-3210
POSITION STATEMENT: Testified in opposition to HB 300.
MARIANNE BURKE, Director
Division of Insurance
Department of Commerce
and Economic Development
P.O. Box 110805
Juneau, Alaska 99801-0805
Telephone: (907) 465-2515
POSITION STATEMENT: Answered questions on HB 300.
ACTION NARRATIVE
TAPE 98-36, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 3:21 p.m. Members present
at the call to order were Representatives Rokeberg, Cowdery,
Sanders and Ryan. Representative Kubina arrived at 3:25 p.m.
HB 300 - ALASKA PATIENTS' BILL OF RIGHTS
Number 0107
CHAIRMAN ROKEBERG announced the committee's first item of business
would be HB 300, "An Act relating to health insurance; and
providing for an effective date," sponsored by Representative
Bunde. Chairman Rokeberg noted the bill would not move out of
committee at this hearing, but it is his intention to conclude the
public hearing. He called on Mr. Jordan to testify.
Number 0158
JIM JORDAN, Alaska State Medical Association, informed the
committee, via teleconference from Anchorage, that he would answer
any questions regarding the written testimony that was previously
provided to the committee.
Number 0222
ED BURGAN, Employee Benefits Consultant, Brady and Company,
testified via teleconference from Anchorage. He stated HB 300
would either stifle or eliminate the use of health maintenance
organizations (HMO) or preferred provider organizations (PPO) in
Alaska by insured clients. Although we don't currently have HMOs,
there are numerous PPO agreements and they would be stifled. Mr.
Burgan informed the committee members the cost of health in Alaska
is currently among the highest in the nation. He continued to read
the following testimony into the record:
"Insurance companies do not mandate the type of coverage you wish
to regulate. They offer policies to plan sponsors, and these plan
sponsors can either purchase a policy, some with and some without
a preferred provider agreement. The majority of benefit plan
sponsors have some form of contractual agreement with hospitals,
physicians and dentists using the clout of joint purchasing on
behalf of the employees to help maintain or increase benefits.
Generally speaking, benefits are increased, not decreased when a
PPO agreement is adopted by a plan sponsor. Employees are advised
in advance of implementing a PPO agreement not 'when they come to
use the plan' as stated in the sponsor statement.
"I believe the guaranteed results of the legislation will be to do
several things. One, substantially increase costs in Alaska to
employers or plan sponsors, or equally reduce benefits to Alaska
employees currently needing to ensure their benefits and are now
using some form of PPO. It will be financially damaging to small
or medium size employers. It will not have any material impact on
larger or self-insured plans. It would benefit the provider
community; i.e., hospitals, physicians and dentists. It would
eliminate incentives to providers to be competitive with other
Alaska or other Lower 48 providers on both costs and quality of
service if a patient does not have an incentive to buy through the
PPO network. It will force employers to move toward self-funded
plans governed by ERISA [Employee Retirement and Income Security
Act] and federal statutes, thereby avoiding or eliminating the
state of Alaska mandated benefits and legislation of this nature.
"At the very least, I would like to suggest that someone contact
some experts on the pricing of this legislation to determine the
adverse cost impact it could have across the state of Alaska.
Thank you."
Number 0430
REPRESENTATIVE JOHN COWDERY asked Mr. Burgan if he is aware of
anybody in Alaska who is being hurt by the present system.
MR. BURGAN stated that he doesn't know of anybody being hurt by the
present system. He said, "If you're referring to plan sponsor in
uses in insurance contracts and also as a preferred provider
agreement in place, generally speaking, I have not encountered
major problems with that type of an arrangement."
REPRESENTATIVE COWDERY referred to a possible situation where a
person was in an accident and was taken to the emergency room
without any say in their ability to have a choice. He said in that
situation, even the fact that they had insurance or not would not
be a factor. He asked if there would be an impact on that kind of
a situation if HB 300 was enacted.
MR. BURGAN responded that he has been in the business for about 30
years and has never encountered a situation where in an emergency
a person could not go to any facility proximate to render the
service and do so without penalty. He stated that he would presume
that type of arrangement would continue under current insurance
contracts because it's impossible to enforce and it's punitive to
the employee.
Number 0550
CHAIRMAN ROKEBERG referred to Mr. Burgan's comment that the
committee should contact some experts who know how to estimate the
costs and the actuarial impacts of this type of legislation and
asked if he could recommend anybody to contact.
MR. BURGAN responded that there are probably a number of national
consulting firms to do the study. He said he could recommend
several names.
CHAIRMAN ROKEBERG asked him to fax his testimony along with a list
of recommended names to the committee.
Number 0621
ROSEMARIE KALAMARIDES, Administrator, Alaska Teamster-Employer
Welfare Trust, testified via teleconference from Anchorage. She
read the following statement into the record:
"Good afternoon, my name is Rosemarie Kalamarides and I'm the
administrator of the Alaska Teamster-Employer Welfare Trust. I've
worked with the Teamster Trust funds for 18 years and I understand
that the issues facing this body are complex. I also know that
many competing interests will provide compelling testimony making
your task even more difficult.
"The sponsors of this bill are attempting to legislate patient
choice. This is a noble goal. Unfortunately, this bill is
misguided and while it may initially give the patients more choice,
ultimately, it will increase the patient's health care costs.
"Make no mistake; this legislation will force medical costs up.
And who will pay the additional costs? Not the employers who are
struggling to compete in a tight marketplace. They will shift the
added costs to the employees, your constituents, many of whom are
already struggling to make ends meet.
"Here is how it works. Employers pool their health care dollars
and either purchase health insurance or self-fund benefits for
their employees. Smaller employers tend to purchase insurance
contracts while larger employers, with the economics to do so, self
fund their benefits.
"Our trust funds the health care benefits of approximately 8,000
covered lives, most of them in Alaska. Under our health care plan,
over 100 employees have pooled their health care dollars and
assigned the task of providing meaningful benefits with the dollars
available.
"It is then our job to plan steps within the limited dollars and as
effectively as possible. One way is to enter the marketplace and
negotiate reduced medical costs with providers, these are commonly
called PPO arrangements, provider groups or hospitals. The way
these preferred arrangements are negotiated is quite simple. For
volume referrals, providers and hospitals agree to discounted
rates. They will only negotiate reduced rates with some assurance
that they will receive volume referrals in exchange for their
discounts.
"This legislation may sound good on the surface, typically called
'Any Willing Provider Legislation,' it says that we must pay any
willing provider the amount that we would pay the preferred
provider. The irony is that plans will not be able to negotiate
preferred arrangements if this legislation is passed. Why would a
provider agree to discounted rates or fees for services if the
volume is not sufficient to cover the deep discounts? They won't.
There is no way to assure volume if this legislation is passed.
"As an administrator, I would prefer not to steer our members to
certain hospitals or certain doctors. But, without these
arrangements in place, I would be telling them that their coverage
is no longer 90 percent for preferred providers or even 80 percent
for non-preferred providers, but 50 percent because misguided
politicians passed ill thought-out legislation which undermined the
ability to negotiate reduced medical rates.
"This legislation makes no sense in Alaska. Alaska providers and
consumers have agreed that there is a reasonable balance between
quality care and affordable care, that patient-centered care is
everyone's goal. Patient-centered care can only be attained
through the teamwork of the doctor, the patient and the health care
payer.
"This legislation attempts to solve very complex problems with
simplistic, uninformed solutions. This legislation is a step
backward. It is hostile.
"Several years ago, I testified against similar legislation.
You've heard from several doctors and their employees who support
this legislation under the manner of consumer choice, but they are
not the consumers.
"You did hear from a consumer. On Friday, you heard from Debbie
Dumman. She recognizes that this legislation would shift health
care dollars from the pockets of consumers into the pockets of
doctors and hospitals. It will not improve their health care. It
may give them more choice, but at too high a price.
"You heard from folks who fund health care. Employer, Walter
Hickel, Jr., put it very well when he said, 'There are not many
options for Alaska businesses to adequately manage the cost of
health insurance benefits for their employees.'
"The employers who fund health care will tell you that they cannot
remain competitive and pay more for medical costs. This means that
their employees, your constituents, will have to pay the additional
costs.
"The message this legislation sends to Alaska is simple, doctors
and hospitals do not have to negotiate with anyone. They can set
the price and Alaskans must pay. This legislation is a thinly
veiled protectionist law, which benefits a few wealthy individuals
and a huge, very profitable, national hospital chain.
"This legislation is anti-competition. It is all about regulating
the free marketplace. Proponents will tell you this legislation
gives choice to consumers. That is baloney. If you pass this
legislation you will accomplish one thing; you will drive health
care costs up, and in doing so you will shift dollars from the
pockets of hardworking Alaskans, and increase the incomes of a few
doctors and hospitals. Thank you."
Number 0902
REPRESENTATIVE CON BUNDE explained Ms. Kalamarides said health care
costs will increase if the legislation becomes law. He asked if
she could give him any assurance that health care costs wouldn't go
up if the bill doesn't become law.
MS. KALAMARIDES responded that she couldn't give him that assurance
but she hopes that she can go out into the marketplace and
negotiate agreements to try to control those costs. If the bill is
passed, it would certainly hinder her ability to do that.
REPRESENTATIVE BUNDE asked Ms. Kalamarides if she agrees that one
way to control costs would be to decrease the level of service.
MS. KALAMARIDES said that if doctors and hospitals are not required
to contain their costs, the only thing that a health plan can do,
with limited dollars, is to unfortunately cut services.
Number 0979
CHAIRMAN ROKEBERG asked Ms. Kalamarides if the Teamsters are self-
insured or if they bargain a contract under a PPO.
MS. KALAMARIDES stated that they are self-insured, which means the
legislation wouldn't currently affect them. She noted they always
have a concern that Congress could allow state law to preempt ERISA
and that could change everything.
CHAIRMAN ROKEBERG said as a self-funded, self-insured organization
any of the mandates that the state legislature passes, or any bill
such as HB 300, would not affect her organization as it is
presently configured.
MS. KALAMARIDES responded in the affirmative.
Number 1053
JACK McRAE, Blue Cross of Washington and Alaska, testified via
teleconference from Seattle. He noted Jeff Davis, the executive
director of the Alaska market, was also with him. Mr. McRae said
he has a real concern about the cost driver that has been
mentioned. There are a number of small businesses that are very
marginal and the cost drivers could cause a lot of the small
businesses to make a decision not to insure their employees. Mr.
McRae said he is concerned that with the passage of HB 300, there
will be a constant shift for everyone in Alaska, and the amount of
uninsured people could increase substantially.
CHAIRMAN ROKEBERG asked for a description of any corporate changes
that Blue Cross of Washington and Alaska has undergone over the
last year. He also asked what his organization's plans and
activities are in the state of Alaska.
Number 1116
JEFF DAVIS, Executive Director, Alaska Market, Blue Cross Blue
Shield of Alaska, explained they have increased their physical
presence in Alaska. He explained he became the executive director
in November, 1997. Staff in the Anchorage office has been
increased. They are currently doing business as Blue Cross Blue
Shield of Alaska. Mr. Davis informed the committee that all of the
changes are designed to help them become closer to the Alaska
market, to understand the unique needs and to see how they might
bring additional value to their members in Alaska.
MR. McRAE interjected that they have been in Alaska prior to
statehood and are very committed to the Alaska market.
Number 1168
CHAIRMAN ROKEBERG asked Mr. McRae if he could explain the name
change and what effect, if any, that has on activities in Alaska.
MR. McRAE said they see it as a marketing advantage in Alaska.
"Blue Cross Blue Shield of Alaska," rather than "Blue Cross of
Washington and Alaska" will give more identity in Alaska. He said,
"The second part of it is the way the shield and the cross is
established is through an association that we belong to, and we are
given the right to use the shield and the cross. We're all
independent stand-alone Blue Cross and Blue Shield plans, but the
association oversees the use of the cross logo and the shield logo.
We have had the authority to use the shield logo in Alaska ever
since we've been in Alaska, but we have not used it. And we were
concerned about another competitor seriously coming in and taking
a look at that shield and being able to tell the association that
we're not using the shield and that they would like to use it in
Alaska as a marketing approach." He pointed out that there are two
reasons they changed the name. One is to reemphasize their input
in Alaska; and two, to reinforce the licensing of the shield which
they have been granted in Washington.
CHAIRMAN ROKEBERG asked what the difference is between Blue Cross
Blue Shield of Alaska and the organization of Blue Cross of
Washington and Alaska. He asked if they are now separate
organizations.
MR. McRAE explained they have been doing business as (dba) Blue
Cross Blue Shield of Alaska. The holding company of that dba is
Blue Cross of Washington and Alaska. Over 1998, they will be
phasing out Blue Cross of Washington and Alaska. They will then be
known in Alaska as Blue Cross Blue Shield of Alaska.
Number 1290
CHAIRMAN ROKEBERG said, "Because you have the license to do
business in the state of Alaska under the names Blue Cross and Blue
Shield and that gives you the exclusivity to operate under our
state statutes as a -- how do you define it? There is a special
portion of our state chapters that -- special health organization,
is that correct?"
MR. McRAE explained the association authorizes the license use of
the shield and the cross. He stated they have the license use,
approved by the association, to do business in Alaska as the shield
and the cross. For example, in Washington State, they have license
to use the cross but they don't have a license to use the shield in
all parts of the state. Mr. McRae stated that parts of the state
are a blue shield plan which are direct competitors with them.
CHAIRMAN ROKEBERG said he isn't concerned what the name of the
business is, but is concerned with how the business is operated.
He said, "You are a nonprofit type organization operating under the
laws of the state of Alaska. Is that correct?"
MR. McRAE responded in the affirmative.
Number 1355
CHAIRMAN ROKEBERG asked Mr. Davis what the number is of individual
policyholders they cover in the state of Alaska.
MR. DAVIS responded that they have approximately 100,000 Alaskans
covered under their coverages.
CHAIRMAN ROKEBERG asked if that is under group or individual plans.
MR. DAVIS said it is a combination of both. He noted there are
approximately 13,000 under the individual plan, and approximately
87,000 under group plans.
Number 1389
CHAIRMAN ROKEBERG asked Mr. Davis who is competitive with his firm
in terms of writing individual policies in the state.
MR. DAVIS explained that there are several competitors in the
individual market. He said, "There is Golden Rule and several
others who write policies in that market, but it's fairly limited."
CHAIRMAN ROKEBERG stated that Golden Rule has been an underwriter
for a long time in Alaska. He pointed out that according to the
1996 Comprehensive Health Insurance and Payment Reform Act (CHIPRA)
assessments, they have less than 1 percent of the business in the
state of Alaska. He asked if they write under different names.
MR. DAVIS responded none that he is aware of.
CHAIRMAN ROKEBERG said, "So somebody that has less than 1 percent
of the health insurance coverage in the state of Alaska you
consider a major competitor?"
MR. McRAE responded, "Sometimes out in the individual market,
especially we have ... the majority of the individual market in
Alaska."
MR. DAVIS noted that in the group market they have a number of
substantial competitors.
MR. McRAE offered to send Chairman Rokeberg those numbers as he
didn't have the numbers with him.
CHAIRMAN ROKEBERG said he would appreciate receiving the numbers.
He said he has the numbers of the 1996 CHIPRA assessments for the
high-risk pool. He asked Mr. McRae what premiums they will be
responsible for in 1997 and what percentage of the share is of
that.
MR. McRAE indicated he would have to guess as he didn't have the
numbers before him. Presently, before the change in the state's
contract, they were paying about one-third of the Alaska
Comprehensive Health Insurance Association (ACHIA) pool. After the
state's contract went self-insured, he estimates they will be
paying about 50 percent of that pool. Mr. McRae said under the
one-third scenario, their payments have been in the area of
$400,000 to $500,000 over the last couple of years.
CHAIRMAN ROKEBERG said, "In 1996, you had 32.2819 and you paid
$485,000. But I understand that there is because of kind of a
anomaly that the gross premium requirements for the pool are down
for 97 and 98 and, therefore, your dollar amount won't go up to
meet your 50 percent - won't be as much or do you have a handle on
that yet?"
MR. McRAE stated that he can't speak on the premium issue, but the
pool does fluctuate every year as to how much money is paid out.
The amounts paid for different years has fluctuated. He said he
doesn't know what they will end up paying for 1997, as he hasn't
looked at the numbers yet.
CHAIRMAN ROKEBERG asked Mr. Davis if he has a goal for 1998 for
their market share.
MR. DAVIS responded that they don't have a specific market share
goal, but they are certainly looking to increase their membership.
He noted they expect fairly modest growth in 1998. He said he
understands that United Health Care is a competitor in the Lower 48
and is looking to enter into Alaska. He said NYLCare has been very
active in Alaska and there are a number of other companies that are
very competitive in the market.
CHAIRMAN ROKEBERG asked if United Health Care is an HMO.
MR. DAVIS said he understands that United Health Care offers a
variety of products from HMO to (indisc.).
CHAIRMAN ROKEBERG asked, "Did you not recently make an announcement
about developing a PPO type program? And does basic one or
traditional program - do they represent any type of a PPO program?"
MR. DAVIS stated they do not. He said, "We actually have PPO
programs already in existence in Alaska. The majority of our
members are in some type of PPO, either hospital - serious
(indisc.) in a hospital only type PPO, but the individual program
plans that you referenced, the basic one and the individual
traditional plan, do not include a PPO component at this time. We
would like to offer one and we're working to develop that and file
it with Division of Insurance as a way to offer additional choices
for individual members. And the intent is to be able to offer the
(indisc.) members a product that is less expensive, therefore, more
affordable."
Number 1678
CHAIRMAN ROKEBERG asked Mr. Davis if his testimony is that they are
working on a PPO for individuals to provide a lower premium for the
Alaska market.
MR. DAVIS responded that is correct. He stated he doesn't know
what the exact difference will be but that is their intent.
CHAIRMAN ROKEBERG asked if there wasn't an investigation of Blue
Cross of Washington and Alaska three years ago regarding the amount
of overhead and effects of the overhead in their organization on
the policy payers in the state of Washington.
Number 1713
MR. McRAE informed the committee members he has been with the
organization since 1994, and doesn't remember an article that was
directed toward high overhead or anything like that. He stated
their overhead costs currently are not high or low.
CHAIRMAN ROKEBERG referred to Washington State passing their health
care reform legislation and asked if their rates didn't go up
substantially in the state of Washington.
MR. McRAE responded, "In 1993, when the Health Care Act passed,
yes, they went up substantially and they continue to go up in the
marketplace, even though in 1995, the legislature did modify the
1993 law, which relieved some of the pressure on that. (Indisc.)
did go up substantially and continue to go up in Washington State."
CHAIRMAN ROKEBERG asked how that affects Alaska policyholders.
MR. McRAE stated that when they established prices in Alaska, they
established rates in Alaska based on Alaska costs and the Alaska
marketplace. The establishment of those rates didn't have anything
to do with Washington's rates. There has also been a substantial
amount of litigation in Washington pertaining to the insurance
commissioner's office in Washington State. The Alaska insurance
commissioner is aware of that and has watched the audits so that
Alaska is only paying Alaska costs.
Number 1819
REPRESENTATIVE BUNDE said, "As your revision of health care in
Washington took place you said premiums went up substantially and
then there was a roll back. When they rolled back the premiums,
did you take a roll back in profits then also?"
MR. McRAE said the insurance reforms changed in 1995 from the 1993
act. He referred to the 1993 act and said some of reforms had been
implemented and some had not. When the 1995 act became law, some
of those reforms were made that had not been implemented yet. He
said they didn't roll back rates after the 1995 act. Mr. McRae
said things just haven't gone into place as of yet. Other parts of
the reform have gone into place and that is where they are seeing
a lot of the cost increases.
REPRESENTATIVE BUNDE referred to increasing health care costs and
said it is safe to say that profits have remained stable.
MR. McRAE responded in the negative. He said they have been
running in the red for the last three years as Blue Cross of
Washington and Alaska. They see the same thing happening in 1997.
That is due mainly to the Washington State marketplace. Mr. McRae
pointed out that there has not been a new carrier that has come
into the Washington State marketplace selling in the individual
market since 1993.
REPRESENTATIVE BUNDE asked how they can maintain a viable business
if they're running in the red. Most shareholders would have some
real concerns about that.
MR. McRAE explained they have had rate increases and they currently
have rate increases pending. They have drawn reserves down. The
Alaska director of insurance has audited them twice over the last
year, and she is comfortable that they are in a very solvent
position and are working very hard to turn that around.
Number 1923
REPRESENTATIVE BUNDE said he has information that says they have an
asset surplus of $128 million, and assets of $393 million. He said
it's difficult to be in the red with those kinds of assets.
MR. McRAE stated the main thing they look at is the reserves
requirement, months of reserves or weeks of reserves. If they were
to close the company today, how long could they pay the bills that
are still coming in. Those reserve requirements are what is being
drawn down. He noted they are still in compliance of the
association and state law, both in Alaska and Washington in
relation to those reserve requirements.
Number 1964
CHAIRMAN ROKEBERG asked if they have to request a premium increase
and approval from the director of the Division of Insurance to be
able to raise their premium.
MR. McRAE said they do. They apply for a premium increase with all
the actuarial information that goes along with that to justify why
the increase is needed. The actuarial representatives from the
insurance departments, whether it's Washington or Alaska, reviews
that information to confirm whether it's justified or not.
CHAIRMAN ROKEBERG asked if they will have a separate and distinct
asset base for Alaska operations.
MR. McRAE responded, "We have had a continuing co-mingled. There
is one asset base for both Alaska and Washington State, and we see
that continuing. The only way that would change is if we went to
the point where we establish a separate board of directors in
Alaska and separate company in Alaska."
Number 2041
CHARLIE MILLER, Lobbyist, Alaska Regional Hospital, came before the
committee. He stated, "Basically we support the concept contained
in HB 300, but the reasons are the size of market and the
uniqueness of the Alaska market as opposed to the concept as
applied in the states. In a lot of markets, the corporation that
owns Alaska Regional wouldn't support this measure, but those
markets differ quite a bit from the Alaska market. We have a
limited number of covered lives and a limited number of providers
and we feel that with a small amount of both, the market can't use
the same mechanisms that are used in a larger market where managed
is successful. With a HMO or a PPO or a P for service choice
available to the patients and to the purchasers of insurance
products or self-insurance, you give the patients a range of choice
in the initial plan. I don't that happens very often in Alaska.
Usually you're given a plan with your employer and that's it. They
don't usually give you the choice there, so that restricts the
patients choice. As far as the providers, there are very few
competitive markets in the state. Usually there is one surgery
center or hospital in a community. The incentive for discount is
already pretty slim, but despite that the payers are able to
negotiate discounts. So to say that there would be no incentive to
discount to a large payer, if this bill passes, I don't think is
quite accurate. Large payers will always be able to discount, and
if there is a lack of providers to compete for the business then
I'm not quite sure where the incentive is anyway other than the
fact that a large payer brings a lot to the table."
MR. MILLER explained that in Fairbanks there is a CON (ph) in place
for a stand-alone surgery center, which would compete with
Fairbanks Memorial. If they're not allowed to access patients,
there won't be any competition for day surgery in that town. He
said if Fairbanks Memorial is successful in getting all the PPO
business, there will be no competition. There will be an anti-
competition situation if the other facility can't come online. Mr.
Miller informed the committee members that Anchorage has a stand-
alone surgery center and two hospitals and that is a competitive
market. Currently, both hospitals will accept PPO business and
write off the additional fee to the patient. He said, "We won a
PPO a few years back for the teacher's contract, which we have
since lost, but at the time Providence put up flyers saying that
they would gladly take the business and waive the additional fee to
the patients." Mr. Miller said if a payer were to come to both
facilities and say, "This is what we think it's worth to pay," it
would still be a discount, but perhaps not as steep as direct
competition. Both facilities could compete for the patients on
quality of service and different factors, and they would both still
have access to this. If they both stay in business, there would be
more competition. Mr. Miller stated they have supported this
measure in the past and they continue to do so, but it's an awkward
spot to be in because there is no other market where you could
compare the results of this type of legislation. Mr. Miller
stated, "We think that this is, in the long term, better for the
market competition, even though in the short term it may cost an
indeterminate amount of money for the purchasers of health care.
We do feel, in the long run, that will balance out."
Number 2304
CHAIRMAN ROKEBERG announced the next witness to testify would be
Gordon Evans.
GORDON EVANS, Lobbyist, Health Insurance Association of America
(HIAA), came before the committee. He informed the committee
members HIAA is a national trade association of about 255 about
smaller commercial health insurance companies. He noted Blue Cross
not AETNA is a member. Mr. Evans read his statement into the
record:
"HIAA opposes HB 300 for a number of reasons, and not the least of
which is that its provisions include an 'any willing provider
mandate,' a consequence of which, in the long run, would be to
increase the cost and reduce the efficiencies of managed care. An
integral part of managed care is the provider network. When a
managed care plan enters into a contract with a particular
provider, whether it's a hospital, a physician or some ancillary
provider, it seeks to accomplish several purposes. One of these
purposes is to establish a long-term relationship with the provider
that enhances the plan's market attractiveness and its ability to
provide access to quality health care.
"A second purpose of a managed care plan is to establish a method
of reimbursement with the provider that improves the plan's ability
to manage its health care costs effectively.
"Managed care plans attract providers by guaranteeing access to a
specified pool of enrollees, and if all providers in a community
are required to be included in the plan, or if an enrollee is
allowed to seek health care services from providers who are not
participating in the plan, there is no economic incentive for any
provider to enter into an alternative delivery or reimbursement
system. Any willing provider laws erodes savings. As the costs
increase, savings can no longer be passed along to consumers and
the value of the plan for consumers is lost. Any willing provider
legislation also hurts consumers by hindering the ability of health
insurers and PPOs, and I will not mention HMOs since Alaska does
not have HMOs and likely never will have, but it hinders our
ability to construct delivery systems that can guarantee specified
standards of care to meet the needs of their members. To serve its
enrolled population efficiently, a health care insurance plan must
be allowed to establish its own credentialing standards, and to
decide on the optimal number and speciality of providers to be
included.
"Increasing the network of providers beyond its ideal size
increases the cost of administering the network. HIAA believes
that managed care systems should be able to limit their networks of
providers and to alter reimbursement systems to reward efficient
providers in their network. Insurers should be free to negotiate
reimbursement schedules with providers to contain health care
expenditures.
"HIAA is opposed to legislation that would restrict the ability of
an insurer, or other entity, to contract with providers and would
require the insurer to accept any provider in a particular service
agreement.
"Buyers of insurance plans, and not state government, should
dictate what services and which provider groups should be covered.
The Federal Trade Commission has determined that any willing
provider mandates are anti-consumer and may discourage competition
on providers, in turn raising prices for consumers and
unnecessarily restricting consumer choice and prepaid health care
programs without providing any substantial public benefit.
"In addition, the National Governor's Association has gone on
record as opposing any willing provider mandates at both the state
and federal levels. They believe these laws can undermine the
access, cost containment and quality assurance benefits provided by
effective managed care organizations.
"Finally, Mr. Chairman, with reference to proposed Section
21.42.390(a)(2) at the bottom of page 1 of this bill, HIAA agrees
that managed care plans should not limit or manage clinical
discussions between physicians and their patients regarding care
or...."
TAPE 98-36, SIDE B
Number 0001
CHAIRMAN ROKEBERG thanked Mr. Evans for his testimony and asked if
there were questions.
REPRESENTATIVE JOE RYAN referred to all the rhetoric about saving
money and said the money is not going away, it's remaining in
somebody's pocket, either the guy who is paying the premium or the
physician or hospital that would be receiving it.
Number 0061
REPRESENTATIVE JERRY SANDERS referred to the way things currently
are and asked if everyone doesn't have a choice of where they want
to go.
MR. EVANS said, "Yes, unless you belong to one of the PPOs that
limits your payment - I mean who you go to as far as how much
they'll pay."
REPRESENTATIVE SANDERS said that is a choice of how much you're
going to pay. He said they can go anywhere they want to.
Representative Sanders said to him the bill is about who is going
to pay for that choice. He said, "If they want to make that
choice, they pay for it. If we institute this bill and if they
want to make that choice, I pay for it."
MR. EVANS asked it would be him as a consumer.
REPRESENTATIVE SANDERS said the people pay for someone to make a
choice.
MR. EVANS stated that is exactly the point. Somebody is going to
end up paying for the extra that's not covered by the policy.
REPRESENTATIVE COWDERY asked if he is correct to say that the rates
are established by actuarial decisions, and if more or less
benefits are given it reflects the cost.
MR. EVANS said that is correct, and especially if the benefits are
mandated. He stated if it is a mandated offering, that means the
insurance company has to offer it and they can charge depending on
how many people take it. If it's a mandated benefit, they have to
offer it and that's where the increase in prices comes in because
they have to underwrite the costs. They have to do all the
actuarial figuring of how much is will cost to actually offer
these.
Number 0197
CHAIRMAN ROKEBERG asked how many companies in HIAA actually writes
insurance in the state of Alaska.
MR. EVANS responded that it has varied. He said he believes
approximately 40 HIAA companies actually writes policies in Alaska.
He noted that Principle is a member of HIAA. New York Life is a
member, but NYLCare is a just a third-party administrator and that
doesn't count.
CHAIRMAN ROKEBERG asked Mr. Evans if he has any idea of what market
share HIAA represents in Alaska.
MR. EVANS said he doesn't know. He noted that Golden Rule is not
a member of HIAA. He stated that HIAA's top company in Alaska is
probably in the same range as what Golden Rules writes.
CHAIRMAN ROKEBERG said he believes Principle is about 5 percent
higher. He asked Mr. Evans if any of the companies he represents
writes point-of-service type payment reimbursements as opposed to
policies that restrict the use under a PPO plan.
MR. EVANS responded that he couldn't answer that question. He
pointed out that he represents the association and each of the
insurance companies has their own procedures of what they do.
Number 0234
CHAIRMAN ROKEBERG said Mr. Evans had earlier referred to a portion
of the bill and asked him to review that again.
MR. EVANS referred to the bottom of page 1, subsection (2), and
said, "For some reason it's cropped up this year as one of these
no-gag rules, I believe is the term people had used - no-gag
clauses rather. And apparently somewhere along the line there must
be some HMOs, I think I've read in some of the national news
magazines that some HMOs tell a provider if they want to work for
them, they cannot tell a patient if there is a better deal he can
get or what his other options are for better treatment. And I just
wanted to say that HIAA is on the record as opposing any such
instruction to a provider. In fact, under our considerations, most
managed care plans do not gag a provider and tell them they cannot
tell a person that they can get better treatment or that there are
other options for their treatment. We don't have any problem with
that one particular paragraph is what I'm saying. We don't approve
or don't care for the part that says that any willing provider can
belong to a managed care plan."
Number 0209
REPRESENTATIVE COWDERY asked Mr. Evans if he knows the percentage
of Alaskans that are uninsured.
MR. EVANS responded that his recollection from several years ago
when Senator Duncan introduced a number of comprehensive health
care bills was that the figure was as high as 25 percent of the
population was uninsured. He said HIAA never agreed with that
figure, but that was the figure that was made.
CHAIRMAN ROKEBERG asked if HIAA came up with an alternate figure.
MR. EVANS responded, "No, except that the figures that were put out
by Blue Cross, by AETNA, by what the Division of Insurance had, it
was a much lower figure, but we never came up with an exact
figure."
Number 0358
REPRESENTATIVE COWDERY asked Mr. Evans if he knows whether the
Native Health Service was included in Senator Duncan's figure.
MR. EVANS stated that his recollection is that they weren't
included because if you were an Alaskan Native, you could go to the
Indian Health Service and get coverage.
REPRESENTATIVE RYAN referred to a Legislative Research Report,
98.056, March 15, 1998, and stated that it talks about 14,000
Natives who don't have medical coverage or are thought to be
insured by the Indian Health Service.
CHAIRMAN ROKEBERG announced Marianne Burke was next to testify.
Number 0503
MARIANNE BURKE, Director, Division of Insurance, Department of
Commerce and Economic Development, testifying via teleconference
from Anchorage, stated she didn't have formal testimony but is
available to answer questions.
CHAIRMAN ROKEBERG asked Ms. Burke who actually administers CHIPRA.
He asked if they have to report to the division because they
collect premiums.
MS. BURKE responded that the board acts as a management policy
organization. It is similar to any other insurance company. They
collect the premiums, the Division of Insurance serves as an ex-
officio member of the board.
CHAIRMAN ROKEBERG stated his concern is that in 1996, AETNA Life
Insurance Company had 42.47 percent of the market share in the
state of Alaska, $1.5 billion worth of policies being written. He
said, "Because of the change in the state going to self-insurance,
do you have any idea, just as a ballpark, what market share they're
going to have. We've heard an estimate from Blue Cross that they
went from 32 up to 50 percent. Do you have any idea what AETNA is
going to be doing?"
Number 0599
MS. BURKE responded that to the best of her knowledge, the amount
of premiums written will be reduced by about $110 million as a
result of the state being self-insured. She noted she has not
worked out the resulting percentages, but it significantly
decreases the position AETNA would have in the state. It increases
all of the other remaining writers.
CHAIRMAN ROKEBERG asked Ms. Burke if she had any knowledge about
the premiums and costs for the CHIPRA pool going down
substantially.
MS. BURKE stated that the costs are going down. However, she is
aware of the fact that there are some extremely expensive
procedures that are on the horizon such as kidney transplants,
which are very expensive. Although the trend seems to be down, she
is aware of the fact that there can be significant increases on a
one-time basis.
CHAIRMAN ROKEBERG asked Ms. Burke if he would be correct to say
that the Division of Insurance doesn't have a statistical method of
determining individual versus group health insurance underwriting
in Alaska.
MS. BURKE stated that is correct.
CHAIRMAN ROKEBERG asked how that could be fixed.
MS. BURKE responded that the information that is provided to the
Division of Insurance lumps a number of different kinds of health
policies together. She said they could request that providers
write their individual (indisc.) out. She said she is sure they
would object because of the additional work, but that data is
available and the state could get it.
Number 0720
REPRESENTATIVE ROKEBERG said he believes the state needs to know
that particularly as it relates to who is writing those policies
and what kind of a situation we're getting ourselves into.
Representative Rokeberg stated that he has been reviewing the issue
of who is covered. He said he believes it is clear to everybody
that if you're a self-insured, self-funded plan, under ERISA you're
completely exempt, under the exemption clause, from federal law.
It seems to be split in case law about whether states have the
ability to regulate the business of insurance and the issues that
relate to the state mandates. Representative Rokeberg asked Ms.
Burke if she cares to speak to this topic.
MS. BURKE informed the committee members that the subject of state-
mandated benefits has been litigated and there is substantial case
law that supports the fact that for ERISA self-insured plans that
the state cannot mandate the benefits. However, under HIPAA
[Health Insurance Portability and Accountability Act] that came
into effect July 1, 1997, a non-federal governmental plan, such as
our state plan, could be mandated to provide state benefits unless
they have received a waiver. The waiver is provided in HIPAA and
is separate from any of the insurance legislation. It would rest
entirely with the state plan itself of whether or not they applied
for and received the HIPAA exclusion. She said she couldn't
testify as to whether or not the state has that at this point. She
said at the time the state plan was transferred from fully-insured
by AETNA to self-insured administered by NYLCare, the plan was in
compliance with all of the mandated state benefits. Ms. Burke
stated she is not aware of the state changing or eliminating any of
those mandated benefits, hence since there has been no legislation
mandating additional benefits since that time, the state's plan
should still be in compliance.
Number 0918
CHAIRMAN ROKEBERG pointed out there currently is a bill before the
legislature mandating contraceptive pills. He asked what the
status of that would be. He also asked how many people she would
estimate would be affected by legislation such as that, and the
bill currently before the committee.
MS. BURKE referred to the bill that would mandate the contraceptive
coverage and said, "Any non-federal, and that's a very important
distinction there, non-federal governmental plan of the state that
was self-insured or have not asked for and been granted a waiver
from HIPAA would have to provide that coverage. As to how many of
them have, I'm sorry I don't have that information. I would not --
it would be a federal activity, it would be a waiver that would go
through HIPAA without touch of the division. It would affect not
just the state plan, which I understand is about 30,000 people, it
would also affect other non-federal governmental plans such as
school districts, cities, boroughs, that had not received this
waiver, and I have no numbers for how many people would be
impacted."
CHAIRMAN ROKEBERG asked if the state of Alaska has been exempt from
the mandates because the state is self-insured. He also asked if
it is voluntary that the state accept the legislative statutory
mandates.
MS. BURKE responded that the state could choose to be exempt from
any state-mandated benefit. While the state was an insured plan,
they were mandated to have any benefit that the legislation passed
into law.
Number 1083
CHAIRMAN ROKEBERG referred to HB 300 and asked how many people or
plans would it affect in the state of Alaska. He also asked who
would be exempt in terms of the population of the state percentage-
wise.
MS. BURKE stated that any plan, such as British Petroleum, ARCO,
Fred Meyer, Carrs, Carr Gottstein, and any of those large employer
plans that are self-insured, would not be subject to the provisions
of either HB 300 or any of the state mandated benefits. In
addition, the federal government plans would also be exempt from
the provisions of HB 300 or any of the mandates. Ms. Burke
informed the committee members that the Indian Health Service is a
governmental plan and would also be exempt from the mandates or the
provisions of HB 300. She said, "To the best of our knowledge, we
would have at most 30 percent of the state individuals who are
covered by one form of insurance or another. And for the record,
I include the Indian Health Service as a plan that is covering
individuals, similar to an insurance plan. But only about 30
percent of the remaining -- or 30 percent of the total population
would be impacted by this legislation."
CHAIRMAN ROKEBERG indicated there were no further witnesses to
testify and closed the public hearing. He announced that HB 300
would be held over for further consideration.
Number 1340
CHAIRMAN ROKEBERG called for an at-ease at 4:37 p.m. He called the
meeting back to order at 4:52 p.m. He announced that the
confirmation hearings would be held over as a quorum was not
present.
ADJOURNMENT
Number 1370
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing
Committee meeting at 4:53 p.m.
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