Legislature(2001 - 2002)
02/26/2001 03:20 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 26, 2001
3:20 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
Representative Andrew Halcro, Vice Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 113
"An Act relating to health care insurance payments for hospital
or medical services; and providing for an effective date."
- HEARD AND HELD
HOUSE CONCURRENT RESOLUTION NO. 1
Relating to establishing a Task Force on a Statewide
Comprehensive Energy Plan.
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 81
"An Act extending the termination date of the Board of Dental
Examiners."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 113
SHORT TITLE:HEALTH CARE INSURANCE PAYMENTS
SPONSOR(S): REPRESENTATIVE(S)GREEN
Jrn-Date Jrn-Page Action
02/05/01 0241 (H) READ THE FIRST TIME -
REFERRALS
02/05/01 0241 (H) L&C, HES
02/26/01 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE JOE GREEN
Alaska State Legislature
Capitol Building, Room 403
Juneau, Alaska 99801
POSITION STATEMENT: Introduced HB 113 as the sponsor.
KEVIN JARDELL, Staff
to Representative Joe Green
Alaska State Legislature
Capitol Building, Room 403
Juneau, Alaska 99801
POSITION STATEMENT: Provided information on HB 113.
JAMES J. JORDAN, Executive Director
Alaska State Medical Association (ASMA)
4107 Laurel
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 113.
MIKE HAUGEN, Executive Director
Alaska Physicians and Surgeons
4120 Laurel, Number 206
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 113.
JEFF DAVIS, Executive Director
Blue Cross Blue Shield of Alaska
2550 Denali, Number 600
Anchorage, Alaska 99503
POSITION STATEMENT: Testified on HB 113.
GUY BELL, Director
Division of Retirement and Benefits
Department of Administration
P.O. Box 110203
Juneau, Alaska 99811-0203
POSITION STATEMENT: Testified on HB 113.
KATIE CAMPBELL, Life and Health Actuary
Division of Insurance
Department of Community and Economic Development (DCED)
P.O. Box 110805
Juneau, Alaska 99503-5948
POSITION STATEMENT: Testified on HB 113.
NICOLE BAGBY, Account Executive
Aetna US Healthcare
Box 91032
Seattle, WA 98111
POSITION STATEMENT: Testified in opposition to HB 113.
KATHY ODEGARD, Operations Manager
Aetna US Healthcare
Box 91032
Seattle, WA 98111
POSITION STATEMENT: Testified on HB 113.
JAMES E. BROOKS, Executive Director
Providence Anchorage Anesthesia Medical Group
3300 Providence Drive, Suite 207
Anchorage, Alaska 99508
POSITION STATEMENT: Testified in opposition to HB 113.
ACTION NARRATIVE
TAPE 01-23, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:20 p.m. Those present
at the call to order included Representatives Murkowski, Kott,
Rokeberg, and Crawford. Representatives Meyer and Hayes joined
the meeting as it was in progress.
HB 113-HEALTH CARE INSURANCE PAYMENTS
Number 0058
CHAIR MURKOWSKI announced that the committee would hear HOUSE
BILL NO. 113, "An Act relating to health care insurance payments
for hospital or medical services; and providing for an effective
date."
Number 0109
REPRESENTATIVE JOE GREEN, Alaska State Legislature, sponsor of
HB 113, said similar bills have already been adopted by 39 other
states. According to HB 113, if a bill [of service] is filed
with an insurance carrier, the insurer should have a reasonable
length of time to make payment. He said the term "clean claim"
is used in the bill and means that all of the conditions of the
insurance carrier have been satisfied, and that there is enough
information to determine it is a bill that should be paid.
REPRESENTATIVE GREEN stated that sometimes that period is
extended beyond what a person might consider a reasonable
timeframe. House Bill 113 outlines [a payment requirement] of
20 working days for a paper claim, and 10 [working] days for an
electronic claim.
Number 0206
REPRESENTATIVE GREEN relayed that there may be a desire to
modify this to calendar days rather than workdays.
REPRESENTATIVE GREEN said "we" want to try and avoid an
insurance company delaying the process for some small reason.
He said it could [potentially] be spread out over a long period
of time to finally reach resolution and payment. This may not
be intentional, but may happen because of new employees
receiving the claims at the insurance company.
Number 0376
REPRESENTATIVE KOTT said he likes the bill and expressed his
understanding. Only 1 of the 39 states, according to the chart
[provided to committee members], has less than 30 days [as the
payment deadline]. There is no state that has 10 days if a
claim is filed electronically. He asked: Is Alaska trying to
get "better than the average and more expeditious?" Or can "we"
fall back to an average time span? He noted that most states
have implemented 30 days for both types of claims. He asked for
the sponsor's comments on whether this is the direction Alaska
wants to take.
Number 0477
REPRESENTATIVE GREEN commented that an electronic claim can be
filed and processed quickly. He said there isn't mail to deal
with, so much of the extraneous days are cut out. Cutting [the
time] in half is arbitrary, but it certainly should be some
amount less, he said.
Number 0510
KEVIN JARDELL, Staff to Representative Joe Green, Alaska State
Legislature, said the average for [payment of] a paper claim is
31.7 days across the country, and within that spectrum, HB 113
is well represented. Six states have enacted separate deadlines
for the electronic clean claims, as opposed to paper claims;
those states are Colorado, Hawaii, Louisiana, New Jersey, New
Mexico, and Texas. He added that Hawaii has a 15-day turnaround
on electronic claims, and said it is working [just fine].
MR. JARDELL explained that the idea of setting a different time
[frame] for electronic claims is something that is being looked
at on the federal level, as an inducement to get medical
professionals and providers to switch to the electronic form.
It is not meant to be a detriment to the insurance companies, he
said, but more of an inducement for the doctors. He pointed out
that most of the insurance companies are heavily promoting
electronic filing. However, it is "our" understanding that some
of the doctors are resistant to this idea. This gives a shorter
timeframe for turnaround of money, and a decrease in the overall
administrative cost with insurance companies.
Number 0577
MR. JARDELL said 15 days isn't the norm, but it is being done.
Number 0622
REPRESENTATIVE KOTT said his concern is that if Alaska goes to
10 days for electronic filing, Alaska will have set the standard
for the most expeditious filing of the 40 states. He asked what
the average is for filing paper and electronic claims.
Number 0657
MR. JARDELL replied that he doesn't have the average, but
Colorado's electronic claim submission in is 30 calendar days,
Hawaii's is 15, Louisiana's is 25, New Jersey's is 30, New
Mexico's is 30, and Texas's is 21 days. He said it leans toward
30 days, but noted that Hawaii and Louisiana have gone to a
lower standard. He pointed out that 10 working days would be
about 15 [calendar days], which is what he thought
Representative Green was saying. He reiterated that this was an
inducement to try to lower insurance payments.
MR. JARDELL stated that there are mixed thoughts about whether
this poses a problem. He said maybe there is some testimony,
which could ferret out a more proper and exact timeframe. He
said depending on whom one talks to, one gets different answers
because some [companies] have more advanced computer systems.
Apparently, there are some systems that treat [claims] the same,
whether they are electronic and so forth; each insurance company
has different comments to make on that [issue].
Number 0750
REPRESENTATIVE ROKEBERG asked for confirmation of his
understanding of the current statute, that it might be 30
working days, but may be permissive.
MR. JARDELL said he reads the statute to be permissive. He
referred to the phrase, "and upon the request of the covered
person shall ... be a separate issue." This deals with the
insurance company having to pay the provider following the 30-
day requirement. He said he thinks most insurance companies
read that as being mandatory; however, he referred to the
regulations under [3 AAC] 26.040 where a company has 10 days to
identify who will be handling the claim, the name of the person,
and the phone number where he or she can be reached.
MR. JARDELL continued by saying that under [3 AAC] 26.070 there
is a 15-day notice requirement, requiring the insurance company
to give notice again, stating whether or not it is going to
accept or deny the claim, and declaring how much more time it
will need. Then, under [3 AAC 26.] 070, there is a 30-day
notice requirement that says the claim has to be paid within 30
days if it's complete. Under [3 AAC 26.] 050 there is a 30-day
notice requirement, which is separate. It says one must give
notification, stating the reason for [needing] the additional
investigative time. Then, under [3 AAC 26.] 070 again, there is
a 45-working day period once additional investigative time has
been requested before [the company] has to notify again that
more investigative time is needed, which would be another 45
working days; this can total about 18 weeks.
MR. JARDELL said even at that point, there is no closure if a
company still needs time to investigate the claim; a company
only has to provide notice every 45 days after that.
Number 0883
MR. JARDELL said the regulation scheme is somewhat complicated.
One will hear that some [of the insurance companies] are not
fully complying with the regulations as they are currently
written, because they are onerous and there are so many notice
requirements. He believed the intent of this legislation was to
have a 30-working-day period to end the claims, which is not
what is [currently] happening.
Number 0919
REPRESENTATIVE HAYES began by declaring a conflict of interest
because he works in the insurance field. He checked his
understanding that this legislation says that a claim has to be
done, from start to finish, in six weeks.
Number 0967
REPRESENTATIVE GREEN clarified that this bill addresses only
clean claims, so if there is controversy over what information
is needed, the clock isn't running. He said this bill is to get
around the problem with the current regulations. He emphasized
that this only applies to non-controversial claims.
Number 1006
CHAIR MURKOWSKI verified that there is another notice [time]
period for claims that are not clean.
REPRESENTATIVE KOTT said a company has to pay an interest rate
penalty if it doesn't comply. He asked if an insurance company
could circumvent the system to get around processing a clean
claim within 20 days.
Number 1079
MR. JARDELL replied that the bill is set up for a company to pay
a claim within 20 days or incur interest penalties until payment
is made. A company can, within the 20 days, notify the provider
as to why it is not a clean claim. At that point the provider
must send the insurance company the additional information
required to make it a clean claim. If everything requested is
not provided, it still isn't a clean claim. If the information
is provided, it is considered a clean claim, and the clock
begins to tick again.
Number 1171
REPRESENTATIVE GREEN said if a company comes up with something
29 days later, for example, then there is a conflict.
MR. JARDELL explained that if "bad faith actions" become a
pattern, those are handled through the Division of Insurance.
There are actions [pursued] to take away the company's ability
to sell insurance in the state. After the 20-day period, if the
insurer receives the information, [the insurer] has five working
days to make a payment or to deny the claim; there is finite
resolution once [the insurer] gets that information. If a
company comes back and says that the information wasn't exactly
what it was looking for, and so forth, at that point, one would
have to go to the Division of Insurance and ask the division to
investigate.
Number 1239
CHAIR MURKOWSKI asked what the rationale was for setting the
interest rate as outlined in [AS] 06.40 [page 2, lines 9-11, of
HB 113], rather than [using] the legal rate of interest.
MR. JARDELL replied that it was appropriate to charge the same
interest rate that the insurance companies charge individuals to
finance insurance premiums. In looking at the chart of other
states that have it, there are a number of different interest
payment rates. Generally, rates are between 12 and 18 percent;
15 percent was thought to be a good tie-in to the other rates
that a company charges.
MR. JARDELL said the legal rate is 10.5 percent, unless
otherwise specified in the contract. Prejudgment interest is
now a floating rate based upon (indisc.).
Number 1323
CHAIR MURKOWSKI asked if insurance companies are currently doing
reporting.
MR. JARDELL said he understood that companies file a quarterly
report to the state, and this would just add one feature to
that. This is not adding an administrative burden to the
companies, he said, because it is currently being done.
CHAIR MURKOWSKI referred to page 2, Section 1, lines 23-25 [of
HB 113]. She said this language seemed out of order, and asked
why it was in the bill.
Number 1392
MR. JARDELL replied that it is current law and has always been
in the statute.
MR. JARDELL, responding to a question about whether "working
days" is defined in statute, said it is, and has always been
used by the Division of Insurance. He said "we" certainly don't
have a problem going to calendar days if it is more acceptable
to the insurance companies. He understood that with some of the
programs that companies use, it is easier to calculate a
calendar day, rather than recalculating each state's holidays
and so forth.
Number 1467
REPRESENTATIVE ROKEBERG referred to page 2, lines 23-25. He
said, "This policy referring to (a) (b) (c) and (d) above may
not contain provisions requiring that services be provided by a
particular hospital or person, except as applicable under an
[human maintenance organization] HMO [AS] 21.86." He said AS
21.86 is the HMO chapter that this legislature has sought to
make inoperable, to make it so there wouldn't ever be HMOs. He
said Alaska has preferred-provider plans. He asked why this
language was in the bill.
MR. JARDELL responded that it is current law.
Number 1526
REPRESENTATIVE MEYER said it seems that people are always trying
to get claims in before the end of the year so they don't have
to worry about next year's deductible. He asked if there is a
provision whereby if an insurance company gets overwhelmed at
the end of the year, it can go past the [time limit set in
statute].
MR. JARDELL responded that companies are held to the same
standard all year round; based on history, companies should be
equipped to anticipate the increased claims and deal with them
in a timely fashion. He said most companies would claim that
they do pay within a reasonable amount of time, although he
didn't want to speak for them.
Number 1608
JAMES J. JORDAN, Executive Director, Alaska State Medical
Association (ASMA), relayed that [ASMA] had already provided
some brief written testimony by Peter Lawrason, President, ASMA.
He said the timeliness of group health insurance claim payments
has been an ongoing issue since he began with the ASMA 4.5 years
ago. In the spring of 1998, U.S. Senator Frank Murkowski asked
the ASMA to conduct a survey of private practice physicians in
Alaska to look at Medicare access issues. He said as long as
the ASMA was going to do the survey, it included some additional
questions about timeliness of group health insurance claims; up
to this point, all that was heard was just anecdotal information
from the doctors.
MR. JORDAN said the survey was not extremely scientific nor were
the results statistically validated. However, the results serve
to indicate the feeling of the medical community. He said 950
surveys [were distributed], and the response rate was 19
percent.
Number 1768
MR. JORDAN said the results showed that Medicaid does a pretty
good job. Regarding private health insurers, the average [days
for payment] was 36, which, at that time, corresponded to the
top nine health insurers in the state. Medicaid "brought up the
rear" at 41 [days]. The data for the slowest-paying health
insurers was 79 days; the shortest turnaround time was 30 days,
and the longest was 365 days. He pointed out that the data is
three years old, and [the situation] may have changed since
then.
MR. JORDAN said [having to pay] interest is an incentive for
carriers to pay promptly, and it also provides an upfront
recognition of the "time value" of money. He mentioned that HB
113 is not just for physicians, it is for all types of medical
care providers that submit bills such as hospitals, nurse
practitioners, physician assistants, and so forth.
Number 1829
MR. JORDAN pointed out that the interest goes to the insured
person unless that person requests that the claims be directly
paid to the care provider. This is the process that is commonly
known in the insurance world as the "assignment of benefit."
Mr. Jardell had mentioned that H.R. 287, the federal bill, looks
at some of the same issues that HB 113 looks at in Alaska. The
[federal bill] has a 30-day timeliness parameter for paper
claims and 15 days for electronic claims.
MR. JORDAN concluded by saying that the ASMA views this as a
good first step, and said the linch pin of this legislation is
the definition of a clean claim. He explained that the
definition utilized in the proposed bill is the definition that
is used in Medicare. Under the Health Insurance Portability and
Accountability Act (HIPAA) of 1996, there are provisions dealing
with the confidentiality of medical records. He said this fits
because under HIPAA, the Health Care Finance Administration
(HCFA) recently published extensive regulations dealing with
confidentiality of medical records. He said critical to this
process is the determination of the minimal amount of
information which needs to be submitted to a health insurer,
while still protecting the individual's confidentiality. He
said it is a work in progress. It is the ASMA's feeling that
the definition of a clean claim will be driven by what comes out
of the HIPAA. He stated that it would probably be the "minimal
elements" that need to be completed on the HCFA 1500 form.
Number 1977
REPRESENTATIVE ROKEBERG asked Mr. Jordan if he thought Alaska
would be "out on the cutting edge" by demanding electronic
payment; it would be considered an insurance mandate, and would
deter insurance companies [from providing services] in Alaska.
He said if this bill is adopted, Alaska would be the most
aggressive state, and he asked what the consequences might be.
MR. JORDAN responded that there might be testimony that could
address that because his comments would just be conjecture.
REPRESENTATIVE ROKEBERG indicated there is always a problem
between groups covered by the Employee Retirement Income
Security Act of 1971 (ERISA), and federal and state laws. He
asked Mr. Jordan if this bill would only apply to those not in
an ERISA-covered groups.
MR. JORDAN said he thought this would only apply to those
entities that can be regulated by the state Division of
Insurance; it wouldn't apply to the ERISA-covered groups.
Number 2083
REPRESENTATIVE ROKEBERG said this would cover the same types of
people that an insurance mandate would, which is a small number.
This would include 10 or 15 [percent] of people in the state,
particularly if the Indian Health Service (IHS) provisions are
fully applied. He said if one has to force the systems to be
compliant, it drags everyone along with it.
Number 2129
MIKE HAUGEN, Executive Director, Alaska Physicians and Surgeons,
an independent practice association in Anchorage, said he
represents roughly 165 doctors, primarily specialists. He said
he wanted to speak about the costs associated with late payments
to his doctors' offices. The diversity of the groups he
represents ranges from an office with 20 doctors, down to single
practitioners. He stated that cost has a time component with
it, and if one of his smaller doctor's offices doesn't get paid,
it is forced to hire additional staff to process claims. Those
costs are ultimately transferred to the consumer in the form of
higher medical costs.
MR. HAUGEN said the committee would hear testimony from one of
the larger groups in town that has the luxury of hiring an
excellent staff person who makes sure that the doctors get paid.
He said many of his smaller doctor [groups] can't afford to do
that, and are forced [to settle] for partial-claim payments. If
an office doesn't have the expertise to follow a claim, it can
be the end of the line. Insurance companies have argued that if
they are forced to modernize their computer systems so claims
can be processed sooner, it imposes a cost that will be passed
on to the beneficiaries in the form of higher premiums. He
thinks the consumers in Alaska are currently bearing that cost
anyway because there are lots of extra staff people in his
doctor's offices who do nothing but track claims. He said if
the process can be streamlined, it would require fewer staff.
Number 2217
MR. HAUGEN remarked that there is an ongoing problem with
Medicare and access for elderly [people] in this state. He said
a lot of his physicians simply couldn't afford to see as many
Medicare patients as they would like. If doctors could lower
the cost of doing healthcare, they may feel more inclined to
take on more Medicare patients. He said Medicare patients just
don't "pay the freight" when it comes to running a medical
office. Ultimately, if the [insurance] carrier can pay the
doctor more promptly, everyone will be better off.
Number 2250
JEFF DAVIS, Executive Director, Blue Cross Blue Shield of
Alaska, emphasized that his company believes in and supports
prompt payment. He said there are 62,000 members in the Alaska
group. "We" pay 86.7 percent of all claims within 14 calendar
days, and 97 percent of all claims within 30 calendar days.
Blue Cross Blue Shield believes that the 30-day payment standard
for claims is reasonable and serves all parties. A concern "we"
have with HB 113 is the provision for the 10-workday turnaround
for electronic claims. He said the 20-[work]day [requirement]
for paper claims is consistent with the 30-[calendar]-day
standard.
MR. DAVIS remarked that the clock running working on the date of
receipt of a paper claim. It takes them a short period of time
to enter the claim into the system, he said, and at that point,
the claim becomes indistinguishable in its process from an
electronic claim. He said "we" can meet that standard, but
there is concern about the cost to members, because it would
take additional staff to meet the 10-day turnaround [time] for
an electronic claim.
Number 2372
MR. DAVIS explained that the claims that go through without any
question are not the issue; it is those claims for which a human
being has to get involved and ask questions, and so forth. The
second concern [Blue Cross Blue Shield] has about the bill is
not that the interest would be attached to a late payment, but
the methodology that will be used. Mr. Davis said that there
was no widely accepted methodology for calculating interest for
the claims that go beyond the established standard. If Alaska
ends up with a standard that is different from other states, it
could become a barrier to doing business in the state,
especially for those carriers that have small market share, or
those that would [like to] enter the state.
Number 2422
MR. DAVIS said [Blue Cross Blue Shield] would be happy to work
with the legislature to modify the bill and make the interest
calculations and standards acceptable from their point of view.
With the changes, Blue Cross Blue Shield would support it.
Number 2436
REPRESENTATIVE KOTT verified with Mr. Davis that the bill would
be more palatable if it reflected 30 calendar days for both
electronic and paper claims.
MR. DAVIS responded affirmatively.
TAPE 01-23, SIDE B
Number 2457
REPRESENTATIVE HAYES remarked that it seems that electronic
claims would be much faster [to process].
MR. DAVIS responded that "we" have people who specialize in
Alaskan claims only. He said most of that group is located in
Washington [state], with a portion in the Anchorage office. He
said for most purposes, the method of transmission speeds up the
process, but the time clock on this bill starts with receipt, so
whether a claim is received in the mail today or electronically
today, the clock starts today for both.
Number 2396
REPRESENTATIVE HAYES asked about Blue Cross Blue Shield's system
of processing [claims].
Number 2376
MR. DAVIS explained that providers can submit an electronic
[claim], and, if they do, it is received by the claims system
and goes through an auto-adjudication process. A large
percentage [of the claims] go through without ever being touched
by a human being, and are paid quickly. When claims need to be
"touched," this means that a person needs to look at them and
understand what is being done.
MR. DAVIS explained that all claims become electronic claims
once they have been entered [into the system], and the process
is indistinguishable from that point forward.
Number 2319
REPRESENTATIVE HAYES said it seem that if there is an electronic
entry, it should take less time than if it is done on paper and
through the mail.
MR. DAVIS replied that the clock starts when his company
receives the claim, so it is really [just] processing time.
REPRESENTATIVE HAYES asked Mr. Davis if he just wants a time
frame that is either 30 days or 15 days, but for both types of
claims to have the same time frame.
MR. DAVIS indicated affirmatively.
Number 2267
MR. DAVIS said there are some [up-and-coming] efficiencies that
could be adopted to handle claims electronically. He explained
that rather than manually entering claims, one could get
optical-character recognition (OCR), which would cut off a day
or so. If the standard was 20 working days for a paper claim,
and 19 for an electronic claim, that would make sense, he said,
because it would represent the efficiencies that occur after the
claim is received - which is the time frame in question.
MR. DAVIS explained that the majority of claims, whether
received electronically or not, still require a human to look at
them. He said if the company didn't have information, for
example, on whether a person had [other insurance] coverage,
that would be a reason to ask a question [and pull the claim for
further investigation].
MR. DAVIS added that his company now asks for that information
up front, and it is entered into the system so claims can go
right through.
Number 2118
REPRESENTATIVE ROKEBERG referred to page 2, subsection (d),
which reads in part:
A claim for which a health care insurer provides
appropriate notice of a deficiency ... [under] (b) of
this section must be paid within five [working] days
after receipt of those items listed as being
deficient. If payment is not made within five working
days, the claim is presumed to be a clean claim.
REPRESENTATIVE ROKEBERG asked if that [section] troubled Mr.
Davis, and went on to ask if Mr. Davis' company pays partial
claims.
MR. DAVIS gave an example. If a member has a bill for $100, and
the member's plan pays 80 percent of covered charges, then Blue
Cross Blue Shield would pay $80. He said the interest [accrued]
would be on the portion owed by the plan, rather than the total
bill, including the portion owed by the member.
REPRESENTATIVE ROKEBERG, turning his attention to another issue,
asked Mr. Davis if there is anything in this legislation that is
inconsistent with the new "Patients' Bill of Rights" that takes
effect July 1, 2001.
Number 2050
MR. DAVIS responded that he had a question about lines 23-24 on
page 2. He said oftentimes there is a timely-payment provision
in provider contracts, but interpreted it to mean that if the
provision was more stringent in the provider contract, then it
would have to be met, and if it was less stringent, then state
law would have to be met.
Number 2026
REPRESENTATIVE CRAWFORD said Representative Green put the two
separate time periods in the bill to give an incentive to
doctors filing electronically. He understands, from what Mr.
Davis has said, that he doesn't think there should be an
incentive to get doctors to file electronically. He asked Mr.
Davis whether there were savings in filing electronically.
Number 1978
MR. DAVIS remarked that the savings are the difference between
having a claim go right into the system, and having a claim
entered into the system by someone. [Blue Cross Blue Shield]
supports electronic filing by Alaskan providers and has worked
closely with physicians in Alaska for over ten years. The
company has used member resources to help set that up. There
are other reasons that [some] providers aren't interested, he
explained, and oftentimes a small office just doesn't want to
deal with it. He pointed out that many providers don't bill for
their patients, but collect the money up front, and the member
has to worry about submitting the claim [to the insurance
company].
MR. DAVIS said the other concern he has about using it as an
incentive is that [Blue Cross Blue Shield] is a taxable, not-
for-profit organization; the cost of providing coverage is
ultimately borne by the members, because there is no other
money; if charging interest is to be an incentive for providers
to submit electronically, it is the members' money being used to
induce a physician to set up electronically, which seems odd to
him.
Number 1904
REPRESENTATIVE KOTT asked Mr. Davis if part of the incentive
wouldn't just be the ease and understanding that the company
already received it, and [the ability to] get instant feedback.
He also asked if organizations could pay claims electronically.
Number 1852
MR. DAVIS responded that at this time, it is his understanding
that there is not direct deposit. He said "we" receive a claim,
it goes through the system and is adjudicated, and a check is
physically cut and sent to the provider along with an
explanation of benefits; an explanation of benefits also goes to
the member showing what was paid.
Number 1832
REPRESENTATIVE KOTT asked for clarification from Mr. Davis about
his previous response regarding the days for payment. He asked
Mr. Davis to clarify that his [previous] affirmative response
meant that he would accept a 15-day standard [for both types of
claims].
MR. DAVIS said "we" support a standard that is either 30
calendar days or 20 working days, which are essentially the same
thing.
REPRESENTATIVE KOTT asked Mr. Davis if there is provision in
statute that says an insurance company has to render payment to
the member within a certain period of time [if the payment is
submitted by the member, not the provider].
MR. DAVIS said he understood it to be the same whether the
payment goes to a member or to a provider.
Number 1740
REPRESENTATIVE ROKEBERG asked Mr. Davis what percentage Blue
Cross Blue Shield holds of the market.
MR. DAVIS responded that [Blue Cross Blue Shield] represents
105,000 members, and he believed the total market to be
approximately 250,000 members. He clarified that Blue Cross
Blue Shield has 53 percent of the insured market.
Number 1695
REPRESENTATIVE ROKEBERG said only a portion of this bill would
be applicable to a percentage of that market because of the
ERISA requirements. He said this bill is applicable to 15 to 20
percent, and if Blue Cross Blue Shield has half of the insured,
the cost shift from the providers to the insurance companies is
back to the people again, at less than 10 or 15 percent of the
market. As a result, he thinks the standards of practice would
change.
MR. DAVIS clarified that of the 250,000 [members], very few
probably have an insured program; this bill would only apply to
those. He said Blue Cross Blue Shield has 53 percent of this
group. He agreed that, in most cases, if a carrier has a mix of
insured and self-funded businesses, "they" would apply one set
of standards, and it would be the most stringent set of
standards as far as turnaround [time]. "They" probably wouldn't
pay interest on the self-insurers, [since that wouldn't be]
required, but as far as turnaround, the same [standard] would
probably be applied to all.
REPRESENTATIVE ROKEBERG followed up by asking - if this was
adopted - isn't it correct that 80 percent [of the carriers]
would speed up the time [requirement], but wouldn't pay interest
because of their exemption from enforcement as ERISA-type
insurers.
MR. DAVIS speculated that this would be the business decision
most carriers would make. Carriers would set up systems to meet
the turnaround standards, but if they weren't required to pay
interest, they would probably not choose to make interest
payments.
REPRESENTATIVE ROKEBERG said the smaller groups would bear the
burden, and this would be a disincentive for underwriting to
(indisc.) in the state.
Number 1562
CHAIR MURKOWSKI asked about the interest methodology. She said
in the bill, the interest would be calculated on each individual
account. She asked if Mr. Davis had found information where the
methodology is different, where interest is calculated based on
the provider.
Number 1534
MR. DAVIS stated that there is much variation among
jurisdictions, and there doesn't appear to be one methodology
that is widely accepted. He said it raises the concern that if
Alaska adopts a different methodology, it potentially places a
barrier to entering this market.
Number 1496
GUY BELL, Director, Division of Retirement and Benefits,
Department of Administration, gave the following background
information. He said the division administers health plans for
22,000 retired public employees, teachers, and their dependents;
11,000 active state employees and their dependents [are also
covered]. He said "we" have a fully self-insured medical plan;
Aetna, the claims administrator, is paid a per-member
administrative fee, and the division covers the cost of claims.
MR. BELL remarked that the division is not sure whether it is
subject to this legislation, but doesn't assume that it is,
because the division is self-insured. However, in the past the
division has tended to follow mandates set by the legislature,
as a matter of public policy.
Number 1423
MR. BELL said generally, the division would be concerned about
anything that would increase plan cost. The cost of interest,
he said, if it were applied, would raise plan premiums. He also
mentioned that the definition of a clean claim might need to be
clarified.
MR. BELL said the division has incentives for prompt payment
within its contract with the third-party administrator. The
incentive is that 80 percent of all claims [must] be paid within
12 calendar days, and if this is not met, the third-party
administrator is required to pay penalties. He clarified that
the penalties are charged to the plan, not the members or
providers.
Number 1358
CHAIR MURKOWSKI asked Mr. Bell if, from his perspective, there
is a difference between electronic and paper claims.
MR. BELL said the division doesn't actually administer the
claims; that would be a question for Aetna, as the third-party
administrator.
REPRESENTATIVE ROKEBERG asked Mr. Bell if the division's policy
has been driven by other legislation, mandates, or an executive
decision.
MR. BELL indicated that it was an executive decision.
Number 1252
REPRESENTATIVE HAYES asked Mr. Bell to provide him with data on
how quickly dental claims are paid, because dental claims seem
to take a lot longer.
MR. BELL said he believed the division could provide data from
Aetna's database on the turnaround times over the past months.
Number 1192
KATIE CAMPBELL, Life and Health Actuary, Division of Insurance,
Department of Community and Economic Development (DCED), stated
that the division is generally supportive of the bill and the
20-working-day requirement. She said she had spoken to
Representative Green's office, and "we" had some technical
suggestions for cleaning up some provisions in the bill. She
clarified that currently, there isn't a reporting requirement;
insurers don't have to report percentages of claims that are
paid within a time period. This would be new to the statute and
to the division, she explained.
REPRESENTATIVE ROKEBERG mentioned the potential HCFA
regulations. He asked Ms. Campbell if she sees any problems
with the definition of a clean claim, and asked whether there is
any interrelationship between the upcoming regulations and the
bill.
Number 1095
MS. CAMPBELL responded that she is not too familiar with the
definition of a clean claim. She knew that some work was being
done on the actual standard claim form. Other states actually
avoid the clean claim definition, she remarked, and [just] have
companies provide standard information; the HCFA reporting claim
form is one [way of providing that information]. If the
information is provided on that [form], then the claim has to be
processed within the time frame.
Number 1051
NICOLE BAGBY, Account Executive, Aetna US Healthcare, Seattle
Office, via teleconference, said Aetna currently holds a large
percentage of the self-insured health insurance market in
Alaska. There are only about 10,000 members in the fully
insured market. She testified in opposition to HB 113, as it is
currently drafted, and remarked that Aetna has many concerns
with the legislation.
MS. BAGBY said the bill is not consistent with the claim-payment
deadline required by Medicare. Medicare uses a 30 calendar-day
deadline for paper claims, and a 15-day [deadline] for
electronic claims. She remarked that the 30-day-payment
schedule is pretty common to all businesses, not just health
insurance companies.
MS. BAGBY said Aetna also believes that the definition of a
clean claim needs to be expanded. There will be disputes about
the definition if the bill passes, and the Division of Insurance
or the courts will have to adjudicate them.
MS. BAGBY pointed out that the bill might [actually] slow down
processing claims. Instead of accepting a claim, and trying to
fix some of the issues, insurers may reject the claim up front,
because of the potential for interest penalties.
MS. BAGBY stated that Aetna also believes that the penalty for a
claim payment, mistakenly made to a patient instead of a
physician, is too severe. This bill would require Aetna to pay
the claim twice, once to the patient and once to the physician.
MS. BAGBY stated that the bill would require Aetna to set up new
tracking and reporting systems for the reports that would need
to be submitted quarterly to the state. It is another added
expense to the healthcare administrative system in Alaska, she
commented.
MS. BAGBY relayed that most of Aetna's self-insured businesses
have contractual or performance guarantees with customers that
payments would be made in a relatively short period of time.
Aetna puts its money at risk to meet these requirements, and
doesn't profit from slow payments; the pool of money that is
used to pay the claims belongs to the self-insured customers,
not to Aetna.
MS. BAGBY concluded by saying that the company still needs some
additional time to provide specific language recommendations to
the committee.
Number 0834
REPRESENTATIVE ROKEBERG asked whether Aetna currently has to
supply reports, because it was mentioned during Ms. Bagby's
testimony that the company would have to set up a whole new
system of tracking. He also asked her to point out in the bill
where it refers to payments needing to be made to both the
claimant and the provider.
KATHY ODEGARD, Operations Manager, Aetna US Healthcare,
responded that Aetna does customer-specific reports, not
[reports with] statewide data.
MS. BAGBY referred to page 2, line 26-28, subsection (e) [which
outlines this language].
Number 0751
CHAIR MURKOWSKI remarked that she understood it to mean that if
there had been a change in whom the payment went to, as is
currently in statute, the insurer would have the right to
recovery [of costs] against the individual or provider that had
erroneously received the payment.
Number 0674
JAMES E. BROOKS, Executive Director, Providence Anchorage
Anesthesia Medical Group, a group of 19 anesthesiologists, said
he had information from a provider's perspective about claim
adjudication in the state.
MR. BROOKS pointed out that his data would differ considerably
from that provided by the insurance representatives, but said he
is prepared to back up his data. He said Mike Haugen asked him
to profile, from his practice's perspective, claims of
adjudication. [Mr. Brooks had a several-page handout for the
committee.] He explained that he had used the payments that
came in during the month of December, and had profiled three
different payers. The sample size [of insured customers] was
241 for one payer, 211 for another, and 37 for the third.
MR. BROOKS proposed that in terms of achieving prompt claims
adjudication, the performance of the insurers, providers, and
the public are not aligned.
Number 0596
MR. BROOKS remarked that the people of Alaska pay premiums, and
expect not only to have the insurance costs covered, but also
for [the process] to be prompt and efficient. He said his data
shows that those payments are not prompt and efficient, and
suggested that only legislation that changes economic
incentives, so it becomes the most profitable form of business,
will change claim adjudication behavior.
MR. BROOKS said as a provider, he hires a coding expert to make
sure that his codes are correct, and four claims specialists to
track claims over the entire process. "We" audit and track
claims until closure. "Our" average time from the date of
service to the time a claim leaves the office is three working
days. He explained that in his analysis, he gave the insurers
the benefit of seven days from the time of service, so that
wouldn't interfere with the "metric"; he added that he didn't
use a 30-day metric.
Number 0455
MR. BROOKS said for efficiency and promptness of payment he used
a 60-day metric. The impact on his organization from not being
paid promptly is a minimum of one full-time employee (FTE), plus
some additional mail and processing costs when claims have to be
processed multiple times.
MR. BROOKS referred to the challenges faced by customers. When
a claim has to be processed multiple times, his company ends up
paying for that cost while the insurer has the money that is due
to the patient and to "us". He explained the process of a claim
appeal and gave the committee copies of some claims that had
recently been sent in on appeal. Referring to one particular
claim on the handout, Mr. Brooks said he delivered the service
on April 6, and was paid incorrectly. He said he then began the
process of trying to get paid correctly. During this process he
spoke to five different representatives between October 13 and
December 6, trying to straighten the claim out.
MR. BROOKS said he finally resorted to a formal appeal. He
attached the HCFA 1500 [form] that was sent originally; the
explanation of benefit from the provider; the follow-up
explanation of benefit; the coding references so [the insurer]
could see how it is suppose to be paid; a record of care so
there would be no doubt about what services was rendered; and an
extract of his contract that tells [the insurer] what he was
supposed to be paid for services. He said he does this for two
reasons. First, it gives [the insurer] the best possibility of
finally paying him correctly for a service that was rendered in
April, and second, in the event he doesn't get paid after the
appeals process, he is ready to turn it over to a lawyer to
pursue payment.
MR. BROOKS remarked that this is just an example of the
frustration a provider's office goes through to get paid when
claims aren't processed correctly the first time. He said his
company has staff turnover because one gets tired, being caught
in the middle.
Number 0285
MR. BROOKS pointed out that he has had insurers admit to him
that as late as July of 2000, they had not integrated [into
their system] the new coding changes, which are published by the
American Medical Association (AMA) for processing claims.
Consequently, all of the claims that hit their system and that
have a requirement for the coding updates to be current will be
rejected and denied.
MR. BROOKS remarked that he has also had people admit to him
that the computer system that considers the claims a second
time, those that are processed for federal employees, will not
recognize the coding modifiers. This means those claims are
denied and rejected. He said another insurer admitted to him
that when [the company] is overwhelmed with work in Seattle, it
outsources the work to California. He stated that when this
happens, there is a quality problem. [He passed out some
information on a claim that had been outsourced.]
MR. BROOKS he gave an example of a claim for delivering 25 units
of anesthesia services; he said he was paid for only one unit:
the company owed him $1,660, and only paid him $92. If this
only happened once, he said, it wouldn't be a major
consideration. He stated that of the three pages he gave the
committee, one would find that this happens over and over again.
He said he doesn't have a managed-care contract with this
insurer, so there is no negotiated adjustment. The company
chose to pay $327 when it owed $664, based on a negotiated
adjustment.
Number 0045
MR. BROOKS said this company would frequently tell the public
that he only filed a claim for one unit of service. He met with
representatives of this company, trying to rectify this, and
finally resorted to sending every patient a copy of his or her
claim form when it was filed. This costs him another claim form
and postage, but he has made that patient his advocate for being
paid promptly and accurately. When that insurer tells a patient
that he filed the claim incorrectly, the patient is already
informed. He said he believes this is why the company is coming
to see him to [try to] rectify the situation.
MR. BROOKS said most recently, another company hired a
subcontractor to do the data entry to transform the HCFA 1500
from a paper copy to an electronic file. The subcontractor was
leaving elements of information off, although the company didn't
tell the public that. The company [instead] chose to tell the
public that he hadn't put those elements of information on the
claim, which then backfired on [the company].
TAPE 01-24, SIDE A
Number 0036
MR. BROOKS referred to one of the handouts and a company he had
profiled. He said the company paid him accurately 89 percent of
the time, and in a timely manner, in 60 days or less. [The
other two companies he profiled] operated at the 74 to 76
percent level of performance for paying accurately, in 60 days
or less. He equated this to a company that processes 1,000
claims a month, and said 250 would be erroneous and late at a
time. Meanwhile, through time, inaccurately paid claims are
accumulating, month after month.
MR. BROOKS directed the committee's attention to the handout.
He said he picked the month of December and showed the payments
received. He explained that this was when the money actually
arrived at his organization. He said to make the data fair,
when he profiled these insurers, he took out every instance in
which [the insurer] was a secondary payer because he didn't want
the performance metrics used to be flawed because someone else
delayed the payment of a claim. He also removed the instances
in which a claim was denied for something that his company might
have made an error on. To back up his data, he offered Excel
spreadsheets [for the committee to review].
MR. BROOKS said anesthesia is a very simple business, in his
opinion, for which to file claims and get paid. There is a base
unit for a particular service, and there are units of time-of-
service that are rendered. Those two are put together and go on
a claim form. He said his organization uses the industry
standard, the HCFA 1500 claim form, for all of the private
payers. He said the computer system wouldn't allow him to leave
elements of information off.
MR. BROOKS remarked that it would take the committee's
assistance and support to change the behavior of insurers; he
suggested that this costs the state's providers a tremendous
amount of money. He stated that he has separate claims people,
and a separate accounting section that tracks every payment that
is not accurate until the day it is resolved. When he finally
turns it over to legal counsel, counsel gets paid 35 percent of
whatever is collected; [additionally, he pays] all of the costs
to get to that point. Mr. Brooks said he does it because if he
doesn't, he believes that there are some insurers that wouldn't
pay him accurately; ultimately, it ends up hurting the patients,
because they pay the premiums.
MR. BROOKS said his organization takes care of every person who
comes in, whether he or she is on Medicare or Medicaid, but "we"
have to get paid to stay in business.
Number 0375
REPRESENTATIVE KOTT asked if Mr. Brooks is seeking a remedy in
the form of an amendment to this legislation that deals with
accurate payments. He said he doesn't believe this legislation
deals with accuracy of payments.
MR. BROOKS replied that he supports the bill because he thinks
it is a step in the right direction. It is not perfect
legislation, however, because there are companies that have data
to show that they paid all of their claims within a certain
amount of time, but it doesn't reflect whether they paid them
correctly. He said in time, "we" can deal with the issue of
being paid accurately.
Number 0441
REPRESENTATIVE KOTT asked Mr. Brooks if he could seek a remedy
at the state level within the Division of Insurance to
investigate those companies who are repeatedly paying claims
inaccurately.
MR. BROOKS said his organization has helped the public appeal to
the division for help, but has not found it to be an effective
way of dealing with the insurers.
REPRESENTATIVE ROKEBERG asked what accounts for most of the
inaccuracy of claim payments.
MR. BROOKS said it takes him two years to train a person to
function efficiently as a claims specialist because the
government has many regulations and processing a claim is
complex.
MR. BROOKS said if the new codes, published each year by the
AMA, are not implemented into the computer system until July,
claims will be processed incorrectly for seven months, even if
the information is entered correctly.
MR. BROOKS pointed out that this information is published in
October so people will take the correct actions to update
software, train staff, and be ready to go on January 1st. He
said the only thing he can say is that it is not important
enough to them to make the capital investment.
Number 0758
REPRESENTATIVE ROKEBERG asked Mr. Brooks if he thought the
situation existed to intentionally create a bigger "cash float."
MR. BROOKS said there are probably some companies out there that
are doing business that way; however, what he has seen, by a
company's own admission, has been that staff training and
education is not up to standard.
MR. BROOKS suggested that his partners on the insurance side
have an obligation to the people paying the premiums to make the
capital investment to train and educate employees. If they fail
to do that, they elevate costs; a small practice in this state
doesn't have the ability to track claims down and will lose the
money. He said the little mom-and-dad practices out there don't
have "a prayer" of getting paid effectively in this environment.
MR. BROOKS referred to insurer C on his handout. He said in
looking at the spreadsheet, one would find that this company
paid him most of the time in less than 60 days. In fact, it
paid him most the time in less than 30 days, unlike the other
two insurers he profiled.
Number 0929
REPRESENTATIVE ROKEBERG said it is a shame that the legislature
can't legislate against sloppy business practices, bad
management, and human resource problems that this state and
others are having. He asked Mr. Brooks if he thought demanding
earlier payment would be the panacea for the problems, and force
companies to make the capital investment.
MR. BROOKS responded that it is a step in the right direction.
He went on to say that when the insurer has to report back to
Wall Street on why it is paying penalties for doing sloppy
business, there might be a change.
Number 1023
REPRESENTATIVE KOTT said he is supportive of using 30 days for
[payment] of both paper and electronic claims. He said he went
through the Alaska State Medical Association chart, and the
average [time frame is] 36 days. And he thinks 30 [days] is
under that. He said according to the testimony from the last
person, there was at least one insurer who is paying promptly
and efficiently under 30 days.
REPRESENTATIVE KOTT referred to the schematics in the sponsor's
packet, and said of the 39 states, 30 have 30 or 45 days, 28
have the same [claim filing requirements], and there is
justification to keep them the same. He stated that he thought
30 days was appropriate. [HB 113 was held over]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:10 p.m.
| Document Name | Date/Time | Subjects |
|---|