Legislature(2015 - 2016)BARNES 124

01/29/2016 03:15 PM LABOR & COMMERCE

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03:19:25 PM Start
03:20:01 PM HB159
04:18:41 PM Overview: Division of Insurance - Department of Commerce, Community & Economic Development
05:00:08 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Division of Insurance by Dept. of Commerce,
Community & Economic Development
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                        January 29, 2016                                                                                        
                           3:19 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
MEMBERS ABSENT                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 159                                                                                                              
"An Act exempting certain health care agreements from regulation                                                                
as insurance."                                                                                                                  
     - HEARD & HELD                                                                                                             
OVERVIEW:  DIVISION OF INSURANCE - DEPARTMENT OF COMMERCE~                                                                      
COMMUNITY & ECONOMIC DEVELOPMENT                                                                                                
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 159                                                                                                                  
SHORT TITLE: HEALTH CARE RETAINER; INSURANCE EXEMPT                                                                             
SPONSOR(s): REPRESENTATIVE(s) KELLER                                                                                            
03/23/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/23/15       (H)       L&C                                                                                                    
04/15/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
04/15/15       (H)       Heard & Held                                                                                           
04/15/15       (H)       MINUTE(L&C)                                                                                            
01/29/16       (H)       L&C AT 3:15 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
KEN TRUITT, Staff                                                                                                               
Representative Wes Keller                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Speaking   on  behalf  of  Representative                                                             
Keller,  sponsor of  HB 159,  presented the  bill and  the change                                                               
made by the proposed committee substitute.                                                                                      
LORI WING-HEIER, Director                                                                                                       
Anchorage Office                                                                                                                
Division of Insurance                                                                                                           
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Speaking  on  behalf  of the  Division  of                                                             
Insurance, expressed the division's concerns with HB 159.                                                                       
DOUG NICHOLSON, D.O.                                                                                                            
Unalaska, Alaska                                                                                                                
POSITION STATEMENT:  Testified in favor of HB 159.                                                                            
CHARLES MCKEE                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Provided  comments that  were not  on topic                                                             
with the published agenda.                                                                                                      
LORI WING-HEIER, Director                                                                                                       
Anchorage Office                                                                                                                
Division of Insurance                                                                                                           
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented an update on  action against Moda                                                             
Health  Plans  Inc.;  and   provided  a  PowerPoint  presentation                                                               
entitled, "Division  of Insurance  - Healthcare  Insurance, dated                                                               
ACTION NARRATIVE                                                                                                              
3:19:25 PM                                                                                                                    
CHAIR KURT  OLSON called  the House  Labor and  Commerce Standing                                                             
Committee meeting to  order at 3:19 p.m.   Representatives Olson,                                                               
Colver, Tilton, Kito, Josephson,  Hughes, and LeDoux were present                                                               
at the call to order.                                                                                                           
         HB 159-HEALTH CARE RETAINER; INSURANCE EXEMPT                                                                      
3:20:01 PM                                                                                                                    
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE  BILL  NO.  159,  "An Act  exempting  certain  health  care                                                               
agreements from regulation as insurance."                                                                                       
3:20:34 PM                                                                                                                    
REPRESENTATIVE  HUGHES  moved  to adopt  the  proposed  committee                                                               
substitute (CS)  for HB 159,  labeled 29-LS0256\H as  the working                                                               
document.   There being  no objection, Version  H was  before the                                                               
3:21:02 PM                                                                                                                    
KEN  TRUITT,  Staff,  Representative  Wes  Keller,  Alaska  State                                                               
Legislature,  speaking   on  behalf  of   Representative  Keller,                                                               
sponsor, said he would present HB  159 and the change made by the                                                               
proposed  CS.   The bill  seeks to  amend the  insurance code  by                                                               
creating  an  exemption  in  the code  for  direct  primary  care                                                               
practice groups  for physicians and other  health care providers,                                                               
so  they  may  contract  directly  with  patients.    Without  an                                                               
exemption,  said contract  would  fall within  the definition  of                                                               
insurance, thus the  purpose of the bill is to  "create space" so                                                               
these  contracts  can  occur  without  the  regulatory  oversight                                                               
related  to  an insurance  product.    Mr. Truitt  expressed  the                                                               
sponsor's belief that  such a contract allows  for a relationship                                                               
between a  physician and  patient.   Additional benefits  from HB
159 are  reducing the cost  of health care and  providing greater                                                               
access to  care.   For example, one  in three  physician retirees                                                               
are primary care physicians and  only one in six recent graduates                                                               
from medical  school specialize  in primary care.   The  bill may                                                               
convince  primary  care  physicians  to  delay  retirement.    He                                                               
directed attention  to the  original version  of HB  159, labeled                                                               
29-LS0256\W, page 1, beginning on line 4, which read in part:                                                                   
     (k) Notwithstanding another provision  of this title to                                                                    
     the  contrary,  this  title  does   not  apply  to  the                                                                    
     solicitation, negotiation,  formation, terms,  or other                                                                    
     action or matter relating to an agreement that                                                                             
          (1) is a contract between a health care provider                                                                      
     and   an   individual    patient   or   the   patient's                                                                    
     representative  in  which   the  health  care  provider                                                                    
     agrees to  provide routine health care  services to the                                                                    
     individual patient for a fee during a specific period;                                                                     
          (2) is in writing;                                                                                                    
          (3) is signed by the health care provider or the agent                                                                
     of the health care provider and by the individual patient                                                                  
     or the representative of the individual patient;                                                                           
          (4) allows the health care provider or the individual                                                                 
     patient to terminate the agreement by giving written                                                                       
     notice to the other party to the agreement;                                                                                
          (5) describes the specific routine health care                                                                        
     services that the agreement covers;                                                                                        
          (6) specifies the fee to be paid by the individual                                                                    
     patient under the agreement;                                                                                               
          (7) specifies the period during which the agreement                                                                   
          (8) prominently states in writing that the agreement                                                                  
     is not health insurance; and                                                                                               
          (9) prohibits the health care provider, but not the                                                                   
     individual patient, from billing an insurer or other person                                                                
     for the services provided under the agreement.                                                                             
     (l) In (k) of this section,                                                                                                
          (1) "health care" means care, treatment, service, or                                                                  
     procedure to maintain, diagnose, detect, manage, or promote                                                                
     an individual's physical or mental condition;                                                                              
          (2) "health care provider" means a person who is                                                                      
     licensed, registered, or otherwise authorized under AS                                                                     
     08 to provide health care services or an individual who is                                                                 
an employee of the person and  acting within the course and scope                                                               
of employment;                                                                                                                  
          (3) "routine health care services" includes                                                                           
               (A)   screening,    assessment,   diagnosis,   and                                                               
     treatment for the purpose of promoting health or the                                                                       
     detection and management of disease or injury;                                                                             
               (B) the dispensing of medical supplies and                                                                       
     prescription drugs from a health care provider's office or                                                                 
               (C) laboratory work, including routine blood                                                                     
     screening or routine pathology screening, performed by a                                                                   
     laboratory that                                                                                                            
                    (i) is associated with the health care                                                                      
     provider that is a party to the agreement described in (k)                                                                 
     of this section; or                                                                                                        
                    (ii) if not associated with the health care                                                                 
     provider that is a party to the agreement described in (k)                                                                 
     of this section, has entered into an agreement with the                                                                    
     health care provider that is a party to the agreement                                                                      
     described in (k) of this section to provide the laboratory                                                                 
     work without charging a fee to the patient for the                                                                         
     laboratory work.                                                                                                           
MR. TRUITT  said aforementioned  subsection (k) is  the exemption                                                               
amending AS  21.03.021.  Following  that, paragraph (1)  sets out                                                               
the contract relationship between  the physician and the patient.                                                               
Continuing to page 2, he said  paragraphs (2) through (9) are the                                                               
elements required for  a written contract, and  beginning on line                                                               
10,  new  subsection  (l), paragraphs  (1)  through  (3),  define                                                               
health  care,  health care  providers,  and  routine health  care                                                               
services.  He pointed out  that "routine health care services" is                                                               
the  phrase in  the  bill that  is used  to  describe the  direct                                                               
primary care relationship.  Further  on page 2, beginning on line                                                               
24,  subparagraph  (C)  [text previously  provided],  begins  the                                                               
definition of  laboratory services, of  which the second  half of                                                               
the  definition, beginning  on line  28, sub-paragraph  (ii), has                                                               
been removed  by the proposed  CS.  The  reason a portion  of the                                                               
definition was removed  is that the definition  required that the                                                               
cost  of laboratory  services  -  at a  laboratory  with which  a                                                               
physician does not have a relationship  - is to be covered by the                                                               
physician  or a  physician's group,  and  not the  patient.   Mr.                                                               
Truitt said the bill is  modeled closely after legislation passed                                                               
last year  in Michigan, which  provides a balance of  freedom for                                                               
physicians  and patients,  and  offers  parameters without  undue                                                               
regulatory oversight.                                                                                                           
3:26:36 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  asked  how "concierge  medicine"  differs                                                               
from HB 159.                                                                                                                    
MR. TRUITT  explained that concierge practice  is identified with                                                               
celebrity  care,  wherein  a  patient   pays  a  physician  or  a                                                               
physician  group  "multiple  thousands  of  dollars,"  through  a                                                               
contract for access,  and the physician or  physician group bills                                                               
insurance in addition  to the contract.  However,  HB 159 differs                                                               
in that  the monthly fee  is for  patient expenses.   He directed                                                               
attention  to Version  W, page  2,  line 8,  paragraph (9)  [text                                                               
previously  provided] that  the physician  or physician  group is                                                               
not  allowed  to  bill  insurance,   but  the  patient  can  seek                                                               
reimbursement  for   care  that  is  covered   by  the  patient's                                                               
REPRESENTATIVE LEDOUX  questioned why a patient  would not prefer                                                               
the physician to bill insurance  because the process described in                                                               
HB  159 lacks  paperwork,  and the  information  required by  the                                                               
insurance company - such as billing  codes - is unavailable.  She                                                               
then offered an example.                                                                                                        
MR.  TRUITT   acknowledged  that   the  provision   addressed  by                                                               
Representative LeDoux  is new  in the  bill in  2015, and  he was                                                               
unsure as  to the exact  answer, except to opine  "that's between                                                               
the  physician and  the patient,  and  then the  patient and  the                                                               
insurance company."                                                                                                             
3:30:34 PM                                                                                                                    
CHAIR  OLSON suggested  that HB  159  allows the  patient to  buy                                                               
prepaid access, and concierge care  includes house calls - with a                                                               
higher  cost  -  and  access.    He  added  that  concierge  care                                                               
providers have fewer patients.                                                                                                  
REPRESENTATIVE  KITO  surmised  a  physician  with  a  small-  to                                                               
medium-sized  practice who  signs a  contract with  many patients                                                               
would  amortize their  care over  the monthly  fees; however,  he                                                               
questioned  whether a  participating  individual  who develops  a                                                               
serious condition  would be adequately  covered, and if  there is                                                               
an  assurance that  a small  practice could  "handle that  cost."                                                               
Further, he  expressed his  concern that  a clinic  - as  a small                                                               
insurer - would be able to  refuse to accept certain patients for                                                               
care in order  to keep their risk low and  thus put more pressure                                                               
on the "regular" insurance market.                                                                                              
MR. TRUITT observed  that even without HB 159, both  of the above                                                               
described circumstances  exist and  are already concerns  for the                                                               
practice of  medicine and  the regulation of  insurance.   He was                                                               
unsure  as  to whether  a  regular  insurance market  exists  for                                                               
private  individuals in  Alaska;  in other  states,  the type  of                                                               
practice  being discussed  typically  works  in conjunction  with                                                               
high-deductible,  catastrophic insurance  products and  is viewed                                                               
as a secondary  insurance, and in fact, qualifies  as a secondary                                                               
insurance  product under  the Patient  Protection and  Affordable                                                               
Care Act of 2010 (ACA).                                                                                                         
3:33:44 PM                                                                                                                    
REPRESENTATIVE HUGHES related her  previous concern about "taking                                                               
the  cream of  the crop  patients";  however, she  was told  that                                                               
physicians desire  to see  a variety  of patients  and experience                                                               
the  challenges and  rewards of  treating  patients with  chronic                                                               
conditions.    Also,  she  pointed  out,  all  of  the  care  the                                                               
physician could provide  is in the contract  thus specialty care,                                                               
such as care for cancer, would not be covered.                                                                                  
REPRESENTATIVE JOSEPHSON  directed attention to the  bill on page                                                               
2, line  18, [text previously provided],  defining routine health                                                               
care  services, including  screening, assessment,  and diagnosis.                                                               
He asked  whether the CS restricts  some of the lab  work that is                                                               
eligible in the monthly fee.                                                                                                    
MR.  TRUITT clarified  that on  line  18 the  word "includes"  is                                                               
typically interpreted to mean "includes,  but is not limited to."                                                               
The CS  does not  prohibit certain  laboratory work  because what                                                               
follows in  subparagraphs (A), (B),  and (C), are  the conditions                                                               
that must  be covered  under routine health  care services.   For                                                               
example,  a large  physician  group that  could  absorb lab  fees                                                               
could include those in the contract.                                                                                            
3:37:08 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  suggested  that   if  a  patient  were                                                               
referred  and  his/her  previous  treatment lacked  coding  -  or                                                               
paperwork  - the  patient would  not be  admitted for  subsequent                                                               
MR. TRUITT  expressed his  understanding that  the bill  does not                                                               
exempt  a  provider  from  their  recordkeeping  responsibilities                                                               
under  the  "physician  practice  act."   Routinely,  coding  and                                                               
billing  records  are handled  by  administrative  staff who  are                                                               
familiar  with insurance  codes, and  who transfer  the treatment                                                               
information   from   a  physician   into   codes.     He   opined                                                               
recordkeeping  will  remain the  same  as  it  is a  standard  of                                                               
REPRESENTATIVE JOSEPHSON  directed attention to page  2, line 19,                                                               
[text previously provided] which  states that routine health care                                                               
services  includes   treatment.    Without  any   limitations  on                                                               
treatment, he  observed that the contracts  between physician and                                                               
patient would get pretty long and complicated.                                                                                  
MR. TRUITT  agreed, and  noted that in  December, the  health law                                                               
committee  of the  Alaska Bar  Association began  addressing this                                                               
3:40:55 PM                                                                                                                    
REPRESENTATIVE LEDOUX  inquired as to  how a patient can  bill an                                                               
insurer because they are paying  for routine, everyday treatment;                                                               
she posed  an example  of a  patient who  is treated  for various                                                               
ailments, "because  they could come  in all the time  under this,                                                               
and  they've paid  for everything,  they've  paid for  everything                                                               
under one, big, lump,  sum."  On the other hand,  in the realm of                                                               
concierge  care,  a patient  pays  [only]  for access  and  every                                                               
specific treatment  could be billed  to the insurance  company by                                                               
the physician or the patient.                                                                                                   
MR. TRUITT  suggested that a  contract may list options  that are                                                               
provided,  with  additional  charges,   and  also  could  specify                                                               
services for which a patient may seek reimbursement.                                                                            
REPRESENTATIVE  LEDOUX stated  that the  contracts allowed  by HB
159 do  not work as  comprehensive insurance unless  coupled with                                                               
an  insurance policy  for services  that  are not  routine.   She                                                               
acknowledged that contracts could work  well as long as a patient                                                               
had another  type of insurance,  such as  catastrophic insurance.                                                               
Representative   LeDoux  asked   what   deductible  amounts   are                                                               
available for catastrophic insurance.                                                                                           
3:46:24 PM                                                                                                                    
CHAIR  OLSON  asked members  to  defer  their questions  for  the                                                               
insurance industry.                                                                                                             
REPRESENTATIVE  HUGHES commented  that new  business models  need                                                               
time to  succeed and the  insurance industry will respond  if the                                                               
model is well-received and saves money.                                                                                         
REPRESENTATIVE  KITO  returned  attention  to page  2,  line  18,                                                               
paragraph (3), sub paragraphs (B)  and (C) regarding prescription                                                               
drugs  and laboratory  work included  in routine  health services                                                               
when they are  available at the providers' facility.   When those                                                               
services  are  not  available at  the  providers'  facility,  the                                                               
patient  would  go to  a  regular  pharmacy  and pay  retail;  he                                                               
expressed   concern  that   a   provider   may  provide   limited                                                               
prescription drugs and laboratory work  thus forcing a patient to                                                               
pay more.                                                                                                                       
MR.  TRUITT stated  that the  aforementioned circumstance  exists                                                               
now; in  fact, the bill  attempts to  alleviate needs and  he has                                                               
not  heard  about that  problem  since  the application  of  this                                                               
practice model 10 years ago.                                                                                                    
REPRESENTATIVE  KITO inquired  as to  the target  market for  the                                                               
exemption created by HB 159.                                                                                                    
MR. TRUITT said  the target market is an individual  who does not                                                               
work for  a large employer  or government, or  who may be  a sole                                                               
proprietor  and who  is  required to  have  an insurance  product                                                               
under ACA.                                                                                                                      
3:50:41 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked whether  the [policy created  by the                                                               
exemption], without  a catastrophic  insurance policy,  meets the                                                               
ACA mandate.                                                                                                                    
MR. TRUITT  was unsure, and  said he  would provide an  answer to                                                               
that question.                                                                                                                  
REPRESENTATIVE JOSEPHSON advised that  either party can terminate                                                               
the agreement by  giving written notice, which  is not consistent                                                               
with ACA.                                                                                                                       
MR.  TRUITT  offered that  in  other  states, contracts  work  in                                                               
conjunction with catastrophic insurance plans.                                                                                  
REPRESENTATIVE   HUGHES   addressed  Representative   Josephson's                                                               
response,  saying that  insurance  through an  employer could  be                                                               
terminated  along  with the  employee's  job,  and that  employee                                                               
would  then be  "within the  federal law  or outside  the federal                                                               
3:52:17 PM                                                                                                                    
LORI   WING-HEIER,  Director,   Anchorage  Office,   Division  of                                                               
Insurance,   Department  of   Commerce,   Community  &   Economic                                                               
Development (DCCED),  acknowledged that the health  care industry                                                               
is in need of innovative  ideas that will bring affordable health                                                               
care  to  Alaskans  and  throughout the  nation.    However,  the                                                               
division has  concerns about the  bill because the  division does                                                               
not  regard  health  care agreements  as  a  secondary  insurance                                                               
product,  but  instead as  access  to  medical care  provided  by                                                               
physicians' clinics.   She said  the division has  been contacted                                                               
by  physicians' clinics  in Anchorage  and Fairbanks  that cannot                                                               
make money based  on the current fee schedules, and  HB 159 would                                                               
allow  clinics to  maintain  their patient  volume  and level  of                                                               
care.   Ms.  Wing-Heier  gave an  example of  a  patient who  was                                                               
notified  by his/her  clinic that  it does  not accept  Medicare,                                                               
however,  if the  patient has  a retainer  agreement, the  clinic                                                               
would  accept Medicare  coverage; therefore,  the contract  for a                                                               
monthly or annual  fee would be paying  for access to care.    An                                                               
additional concern  is whether insurance  can be billed  for care                                                               
not totally  outside of the contract,  and then billed to  an ACA                                                               
qualified -  or grandfathered -  health plan.  She  restated that                                                               
the  contract is  not  an  insurance product,  and  "a bill  just                                                               
cannot be  generated to  then bill the  insurance company."   Ms.                                                               
Wing-Heier said  the division recognizes  that there is  a health                                                               
care  crisis, and  seeks to  keep  costs down  thus is  concerned                                                               
about billing for services that are  part of a contract between a                                                               
patient and a  provider.  The division has no  doubt that HB 159,                                                               
as written,  does not create  a qualified  ACA health plan.   She                                                               
remarked as follows:                                                                                                            
     But could it go outside, and  we could say it is not an                                                                    
     insurance product?   We  think we  could, but  we would                                                                    
     like to  see it with some  constraints.   The  State of                                                                    
     Washington  ... asks  that they  be  registered with  a                                                                    
     two-, it's a very  simple, two-page registration and it                                                                    
     allows for  consumers then to register  complaints, and                                                                    
     then it  asks that we  report back to  the legislature,                                                                    
     of  complaints received.   It's  a  simple process,  we                                                                    
     think we  could do it,  so that  you know if  these are                                                                    
     being successful within the state or not.                                                                                  
3:56:25 PM                                                                                                                    
REPRESENTATIVE  LEDOUX said  her  understanding is  that even  if                                                               
patients who qualify for Medicare  want to see their primary care                                                               
physician, and offer  to pay the shortfall, the  extra payment is                                                               
prohibited  if  the physician  provides  care  to other  Medicare                                                               
MS. WING-HEIER said  the division does not  regulate Medicare and                                                               
is unable to advise consumers in this regard.                                                                                   
REPRESENTATIVE  LEDOUX assumed  a doctor  who has  other Medicare                                                               
patients can enter  into an agreement created by HB  159 with one                                                               
who  qualifies  for  Medicare.   The  doctor  then  collects  the                                                               
monthly agreement fee and also bills Medicare for reimbursement.                                                                
MS. WING-HEIER said physicians seek  agreements which include the                                                               
ability to  treat their  patients who  now qualify  for Medicare,                                                               
and also collect fees from contracts with those patients.                                                                       
CHAIR  OLSON  restated  his  request  that  members  defer  their                                                               
questions to the insurance industry.                                                                                            
REPRESENTATIVE  HUGHES   asked  whether  a  physician   would  be                                                               
prevented from  having, within his/her  patient load, a  group of                                                               
patients with contracts for direct  primary care and also a group                                                               
of patients who are traditionally billing insurance.                                                                            
4:00:01 PM                                                                                                                    
MS. WING-HEIER  said there  is no reason  a physician  cannot see                                                               
Medicare   patients  and   others.     In  further   response  to                                                               
Representative  Hughes, she  pointed out  that a  patient with  a                                                               
high deductible under  an ACA individual plan may  benefit from a                                                               
retainer agreement.                                                                                                             
REPRESENTATIVE  HUGHES returned  attention to  the aforementioned                                                               
registration in  Washington and questioned whether  that function                                                               
would already be  the responsibility of the  State Medical Board,                                                               
MS.  WING-HEIER  was unsure  whether  the  State Medical  Board's                                                               
responsibilities would  be a duplication  of this process.    She                                                               
restated  that because  these contracts  look  like an  insurance                                                               
product  to   consumers,  consumers   direct  questions   to  the                                                               
division.     Washington's  retainer  agreement  bill contains  a                                                               
provision  for registration  through the  division of  insurance,                                                               
and not through its licensing board.                                                                                            
CHAIR OLSON  speculated that  in areas  with a  large population,                                                               
day  surgery clinics  and  diagnostic centers  will  be the  next                                                               
group  to   offer  contracts.     He  expressed  his   hope  that                                                               
alternatives will grow.                                                                                                         
REPRESENTATIVE  JOSEPHSON  cautioned  that contracts  will  cause                                                               
many disputes  between physicians and  patients on the  extent of                                                               
treatment.   He asked, "What does  it mean to say,  'I've treated                                                               
you,' what  does it  mean to  say, 'I've  diagnosed you,  or I've                                                               
assessed you'?"                                                                                                                 
4:03:56 PM                                                                                                                    
MS. WING-HEIER stated that the division questions the following:                                                                
     Can  the clinic  sustain the  treatment diagnosis?   At                                                                    
     what  point  does it  go  from  what I  would  consider                                                                    
     primary care,  to taking  someone through  a full-blown                                                                    
     cancer diagnosis ....  Our  conclusion has been that it                                                                    
     depends on  how the  contract is  written, not  so much                                                                    
     the  statute, and  that  it  would be  to  find in  the                                                                    
     contract itself as  to ... the extent  of the treatment                                                                    
     you would  receive under the  contract you  signed with                                                                    
     your physician.                                                                                                            
MR. TRUITT advised that Washington  was the second state to enact                                                               
pertinent  legislation;   published  data   from  the   State  of                                                               
Washington's division of insurance  indicated that in fiscal year                                                               
2014,  there  were  8,558  patients within  the  state  who  were                                                               
"members of  these types of  organizations" and no  complaints of                                                               
disputes have been received.                                                                                                    
REPRESENTATIVE  LEDOUX   asked  whether   there  was   data  from                                                               
Washington on patients  who are seeing specialists  as opposed to                                                               
general practitioners; she suggested  primary care physicians may                                                               
have an incentive to refer patients to a specialist earlier.                                                                    
MS.  WING-HEIER  has heard  that  patients  with agreements  seek                                                               
primary  care sooner  in  order  to get  a  referral, and  proper                                                               
medical treatment, on a timely basis.                                                                                           
4:07:51 PM                                                                                                                    
CHAIR OLSON opened public testimony on HB 159.                                                                                  
DOUG NICHOLSON,  D.O., said he  is a 64-year-old  family practice                                                               
doctor working at the Iliuliuk  family health center in Unalaska.                                                               
Dr.  Nicholson  explained  that  the  current  model  of  medical                                                               
practice is a volume-based model  that generates a certain amount                                                               
of revenue  related to the  number of patients  treated; however,                                                               
in a direct pay care model,  clinics may have a limited amount of                                                               
patients and  can see patients  on the  same day, over  Skype, or                                                               
via a  video screen for visits  that do not require  an in-person                                                               
examination.   He said  he was  unsure how  much longer  he could                                                               
continue a  volume-based practice,  but in a  relationship model,                                                               
with  a smaller  group of  patients,  he may  continue for  10-15                                                               
years.  Dr.  Nicholson visited a direct care pay  model in Kansas                                                               
and  was  told  it  was  successful;  there  was  flexibility  in                                                               
treating patients  and in  billing.  The  direct care  model also                                                               
works best for  those who have high  deductibles and catastrophic                                                               
health care,  but it is  not designed for  the uninsured.   It is                                                               
also designed  for small employers who  may pay a portion  of the                                                               
direct care  fee.  He  opined health care  for most people  is at                                                               
the primary care level.  In  Unalaska, health care charges are in                                                               
the 90th percentile in costs, and  a patient may have a $300 bill                                                               
for  a  10-15  minute  visit;  the direct  care  model  allows  a                                                               
physician to  charge for "what  you're actually doing."   He gave                                                               
examples  of  low cost  medication  and  of other  advantages  to                                                               
direct pay care,  such as more decisions made  between the doctor                                                               
and the patient.                                                                                                                
4:13:26 PM                                                                                                                    
CHARLES MCKEE provided  comments that were not on  topic with the                                                               
published agenda.                                                                                                               
4:15:19 PM                                                                                                                    
CHAIR OLSON,  after ascertaining no  one else wished  to testify,                                                               
closed public testimony on HB 159.                                                                                              
[HB 159 was held over.]                                                                                                         
4:15:37 PM                                                                                                                    
The committee took an at ease from 4:15 p.m. to 4:17 p.m.                                                                       
^OVERVIEW:    DIVISION OF  INSURANCE  -  Department of  Commerce,                                                               
Community & Economic Development                                                                                                
   OVERVIEW:  DIVISION OF INSURANCE - Department of Commerce,                                                               
                Community & Economic Development                                                                            
4:18:41 PM                                                                                                                    
CHAIR OLSON announced  that the final order of  business would be                                                               
a  presentation by  the director  of the  Division of  Insurance,                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
4:18:51 PM                                                                                                                    
LORI   WING-HEIER,  Director,   Anchorage  Office,   Division  of                                                               
Insurance,  DCCED,   stated  that  since  her   presentation  was                                                               
scheduled there has  been a dramatic change  related to insurance                                                               
in the state, which she will  address.  She provided a PowerPoint                                                               
presentation   entitled,    "Division   of   Insurance-Healthcare                                                               
Insurance," dated  1/19/16.  Ms.  Wing-Heier said the  mission of                                                               
the division of insurance is  to protect consumers in Alaska, and                                                               
the division's recent action against  Moda Health Plan, Inc., was                                                               
to do so.  The division  has a statutory responsibility to review                                                               
rates,  rules, and  forms,  and to  determine  whether rates  are                                                               
excessive,   inadequate,  or   unfairly   discriminatory.     She                                                               
explained that  excessive rates are  not those that  affect one's                                                               
budget, but  are justified  by whether they  support the  pool of                                                               
individuals insured and the claims  thereof; inadequate rates are                                                               
"almost  the  opposite";  and  to determine  whether  a  rate  is                                                               
unfairly discriminatory is to ensure  that any rate difference is                                                               
allowable, such as higher rates  charged for tobacco users [slide                                                               
2].   Slide 3 was  a list of  common acronyms which  was provided                                                               
for reference purposes.   She continued to  update the committee,                                                               
noting that  the Patient  Protection and  Affordable Care  Act of                                                               
2010 (ACA) was  enacted 3/23/10, and under the terms  of the Act,                                                               
insurance plans in  effect at that time remain in  effect and are                                                               
called grandfathered  plans.  In  2013, a decision was  made that                                                               
plans purchased after 3/23/10, and  before 1/1/14, are considered                                                               
non-grandfathered,  and must  be  rewritten to  comply with  ACA.                                                               
Therefore, at this time the  division is reviewing three segments                                                               
of  insurance   plans:  grandfathered  plans  written   prior  to                                                               
3/23/10;  non-grandfathered  plans  written between  3/23/10  and                                                               
1/1/14, which will transition in  2016 or 2017; and plans written                                                               
after  1/1/14 [slide  4].   Ms. Wing-Heier  said there  have been                                                               
rate increases:   in  2014, Premera's  average increase  was 37.2                                                               
percent and  Moda's average increase  was 27.4 percent;  in 2015,                                                               
Premera's average  increase was  38.7 percent and  Moda's average                                                               
increase was 39.6 percent [slide  5].  She stressed that included                                                               
in the division's  task of protecting consumers is  to review the                                                               
solvency of  the companies,  the size and  health of  the insured                                                               
pool, and "the  simple math of going back into  what does, [what]                                                               
are  the rates,  and  what [it  is] going  take  to support  that                                                               
pool."   There  is  no doubt  that more  people  have started  to                                                               
enroll; however, in  2016 Assurant is out of  the marketplace and                                                               
their clients would have enrolled  in Premera or Moda.  Recently,                                                               
it appeared that  the number of enrollees has  been split between                                                               
Premera and Moda, although in  2015, Moda had a significant share                                                               
of  the market  due to  its lower  rates.   Ms. Wing-Heier  said,                                                               
"Even with the rate increases, the  health of the pool has led to                                                               
significant financial  distress for  [Moda] and the  result [was]                                                               
the order  that was issued this  week."  Aetna and  Assurant have                                                               
left the market and Celtic  Health Plan has not written business,                                                               
although they have been approved  by the Centers for Medicare and                                                               
Medicaid Services (CMS).  She  expressed her hope that Celtic and                                                               
Aetna, after its  merger, may come back to the  market in Alaska,                                                               
but a statute is in place  that prevents Aetna's reentry for five                                                               
years [slides 6, 7, and 8].                                                                                                     
4:26:39 PM                                                                                                                    
CHAIR  OLSON questioned  whether  the change  in  statute can  be                                                               
accomplished without legislation.                                                                                               
MS. WING-HEIER was unsure.   She said the division will determine                                                               
whether a change  can be made through regulation,  if Aetna seeks                                                               
to reenter the market after its merger.                                                                                         
CHAIR OLSON urged the division  to pursue making a change through                                                               
regulation, if at all possible.                                                                                                 
MS.  WING-HEIER assured  the committee  the  division is  working                                                               
hard  to  bring  insurance  competition  back  to  Alaska.    She                                                               
returned attention to  slide 7, and relayed that at  one point in                                                               
one  individual market  there  were over  $44  million in  losses                                                               
which,  when divided  by the  number of  enrollees, equaled  over                                                               
$6,000 per member, not including  the cost of adjudicating claims                                                               
and claims  management.  Potential  drivers of premiums  in 2017,                                                               
based  on [Milliman  Healthcare  Reform  Briefing Paper  December                                                               
2015],  are:     health  care   costs,  including  the   cost  of                                                               
prescription drugs,  and utilization,  sought at  emergency rooms                                                               
and not from primary care  providers; changes to essential health                                                               
benefits,  which may  affect rates;  additional  data, which  may                                                               
stabilize the market in Alaska;  continued migration of insurers,                                                               
which   is  incorporating   non-grandfathered   plans  into   the                                                               
individual   market;  insurers   merging   and  exiting   markets                                                               
nationwide,  as  are  Aetna  and   Assurant  in  Alaska;  ongoing                                                               
uncertainty in  court cases and upcoming  elections; reinsurance;                                                               
risk corridor; risk adjustment; and  changes in fees and taxes in                                                               
ACA [slide 9].                                                                                                                  
4:31:46 PM                                                                                                                    
MS. WING-HEIER  advised that potential  cost drivers in  Alaska -                                                               
in addition  to having one  provider - are:   the cost  of health                                                               
care,  which is  among  the  highest in  the  nation and  thereby                                                               
affects  rates;   and  limited  providers  and   challenges  with                                                               
provider networks,  because many  residents are rural  and Alaska                                                               
has a small population.                                                                                                         
REPRESENTATIVE JOSEPHSON returned attention  to slide 5 and noted                                                               
Alaska  had rate  increases  of  38 percent  and  39 percent;  he                                                               
inquired  as to  the national  average of  rate increases  in the                                                               
individual marketplace.                                                                                                         
MS. WING-HEIER said she would provide that information.                                                                         
CHAIR  OLSON  added  that  the   University  of  Oregon  workers'                                                               
compensation comparison  of five  states illustrated  a disparity                                                               
of cost between Alaska and other states.                                                                                        
REPRESENTATIVE JOSEPHSON  asked what  the average  Alaskan spends                                                               
for health care in the individual marketplace.                                                                                  
MS. WING-HEIER was unsure because  of premium tax credits and the                                                               
many  plans  that are  available;  for  example, there  were  two                                                               
insurers,  three tiers,  multiple plans  within tiers,  different                                                               
pricing,  and three  regions within  the state.     She knows  of                                                               
plans that  cost $1,800  per month, per  person, and  others that                                                               
cost  $500 per  month, per  person, before  subsidies.   In 2015,                                                               
Alaska was the  highest in rate increases; in  2016, other states                                                               
are making similar rate increases to keep the carriers solvent.                                                                 
4:35:18 PM                                                                                                                    
REPRESENTATIVE HUGHES  returned attention  to slide  10 entitled,                                                               
"Alaska - Potential Cost Drivers"  and asked whether the division                                                               
tracks the number  of providers in Alaska, and  how that compares                                                               
with  rate  increases.   She  expressed  her  understanding  that                                                               
increasing  the ratio  of primary  care  providers to  population                                                               
serves to lower health care costs and health insurance rates.                                                                   
MS. WING-HEIER  agreed that there  is a shortage of  primary care                                                               
physicians in Alaska,  which causes residents to  go to emergency                                                               
rooms  for care.   She  returned to  the list  of potential  cost                                                               
drivers [slide 10].  The  individual market is expected to remain                                                               
at  between 20,000  and 22,000,  but -  reflected by  the adverse                                                               
loss experience,  it is not a  healthy pool - she  said, "... not                                                               
buying insurance and paying the  penalty to the [Internal Revenue                                                               
Service  (IRS)], are  the healthy  ones; somehow  we need  to get                                                               
those  to buy  insurance  too, and  we're  struggling with  that,                                                               
because of the premiums."                                                                                                       
REPRESENTATIVE KITO recalled before the  enactment of ACA, it was                                                               
anticipated  that  Alaska   had  approximately  27,000  uninsured                                                               
residents; he asked  whether the division believes  the number of                                                               
uninsured  residents  is  still  around 28,000,  and  the  number                                                               
between  22,000 and  28,000 is  the  number of  residents in  the                                                               
healthy population.                                                                                                             
4:38:19 PM                                                                                                                    
MS. WING-HEIER said,  "I would think right now  that probably ...                                                               
there's  probably five  or six  thousand that  we're not  getting                                                               
to."   Returning  to slide  10,  she advised  that national  cost                                                               
drivers  do  impact  Alaska,  but   the  most  impact  is  local.                                                               
Continuing  on the  topic of  potential cost  drivers, Ms.  Wing-                                                               
Heier stated that for 2017, CMS  has issued over 100 revisions to                                                               
the   plan   affecting    deductibles,   filing   data,   uniform                                                               
modifications, re-certifications,  riders, network  adequacy, the                                                               
certification  process, and  more.   She restated  the additional                                                               
potential   cost   drivers:   medical  trends   are   increasing;                                                               
reinsurance and risk  corridor; transitional or non-grandfathered                                                               
plans will enter  the market and increase  enrollees; mergers and                                                               
acquisitions will tighten the market,  but may provide additional                                                               
choices  in Alaska  [slide 11].   In  response to  Representative                                                               
Hughes,  she explained  that medical  costs have  been relatively                                                               
flat but  are now increasing,  which affects the overall  cost of                                                               
insurance.  In  response to Chair Olson, she said  the trend also                                                               
affects the cost of prescription drugs.                                                                                         
MS. WING-HEIER presented  slide 12 entitled, "The  Three Rs," and                                                               
explained that  risk adjustment,  reinsurance, and  risk corridor                                                               
were mechanisms  in ACA that  were meant to stabilize  the market                                                               
between all  insurers, until the  effects of the Act  were known.                                                               
Risk adjustment was  devised so that companies  with "bad" losses                                                               
from certain  coded claims  would receive  money from  those with                                                               
"good" losses.  However, the  mechanism is working backwards; for                                                               
example,  a company  like Moda  is  having to  pay Premera,  even                                                               
though the  purpose of risk  adjustment was to protect  a company                                                               
with  a lesser  rate  and  higher claims.    The risk  adjustment                                                               
mechanism is  currently under  review.   Reinsurance is  a three-                                                               
year  program that  sunsets this  year, thus  insurance companies                                                               
will  have  to buy  commercial  reinsurance,  which could  impact                                                               
rates.    Risk  corridor  is   a  program  that  took  a  certain                                                               
percentage of  profit from profitable insurance  companies, again                                                               
to  stabilize the  market  for the  first  three years;  however,                                                               
losses were  higher than anticipated and  companies only received                                                               
12.6 percent of their losses [slide 12].                                                                                        
REPRESENTATIVE  JOSEPHSON  asked  whether 12.6  percent  was  the                                                               
insurance companies' profit.                                                                                                    
MS.  WING-HEIER gave  an  example of  an  insurance company  that                                                               
expected to receive  100 percent of $50 million  from the federal                                                               
government  through  the  risk  corridor  program,  but  actually                                                               
received 12.6 percent of $50 million.                                                                                           
[There followed a brief discussion of other mechanisms.]                                                                        
4:45:43 PM                                                                                                                    
MS. WING-HEIER informed  the committee that in  2017, ACA Section                                                               
1332 permits states to apply  for a State Innovation Waiver which                                                               
she  characterized as  a "huge  step, a  scary step."   Colorado,                                                               
Minnesota,   Hawaii,   and   Massachusetts  are   exploring   the                                                               
possibilities of the  waiver, and Vermont tried and  failed.  The                                                               
waiver allows the state, by  itself, to provide the same benefits                                                               
to consumers as does ACA,  rather than participate at the federal                                                               
level.  The  state must garner legislative approval  to apply for                                                               
the waiver;  further, the  waiver is subject  to approval  by CMS                                                               
[slide 13].                                                                                                                     
REPRESENTATIVE JOSEPHSON  stated, "What  you're speaking  of here                                                               
...  is more,  more than  just the  state taking  control of  the                                                               
individual market,  it's the whole  shooting match, it's  sort of                                                               
taking the entire bill."                                                                                                        
MS. WING-HEIER said  that's correct.  She provided a  list of the                                                               
requirements for the state to  obtain a waiver including, provide                                                               
coverage at least as broad as  that of ACA with the same "out-of-                                                               
pocket, cannot increase the federal  deficit, and submit business                                                               
plans.  She  said the state would  be taking the risk  that if it                                                               
fails, the  state would take  on the  obligation, which is  a big                                                               
undertaking [slide 14].                                                                                                         
4:47:16 PM                                                                                                                    
CHAIR OLSON  asked how many positions  would need to be  added to                                                               
the division to do so.                                                                                                          
MS. WING-HEIER  opined the  division would  need to  establish an                                                               
organization similar  to the  Alaska Permanent  Fund Corporation,                                                               
or an organization  outside of the state.  The  money paid out in                                                               
premium tax  credits would come  to the  state as a  block grant,                                                               
which  would  be  disbursed  back to  citizens  for  premium  tax                                                               
credits, based  on premiums charged  by the state, and  there are                                                               
other  possibilities;   however,  the   division  will   see  how                                                               
successful other states are after 1/17/16.                                                                                      
REPRESENTATIVE LEDOUX asked how much  this option would cost, and                                                               
whether the state would function as an insurance company.                                                                       
MS.  WING-HEIER said  the division  has not  considered the  cost                                                               
because the organization  would have to be  a stand-alone entity.                                                               
In further  response to  Representative LeDoux,  she acknowledged                                                               
that all  options should be  explored, but cautioned  that, based                                                               
on known  losses, without a  pool of enrollees in  the individual                                                               
market larger  than 22,000 it would  be a gamble.   She suggested                                                               
that enrolling all  of the state employees would  create a bigger                                                               
pool, and there  is a question of what other  groups to bring in.                                                               
She also  questioned "who's going  to administer it and  how does                                                               
it pay for itself?"                                                                                                             
REPRESENTATIVE JOSEPHSON  observed that of  approximately 730,000                                                               
Alaskans, about 22,000 have been  added to the individual market,                                                               
about  20,000 have  been added  through  Medicaid expansion,  and                                                               
some have other  coverage.  He asked for the  number who are left                                                               
MS. WING-HEIER advised  that the division has  estimated about 16                                                               
percent  of the  population  may  be insured  [in  a state  plan]                                                               
because   federal  employees   would   not   enroll,  nor   would                                                               
beneficiaries of  the Indian Health  Service (IHS),  Medicaid, or                                                               
Medicare.   She said, "We  just don't know  if the number  is big                                                               
enough to  make it work."   However, the division will  watch the                                                               
activities  in   other  states,   especially  Hawaii   which  has                                                               
demographics similar to Alaska's.   She turned to other solutions                                                               
such as regional  exchanges, although at this time  sales are not                                                               
allowed across state lines.  Also,  it may be possible to combine                                                               
small and  individual groups to  spread the risk, but  that would                                                               
not make small group constituents happy.                                                                                        
4:52:54 PM                                                                                                                    
REPRESENTATIVE KITO  surmised regional  exchanges are  limited by                                                               
insurance laws rather than ACA;  he asked whether other states or                                                               
regions have considered selling products across state lines.                                                                    
MS.  WING-HEIER said  there  is much  discussion  in this  regard                                                               
among  the  National   Association  of  Insurance  Commissioners,                                                               
particularly by those from small states.                                                                                        
REPRESENTATIVE  HUGHES  asked  whether   state  or  federal  laws                                                               
disallow sales across state lines.                                                                                              
MS.  WING-HEIER said  both.    In response  to  Chair Olson,  she                                                               
advised that state employees are  not impacted by the decision on                                                               
Moda.   Although  the state  insurance card  indicates Moda,  the                                                               
dental plan is  actually Oregon Dental - which is  under the same                                                               
parent company - but is not  Moda Health Plan Inc., against which                                                               
an order has been issued.                                                                                                       
CO-CHAIR  OLSON suggested  the division  email state  dental plan                                                               
enrollees informing them in this matter.                                                                                        
REPRESENTATIVE HUGHES  asked for suggestions  as to how  to bring                                                               
health care insurance rates and  health care costs down in Alaska                                                               
and nationally.                                                                                                                 
MS. WING-HEIER  stated that the division  is provided information                                                               
from all  of the parties  to this issue  and sees a  disparity in                                                               
medical  rates that  cannot be  justified;  although the  medical                                                               
community is  a source of pride  for Alaska, the cost  of medical                                                               
care  is  inexplicable when  compared  with  other states.    She                                                               
questioned why medical  procedures in Anchorage cost  up to seven                                                               
times the cost  of the same procedure in Seattle,  and urged that                                                               
the providers  - not necessarily  small clinics -  recognize that                                                               
the  cost of  health care  is  becoming unaffordable.   When  the                                                               
division receives a filing, although  the rates have already been                                                               
negotiated, it is  unknown why a hospital or  clinic charges what                                                               
it does.  She said, "And I  think that's the missing piece of the                                                               
4:57:42 PM                                                                                                                    
CHAIR OLSON  recalled previous testimony  from the  Department of                                                               
Labor & Workforce Development that  health care providers justify                                                               
what  they charge  in order  to "pick  up the  difference between                                                               
what Medicaid will pay and what  their costs are ... and it's not                                                               
illegal I might add."                                                                                                           
[There  followed  a  brief  discussion  about  medivac  costs  in                                                               
REPRESENTATIVE JOSEPHSON  pointed out that unknown  medical costs                                                               
are  hard on  consumers and  providers are  reluctant to  discuss                                                               
5:00:08 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
5:00 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB159 Fiscal Note DCCED-DOI-01-22-16.pdf HL&C 1/29/2016 3:15:00 PM
HB 159
HB159 Supporting Documents-Blue Cross Provider Manual.pdf HL&C 1/29/2016 3:15:00 PM
HB 159
HB159 Supporting Documents-Medicare Physician Provider Manual.pdf HL&C 1/29/2016 3:15:00 PM
HB 159
HB159 Supporting Documents-Medicaid Provider Manual.pdf HL&C 1/29/2016 3:15:00 PM
HB 159
HB159 Draft Proposed Blank CS ver H.pdf HL&C 1/29/2016 3:15:00 PM
HB 159
DCCED-Div of Insurance Presentation 1-29-16.pdf HL&C 1/29/2016 3:15:00 PM
DCCED - Div of Insurance presentation
Top 25 Surgery Code Procedures by Paid Amounts for AK.pdf HL&C 1/29/2016 3:15:00 PM
Referenced during meeting