Legislature(2015 - 2016)BARNES 124
01/29/2016 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB159 | |
| Overview: Division of Insurance - Department of Commerce, Community & Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 159 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
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
1/29/16."
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
committee.
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
applies;
(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
facility;
(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
insurance.
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
care.
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
practice.
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
matter.
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
law."
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
patients.
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,
DCCED.
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
(DCCED).
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
uninsured.
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
puzzle."
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
Alaska.]
REPRESENTATIVE JOSEPHSON pointed out that unknown medical costs
are hard on consumers and providers are reluctant to discuss
rates.
5:00:08 PM
ADJOURNMENT
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 |