Legislature(2015 - 2016)BARNES 124
02/05/2016 03:15 PM House LABOR & COMMERCE
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| Overview: Department of Administration, Health Plans | |
| Adjourn |
* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 5, 2016
3:18 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)
OTHER MEMBERS PRESENT
Representative Max Gruenberg
COMMITTEE CALENDAR
OVERVIEW: DEPARTMENT OF ADMINISTRATION~ HEALTH PLANS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOHN BOUCHER, Deputy Commissioner
Office of the Commissioner
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Alaska Department of Administration Health Plans,"
dated 2/5/16.
MICHELE MICHAUD, Chief Health Official
Central Office
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions during the PowerPoint
presentation entitled, "Department of Administration Health
Plans," dated 2/5/16.
ACTION NARRATIVE
3:18:05 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:18 p.m. Representatives Olson,
Hughes, LeDoux, Tilton, Kito, and Josephson were present at the
call to order. Representative Colver arrived as the meeting was
in progress. Representative Gruenberg was also present.
^OVERVIEW: DEPARTMENT OF ADMINISTRATION, HEALTH PLANS
OVERVIEW: DEPARTMENT OF ADMINISTRATION, HEALTH PLANS
3:18:47 PM
CHAIR OLSON announced that the only order of business would be
an overview by the Department of Administration on health plans.
3:19:12 PM
JOHN BOUCHER, Deputy Commissioner, Office of the Commissioner,
Department of Administration, provided a PowerPoint presentation
entitled, "Alaska Department of Administration Health Plans,"
dated 2/5/16. Mr. Boucher informed the committee he would
present an overview of AlaskaCare Health Plan, and a status
report on the state's largest health care third-party
administrator, Aetna. The Division of Retirement and Benefits
(DRB), Department of Administration (DOA), administers a program
that covers over 86,000 people of which 80 percent is enrolled
in the retiree plan and 20 percent is in the employee plan;
retirees and their dependents total about 70,000 people, and
employees and dependents total about 16,700 people [slide 2].
Currently, the division administers ten different plans for
employees and retirees. There are three employee medical and
prescription drug programs, two dental programs, and one vision
program, along with a flexible spending account; for retirees,
there are the retiree medical prescription drug plan, an
optional package for dental, vision, and audio, and a long-term
care program. Soon there will be a new plan for defined
contribution retirees. Mr. Boucher said all of the plans are
managed by the chief health official and a staff of six, with
support from DRB [slide 3]. He provided a brief history of
health insurance in the state, noting that the state has been
self-insured since 1997, and the state contracts with third-
party administrators to process claims and execute the health
plans [slide 4].
3:23:22 PM
REPRESENTATIVE COLVER asked for the level of customer
satisfaction earned by Aetna as the plan administrator, compared
to the previous administrator, Wells Fargo.
MR. BOUCHER advised he would respond to that question shortly.
In further response to Representative Colver, he explained that
Moda is an umbrella name used for multiple companies; the state
employee dental plan is a contract with Oregon Dental Service,
which is a separate entity from Moda Health Plan Inc. Moda
Health Plan Inc., "is in the process of being looked at by the
division of insurance."
REPRESENTATIVE HUGHES asked whether the members of all of the
health care plans are put into the same pool - which would
reduce the cost of care - or are in separate pools, which keeps
the cost higher.
MR. BOUCHER said actuarially, members are provided different
rates for different risk pools within the plans, thus their
premiums are dependent upon the type of plan.
REPRESENTATIVE HUGHES surmised premiums would be cheaper if all
members were combined in one risk pool.
MR. BOUCHER explained that a number of factors affect the
employee benefit credit. Some credits are negotiated, and some
are not; in some cases it is a matter of collective bargaining.
REPRESENTATIVE HUGHES concluded that the state pays more because
members are in different risk pools, and negotiated separately.
She clarified that her question was to whether the state pays a
higher cost, because her understanding is that larger risk pools
earn better rates.
MR. BOUCHER agreed, and further explained that the retiree risk
pool and the employee risk pool garner a "blended rate," which
is paid by employees' and retirees' separate funds.
3:27:11 PM
REPRESENTATIVE HUGHES remarked:
Can you please clarify, is it all one risk pool and it
is all the same rates? I don't think it is because
you said they, they negotiate different things. I'm
just trying to look at this and think how could we
save money. And are we doing it in the lowest cost
way, is my question.
3:27:30 PM
MR. BOUCHER responded:
The risk pool for all the employees is one risk pool;
however, the amount of benefit, or the amount that the
individual pays into the plan, is dependent upon the
benefit that they get, and so it is considered, from
an insurance prospective I believe, one risk pool for
the employees, and one for the retirees. The benefit
credit that the employee is allowed to provide toward
buying their particular plan is, can be a negotiated
item.
CHAIR OLSON further explained that the state does not buy
insurance but buys reinsurance. The state is self-insured up to
a certain amount, and pays for claims, except it has excess
insurance to cover very expensive health issues for individuals;
in fact, it is one insurance pool because insurance does not pay
until costs reach "upper layers."
MR. BOUCHER added that the premiums, and reserves that have
accumulated over time, pay for claims and the administration of
the plan.
REPRESENTATIVE KITO questioned how the state covers costs for
claims and administration, and asked for the status of the
state's reserve.
MR. BOUCHER answered briefly that the state's reserves have been
shrinking in the last 12 months, and he will more fully address
this issue later in the presentation. He directed attention to
slide 5, which illustrated the AlaskaCare Health "spend" in
fiscal year 2015 (FY 15), and FY 16 through January, 2016.
3:30:29 PM
MICHELE MICHAUD, Chief Health Official, Central Office, Division
of Retirement and Benefits, DOA, clarified that the AlaskaCare
Health spend illustrated on slide 5 is based on actual amounts
paid for claims for this time period, rather than when the
claims were incurred.
MR. BOUCHER said the total spend was about $627.7 million for
retiree and active employee claims in FY 15, and there has been
a general increase for both plans. He expressed surprise in
that the active employee plan appears to have increased
utilization, which may be explained by uncertainty within the
workforce.
REPRESENTATIVE KITO recalled that the new provider was selected
because it was going to decrease health care costs; in fact, his
constituents have reported that their claims and coverage have
been denied, but costs continue to increase significantly.
MR. BOUCHER expressed his belief that the new third-party
administrator is delivering significant network savings; he
added that national trends indicate that a 9 percent increase is
not uncommon. Also, he cited a significant increase in the cost
of pharmaceuticals because of the introduction of new drugs.
REPRESENTATIVE LEDOUX asked what the state pays the
administrator.
MR. BOUCHER answered that in FY 15 Aetna received about $16.4
million and in FY 16 the base fee is $15.5 million with a
potential $3.6 million "at-risk" [of being assessed penalties].
The contract calls for "either performance guarantees or earn-
backs that have to be earned as part of an incentive."
REPRESENTATIVE LEDOUX asked how an administrator earns bonus
points.
MR. BOUCHER explained that points are based on various
benchmarks related to services, such as the call center, and
there are a number of other performance guarantees that have to
be met.
3:34:28 PM
REPRESENTATIVE LEDOUX surmised the administrator earns points
for holding down the amount the state spends.
MS. MICHAUD said there is a claims trend guarantee.
REPRESENTATIVE LEDOUX questioned whether that provision is an
incentive for the administrator to deny valid claims.
MS. MICHAUD stated that most of the performance guarantees are
structured towards claims accuracy and timeliness, which would
counteract denying claims to achieve the claims trend.
REPRESENTATIVE JOSEPHSON asked whether the aforementioned $627.7
million is money for premiums paid, or charges incurred by
Alaskans for medical services.
MS. MICHAUD said $627.7 million was paid for medical services
received, not including administrative fees.
3:36:08 PM
REPRESENTATIVE JOSEPHSON posed the scenario of six individuals
who pay $1,400 per month each for premiums, but do not receive
services during one month. He asked whether there was a simple
answer as to how Aetna used the premiums that were paid by these
individuals.
MS. MICHAUD responded that Aetna would not have the money from
the premiums; the state retains the premiums, Aetna pays the
claims, and then bills the state for the amount of the claims
incurred.
CHAIR OLSON remarked:
The money from the premium is aggregated, and then you
either have a stop loss, or you have a limit where the
reinsurance kicks in, say $5 million in the aggregate,
or $10 million or whatever, and then they either get
100 percent or get a percentage, 75 or 80 percent, I
suspect you guys probably get 100. But ... all the
money goes in and their best guess is, whatever the
insurance actually kicks in at, that they collect
enough premium over the 12 months to pay the
anticipated claims. ... The key is trying to get the
balance, to where you collect enough premium to cover
the claims, you're accurate, and that's what keeps
the, ultimately keeps the rates down, is, if we have
best guesses that turn out to be pretty accurate.
3:38:26 PM
MR. BOUCHER returned attention to a bar chart on slide 6, which
indicated that between FY 10 and FY 13 there were significant
increases in health care costs. To address this trend, the
previous administration adjusted the current request for
proposal (RFP); however, due to the more recent savings brought
by the new third-party administrator's larger network, costs
were contained, resulting in an increase in reserves available
to the plan. Therefore, a policy decision was made to lower
rates and gradually deplete reserves. In mid-FY 15, overall
claims began to grow, and the present forecast is that FY 16
rates were set too low. He cautioned that there could be a very
small reserve in the beginning of FY 17. In forecasting to
determine appropriate rates, the division considers the
following four "levers": plan design changes to affect cost
trends; negotiating with providers on the cost of medical
services; collective bargaining to address employee
contributions; and adjusting employer contributions. Mr.
Boucher turned the discussion to the state's third party
administrator, Aetna, and informed the committee that in
calendar year 2015, Aetna processed approximately 2.9 million
medical and pharmacy claims, and the average turnaround time was
approximately 14 calendar days. Due to a feature in the state's
health care plan, approximately 46 percent of overall claims
must be processed by hand, which slows processing time and adds
to administrative costs. Year to date claims accuracy is
estimated at approximately 97 percent, indicating there were
90,000 problems [slide 7]. He suggested that a higher
percentage of auto-adjudicated claims would lead to faster
processing and fewer errors.
3:43:39 PM
REPRESENTATIVE KITO asked Mr. Boucher to describe the auto-
adjudicated process, and asked what percentage of challenged
claims are reinstated after being reviewed by the state.
MR. BOUCHER responded that a claim can be adjudicated by a
computer-generated process, or by hand. In either case, if a
claim is denied, and is appealed by a member, there is an
administrative review within Aetna. If there is a claims
processing error, the claim is overturned by Aetna. A Level II
appeal can be either an administrative-type claim, which is
reviewed within Aetna, or a clinical-type appeal, which is
reviewed by a three-person external review [organization] (ERO).
Furthermore, Level II and Level III claims may be reviewed by
the division.
3:46:03 PM
REPRESENTATIVE LEDOUX surmised the turnaround time of 14
calendar days is the period of time between the submission by
the physician and the payment by Aetna to the physician.
MS. MICHAUD said yes. That is the typical time from the point
that the provider submits the claim, to the time the payment is
made to the provider or to the member.
REPRESENTATIVE LEDOUX asked whether the contract determines how
long the state has to pay Aetna, after the state receives its
claims.
MS. MICHAUD explained the division receives a billing of
submitted claims daily from the third-party administrator, and
must pay within ten working days.
REPRESENTATIVE LEDOUX suggested that holding the billing for ten
working days would garner the state interest on its money.
3:48:05 PM
MR. BOUCHER expressed his belief that invoices are paid as
promptly as possible. He directed attention to slide 8, which
indicated the total number of appeals in 2015, for the retiree
and employee plans:
· approximately 1,200 Level I appeals closed
· 131 Level II administrative appeals closed; 23 percent
overturn rate by Aetna on Level I and Level II
administrative appeals
· 52 other Level II appeals closed; 29 percent overturn rate
by ERO on Level II appeals
· 21 Level III appeals to the Office of Administrative
Hearings (OAH); 3 Level III appeals to superior court
MR. BOUCHER advised that all Level III appeals are first heard
by the division of retirement and benefits [slide 8].
3:50:38 PM
REPRESENTATIVE LEDOUX asked why some Level II appeals are heard
by Aetna and some by ERO.
3:51:04 PM
MR. BOUCHER responded that appeals to ERO may address whether a
procedure is medically necessary. In further response to
Representative LeDoux, he said other appeals are administrative
in nature.
MS. MICHAUD further explained that a non-clinical administrative
appeal that is reviewed by Aetna may be due to a math error, or
a question over the coordination of benefits.
REPRESENTATIVE KITO asked for the overturn rate for Level III
appeals.
MS. MICHAUD said she would provide that information.
REPRESENTATIVE HUGHES questioned whether ERO members are truly
independent, or whether they receive compensation from Aetna.
MS. MICHAUD advised that Aetna contracts with three independent
review organizations so that there is a rotation of ERO panels.
3:53:28 PM
CHAIR OLSON asked whether medical tourism is an option with
Aetna.
MR. BOUCHER said medical tourism is not robust and most claims
of that type are for procedures that are not offered within
Alaska; however, employers and the state are examining that
option.
CHAIR OLSON said workers' compensation carriers and major unions
do utilize that option.
3:55:04 PM
REPRESENTATIVE JOSEPHSON asked for a description of the daily
invoice for claims that is received by the state from the
insurance provider.
MR. BOUCHER said he would provide that information. Returning
to the appeal process, he noted that the number of appeals may
indicate that certain benefits of the plan are not well-
understood, or there are misunderstandings, and that there is an
area that needs to be addressed. For example, in chiropractic
and physical therapy, there is a requirement that for continued
treatment after a number of visits, there must be a
determination of medical necessity. Appeals in the category of
pharmacy may be because the drug is not covered, or that the
prescription was filled too early.
REPRESENTATIVE LEDOUX asked, "... if somebody is seeing a doctor
and the doctor prescribes physical therapy, in what situations
are you going to second-guess the doctor and say that that
physical therapy is not necessary?"
MS. MICHAUD answered that there is a cap on chiropractic in the
employee plan; for both plans, there is a requirement that there
be a significant improvement in bodily function occurring and
that is expected to occur. If a member is no longer making
improvement, and other responses may be appropriate, the claim
may be reviewed by the second level of external review for
clinical appeals. Aetna's decision, clinical evidence, and the
evidence-based medicine guidelines are reviewed by an
independent doctor.
REPRESENTATIVE JOSEPHSON observed that limiting coverage has
always been a subject for misunderstanding about the insurance
industry, and whether insurance covers "everything."
MS. MICHAUD agreed. She has heard that up to 30 percent of
health care services received in the U.S. are unnecessary and
potentially harmful. The state relies on its third-party
administrator to ensure that evidence-based medicine is being
applied.
4:00:39 PM
CHAIR OLSON asked whether said reported unnecessary procedures
include those that are done to protect doctors from malpractice
suits.
MS. MICHAUD was unsure.
REPRESENTATIVE LEDOUX, noting that she previously lived in a
rural area, expressed her concern that insurance benefits are
based on charges that are deemed usual, customary, and
reasonable (UCR). She provided an example of receiving
treatment in Kodiak for an amount "that's what's usual and
customary in the area," but which was not paid in full by the
insurance company.
MS. MICHAUD acknowledged that a provision for usual and
customary fees is in the state's plan and is referred to as "a
recognized charge." She advised that this is a problem
nationally, but more so in Alaska. Insurance companies rely on
a non-profit company called FAIR Health which reviews billing
claims from all of the payers in a geographic area and
determines the prevailing charge. In further response to
Representative LeDoux, she said there are five separate
geographic areas in Alaska; the division hopes that Aetna will
expand its network, so more rural clinics are included and can
provide protection to members against a "balanced bill."
REPRESENTATIVE LEDOUX asked for the rulings from appeals
stemming from refusals to pay more than [a recognized charge].
MS. MICHAUD stated that the state changed its recognized charge
terminology effective in January, [2016], and has not had an
appeal proceed thus far. Appeal rulings at the Aetna level have
upheld the denial because the plan documents the recognized
charge, and Aetna is administering to the plan document. She
was unsure as to whether a Level III appeal has gone before OAH
or the superior court related to the aforementioned language in
the plan.
4:05:32 PM
REPRESENTATIVE HUGHES said she was hearing of problems from her
constituents, and gave an example of a retiree who was referred
by a doctor for physical therapy for an extended period of time.
After accruing expenses of $10,000 to $20,000 for treatment, the
member was told the visits were not covered by insurance, and
was left with the responsibility to pay. She asked why
notification to the doctor, patient, and physical therapist was
so delayed, allowing this situation to occur.
MS. MICHAUD stated that the state's plan relies on the medical
necessity determination of the third-party administrator; during
the switch from one third-party administrator to another, there
were changes in what is considered medically necessary. Because
of the number of procedures involved, the division was not
immediately aware of where differences would occur, and it did
not communicate sufficiently; however, Aetna, unlike the
previous administrator, posts its clinical policy bulletins -
which outline what is medically necessary - online, and the
bulletin can be used by the patient and provider to see how
Aetna determines what is medically necessary.
REPRESENTATIVE HUGHES questioned whether, after the transition
from one third-party administrator to another is complete,
notification will be provided to clinics, physicians, physical
therapy clinics, and patients; further, she urged that if
notification was not given during the transition, the treatment
should be covered.
MR. BOUCHER offered to review this situation.
REPRESENTATIVE HUGHES seeks to ensure that all of those affected
during this period of transition - or during a future period of
transition - are notified by the division in order to prevent a
similar situation.
MS. MICHAUD pointed out there was an article, specific to
chiropractic and physical therapy, in the division's April,
2015, newsletter to all members. Further, Aetna has met with
the state chiropractic association and some physical therapists
to discuss its clinical policy bulletins.
4:10:44 PM
REPRESENTATIVE HUGHES stressed the importance of communicating
with physicians because that seems to be where the breakdown of
communication is occurring.
REPRESENTATIVE KITO gave an example of a constituent who was not
informed of a pharmaceutical change until a notice of nonpayment
for $50,000 was received from their pharmacist. In a similar
manner, neither the patient nor the pharmacist were notified,
and he stated that all should have been notified immediately at
the time of the change.
MR. BOUCHER acknowledged that the transition was not very
smooth, and said the division will work through issues as they
arise.
REPRESENTATIVE LEDOUX inquired as to how a change in
administrator could change the terms of the insurance policy.
4:13:38 PM
MR. BOUCHER said, "And generally, it should not. I agree with
you, so, but there are administrative things that happen when
different people are executing our plan."
REPRESENTATIVE LEDOUX asked whether a legal opinion was sought
to determine what was legally in the terms of the policy.
MS. MICHAUD relayed that there are millions of procedures and
codes and each cannot be identified within a plan document. She
restated that the plan document relies on terms such as medical
necessity, which has historically been determined by the claims
administrator. Aetna's aforementioned public clinical bulletins
are issued for both pharmacy and medical, and provide a guide to
the medical evidence that is used to make medical necessity
determinations. In addition, the third-party administrator must
keep up with changes in medical science and pharmacology.
REPRESENTATIVE LEDOUX opined that newsletters are insufficient
notice of significant changes.
REPRESENTATIVE TILTON asked who determines whether a provider is
in a network.
MS. MICHAUD explained that third-party administrators are
affiliated with a network; for example, HealthSmart, the state's
previous administrator, contracted with Beech Street to provide
the previous MultiPlan network. Aetna has its own network and
contracts directly with providers; however, a provider cannot be
forced to join a network, but must be willing to abide by the
terms of a network agreement.
4:18:02 PM
CHAIR OLSON added that his constituents have many complaints
about the network.
MR. BOUCHER assured the committee that the administration was
sensitive to problems with the transition to Aetna, and sought
to establish a baseline of overall customer satisfaction of
health care delivery through a survey. In August, 2015, DRB
commissioned a study by DSS Research which surveyed over 700
residents for a statistically valid sample. The survey included
562 retirees and 151 active employee members, which reflects the
membership. The survey also provided demographics, such as
retirees living outside Alaska, to compare the caliber of Aetna
services outside of the state. In fact, in terms of overall
satisfaction, the percentage of "not too satisfied" or "not at
all satisfied" varied between those living in and out of the
state. Mr. Boucher suggested this could be attributed to
network challenges in Alaska [slide 10].
REPRESENTATIVE JOSEPHSON returned attention to slide 5 which
indicated that it costs the state four times more to cover
retirees as it does to cover active employees. He surmised that
Medicare would pay 90 cents to the state's 10 cents of the
benefit of a retiree 65 years old and over.
MR. BOUCHER said correct. However, [under-65 years old]
retirees are very expensive to cover. Overall, the retiree plan
does benefits from the number of baby boomers who are now
eligible for Medicare, and that is holding down "a trend cost."
Furthermore, Medicare does not cover those who live outside the
U.S.
4:23:25 PM
MS. MICHAUD added that the plan is not secondary for
prescriptions, thus pharmaceutical costs for retirees are high.
MR. BOUCHER advised that pharmacy has just increased to over 50
percent of the state's total spend, which is a reason for
concern.
REPRESENTATIVE HUGHES asked why the percentage of members who
are living in Alaska, and are dissatisfied with Aetna, is twice
the percentage of members living outside of Alaska, and who are
dissatisfied.
MR. BOUCHER listed a variety of reasons gleaned from a test
field: how claims were processed; confusing explanation of
benefit (EOB) forms, particularly for retirees coordinating
coverage with Medicare; a dislike for administrative policies;
and poor customer service.
CHAIR OLSON questioned whether the survey was proportioned on a
population basis.
MR. BOUCHER said the survey was random, but he was unsure of the
geographical representation, except for those living inside or
outside of the state.
CHAIR OLSON observed that when he conducts a poll he contacts
450 to 500 residents with a margin of error at 4 percent; an
aggregated survey may represent the whole state, but would
underrepresent the Bush.
MR. BOUCHER stated that the survey was not intended to represent
each individual geographic area within the state. He cautioned
that a survey that isolated geographic areas would be very
expensive. He spoke of efforts to improve the survey in the
future. The survey also reported on member satisfaction with
the pharmacy plan, which indicated that levels of satisfaction
were similar without regard to demographics: Between 8 percent
and 10 percent of the total population was "not too satisfied"
or "not at all satisfied." Regarding pharmacy, those
dissatisfied reported: dissatisfaction with the benefit
coverage; difficulty in using the mail order service; how claims
were processed; a dislike of administrative policies; and poor
customer service [slide 11]. Mr. Boucher related that the
division heard the Aetna Concierge call center was not helping
members, thus the survey was directed to that particular issue;
in fact, 25 percent to 30 percent were unhappy with call center
service. He cautioned that not all of those surveyed used the
call center and the margin of error was higher [slide 12]. The
Aetna Concierge call center team in Fresno, California, handles
approximately 89,000 calls per year. The call center earned the
following ratings: 94 percent first call resolution percentage;
98 percent quality; 1.2 percent abandonment rate; 85 percent
answered within 30 seconds [slide 13]. The division was not
satisfied with the call center performance, and the call center
was assessed a penalty of $546,040. In addition, the division
contracted with Segal Co., to conduct a neutral party review
that found that overall Aetna is providing good service;
however, the customer service level is not as promised [slide
14].
CHAIR OLSON suggested that call center staff and all third-party
administrator employees provide identification to members when
they call.
4:34:27 PM
REPRESENTATIVE LEDOUX recalled not being able to speak to a
person for the first ten minutes during a call to one of the
call centers.
MR. BOUCHER expressed the division's view that the call center
is the face of the plan, and a core value is for the customers
to be treated well. The state, through its performance
guarantees, has made clear to Aetna its expectations and in
response, Aetna is providing additional customer service
training. One of the complaints has been that members have to
repeat calls, and then receive conflicting information, so Aetna
will develop a tool to track repeat calls; he opined that the
state's message is getting through to Aetna, and he gave
examples of improved service.
REPRESENTATIVE KITO returned attention to the $16.4 million paid
to Aetna in FY 15, and the base fee of $15.4 million for FY 16;
he asked whether that amount is over and above the expense of
their activity and if so, how Aetna's administration of the plan
is paid for.
MR. BOUCHER responded:
I guess I can best describe this as: We have a base
fee, and, and fees at-risk. And depending on
different aspects of their performance, they would be
rewarded or penalized, based upon that.
REPRESENTATIVE KITO clarified:
So ... my question really is: Is the fee, the $15.5
million their entire cost for administering the
program, or is that, the, over and above the cost of
administering the program?
4:39:37 PM
MR. BOUCHER said he could not answer that question but would
provide the answer if possible.
MS. MICHAUD, in response to Chair Olson, said the contract with
Aetna is not finalized, but the state has a 16-page letter of
agreement with Aetna and the full contract will be much larger.
The letter of agreement is not confidential and is posted on the
division's web site.
MR. BOUCHER turned to other performance issues with Aetna in
2014, and pointed out that the total penalties were nearly $1.2
million. Because of that, the contract with Aetna remains
unsigned and the administration is negotiating with Aetna to
include additional performance guarantees for 2015 [slide 15].
Mr. Boucher restated that Aetna won the third-party
administrator RFP because of the value of its network, and about
600 additional providers have been added to the network in 2014
and 2015 [slide 16].
REPRESENTATIVE JOSEPHSON recalled that in 2013, there was one
orthopedic surgeon on the preferred provider list in Anchorage.
MR. BOUCHER acknowledged some providers are very reluctant to
join the network. In further response to Representative
Josephson, he said he did not know their motivation [to
refrain]; however, specialists' fees can be 300 percent to 400
percent higher in Alaska when compared to procedures elsewhere.
REPRESENTATIVE COLVER asked whether patients are traveling to
Seattle for care because of the lack of preferred providers.
4:45:13 PM
MR. BOUCHER said he was unsure of the volume.
REPRESENTATIVE HUGHES asked whether there are preferred
providers outside of the state.
MR. BOUCHER said yes. They are part of the Aetna network and
also deliver care to many retirees who live outside of the
state.
REPRESENTATIVE LEDOUX questioned whether a member who can show
that a procedure is cheaper outside of Alaska could have their
plan pay for a travel companion to care for them.
MS. MICHAUD responded that there is a provision for surgery that
is less expensive elsewhere, and travel will be paid for the
patient; however, the plan will not pay travel costs for a
companion.
REPRESENTATIVE LEDOUX observed that if a procedure costs 400
times less elsewhere, it would be beneficial to pay for a
companion.
MR. BOUCHER said the state is looking into travel for a
companion; in fact, it is common to have "a wraparound package"
that includes transportation from the airport at certain
facilities. On the other hand, he cautioned about maintaining a
balance in order to keep providers in Alaska.
REPRESENTATIVE LEDOUX expressed her belief that workers'
compensation will pay for a companion's travel; she asked why
the state would not.
MR. BOUCHER stated that in instances such as transplants, travel
for a companion is paid. In further response to Representative
LeDoux, he said a process to determine when to pay for a
companion needs to be established, and the timeline for that is
unknown.
REPRESENTATIVE KITO suggested that the difference in customer
satisfaction between those living in- and out-of-state, might be
that Outside there is a robust network. He urged, "We might
need to relook at the out-of-network, in-network discussion with
Aetna as we look forward to the contract."
4:50:17 PM
REPRESENTATIVE COLVER asked whether international medical travel
is covered by AlaskaCare.
MS. MICHAUD said coverage is good worldwide, so a member who
chooses to travel outside of the U.S. would have coverage for a
medical procedure, but not for the travel expense. In further
response to Representative Colver, she opined members travel for
care because of the expertise available or because of lower
cost. In response to Representative LeDoux, she said the travel
benefit is restricted to travel within the U.S. in all
circumstances.
MR. BOUCHER returned to why Aetna was selected, noting that the
percentage off of billed charges in 2014 and 2015 has been about
35 percent, which reduced the state spend by approximately $110
million each year. The previous administrator delivered
approximately a 23 percent discount off billed charges;
therefore, the value to members and to the plan is in the range
of $35 million to $40 million [slide 17]. Although the division
understands there are problems with Aetna, Aetna has delivered
savings, and if the division continues to address customer
service issues, and grows the network - given the state's fiscal
situation - the state needs to continue with Aetna. Efforts by
the division to address ongoing management with Aetna are as
follows [slides 18 and 19]:
· meet with Aetna weekly to review performance improvement
projects
· Segal Co., will perform a claims audit
· monitor appeals prior to submittal to OAH
· engage with retirees and employees to resolve customer
service concerns
· evaluate travel benefits
· update Retiree Insurance Information Booklet
MR. BOUCHER continued with actions that are expected from Aetna
[slide 20]:
· redesign EOB form
· improve pharmacy coordination of benefits at point of sale
· direct participation of pharmacy customer service team to
supplement CVS Caremark, and inclusion of CVS Caremark in
weekly meetings
· become more actively engaged with stakeholder groups
4:57:59 PM
REPRESENTATIVE KITO said:
[Regarding] the CVS Caremark relationship ... is there
a clear non-directional component of that so if we
have a member that is interested in getting a pharmacy
benefit, they're not directed to a better price at
CVS?
MR. BOUCHER answered that CVS is the administrator of the claims
processing, thus from this relationship, the state has realized
a significant number of pharmacy rebates.
REPRESENTATIVE KITO expressed his concern that Aetna has a
direct relationship with CVS, and asked if members are directed
to CVS pharmacies.
MS. MICHAUD said although there are CVS pharmacies that are part
of the Aetna network, there is no incentive to utilize CVS
pharmacies. The mail order program is an Aetna program and
Costco is part of the mail order network, along with Diplomat
Specialty Pharmacy.
REPRESENTATIVE HUGHES asked the division to respond in writing
to the following question: What is happening to coordinate care
to save costs, and to group purchasing for medical procedures?
MR. BOUCHER said the division is currently evaluating a
relationship with "the health care coalition of Alaska."
MS. MICHAUD, in response to Chair Olson, said the state did not
have network providers outside of the U.S.
5:00:58 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 |
|---|---|---|
| DOA-Div of Retirement and Benefits-Presentation 02-05-16.pdf |
HL&C 2/5/2016 3:15:00 PM |
DOA-Div. of Retirement and Benefits Presentation |