Legislature(2001 - 2002)
03/28/2001 06:06 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 28, 2001
6:06 PM
TAPES
SFC-01 # 56, Side A
SFC 01 # 56, Side B
CALL TO ORDER
Co-Chair Pete Kelly convened the meeting at approximately 6:06 PM.
PRESENT
Senator Dave Donley, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Lyda Green
Senator Gary Wilken
Senator Alan Austerman
Senator Lyman Hoffman
Senator Donald Olson
Attending via Teleconference: From Anchorage: BOB LOHR, Director,
Division of Insurance, Department of Community and Economic
Development
SUMMARY INFORMATION
SB 37-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE
The Committee considered and adopted two amendments and heard from
the Department of Community and Economic Development. The bill
moved from Committee.
SB 48-MUNICIPALITIES:INCORP/PROPERTY VALUATION
The Committee adopted a committee substitute and moved the bill
from Committee.
SB 123-FEDERALLY FUNDED PROJECTS OF RAILROAD
This bill was scheduled but not heard.
CS FOR SENATE BILL NO. 37(L&C)
"An Act relating to collective negotiation by physicians with
health benefit plans, to health benefit plan contracts with
individual competing physicians, to the application of state
antitrust laws to agreements involving providers and groups of
providers affected by collective negotiations, and to the
effect of the collective negotiation provisions on health care
providers."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Kelly drew attention to the proposed committee substitute
Version "B", which was introduced, but not adopted during the
previous hearing. He pointed out that a provision regarding the
exemption of nurses was inadvertently omitted in this committee
substitute, which a proposed amendment would reinsert. He pointed
out that this amendment reflects an agreement with the nurses
association.
Senator Wilken moved for adoption of CS SB 37 22-LS0323\B, 3/27/01
as a working draft.
Without objection it was ADOPTED.
Amendment #1: This amendment adds a new subsection on page 7, lines
15-19 of the committee substitute to Section 1. Chapter 50.
Collective Negotiation by Physicians. Sec. 23.50.020 as follows.
(p) Nothing in this section shall be construed as
exempting from the application of the antitrust laws the
conduct of providers or negotiations or agreements between
providers and a health benefit plan if the purpose or effect
of the conduct, negotiations, or agreements would be, directly
or indirectly, to exclude, limit the participation or
reimbursement of, or otherwise limit the scope of services to
be provided by separate or competing classes of providers who
practice or seek to practice within the scope of the
occupational licenses held by the providers.
Senator Wilken moved for adoption.
There was no objection and the amendment was ADOPTED.
Amendment #2: This conceptual amendment deletes Section 3, the July
1, 2006 sunset date, from page 8, lines 30 and 31 of the committee
substitute.
Co-Chair Kelly moved for adoption. He explained this sunset date
was inserted in the bill as a result of concerns over increased
health care costs. He assured that most of the concerns have been
addressed, such as making the negotiations voluntary, establishing
veto provisions for both the carriers and providers, that "soften
the impact" of a worse case scenario. He surmised that the need for
the sunset is therefore no longer necessary and warned that the
insurance corporations would wait for the sunset date rather than
participate in negotiations.
The amendment was ADOPTED without objection.
Co-Chair Kelly addressed the Department of Administration fiscal
note that describes possible impacts to the state employees' self-
insurance plan. He noted that the committee substitute Version "B"
eliminates self-insured plans from the negotiation requirements and
therefore, there would be no fiscal impact to the state. He
recommended the Committee adopt a zero fiscal note for the
Department of Administration.
Senator Green asked the impact of the provision regarding self-
insured plans.
Co-Chair Kelly explained that the state, municipalities and most
labor organizations would not be required to abide by the
negotiation requirements established in this legislation. He
clarified that physicians would not have the protection of the
state action doctrine if they entered into negotiations with self-
insured organizations.
Senator Green wanted to know the segment of the population effected
by the removal of the self-insured from the legislation.
Co-Chair Kelly did not know.
Senator Wilken moved to adopt a zero fiscal note for the Department
of Administration.
Co-Chair Kelly clarified for Senator Austerman that the new fiscal
note would delete reference to a potential $3.5 million to $9.1
million increase to the state.
Senator Austerman assumed that health maintenance organizations
(HMO) and similar organizations are not self-insured.
Co-Chair Kelly pointed out that there are no HMOs operating in the
state, but there are preferred provider organizations.
Senator Austerman asked if any of the preferred provider
organizations are self-insured.
Co-Chair Kelly answered they are not.
Senator Hoffman asked about the second paragraph of the fiscal note
analysis regarding any increased costs that would be borne by the
employee, and asked if the removal of the self-insured portion of
the bill would eliminate this.
Co-Chair Kelly responded that the matter was irrelevant with the
proposed zero fiscal note.
Senator Austerman commented that the expenses shown on the current
fiscal note were estimates and that there is no way to know if
health care costs would increase or not.
Senator Green expressed that she did not understand the reasoning
behind the legislation. She judged the sponsor's legislative
findings to be questionable and she did not agree with them. She
asserted that there would be a fiscal impact as a result of the
bill. She cited from the findings, "There are however instances in
which a health benefit plan dominates the market to the degree that
fair negotiations…" She wondered how many people remained available
to participate in the negotiations when the self-insured are
removed from the process. She recalled discussions regarding the
impact on the Comprehensive Health Insurance Association (CHIA)
caused by changing health care coverage for state employees to a
self-insured system. She stressed that this action removed a large
segment of the population from private insurance plans. She was
concerned that this legislation targets the small group remaining.
Co-Chair Kelly directed the discussion to the motion on the table
to adopt a fiscal note.
There was no objection and a zero fiscal note for the Department of
Administration was adopted.
Senator Green stressed that if a fiscal note applies to the state
and its employees only, it could be claimed that the legislation
would have an indeterminate fiscal impact, but that it does not
give assurance to those with private insurance that there would be
no cost increase. He requested the Department of Community and
Economic Development address this concern.
Co-Chair Kelly did not agree that the consumer costs would increase
an estimated 15 to 20 percent as a result of this legislation. This
he explained is because the program is "completely voluntary". He
stressed that the insurance companies could decline to participate
in negotiations and the physicians would have no retaliation
options nor could they refuse patients covered by that insurance
company.
Senator Green expressed her concerns were based on the size of the
pool of participants that are not self-insured.
[Note: teleconference connection is very poor. Much of the
testimony is inaudible.]
BOB LOHR, Director, Division of Insurance, Department of Community
and Economic Development, testified via teleconference from
Anchorage that once the self-insured participants are excluded from
the bill, the number of people covered by this legislation would
decline.
Mr. Lohr noted that if physician fees were negotiated at a higher
rate, the increase could result in a rise in the cost of insurance.
Senator Green wanted a percentage figure.
Mr. Lohr estimated "ten-percent of the total published." [Continued
testimony inaudible.]
Senator Green asked if it is typical that the remaining privately
insured participates attempt to enter a self-insured pool.
Mr. Lohr replied there would be an economic incentive to increase
the volume of members in an insurance plan for the purposes of
negotiations. He indicated that plan administrators would look to
do this or possibly reduce benefits or eliminate coverage
completely.
Senator Green asked about the impact on CHIA.
Mr. Lohr explained that CHIA is based on the number of health
insurers participating in the market and that percentage of the
total market. He said the assessment to fund CHIA is determined by
the board of directors for CHIA. [Additional comments inaudible.]
Co-Chair Kelly reiterated earlier assumptions that health care
prices would increase because of negotiated prices. He countered
that this legislation provides either side with veto power and that
insurance companies could refuse to negotiate fees. He remarked,
"This constant talk about prices being raised, I think is uncalled
for. It doesn't follow what is in the bill." He admitted that
quality of care issues are a different matter, such as determining
what procedures constitute emergency services. He noted that there
could be price increases in this area.
AT EASE 6:28 PM / 6:29 PM
Senator Wilken offered a motion to report from Committee CS SB 37
22-LS0323\B as amended with forthcoming zero fiscal note from the
Department of Administration, Division of Retirement and Benefits.
Without objection, the bill MOVED from Committee.
CS FOR SENATE BILL NO. 48(CRA)
"An Act relating to the determination of full and true value
of taxable municipal property for purposes of calculating
funding for education and certain other programs, to
incorporation of third class boroughs, to incorporation of
certain boroughs in the unorganized borough and annexation of
portions of the unorganized borough to boroughs and unified
municipalities, and to the formation of separate unorganized
boroughs; and providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
Senator Wilken updated the Committee on events since the previous
hearing related to a subcommittee formed to review this legislation
and chaired by Senator Leman. Senator Wilken noted a proposed
committee substitute, Version "R" would be offered.
Senator Leman listed membership on the subcommittee as Senator
Wilken, Senator Hoffman and himself who heard testimony from
"interested parties" across the state. He noted that while there
was testimony in favor of the legislation from the City of Cordova,
there was a far greater amount of testimony in opposition,
primarily from rural communities. He summarized responses from
rural communities as "We don't want no government." and "We want
services but we don't want to pay for it." He stated that no
specific amendments were offered.
Senator Hoffman corrected that there were recommendations offered,
for example if there were boroughs organized, they should be done
so by a vote of the residents. He emphasized that of all the
testimony heard, there was one speaker in support of the bill and
the remaining 20 speakers reflected and "overwhelming opposition"
to the legislation. He stressed that there was a speaker for each
of the recommended model boroughs who opposed the bill. He singled
out the Valdez borough as an example, noting that while the
community of Cordova was in support of the mandatory borough,
residents of Valdez opposed it.
Senator Wilken asserted that he had received unsolicited support
for the legislation, given the "difficult positions" placed on
those voicing support. He noted the Eagle River Chamber of Commerce
as a supporter. He stressed that the facts and intent of the bill
speaks "to the effort and the reasons why it should pass."
Senator Wilken moved for adoption of CS SB 48 22-LS0025\R, 3/28/01
as a working draft.
Senator Hoffman objected for explanation.
Senator Wilken detailed the changes in the committee substitute as
follows.
Page 4 lines 16-18: new language, "In addition, the commission
shall hold at least one public hearing in each community with
at least 400 residents and in each home rule or first class
city located in the area."
Senator Wilken commented this had been discussed during a previous
hearing and noted there would be no fiscal impact on the department
given the Local Boundary Commission's (LBC) experience in the
matter.
Page 4, line 23 - 26: changes "each annexation" to "an
annexation" and inserts "however the commission may submit not
more than two petitions to the legislature under this
subsection each year."
Senator Wilken reminded that the legislature has noted that this
legislation "sells patience" as much as it "sells fairness." He
expressed he has waited ten years to receive studies on the
identified areas. He predicted that the two petitions per year is
an ambitious schedule. He also thought that once this system is
validated and in place and residents in unorganized Alaska realize
that they "can help pay for education and can support government
like others in Alaska" these residents would find it in their best
interest to form a borough under existing law. He stated that this
language addresses concerns that this bill is "a mass wholesaling
of unorganized Alaska into boroughs."
Page 5, line 12 through "voter", and line 15: inserts new
language stipulating that if a borough is incorporated and if
there is to be use taxes or sales taxes, those taxes must have
voter approval from the residents of the new borough.
Senator Wilken suggested that for some boroughs, it could be more
appropriate to fund their government in other ways besides property
taxes.
Page 5, line 21: inserts "on the date of the annexation"
Senator Wilken noted this change was the recommendation of the
Department of Natural Resources and addresses the concern related
to annexed land to a borough as deemed appropriate by the LBC under
this legislation, and the borough's entitlement to ten-percent of
the state-owned portion of the annexed land.
Senator Green asked if the committee substitute also includes the
same legislative purpose as contained in the Senate Community and
Regional Affairs committee substitute.
Senator Wilken affirmed it was.
AT EASE 6:42 PM / 6:43 PM
Senator Hoffman removed his objection and the committee substitute
was ADOPTED as a working draft.
Senator Austerman shared that he had been considering a delayed
effective date for this legislation. He spoke to concerns that once
the bill became law, those communities that already have a sales
tax with a portion dedicated to local education, would be precluded
from making decisions regarding what forms of taxation to adopt. He
surmised that the two petitions per year stipulation would give
communities ample opportunity to make these decisions.
Senator Wilken spoke to the search for funds for K-12 education and
responded that while some argued that this legislation is
premature, he also faced pressure that this is not soon enough.
Senator Olson remarked that this bill would continue to receive
scrutiny. He opined that one of the appeals of Alaska is its
opportunity for independent thinking. He referred to the
stipulation in the committee substitute that provides LBC petition
approval without voter ratification. He compared this to taxing
citizens but allowing them no influence in these decisions.
Co-Chair Kelly countered that some communities receive money but
pay nothing to the state. He suggested that those communities that
do not want government should not receive the benefits of
government. He understood that there are some communities that are
unable to contribute.
Senator Wilken commented that 83 percent of Alaskans had government
"crammed down their throats" in the early 1960s, which turned out
to be beneficial. He noted that Alaska is the only state with
unorganized governmental districts. He surmised that when citizens
actually assist in paying for local education, they take a greater
interest in how the funds are spent, which improves the quality of
education. He asserted that those areas that can contribute should
begin to do so and that those areas unable to contribute should be
assisted in developing an economy so that they could contribute in
the future. He suggested that this legislation helps focus state
resources on those areas in need of assistance.
Senator Hoffman agreed that some areas would be unable to
contribute. He stressed many of the unorganized boroughs are
comprised mostly of federal land and that the state receives
federal funding, i.e. Impact Aid Program, in lieu of taxes. He gave
as examples, the Lower Kuskokwim School District, which receives
$8.3 million in impact aide, and the Bering Strait School District,
which receives $5.6 million. He calculated the Average Daily
Membership (ADM) for these districts and the amount of funding
received per student and compared these figures to local
contributions for school districts in Anchorage, Juneau and
Fairbanks, noting that the larger communities have a lower per
student allocation. He surmised that when considering the impact
aid as contribution to local education in lieu of taxes, the two
districts have a greater per student allocation.
Co-Chair Kelly appreciated the math, and asked if this takes into
consideration that Anchorage, Fairbanks and Juneau also contributes
additional taxes to local education.
Senator Hoffman stressed that this legislation addresses equity and
fairness in education funding. Therefore, he expressed that the
Lower Kuskokwim and Bering Straits school districts are already
contributing fairly to their local education.
SFC 01 # 56, Side B 06:55 PM
Senator Hoffman responded to a question by Co-Chair Kelly
suggesting that the Impact Aid Program and ADM relationship should
be calculated for all school districts. He noted that one reason
many areas of the state remain unincorporated is because of the
large make-up of federal lands.
Senator Wilken disagreed that the federal impact aid should be
considered as a local contribution, stating that it is not
considered as such in the Fairbanks school district. He cited a
March 29, 2000 letter from the US Department of Education as
follows.
Financial need of such agencies for the provision of free
public education for children served by such agency [US
Department of Education], except that a State may consider as
local resources funds received under this title…only [Impact
Aid Program] in proportion to the share that local tax
revenues covered under a State equalization program are of
total local tax revenues.
Senator Wilken concluded that if no local taxes are collected for
education, the Impact Aid Program funds could not be claimed as
local contribution.
Senator Hoffman pointed out that this bill provides taxing property
to raise the local effort. He stressed that when a community is
limited in the number of acres available for taxation due to
federal ownership, the ability to collect those taxes is limited.
He surmised that the Impact Aid Program funds should therefore be
considered local effort. He stressed that many communities in his
district are themselves located on federally owned property.
Co-Chair Kelly responded that a community with 95 percent federally
owned land would not be a top priority for organization by the
boundary commission.
Senator Wilken agreed.
Co-Chair Kelly accepted Senator Hoffman's position that an area
consisting primarily of federal land the ability to collect taxes
is decreased.
Senator Hoffman remarked that 67 percent of the land in Alaska is
exempt from taxation because it is federally owned. He estimated
that the existing organized boroughs contain a lower percentage of
federally owned land, leaving a higher percentage in the
unorganized boroughs.
AT EASE 7:01 PM / 7:01 PM
Senator Wilken offered a motion to report CS SB 48, 22-LS0025\R,
from Committee with accompanying Department of Community and
Economic Development fiscal note for $130,000.
Senator Hoffman objected.
A roll call was taken on the motion.
IN FAVOR: Senator Wilken, Senator Austerman, Senator Green, Senator
Leman, Co-Chair Donley and Co-Chair Kelly
OPPOSED: Senator Hoffman and Senator Olson
ABSENT: Senator Ward
The motion PASSED (6-2-1)
The bill MOVED from Committee.
ADJOURNMENT
Co-Chair Pete Kelly adjourned the meeting at 07:03 PM
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