Legislature(2001 - 2002)

03/28/2001 06:06 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                          March 28, 2001                                                                                      
                              6:06 PM                                                                                         
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.                                                              
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                                                                     
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                                                            
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
     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                                                            
     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                                                            
     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                                                            
     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.                                                                                                  
Co-Chair Pete Kelly adjourned the meeting at 07:03 PM                                                                           

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