Legislature(1999 - 2000)
02/21/2000 01:35 PM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE
February 21, 2000
1:35 p.m.
MEMBERS PRESENT
Senator Mike Miller, Chairman
Senator Pete Kelly, Vice-Chairman
Senator Gary Wilken
Senator Drue Pearce
Senator Kim Elton
MEMBERS ABSENT
None
COMMITTEE CALENDAR
SENATE CONCURRENT RESOLUTION NO. 15
Relating to Alcohol-Related Birth Defects Awareness Weeks.
-MOVED SCR 15 OUT OF COMMITTEE
SENATE BILL NO. 191
"An Act making appropriations for the operating and capital
expenses of the state's integrated comprehensive mental health
program; and providing for an effective date."
-MOVED SB 191 OUT OF COMMITTEE
SENATE BILL NO. 256
"An Act relating to regulation of managed health care and allowing
physicians to collectively negotiate with a health care insurer
that has substantial market power."
-HEARD AND HELD
PREVIOUS SENATE COMMITTEE ACTION
SCR 15 - No previous Senate action.
SB 191 - No previous Senate action.
SB 256 - No previous Senate action.
WITNESS REGISTER
Ms. Holly Hemming
Staff to Senator Lincoln
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Testified for the sponsor of SCR 15
Senator Georgianna Lincoln
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SCR 15
Mr. Jeff Jesse, Executive Director
Alaska Mental Health Trust Authority
550 West 7th Ave., Suite 1820
Anchorage, AK 99501
POSITION STATEMENT: Supports SB 191
Ms. Janet Clarke, Director
Division of Administrative Services
Department of Health and Social Services
PO Box 110650
Juneau, AK 99811-0650
POSITION STATEMENT: Discussed DHSS Mental Health Budget Items in
SB 191
Ms. Alison Elgee, Deputy Commissioner
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Discussed DOA Mental Health Budget Items in SB
191
Mr. Dwayne Peeples, Director
Division of Administrative Services
Department of Corrections
PO Box 112000
Juneau, AK 99811-2000
POSITION STATEMENT: Discussed DOC Mental Health Budget Items in SB
191
Ms. Caren Robinson, Chair
Alaska Mental Health Trust Authority
550 West 7th Ave., Suite 1820
Anchorage, AK 99501
POSITION STATEMENT: Answered questions about SB 191
Mr. Jim Jordan, Executive Director
Alaska State Medical Association
4107 Laurel Street
Anchorage, AK 99508
POSITION STATEMENT: Supports SB 191
Mr. Mike Haugen, Executive Director
Alaska Physicians and Surgeons, Inc.
4120 Laurel Street, Suite 206
Anchorage, AK 99508
POSITION STATEMENT: Supports SB 191
Dr. George Rhyneer
Alaska Heart Institute LLC
3340 Providence Dr.
Anchorage, AK
POSITION STATEMENT: Supports SB 191
Mr. Gordon Evans
Health Insurance Association of America
211 4th Street, No. 305
Juneau, AK 99801
POSITION STATEMENT: Opposed to SB 256
Mr. Jerome Selby
Providence Health Systems of Alaska
PO Box 962
Kodiak, AK 99615
POSITION STATEMENT: Supports SB 256 with changes
Mr. Gary Schwartz
Independent Medical Providers
PO Box 73178
Fairbanks, AK 99707
POSITION STATEMENT: Supports SB 256
ACTION NARRATIVE
TAPE 00-6, SIDE A
Number 001
CHAIRMAN MILLER called the Senate Health, Education and Social
Services (HESS) Committee to order at 1:35 p.m. All members were
present.
SCR 15-ALCOHOL-RELATED BIRTH DEFECTS AWARENESS
MS. HOLLY HEMMING, legislative intern for Senator Lincoln, made the
following statement. SCR 15 proposes that Alaska establish two
awareness weeks for fetal alcohol syndrome (FAS) - one during the
week previous to Mother's Day and one previous to Father's Day.
FAS is the number one cause of birth defects and mental retardation
in America and in Alaska. It is the only birth defect that is
completely preventable. The estimated lifetime cost to the State
of each FAS child is between $1.4 and $2.0 million. Approximately
10 FAS children are born in Alaska every year, and an estimated 400
people with FAS live in Alaska right now, at a cost to the State
of about $560 million a year. People with fetal alcohol effects
(FAE) lack the physical appearance of FAS but they have the same
damage to their brain and organs and FAE can be just as serious.
The weeks of Father's Day and Mother's Day are appropriate dates to
recognize the role and responsibility of parents in FAS. She
pointed out that committee packets contain an article that
discusses the in utero alcohol damage that can happen after one
drink and other information on FAS and its effects.
SENATOR LINCOLN added that FAS and FAE have been talked about as a
children's syndrome to date, but she has met adults in Alaska with
FAS and FAE - a sorry predicament because help is not available for
those people. Unfortunately, Alaska does not have legislation that
addresses ways to alleviate FAS and FAE. SCR 15 only makes the
public throughout Alaska aware of this totally preventable
syndrome.
There being no further testimony or questions, SENATOR ELTON moved
SCR 15 out of committee with individual recommendations. There
being no objection, the motion carried.
SB 191-APPROPRIATIONS: MENTAL HEALTH
MR. JEFF JESSE, Executive Director of the AMHTA, spoke via
teleconference from Anchorage and said he would review the proposed
items in the Governor's budget that were not accepted at the level
recommended by AMHTA.
CHAIRMAN MILLER asked that state agency staff testify first.
MS. JANET CLARKE, Director of Administrative Services at the
Department of Health and Social Services (DHSS), gave the following
overview of a packet of reports from OMB to explain some of the
items that the Governor included in SB 191.
The first page is a summary of the budget items included by the
Governor in the integrated mental health program. Some items are
included as increases because AMHTA and Senate Finance Committee
members agreed that AMHTA would initially fund those items but
eventually they would be funded with general funds. Two of those
items in the DHSS budget are training for residential child care
providers and institutional prevention for community developmental
disabilities grants.
The large increase in general fund items in the DHSS budget is an
increase in the Medicaid program related to the API 2000 Community
Implementation Plan. Services in Anchorage will be reconfigured to
allow community hospitals to pick up some of the services currently
provided by API. Another increase of $100,000 was included for
training of foster parents who care for severely emotionally
disturbed children. Another $100,000 increase is to reopen the
Fahrenkamp Center as a residential facility. That facility was
built over ten years ago and has been used by the community mental
center as office space and for counseling. DHSS has a proposal in
the capital budget to remodel the facility so that it can be used
for residential treatment. The other major general fund item does
not show up in SB 191 but it is related to mental health services.
The Governor has proposed a general fund increment to reduce the
infant learning wait list. Other increments relate to $3.4 million
of AMHTA funds for different activities within DHSS.
MS. CLARKE briefly highlighted some of the projects in the summary
of the Governor's capital budget for DHSS. The total of DHSS's
capital projects amount to $7.5 million. $495,000 was included to
reopen the Fahrenkamp residential facility. Stop-gap repairs in
the amount of $379,000 are required at API until the state can
finalize an agreement to purchase Charter North Hospital. Even if
that agreement is finalized today, API will be used for the next
two years. Many of the other projects are grant programs that are
competitively awarded to different agencies.
Number 0896
ALISON ELGEE, Deputy Commissioner of the Department of
Administration (DOA), discussed DOA's list of budget items for
integrated mental health programs. The general funds in the amount
of $126,000 for the Public Defender Agency (PDA) are new to the
AMHTA bill but it is not new money for the PDA. This format
recognizes that the work done by the PDA when representing indigent
clients in danger of involuntary commitment is an expenditure
related to services for the beneficiaries of the Mental Health
Trust.
The rural long term care development project and innovative respite
project are continuing projects. DOA "backs out" those projects
and then adds them back in each year as a result of AMHTA's funding
decisions.
DOA is looking for an opportunity to upgrade the ability of the
Division of Senior Services to provide quality assurance. DOA has
no comprehensive monitoring function for the variety of services it
licenses and regulates. This money would allow DOA to put some
tools in place so that it could ensure that the services delivered
meet the standards to prevent a crisis.
Day treatment for the Chronically Mentally Ill Elderly Program is
also a continuation of DOA's outreach efforts for the elderly. DOA
is building on that work to focus on outreach to elderly with
substance abuse problems. The mini grants for beneficiaries with
ADRD is a continuing project. The last two projects, funded by the
AMHTA, are a project to develop a comprehensive assessment tool for
long-term care facilities to reduce paperwork and to create
training materials for a family and private guardian member
training program. That increment is also reflected in the general
funds column in the amount of $355,000 for the Office of Public
Advocacy for public guardians. The caseload of Alaska's public
guardians is running twice the recommended national average. Right
now they are unable to perform the statutory requirement to work
with private and family guardian members. The funds would help
them reduce the caseload of public guardians and give them that
capacity.
DEPUTY COMMISSIONER ELGEE noted that two other general fund
requests have been proposed: one expands DOA's care coordination
function from four to six regions, the other is to implement
ongoing training for caregivers in ADRD care techniques.
DEPUTY COMMISSIONER ELGEE pointed out a high priority of AMHTA and
DOA is to increase the general relief daily rate. That money is
being carried in the fiscal note to SB 73. DOA has one capital
project for a data integration project. By combining functions
previously performed by other parts of state agencies, data bases
that were developed for each function will be integrated by the
Division of Senior Services to create a comprehensive tracking
system.
Number 1161
DWAYNE PEEPLES, Director of the Division of Administrative Services
in the Department of Corrections (DOC), discussed DOC's requests.
This year, DOC has three AMHTA operations in the operating budget.
The first two represent third year transitions between AMHTA funds
and general fund mental health funds. The first is an 18-bed
psychiatric unit set up at the Highland Mountain institution,
established in the fall of 1997. This is the final year of the
transition and the total operating cost will be $600,000. The
second item is again a transition from FY 98 from AMHTA to the
general fund for a mental health planner. This position
coordinates services for the AMHTA beneficiaries within DOC. The
last item is a new proposal to establish a men's substance abuse
residential treatment facility within one of DOC's correctional
institutions. The $82.9 is a match for federal money in the amount
of $236.0. The new facility will provide fairly intense treatment
services for 40 to 50 men prior to the end of their incarceration.
The only capital budget item being requested by DOC is for a
collaborative project with DHSS to develop a telepsychiatry program
between 10 rural correctional facilities and 10 mental health
centers and psychiatric units in Anchorage. This program will
decrease travel costs and increase services by allowing video
teleconferencing for diagnosis and treatment with inmates.
SENATOR WILKEN asked if the men's residential substance abuse
treatment program is a new program.
MR. PEEPLES replied it is a new initiative.
SENATOR WILKEN asked that Mr. Peeples provide some detailed
information for the Finance Committee regarding how the program
will be structured and where and how the results will be measured.
DEPUTY COMMISSIONER ELGEE mentioned that DOTPF houses a capital
appropriation for a grant program for coordinated transportation
and vehicles that benefits all four beneficiary groups. All four
groups applied to DOTPF for the money provided through this capital
project.
Number 1353
MR. JESSE referred to a chart entitled "Alaska Mental Health Trust
Authority FY01 Mental Health Trust Operating Budget Recommendations
not accepted by the Governor." The first item on that chart is a
match for the assisted living rate increase. Over $800,000 of
AMHTA income has been committed as a match. The general fund
portion was not placed in the Governor's budget because it is
expected to be funded from the fiscal note to SB 73. Item 5 on the
chart is the DOC Men's Sub-Acute Care Unit in the amount of
$300,000. This program would build on to a successful inpatient
treatment program for the most severely mentally ill inmates at the
Cook Inlet facility. The intent of this increment was to provide a
higher level of care for those men when they are housed with the
general population of inmates. Another item, listed between items
6 and 7, for substance abuse treatment for rural women with
children, contains $500,000 of AMHTA funds but does not include the
$500,000 general fund match. Usually the trustees are concerned
when their proposals to match efforts with the State are not
accepted. The AMHTA match remains in SB 191 because of the
critical nature of the services.
MR. JESSE referred to a chart entitled "FY01 Mental Health Trust
Capital Budget Recommendations not accepted by the Governor" and
pointed out the Governor's capital budget did not include either
the AMHTA $100,000 commitment or the $914,000 general fund
commitment for the Adult Day Care Facility in Juneau. AMHTA will
be approaching the DOA subcommittee to request that at least
$100,000 AMHTA be placed in the budget to allow the planning
process to begin. The Governor's Office is concerned that a false
expectation of assured construction will be created if the planning
money is forthcoming. The $30,000 in item number 3 on the chart is
to make the physical modifications necessary to provide treatment
programs discussed in the operating budget. Modifications include
cell re-configurations and the addition of video equipment to
monitor inmates with serious mental illnesses. Three other
programs not accepted for the Governor's capital budget involve
AHFC programs for mental health trust beneficiaries. He noted that
without housing, many of AMHTA's beneficiaries continue to cycle
through API, the court system, and other expensive treatment
programs. Housing is an essential component when trying to divert
people from the emergency service system.
MR. JESSE commented on a few issues that are not addressed in SB
191 but are critical to a comprehensive mental health program.
Foremost among those issues is the Medicaid budget. There is a
significant increase in that formula program but several of the
Medicaid options would not be funded - eyeglasses, dental care,
hearing aids, and mental health rehabilitation. Those services are
the backbone of Alaska's mental health system. The smaller
hospital at API and the project to redesign the service system for
people with mental health crises are very dependent on the Medicaid
component of the budget. A large portion of the general funds for
the Medicaid budget were originally from grant funds in the
Community Mental Health grant area. AMHTA believes it would be a
monumental disaster to lose those critical services.
SENATOR ELTON asked whether AMHTA staff will be present during
budget subcommittee hearings.
MS. CAREN ROBINSON, Chair of AMHTA, said yes.
SENATOR WILKEN moved SB 191 with its accompanying fiscal note out
of committee with individual recommendations. There being no
objection, the motion carried.
SB 256-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE
SENATOR PETE KELLY, sponsor of SB 256, explained that SB 256
addresses inequities that have grown out of the rapidly changing
health care industry, specifically the merging of 18 leading health
care insurance companies into 6 since 1994, which has given those
companies a dramatic increase in their bargaining power with
individual doctors. No corresponding increase in the ability of
doctors to negotiate with these large companies has occurred.
Doctors are restricted by the antitrust provisions placed on the
states by Congress. The antitrust laws do make provision, however,
for a state action doctrine, which would be created by SB 256. The
doctrine allows doctors to negotiate with health insurance
companies with state oversight.
Number 2018
MR. JIM JORDAN, Executive Director of the Alaska State Medical
Association (ASMA), made the following comments about SB 256.
There has been an aggregation in the health insurance industry in
the last several years. Alaska has never had a great number of
health insurance companies competing in its marketplace. One
merger under consideration by the FTC is Aetna US Healthcare and
Prudential. If that merger takes place, the New York Times has
reported that one in ten Americans will be covered by the new mega-
corporation. Health insurance plans have increasingly incorporated
practices and procedures to manage health care to keep costs down.
Theoretically, the health insurer negotiates discounted fees for
health care for a promise of a more guaranteed stream of patients.
Large group medical practices, none of which exist in Alaska, and
big hospitals have more equal bargaining power with the health
insurers than the typical Alaska physician who is in a small group
practice or works solo. A gross inequity in bargaining power
exists.
There is no conceivable way that any health insurance will bargain
with each individual physician regarding each individual contract
provision. Independent competing physicians are prevented from any
collective action by the federal antitrust laws to which,
ironically, the insurers are not subject. This fact, plus the
market concentration of health insurers, causes the imbalance in
bargaining power. With insurers having such a high degree of
leverage, the balance of interests no longer exists in the market
for health care delivery and finance.
A mechanism is available, however, that permits independent
competing physicians to collectively negotiate with health insurers
in regard to the provisions of physicians' services. That
mechanism requires an act by the legislature to create the state
action doctrine exception. It was first set forth in a 1943 U.S.
Supreme Court case, Parker v. Brown. In general, the state action
doctrine states that antitrust actions do not apply to actions by
a state operating in its sovereign capacity or to private conduct
compelled or approved by the state. In other words, where the
requirements of the state action doctrine are met, behavior that
would otherwise violate the antitrust laws will be exempt from
antitrust scrutiny.
The test to qualify for exemptions varies depending on the identity
of the party performing the action in question. If the party is a
legislature or state court, no further inquiry is required. Where
the party is a state agency or a local government official, further
inquiries are required with respect to whether the action in
question followed a clearly articulated and affirmatively expressed
state policy. When the party is a private party, the test for
qualifying is the strictest. In addition to having to comport with
the clearly articulated and affirmatively expressed state policy,
the action must be subject to active state supervision. Passive
but theoretical power of a state to review a private action in
question is insufficient to meet this standard. Physicians fall
into the category of private parties, therefore collective actions
taken by them would ordinarily be illegal under antitrust laws. In
the instance of independent physicians engaging in collective
negotiations with the health insurer, such actions would only be
exempt from antitrust scrutiny if the requirements for a private
party are met.
SB 256 sets out the clearly articulated and affirmatively expressed
policy in that joint negotiations can only take place when an
insurer has sufficient and substantial market power. The joint
negotiation must be performed for the physicians by an authorized
third party. The process must be supervised by the Commissioner of
the Department of Labor and the Attorney General and it does not
allow for any joint action that would contribute to any form of
boycott of services or a strike by the physicians who are
negotiating. ASMA supports SB 256 with proposed amendments.
DR. GEORGE RHYNEER, a practicing cardiologist from Anchorage, a
member of ASMA, and President of the Alaska Physicians and
Surgeons, stated support for SB 256. ASMA members have suffered
considerably because of their inability to stand up to insurance
companies who have a "take it or leave it" attitude toward
contracts. Physicians want to be able to get together to talk
about real issues such as what constitutes emergency care, what
constitutes the need to be seen by a physician, and what
constitutes good medical care. Right now, physicians are
prohibited from doing so by the FTC. A proposed consent decree for
the Fairbanks' physicians who have the Independent Practices
Association, indicates that talking about such medical matters
constitutes collusion and constitutes a change in the amount of
money that will be spent in the community by the community or the
health insurers. Members of the medical profession have
traditionally enjoyed reasonable discussions, to the betterment of
all patients. The APS feels the situation is out of hand and
allows an insurance company, such as Blue Cross, to tie into the
federal government health care plan, so that federal employees only
get 50 percent reimbursement from non-Blue Cross providers while
they get 100 percent reimbursement from Blue Cross providers. That
policy acts as a bludgeon to force physicians to sign up with a
regular program. There are a number of different issues of this
sort and he is interested in resolving the problem.
SENATOR WILKEN asked Dr. Rhyneer to give an example of this dilemma
in layman's terms.
TAPE 00-06, SIDE B
DR. RHYNEER said Blue Cross recently provided exclusive contracts.
It went to one group of cardiologists in the state and said it
wanted them to take care of all Blue Cross patients for a
predetermined fee. If the cardiologists agreed, Blue Cross would
exclude the other cardiologists from being able to treat Blue Cross
patients. Dr. Rhyneer noted that a small number of cardiologists
practice in Alaska. Before this Blue Cross interruption, all
cardiologists spoke and worked with one another on complex cases
and worked together to recruit new physicians to the state. That
working relationship was destroyed by the promotion of super-
economic competition between the two groups. Blue Cross has done
this with the urologists in Anchorage as well. Communities need to
maintain the collegiality of physicians.
Regarding federal employees, DR. RHYNEER said in times past,
federal employees were covered under federal Blue Cross, which paid
the standard percentage for physicians' visits - the same as it
covered for private Blue Cross plan holders. When physicians
became less interested in signing up with Blue Cross, it was able
to tie in with the federal Blue Cross plan so that federal Blue
Cross patients were not satisfactorily reimbursed for their medical
care by those physicians. Physicians find it difficult to stop
caring for patients who do not get proper reimbursement for their
medical problems so physicians often forgive patients half of the
bill amount.
SENATOR WILKEN asked, in regard to Dr. Rhyneer's first example,
what fee the insurance company offered to pay the cardiologists.
DR. RHYNEER said a fee by procedure by patient.
SENATOR WILKEN asked if the insurance companies provided a list of
procedures with the amount to be reimbursed.
DR. RHYNEER said yes.
SENATOR WILKEN asked if the group that was excluded would not get
any reimbursement.
DR. RHYNEER explained those cardiologists would receive much less
than the standard payment and the insurance company told patients
not to see those doctors because the reimbursement would be much
less. The insurance company also told the other physicians in the
State who were Blue Cross providers to not refer their patients to
the doctors under penalty.
Number 2216
SENATOR WILKEN asked if the allegation is that the insurance
company does that by discipline or whether it is done in a blanket
fashion across a city or state.
DR. RHYNEER said insurance companies have done this in other
states. They first contract with one group and if they lose money
in a year, the fee is reduced by 20 percent.
SENATOR WILKEN asked if the suggested remedy is to allow physicians
to speak to each other and align the charges.
DR. RHYNEER said it would allow physicians to talk to the insurance
companies about what constitutes good medical care, what
constitutes an emergency, what constitutes covered procedures, what
constitutes a reasonable charge, and under what circumstances
discussions about fees can take place.
SENATOR WILKEN asked if physicians are trying to raise the rates.
DR. RHYNEER replied the physicians want to be able to talk as a
group with the insurance companies and propose that insurance
companies cover heart attacks as emergencies, for example.
Physicians need to be able to talk as a group about medical issues
and about payment as well. At this time, he is prohibited, by FTC
antitrust laws, from talking to a physician across the hall.
SENATOR WILKEN asked if the physicians would take a common front to
the insurance company and propose rules for administering medicine
in Alaska which the insurance companies could take or leave.
DR. RHYNEER replied the insurance companies could say take it or
leave it or make changes.
MIKE HAUGEN, Executive Director of Alaska Physicians and Surgeons
(APS), explained that APS's 165 physicians are on the front line of
these contracts. APS currently operates under the "Messenger
Model" which effectively bars it from negotiating on behalf of its
physicians. As executive director, he acts as a go-between among
the carriers and physicians. He can poll his members on their
individual opinions and give aggregated information to the
carriers. While it is true that fees are a component of this
discussion, the discussion includes all kinds of extremely
important patients' rights issues. The IPA believes that enacting
this type of legislation will inject new blood into this State as
far as third party payers go. The traditional players have had the
predominant market share for quite awhile. Many smaller players
are interested in entering this market but doctors are afraid to
talk to them because of the federal antitrust laws. SB 256 will
allow doctors to come together and talk to the smaller players. It
is much more efficient for a smaller player to talk to one entity,
such as the APS, than to create a network of doctors.
MR. JORDAN emphasized that SB 256 provides a mechanism that is
voluntary - insurers do not have to participate. SB 256 also
requires active state oversight to ensure that the result of the
actions are fair. Third, this measure would allow a single
contract to contain different levels of fees for physicians of the
same specialty and for different types of physicians. That
provision will allow room for negotiation within the contract. He
stressed that the most important aspect of SB 256 is the fact that
it will allow physicians to speak about some very important issues.
Number 1973
SENATOR KELLY asked if SB 256 passed, and a group of physicians
from Anchorage formed a group and presented a contract to an
insurance provider which was rejected, the insurance provider's
only option would be to negotiate with the group or to do business
with individual doctors.
MR. JORDAN said that is correct.
SENATOR ELTON noted the title of SB 256 refers to physicians,
Section 1 refers to health care providers, and Section 2 again
refers to physicians. He pointed out in Section 1, a health care
provider is described as a person licensed in Alaska or another
state to provide health care services. He questioned whether that
includes chiropractors and dentists and why two terms are referred
to.
MR. JORDAN replied the provisions in Section 1 were taken from HB
211, which pertains to Alaska's patient bill of rights. One
element of HB 211 deals with physicians' services contracts but it
does not necessarily cover contracts that would be negotiated under
the state action doctrine exception that is set forth in SB 256.
SENATOR ELTON asked if, upon passage of SB 256, other health care
providers will have the same rights to collectively negotiate as
physicians will.
MR. JORDAN said no.
SENATOR ELTON asked if the state's self insurance health care
program would be included in the definition in Section 1.
MR. JORDAN said he does not believe so under that definition,
however the State Medical Association has asked that SB 256 be
amended to include all types of health benefit plans. He noted
there is a question about the degree to which a state can regulate
a health and welfare plan under the federal Employment Retirement
Income Security Act (ERISA) of 1974. That Act exempts, to a great
degree, from state regulation health and welfare plans. Until the
last four or five years, that preemption from state regulation has
been absolute. As a result of a recent federal court case, that
exemption is no longer automatic. Those areas regarding health and
welfare plans that states regulate, that deal with quality of care,
are not subject to the ERISA preemption. Those that deal with
quantity of care, such as a mandated type of benefit, do fall under
the ERISA preemption and would not be subject to state regulation.
He contended that SB 256 deals with quality of care.
SENATOR ELTON asked Mr. Jordan if the proposed amendment would
change SB 256 so that the state's self-insurance plan would be
regulated.
MR. JORDAN said yes.
CHAIRMAN MILLER asked for the proposed amendment.
MR. JORDAN replied that conceptually, the amendment would change
the scope from applying to health care insurers to health benefit
plans. AS 21.54.500 contains a definition of health benefit plans.
Number 1633
CHAIRMAN MILLER asked how many other states have taken action
similar to SB 256.
MR. JORDAN replied as of Friday (February 18), two states have
enacted state action doctrine exceptions: the State of Texas which
also allows the negotiation of fees; and the State of Washington.
Legislation is currently under debate in the states of Delaware,
Hawaii, Illinois, Pennsylvania, New York, District of Columbia and
Alaska. Legislation is in the process of being drafted in
California, Florida, Georgia, Michigan, New Jersey, and Tennessee.
CHAIRMAN MILLER asked whether SB 256 covers all actions, including
fees.
MR. JORDAN responded yes.
Number 1562
MR. GORDON EVANS, representing the Health Insurance Association of
America (HIAA), made the following comments. HIAA opposes SB 256
for two simple reasons. First, giving physicians an antitrust
waiver would deny consumers a choice, quality and affordability.
Second, health care costs would increase significantly for both the
public and private sectors.
In the past year there has been significant debate at both the
federal and state level about physician collective bargaining or
physician antitrust waivers. Despite differences among the various
proposals, there are four incontrovertible facts. First, quality
is not the driving force behind the physician collective bargaining
movement - it's economics. Legitimate mechanisms already exist
within the boundaries of current antitrust law under which health
care providers can and do collaborate and negotiate with health
plans, patients and others on clinical or quality of care issues or
other concerns. Second, consolidation among health plans has been
and continues to be subject to rigorous antitrust scrutiny at both
the state and federal levels. Third, antitrust waiver legislation
is anti-competitive and would raise costs for health care programs,
financed by both the public and private sectors through Medicare
and Medicaid and other government programs, as well as employer and
union sponsored plans. Fourth, legislation at either the state or
federal levels will be costly. For example, if legislation such as
that proposed at the federal levels which is HR 1304, were to
become law, health care premiums in the private sector would
increase by six to 11 percent. On the national level, total annual
personal health care spending would rise up to $80 billion
annually. These added costs would be paid for by consumers,
employers, and taxpayers without any improvement in the quality of
patient care. Alternatively, 1.2 to 2.4 million more Americans
could be uninsured if their employers chose not to insure because
of the extra cost.
Physicians who are already among the nation's highest paid
professionals are among the least likely Americans to need the
benefits of unionization. Over the last decade, as managed care
has grown, physician incomes have increased more than 77 percent
with a median net income of 1977 of $199,600. Antitrust waivers or
some other form of special treatment that they are seeking through
SB 256, would effectively allow physicians to further increase
their salaries. Moreover, the reality is that physicians are not
seeking to form real unions. Rather, they seek to form unrestricted
collective bargaining units without the regulatory oversight that
all unions are subject to. Physicians are asking state and federal
governments for unique legal rights to engage in conduct that would
otherwise be per se illegal under the antitrust laws. Granting
physicians special waivers to collectively bargain and set prices
without regulatory oversight is unwarranted and detrimental to
consumers. Physician collective bargaining legislation is opposed
by the Chairman of the Federal Trade Commission, Robert Pitofski.
Under current law, consolidation among health plans and insurers is
subject to rigorous antitrust scrutiny at both the state and
federal levels.
The health insurance industry continues to remain very competitive,
making it improbable for any one plan to be able to exercise
significant market power in its negotiations with health care
providers. In conclusion, collective bargaining for physicians
would serve to benefit the few at the expense of consumers and
taxpayers.
SENATOR ELTON said he reads the bill to require that, with the
advice of the attorney general, the commissioner can approve or
disapprove of contracts which is a perfect definition of approval
by the state.
MR. EVANS commented that only applies to the contracts put together
by physicians.
SENATOR KELLY indicated that subsection (e) on page 7 enumerates
the state's involvement.
MR. EVANS pointed out subsection (e) applies before physicians
engage in any collective negotiations.
SENATOR KELLY thought the bill makes it clear that the parameters
of the contract must be presented to the State before the parties
can enter into the contract.
MR. EVANS noted that is a change from the Texas law. Texas allows
a boycott which SB 256 does not.
MR. EVANS pointed out for the record that Blue Cross is not a
member of HIAA.
MR. JEROME SELBY, speaking via teleconference on behalf of
Providence Health Systems of Alaska, asked legislators to fine tune
the legislation and pass it into law. Three items are of concern.
Providence Health Systems employs about 3,000 people so an
increase in the cost of insurance is of concern. Second, Section
1(4), regarding publishing of compensation rates, will continue to
cause a problem in relation to federal antitrust law. He suggested
that section be deleted if it is in violation of a federal
requirement. The third concern has to do with community size.
Section 1(c)(7) on page 7,line 2, could negatively impact smaller
communities because the community may have few physicians so the
percentage factor may not work well. He suggested applying that
subsection to communities with a larger population.
GARY SCHWARTZ, a management consultant from Fairbanks, stated he
works with the Independent Practice Association which consists of
78 physicians in Fairbanks and a number of insurance carriers and
made the following comments. He believes the anti-competitive
environment with insurance carriers can be alleviated with SB 256.
Small carriers do not have adequate resources and infrastructure to
individually contract to work with physicians. There are 37 small
practices in Fairbanks - small carriers are unable to come to
Fairbanks and negotiate agreements. Also, the willingness of
physicians to perform a number of the administrative services that
are requested by those small carriers could be in fact supported
and endorsed with the passage of SB 256. By administrative
services, he means groups of physicians who credential providers,
provide quality assurance programs to improve care, do utilization
review, and identify medically appropriate coverage criteria.
Finally, he believes the provision of usual and customary fee data
for independent physicians in SB 256 is appreciated and would be
valued by the small insurance carriers when preparing their fee
offers.
CHAIRMAN MILLER announced that the committee must adjourn due to
schedule conflicts. He asked that those people who suggested
changes and amendments work with the sponsor so that a proposed
committee substitute can be prepared and brought before the
committee next Wednesday. He noted his intention to take action on
the bill at that time. He adjourned the meeting at 3:05 p.m.
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