Legislature(1995 - 1996)
03/23/1995 01:35 PM Senate L&C
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SENATE LABOR AND COMMERCE COMMITTEE
March 23, 1995
1:35 P.M.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator John Torgerson, Vice Chairman
Senator Mike Miller
Senator Jim Duncan
Senator Judy Salo
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 104
"An Act relating to joint insurance arrangements; and providing for
an effective date."
SENATE BILL NO. 100
"An Act relating to unfair discrimination against a physician
assistant or acupuncturist under a group health insurance policy."
PREVIOUS ACTION
SB 104 - No previous action to consider.
SB 100 - See Health, Education & Social Services minutes dated
3/6/95 and 3/16/95.
WITNESS REGISTER
Mary Jackson, Legislative Aide
Senator John Torgerson
State Capitol]
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 104.
Don Koch, Chief
Market Surveillance Section
Division of Insurance
Department of Commerce and Economic Development
P.O. Box 110805
Juneau, AK 99811-0805
POSITION STATEMENT: Opposed SB 104.
Jonathan Schaeffer, L.Ac.
174 S. Franklin, #200
Juneau, AK 99801
POSITION STATEMENT: Supported SB 100.
Rachel Yates
Alaska Marriage and Family Therapy
1301 1st St.
Douglas, AK 99824
POSITION STATEMENT: Supported adding marriage and family therapy
to SB 100.
Jerry Reinwand
Blue Cross of Washington and Alaska
P.O. Box 327, MS 301
Seattle, WA 98111-0327
POSITION STATEMENT: Commented on SB 100.
Linda Rexwinkel
Juneau, AK
POSITION STATEMENT: Supported SB 100.
Bob Stalnaker, Director
Division of Retirement and Benefits
Department of Administration
P.O. Box 110203
Juneau, AK 99811-0203
POSITION STATEMENT: Stated neutral position on SB 100.
Suzanne Cortright, Acupuncturist
174 S. Franklin, #200
Juneau, AK 99801
POSITION STATEMENT: Supported SB 100.
Judith Frost
Juneau, AK 99801
POSITION STATEMENT: Supported SB 100.
ACTION NARRATIVE
TAPE 95-14, SIDE A
Number 001
SL&C 3/23/95
SB 104 JOINT INSURANCE ARRANGEMENTS
CHAIRMAN KELLY called the Senate Labor and Commerce Committee
meeting to order at 1:35 p.m. and announced SB 104 to be up for
consideration.
MARY JACKSON, Aide to Senator Torgerson, said this legislation,
passed in 1986, authorized municipalities, school districts, and
REA's to form joint insurance arrangements and extends that
authorization to entities that perform a quasi-governmental service
defined as being non-profit corporations, native associations, and
native village councils. The test of "quasi-government" is that
they must exercise at least two of the general municipal powers.
Number 43
DON KOCH, Chief, Market Surveillance Section, Division of
Insurance, said he did not support the extension proposed in SB
104. The reason is because the entities involved under this
legislation could form a joint arrangement; they don't necessarily
have to join an existing arrangement. He was concerned primarily
with the financial wherewithal of those entities to bear each
others liabilities. A joint insurance arrangement is not
necessarily the purchase of an insurance product; it's an agreement
to share the liabilities of others who are a part of that
agreement, he explained.
MR. KOCH said that mechanisms already exist allowing purchase of
insurance jointly and he has no problem with that. He explained
there is an existing federal statute that enables risk purchasing
groups and risk retention groups. The risk purchasing group allows
a group of entities to come together, pool their resources, and
jointly purchase insurance, but not jointly share each others
risks. He referenced AS 21.36.190 in this regard.
SENATOR KELLY asked why he hadn't received a position paper from
the Division of Insurance regarding this legislation. MR. KOCH
replied that it had been completed yesterday and needed to be
reviewed by "the chain of command." He said the division was also
dealing with a number of other controversial issues.
SENATOR TORGERSON asked if the department opposed the joint
insurance arrangement when it was established seven years ago. MR.
KOCH replied that initially they had some of the same concerns. At
that time, however, it was pointed out that under the powers of a
municipality, extending to the school districts, had taxing power
and the ability to draft ordinances and enforce them. The
financial concerns "tended to go away" since a tax base would be a
backup.
SENATOR TORGERSON pointed out that there is presently a successful
program operating in the state including municipalities and public
corporations, so the liability would be spread out even farther.
MR. KOCH replied that basically their view has been that whenever
unregulated entities share risk, as soon as there are two, you
basically have an insurance plan. There are already a number of
mechanisms in the insurance code that provide opportunities for
people to form insurers of various kinds. One kind that comes to
his mind is the reciprocal exchange which is a form of insurance
company that is totally owned by the people who are insured. The
management of a reciprocal exchange is performed by an attorney in
fact so there isn't the normal "superstructure" an insurance
company has. The expenses are, therefore, reduced. Two of these
are already in the state - Alaska Timber Insurance Exchange and
ARECA Insurance Exchange. There are a series of financial
requirements in place and performance issues. The lack of
regulatory oversite was deliberate in this type of arrangement,
because there were conflicts between state statue and municipal
regulations. He explained that municipalities are generally more
sophisticated when they go into the market place. They have
attorneys on staff and can make and receive the kinds of judgements
they need to make decisions. His concern is with non profit
corporations, in particular, they may not have that degree of
sophistication, so when they make an agreement to share someone
else's liabilities, they might not know what they are doing.
SENATOR KELLY noted there was a letter of support from Egegik
Improvement Corporation saying the reason they want this
legislation is so they can join the pools and pay lower premiums.
Yet, he mused, there are higher risks for taking large losses by
joining one of the pools. MR. KOCH said that was definitely a
concern.
SENATOR KELLY asked if they would regulate the new units. MR. KOCH
replied that they wouldn't. Furthermore, none of the provisions in
the Insurance Code apply to them, including things such as reserves
for losses, including such things as capital and surplus
requirements so there is some floor for finances or trade
practices.
Number 271
SENATOR KELLY asked who regulated them. MR. KOCH said he thought
they made an annual report to the legislature.
Number 283
MS. JACKSON informed the committee that the regulatory practices
that the JI's have to conform to are state statute. The Division
of Insurance does not have oversite.
SENATOR KELLY asked Mr. Koch if the regulations were in state
statute or state regulation. He replied that if there were
regulations at all, they were not in the Insurance Code and he
didn't know of them existing anywhere else.
SENATOR KELLY asked how he defined a trade practice. MR. KOCH
replied unfair claims settlement practices, discrimination,
boycott, coercion, intimidation, misrepresentation are all things
that are dealt with in the Insurance Code in Chapter 36, the Unfair
Trade Practices Act.
SENATOR KELLY asked if he was saying that none of those things
would be enforceable with the new organization. MR. KOCH replied
that was correct; they do not apply. Statute 76 is structured as
an exclusive statute, and nothing else in Title 21 applies to it.
KEVIN SMITH, Alaska Municipal League Joint Insurance Association,
said the reason they support this legislation is because they have
received a number of phone calls from non profits and village
councils that are taking over traditional municipal services who
are finding that liability insurance is becoming expensive for
them. Some of them are very small with very few assets and not
necessarily the sophistication Mr. Koch attributes to them.
SENATOR KELLY asked how many municipalities he had in his group
right now. MR. SMITH answered 95.
SENATOR KELLY asked if there were a $1 million liability loss,
would that be divided by 95. MR. SMITH replied there was another
mechanism in the form of financial requirements of a JIA that would
make the structure such that you shouldn't ever have to go to the
membership to seek additional funds. AS 21.76.020 says: "By
October 1 of each year, the administrator of a joint insurance
arrangement shall prepare and deliver to the LBA Committee a report
showing the true, correct financial condition of the arrangement."
The report must: have a certified analysis by a member of the
American Academy of Actuaries of the sufficiency of the loss
reserves, be certified by a public accountant and must include a
provision in the cooperative agreement requiring an annual
determination by a casualty actuary who is, again, a member of the
American Academy of Actuaries. The annual determination would show
that the procedures for establishing reserves for losses are
actuarialy sound.
Number 350
SENATOR KELLY asked if there were two reports on file now at LBNA.
MR. SMITH answered presumably. SENATOR KELLY asked staff to get
the reports.
MR. SMITH continued saying a JIA would have to do an annual
independent audit including a review of the actuarial assumptions
used for establishing the reserves, including a certification that
the actuarial assumptions continue to be sound and that the level
of reserves are adequate.
SENATOR KELLY asked, again, about a $1 million liability claim and
if all 95 members pay equally and do they all pay equally into the
reserves. MR. SMITH replied no, if they were to go back to the
membership and assess them, it would be based on payroll. In the
case of $1 million claim, the excess insurance would pick that up.
SENATOR TORGERSON asked how successful this JIA program has been
since its inception. MR. SMITH replied that the program started in
1988 with 37 members over the objections of the Division of
Insurance. There are now 95 members; they get approximately $5
million in premiums each year. The goal of the organization was to
stabilize the commercial market so that rates weren't fluctuating
up and down. He said he had seen a number of commercial carriers
cut their quotes in order to compete with a joint insurance
association. He said they have 60% of the market share in
municipalities alone.
SENATOR KELLY asked what their reserves were. MR. SMITH replied
that they have approximately $16 million.
SENATOR KELLY asked if they had any outstanding lawsuits going.
MR. SMITH said he didn't know that and it wouldn't be in the
report. He said it would probably be a line item where the
accountant said these are the outstanding liabilities at the time.
SENATOR KELLY said he would hold SB 104 until receiving copies of
the reports and the letter from the Division of Insurance.
Number 412
SL&C 3/23/95
SB 100 DISCRIMINATION UNDER GROUP HEALTH INS.
SENATOR KELLY announced SB 100 to be up for consideration. He said
they are working on work draft 9SLS0788/F4 3/22/95 which changes
the title and deals with including physician assistant and
acupuncturist into the bill.
SENATOR MILLER said he understood there were three groups who were
interested and all three have merits. He thought it was possible
there should be a separate bill for each group.
After discussion with committee members SENATOR KELLY said they
would begin taking testimony and asked Jack Heesch to address the
committee.
MR. HEESCH said he would answer questions.
JONATHAN SCHAEFFER, Licensed Acupuncturist, said that SB 100 would
allow freedom of choice for folks with insurance. This is
basically a fundamental right and a principal that this country was
based on. Acupuncture is a very safe and effective form of health
care for many conditions. In the long run, its use reduces health
costs for consumers and insurers. He supported adding physician
assistants and acupuncturists to the ranks of the reimbursable
health care providers of the state.
RACHEL YATES, Alaska Association of Marriage and Family Therapists,
said she would like to answer any questions they have about
marriage and family therapy.
SENATOR KELLY said that he didn't think that what she did, while
being very important, was medicine. Personally, he thought the
list should just include medical providers.
JERRY REINWAND, Blue Cross, said he thought the committee really
needed to look at the public policy issues involved in light of the
memo from Mr. Koch, Division of Insurance, specifically where he
says 090 (d) isn't a mandate, but then says later that it is a
mandate. He said he was still unclear about that section.
MR. KOCH said perhaps one way to address that question is that if
a policy provides coverage for treatment of a headache, then it
should extend to anyone on the list who can provide treatment for
a headache. If, however, the policy structures itself in a way
that says you're addressing a diagnosis as to what's causing the
headache, then only those people who can make a diagnosis as to
what is causing that headache can be the service providers. He
didn't view this as a mandate of coverage. It is intended to be an
antidiscrimination provision. It says basically, if a provider can
provide a coverage that is covered on a policy and do so within the
scope of his license, then you can't discriminate against him. He
didn't view this as a mandate. He added this would cause some
serious concern for those who don't want to deal with particular
professions.
MR. REINWAND said that answered his question.
SENATOR DUNCAN said he was not sure that was a solution he could
support. MR. KOCH explained if the cause of a backache was beyond
the scope of an acupuncturists' practice, he would be excluded.
The insurer is the one who makes that determination.
SENATOR DUNCAN asked if there was nothing to stop insurers from
just making a policy call on a corporate level denying acupuncture
all together. MR. KOCH replied that if they did that, they would
have to be very careful about how they worded the coverages in
their policy, because as soon as they provided a coverage that was
clearly within the scope of their practice, and allowed another
practitioner to perform it, they would be up against
discrimination. It's not requiring them to provide the coverage,
but it does say that if you provide it, you can't discriminate
against those who can provide that service.
SENATOR DUNCAN asked if adding acupuncturists to this list would
prohibit an insurance contract from specifically excluding
acupuncturists. MR. KOCH replied that it would.
SENATOR DUNCAN asked who decided what is a valid treatment. MR.
KOCH explained that decision goes to the insurer first, and then
a complaint could be filed with the Division of Insurance. The
Division would review what was within the scope of their practice
and, if it's within the scope of their practice, they would go to
the insurer and see why they declined to cover it. The courts can
also determine what's within the scope of the practice of the
acupuncturist.
Number 550
SENATOR DUNCAN said he knew of a case where a physician assistant
provided some services which were within the scope of a P.A. and
provided that service in a physician's office. The physician
submitted a claim to the insurance industry and was denied, because
it was a physician assistant who did it. He asked if physician
assistant were added to the list, could that happen. MR. KOCH said
that that could not occur.
TAPE 95-14, SIDE B
SENATOR SALO asked for his response to Senator Kelly's contention
that these should just be medical providers. MR. KOCH said if a
group health policy structures itself in a way to provide coverages
for things that are not typically within the practice of a
physician or extend to other things, then it may be appropriate.
The policy states what it's intending to provide. If it says
marital counseling and the current list says the only ones who can
provide marital counseling are the psychologist or physician, then
it is limited to just those.
SENATOR DUNCAN said his concern with stating in statute that this
is not mandated coverage, that it would give insurers a loophole to
say they don't recognize that an acupuncturist provides services.
MR. KOCH said he would prefer that language not appear in this
section of law and typically the place where mandates of coverage
are placed are in chapter 42, the section of law that deals with
contract content.
Number 552
SENATOR KELLY announced a break from 2:25 - 2:32.
MR REINWAND said he still thought the effect of 090 (d) was to
mandate coverage. He thought that was a much different policy
question than adding people to the list. He thought it would be
helpful for the committee to clarify the statute does not mandate
coverage.
Number 535
LINDA REXWINKEL said her concern was with acupuncture. She said
she suffered from a chronic pain syndrome called reflex sympathetic
dystrophy which she contracted in 1991. Basically, the sympathetic
system in her leg has gone crazy and produces pain on its own
initiative in the form of swelling which cut off her circulation,
and if left untreated, her leg would gangrene and require
amputation. She had no alternative, but to secure medical
treatment which has amounted to about $65,000 since 1991. The
normal course of treatment for this disorder by the medical
profession is an injection of anesthetic which did not work for her
at all. Since 1993, she has seen Suzanne Cortright, an
acupuncturist here in Juneau. The average cost for the medical
treatment that didn't work was about $1,000. Ms. Cortright's
treatments are just a fraction of that and the amount of pain
relief is substantial. For many people with chronic pain,
alternative medicine is about the only course of treatment they
have available to them, because the regular medical profession does
not fully understand what is happening and can't provide relief.
As an employee under the state's plan, her acupuncture was not
covered by Aetna Health Plans. She thought she faced unfair
discrimination, because she knows people who had acupuncture
treatments by physicians who were covered by Aetna.
It, therefore, seems to her that we have occupational licensing for
various professions, but do not accord them the same kind of
treatment as we would an M.D. It seems we allow for coverage of
services by a doctor merely because he has an M.D. behind his name,
even though he made not have had any specific kind of acupuncture
training and merely has someone else administer the needles for
him.
She said the cost of the treatments between the two would be much
less for the acupuncturist. The issue is not only of fair coverage
and discrimination, but to provide people with an alternative to
traditional medicine when it doesn't work, and to be able to
receive reimbursement for it, and also cost containment.
SENATOR KELLY said he was in favor of the lower cost, but it seems
that they are adding to the list, but no one is saying you only get
one of these, so he wondered if there really was any savings in the
final analysis.
MS. REXWINKEL said she thought there was a cost savings, because
people go to whomever their insurance covers. If the alternative
is provided, people can go to whomever they want. She did not
believe putting acupuncturist in there makes it a mandated service.
From when she sold insurance, she recollects that insurance
companies have the ability to make discretionary changes in the
policies in the coverage they provide. She asked why they wouldn't
want it covered, if they are already paying for it under an M.D.
and providing alternatives to people is one way to control cost.
SENATOR DUNCAN asked why Aetna turned her down. MS. REXWINKEL said
"service not covered." She said she didn't realize they were
covering acupuncture by a physician in Anchorage until just
recently. She has drafted a letter to Aetna and Division of
Retirement and Benefits detailing the fact that they are paying for
services under a physician in Anchorage, even though they are not
paying for her acupuncturist down here.
MS. REXWINKEL said her experience with Aetna is that many times it
is the initial claims representative, then the claims supervisor,
and then it would be a nurse who reviews the file and makes the
determination on what is covered.
An appeal goes to the Division of Retirement and Benefits who
review Aetna's denial and then the courts are beyond that.
Number 427
BOB STALNAKER, Director, Division of Retirement and Benefits, said
he had a neutral position on SB 100. He said in the case of an
M.D. using acupuncture for treatment modalities, they would have to
check that out.
SENATOR SALO said she didn't think it was unusual to go to a
medical doctor, a chiropractor, acupuncturist, or a massage
therapist, or whoever to find a solution to your condition. She
asked how that was handled under the Aetna system. MR. STALNAKER
said he thought that situation would be very rare, and people
normally switch providers within the same professional service.
SENATOR SALO said she disagreed, that she personally knows people
who seek many different kinds of health care, especially when you
think of chiropractic services in addition to a medical doctor.
MR. STALNAKER noted that the insurer would eventually deny coverage
after a point in time, because of improper treatment.
SENATOR DUNCAN asked him if he agreed with Mr. Koch's position,
that if there is a service specifically covered by Aetna, as in Ms.
Rexwinkel's case, and she goes to a physician, they pay the claim.
If she goes to an acupuncturist for that condition, Aetna would
have to pay the claim also. MR. STALNAKER said that would be
correct if acupuncture services were an accepted form of treatment
for that ailment.
Number 375
SENATOR DUNCAN asked who makes the determination of what's an
accepted form of treatment for that condition. MR. STALNAKER said
the decision is made by the insurance carrier through generally
accepted treatment modalities, the "treatment book."
SENATOR DUNCAN asked if the state had any ability to have impact on
that. He said he really didn't have too much faith in getting non
traditional services covered, because Aetna corporate headquarters
could just say they don't accept that as a form of treatment for
that particular condition. He didn't see what good it did to have
anyone listed, if the state is leaving it up to the insurance
industry to make the decision about what are accepted forms of
treatment.
MR. STALNAKER said there will always be treatments that are not yet
medically accepted forms of treatment that over time might become
accepted. SENATOR DUNCAN said, in reference to Ms. Rexwinkel's
condition, that it was a "fringe condition" and he wanted to see
the book that Aetna uses for these determinations.
MR. STALNAKER responded that "the book" defines what's an
acceptable treatment rather than who is acceptable to do it. If an
acupuncturist is licensed to perform that form of treatment, they
would be reimbursed.
SENATOR DUNCAN said he didn't understand what an acupuncturist's
license says.
Number 300
SUZANNE CORTRIGHT, Acupuncturist, read the statute definition of an
acupuncturist: "A form of healing, developed from traditional
Chinese medical concepts, that uses the stimulation of certain
points on or near the surface of the body by the insertion of
needles to prevent or modify the perception of pain or normalize
physiological functions. The practice of acupuncture means the
insertion of sterile acupuncture needles and the application of
moxibustion to special areas of the human body based upon
acupuncture diagnosis. The practice of acupuncture includes
adjunctive therapies involving mechanical, thermal, electrical, and
electro-magnetic treatment and the recommendation of dietary
guidelines and therapeutic exercises."
MR. STALNAKER said we pay to have medical experts make those kinds
of calls. He felt they would do it without discrimination and with
a completely open mind in what is generally accepted in the medical
profession. He said acupuncture is allowed as a form of
anesthesiology. SENATOR DUNCAN commented that the insurance
industry can hire doctors to give opinions like he can hire an
attorney to give him an opinion.
Number 290
MS. CORTRIGHT presented a list from the World Health Organization
of things that are acceptable for treatment by acupuncture. She
said insurance coverage for acupuncture increases the efficiency of
our health care system. By beginning treatment with the least
invasive and least expensive modalities there will be less money
spent overall. She said that often her patients have been through
months or years of medical treatment that was quite costly and
ineffective. Acupuncture often provides relief for them at a small
fraction of the cost. If it were covered by insurance, it would
provide encouragement for people to seek these less expensive
modalities earlier. She said that acupuncture is very effective
for addictions.
SENATOR TORGERSON asked if her treatment just made people feel
better or if it really cured them too. MS. CORTRIGHT said
absolutely; the goal is to get people better so that they don't
come back. She noted that some insurance companies cover
acupuncture (in pilot programs), like Blue Cross and Blue Shield of
Washington and Oregon, and they are saving money.
Number 211
MS. YATES wanted to point out that marriage and family therapists
are licensed providers of a clinical service in this state. They
are mental health providers and however you describe that, it is
more or less medical. Marriage and family therapy is regularly
mandated to clients in the state via the judicial system and the
Division of Family and Youth Services. They seek to repair
relational difficulties within the family system.
JUDITH FROST said she took time off from work to testify, because
she feels strongly about this issue. She said acupuncture has been
much more effective than any other alternative she has tried for
her sleep disorder and depression from the death of her daughter.
She tried traditional medical treatments and became addicted to
valium. She then started going to Suzanne Cortright for
acupuncture treatments and found that it was most effective for
dealing with her condition.
She works for a company that does cover acupuncture. She feels
strongly that everyone should be able to have their insurance
coverage pay for acupuncture treatment.
SENATOR DUNCAN asked what insurance company she used. She replied
it was Northwestern.
SENATOR KELLY said the committee would take into consideration the
testimony heard and bring the bill up at a later date.
SENATOR KELLY adjourned the meeting at 3:10 p.m.
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