Legislature(2023 - 2024)BELTZ 105 (TSBldg)
02/20/2023 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): 80th Percentile Rule from the Division of Insurance | |
| SB70 | |
| SB55 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 70 | TELECONFERENCED | |
| += | SB 55 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 20, 2023
1:32 p.m.
MEMBERS PRESENT
Senator Jesse Bjorkman, Chair
Senator Click Bishop, Vice Chair
Senator Elvi Gray-Jackson
Senator Kelly Merrick
Senator Forrest Dunbar
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION(S): 80TH PERCENTILE RULE FROM THE DIVISION OF
INSURANCE
- HEARD
SENATE BILL NO. 70
"An Act relating to coverage for additional insureds under owner
and contractor controlled insurance programs; and providing for
an effective date."
- HEARD & HELD
SENATE BILL NO. 55
"An Act extending the termination date of the State Medical
Board; and providing for an effective date."
- MOVED SB 55 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 70
SHORT TITLE: OWNER & CONTRACTOR CONTROLLED INSURANCE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/15/23 (S) READ THE FIRST TIME - REFERRALS
02/15/23 (S) L&C
02/17/23 (S) JUD REFERRAL ADDED AFTER L&C
02/20/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 55
SHORT TITLE: EXTEND STATE MEDICAL BOARD
SPONSOR(s): WIELECHOWSKI
02/01/23 (S) READ THE FIRST TIME - REFERRALS
02/01/23 (S) L&C, FIN
02/17/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/17/23 (S) Heard & Held
02/17/23 (S) MINUTE(L&C)
02/20/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the 80th Percentile
Rule relating to health insurance.
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Introduced SB 70 on behalf of the
administration.
ED MARTIN, representing self
Kenai, Alaska
POSITION STATEMENT: Testified in opposition to SB 70.
SENATOR BILL WIELECHOWSKI, District K
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a brief recap of SB 55.
ACTION NARRATIVE
1:32:30 PM
VICE-CHAIR CLICK BISHOP called the Senate Labor and Commerce
Standing Committee meeting to order at 1:32 p.m. Present at the
call to order were Senators Gray-Jackson, Dunbar, Merrick, Chair
Bjorkman (via teleconference) and Vice-Chair Bishop.
^PRESENTATION(S): 80th PERCENTILE RULE FROM THE DIVISION OF
INSURANCE
PRESENTATION(S): 80th PERCENTILE RULE FROM THE DIVISION OF
INSURANCE
1:33:14 PM
VICE-CHAIR BISHOP announced a presentation from the Division of
Insurance titled, "Alaska's 80th Percentile Rule". He invited
Ms. Wing-Heier to put herself on the record and begin her
testimony.
1:33:57 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development, Anchorage, Alaska,
presented an overview of the 80th Percentile Rule. The 80th
percentile is not a statute; it is a regulation. The division
issued a public testimony notice on whether the state should
repeal the 80th Percentile Rule. It is a controversial subject.
The division has scheduled three hearings. She said consumers
that purchase healthcare insurance will testify the 80th
percentile is driving up the cost of healthcare, and
consequently, drives up the cost of health insurance. She said
providers will testify the 80th percentile is what keeps them
doing business in Alaska. She said the administration is in a
conundrum. It knows how much the cost of the state's healthcare
affects private citizens, small employers, large employers, and
school districts, but the administration also respects its
healthcare providers.
1:35:12 PM
MS. WING-HEIER reviewed slide 2.
What is the 80th Percentile Rule?
3AAC 26.110(a) in relevant part provides "a person
that provides coverage in this state for health care
services or supplies on an expense incurred basis for
which benefits are based on an amount that is less
than the actual amount billed for the health care
services or supplies shall?.determine the final
payment for a covered service or supply based on an
amount that ?is equal to or greater than the 80th
percentile of charges (based on a statistically
credible profile for each geographical area) for the
health care services or supplies."
MS. WING-HEIER clarified this regulation describes "a person" as
an insurance company or someone paying healthcare bills. A
person shall pay what is determined as the final payment for a
covered service or supply based on an amount equal to or greater
than the 80th percentile charges based on a statistically
credible profile for each geographical area. Determining a
statistically credible profile for each geographical region is
sometimes tricky because the state is extensive, and costs vary
from rural to urban.
1:35:48 PM
MS. WING-HEIER reviewed slide 3:
This is not paying claims at 80 percent
Different health care providers may charge different
amounts for the same health care service. When these
different charges are listed from the lowest charge to
the highest charge, the 80th percentile would be the
data point where 80 percent of the number of listed
charges fall below the data point and 20 percent of
the number of listed charges fall above the data
point.
MS. WING-HEIER said it is known that different healthcare
providers charge different amounts. It is a concern. There are
two different fees:
- The division refers to one as the rack rate, and
- The negotiated rate is what insurance companies pay.
MS. WING-HEIER clarified that the 80th percentile is not the
same as 80 percent; it does not mean health-insurers pay 80
percent of a bill. The 80th percentile means the median of all
the charges in the system and the data point where 80 percent
fall above and 20 percent fall below. The charges are fairly
similar for radiologists, anesthesiologists, etc. There is not
much difference in their charges. The committee will hear
various arguments from constituents. She said one argument is
that the 80th percentile sometimes helps set rates, remarking
that she neither agrees nor disagrees with the view.
1:36:52 PM
MS. WING-HEIER advanced to slide 4 to discuss who the 80th
Percentile Rule affects. She said it applies directly to all
insured plans, which is a small Alaska group. The division
estimates that 15 - 20 percent of Alaskans are in an insured
health plan, where there is an insurance company that the
division regulates. The 80th percentile does not cover union
trusts and self-insured plans, but large plan administrators
expect to be paid near or close to the 80th percentile. The
state plan paid at that higher rate up until recently but has
negotiated down. She noted it has become a common way to pay for
healthcare, even on self-funded or large trust plans. Slide 4
reads:
Who does the 80th Percentile Rule apply to?
The Rule applies to accepted health benefit plans and
health benefit plans in the individual, small group,
and large group markets.
The Rule does not apply to self-funded health benefit
plans typically established by large employers.
1:37:42 PM
SENATOR GRAY-JACKSON asked for more detail about how the 80th
percentile works.
MS. WING-HEIER offered a supposition, using basic math to answer
the question.
SENATOR GRAY-JACKSON said that she understood the math but
sought more overall detail.
MS. WING-HEIER replied that the Rule applies to out-of-network
claims but not to in-network claims because those rates are
negotiated.
SENATOR GRAY-JACKSON sought confirmation that the application of
the Rule depends on whether the claim is in-network or out-of-
network.
MS. WING-HEIER answered yes. The Rule applies to out-of-network
claims; in-network claims have a negotiated rate. The 80th
percentile applies to claims where the insurance provider and
the health care provider have not agreed on a contract. More and
more providers are in-network in Alaska; nonetheless, there are
still a few out-of-network providers.
1:39:19 PM
MS. WING-HEIER reviewed slides 5, 6, and 7:
Slide 5
Why was it adopted?
The Alaska Division of Insurance updated the governing
regulation in 2004 and added the minimum 80th
Percentile Rule as the standard for claims
reimbursement at the time.
The regulation was originally adopted to protect
consumers from excessive bills.
Slide 6
Why is the division considering repealing?
The rule has been criticized for influencing the cost
of health care in the state; and
The consumer protection may no longer be necessary due
to Congress passing the No Surprise Act in 2020.
Slide 7
The No Surprise Act
Previously consumers were responsible for balance
bills often referred to as surprise billing.
With the 80th Percentile Rule, Alaskans with state
regulated health coverage rarely saw large surprise
bills.
Now the No Surprise Act protects consumers covered
under group and individual health plans from most
surprise medical bills.
1:39:20 PM
MS. WING-HEIER said the 80th Percentile Rule was adopted in 2004
because Alaskan consumers complained insurance companies paid
such small amounts that they were left with huge balance bills
or surprise bills. This regulation was implemented to protect
consumers from companies that paid $10 on a $100 charge.
MS. WING-HEIER said she was a proponent of the 80th Percentile
Rule. She thought it would prevent surprise bills; however,
Alaska did not really have a surprise bill problem because
insurance providers paid at the 80th percentile. The federal
government passed the No Surprise Act in 2020. The Act required
insurance companies and healthcare providers to negotiate rates,
which took the consumer out of the middle. In Alaska, a
qualifying payment amount in statute or regulation takes
precedence. So, even with the No Surprise Act, Alaska still
adjudicates claims based on the 80th percentile.
1:40:44 PM
SENATOR DUNBAR asked what the No Surprise Act covers.
MS. WING-HEIER replied that the No Surprise Act (NSA) covers the
consumer protections listed on slide 8:
NSA - Consumer Protections
Establishes new federal protections against most
surprise medical bills in certain cases:
• When a patient receives out-of-network services
during an emergency visit, or
• From a non-network provider at an in-network
hospital without advance notice (e.g.
anesthesiology, radiology, etc.), or
• Services from an out-of-network air ambulance
service provider.
1:41:46 PM
SENATOR DUNBAR sought confirmation that the No Surprise Act
deals primarily with emergency room visits and other procedures.
MS. WING-HEIER answered that is correct.
SENATOR DUNBAR sought confirmation that the 80th Percentile Rule
covers a much broader scope than the NSA. Repealing the Rule
would leave some gaps; NSA only alleviates some of the concerns
the Rule addresses.
MS. WING-HEIER answered there could be some gaps. A No Surprise
Act dispute between a provider and a payer goes to adjudication,
and it is settled in almost a baseball-style arbitration. Alaska
has not seen many adjudications because of the 80th Percentile
Rule; however, the division expects there will be payer and
provider payment disputes if the 80th percentile goes away.
1:43:02 PM
VICE-CHAIR BISHOP commented that he would like to see the
percentage of people inside and outside the 80th percentile on a
pie chart. He asked whether there is data on who is still
covered by the 80th percentile, for example, is it 10, 15, or 20
percent of the population.
MS. WING-HEIER answered that she does not have that data. The
division compared Alaska's charges to Seattle and North Dakota.
In 2018 or 2019, the division did a fairly large study to see
the difference between what Alaska paid at the 80th percentile.
Those negotiating the in-network agreements say the 80th
Percentile Rule is a detriment and cannot negotiate as strong a
deal as they would like. Providers can stay out-of-network and
get paid 80th percentile fees, whereas in-network providers get
paid less. This is one concern that prompted this hearing.
1:44:43 PM
MS. WING-HEIER reviewed slide 9, "NSA - Enhanced Consumer
Disclosure:"
A provider or facility must disclose information
regarding balance billing protections.
Provide a good faith estimate of the expected charges
in advance of scheduled services, or upon request, to
patients or their representatives.
These tools are intended to allow consumers of
healthcare to make informed decisions about utilizing
in- and out-of-network providers or facilities.
1:45:36 PM
MS. WING-HEIER advanced to slide 10. She said hearings start
Wednesday. It is a regulation process. She said that she
understands the concerns of the medical community and consumers.
The state is at a point where it needs to make the decision to
repeal or keep going with the 80th percentile and high
healthcare costs. Slide 10 reads:
Public Comment Period
The division seeks comments and recommendations from
members of the public on whether to make changes to 3
AAC 26.110.
Three hearings:
• February 22nd - Atwood Building, Anchorage, AK
• February 24th - Atwood Building, Anchorage, AK
• March 1st - State Office Building, Juneau, Alaska
Submit written comments to Sarah Bailey at
Sarah.Bailey@Alaska.gov Comment period closes on March
6, 2023.
1:46:04 PM
SENATOR DUNBAR asked which states have an 80th Percentile Rule
or something similar to it and how the cost of health care
compares in the states that have and do not have it.
MS. WING-HEIER answered New York is the only state that uses an
80th Percentile Rule, and only for emergencies. They have been
getting away from it since the No Surprise Act passed. No other
state uses it like Alaska does, not one.
SENATOR DUNBAR sought confirmation that the legislature funded
an all-payer claims database last year.
MS. WING-HEIER replied that the legislature funded the division
to get the state, Medicaid, AlaskaCare, and insurance companies
to submit claims voluntarily. It will not encompass all Alaskans
as a true all-payer claims database would.
1:47:10 PM
SENATOR DUNBAR asked whether the large insurance companies
agreed to give their data to the all-payer claims database.
MS. WING-HEIER replied the database is not all set up yet. The
division went through a request for proposal (RFP) process,
issued a contract in July, and signed it by November. So, the
system is in the design phase. She expressed her belief that the
largest insurer would participate in the database, and the
smaller insurance companies will too. Premera has 90 percent of
the market in Alaska.
SENATOR DUNBAR sought confirmation that Premera intends to
participate.
MS. WING-HEIER confirmed Premera will participate.
1:48:12 PM
CHAIR BJORKMAN (via teleconference) sought confirmation that the
80th Percentile Rule acts as a price guarantee. Providers
determine the amount they can charge, then submit those prices
to the all-payer claims database. Therein, they kind of control
the cost themselves. He asked if this was a correct
characterization.
MS. WING-HEIER replied that this has been one of the criticisms
about this regulation from many people, but she declined to
characterize the regulation.
CHAIR BJORKMAN asked how she would explain it better.
MS. WING-HEIER answered the 80th percentile sets a high bar for
claim payments and probably allows little room for insurance
companies to negotiate network agreements that help reduce the
cost of health care.
1:49:46 PM
CHAIR BJORKMAN asked if the high bar for payments is set when
providers, who expect 80th percentile payments, submit their
prices to the all-payer claims database.
MS. WING-HEIER replied that she is not sure that it would be,
adding she was unsure about the question. She asked him to
elaborate.
CHAIR BJORKMAN asked who provides the prices that establish the
80th percentile number.
MS. WING-HEIER answered the providers do.
CHAIR BJORKMAN asked whether those prices are used to calculate
the guaranteed rate insurance companies use to pay claims. He
sought confirmation that providers have an extraordinary
influence over the guaranteed, by law, price floor.
MS. WING-HEIER answered yes, it does give them a healthy say in
what insurance companies pay them.
CHAIR BJORKMAN restated and sought confirmation that:
- providers input the cost of their services into the database;
- the price level of the 80th percentile is calculated based on
those costs; and
- providers are guaranteed payment at that level.
MS. WING-HEIER answered that is correct.
1:51:30 PM
SENATOR DUNBAR dovetailed off Chair Bjorkman's statements. He
sought confirmation that 15 - 20 percent of people have
insurance plans subject to the 80th Percentile Rule. He asked
whether the 80th Percentile Rule is calculated based on the 15 -
20 percent numbers or all paid claims.
MS. WING-HEIER answered it is all claims.
SENATOR DUNBAR asked if it was fair to say that might reduce
costs a bit because the other 80 - 85 percent are presumably
negotiating a little bit more aggressively to get some of the
costs down.
MS. WING-HEIER replied that she could be wrong, but 85 percent
might be a little high for in-network providers.
SENATOR DUNBAR said that regardless of the numbers, in-network
providers are presumably negotiating harder to lower costs. He
asked if that is a fair assessment.
MS. WING-HEIER answered yes.
1:52:42 PM
SENATOR DUNBAR commented that on its face, it seems like a
ratchet. If it has to be the 80th percentile, then it seems like
the costs will go forever. There is no natural mechanism to
bring it down. He asked about Medicare and Medicaid. He
expressed concern about unintended consequences for Medicaid and
Medicare recipients, wondering whether there is any concern that
this will reduce access to providers for either of those groups.
MS. WING-HEIER answered that the division does not believe it
will affect Medicaid and Medicare recipients. She noted some
providers do not accept Medicare or Medicaid. The Department of
Health (DOH) may have a different view.
SENATOR DUNBAR asked why DOH might have a different view.
MS. WING-HEIER said that she could not speak on behalf of DOH.
She speaks as the Division of Insurance director, and from the
division's view, it appears the 80th percentile will not affect
Medicaid and Medicare recipients or have an unintended
consequence.
1:54:08 PM
VICE-CHAIR BISHOP asked whether the state would have a fairly
good overview by the end of the March 1 regulation and public
comment process.
MS. WING-HEIER replied that it would.
1:54:19 PM
SENATOR GRAY-JACKSON sought confirmation that the Rule only
applies to out-of-network providers. Other providers negotiate
their prices.
MS. WING-HEIER replied that is correct.
SENATOR GRAY-JACKSON asked whether the Rule applies to the
Indian Health Service (IHS).
MS. WING-HEIER answered no it does not.
SENATOR GRAY-JACKSON sought confirmation that the Rule does not
apply because IHS is a federal agency.
MS. WING-HEIER responded that is correct. She clarified there
could be a situation in a rural community, or someone who is not
a beneficiary under IHS could get treatment. That facility could
still bill Premera, Moda Health, and Aetna.
SB 70-OWNER & CONTRACTOR CONTROLLED INSURANCE
1:55:17 PM
VICE-CHAIR BISHOP announced the consideration of SENATE BILL NO.
70 "An Act relating to coverage for additional insureds under
owner and contractor controlled insurance programs; and
providing for an effective date."
VICE-CHAIR BISHOP invited Ms. Wing-Heier to put herself on the
record and introduce SB 70.
1:55:51 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development, Anchorage, Alaska,
introduced SB 70 on behalf of the administration. She said a
large construction project in Alaska:
- is worth over $50 million;
- has to be in a defined location, and
- has a defined period, like two or three years.
MS. WING-HEIER said the Trans-Alaska Pipeline and some
improvement projects at the Anchorage International Airport
would qualify as large construction projects. The owner buys all
the insurance for a project instead of every contractor and sub-
contractor buying their own. She said there is not really a
limit to what an owner can purchase, naming workers'
compensation, general liability, and professional liability
insurance. The project owner controls a master program and
insures employees and all the project workers under it. In some
situations, the owner delegates that authority to the general
contractor; that is called contractor-controlled instead of
owner-controlled, which is basically the same thing.
MS. WING-HEIER said she consulted attorneys representing the
division to propose changing one sentence. The sentence
clarifies that a contractor would be an additional insured or a
sub-contractor would be an additional insured and have the full
benefits of the insurance policy that the owner would buy. She
said the original bill will be amended, but the intent will not
change. The administration introduced SB 70, so the division is
ready to help if a project exceeds $50 million; the division has
to approve these projects. She believed a project like this
could be on the North Slope.
1:58:10 PM
SENATOR DUNBAR commented that SB 70 deletes paragraph (4). He
asked how long this language has been in statute.
MS. WING-HEIER replied since 2005.
SENATOR DUNBAR asked whether there have been any large
construction projects since 2005 that went through this process.
MS. WING-HEIER expressed her assurance that projects have
qualified since 2005. However, she has not approved one in her
ten years with the division. She said the division reviewed the
statutory language and noticed some ambiguity. The changes in SB
70 clarify the intent.
1:59:07 PM
VICE-CHAIR BISHOP opened public testimony on SB 70.
1:59:43 PM
ED MARTIN, representing self, Kenai, Alaska, testified in
opposition to SB 70. He is a general contractor who is licensed,
bonded, and insured. He has contracted in Alaska for many years.
He said his concern is that the state is unnecessarily creating
money for insurance companies. It is ironic that state attorneys
want to change one word in a statute. It is also ironic that the
state is not following AS 39.15.010-100. He said that public
official bonds are not provided for any department heads who
should carry a bond for malfeasance, misfeasance, and
nonfeasance in office. It blows his mind that the attorneys want
to change one word that would affect the private sector yet
disregard AS 39.15.010-100. He said he would not turn down
insurance if someone wanted to insure him, but he wants the
state to be accountable for following the statutes that other
citizens have to follow. He said he would like the committee to
investigate and follow up on AS 39.15.010-100.
2:03:45 PM
VICE-CHAIR BISHOP closed public testimony on SB 70.
VICE-CHAIR BISHOP invited Ms. Wing-Heier to offer a closing
statement.
2:04:06 PM
MS. WING-HEIER said the division will offer an amendment to SB
70 during the next hearing that is likely to alleviate some
concerns.
VICE-CHAIR BISHOP held SB 70 in committee.
2:04:27 PM
At ease.
SB 55-EXTEND STATE MEDICAL BOARD
2:04:54 PM
VICE-CHAIR BISHOP reconvened the meeting and announced the
consideration of SENATE BILL NO. 55 "An Act extending the
termination date of the State Medical Board; and providing for
an effective date."
He said this is the second hearing and the intention is to hear
a brief recap of the bill, close public testimony, and solicit
the will of the committee. He invited Senator Wielechowski to
put himself on the record and begin the recap of SB 55.
2:05:27 PM
SENATOR BILL WIELECHOWSKI, District K, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 55, stated that the bill extends
the termination date of the State Medical Board from June 30,
2023 to June 30, 2031.
2:05:52 PM
VICE-CHAIR BISHOP asked if anyone wished to testify on SB 55.
Finding no testifiers, he closed public testimony.
2:06:25 PM
SENATOR GRAY-JACKSON moved to report SB 55, work order 33-LS-
0347\A, from committee with individual recommendations and
attached fiscal note(s).
2:06:38 PM
VICE-CHAIR BISHOP found no objection and SB 55 was reported from
the Senate Labor and Commerce Standing Committee.
2:07:13 PM
There being no further business to come before the committee,
Vice-Chair Bishop adjourned the Senate Labor and Commerce
Standing Committee meeting at 2:07 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 70 version A.PDF |
SL&C 2/20/2023 1:30:00 PM |
SB 70 |
| SB 70 Transmittal Letter 02.15.2023.pdf |
SL&C 2/20/2023 1:30:00 PM |
SB 70 |
| SB 70 Sectional Analysis Ver A 02.15.2023.pdf |
SL&C 2/20/2023 1:30:00 PM |
SB 70 |
| 02.20.23 DCCED_DOI Presentation to SL&C 80th Percentile Rule.pdf |
SL&C 2/20/2023 1:30:00 PM |
DCCED-DOI Presentation to SL&C |
| SB 70 Fiscal Note-DCCED-DOI 02.15.23.pdf |
SL&C 2/20/2023 1:30:00 PM |
SB 70 |