03/27/2023 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB74 | |
| SB75 | |
| SB84 | |
| SB45 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 74 | TELECONFERENCED | |
| += | SB 75 | TELECONFERENCED | |
| += | SB 84 | TELECONFERENCED | |
| + | SB 45 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 27, 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
SENATE BILL NO. 74
"An Act relating to an interstate physical therapy licensure
compact; relating to the licensure of physical therapists,
physical therapist assistants, occupational therapists, and
occupational therapy assistants; and providing for an effective
date."
- MOVED SB 74 OUT OF COMMITTEE
SENATE BILL NO. 75
"An Act relating to an audiology and speech-language interstate
compact; relating to the practice of audiology and the practice
of speech-language pathology; and providing for an effective
date."
- MOVED SB 75 OUT OF COMMITTEE
SENATE BILL NO. 84
"An Act relating to the business of money transmission; relating
to money transmission licenses, licensure requirements, and
registration through the Nationwide Multistate Licensing System
and Registry; relating to the use of virtual currency for money
transmission; relating to authorized delegates of a licensee;
relating to acquisition of control of a license; relating to
record retention and reporting requirements; authorizing the
Department of Commerce, Community, and Economic Development to
cooperate with other states in the regulation of money
transmission; relating to permissible investments; relating to
violations and enforcement of money transmission laws; relating
to money transmission license exemptions; relating to payroll
processing services; repealing currency exchange licenses; and
providing for an effective date."
- HEARD & HELD
SENATE BILL NO. 45
"An Act relating to insurance; relating to direct health care
agreements; and relating to unfair trade practices."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 74
SHORT TITLE: PHYSICAL THERAPY LICENSURE COMPACT
SPONSOR(s): SENATOR(s) WILSON
02/17/23 (S) READ THE FIRST TIME - REFERRALS
02/17/23 (S) L&C, FIN
03/08/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/08/23 (S) Heard & Held
03/08/23 (S) MINUTE(L&C)
03/27/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 75
SHORT TITLE: AUD. & SPEECH-LANG INTERSTATE COMPACT
SPONSOR(s): SENATOR(s) WILSON
02/17/23 (S) READ THE FIRST TIME - REFERRALS
02/17/23 (S) L&C, FIN
03/08/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/08/23 (S) Heard & Held
03/08/23 (S) MINUTE(L&C)
03/27/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 84
SHORT TITLE: MONEY TRANSMISSION; VIRTUAL CURRENCY
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/24/23 (S) READ THE FIRST TIME - REFERRALS
02/24/23 (S) L&C, JUD, FIN
03/06/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/06/23 (S) Heard & Held
03/06/23 (S) MINUTE(L&C)
03/27/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 45
SHORT TITLE: DIRECT HEALTH AGREEMENT: NOT INSURANCE
SPONSOR(s): WILSON
01/25/23 (S) READ THE FIRST TIME - REFERRALS
01/25/23 (S) HSS, L&C
02/07/23 (S) HSS AT 3:30 PM BUTROVICH 205
02/07/23 (S) Heard & Held
02/07/23 (S) MINUTE(HSS)
02/09/23 (S) HSS AT 3:30 PM BUTROVICH 205
02/09/23 (S) Heard & Held
02/09/23 (S) MINUTE(HSS)
02/21/23 (S) HSS AT 3:30 PM BUTROVICH 205
02/21/23 (S) Scheduled but Not Heard
02/23/23 (S) HSS AT 3:30 PM BUTROVICH 205
02/23/23 (S) Moved CSSB 45(HSS) Out of Committee
02/23/23 (S) MINUTE(HSS)
02/24/23 (S) HSS RPT CS 1DP 4NR SAME TITLE
02/24/23 (S) DP: WILSON
02/24/23 (S) NR: TOBIN, KAUFMAN, GIESSEL, DUNBAR
03/27/23 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
SENATOR DAVID WILSON, District N
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 74 and SB 75.
SUSAN ADAMS, Director
State Legislative & Regulatory Affairs
American Speech-Language-Hearing Association (ASHA)
Rockville, Maryland
POSITION STATEMENT: Stated support for SB 75.
NAHALE KALFAS, General Counsel
Speech Language Pathology and Ideology Interstate Compact;
Legal Counsel, Council of State Governments
Raleigh, North Carolina
POSITION STATEMENT: Stated support for SB 75.
ROBERT SCHMIDT, Director
Division of Banking and Securities
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Offered a recap of SB 84.
TRACY RENO, Chief of Examinations
Division of Banking and Securities
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Offered a recap of SB 84.
LAHKA PEACOCK, Co-Owner
QuyanaCARD
Nome, Alaska
POSITION STATEMENT: Testified in support of SB 84
MATTHEW LAMBERT, Deputy General Counsel
Conference of State Bank Supervisors (CSBS)
Washington, District of Columbia
POSITION STATEMENT: Testified in support of SB 84.
ADAM ATLAS, Attorney at Law
Money Services Business Association (MSBA)
Montreal, Quebec, Canada
POSITION STATEMENT: Testified in support of SB 84.
SENATOR DAVID WILSON, District N
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 45.
JASMINE MARTIN, Staff
Senator David Wilson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis for SB 45.
PETE DIEMER, Health Care Attorney
Clayton and Diemer, LLC
Anchorage, Alaska
POSITION STATEMENT: Gave invited testimony on SB 45.
DR. JOSH UMBEHR, Family Physician
Atlas MD
Wichita, Kansas
POSITION STATEMENT: Gave invited testimony on SB 45.
ACTION NARRATIVE
1:32:25 PM
CHAIR JESSE BJORKMAN called the Senate Labor and Commerce
Standing Committee meeting to order at 1:32 p.m. Present at the
call to order were Senators Merrick, Gray-Jackson, Bishop, and
Chair Bjorkman. Senator Dunbar joined the meeting immediately
thereafter.
SB 74-PHYSICAL THERAPY LICENSURE COMPACT
1:33:57 PM
CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 74
"An Act relating to an interstate physical therapy licensure
compact; relating to the licensure of physical therapists,
physical therapist assistants, occupational therapists, and
occupational therapy assistants; and providing for an effective
date."
He asked the sponsor to provide a recap of SB 74 which was
introduced to the committee on March 8.
1:34:51 PM
SENATOR DAVID WILSON, District N, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 74, gave a recap of the bill. He
said SB 74 is an act establishing an interstate physical therapy
compact. The compacts established in SB 74 and SB 75 allow the
state to retain its autonomy and continue to set the regulations
and fee structures for the interstate compact piece as well as
for those that would apply for licensure under state
regulations.
1:36:06 PM
SENATOR DUNBAR joined the meeting.
1:36:25 PM
CHAIR BJORKMAN opened public testimony on SB 74; finding none,
he closed public testimony.
CHAIR BJORKMAN solicited the will of the committee.
1:37:12 PM
SENATOR BISHOP moved to report SB 74, work order 33-LS0138\S,
from committee with individual recommendations and attached
fiscal note(s).
1:37:39 PM
CHAIR BJORKMAN found no objection and SB 74 was reported from
the Senate Labor and Commerce Standing Committee.
1:37:46 PM
At ease.
SB 75-AUD. & SPEECH-LANG INTERSTATE COMPACT
1:39:27 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 75 "An Act relating to an
audiology and speech-language interstate compact; relating to
the practice of audiology and the practice of speech-language
pathology; and providing for an effective date.
This is the second hearing. He asked the sponsor to provide a
recap of SB 75 which was introduced to the committee on March 8.
1:40:13 PM
SENATOR DAVID WILSON, District N, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 75, stated that SB 75 establishes
an Act relating to an audiology and speech-language pathology
interstate compact. This helps promote cooperation among the
states; interstate compact licensures help increase the quality
of care by decreasing burdens to licensing while maintaining
rigorous licensing standards and state sovereignty.
1:40:55 PM
CHAIR BJORKMAN asked if members had questions for the bill
sponsor; seeing none, he opened public testimony on SB 75.
1:41:22 PM
SUSAN ADAMS, Director of State Legislative & Regulatory Affairs,
American Speech, Language and Hearing Association, Rockville,
Maryland, stated support for SB 75 and offered to answer
questions about how the compact works.
1:41:58 PM
NAHALE KALFAS, General Counsel, Audiology and Speech-Language
Pathology Interstate Compact; Legal Counsel, Council of State
Governments, Raleigh, North Carolina, stated support for SB 75
and offered to answer questions about how the compact works.
1:42:35 PM
CHAIR BJORKMAN closed public testimony on SB 75 and solicited
the will of the committee.
1:42:54 PM
SENATOR BISHOP moved to report SB 75, work order 33-LS0139\B,
from committee with individual recommendations and attached
fiscal note(s).
CHAIR BJORKMAN found no objection and SB 75 was reported from
the Senate Labor and Commerce Standing Committee.
1:43:21 PM
At ease.
SB 84-MONEY TRANSMISSION; VIRTUAL CURRENCY
1:46:36 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 84 "An Act relating to the
business of money transmission; relating to money transmission
licenses, licensure requirements, and registration through the
Nationwide Multistate Licensing System and Registry; relating to
the use of virtual currency for money transmission; relating to
authorized delegates of a licensee; relating to acquisition of
control of a license; relating to record retention and reporting
requirements; authorizing the Department of Commerce, Community,
and Economic Development to cooperate with other states in the
regulation of money transmission; relating to permissible
investments; relating to violations and enforcement of money
transmission laws; relating to money transmission license
exemptions; relating to payroll processing services; repealing
currency exchange licenses; and providing for an effective
date."
He noted that this is the second hearing of this bill in the
Senate Labor and Commerce Committee.
1:47:30 PM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development,
Anchorage, Alaska, offered a recap of SB 84. He reported that
money transmission is a $5.8 billion industry to, from, and
within Alaska. About two-thirds of that industry is end-to-end
payments owned by mobile payment applications such as PayPal,
Cash App, Apple Pay, and Google Pay.
MR. SCHMIDT explained that the legislature wrote the current
money transmission law in the mid-2000s, passed it in 2007 and
it took effect in 2008. At the time it was written, mobile
payments, iPhones, and cryptocurrency did not exist. Dean Fleer,
the division's most senior money transmission examiner joined
the division in 2011; at that time, there were about 30 licensed
money-transmitters, now there are 168, but division staffing for
this industry remains the same. SB 84 resulted from a joint
industry regulator approach. He encouraged members of the
committee to hear from industry professionals who are
knowledgeable about the topic.
There is no state advocating for federal preemption. No industry
trade group or major market participant is advocating for
federal takeover of this space. Alaska would be a minority of
one if it were to ask for federal takeover of money
transmission. While some aspects are overseen by the federal
government, no federal regulator performs overall safety and
soundness examinations of the money transmission industry.
States perform that function. The division responds to nearly
1,000 inquiries from constituents regarding financial concerns.
Alaska is in a better position to maintain control of money
transmissions and protect Alaskans. Yielding this authority to
the federal government would diminish Alaska's sovereignty.
1:50:49 PM
TRACY RENO, Chief of Examinations, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development, Anchorage, Alaska, offered the following recap of
SB 84:
SB 84 amends Title 6, Chapter 55 of The Alaska Money
Services Uniform Act. The purpose of this bill is to
replace existing money state transmission laws to
modernize licensure requirements; add model language
for virtual currency industries; allow the Department
of Commerce Community and Economic Development to
coordinate with other states in the regulation,
licensing, and supervision to standardize the types of
activities that are subject to licensing; and
modernize safety and soundness requirements for money
transmission. There will be a lot of repeal and
reenacts because this bill is adopting a model law.
This bill conforms with the model law by providing
application requirements for a money transmitter
license, and allows the department to change or update
reforms to be consistent with licensing requirements
in the Nationwide Multistate Licensing System (NMLS).
This is important because companies that transmit
money don't want 50 different sets of laws to follow.
Money transmitters spent two years drafting the model
law with state regulators. This bill reduces
regulatory burden by streamlining initial application
and renewal processes so that they are the same every
year and in every state. Our licensers want Alaska's
statutes to be uniform with the rest of the country.
It's less paperwork for the companies requiring less
staff; it gets their license approved faster so that
they can get businesses up and running, and it says
Alaska is open for business.
1:52:35 PM
MS. RENO continued.
This bill conforms with the model law by changing
license renewal, renewal reporting, and renewal
terminology. Fees collected at the time of renewal
will change with this bill. Fees are currently set in
regulation, and Section 52 ensures that fees collected
are sufficient to cover the cost and to do the work.
The annual renewal fee will be based on the licensee's
total volume of money transmission to, from, and
within Alaska. A good example of this is currently a
licensee that transmits $100,000,000 each year pays
the exact same renewal fee as a licensee that
transmits $1 billion a year. There are currently 168
licensed Alaska transmitters that each pay $1,000
annually to renew their license; no matter their size,
their complexity, or their geographic location they
all pay the same flat $1000 annual renewal fee. We
will take special consideration for small mom and pop
businesses to ensure that the tier is not a barrier to
entry for these small businesses. Having the details
of renewal fees in regulation will allow us to update
the fees charged to cover the regulatory costs of
supervision and keep pace with growth and innovation
in the industry.
1:53:45 PM
MS. RENO continued.
The proposed amendments to AS 06.55.850 would create a
tiered assessment for renewal fees. The assessment
would have several tiers with a range of volume
transmitted annually, and would take a percentage to
calculate the renewal fee. The division has been
researching what some other state's assessments look
like, and the hourly cost of examinations would no
longer be billed for those examinations which are
1000s of dollars. They'll be covered as part of the
new tiered assessment renewal fee. Expenses for travel
would still be billed. This should reduce the
regulatory cost of small money transmitters, providing
businesses certainty when planning for their annual
budgets. This bill conforms with the model law and
will protect Alaska consumers by running criminal
background checks on people who control or run a money
transmitter company. These background checks will be
conducted automatically at application through the
NMLS, keeping bad actors from operating the companies
that we license and saving hundreds of hours of DBS
staff time.
1:54:41 PM
MS. RENO continued.
This bill conforms with the model law to add new
sections regarding virtual currency derived from the
Uniform Law Commission's language from the Uniform
Regulation of Virtual Currency Businesses Act. It uses
standard uniform language and it provides a foundation
to regulate virtual currency. This allows the division
to regulate virtual currency and adds virtual currency
to the definition of money transmission. Details of
what is and is not considered licensed activity are
provided in the bill. It details a list of exempted
activities for things like online gaming and provides
disclosure requirements, so that Alaskan consumers
know where to go when they have a complaint. This bill
updates enforcement provisions for consistency with
the model law regarding the suspension and revocation
of the license. It amends civil penalties allowing the
department to cover regulatory costs by assessing its
costs and expenses for investigations and allowing a
broader spectrum of orders to be issued. This
amendment will allow staff to use network supervision
working with other states, to jointly conduct
examinations, and to investigate and take multi-state
enforcement action on bad actors. These amendments
also ensure that in the case of bankruptcy, the funds
entrusted to a money transmitter to send are the
consumer's property, not the company's. The licensee
will be prohibited from using these funds as assets on
their financial statements.
1:55:59 PM
MS. RENO continued.
While this bill follows the model law, a few
modifications were made to make sure it was the right
fit for Alaska. As an example related to net worth
requirements, in the model law the net worth
requirement starts at $100,000. After listening to
small businesses and other stakeholders last session,
the division reduced the net worth requirement to
$35,000, as this is more appropriate for Alaska. This
bill also allows the department to exempt applicants
or licensees from the net worth requirements.
Why is this bill important?
Last year Alaskans sent or received 31 million money
transmission transactions worth $5.8 billion dollars.
This bill will protect Alaska consumers, it will
reduce regulatory burden, it adopts the model law that
industry drafted with state regulators, it will
protect Alaska's sovereignty by creating uniform
statutes across the country, and this bill will allow
the division to have the ability to update fees and
require license in regulation to keep up with
technology and the innovation in this ever-evolving
financial industry. Events of the last year have
demonstrated the need for modernization of Alaska's
money transmission laws.
1:57:27 PM
SENATOR GRAY-JACKSON thanked Mr. Schmidt, Tracy Reno, and the
Division of Banking and Securities staff for their help and
explanation of cryptocurrency.
1:58:19 PM
CHAIR BJORKMAN opened public testimony on SB 84.
1:58:49 PM
LAHKA PEACOCK, Co-Owner, QuyanaCARD, Nome, Alaska, testified in
support of SB 84. He stated that QuyanaCARD is a pre-paid card
business based in Nome that services 1500 cardholders in rural
villages that lack access to traditional banking services. He
shared that when an auditor performed their first bank
examination, his company had to cover the cost of the auditor's
transportation, lodging, car rental, and hourly rate. He learned
from the auditor that all of their paperwork and fees are the
same as Google Pay, a billion dollar business. His business
continued to operate through difficult times, always pushing to
change the regulations to reduce the annual renewal fees,
bonding fees, and exam fees that cost as much as Google Pay.
Exam fees are $20000 which is the same as PayPal. Full financial
audits cost $3500 annually. SB 84 would help his business deal
with these barriers to entry, allowing QuyanaCARD to stay in
business and pave the way for more similar businesses.
2:02:48 PM
MATTHEW LAMBERT, Deputy General Counsel for Policy, Conference
of State Bank Supervisors (CSBS), Washington, D.C., testified in
support of SB 84. He explained that CSBS is an association of
the banking departments from each state. He said SB 84 should be
"win win win," by reducing the regulatory burden for industry,
modernizing requirements for regulators including making it
easier for regulators to work together and more efficiently, and
allowing for the states to continue to serve as laboratories of
innovation. Because states have taken the lead, hundreds of new
companies are trying to enter the industry, creating a
competitive framework for innovation. The main challenge is
having the flexibility that allows for companies to operate on a
scale that can focus on niche situations, all the way up to
global superpowers.
2:04:59 PM
CHAIR BJORKMAN asked how this legislation would prevent a
recurrence of the fraud scandal like that of Sam Bankman-Fried,
founder and CEO of the cryptocurrency exchange company, FTX.
MR. LAMBERT said that FTX and Sam Bankman-Fried moved money
across global borders. He pointed out that the United States
cannot prevent fraudulent transactions across borders, but
legislators can ringfence US assets. He commented on the fallout
of FTX and explained how to protect customers from the scenario
he described.
2:07:29 PM
MR. SCHMIDT commented that a common feature of the noteworthy
crypto bankruptcies the Division of Banking and Securities
reviewed last year was that customer accounts had been pledged
as assets of the company to the company's creditors. He
explained that SB 84 contains a prohibition that a customer's
account cannot be pledged as collateral to the exchanger's
creditors. This issue has been rampant in crypto bankruptcies.
2:08:39 PM
ADAM ATLAS, Money Services Business Association (MSBA),
Montreal, Quebec, Canada, stated that the Money Transmission
Modernization Act will codify the model act that was referenced
earlier. He said MSBA is in favor of SB 84 and supports rolling
out the model law because it provides significant benefits to
customers, states and the industry alike. Customers will benefit
from dealing with money transmitters in Alaska that are
regulated in a way that is consistent with how those suppliers
are regulated in other states. The industry will benefit from
greater clarity in operations and supervision and reducing the
complexity of complying with state-specific laws and the need to
comply with duplicate oversight requirements. This new law will
encourage more services in Alaska and serve underbanked
consumers. He said MSBA supports the idea of the regulator
setting the fees so that smaller volume transmitters would pay
fewer fees than a large volume transmitter. Greater efficiency
would be achieved under the model act, empowering the state to
use technology, apply data analytics, and share resources under
a network system.
2:13:00 PM
CHAIR BJORKMAN closed public testimony on SB 84 and held SB 84
in committee. He stated that written testimony may be submitted
to slac@akleg.gov.
2:14:03 PM
At ease.
SB 45-DIRECT HEALTH AGREEMENT: NOT INSURANCE
[CSSB 45(HSS) was before the committee.]
2:19:29 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 45 "An Act relating to
insurance; relating to direct health care agreements; and
relating to unfair trade practices."
He asked Senator Wilson to introduce the bill.
2:19:51 PM
SENATOR DAVID WILSON, District N, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 45, paraphrased the following
sponsor statement:
[Original punctuation provided.]
Senate Bill 45 is necessary to reduce barriers between
Alaskans and their chosen health care provider. This
bill allows patients and health care providers to
enter into direct health care agreements (DHCA). A
direct health care agreement is a contractual
agreement between a patient and a provider for health
care services. The patient pays a flat, periodic fee
(generally monthly) in exchange for routine visits and
access to their health care provider.
These agreements are only between a provider and a
patient. Unlike the insurer-patient-provider trifecta,
in a DHCA agreement, no third-party is directly
participating in or profiting from the provider-
patient relationship. Doctors currently spend about
half their working hours on paperwork including
paperwork for third party insurance. Direct Health
Care (DHC) reduces bureaucracy by allowing patients to
pay a flat fee for routine care instead of billing
insurance for every doctor's visit. The reduction in
administrative burden leads to reduced costs and more
time in the day for doctors to spend with their
patients.
While a person with private health insurance may elect
to obtain a DHCA to supplement their current health
insurance such as a high deductible plan, but these
models are not health insurance nor do they replace
it and should not be regulated as such.
This bill will clearly exclude qualified DHCA from
Title 21, or insurance regulations, and will clear up
any confusion regarding the legality of direct health
care agreements thereby improving the public's access
to lower cost, high quality health care.
Please contact Jasmin Martin in my office at (907)465-
8165 or by email at Jasmin.Martin@akleg.gov for more
information. I respectfully ask for your support of
this legislation.
2:22:09 PM
SENATOR GRAY-JACKSON asked if he said that SB 45 eliminates
explanation of benefits (EOBs).
SENATOR WILSON answered no, but somebody who had a direct health
care provider agreement that was outside of insurance would not
receive an EOB because the benefit would be within their health
contract.
SENATOR GRAY-JACKSON commented that she likes receiving
electronic EOBs and sought further clarification.
SENATOR WILSON replied that this is not insurance and would be
separate from getting an EOB.
2:23:13 PM
JASMINE MARTIN, Staff, Senator David Wilson, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for SB 45.
[Original punctuation provided.]
Sectional Analysis
Senate Bill 45 v. U
"An act relating to insurance; relating to direct
health care agreements; and relating to unfair trade
practices."
Section 1: Adds a new section (.025 Direct health care
agreements) to AS 21 (Insurance) .03 (Scope of Code).
Section (a), page 1, line 5, through 10: Allows a
provider and a patient to enter into a direct health
care agreement. This section also stipulates that
Medicaid recipients under AS 47.47 and those receiving
assistance for catastrophic illness and chronic or
acute medical conditions under AS 47.08 are not
eligible to enter a DHCA.
Section (b), page 1, line 11, through page 2, line 24:
Specifies what a DHCA must contain.
(1) It must describe the services a patient is
entitled to for payment of a periodic fee.
(2) It must specify: the amount of the periodic fee,
the length of period the fee covers, any additional
fees the provider or business may charge.
(3) It must include contact information for a
representative of the provider or business that is
responsible for patient complaints and for patients
request to amend the agreement.
(4) It must state that the agreement is not health
insurance.
(5) Prominently state that the patient is not
entitled to protections under Patient Protections
Under Health Care Insurance Policies or Trade
Practices and Frauds (AS 21.07 and 21.36
respectively).
Section (c), page 2, line 25, through page 3, line 1:
Specifies that a patient may terminate an agreement
within 30 days. Requires any fees and payments, less
payments made for services the health care provider
has already performed that are not included in the
periodic fee.
Section (d), page 3, line 2 - 12: Sets terms by which
a health care provider may immediately terminate a
DHCA.
Section (e), page 3, line 13 - 15: Specifies that a
patient may terminate a DHCA immediately if a provider
violates the terms of the agreement.
Section (f), page 3, line 16 - 22: Specifies that a
provider may change the fee up to once a year, only
with a written 45-day notice. A patient may cancel
within those 45 days with no penalty.
Section (g), page 3, line 23 - 26: Specifies that a
patient or provider can terminate an agreement with at
least 30 days' notice.
Section (h), page 3, line 27 - 30: Specifies that a
provider may charge a termination fee if the patient
cancels under (c) or (g).
Section (i), page 3, line 31, through page 4, line 4:
Specifies that a patient must pay the periodic fee,
prorated through the date of termination if they
cancel under (f) or (g).
Section (j), page 4, line 5 - 7: Specifies that the
patient is billed by the provider at the end of the
period covered by the fee.
Section (k), page 4, line 8 - 13: Allows an employer
to pay the periodic fee on behalf of an employee. This
does not mean the employer is a health insurance
provider or business.
Section (l), page 4, line 14 - 17: Specifies that a
DHCA is not subject to AS 21.07 (Patients Protections
Under Health Care Insurance Policies) or AS 21.36
(Trade Practices and Frauds) but is subject to other
consumer protections and regulations.
Section (m), page 4, line 18 - 30: Specifies that a
DHCA is not insurance and is not regulated as such.
Section (n), page 4, line 31, through page 5, line 21:
Defines: direct health care agreement, health care
business, health care insurance, health care insurer,
health care provider, health care service, health
insurance, health maintenance organization, and
medical services corporation.
Section 2: Adds a new section (.915 Direct health care
agreements) to AS 45 (Trade and Commerce) .45 (Trade
Practices).
Section (a), page 5, line 22 - 29: Specifies that a
provider may not decline to enter or terminate a DHCA
solely based on a patient's status within a protected
class.
Section (b), page 5, line 30, through page 6, line 4:
Specifies that a provider may decline to enter an
agreement if they are unable to provide the care the
patient needs, or their practice is at capacity.
Section (c), page 6, line 5 - 8: Specifies that a
provider may terminate a DHCA with a current patient
based on their health status only if the providers is
not able to provide the services the patient requires
or in accordance with AS 21.03.025 (section 1 of this
legislation).
Section (d), page 5, line 9 - 21: This is a "false
advertising" clause. This section prohibits a provider
from false advertising regarding a direct health care
agreement. It specifically prohibits advertising these
agreements as insurance or as an alternative to
insurance.
Section (e), page 5, line 22 - 28: Defines: direct
health care agreement, health care business, health
care provider, health care service, and health
insurance.
Section 3: Adds a new paragraph to AS 45 (Trade and
Commerce) .45 (Trade Practices) .471 (Unlawful acts
and practices).
Section (58), page 6, line 29 - 30: Adds violations of
AS 45.45.915 (section 2 of this legislation) to the
list of unfair methods of competition and unfair or
deceptive acts or practices in the conduct of trade or
commerce that are declared to be unlawful.
2:30:51 PM
SENATOR MERRICK asked how many providers are interested in
providing this service.
SENATOR WILSON answered that he did not have an exact number.
2:31:36 PM
SENATOR DUNBAR directed attention to the sectional analysis to
Section H, cross-referenced with Section C and Section G. He
asked about the need for allowing the provider to charge a
termination fee. He expressed his understanding of Section C,
that the patient must cover outstanding costs. Regarding Section
G, he noted the equal ability of both parties to sever the
relationship with a 30-day notice. He asked the reason to allow
an additional termination fee.
MS. MARTIN replied that the only scenario in which the provider
is allowed to charge a termination fee is when the patient
initiates the cancellation.
SENATOR DUNBAR commented that patients would need to give a 30-
day notice, potentially paying for a full month of service. He
questioned the reason for allowing providers to charge for an
additional month of service, on top of the initial termination
fee.
MS. MARTIN responded that it might be useful to have the health
care attorney Pete Diemer join the conversation.
2:33:12 PM
SENATOR WILSON added that many entities do the same to recover
the cost. The termination fee allows time to recoup. The fee is
agreed to when the parties sign the contract, so it does not
come as a surprise. Hopefully it will be explained to individual
patients.
2:34:04 PM
MS. MARTIN commented that SB 45 does not require a provider to
charge a cancellation fee. The written agreement must contain
any such fees so the patient would be aware of this before
entering the agreement.
2:34:24 PM
SENATOR DUNBAR said that this is a unique situation in a highly
regulated industry, where a large disparity exists between
information and relative power between providers and their
patients. He suggested that consumers could be protected by
eliminating the possibility of a termination fee.
2:35:26 PM
CHAIR BJORKMAN segued to invited testimony.
2:35:41 PM
PETE DIEMER, Health Care Attorney, Clayton and Diemer, LLC,
Anchorage, Alaska, gave invited testimony on SB 45. He clarified
that SB 45 was not designed to replace insurance, but to be a
safe harbor to providers and patients who desire this
alternative arrangement. It is not designed to replace the
existing robust regulation of health care providers under their
professional licensing rules, but should work in concert with
existing consumer protection rules under the Alaska Unfair Trade
Practices and Consumer Protection Act. He directed the following
answer to Senator Dunbar's question: the concept behind the
cancellation fee is potentially to cover the administrative cost
of onboarding; the cancellation fees are permissive, not
required and cannot be charged were the provider to terminate
the agreement.
2:38:27 PM
SENATOR MERRICK asked why a provider would choose to terminate a
contract.
MR. DIEMER answered that the patient-physician relationship is
governed by existing Alaska regulation which has adopted the
American Medical Association 2016 Code of Ethics. It provides
sideboards for the patient-physician relationship in the event
of termination. Should the relationship become dysfunctional,
this would be the mechanism that would allow a physician to
terminate the relationship.
2:40:08 PM
SENATOR DUNBAR commented that Mr. Diemer's answer about the
termination fee makes sense in terms of the administrative costs
of onboarding someone. He noted that subsection (h) allows a
termination fee in both the onboarding with subsection (c), as
well as in subsection (g), which covers the broader provision
for the patient terminating the relationship. He asked, if the
provider has already recovered their administrative costs, if it
would be harmful to the providers if this were limited to only
subsection (c), not subsection (g). He expressed that he is
trying to protect consumers so they are able to get out of these
relationships in a way that isn't punitive. He prefers to avoid
a gym membership style situation, in which a customer pays a
monthly fee and does not get anything out of it. He asked Mr.
Diemer whether that narrower amendment would be less harmful to
providers.
MR. DIEMER deferred to the bill sponsor, but stated that in his
view, elimination of the permissive cancellation fee within
subsection (g) would not negatively alter the framework. It
would provide greater patient protection. The upfront
administrative costs are incurred early and that's what
subsection (c) would be designed to address. Conceptually, he
agreed that the administrative costs would already be covered
should subsection (g) termination occur.
2:42:52 PM
CHAIR BJORKMAN asked how the relationship currently works
between patients who don't have healthcare insurance and their
health care provider.
MR. DIEMER replied that SB 45 is designed to work in conjunction
with insurance. It would work particularly well with high
deductible plans. If a patient does not have insurance today,
their relationship with the provider is a fee for each service.
The distinction with the direct health care agreement concept is
that it allows a provider to offer a defined menu of services
for a defined periodic fee. This allows a greater breadth of
services at a typically much lower cost than a fee for service
model.
2:44:54 PM
CHAIR BJORKMAN asked how patients who are seeking care know the
difference between health care they are receiving and what would
be covered by insurance.
2:45:27 PM
MR. DIEMER said it depends whether the patient has or does not
have insurance. If the patient does not have insurance, then
there is no insurance to cover anything; in that scenario they
would be "fee for service." In the direct healthcare agreement
scenario, there would be a menu of services for a defined
periodic fee. If the patient has insurance, then the scope of
the services provided by the direct health care provider are
often different than the services that might be covered by the
insurance. These work well with high deductibles. The patient
might be $7,000 away from accessing a service but those same
services might be covered by that periodic fee, providing
greater access to services before the insurance is triggered.
Direct healthcare agreements are designed to increase patient
access to care, particularly in the case of high deductible
plans. In the insurance context, the deductible is designed to
reduce access to care, and this is designed to bridge that gap.
2:47:24 PM
CHAIR BJORKMAN commented that he was struggling with whether the
client with a DHCA can negotiate with their provider. He
summarized that this bill proposes to charge an initiation fee
for someone to have access to a medical provider, then there is
a subscription fee to gain access to a deductible-free menu of
services that can be adjusted according to whatever the provider
and patient decide.
2:49:11 PM
MR. DIEMER disagreed with the characterization of this being a
fee for access. He said this is a fee for a defined scope of
services that may include a whole menu of items such as labs,
wellness checks, and sick checks. This is not like concierge
medicine where one pays for a fee for accelerated line pass, or
access; this is a defined scope of services for a defined fee.
There might be certain services that are outside a direct health
care agreement, such as a specialty service, but it's not a fee
for access.
CHAIR BJORKMAN said he was reading from a statement that says
the patient pays a flat periodic fee, generally monthly, in
exchange for routine visits and access to their health care
provider.
2:50:33 PM
SENATOR WILSON responded that SB 45 is geared toward those who
are underinsured. Most of the patients who have no insurance
will be covered through other state programs. Those on Medicare
or those who have high deductible plans can set up a plan based
on a la carte services where everything is negotiable. This
supplemental plan would not put those patients before or after
other patients in terms of access to services. Some people never
go to the doctor because they wait for catastrophic events to
occur and they can't afford to pay out-of-pocket before their
insurance is available. With a direct health care agreement, the
patient knows the price ahead of time so it could help increase
access.
CHAIR BJORKMAN asked whether someone's membership fee goes
toward their deductible for their insurance policy.
SENATOR WILSON answered no because this is not insurance.
2:53:13 PM
SENATOR DUNBAR commented that in the prior committee of
referral, there was a reference that the fees are often close to
$100. He sought clarification on how a provider makes money at
$100 per month. An a la carte menu implies that a patient is
purchasing services as needed, but the bill describes a
membership fee. He asked if member patients have access to a
certain number of appointments, or if it is unlimited.
SENATOR WILSON replied that $100 was the average national fee
for states that already practice direct healthcare or DHCA
agreements. There are many different health care specialties and
health care providers so it is going to be different for each
health care provider. One's direct healthcare agreement could
have a set price for basic wellness checks, but this might be
the set price per Xray; it depends on the agreement and how
complicated or simple it might be. It is up to the individual
providers to set those agreements.
2:55:29 PM
MS. MARTIN commented that being able to charge low fees is an
example of how much money and time is being wasted on the
bureaucracy of billing different insurances.
SENATOR DUNBAR agreed that there is a lot of bureaucracy in the
health insurance system, especially in Alaska where costs are so
high. He is still concerned that there would be a mismatch
between what consumers are going to expect from SB 45 and what
is going to be provided if fees are that low, especially in
medical services where there is such an asymmetry of information
between consumers and medical providers. Maybe a consumer
thought something was covered, but the thing they needed doesn't
count. He expressed that he is struggling with how these
economics would play out in Alaska.
2:56:59 PM
[The following testimony is garbled and some is indiscernible.]
DR. JOSH UMBEHR, Family Physician, Atlas MD, Wichita, Kansas,
gave invited testimony on SB 45. He said that he has been a
direct primary care physician for 13 years and is one of the
creators of the movement. He opined that the bill has far more
language than necessary. Most states have far less regulation
because direct primary care is in a separate class than other
physicians. This practice falls under all standard state rules
and AMA guidelines. To the Senator's point about cost
effectiveness, he said his clinic charges $10 per month in fees.
[The remainder of the testimony is indiscernible].
2:58:43 PM
SENATOR WILSON agreed with Dr. Umbehr's comments about prices.
Denials Management LLC returns a lot of claims to the providers
which takes staff time to process; it can cost hundreds of
thousands of dollars per year to process denials for just one
small health clinic. Cutting out the middle man and implementing
direct health care agreements will help Alaska get to a better
cost of care.
2:59:53 PM
SENATOR DUNBAR asked Dr. Umbher what his patients get for the
$10 per month fee.
DR. UMBHER explained that the per month fee is $10 for children
aged 0-19, $15.75-$100 per month for adults based on age for
services such as: unlimited home visits, office visits, tele-
medicine visits, no co-pays, any procedure free of charge,
biopsies, injections, ultrasounds, casting, splinting,
medication and labs in house. The total comes out to about a 95
percent savings. It will vary by location due to the cost of
living but is a viable model to drastically reduce the cost of
care which can help small businesses decrease the cost of
insurance.
SENATOR DUNBAR asked Dr. Umbher how he earns money and whether
he is subsidized because $10 per month would not seem to cover
costs.
DR. UMBHER answered that it has proven to be profitable, growing
by about 20-30 clinics per month. Charging $50 per patient per
month averaged across all ages, equals $360,000 per year. There
is one nurse for every two doctors.
3:03:36 PM
CHAIR BJORKMAN held SB 45 in committee.
3:04:08 PM
There being no further business to come before the committee,
Chair Bjorkman adjourned the Senate Labor and Commerce Standing
Committee meeting at 3:04 p.m.