Legislature(1999 - 2000)
03/02/2000 01:40 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
March 2, 2000
1:40 p.m.
MEMBERS PRESENT
Senator Jerry Mackie, Chairman
Senator Tim Kelly, Vice Chairman
Senator Loren Leman
Senator Lyman Hoffman
MEMBERS ABSENT
Senator Dave Donley
COMMITTEE CALENDAR
SENATE BILL NO. 279
"An Act relating to the redemption of shares of certain Alaska
corporations."
-MOVED SB 279 OUT OF COMMITTEE
SENATE BILL NO. 230
"An Act relating to the relationship between employees and labor
organizations; and prohibiting collective bargaining contracts that
require employees to join a labor or employee organization; and
providing for an effective date."
-HEARD AND HELD
SENATE BILL NO. 276
"An Act requiring that health care insurers provide coverage for
treatment of diabetes."
-MOVED SB 276 OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
SB 279 - See Labor and Commerce Committee minutes dated 2/29/00.
SB 276 - No previous action to report.
SB 230 - No previous action to report.
WITNESS REGISTER
Mr. David Grey, Aide
Senator Jerry Mackie
State Capitol Bldg.
Juneau, AK 99811
POSITION STATEMENT: Commented on SB 279 for sponsor.
Mr. Franklin Terry Elder, Director
Division of Banking and Securities
Department of Commerce and Economic Development
P.O. Box 110807
Juneau, AK 99811
POSITION STATEMENT: Commented on SB 279.
Mr. Julius Brecht
900 W 5th Ave #600
Anchorage, AK 99501
POSITION STATEMENT: Supported SB 279.
Mr. Jimmy Jackson
GCI Representative
2550 Denali St.
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 279.
Mr. Stephen Goodrick, Vice President
National Right to Work Committee
8001 Bradock Rd.
Springfield, Virginia 22160
POSITION STATEMENT: Supported SB 230.
Senator Mike Miller
Senate District Q
Alaska State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Sponsor of SB 276
Ms. Betsy Turner Bogren
Fairbanks District Manager
American Diabetes Association
PO Box 343
Ester, AK 99725
POSITION STATEMENT: Supported SB 276.
Max Bogren
PO Box 343
Ester, AK 99725
POSITION STATEMENT: Supported SB 276.
Ms. Michelle Cassano
Executive Director
American Diabetes Association
801 W Fireweed
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 276.
Ms. Janel Wright
3330 Arctic Blvd. #1303
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 276.
Mr. Howard Hedges
4032 Beluga Circle
Homer, AK 99603
POSITION STATEMENT: Supported SB 276.
Ms. Daisy Lee Bitter
62479 E Skyline Dr.
Homer, AK 99603
POSITION STATEMENT: Supported SB 276.
Gordon Evans
Health Insurance Association of America
211 4th Street, Suite 305
Juneau, AK 99801
POSITION STATEMENT: Supported SB 276 if amended.
ACTION NARRATIVE
TAPE 00-7, SIDE A
Number 001
CHAIRMAN MACKIE called the Senate Labor and Commerce Committee
meeting to order at 1:40 p.m. Present were Senators Leman, Tim
Kelly, Hoffman, and Chairman Mackie.
SB 279-REDEMPTION OF CORPORATE SHARES
CHAIRMAN MACKIE announced SB 279 to be up for consideration.
MR. DAVID GREY, Aide to Senate Labor and Commerce, said SB 279 is
an act related to redemption of shares of certain Alaskan
corporations. It allows the redemption of preferred stock at the
discretion of the stock holder. By providing this option, Alaska
corporations are given an alternative method to raise funds and
Alaskan investors are given an expanded investment opportunity.
As the Alaskan Corporate Code stands now, redemption of preferred
shares is only at the option of the issuer. The right to have
stock redeemed under specific conditions can be an important aspect
for a stock sale or transaction. This share redemption right gives
the shareholder an avenue to get the holder's cash back under terms
negotiated with the issuing corporation.
Under this bill, preferred stock share redemption must also comply
with other restrictive provisions of the Corporate Code. For
example, a redemption is prohibited if the amount of the
corporation's retained earnings immediately before the proposed
distribution does not equal or exceed the amount of the proposed
distribution. "You've got to have enough money to pay everybody
off."
The Alaska Corporate Code is modeled in large part after the
California Corporation Code. This body of law has since been
amended and expanded to allow for this kind of stock redemption.
A number of other states have also allowed the issuance of
preferred stocks similar to what is being proposed by this bill.
MR. TERRY ELDER, Director, Division of Banking, Securities, and
Corporations testified that a number of other states already allow
this option to corporations. It wouldn't have any fiscal impact on
his department in terms of filing requirements. They agree that
there are other sections of the Corporation Code that provide
adequate security for shareholders so that they wouldn't be
financially harmed by redemptions. Consequently, it just becomes
a public policy issue for the legislature to decide.
CHAIRMAN MACKIE asked what other states do.
MR. ELDER answered that California, in particular, which our Code
was based on, and a number of other states have already amended
their acts to allow for this option.
CHAIRMAN MACKIE asked if he saw any public policy reasons or
downside why they should continue to deny that option.
MR. ELDER said he didn't.
Number 411
SENATOR LEMAN asked if he would recommend to the Governor that he
sign this.
MR. ELDER responded that he was not taking a position on the bill,
but, if the bill passes the legislature, and the Governor asks the
Commissioner, and the Commissioner asks him, he couldn't see any
reason why he wouldn't recommend it.
SENATOR KELLY asked who requested it.
CHAIRMAN MACKIE answered that the Labor and Commerce Committee
introduced it at the request of some companies. He thought GCI was
one.
Number 477
MR. JULIUS BRECHT, Attorney and Managing Shareholder of the Law
firm Wolforth, Bachelor, Johnson, and Brecht, said he was a past
Director of the Alaska Division of Banking, Securities, and
Corporations. He said he had submitted a written statement in
support of this bill which they should already have. He summarized
his statement saying that he participated in the development and
review of proposals for a new Alaska Corporate Code. As
comprehensive as that effort was, time marches on and corporate law
needs change. Redemption of shares is an example. The proposed
changes to section .325 do not lessen the provisions in the Code
for protection of shareholders of a corporation. They will allow
greater flexibility to a corporation's board of directors in
addressing capital needs in the present day financial markets.
MR. JIMMY JACKSON, GCI, said their chief financial officer, John
Lowe, has submitted testimony in support of SB 279. Since he is
traveling today, Mr. Jackson said he was here to reiterate his
testimony and answer questions. Several other states, including
those who are leaders in corporate law like Delaware, already allow
preferred stock which is redeemable in this way at the option of
the shareholder.
GCI is an Alaskan corporation, founded by Alaskans, and is one of
the few publicly traded corporations. Unfortunately, they are at
a disadvantage because they cannot issue preferred stock which is
redeemable at the option of the shareholder. This is a
disadvantage to them in trying to raise capital to conduct their
business. Without this law, businesses will be less inclined to
incorporate in Alaska and more inclined to incorporate in another
state.
MR. DAVID TAYLOR, Chief Financial Officer, Grady and Company, a
privately held insurance brokerage, supported SB 279 for many of
the same reasons that have already been stated. By enabling
Alaskan corporations to remain competitive with other states in the
raising of capital, this is a revenue positive bill for the State
and will result in additional taxable income.
CHAIRMAN MACKIE asked if there was anyone else to testify and
getting no response he closed the pubic testimony.
SENATOR LEMAN thanked him for introducing this legislation. It was
good and timely.
SENATOR KELLY commented that he wasn't sure of that since they had
the bill only ten days and had heard from only one corporation. He
would like to believe that. He wanted to hear if there is another
side of the story. He wanted to hear that, too.
CHAIRMAN MACKIE responded that the bill was scheduled twice and the
same people had testified. He asked Mr. Grey if there was any
opposition to the bill. He indicated there was none. He asked
Senator Kelly if he wanted to hold the bill and he indicated no.
SENATOR KELLY said this appears to be a major change in the
Corporate Code and he's not sure if the corporate world is aware of
that, yet.
SENATOR LEMAN moved to pass SB 279 from committee. There were no
objections and it was so ordered.
SB 230-RIGHT TO WORK
CHAIRMAN MACKIE announced SB 230 to be up for consideration.
SENATOR LYDA GREEN, sponsor, introduced Stephen Goodrick, National
Right to Work Committee, the premier spokesman on the subject.
MR. STEPHEN GOODRICK, Vice President, National Right to Work
Committee, said they are an organization made up of 2 million
members and supporters across the country who are united in the
belief that it is wrong to compel any worker to pay union dues or
to join a union as a condition of employment. It's the only thing
they are about, but they feel very strongly about it.
Number 1070
MR. GOODRICK said his job is to monitor legislation across the
country. They became aware of Alaska through their membership here
and members of the legislature that there was an effort to seek
enactment or introduction of the State Right to Work bill.
He addressed the question brought up by the Commissioner of the
Department of Labor as to whether they have 5,000 - 10,000 members
in Alaska; the exact count is 5,920. He said that 80% of the
American public think it is wrong to require a worker to pay union
dues or fees as a condition of employment. He would be surprised
if a majority of Alaskans don't agree with the national opinion on
that question. He commended Representative Kohring and Senator
Green for taking the very first step towards freeing Alaskan
workers from the tyranny of compulsory unionism.
SB 230 is simple even though a lot of union officials wanted to
make it seem very complicated. It makes it illegal to force
workers to pay union dues as a condition of employment. It does
nothing to diminish the right of an individual worker to join and
participate in a labor union. Those rights are protected under
federal law and they wouldn't support anything contrary to that.
He asked what could be more basic or more fair than letting
individual workers decide for themselves what groups are worthy of
their support and patronage. Unfortunately, in Alaska today,
thousands of working men and women have no such choice. The
message to these independent minded workers is unmistakable. Join
the union and pay the union dues or don't work here.
There is no natural right in a free society for any private
association to compel representation or financial tribute. The
true role of government in a free society is to protect the
individual's ability to exercise his or her rights without
harassment or interfering. Passing "right to work" would let
Alaska's workers say to their union officials "Persuade me;
convince me; don't force me."
Unions operate the same in right to work states as they do in
enforced unionism states like Alaska. Under the right to work law,
the only thing that changes is that union officials can no longer
negotiate with an employer for a union security clause, a contract
that forces all the workers to pay union dues whether they wish to
or not.
"Despite misinformation from union officials, right to work has no
real affect on nominal wages." According to the Union Membership
and Earnings Data published by the Bureau of National Affairs, the
average weekly earnings of private sector union members in a right
to work state is $600 while union members earn $594 in nonright to
work states. In fact, right to work is a little tiny bit ahead.
Alaska's failure to pass a right to work clause costs far above the
injustice to individual workers. Every Alaskan pays the price in
lost jobs, higher taxes, and a lower standard of living. It hurt
consumers, it hurts taxpayers, and hurts workers.
The AFL/CIO's own numbers show that right to work states have
higher real income. Their information comes from the U.S.
Department of Labor data and does not adjust for anything.
Number 1395
But if you adjust for the cost of living, the benefits of right to
work becomes clear. The average of hourly earnings in
manufacturing industries in right to work states are 8% higher than
they are in nonright to work states. Average earnings in
manufacturing are 7.6% higher in right to work states than in
nonright to work states. Average per capita personal income is
$1,100 higher in right to work states than in compulsory union
states. The average annual pay overall is $900 higher in right to
work states than it is in compulsory union states.
These numbers confirm the right to work advantage reported by Nobel
Prize winning economist, James Bennet, at George Mason University.
The gap is even wider as a result of adjusting for state
differences in taxation. A quote from Dr. Bennet's report, A
Higher Standard of Living in Right to Work States, says that a
typical urban family in a right to work state has $2,852 more
after-tax purchasing power than the very same family would have in
a nonright to work state. He shows that much of the reason
families are so much better off in right to work states is that
they pay 25 percent more for food, housing, health care, utilities,
property taxes, and college tuition than families in enforced union
states. What matters to workers is not how much they earn, but how
much of it they get to keep and spend. Right to work does better
in every category when you look at it that way.
Since 1980, per capita income in right to work states by 11% more
than in nonright to work states. Total economic growth in right to
work states has out paced nonright to work states by 25% since 1991
and is projected to continue at the same pace to 9% by 2001
according the Financial World Magazine.
The importance which business attributes to a state's policy
encouraging cooperative and voluntary relations between labor and
management has been very clear for many years. According to Ann
Elizabeth Morris, President and Chief Economist of the Insight
Research Corporation, one of the leading dominant competitors in
corporate relocation research, says "Ninety percent of companies
use forced collective bargaining as a first kick-out criteria and
choose to locate in only right to work states when their overall
operating requirements give them any latitude on this issue." He
said that Alaska is cutting itself off at the knees at the
beginning by continuing to allow the forced union policy to remain
in place, because it keeps out nine out of 10 companies that might
come to Alaska and hire people and pay taxes. The results of this
thinking can be very clearly seen.
According to the U.S. Department of Labor, between 1960 and 1993,
right to work states created nearly 2.7 million new high paying
manufacturing jobs while during the very same period, forced union
states lost about 1.4 million jobs. The fact is that the
prosperity the nation has encountered and enjoyed over the last 20
years has been produced by the workers and employers in the right
to work states. If you cut the country in half and made half of it
compulsory unionism and the other half right to work, you would see
the nonright to work half in a severe economic recession and severe
decrease in job creation; and you would have seen a tremendous
growth rate in right to work America. The evidence is clear that
employee freedom and prosperity go hand in hand.
This is where right to work differs with organized labor's
officials. They have a higher belief and trust in the intelligence
of American workers to make these decisions on their own behalf.
They will not be hurt by being allowed to choose for themselves
what to do with their own money.
The case in Alaska is compelling from any legitimate perspective.
Is it right to ask a person who voted against union representation
in the first place to pay or be fired. Political; is it the right
thing to allow forced union dues to be spent by organized labor in
direct contravention of the beliefs and view of their own members
in supporting political candidates who are out of touch with the
working man in America. Or is it smart economically? No it's not;
but union officials want to keep coercing union dues from unwilling
workers and they will do or say anything to keep their money
rolling into their coffers and right into their wallets out of
Alaska workers' paychecks.
By fighting against right to work, union officials are telling you
that this is union busting legislation. That the only way they can
stay in business is by forcing their members to pay dues. This is
a damming admission. If their power is based on the ability to
force or coerce workers to pay, that's an illegitimate power and it
should be removed.
Right to work supporters know that when workers see a union truly
representing them, they won't need to be compelled by government
guidance to pay tribute. They will gladly join on their own if
they see it's in their self interest. A good labor union has no
need for compulsory systems of membership recruitment to attract
their members. A bad union doesn't deserve to continue to have
that power. In the interests in the rights of working men and
women of Alaska, he urged them to support HB 309 and SB 230.
Number 1700
CHAIRMAN MACKIE recapped that he said 80% of Americans oppose
mandatory dues and union membership and asked him to expand on
that.
MR. GOODRICK responded that the numbers had gone up over the last
20 years. It's always been a solid majority. This idea of
requiring workers to pay union dues has been a foreign concept to
American workers. It has gone up a couple of points in the fall of
every decade. The latest poll they have is 78%. The question is
asked: "Do you think that a worker should be required to pay union
dues or fees in order to get or keep a job."
CHAIRMAN MACKIE said how many states right now have right to work
laws such as proposed in this legislation.
MR. GOODRICK answered 21.
CHAIRMAN MACKIE asked if it was correct that 21 states have no
requirement to pay union dues or join a union for employment.
MR. GOODRICK said that was correct.
CHAIRMAN MACKIE asked what some of them were.
MR. GOODRICK answered geographically it was almost all of the south
and most of the west.
CHAIRMAN MACKIE asked him to name some of the western states.
MR. GOODRICK replied Kansas, Wyoming, Kansas, Florida, Georgia,
South Carolina, North Carolina, Arkansas, Alabama...
CHAIRMAN MACKIE said he asked for the west.
MR. GOODRICK replied Kansas, Nebraska, Texas, Utah, Wyoming, one or
two of the Dakotas.
CHAIRMAN MACKIE asked if any federal laws were in conflict with
this legislation.
MR. GOODRICK responded that the history is very interesting. It
all goes back to 1936 when FDR paid off organized labor for their
support in his presidential campaign by enacting the National Labor
Relations Act (Wagner Act). It made a blanket national policy that
workers should be required to pay union dues as a condition of
employment in a union shop. That was very unpopular. It caused a
tremendous backlash which is one of the things that lead to the
brief Republican take-over of Congress under President Truman.
Instead of just repealing it like they should have, they simply
said this is so unpopular we are going to make an exception. If a
state legislature will jump through the hoop of passing a state
right to work law, they would allow them to be shielded against
that federal policy. Unless the legislature is able to overcome
the $14 billion empire of organized labor and pass a law like this,
it's the federal law. This is the only area in the private sector
a state legislature will be able to do much about union or labor
policy. Everything else would be superseded by federal law.
The other solution to this problem of the burden of representation
used by organized labor officials to justify compulsory payment of
these dues is to either let the workers decide whether or not to
pay themselves or remove from organized labor any compulsion to
represent them. Either one of them would be fair solutions, but of
course they are opposed to any restrictions on their power and
authority. They demanded the right to be the only exclusive
representative of the workers to their employers and they turn
around and use that privilege and one wrong plus another wrong to
make another wrong doesn't give them the right to force people to
pay for representation that they demanded in the first place.
CHAIRMAN MACKIE pointed out that there was an opposing view and
that would be presented at the next meeting.
Number 1908
SENATOR HOFFMAN asked if in the statistics in the right to work
states with agricultural jobs, it shows that Nevada has a markedly
larger percentage increase than other states (72%) and he asked why
that is.
MR. GOODRICK answered that Nevada is a right to work state and he
didn't know if they could attribute the entire jump to passage of
that law.
SENATOR LEMAN asked again what states are right to work states.
MR. GOODRICK replied mostly the south and the west.
CHAIRMAN MACKIE said the west is California, Oregon...
MR. GOODRICK said he thought the west was everything west of the
Mississippi - Idaho, Nevada, Utah, Arizona, Wyoming, North and
South Dakota, Nebraska, Texas, Kansas.
CHAIRMAN MACKIE noted that those were all way south and way Midwest
and east of us.
SENATOR KELLY asked what was the last state to go right to work.
MR. GOODRICK answered in 1982 Idaho enacted their right to work law
by a three quarters majority over the governor's veto. In 1986
organized labor challenged that law through a referendum; even
though his organization started out 25 points ahead in the poll at
the beginning, they won narrowly with 53% after organized labor
spent an estimated $6 per registered voter on that referendum.
SENATOR KELLY asked when was the last big state wide fight over
this issue throughout the nation.
MR. GOODRICK said they have lost a lot of fights since then. It is
very close to passage in New Hampshire, Oklahoma, Colorado,
Montana, and New Mexico.
SENATOR KELLY asked if he was talking about within the legislature
or in the public arena through an initiative or referendum.
MR. GOODRICK said he was strictly speaking of the legislative
process. There hadn't been a referendum since 1986 which is the
one they won in Idaho. There are other labor related proposals
that look and smell like right to work, but are not, that have been
on the ballot, such as the California initiative to restrict the
use of forced dues for politics.
SENATOR KELLY asked if that passed.
MR. GOODRICK said that did not. It was a flawed proposal in the
first place.
Number 2022
SENATOR LEMAN said it was hard to argue against someone having the
right to work without being forced t join anything. Yet he gets
messages saying this is more than what it purports to be - a hidden
agenda.
MR. GOODRICK said that's how it comes off in every state. The lies
range from the outrageous to the absurd. There was a rumor that
they started "clan" activity in Idaho.
SENATOR LEMAN said he was going to ask the same question of the
people on the other side of the issue.
SENATOR HOFFMAN asked what other states were considering this
legislation actively today.
MR. GOODRICK answered depending on various levels of active (he
would say the Alaska legislature is not actively considering it),
states like Colorado, New Mexico, New Hampshire, and Montana.
CHAIRMAN MACKIE asked if the issue was being placed before the
voters in those states.
MR. GOODRICK responded that it was in the legislature. On the east
coast in a lot of states there is no referendum or initiative
process.
CHAIRMAN MACKIE thanked Mr. Goodrick for his testimony and said
they would hear the other side of the issue on Tuesday.
SB 276-REQUIRE HEALTH INS COVERAGE FOR DIABETES
CHAIRMAN MACKIE announced SB 276 to be up for consideration.
SENATOR MIKE MILLER, sponsor of SB 276, stated that he was asked by
members of the American Diabetes Association (ADA), in his role as
Chairman of the Senate HESS Committee, to introduce SB 276. The
bill requires health care insurers to provide coverage for
treatment of diabetes. He noted it is rare for a Republican
legislator to offer legislation that requires insurers to provide
coverage, but he believes the lack of coverage for diabetes
treatment affects over 30,000 Alaskans and that people with
diabetes must take many actions to control their disease. He
admitted that he was taken aback to learn that diabetes treatment
coverage is not required. He noted his sponsor statement was in
members' packets and that he and others were available to answer
questions.
SENATOR LEMAN commented that the issue of mandatory coverage versus
mandatory offering may not be as obvious on this issue as it has
been on others, but he believes people should be allowed the
flexibility to choose their own health plans and the amount of
coverage they want. He asked Senator Miller why he chose the
approach of mandatory coverage.
SENATOR MILLER replied that the legislature has mandated coverage
for other things, some which he did not agree with, but he feels
the legislature should go in that direction on coverage for
diabetes. He personally feels that mandatory coverage is the right
thing to do in this case.
SENATOR LEMAN asked if early detection and education will result in
decreased expenditures and save lives.
TAPE 00-07, SIDE B
Number 2300
SENATOR MILLER indicated that an ADA study shows an annual savings
of $917 per person with diabetes when they have insurance coverage.
He asked that further questions on the ADA study be directed to
representatives from the ADA members. He said, as with all
diseases, an early diagnosis and treatment can save more money
later on.
SENATOR LEMAN remarked that he saw a proposal yesterday for an
upper cap on outpatient education costs and that he was told that
education could take as many as six hours per year. He said he can
understand why insurance companies might want to make sure that the
outpatient education coverage is limited. He asked Senator Miller
whether he believes that a time or dollar limit on outpatient
education is a reasonable approach.
SENATOR MILLER said he hopes the health care providers would be
self-limiting and that he does not favor a cap because each
individual is different; one may need 15 hours of education while
another may need 30 hours.
SENATOR LEMAN asked whether it would be reasonable for the insurers
to require a person who exceeds the 90th percentile amount for
education to provide documentation as to why the additional
education is necessary.
SENATOR MILLER replied, that on the face, that request sounds
reasonable because it would only apply to the top ten percent and
because requiring documentation is different than requiring a cap.
He asked that those questions be addressed to the medical
professionals who work with diabetics on a daily basis because they
are better able to provide answers.
SENATOR LEMAN noted that these issues are important to work through
and that others who want to testify may want to give them some
thought.
CHAIRMAN MACKIE asked participants who wish to testify to limit
their testimony to a few minutes so that everyone can be heard.
Number 2167
CHAIRMAN MACKIE declared, for the record, that he supports this
legislation but that he has a conflict of interest because his
father is diabetic.
MS. BETSY TURNER BOGREN, the Fairbanks District Manager for the
ADA, urged committee members to support SB 276 for the following
reasons. SB 276 will ensure that Alaskans have access to the
medicines, supplies, and patient education that is necessary to
properly manage diabetes by requiring reimbursement from insurance
companies for these expenses. Regarding the concern expressed
about the effect of a mandate, she is confident, after listening to
testimony and reviewing the material and data provided to committee
members, that legislators will be persuaded and conclude that
diabetes management is different from other diseases and that this
type of insurance does require a special look.
MS. BOGREN said diabetes is a very serious disease that affects
over 30,000 Alaskans. It is the leading cause of kidney disease,
blindness, nerve damage, and lower limb amputations. It is a major
risk in heart disease and stroke. The management of diabetes is
substantially different from that of other diseases. Proper
management is done by the patients themselves. Patients,
therefore, must have access to supplies and medicines, but more
importantly, to good patient education when they are going through
a steeper learning curve.
MS. BOGREN addressed three concerns that have been expressed about
SB 276. The first relates to why the state should mandate private
industry to provide coverage. She believes the answer to that
concern is that the insurance industry does not behave like other
industries. The patient is not the consumer. In most cases, when
a patient has diabetes insurance coverage, that coverage is
purchased by the employer. A patient does not have direct buying
power when purchasing insurance. Also, not every employer is able
or interested in learning what the needs of employees with diabetes
are.
Diabetes mandates have been passed in 37 states, by both Democratic
and Republican legislatures, and signed by Democratic and
Republican governors. No effort to repeal the law has been made in
any state, suggesting that in all cases, the law has had the
anticipated effect. The State of Wisconsin determined that
premiums did increase by about one-tenth of one percent as the
result of passing similar legislation.
Another concern is that mandated coverage would raise costs and be
a special burden to the small business owner in Alaska and
therefore cause a disenrollment from insurance. Studies in other
larger states have concluded that there has been no evidence that
would result.
MS. BOGREN noted committee members' packets contain copies of
studies showing the cost savings associated with preventive
medicine. In a study done in Maine, diabetes control resulted in
32 percent fewer hospitalizations and shorter hospital stays. In
Maryland, hospitalizations and stays declined 50 percent after
coverage was mandated. She correlated that when patients are able
to make the daily decisions, they can respond to the ups and downs
of diabetes control. They do not have to wait until they are in
crisis to see a doctor and they do not visit doctors as often.
Acute care is expensive and can be minimized. A Maryland study
suggests that about $917 per patient per year will be saved if
patients are able to manage their disease. She asked committee
members to consider that if the private sector decides not to cover
these costs, it may not see the benefits of long term savings from
long term health care. When people with Type 2 diabetes, which
accounts for about 95 percent of the patients, have health
complications, they are generally in their 60's, so they qualify
for Medicare and Medicaid. If the private sector will not provide
coverage, the patient pays the price in the human toll, and the
state pays the price in the form of Medicaid or Medicare.
MS. BOGREN said the ADA is strongly opposed to capping the amount
allowed for diabetes education. First, education is the foundation
of this bill. Patients can receive unlimited supplies and
medicine, but it will be useless unless they know how to use it.
Second, the American Diabetes Association is not aware of any other
legislation that caps the amount of outpatient health care that can
be provided. She suggested that the insurance companies share
statistics with legislators showing that there is widespread
overuse of outpatient education services, if that is what they are
saying. The ADA is not aware of any demonstrated overuse of the
patient education system.
Finally, the amount of $250 has been suggested for patient
education. That amount is minimal, especially in light of the fact
that the national standards for diabetes education recommend 12
hours of outpatient care. When her son was diagnosed with
diabetes, it took her family about 20 hours per week for two months
to learn what carbohydrate management was about. Her family needed
support from occupational educators, and the people she sees in
support groups need more than that. If the legislature is
considering setting a cap, she hopes the cap will be no lower than
the amount established by the state as the minimum standard of
care. The ADA set a minimum standard at 16 hours.
Number 1741
MAX BOGREN, the 11-year old son of Ms. Turner Bogren, read the
following testimony.
Mr. Chairman and committee members:
My name is Max Bogren and I am 12 years old and I have had
diabetes five and one-half years. I have to work hard to keep
my blood sugar in control and manage my diabetes. Every day
I test my blood sugar at least five times and I give myself
three shots of insulin. I can't vary the amount of food I eat
from day to day and I have to eat at the same time every day.
Exercise has to be a big part of my life. Luckily for me, I
was already an active kid so it's easy to just keep [indisc.]
with exercise.
MAX then gave a demonstration of how he tests his blood sugar and
injects himself with insulin.
MAX continued with his testimony as follows.
On sick days, everything gets more complicated. My blood
sugar is high and I need to test my urine for keytones. A
couple of days ago, I saw my doctor and she thought I might
want to use an insulin pump. That will take a lot of new
learning. My entire life will change around and it will
probably improve my blood sugar. Without all of this, I'd
probably spend a lot of time in the hospital. With this
expensive equipment, I'm probably going to need good insurance
for the rest of my life. Please support SB 276. Thank you.
CHAIRMAN MACKIE thanked Ms. Turner Bogren and Max for their
testimony. He then took teleconference testimony.
MS. MICHELLE CASSANO, Executive Director of the American Diabetes
Association, thanked the Chairman for scheduling this vital bill.
She commented that the cost of diabetes education varies with each
patient. The American Diabetes Association feels there is no need
for a cap on the annual education costs as there is no evidence
that any abuse has been reported in that area. She pointed out
that what Max Bogren demonstrated to the committee, is something
that he must do many times per day. Diabetes has no cure - it is
a lifelong disease and nobody gets a day off. She offered to
answer questions.
MS. JANEL WRIGHT told the committee she has had diabetes for 25
years. She asked each member to support SB 276. This bill will
ensure that Alaskans have access to the medication, equipment,
supplies and education necessary to treat and control diabetes.
When people with diabetes have access to those things, they are
able to self-manage their disease. Then, the complication of
diabetes can be minimized and consequently health care costs for
those people are greatly reduced.
MS. WRIGHT illustrated the importance of access to effective
treatment for diabetes with her own story. Many years ago, she
entered college, eager to get her education and make something of
herself. Several weeks after school started and after several
trips to the emergency room, the health clinic doctor contacted her
parents and recommended that she go home because her diabetes was
not under control. She begged her parents to let her stay while
she worked with her biology professor to control her diabetes. At
that time, diabetes education was not available. She had a
headache throughout her college years and did not know why. She
graduated from college and went on to law school. The headaches
and her vision got worse. Law school was stressful and she still
did not know how to control her diabetes. The insurance plan she
had did not cover the cost of syringes, a blood test machine, test
strips, or education. It covered only the cost of insulin. Being
a poor student, she scraped together funds to buy syringes. In
1988 she moved to Alaska. At that time, she obtained insurance
that covered the cost of controlling her diabetes. She was able to
get the supplies and medicine she needed.
MS. WRIGHT explained to committee members that a test, named
Hemoglobin A1C, shows a person's blood sugar levels for the
previous three months. Right before she was able to get her blood
test machine and other supplies, her hemoglobin A1C was 8.5, which
means her blood sugars were about 250 or higher. Ideally, her
blood sugars should be between 90 and 120. The doctor explained
that is why she could not see and needed glasses. Studies show
that when blood sugars are as high as hers were, the costly
complications of diabetes, such as impaired vision and blindness,
kidney disease, nerve damage, amputations, heart disease and stroke
are much more likely to occur. She has been using a pump for
twelve years and has had access to supplies and education for 12
years. The results of her latest Hemoglobin test was 5.4. This
means that her blood sugar average over the past three months was
94. She attributes that level to the insurance coverage she has
that allows access to those supplies necessary to control her
diabetes. She no longer has to wear glasses.
As a staff attorney for the Disability Law Center of Alaska, she
advocates and protects the rights of Alaskans with disabilities.
Many individuals with diabetes come to her office seeking
assistance in obtaining social security. Due to uncontrolled
diabetes, these individuals are unable to work. Many worked at one
time but had no health insurance or had insurance that did not
cover diabetes treatment. She believes if her insurance company
did not cover the cost of diabetes treatment, she would be unable
to work and would be seeking social security benefits herself.
MS. WRIGHT said that 37 states have passed legislation similar to
SB 276. Wisconsin was the first state to enact diabetes insurance
coverage and did so in 1987. Studies in Wisconsin have shown there
was no rise in insurance premiums after the law was passed. New
Mexico passed its legislation in 1997, and Maine in 1996. Each of
those states has reported no expected premium increases. She urged
legislators to help Alaskans with diabetes to lead healthier and
more productive lives by supporting SB 276.
Number 1196
SENATOR LEMAN asked Ms. Wright how much it costs per year to manage
her diabetes.
MS. WRIGHT estimated that last year her expenses were close to
$5,000 but that she also got a new pump which cost $5,595. She
does not need a new pump every year. The national average is
$3,500 and a lot of people cannot afford that amount.
MS. BOGREN told Senator Leman that Max's expenses vary each year,
but they are running about $3,000 right now. She noted that
syringes are not as expensive as the pumps, but that the test
strips cost about 75 cents a piece and he uses five per day.
SENATOR LEMAN asked how people will pay the $600 per month for a
health insurance premium if they cannot afford $3,000 per year for
supplies and medicine.
MS. WRIGHT said that her employer pays for her health insurance.
MS. BOGREN said that is a great answer to the question Senator
Leman asked earlier about the difference between offerings and
mandated coverage. She noted in the states who have a mandated
offering, all of the costs are reduced to the pool of people who
have diabetes. For that pool, folks save by paying out-of-pocket
rather than paying the high premiums. That is why the American
Diabetes Association is advocating for mandated coverage rather
than a mandated offering.
CHAIRMAN MACKIE mentioned that Max has insurance coverage through
his father's employer, but that part of Ms. Turner Bogren's mission
is to look out for the people who do not have coverage.
MS. BOGREN said that part of her mission is to watch out for
children like Max who, when they are no longer covered by their
families, will be looking for good health insurance. Her son does
not want to have to move to another state that has mandated
coverage when he turns 23 or 24. She pointed out that her husband
asks to review his employer's coverage plans when they are up for
renegotiation which occurs about every five years.
Number 995
MR. HOWARD HEDGES, a resident of Homer, recounted his experience
with the diagnosis and management of his diabetes. He was
diagnosed as diabetic in 1991. Without knowing the symptoms, he
went through the previous ten years with diabetes without being
diagnosed. When he finally got to a doctor, his blood sugar was
totally out of control. He was able to work with a COBRA plan for
six months, but once that expired, he could not afford insurance
coverage as a self employed person. While covered, he got a test
machine, syringes, test strips, and insulin. After he lost the
coverage, he tried to control his diabetes for two years with diet,
by cutting test strips in half and by getting outdated bottles of
insulin from friends. In 1993, the progression continued and he
had a heart attack. Two weeks later he had a stroke that paralyzed
his left side. His blood sugars were over 900 at the time of the
stroke. With no health insurance, he went to Providence for five
weeks of rehabilitation at a cost of $160,000. He and his health
care providers are convinced that had he been able to continue to
tighten down on his blood sugars, he could have avoided the stroke.
Now, at the age of 44, he is on Medicaid, Medicare and Social
Security. He feels fortunate to have that coverage and reminded
committee members that many people do not have the desire to have
a stroke so that they can have insurance coverage. He asked
committee members to support SB 276 so that the advances in
diabetes treatment can be taught to people.
SENATOR HOFFMAN told Mr. Hedges that he was researching diabetes on
the Internet and learned that only one out of three people know
they have diabetes. He asked Mr. Hedges if he thought that number
sounded accurate.
MR. HEDGES said it does. He noted he had all of the symptoms but
thought he was not feeling right because he was working hard and
"burning the midnight oil."
MS. DAISY LEE BITTER, a resident of Homer, related her personal
experience. For 25 years, she was a teacher and principal in the
Anchorage School District. She has lived with diabetes for 53
years and had insulin not been discovered, she would have died over
50 years ago. Alaska is only one of 13 states without diabetes
coverage legislation. She does not like to use the word
"mandatory" because she sees the legislation as a cost saving
measure, as studies in other states have shown. She knows that
some insurance companies are smart enough to know that if they
cover supplies and medicines, they are unlikely to have to pay the
high cost of emergencies, hospitalizations, and the many
complications associated with diabetes.
Number 658
CHAIRMAN MACKIE noted his intention to move this bill today.
GORDON EVANS, Health Insurance Association of America (HIAA),
stated the HIAA has opposed mandatory insurance because it does and
will raise costs. Cost increases are affected by a series of
mandates. Alaska has seven mandates for coverage and two mandated
offerings at this time, while Wisconsin has over 40. HIAA will
support the bill if it is amended to include a cap on patient
education. HIAA came up with the cap amount of $250 because three
states have caps: one at $100, one at $250, and one at $500. He
pointed out the cap only applies to outpatient management education
and training, and not to the cost of supplies and medicine. He
asked how many of the estimated 36,000 Alaskans with diabetes will
be affected by passage of SB 276, since many of those people may
already be covered. He repeated that HIAA is opposed to government
mandates but HIAA will support SB 276 if it is amended.
SENATOR HOFFMAN asked when HIAA last recommended that it provide
coverage.
MR. EVANS replied in the 15 years that he has represented HIAA in
Alaska, he has been pro-active on one major piece of legislation
that passed: small employer health insurance coverage for 2 to 50
employees. He has worked with the acupuncturists to get a mandated
offering, and he has worked with the chiropractors, and on the
dental/vision/auditory portion of state insurance. In general, the
health insurance industry supports bills when they do not mandate
coverage, and that he has appeared before the legislature when such
bills were being considered.
TAPE 00-08, SIDE A
Number 001
CHAIRMAN MACKIE said he has also opposed mandates that go up
against people like Max. He personally is willing to pay more on
his insurance premium if it means that other folks would have the
opportunity for coverage.
MR. EVANS added that the mammogram bill that passed in recent
years, the prostate cancer screening bill, the 48-hour birth
control - all have passed in the last five years. He had testified
that the only opposition they had to the bills was because it was
mandated; then they backed off and supported them. When major
problems (diabetes is probably one of those) come up, it's good
that they are insured so that everyone shares the cost of it, not
just those who have to bear the expense.
CHAIRMAN MACKIE noted that Ms. Bogren said the insurance premiums
would go up around a tenth of a percent and asked if the industry
had analyzed what it would do to Alaskans.
MR. EVANS replied no they had not. Anytime a coverage is mandated,
the insurers figure that into their underwriting. They don't use
the same figures. He didn't think there was any study that would
show how much a premium increases because of it.
CHAIRMAN MACKIE asked the committee to review the amendment from
Mr. Evans in their packets. It's on page 1, line 14, after
diabetes insert, "and the insurer shall pay up to $250 for such
covered out patient expenses per person per year."
MR. EVANS said if there is a cap, that is only applied to the
education and/or training and not to the coverage of the materials
which are the most expensive.
Number 250
SENATOR KELLY said he was nervous about the breadth of the language
in this bill, because every time they add or mandate additional
coverages, premiums do go up. It's inevitable. He is nervous
about their being no caps at all and about the concept of
"nutrition therapy." He didn't really know what that meant.
SENATOR MILLER responded that those were valid concerns, but he had
a lot of confidence in the health providers in the state and
believed they would not overcharge on these issues. A couple might
push the envelope, but unfortunately that happens in any
profession. He thought the $250 was entirely too low. He had
heard testimony of roughly around 15 hours at $100 per hour which
is $1,500. This is an average and he is uncomfortable trying to
stick everyone into the same box.
SENATOR KELLY said he agreed that the $250 was too low, but he
thought they should study the issue. Every week you read about
some provider who is pulling some shenanigans like Medicaid. He
thought they had some responsibility to define what is unnecessary
medication and not put them in the position of billing and billing
and billing.
SENATOR LEMAN concurred with what Senators Kelly and Miller are
saying. They ought to be concerned about costs and one of the
things he's concerned about is why does an insulin pump have to
cost $5,600? Why does a wheel chair have to cost $20,000? These
are questions we ought to be asking. Consumers ought to be asking
that rather than saying that's the price; someone should pay for
it. There ought to be cost and utilization review.
CHAIRMAN MACKIE called an at ease for one minute.
CHAIRMAN MACKIE said there was some feelings about looking at the
number more and asked Mr. Evans to continue to work with the
sponsor as the bill moves through the legislature.
MR. EVANS said that the language about what constitutes education
and training needs to be clarified.
CHAIRMAN MACKIE said that the members concurred and they would try
to work and tighten it up without defeating the purpose. He asked
if there was anyone with objections to the bill.
SENATOR LEMAN moved to pass SB 276 from committee with individual
recommendations. There were no objections and it was so ordered.
CHAIRMAN MACKIE adjourned the meeting at 3:35 p.m.
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