Legislature(2013 - 2014)CAPITOL 106
02/14/2013 08:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| Overview: Alaska Care Active Employee Health Plan | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE STATE AFFAIRS STANDING COMMITTEE
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 14, 2013
8:02 a.m.
MEMBERS PRESENT
SENATE STATE AFFAIRS
Senator Fred Dyson, Chair
Senator Cathy Giessel, Vice Chair
Senator John Coghill
Senator Bill Wielechowski
HOUSE STATE AFFAIRS
Representative Bob Lynn, Chair
Representative Wes Keller, Vice Chair
Representative Lynn Gattis
Representative Shelley Hughes
Representative Doug Isaacson
Representative Jonathan Kreiss-Tomkins
MEMBERS ABSENT
SENATE STATE AFFAIRS
Senator Bert Stedman
HOUSE STATE AFFAIRS
Representative Charisse Millett
COMMITTEE CALENDAR
OVERVIEW: ALASKA CARE ACTIVE EMPLOYEE HEALTH PLAN
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BECKY HULTBERG, Commissioner
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Presented an overview of the AlaskaCare
Active Employee Health Plan.
EMILY COTTER, Strategic Initiatives Health Coordinator
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Presented information on innovative health
care plan approaches.
ACTION NARRATIVE
8:02:08 AM
CHAIR FRED DYSON called the joint meeting of the Senate and
House State Affairs Standing Committees to order at 8:02 a.m.
Present at the call to order were Senator Giessel and Chair
Dyson, and Representatives Gattis, Isaacson, Keller, Kreiss-
Tomkins, and Chair Lynn.
^OVERVIEW: ALASKA CARE ACTIVE EMPLOYEE HEALTH PLAN
OVERVIEW: ALASKA CARE ACTIVE EMPLOYEE HEALTH PLAN
8:02:20 AM
CHAIR DYSON announced that the only order of business would be
the continuation of an overview of the Alaska Care Active
Employee Health Plan. He complimented Commissioner Hultberg on
her previous presentation. He appreciated the frankness and
integrity of her words.
BECKY HULTBERG, Commissioner, Department of Administration,
reviewed the presentation from the previous week. She said she
discussed health care trends in the United States and in Alaska,
and health care spending as an enterprise in Alaska. She also
explained the active employee plan, its premium structure, some
of the challenges of that structure, and contribution trends in
the United States.
CHAIR LYNN noted the arrival of Representative Hughes.
COMMISSIONER HULTBERG began the presentation with FY 2012
medical plan expenses for the Active Employee Health Plan. She
said the expenses, as well as the premiums, have grown. There
was a little bit of a leveling off of expenses in FY 2010 and FY
2011, followed by an increase in FY 2012. The trend seems to be
continuing in FY 2013 and is of concern.
She mentioned the depressive effect of the Affordable Health
Care Plan on cost.
CHAIR DYSON asked for the reason for that effect.
COMMISSION HULTBERG opined that it was due to providers looking
more closely at cost and deciding not to make a cost increase.
There is also a general level of uncertainty regarding the
economy so people tend to delay health care.
8:08:04 AM
COMMISSIONER HULTBERG discussed what drives costs in the Active
Employee Health Plan. The first driver is population growth. The
other two factors are unit pricing and utilization. She said the
graph shows the price of medical services and how the changes in
medical costs per member per month increased. From April 2010 to
March 201, compared to April 2011 to March 2012, the change in
medical per member per month increased by 4 percent. However,
the unit pricing increased by 9 percent, and the change in
utilization decreased by 4 percent. The decline in utilization
was counteracted by the 9 percent increase in pricing.
CHAIR DYSON said he has heard from the medical providers that
they are in financial trouble due to marginal reimbursement
rates.
COMMISSIONER HULTBERG replied that it depends on which provider
one considers. There is a great deal of varied pricing
structures and profit margins amongst providers. Urban hospitals
are very different from rural hospitals. Specialists are very
highly compensated. She concluded that compensation is relative
to the type of provider. She suggested, from a customer
perspective, that value must be sought.
8:12:42 AM
CHAIR DYSON thought it was counterintuitive that big providers
are more expensive than small providers.
COMMISSIONER HULTBERG explained that smaller providers have to
spread more cost over a smaller population.
CHAIR DYSON asked if costs are higher with urban providers.
COMMISSIONER HULTBERG clarified that profit margins are higher
for the urban hospitals.
CHAIR DYSON asked about the "per unit cost."
COMMISSIONER HULTBERG said the department has not done a
specific service cost comparison between rural and urban
hospitals.
CHAIR DYSON inquired about the impact of having more
sophisticated equipment at an urban site.
COMMISSIONER HULTBERG agreed there was a cost for that. She
added that she thought more expensive equipment was one of the
cost drivers. She opined that today many services are now
provided in Alaska that did not previously exist. However, they
become expensive over a small population base. She voiced
concern about the excessive expense and where it stops.
8:15:13 AM
CHAIR DYSON agreed that a concern is that the medical profession
is often doing more than is needed.
REPRESENTATIVE ISAACSON asked about the 9 percent change in unit
pricing leading some to seek treatment outside of Alaska. He
inquired if Commissioner Hultberg agrees that in order to
decrease unit pricing, the state should pay for members to seek
treatment out of state.
COMMISSIONER HULTBERG emphasized that she thinks it is a
positive factor that Alaska has grown in its ability to provide
medical care. She said the question is whether or not Alaska can
afford to continue to provide even more medical services in
Alaska. The answer depends on what the community wants to have
and what they are willing to pay for, what the service is, and
the financial health of the provider. Alaska is at the point,
regarding cost, where it has to question whether or not there is
value in continuing to bring more and more here.
She addressed the issue of out-of-state health service by
informing the committee what other large insurance companies are
doing. She said some employers are contracting with Centers of
Excellence for certain procedures because prices are lower and
outcomes are better. As an example, Walmart does that for
cardiac procedures because the major medical centers do better
for less cost.
She stressed that in Alaska it is important to support locally
delivered health care. However, at some point, due to expense,
it becomes smarter to "contract for value". She said that some
procedures are billed at 36 times the usual, customary,
reasonable cost (UCR) in Seattle. She hoped local medical
providers would step up and correct huge margin differences.
8:20:34 AM
SENATOR GIESSEL she referred to a statement by Deputy
Commissioner Barnhill where he talked about medical providers
acting "rationally" in an economic sense. She agreed that there
were wonderful specialists now in Alaska, but there is little,
if any, competition, so the provider charges what the consumer
will bear, creating an economic crisis. The fact that people are
seeking services out of state creates a competitive environment
that may help drive costs down.
COMMISSIONER HULTBERG agreed. She added that the state is not
blaming providers. In some ways the state is part of the problem
because it continues to pay 60 percent of the bill. At some
point it does not make sense to continue this way; the state
needs to consider if it is acting rationally, as well.
CHAIR DYSON asked about cost escalation on a national level in
major cities, as compared to Alaska.
COMMISSIONER HULTBERG replied that costs tend to be lower in a
competitive market. However, too much consolidation also can
lead to monopolistic price increases.
She made a point about the personal nature of health care. She
said she feels the state has an obligation, from a plan
standpoint, to provide the best information to its employees and
the best access to care from quality and cost standpoints.
8:24:58 AM
COMMISSIONER HULTBERG shared a personal story about a family
member and the Mayo Clinic. She said state employees need to
have the option to go to out-of-state facilities for care,
especially when it is going to save the state money.
CHAIR DYSON referred to Representative Isaacson's question and
asked if a preferred provider limits members' choices.
COMMISSIONER HULTBERG said no, but it makes out-of-pocket costs
greater. She explained that there is a network in place in
Alaska, but no penalties for those who choose to go out of the
network for services, except for the two Anchorage hospitals.
Sometimes, when a member goes out of network, they may receive a
bill if costs are above 90 percent of UCR.
8:28:20 AM
REPRESENTATIVE ISAACSON understood the value of choice and
fiscal restraint, but also the need to induce the industry's
ability to meet needs in state. Small populations don't have the
medical equipment or services. He inquired if Commissioner
Hultberg had considered providing more Centers of Excellence,
such as those in Fairbanks and Nome.
COMMISSIONER HULTBERG agreed that it is difficult in a smaller
community to have a financially sustainable medical business.
She related that she has had conversations with the Alaska State
Hospital and Nursing Home Association, Bartlett Hospital, and
Soldotna Hospital about this topic. She said there are
innovative ideas coming from some of those providers.
She related that often people do not know the difference between
costs for services in state versus out of state. Some services
are competitive, some are not.
REPRESENTATIVE KELLER asked about researching Centers of
Excellence sources for the best treatment.
COMMISSIONER HULTBERG thought that information on quality of
care has become more available recently. Quality data was
available at most major medical centers, but not at all major
medical centers. She suggested that providers must be encouraged
to publish information on quality outcomes.
8:34:49 AM
REPRESENTATIVE HUGHES inquired about vastly differing unit
pricing and how that is communicated to providers. She asked how
UCR's are established and adjusted, based on information from
outside providers. She asked if travel out of state for medical
care is causing prices to come down.
COMMISSIONER HULTBERG said the state has had the same medical
travel benefit for many years. She thought the state could do a
better job of informing members of it. Right now the state is
not encouraging out-of-state treatment.
She said, with respect to the pricing variation, sometimes the
state will reach out to a provider through a third party
administrator and network, which may ask the provider to join.
REPRESENTATIVE HUGHES suggested it might be time for the state
to pro-actively act in ways to help reduce costs when there are
high UCR differences.
COMMISSIONER HULTBERG reported that the conversation has begun
but the plan changes have not been made. The division's current
focus is hiring a new third party administrator. It is unknown
what Centers of Excellence model the new administrator will
bring. There are many insurance providers that bring networks to
their clients. The network may or may not change.
8:39:39 AM
CHAIR DYSON said Senator Wielechowski and Senator Coghill joined
the meeting.
REPRESENTATIVE ISAACSON pointed out the difference between
requiring and encouraging quality data reporting, in order to
prevent unintended consequences.
COMMISSIONER HULTBERG agreed. She said the provider community
does not need additional mandates. The state's ability to have
an impact in the market is through choices, such as contracts
for value, not by regulations.
SENATOR GIESSEL discussed the constraints the state has placed
on competition through a program called Certificate of Means.
She said that sometimes a smaller entity, such as a surgery
center, can provide lower cost, high quality care. She asked
what the process is for smaller surgery centers to get into the
network, even in a venue such as Anchorage.
COMMISSIONER HULTBERG replied that the best way to get into the
network, currently, is through the third-party administrator.
The division is considering contracting directly with smaller
surgery centers.
8:43:05 AM
CHAIR DYSON asked if it would be appropriate to require no more
cost shifting.
COMMISSIONER HULTBERG said Chair Dyson raises a good point about
cost decisions for large medical providers. She said cost
shifting is a business decision in which the state has no part.
She agreed that there is a significant amount of cost shifting
within hospitals, but also among payers, such as Medicare. It is
a reality of the system and a decision by society that all shall
receive care. She sympathized with hospitals that have to pay
for those who can't pay.
8:46:00 AM
CHAIR DYSON appreciated the quality of questions asked by
members.
He asked if state employees visit emergency centers less and
asked if that data could be used to receive a break on cost.
COMMISSIONER HULTBERG agreed that there could be an innovative
payment structure, such as paying different rates for different
groups. The state does not have a bundle payment system - one
bill for all services rendered - yet, but would like to, but it
is challenging. It could bring health care costs down if the
medical providers are in alignment. All three entities have to
be in alignment; provider, the payer, and the patient.
8:49:14 AM
REPRESENTATIVE GATTIS did not like getting bills from separate
entities. She said it is difficult to determine the accuracy of
the bills.
COMMISSIONER HULTBERG agreed that it is difficult to be a good
consumer in that situation.
SENATOR WIELECHOWSKI said that 5 percent of the people are
generating 60 percent of the costs and 15 percent of the people
are generating over 80 percent of the costs. He wondered if
there were ways to solve that problem.
8:51:27 AM
COMMISSIONER HULTBERG agreed that the top 5 percent drive 60
percent of the cost. She showed a graph of a typical model of
health care costs. The people in the bottom band are the healthy
ones and need to be kept healthy. Next two bands likely have
underlying chronic conditions. The goal is to help those people
manage their health issues. The higher band consists of those
with high cost care needs. Here, the goal is to support those
who are very ill make the best choices for their care.
REPRESENTATIVE HUGHES asked for information about strategies for
the high cost care group.
8:53:34 AM
EMILY COTTER, Strategic Initiatives Health Coordinator, Division
of Retirement and Benefits, Department of Administration,
explained strategies of care for the highest cost group. The
third party administrator currently has a program called "Case
Management," a dedicated group of employees that identifies
high-cost members and helps to coordinate care for them.
REPRESENTATIVE HUGHES asked if it is a proactive health
outreach.
MS. COTTER said it was, however, the patient has the option to
request that service and support, also.
REPRESENTATIVE HUGHES asked if it is bringing costs down and if
there is more that can be done.
MS. COTTER explained that the third-party administrator provides
quarterly reports on cost savings of the program. She offered to
find that information and report back to the committee.
CHAIR DYSON said it is hard to quantify cost avoidance.
8:56:14 AM
SENATOR GIESSEL shared a story of a successful coordinated cost
management model used by Alaska members of the American Academy
of Pediatrics. Both the patient and the provider benefit by
greater cost savings and satisfaction from such a model. It does
not have to be managed by the highest - cost medical
professional, the physician. She said she was glad the state was
pursuing this option.
COMMISSIONER HULTBERG shared information from claims data about
payment comparisons by procedure. It includes the 90 percent UCR
physician fee charges for Seattle and Anchorage.
COMMISSIONER HULTBERG showed information from a study the Health
Care Commission did comparing price of procedures by state.
CHAIR DYSON asked for clarification regarding the percentages.
COMMISSIONER HULTBERG explained that the study compared
physician charges in six states. They compared an average of the
six states to each state's costs in a variety of medical
specialty areas. Alaska is very much more expensive than other
states in most areas. In pediatrics and family medicine the cost
is about one and a half times more, but in cardiology and
surgery, costs are double in Alaska. She said those are the
areas the state needs to look at first.
9:01:35 AM
COMMISSIONER HULTBERG highlighted market constraints:
· Lack of alignment in interests between payer, providers,
and patients
· Lack of transparency in price and quality
· Reduced competition and barriers to entry
· High percentage of government spending - 60 percent of
market share.
COMMISSIONER HULTBERG referred to an Institute of Social and
Economic Research (ISER) study on health care costs in Alaska
done in 2011. It was discovered that government is paying about
60 percent of health care costs in Alaska. She concluded that
government has to change if it expects different outcomes in the
market.
REPRESENTATIVE KELLER asked how that number compares to other
states.
COMMISSIONER HULTBERG did not know.
9:03:04 AM
CHAIR DYSON asked about the coordination of benefits when the
employee has Medicare, Veteran's benefits, and Native Health
Care benefits.
COMMISSIONER HULTBERG replied that Medicare is primary and the
state retiree benefit is secondary. There is a coordination of
benefits. She did not know how the other two benefit plans fit
into the whole picture.
CHAIR LYNN listed all the plans he has and the confusion over
coordination of benefits.
COMMISSIONER HULTBERG agreed that the coordination of benefits
is complicated.
9:05:05 AM
REPRESENTATIVE KELLER requested more information about
coordination of benefits. He thought that Medicaid was the first
payer, before Indian Health benefits. He said that was
significant because of Medicaid expansion issues. He wondered
how much cost will be shifted from federal to state government.
He said it is a significant question.
COMMISSIONER HULTBERG shifted to case studies. She mentioned a
book called The Company that Solved Health Care that tells about
a C.E.O.'s experience of controlling health care costs in a
small company.
She referred to two models of innovative approaches: Value-Based
Health Plan and Consumer Directed Health Plan (CDHP).
9:08:41 AM
MS. COTTER said the Value-Based Health Plan uses financial
incentives to encourage healthy choices and to discourage
unhealthy choices. Nebraska uses this plan.
She described the Consumer Directed Health Plan - or high
deductible health care plan - as defined by the IRS in 2013 as a
health plan where the deductible for an individual was $1,250 at
a minimum, and the deductible for a family was $2,500 at a
minimum. Indiana uses this plan.
She noted one of the benefits of the CDHP is that it increases
price sensitivity by employees. The savings associated with both
plans were attributed to the same three factors: increased use
of generic medications over brand medication, decrease use of
specialists and increase use of primary care physicians, and
decreased use of emergency room visits.
9:10:17 AM
MS. COTTER related the components of Nebraska's Value-Based
Health Plan. In 2009 Nebraska added a "Wellness Plan" to its
traditional plan. It reduces employee's share of costs for
wellness, preventive and high-quality services in exchange for
lower premiums. It required employees and spouses to complete
series of tasks during the prior 12 months. They completed a
health risk assessment and a health education course and made a
preventive visit to a primary care physician to assess
biometrics. If employees completed those three tasks they could
enroll in the Wellness Plan.
MS. COTTER listed the results of the Wellness Plan: it offered
much lower premiums than traditional plans, 2010 and 2011
premium increases were less than 1 percent and the estimated
return on investment was 2.7 to 1. The savings were attributed
to reduced utilization of high cost services.
9:14:35 AM
MS. COTTER turned to Indiana's Consumer Driven Health Plan I
(CDHP) implemented in 2006. The plan had an individual
deductible of $2,500 and a family deductible of $5,000. Indiana
contributed 45 percent of the deductible to a Health Savings
Account (HSA) which is directly connected to the high deductible
health care plan.
CHAIR DYSON asked if the employee's contribution is from pre-tax
dollars and can be rolled forward.
MS. COTTER said yes. The account rolls forward annually and the
amount accrued can be taken with the employee. The employers can
also make contributions to the account, along with employees.
She continued to explain that for an individual, the state
contributed $1,250 and for a family the state contributed
$2,500.
REPRESENTATIVE HUGHES asked if primary care was included.
MS. COTTER replied that in Indiana preventive care was covered,
with no application of copay or deductible. She stressed that
two of the most important factors of a plan are that the
employer does contribute to the HSA, and copays and deductibles
are applied to preventive care. These factors must be clearly
communicated to the employees.
9:17:41 AM
MS. COTTER continued to say, in 2007, Indiana added a second
CDHP plan with lower deductibles, but higher premiums. She
listed the results of Indiana's plans. The state of Indiana
saved money - CDHP 2010 savings were 10.7 percent, or $17
million to $23 million. Employees saved money - in 2010,
employees saved $7 million to $10 million and unused funds in
the HSA were over $30 million, which is about $2,000 for each
employee. Under this plan, CDHP participants did not put off or
avoid using important health care services.
9:19:28 AM
COMMISSIONER HULTBERG explained opportunities for AlaskaCare.
She said the state has begun the implementation of an employee
wellness program. The state is now covering preventative care at
100 percent and has implemented Weight Watchers at Work, a new
Tobacco Cessation Program, and formed an employee wellness
committee.
She stated that the state needs to improve consumerism and
appropriate utilization of services by its members. The state
also should look at plan design changes to align payer, patient,
and provider interests. It should look at contracting strategies
for value. And, finally, the state must complete the procurement
process for a third-party administrator.
9:22:30 AM
COMMISSIONER HULTBERG listed the barriers to success. She
emphasized that change is hard. In order to transform the health
care market, how people think about health care must be
transformed. There is a lack of price sensitivity on the part of
consumers when health care is essentially free, as it has been
in the past.
She said another potential barrier is the fact that the benefit
credit is bargained. Also problematic is that the state is
faced with limited resources and the implementation of a new
plan with limited resources.
She noted that AlaskaCare is highly visible and it operates in a
political context. Changes to the plan will be highlighted.
She stressed that AlaskaCare has to be sensitive to the barriers
and reach out to work with stakeholders in the process to ensure
that employees are getting the best quality care at a good
value.
COMMISSIONER HULTBERG concluded with the challenge, "We must
lower the rate of growth of our health care spending. Our
current path is not sustainable."
She stated that the state's approach is to work on the issues
with the provider community and to support the delivery of high-
quality, cost-effective health care in Alaska.
9:25:46 AM
SENATOR COGHILL requested information about how often the state
has to renegotiate a contract with a third party administrator.
COMMISSIONER HULTBERG said the process of procuring a third-
party administrator takes all of the division's capacity. By
statute, the contract can only last for 5 years; a three-year
contract with two optional one-year extensions. Currently, the
state is in the fourth year of a contract with HealthSmart. When
the contract was procured, it was with Wells Fargo, which was
acquired by HealthSmart. The state elected to seek a new vendor
and have some certainty on the vendor partner for next five
years in order to work on strategic initiatives.
9:27:45 AM
CHAIR DYSON asked what the committee can do to help.
COMMISSIONER HULTBERG voiced appreciation for the offer, but
said the division would not request more staff, it would just
work smarter. She pointed out that the state health care plan is
not subject to the insurance code, so she did not see a need for
statutory changes. She spoke of the value of communicating
issues with the legislature. She requested feedback about the
plan design and support for the changes.
SENATOR WIELECHOWSKI voiced appreciation for the testimony. He
suggested focusing on controlling costs, rather than increasing
employee payments.
COMMISSIONER HULTBERG agreed that the core issue of cost drivers
was important. They can be addressed through a regulatory
approach or through health choices by consumers. She said the
beauty of the consumer directed health plan is that the money is
provided by the employer to an account in the employee's name,
giving them a vested interest in how that money is spent.
9:31:15 AM
CHAIR DYSON said the early part of the presentation dealt with
cost containment.
CHAIR LYNN thanked the presenters. He added that legislators are
trying to get the best health care information as legislators,
but also as consumers. He stated he has had a positive
experience with state health care insurance.
9:32:41 AM
There being no further business to come before the committee,
Chair Dyson adjourned the Joint Senate and House State Affairs
Standing Committees at 9:32 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DOA_JSTA_AlaskaCare_Overview_2_7_13.pdf |
SSTA 2/14/2013 8:00:00 AM |
Alaska Care Overview |