CS FOR SENATE BILL NO. 37(L&C) "An Act relating to collective negotiation by physicians with health benefit plans, to health benefit plan contracts with individual competing physicians, to the application of state antitrust laws to agreements involving providers and groups of providers affected by collective negotiations, and to the effect of the collective negotiation provisions on health care providers." Co-Chair Kelly explained that essentially SB 37 would create, in law, a structure by which physicians could negotiate with insurance companies collectively without violating anti-trust laws if they had the oversight of a state agency. He noted that the state action doctrine would create the oversight of the negotiations by a state agency; in this case they chose the Department of Law. He referred to a supreme court case back in 1943, which accepted the fact that the anti-trust provisions would not work in every situation. He suggested that it would be a situation where it was not appropriate to apply strict anti-trust provisions and where there was a need for state oversight. He concluded that what they were creating was the ability for physicians to come together and negotiate with insurance companies on a voluntary basis. KRIS KNAUSS, staff to Senator Pete Kelly, explained that within geographical service if there were more than 40 physicians in an area then only 30 percent of them could negotiate and if there was less than 40 then 100 percent could negotiate, which means that in the more urban areas, such as Anchorage, only 30 percent of the market would be negotiating with insurance companies. He pointed out that in the latest version of SB 37 they excluded the self insured from the bill and changed some of the language in the bill with regards to a physician negotiating only with an insurance agency and those negotiations becoming confidential rather than having a public process or hearing. He indicated that there was not a competitive group of large insurance companies in the state and what they were trying to do was open the door for the smaller insurance companies to negotiate with physicians. Co-Chair Kelly explained that one of the problems was in the past few years the number of insurance companies went from 18 to six and as they continued to buy each other up they gained more and more market power. He noted that with the physicians they have had nothing of the like happen to them and they also have the anti- trust laws working against them; therefore, if they were to get together with a colleague to discuss something with regards to negotiations with insurance companies the Federal Trade Commission (FTC) could shut them down and fine them. He stated that SB 37 would allow the physicians to come together on a voluntary basis and negotiate with the insurance companies and they would not be threatened with legal action because of it. Senator Olson wondered why the self-insured were excluded if it meant solo-practitioners were being excluded. Co-Chair Kelly replied that the solo-practitioner would not be able to take advantage of the bill; they would be excluded from the provisions of the bill. Senator Olson wondered if the definition of self-insured meant covering malpractice. Co-Chair Kelly clarified that it was not the self-insured physician, but rather, for example, the State of Alaska and the teamsters would be considered self-insured. Senator Green further clarified that self-insured had to do with groups of people that had chosen to be self-insured, rather than have a third-party deal with the insurance companies. CLYDE SNIFFEN, Department of Law, testified via teleconference from Anchorage, expressed that they continued to have concerns with the bill. JANET PARKER, Deputy Director, Division of Retirement and Benefits, Department of Administration, indicated that she was there to answer any questions regarding the fiscal note. Senator Wilken wondered if she was speaking to the fiscal note dated March 15. Ms. Parker yes. Senator Wilken pointed out that it would seem that SB 37, by increased competition, would drive costs down, but according to the fiscal note the cost is being driven up by almost $9 million in the state plan. He said that he was in favor of the bill, because it appeared to drive down costs. Ms. Parker explained that what they were doing was giving providers the opportunity to ban together and negotiate. She noted that they were not going to try and negotiate their reimbursement down, but rather negotiate it up. Co-Chair Kelly indicated that throughout the course of SB 37 they heard many people testify that it would drive costs up. He pointed out that the negotiations were completely voluntary and if the insurance companies do not want to negotiate than they do not have to. He also pointed out that the provisions of the bill stated that the physicians could not act in a retaliatory manner and they could not boycott. He stressed that all SB 37 was doing was allowing physicians to act in such a manner that they could at least come to a group to decide whether they wanted to negotiate in the first place and then the insurance companies have the option of saying "no." He does not see how there could be an increase of 5 to 13 percent in healthcare costs. Ms. Parker replied that there really was no way of knowing, because it had not occurred yet. She explained that they have just done some studies based on federal legislation that were similar. Co-Chair Kelly clarified, "There were some studies on that and there were also studies that said the methodology on the study that you're referring to was completely out of wack and it sounds to me - and Ms. Parker I certainly don't mean to criticize what you've said, because I know these aren't the numbers that you've come up with necessarily, I mean I'm not holding you accountable for these exact numbers in here, but they are the numbers that I've been hearing from a number of organizations and testifiers and I think it's a number that's just flat been pulled out of the air." Ms. Parker said, "I plead the fifth." Co-Chair Kelly commented that it brought up a good point, that being, how could something that is completely voluntary drive up costs. He did not think that it would drive up costs. He reiterated that all SB 37 did was provide some oversight to allow physicians to come together so that they would have some market power to deal with insurance companies that were getting larger and more powerful; therefore, there would be some kind of equality and equity in the bargaining position. He stressed that SB 37 was not a "sky is falling" bill as had been presented. Co-Chair Kelly reported that the bill would be HELD in Committee. AT EASE 9:27 AM/9:30 AM