HOUSE FINANCE COMMITTEE May 6, 1994 8:35 a.m. TAPE HFC 94-161, Side 2, #000 - end. TAPE HFC 94-162, Side 1, #000 - end. CALL TO ORDER Co-Chair Larson called the House Finance Committee to order at 8:35 a.m. PRESENT Co-Chair Larson Representative Hoffman Co-Chair MacLean Representative Martin Vice-Chair Hanley Representative Navarre Representative Brown Representative Parnell Representative Foster Representative Therriault Representative Grussendorf ALSO PRESENT Paul Fuhs, Commissioner, Department of Commerce and Economic Development; Ken Sykes, Marketing Analyst, Division of Insurance; Department of Commerce and Economic Development; Gary Brewer, Alaska Regional Hospital; Sharon Anderson, Alaska Regional Hospital; Jerry Rheinwald, Lobbyist, Blue Cross Insurance Company; Sherrie Goll, Alaska Association of Martial and Family Therapists; John Walsh, Special Assistance, Department of Community and Regional Affairs. SUMMARY INFORMATION HB 441 "An Act reducing certain appropriations for fiscal year 1994; and providing for an effective date." CSHB 441 (FIN) was reported out of Committee with "no recommendation". HB 455 "An Act making and amending operating and capital appropriations and ratifying certain state expenditures; and providing for an effective date." CSHB 455 (FIN) was reported out of Committee with "no recommendation" HB 534 "An Act relating to insurance, to the licensing, accreditation, examination, regulation, and solvency of persons engaged in the insurance business, including insurers, nonadmitted insurers, purchasing groups, risk retention groups, and United States branches of alien insurers; relating to the management of and the filing of reports by persons licensed or otherwise doing business under the insurance code; amending Alaska Rule of Civil Procedure 45; and providing for an effective date." CSHB 534 (FIN) was reported out of Committee with individual recommendations and with a zero fiscal note by the Department of Commerce and Economic Development, 4/8/94. HOUSE BILL NO. 441 "An Act reducing certain appropriations for fiscal year 1994; and providing for an effective date." Co-Chair MacLean provided members with proposed committee substitute, work draft #8-LS1628\E, 5/5/94 (copy on file). She explained that the proposed committee substitute would remove the reappropriation projects from HB 455 and place them in HB 441. Co-Chair MacLean MOVED to ADOPT work draft #8-LS1628\E, 5/5/94. There being NO OBJECTION, it was so ordered. Co-Chair MacLean provided members with AMENDMENT 1 (copy on file). She explained that amendment 1 was submitted at the request of the Office of Budget and Management, Department of Community and Regional Affairs. Co-Chair MacLean MOVED to RESCIND the Committee's action in failing to adopt AMENDMENT 1 during the House Finance Committee's meeting on May 5, 1994. There being NO OBJECTION, it was so ordered. JOHN WALSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS explained that the amendment would extend the lapse date on funding to the Department of Community and Regional Affairs. He stressed that funds will be used to reduce demand on the Power Cost Equalization Program. In response to a question by Representative Parnell, Mr. Walsh emphasized that due to transitions in the department, field travel was limited. Co-Chair MacLean observed that the Alaska Energy Authority was moved into the Department of Community and Regional Affairs during the past legislative session. She maintained that the department needs the carry forward. Co-Chair MacLean MOVED to ADOPT AMENDMENT 1. Representative Hanley OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Brown, Grussendorf, Navarre, Foster, MacLean, Larson OPPOSED: Therriault, Hanley, Parnell Representative Hoffman was not present for the vote. The MOTION PASSED (7-3). Co-Chair MacLean provided members with AMENDMENT 2 (copy on file). Amendment 2 would amend Section 21, Chapter 79, SLA 1993, page 71, lines 11-12 to read "Bristol Bay Campus Building Addition." Co-Chair Larson MOVED to ADOPT AMENDMENT 2 on behalf of Representative Hoffman. There being NO OBJECTION, it was so ordered. Co-Chair Larson MOVED to report CSHB 441 (FIN) out of Committee with individual recommendations. There being NO OBJECTION, it was so ordered. CSHB 441 (FIN) was reported out of Committee with "no recommendation". HOUSE BILL NO. 455 "An Act making and amending operating and capital appropriations and ratifying certain state expenditures; and providing for an effective date." Representative Martin MOVED to report CSHB 455 (FIN) out of Committee with individual recommendations. CSHB 455 (FIN) was reported out of Committee with "no recommendation" Co-Chair Larson discussed a request to waive legislation from Committee. HOUSE BILL NO. 534 "An Act relating to insurance, to the licensing, accreditation, examination, regulation, and solvency of persons engaged in the insurance business, including insurers, nonadmitted insurers, purchasing groups, risk retention groups, and United States branches of alien insurers; relating to the management of and the filing of reports by persons licensed or otherwise doing business under the insurance code; amending Alaska Rule of Civil Procedure 45; and providing for an effective date." Co-Chair Larson provided members with a proposed committee substitute, work draft # 8-LS1766\J, 5/5/94 (copy on file). He noted that new language was added on page 60, line 3 through page 61, line 27. JERRY RHEINWALD, LOBBYIST, BLUE CROSS testified in opposition against the proposed committee substitute. He asserted that the new section is targeted at Blue Cross. He maintained that the issue is complex and complicated. He suggested that more time is needed to look at the issue. Representative Martin noted that new language was also added in section 87 on page 58. SHARON ANDERSON, ALASKA REGIONAL HOSPITAL testified in support of the proposed committee substitute. She explained that the proposed committee substitute provides for patient access to hospitals and physicians of their choice. She asserted that other insurance companies are already subject to the provisions contained in the proposed committee substitute. Ms. Anderson clarified that the state of Alaska has utilized preferred arrangements as the result of negotiations between two parties without an open bid. Representative Hanley noted that a "provider or hospital willing to meet the terms and conditions of the preferred provider may not be excluded." Ms. Anderson described a "preferred provider arrangement". Representative Therriault observed that there is a trade off between price and volume. GARY BREWER, CHIEF EXECUTIVE OFFICER, ALASKA REGIONAL HOSPITAL stressed that the Alaska Regional Hospital has not been allowed to participate as a bidder on contracts. Ms. Anderson noted that Aetna has a preferred provider arrangement with Providence Hospital. Aetna pays the negotiated price for patients that choose to come to the Alaska Regional Hospital. She noted that they wish to allow medical service corporations to participate. She maintained that the proposed committee substitute would help curb costs. Mr. Brewer noted that health care inflation is at 4.9 percent. Representative Navarre express concern with the cost of health care inflation. Representative Martin recommended that section 87 be removed from the proposed committee substitute. Representative Martin MOVED to ADOPT CSHB 534 (L&C). (Tape Change, HFC 94-162, Side 1) Co-Chair MacLean OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Navarre, Hanley, Martin, Parnell, Therriault OPPOSED: Brown, Foster, Hoffman, Grussendorf, MacLean, Larson The MOTION FAILED (5-6). Co-Chair MacLean MOVED to ADOPT work draft # 8-LSl766\J, 5/5/94. Representative Martin OBJECTED. Representative Martin WITHDREW his OBJECTION. There being NO OBJECTION, it was so ordered. PAUL FUHS, COMMISSIONER, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT provided members with AMENDMENT 1 (copy on file). He expressed concern that the legislation not become the vehicle for workmen cGmpensation amendments. KEN SYKES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT noted that the provision for preferred providers was not included in the senate companion bill. He noted that amendment 1 contains technical changes to keep the department in line with the national accreditation force, National Association of Insurance Commissioners. Mr. Sykes discussed the appointment of independent counsel provision on page 60, line 3. He noted that an insured or policy holder has the right to hire independent counsel for defence under their insurance policy. This section attempts to clarify the standards of this practice. Representative Navarre MOVED to ADOPT AMENDMENT 1. Representative Brown questioned the effect of the change on page 9, line 9. Mr. Sykes explained that any document received by the National Association of Insurance Commissioners is a public document. The National Association of Insurance Commissioners would be deleted by the amendment in order to allow discretion, by the Division of Insurance, of disclosure for market competition. Records can be subpoenaed directly from the company involved. There being NO OBJECTION, AMENDMENT 1 was adopted. Representative Martin MOVED to delete section 87 on page 58. Mr. Sykes noted that the Department of Commerce and Economic Development is neutral in regards to section 87. Co-Chair MacLean OBJECTED to the motion to delete sections 87. Representative Navarre noted that section 87 is controversial and has not had sufficient scrutiny. Representative Hanley expressed concern that section 87 is directed toward only Blue Cross. Mr. Sykes explained that insurance companies are regulated under AS 09. Medical service providers and hospital organizations are different from insurance companies. He noted that patients are reimbursed 80 percent for services by a physician approved by the preferred provider. If the patient goes to a doctor outside of the preferred provider agreement they are reimbursed for only 75 percent of the cost. Section 87 would remove the five percent gap. He clarified that the state's current health care contract would not be directly effected since the contract is with Aetna. However, VSP or eye care providers will have to comply with the provision. Representative Parnell expressed concern that long term impacts of the provision contained in section 87 have not been considered. Representatives MacLean and Grussendorf spoke in support of retention of section 87. A roll call vote was taken on the MOTION to delete section 87. IN FAVOR: Navarre, Hanley, Martin, Parnell, Therriault OPPOSED: Brown, Foster, Hoffman, Grussendorf, MacLean, Larson The MOTION FAILED (5-6). Representative Brown provided members with AMENDMENT CSHB 545 (L&C) (copy on file). She explained that the legislation would prevent health insurance companies from discriminating against marital and family therapists. SHERRIE GOLL, ALASKA ASSOCIATION OF MARITAL AND FAMILY THERAPISTS noted that the adoption of CSHB 545 (L&C) into CSHB 534 (FIN) would add marital and family therapists to the unfair discrimination statute. Mr. Rheinwald spoke in opposition to the adoption of CSHB 545 (L&C). Commissioner Fuhs spoke in opposition to the adoption of CSHB 545 (L&C). Representative Brown MOVED to ADOPT CSHB 545 (L&C) as a new section in CSHB 534 (FIN). Representative Martin OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Brown, Hoffman OPPOSED: Navarre, Grussendorf, Foster, Hanley, Martin, Parnell, Therriault, MacLean, Larson The MOTION FAILED (2-9). Co-Chair MacLean MOVED to report CSHB 534 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Navarre OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Grussendorf, Brown, Hoffman, Foster, Hanley, Martin, Therriault, MacLean, Larson OPPOSED: Navarre, Parnell The MOTION PASSED (9-2). CSHB 534 (FIN) was reported out of Committee with "individual recommendations" and with a zero fiscal note by the Department of Commerce and Economic Development, 4/8/94. ADJOURNMENT The meeting adjoured at 10:00 a.m.