00 SENATE BILL NO. 256 01 "An Act relating to regulation of managed health care and allowing physicians 02 to collectively negotiate with a health care insurer that has substantial market 03 power." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 21.42 is amended by adding a new section to read: 06  Sec. 21.42.175. Patient and health care provider protection. (a) A contract 07 between a participating health care provider and a managed care entity that offers a 08 group managed care plan must contain a provision that 09  (1) clearly identifies all health care services to be provided; 10  (2) clearly identifies which health care services are to be provided by 11 a contracting health care provider; 12  (3) clearly identifies and describes each insurance policy used by the 13 group managed care plan to provide identified health care services to a covered person; 14  (4) clearly states the compensation rates for each provider used by the 01 group managed care plan to provide health care services; 02  (5) clearly states all ways in which the contract between the health care 03 provider and managed care entity may be terminated; a provision that provides for 04 discretionary termination by either party must apply equitably to both parties; 05  (6) provides that, in the event of a dispute between the parties to the 06 contract, the following procedure must be used before either party may pursue other 07 remedies: 08  (A) an initial meeting at which all parties are present or 09 represented by individuals with full decision-making authority regarding the 10 matters in dispute shall be held within seven days after the plan receives notice 11 of the dispute or gives notice to the provider; 12  (B) if, within 30 days following the initial meeting, the parties 13 have not resolved the dispute, the dispute shall be submitted to mediation 14 directed by a mediator who is mutually agreeable to the parties and who is not 15 regularly under contract to or employed by either of the parties; each party 16 shall bear its proportionate share of the cost of mediation, including the 17 mediator fees; 18  (C) if, after a period of 60 days following commencement of 19 mediation, the parties are unable to resolve the dispute, either party may submit 20 the dispute to binding arbitration in accordance with (E) of this paragraph; 21  (D) the parties shall agree to negotiate in good faith in the 22 initial meeting and in mediation; 23  (E) after 10 days' written notice to the other party, either party 24 may submit the dispute to final and binding arbitration; binding arbitration shall 25 be held in the judicial district in this state where the services at issue in the 26 dispute were or are to be performed; at the request of either party, an 27 arbitration proceeding may be conducted electronically, including by telephone 28 or video conferencing; and 29  (F) binding arbitration shall be conducted under the rules of the 30 National Health Lawyers Association Alternative Dispute Resolution Project; 31 each party shall be responsible for its own costs and expenses related to the 01 arbitration, including attorney fees, and shall bear a proportionate share of the 02 arbitrator fees; the arbitrator shall be selected by mutual agreement between the 03 parties; the arbitrator shall be an attorney and a member of the National 04 Academy of Arbitrators or the National Health Lawyers Association; 05  (7) states that a health care provider may not be penalized or the health 06 care provider's contract terminated by the managed care entity because the health care 07 provider acts as an advocate for a covered person in seeking appropriate, medically 08 necessary health care services; 09  (8) protects the ability of a health care provider to communicate openly 10 with a covered person about all appropriate diagnostic testing and treatment options; 11  (9) clearly identifies the length of time during which the contract is to 12 remain in effect; a contract term may not exceed five years; and 13  (10) defines words in a clear and concise manner. 14  (b) A contract between a participating health care provider and a managed care 15 entity that offers a group managed care plan may not contain a provision that 16  (1) provides financial incentives to the health care provider for 17 withholding covered health care services that are medically necessary; 18  (2) describes the products used by the plan as including all products 19 that are currently offered by the managed care entity; and 20  (3) requires the health care provider to be compensated for health care 21 services performed at the same rate as the health care provider has contracted with 22 another managed care entity. 23  (c) A managed care entity may not enter into a contract with a health care 24 provider that includes an indemnification or hold harmless clause for the acts or 25 conduct of the managed care entity. An indemnification or hold harmless clause 26 entered into in violation of this subsection is void. 27  (d) The standard provisions, other than those specifying the exact 28 compensation, of a contract between a health care provider and a managed care entity 29 must be filed and approved by the director before being used. 30  (e) In this section, 31  (1) "group managed care plan" or "plan" means a group health 01 insurance plan operated by a managed care entity; "group managed care plan" does not 02 include an integrated medical group; 03  (2) "health care provider" means a person licensed in this state or 04 another state of the United States to provide health care services; 05  (3) "health care services" means treatment of an individual for an 06 injury, illness, or disability and includes preventative treatment of an injury or illness; 07  (4) "health insurance" has the meaning given in AS 21.12.050(a); 08  (5) "integrated medical group" means a group of providers who 09 contract with a health care plan for the direct provision of health care services to a 10 person covered by a health care plan; 11  (6) "managed care" means a contract given to an individual, family, or 12 group of individuals under which a member is entitled to receive a defined set of 13 health care benefits through an organized system of health care providers in exchange 14 for defined consideration and that requires the member to use, or creates financial 15 incentives for the member to use, health care providers managed, employed by, or 16 under contract with a managed care entity; "managed care" does not include Medicaid 17 coverage under 42 U.S.C. 1396 - 1396p (Social Security Act); 18  (7) "managed care contractor" means a contractor who establishes, 19 operates, or maintains a network of participating health care providers, conducts or 20 arranges for utilization review activities, and contracts with a managed care entity; 21  (8) "managed care entity" means an insurer, a hospital or medical 22 service corporation, a health maintenance organization, an employer or employee 23 health care organization, or a managed care contractor that operates a group managed 24 care plan; 25  (9) "participating health care provider" means a health care provider 26 who has entered into an agreement with a managed care entity to provide services or 27 supplies to a patient covered by a group managed care plan; 28  (10) "provider" means a health care provider. 29 * Sec. 2. AS 23 is amended by adding a new chapter to read: 30 Chapter 50. Collective Negotiation by Physicians. 31  Sec. 23.50.010. Legislative findings. (a) The legislature finds that permitting 01 competing physicians to engage in collective negotiation of certain terms and 02 conditions of contracts with health care insurers will benefit competition, so long as 03 the physicians do not engage in an express or implied threat of retaliatory collective 04 action, including boycotts or strikes. 05  (b) The legislature finds that permitting physicians to engage in collective 06 negotiations over fee-related terms may, in some circumstances, yield anti-competitive 07 effects. There are, however, instances in which health care insurers dominate the 08 market to the degree that fair negotiations between physicians and the health care 09 insurers are not possible in the absence of joint action on behalf of the physicians. In 10 those circumstances, health care insurers can virtually dictate the terms of the contracts 11 that they offer to physicians. 12  (c) The legislature finds that it is appropriate and necessary to authorize 13 collective negotiations between competing physicians and health care insurers on fee- 14 related and other issues when the imbalances in bargaining capacity described in this section 15 exist. 16  Sec. 23.50.020. Collective action by physicians. (a) Competing physicians 17 may meet and communicate in order to collectively negotiate with the health care 18 insurer concerning any of the contract terms and conditions described in this 19 subsection. Competing physicians may not engage in a boycott related to these terms 20 and conditions. Competing physicians may meet and communicate concerning 21  (1) clinical practice guidelines and coverage criteria; 22  (2) the respective liability of physicians and health care insurers for the 23 treatment or lack of treatment of insured or enrolled persons; 24  (3) administrative procedures, including methods and timing of the 25 payment of services to physicians; 26  (4) procedures for the resolution of disputes between health care 27 insurers and physicians; 28  (5) patient referral procedures; 29  (6) the formulation and application of reimbursement methodology; 30  (7) quality assurance programs; 31  (8) health service utilization review procedures; and 01  (9) criteria to be used by health care insurers for the selection and 02 termination of physicians, including whether to engage in selective contracting. 03  (b) Except as provided in (c) of this section, competing physicians may not 04 meet and communicate for the purpose of collectively negotiating the following terms 05 and conditions with a health care insurer: 06  (1) the fees or prices for services, including fees or prices arrived at by 07 applying any reimbursement methodology procedures; 08  (2) the conversion factor in a resource-based relative value scale 09 reimbursement methodology or similar methodologies; 10  (3) the amount of any discount on the price of services to be rendered 11 by the physicians; 12  (4) the dollar amount for capitation or fixed payment for each person 13 covered by the health care insurer for health services rendered by physicians to a 14 health care insurer's insureds or enrollees; or 15  (5) the inclusion or alteration of terms and conditions to the extent that 16 they are prohibited or required by law; however, this paragraph does not limit 17 physician rights to collectively petition the government for a change in the law. 18  (c) Competing physicians within the service area of a health insurer may 19 collectively negotiate the terms and conditions of contracts described in (b) of this 20 section if the health care insurer has substantial market power. A health care insurer 21 has substantial market power under this section if the health care insurer's market 22 share exceeds 15 percent 23  (1) as measured by the number of covered lives as reported by the 24 director of insurance for the most recently completed calendar year or by the actual 25 number of consumers of prepaid comprehensive health services; or 26  (2) within a particular service area when its market segments are added 27 together for all types of health insurance insureds or enrollees and for Medicare and 28 Medicaid beneficiaries. 29  (d) In exercising the collective rights granted by (a) and (c) of this section, 30  (1) physicians may communicate with each other with respect to the 31 contractual terms and conditions to be negotiated with a health care insurer; 01  (2) physicians may communicate with an authorized third party 02 regarding the terms and conditions of contracts allowed under this section; 03  (3) the authorized third party is the sole party authorized to negotiate 04 with health care insurers on behalf of a defined group of physicians; 05  (4) physicians can be bound by the terms and conditions negotiated by 06 the authorized third party that represents their interests; 07  (5) a health care insurer communicating or negotiating with the 08 authorized third party may contract with, or offer different contract terms and 09 conditions to, individual competing physicians; 10  (6) an authorized third party may not represent more than 30 percent 11 of the market of practicing physicians for the provision of services, or a particular 12 physician type or specialty in the service area or proposed service area, if the health 13 care insurer has less than a five percent market share as determined by the number of 14 covered lives as reported by the director of insurance for the most recently completed 15 calendar year or by the actual number of consumers of prepaid comprehensive health 16 services; and 17  (7) the authorized third party shall comply with the provisions of (e) 18 of this section. 19  (e) A person acting or proposing to act as an authorized third party under this 20 section shall, 21  (1) before engaging in collective negotiations with a health care insurer, 22  (A) file with the commissioner the information that identifies 23 the authorized third party, the authorized third party's plan of operation, and the 24 authorized third party's procedures to ensure compliance with this section; 25  (B) furnish to the commissioner, for the commissioner's 26 approval, a brief report that identifies the proposed subject matter of the 27 negotiations or discussions with a health care insurer and that contains an 28 explanation of the efficiencies or benefits that are expected to be achieved 29 through the collective negotiations; the commissioner may not approve the 30 report if the proposed negotiations exceed the authority granted in this chapter 31 and, if they do, shall enter an order prohibiting the collective negotiations from 01 proceeding; the authorized third party shall provide supplemental information 02 to the commissioner as new information becomes available that indicates that 03 the subject matter of negotiations with the health care insurer has changed or 04 will change; 05  (2) within 14 days after receiving a health care insurer's decision to 06 decline to negotiate or to terminate negotiations, or within 14 days after requesting 07 negotiations with a health care insurer who fails to respond within that time, report to 08 the commissioner that negotiations have ended or have been declined; 09  (3) before reporting the results of negotiations with a health care insurer 10 and before giving physicians an evaluation of any offer made by a health care insurer, 11 provide to the commissioner, for the commissioner's approval, a copy of all 12 communications to be made to physicians related to the negotiations, discussions, and 13 health care insurer offers. 14  (f) With the advice of the attorney general, the commissioner shall either 15 approve or disapprove the collective negotiation subject to the reporting required in (e) 16 of this section within 30 days after receiving the reports. If disapproved, the 17 commissioner shall furnish a written explanation of any deficiencies along with a 18 statement of specific remedial measures that would correct any identified deficiencies. 19 An authorized third party who fails to obtain the commissioner's approval is 20 considered to be acting outside the authority of this section. 21  (g) This section does not authorize competing physicians to act in concert in 22 response to a report issued by an authorized third party related to the authorized third 23 party's discussion or negotiations with a health care insurer. The authorized third party 24 shall advise the physicians of the provisions of this subsection and shall warn them of 25 the potential for legal action against those who violate state or federal anti-trust laws 26 by exceeding the authority granted under this section. 27  (h) A contract allowed under this section may not exceed a term of five years. 28  (i) The documents relating to a collective negotiation described under this 29 section that are in the possession of the department are confidential and not open to 30 public inspection. 31  Sec. 23.50.030. Fee for registration of authorized third parties. The 01 commissioner shall adopt regulations that establish the amount and manner of payment 02 of a registration fee for authorized third parties. The commissioner shall establish the 03 fee level so that the total amount of fees collected from authorized third parties 04 approximately equals the actual regulatory costs for the oversight of joint negotiations 05 between physicians and health care insurers. The commissioner shall annually review 06 the fee level to determine whether the regulatory costs are approximately equal to fee 07 collections. If the review indicates that the fee collections and regulatory costs are not 08 approximately equal, the commissioner shall calculate fee adjustments and adopt 09 regulations under this section to implement the adjustments. In January of each year, 10 the commissioner shall report on the fee level and revisions for the previous year under 11 this section to the office of management and budget. In this section, "regulatory costs" 12 means costs of the department that are attributable to oversight of joint negotiations 13 between physicians and health care insurers. 14  Sec. 23.50.040. Regulations. The commissioner may adopt regulations 15 necessary to implement this chapter. 16  Sec. 23.50.099. Definitions. In this chapter, 17  (1) "authorized third party" means a person authorized by the 18 physicians to negotiate on their behalf with a health care insurer under this chapter; 19  (2) "commissioner" means the commissioner of labor and workforce 20 development; 21  (3) "health care insurer" has the meaning given in AS 21.54.500. 22 * Sec. 3. AS 45.50.572 is amended by adding a new subsection to read: 23  (k) AS 45.50.562 - 45.50.596 do not forbid the existence or operation of 24 organizations of physicians acting in accordance with AS 23.50, or forbid or restrain 25 members of those organizations from lawfully carrying out the legitimate objectives 26 of them; nor are these organizations or members illegal combinations or conspiracies 27 in restraint of trade under the provisions of AS 45.50.562 - 45.50.596.