Legislature(1999 - 2000)
04/12/2000 01:55 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 211
An Act relating to liability for providing managed care
services, to regulation of managed care insurance
plans, and to patient rights and prohibited practices
under health insurance; and providing for an effective
date.
REPRESENTATIVE NORMAN ROKEBERG stated that patients need
assurance that the quality of their health care will not be
compromised as managed care expands. CS HB 2II (L&C)
requires managed care entities to provide a reasonable
standard of health care, and holds them civilly liable if
they do not. It also establishes requirements for contracts
between managed care entities and their health care
providers, patients and their group managed care plans,
health care insurers and the insured, providing patients
with the following:
• Access to emergency room services;
• Availability of medical services or adequate referral
options;
• Full disclosure of treatment options;
• Choice of health care providers, including specialists;
• Clear descriptions of covered items and services,
benefits, procedures, compensation methods,
availability (and exclusions) of prescription
medications and the availability of translation or
interpreter services;
• A point-of-service plan option;
• Follow-through of preapproved payment;
• Quick utilization review decisions;
• Opportunity for appeals of utilization review
decisions; and
• Added protection from denial, reduction, or termination
of payment for health care services.
Representative Rokeberg noted that in addition, the
legislation would provide health care providers the freedom
to share all testing and treatment options with their
patients, and would let them advocate for their patients
without the risk of being penalized or terminated by the
managed care entity they contract with. It also prohibits
contracts between managed care entities and health care
providers from including "hold harmless" clauses for the
managed care entity or financial incentives for providers to
withhold medically necessary services.
Representative Rokeberg noted that while the legislation
streamlines the health care system, managed care might also
increase the vulnerability of patients and doctors,
resulting in a lower quality of care. The legislation is
necessary to ensure continued quality health care in the
face of a growing managed care industry.
Representative Rokeberg continued his analysis of the
legislation before Committee members.
· Section 2: Imposes civil liability on managed care
entities for certain health care acts. Creates a defense
to the civil action and certain exclusions to liability.
· Section 3: Imposes certain provisions that must be
included in a contract between a health care provider and
a managed care entity. Specifies that certain provisions
cannot be included in a contract between a health care
provider and a managed care entity. Prohibits an
indemnification clause in a contract between a provider
and a managed care entity. Requires that group managed
care plans include certain contract provisions. Imposes
certain requirements regarding a covered persons choice
of a health care provider, including a non-network
option, continuing treatment by a health care provider
whose contract is terminated, and notification when a
provider contract is terminated for cause. Specifies that
medical and financial information concerning a covered
person or applicant is confidential. Establishes an
external appeals mechanism for covered persons. Adds a
provision regarding religious non-medical providers.
· Section 4: Makes a violation of AS 21.07 an unfair
insurance trade practice.
· Section 5: Prohibits a health care insurer from limiting
information on care or treatment. Requires that treatment
decisions are made by a licensed health care provider
trained in the area in question and that denial of
coverage occurs only after consultation.
Representative Rokeberg spoke to the handout distributed
addressing the federal Employee Retirement Income Security
Act (ERISA) which was passed in 1974. [Copy on File]. That
piece of federal law regulates employee pension and welfare
plans.
Co-Chair Therriault noted that the letters from the medical
association had been drafted to the "M" version of the
legislation. He asked the differences between the two
versions. Representative Rokeberg pointed out that the
April 12 letter from the Alaska State Medical Association
(ASMA) addressed the "W" version. [Copy on File].
COLLEEN SAVOIE, (TESTIFIED VIA TELECONFERENCE), HEALTH CARE
CONSULTANT, BRADY & COMPANY, ANCHORAGE, noted three areas of
concern with the proposed legislation. She commented on the
conflict with ERISA. Ms. Savoie suggested placing language
in the bill which would clarify that ERISA supercedes
language contained in the bill. That action could remove
all conflict. She added that there are several items of
concern regarding conflict resolution such as removing the
fiduciary responsibility from the planned fiduciary. Such
an example would be the controversy over medical necessity
language which should be included in the plan and decided by
the plan's fiduciary. Ms. Savoie pointed out that language
had been included in several versions of HB 211 and defined
by the medical community.
Ms. Savoie noted, an additional concern that the bill does
not protect client participants. The bill is a "physicians
advocate" bill. She emphasized that in the end, it will
have an adverse affect on all the participants. This
legislation was not requested by the Alaskan public, but
instead it was drafted by the Alaskan physician
organizations. Ms. Savoie stated that members and families
belonging to the organizations represented by her, do oppose
the passage of HB 211 many of which are labor organizations.
Ms. Savoie continued, the third area of concern is that the
legislation would be detrimental and costly to health care
plan sponsors and the participants. She pointed out that
health care costs in Alaska are the highest in the nation
and that these costs will continue to increase over the
years. The costs will be passed down to the plan
participants. Ms. Savoie stressed that it is the
"physicians" who will be receiving the additional income if
the bill passes.
JIM JORDAN, (TESTIFIED VIA TELECONFERENCE), EXECUTIVE
DIRECTOR, ALASKA STATE MEDICAL ASSOCIATION (ASMA),
ANCHORAGE, advised that the proposed version does contain
protection for the Alaska clients. He voiced opposition to
comments made by the previous speaker. Mr. Jordan added
that ASMA feels that the ERISA pre-emption of various states
regulating "quality of care" issues, has been significantly
narrowed through recent court decisions and it is expected
that the National Patients Bill of Rights will address that
issue. Mr. Jordan noted that the current version of the
bill would provide an important patient protection. The
issues of liability and medical necessity need to be
addressed by the Legislature during the next session.
Representative Rokeberg requested Mr. Jordan explain the
importance of inclusion of ERISA in the bill. Mr. Jordan
replied that there is a question as to how ERISA is
currently constructed and how far the State can go in
regulating that. He noted that this is a complex issue and
up until the last couple of years, the courts have narrowly
interpreted ERISA. In recent years, there have been several
court cases that have moved away from that decision. At
this time, it is important to determine the quality of care
issues versus quantity. The court has specified that in the
decisions regarding the quality of care, the State will
regulate. That area would still be dependent upon
interpretations made by the court. There are three issues
in the midst of the debate. The first two are medical
necessity and liability and the third deals with the ERISA
concerns, expected to be clarified through federal
legislation.
Vice Chair Bunde inquired what would happen if a situation
was not an emergency, and how then would the appeal be
addressed. Representative Rokeberg replied that there are
two tracks of response. The first is the 24-hour track and
the second would be eighteen-days to appeal.
Vice Chair Bunde voiced concern with the payment and that
itemizing the qualifications of the appeal process would be
paid for by the participants. He questioned how the appeal
would come to resolution. Representative Rokeberg replied
that it would be through a third party external review
system. Representative Rokeberg advised that it would cost
nothing. In response to Representative Bunde,
Representative Rokeberg stated that if the person did not
like the appeal, that person could go to court, which would
create an arbitration situation.
Representative Rokeberg stated that the legislation provides
for truly independent review and judgement which is the
centerpiece of the legislation. Representative Bunde
clarified that the last review would rest with the
independent third party before it goes to court.
(TAPE CHANGE, HFC 00 - 113, Side 2).
Representative Rokeberg pointed out the letter included in
member's packets from Blue Cross and Blue Shield of Alaska
indicating their support of the bill. [Copy on File].
JOHN CYR, PRESIDENT, NATIONAL EDUCATION ASSOCIATION (NEA),
PRESIDENT OF NEA-ALASKA HEALTH TRUST, JUNEAU, noted that NEA
Health Trust insures the health of about 15,000 Alaskans,
and is an ERISA trust. He voiced concern when he heard that
the ERISA trust interpretation would be decided by the
court. He asked what this would cost the NEA Health Trust
down the road in legal fees. If a person were insured with
the NEA Alaska Health Trust, there exists only a question of
whether or not the procedure you need would be covered in
the health plan. There is an appeals procedure that is
built into that process. He stated that the main concern
now is if a service is covered or not.
Mr. Cyr requested that language be added to the bill which
clearly states that ERISA trusts are not covered by this
bill. He emphasized that by litigating some sections of the
bill would mean that ultimately, NEA members would bear
those costs.
Additionally, Mr. Cyr asked what the proposed legislation
would do to health care costs. At this time, the school
districts across the State are looking at a 15-20% increase
to health care costs across the board. As an employer, the
cost of health went up 44% last year. Small businesses can
not afford any future raises in the health care costs.
Co-Chair Therriault asked if ERISA indicated that State law
does not apply, would there need to be language added which
clarifies that State law does not apply to the federal law.
Mr. Cyr commented that he did not believe so until previous
testimony regarding the courts being the final decision
making body. Co-Chair Therriault advised that the Committee
would hold the bill to determine if that concern was valid.
Representative Rokeberg stated that the testimony from Mr.
Jordan indicates that the line of cases has to do with
quantity and quality. Only if it were a quality care issue,
would case law come down. He emphasized that the bill would
not apply to Mr. Cyr's organization.
Representative J. Davies questioned how removing the ERISA
concern would "hurt" the bill. Representative Rokeberg
stated that it was a quality of care issue, and should be
applicable. Representative J. Davies stated that could
exclude an entire section of actions of quantity.
Representative Rokeberg replied that would not be
appropriate; he noted that there are a large number of
people that would not be affected by the bill.
Mr. Cyr reiterated that NEA Health Trust does not oppose the
bill, however, they currently have an ERISA trust, which
insures about 15,000 Alaskans. He stated that he would like
to see continue in the future. If the passage of the bill
meant that health care costs would increase for members that
are insured, then NEA would oppose the legislation.
Co-Chair Therriault clarified that the risk of litigation
which NEA is fearful of, is regarding whether they are
included in the bill or not. Representative J. Davies asked
if Mr. Cyr understood the distinction between quantity and
quality and if it would be appropriate to State regulate
that.
Mr. Cyr replied that if it is the quality of health care
that is the issue, and NEA is not a "player", then it would
not be a concern. If there is a question regarding the
quality of the service that NEA provides, he pointed out
that there already exists a major appeals process within
their system.
Co-Chair Therriault asked the services that NEA provides.
Mr. Cyr replied that NEA serves all the teachers in the
Anchorage area school district and all the outlining
districts. NEA is self-insured and pays health care costs
for all their covered employees. The issues of quality are
the timeliness of return, and are handled internally. Those
issues are covered under ERISA and it is preferred that they
stay that way. When the Health Trust was established, it
was set up under that set of guidelines.
Representative J. Davies stated that he did not understand
the difference between quality and quantity. Mr. Cyr
stressed that under ERISA, there is a fiduciary
responsibility to their membership to have enough financial
savings and insurance to meet their medical needs.
Representative Rokeberg noted that a definition of ERISA
does exist. He stressed that NEA is exempt because they are
self-insured. It is only those ERISA groups that are
currently covered by insurance companies that would be
impacted by this bill. The potential impact may have
provisions at the federal level which would effect ERISA.
Representative Rokeberg requested Mr. Jordan to provide case
examples.
Mr. Jordan stated that there had been an extensive legal
analysis provided to the Chair of the House Judiciary
Committee. He spoke to the quantity versus quality concerns
voiced by Representative J. Davies. When the court makes a
determination of the privacy of regulation of the regulatory
authority that would be a mandated benefit such as the State
mandating that there be coverage for diabetes, would be a
quantity type issue. It appears that would be preempted
from having the State regulate the interests.
Mr. Jordan continued, the quality concern is more difficult
to explain. He stated that the definition assumes that an
item would need to be covered under the health plan. That
could have to do with a particular service that a patient
might want that the health plan determines is not medically
necessary. It is the type of discussion of what is "not
medically necessary", which is a quality issue concern.
This area is where the court would decide whether to allow
more regulatory authority. Mr. Jordan noted that these
types of cases are being brought forward by the people
enrolled under these plans. He acknowledged that this is
one of the key issues being discussed on the federal
legislation level. Currently, the ERISA plan participants
are not necessarily covered because of the ERISA pre-
exemption language. Federal law does have priority over
State law.
Representative J. Davies asked further clarification of
"medical necessity". He questioned the consequences of not
being able to come to an agreement in Committee.
Representative Rokeberg replied that a common law definition
of medical necessity has been used since statehood. Medical
necessity is either defined or indicated in all provided
contracts. Whether it is fully defined or not is the issue.
The medical profession wishes to redefine it and are working
their way around the system. They believe this is
justifiable. He assumed that the issue is how to have cost
containment and place constraints on them. Every plan is
different and the standards will be different. He noted
that the review process created in the bill, uses the terms
medical necessity and sets out the scope of the contract.
Additionally, it will determine the perimeters of the
external review board definition.
Representative J. Davies summarized comments made by
Representative Rokeberg, pointing out that it is determined
in the external review process and then ultimately in court.
Representative Rokeberg agreed.
Vice Chair Bunde asked if cost was a factor considered in
the medical judgement. Representative Rokeberg replied that
sometimes cost should be a factor and that being aware of
cost makes all providers more sensitive to that concern.
Representative J. Davies asked if the bill touched the issue
of whether the doctors were aware of these costs and their
interest in that. He suggested that the decision for the
medical group to prescribe would mean more money in their
pockets. Representative Rokeberg exclaimed that there is a
prohibition to giving incentives.
HB 211 was HELD in Committee for further consideration.
(TAPE CHANGE, HFC 00 - 114, Side 1).
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