Legislature(2023 - 2024)BUTROVICH 205
02/07/2023 03:30 PM Senate HEALTH & SOCIAL SERVICES
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| Audio | Topic |
|---|---|
| Start | |
| SB45 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 45 | TELECONFERENCED | |
SB 45-DIRECT HEALTH AGREEMENT: NOT INSURANCE
3:30:33 PM
CHAIR WILSON announced the consideration of SENATE BILL NO. 45
"An Act relating to insurance; relating to direct health care
agreements; and relating to unfair trade practices."
3:31:28 PM
CHAIR WILSON, District N, speaking as the sponsor of SB 45,
provided the sponsor statement as follows:
[Original punctuation provided.]
Senate Bill 45 is necessary to reduce barriers
between Alaskans and their chosen health care
provider. This bill allows patients and healthcare
providers to enter into direct health care agreements
(DHCA). A direct health care agreement is a
contractual agreement between a patient and a provider
for health care services. The patient pays a flat,
periodic fee (generally monthly) in exchange for
routine visits and access to their healthcare
provider.
These agreements are only between a provider and
a patient. Unlike the insurer-patient-provider
trifecta, in a DHCA agreement, no third-party is
directly participating in or profiting from the
provider-patient relationship. Doctors currently spend
about half their working hours on paperwork
including paperwork for third party insurance. Direct
Health Care (DHC) reduces bureaucracy by allowing
patients to pay a flat fee for routine care instead of
billing insurance for every doctor's visit. The
reduction in administrative burden leads to greatly
reduced costs and more time in the day for doctors to
spend with their patients.
While a person with private health insurance may
elect to obtain a DHCA to supplement their current
health insurance such as a high deductible plan, but
these models are not health insurance nor do they
replace it and should not be regulated as such.
This bill will clearly exclude qualified DHCA
from Title 21, or insurance regulations, and will
clear up any confusion regarding the legality of
direct health care agreements thereby improving the
public's access to lower cost, high quality health
care.
3:32:14 PM
SENATOR KAUFMAN arrived at the meeting.
3:32:40 PM
JASMIN MARTIN, Staff, Senator David Wilson, Alaska State
Legislature, Juneau, Alaska, said Senate Bill 45 reduces
barriers between patients and providers by clearly allowing
direct health care agreements. A direct health care agreement is
between a patient and a provider with no third-party
intermediary profiting. Parties spell out the terms of the
agreement in a contract. The patient pays a flat periodic fee in
exchange for routine care, provider access, and other services,
as spelled out in the contract. She stated that an
oversimplified analogy of how a direct healthcare agreement
works is a gym membership. A person pays to access a gym and
uses standard equipment, but extras like a tanning bed may not
be in the contract and require an extra fee. Direct health care
fees are about $100. An employer can pay the fee but is not a
party to the agreement. Direct health care has the following
benefits:
• Reduced bureaucracy
• More appointment opportunities
• Longer patient visits
• Reliable care
• Higher doctor morale
3:35:25 PM
MS. MARTIN said Alaska has broadly drafted insurance laws, and
the legality of direct healthcare agreements needs to be
clarified. Currently, the official opinion of the Department of
Commerce, Community and Economic Development is that insurance
statutes would regulate the agreements. She reiterated that
Alaska statute does not explicitly contemplate or prohibit these
direct provider agreements. The agreements fall under the broad
category of insurance as defined in Alaska law. SB 45 defines
that direct health care agreements are not insurance. Direct
health care agreements are different from insurance, health
maintenance organizations, and medical services corporations for
the following reasons:
• No third-party middleman
• No risk to the insurer
• Periodic fees are charged at the end of a period; no prepay
3:37:10 PM
MS. MARTIN provided the sectional analysis for SB 45 as follows:
[Original punctuation provided.]
Section 1: Adds a new section (.025 Direct health care
agreements) to AS 21 (Insurance) .03 (Scope of Code).
Section (a), page 1, line 5, through 11: Defines a
direct health care agreement (DHCA) as a written
agreement between a patient (or representative) and a
health care provider or business. This section also
stipulates that Medicaid recipients under AS 47.47 and
those receiving assistance for catastrophic illness
and chronic or acute medical conditions under AS 47.08
are not eligible to enter a DHCA.
Section (b), page 1, line 12, through page 2, line 19:
Specifies what a DHCA must contain.
(1) It must describe the services a patient is
entitled to for payment of a periodic fee.
(2) It must specify: the amount of the periodic
fee, the length of period the fee covers, any
additional fees the provider or business may
charge.
(3) It must include contact information for a
representative of the provider or business that
is responsible for patient complaints.
(4) It must state that the agreement is not
health insurance.
(5) Prominently state that the patient is not
entitled to protections under Patient Protections
Under Health Care Insurance Policies or Trade
Practices and Frauds (AS 21.07 and 21.36
respectively).
Section (c), page 2, line 20, through 29: Specifies
that a patient may terminate an agreement within 30
days. Requires any fees and payments, less payments
made for services the health care provider has already
performed that are not included in the periodic fee.
This section does allow the provider or business to
charge a cancelation fee equal to no more than one
month's cost of the periodic fee.
Section (d), page 2, line 30, though page 3, line 8:
Specifies that a patient or provider can terminate an
agreement after 30 days with at least 30 days' notice.
The provider must prorate the periodic fee to the date
of termination. The healthcare provider may charge a
termination fee if the patient is the one to initiate
the cancelation.
Section (e), page 3, line 9, through 11: Specifies
that a provider may change the fee up to once a year,
only with a written 45-day notice.
Section (f), page 3, line 12, through 14: Specifies
that the patient is billed by the provider at the end
of the period covered by the fee.
3:40:35 PM
At ease.
3:41:25 PM
CHAIR WILSON reconvened the meeting.
Section (g), page 3, line 15, through 20: Allows an
employer to pay the periodic fee on behalf of an
employee. This does not mean the employer is a health
insurance provider or business.
Section (h), page 3, line 21, through 31: Sets terms
by which a health care provider may immediately
terminate a DHCA.
Section (i), page 4, line 1, through 5: Specifies that
a patient or provider may terminate a DHCA if either
party violates the terms of the agreement.
Section (j), page 4, line 6, through 9: Specifies that
a DHCA is not subject to AS 21.07 (Patients
Protections Under Health Care Insurance Policies) or
AS 21.36 (Trade Practices and Frauds) but is subject
to other consumer protections and regulations.
Section (k), page 4, line 10, through 22: Specifies
that a DHCA is not insurance and is not regulated as
such.
Section (l), page 4, line 23, through page 5, line 8:
Defines: health care business, health care insurance,
health care insurer, health care provider, health care
service, health insurance, health maintenance
organization, and medical services corporation.
Section 2: Adds a new section (.915 Direct health care
agreements) to AS 45 (Trade and Commerce) .45 (Trade
Practices).
Section (a), page 5, line 11, through 17: Specifies
that a provider may not decline to enter or terminate
a DHCA solely based on a patient's status within a
protected class.
Section (b), page 5, line 18, through 23: Specifies
that a provider may decline to enter an agreement if
they are unable to provide the care the patient needs,
or their practice is at capacity.
Section (c), page 5, line 24, through 27: Specifies
that a provider may terminate a DHCA with a current
patient based on their health status only if the
providers is not able to provide the services the
patient requires or in accordance with AS 21.03.025
(section 1 of this legislation).
Section (d), page 5, line 28, through page 6, line 2:
Defines: direct health care agreement, health care
business, health care provider, and health care
service.
Section 3: Adds a new paragraph to AS 45 (Trade and
Commerce) .45 (Trade Practices) .471 (Unlawful acts
and practices).
Section (58), page 6, line 4: Adds violations of AS
45.45.915 (section 2 of this legislation) to the list
of unfair methods of competition and unfair or
deceptive acts or practices in the conduct of trade or
commerce that are declared to be unlawful.
3:44:02 PM
MS. MARTIN noted that SB 45 allows for direct health care
agreements. Direct health care and direct primary care are
similar terms, but not interchangeable, as primary care
agreements only allow for contracts with primary care
physicians. Some testifiers may use the term direct primary care
agreements.
3:44:49 PM
SENATOR GIESSEL referred to SB 45, page 3, line 23, and asked
what would constitute a failure to comply with a treatment.
3:45:30 PM
MS. MARTIN deferred the question to Mr. Diemer.
3:45:47 PM
CHAIR WILSON opened invited testimony on SB 45.
3:46:00 PM
PETER DIEMER, Partner, Clayton & Diemer LLC., Anchorage, Alaska,
replied that he would briefly overview SB 45 and then respond to
the question. He stated that SB 45 allows the legislature to
make limited-scope amendments to Title 21 so that Alaska can
fully embrace the direct healthcare service and payment model.
Title 21 currently contains a broad definition for health care
insurer, health care maintenance organization, and medical
service corporation. SB 45 creates a safe harbor for providers
and patients who elect to engage in a qualified direct health
care agreement while creating important patient and consumer
protections. SB 45 does not change the relationship between a
patient and their insurer. The Division of Insurance regulates
insurance, health maintenance organizations, and medical service
organizations. SB 45 does not change the exercise of independent
clinical judgment by the provider or any existing regulations
that apply to various licensed providers engaging in a direct
health care agreement. In answer to Senator Giessel's question,
he replied that Alaska administrative codes, promulgated by the
American Medical Association (AMA), apply to all physicians. He
stated that SB 45, Section 1, subsection (h), paragraphs (1-3)
are consistent with the AMA's code of ethics and published
guidance on terminating a physician-patient relationship.
3:50:33 PM
SENATOR GIESSEL commented that the language seems broad as
patients routinely do not follow treatment plans.
3:51:10 PM
SENATOR TOBIN asked what would happen if a patient could not
complete a treatment plan due to lacking personal funds.
3:51:45 PM
MR. DIEMER replied that direct health care agreements usually do
not include prescriptions within the scope of services, as
physicians generally only offer the services they can provide.
Typically, physicians work with patients to obtain needed
treatment. Standards for the termination of a patient
relationship exist. A physician must use the AMA code to
determine whether the relationship can continue. Termination is
generally due to a lack of willingness to comply.
3:52:56 PM
SENATOR TOBIN suggested adding language to SB 45 to clarify that
a doctor cannot arbitrarily drop a patient from an agreement.
3:53:27 PM
SENATOR GIESSEL agreed that medication is often more expensive
than a physician's visit. She stated it would be prudent for a
patient to carry health insurance.
3:54:21 PM
MR. DIEMER replied that direct health care agreements are
complementary to insurance. Direct healthcare agreements are
often a good fit for individuals with high deductibles. Most
providers recommend that patients maintain insurance.
3:55:21 PM
SENATOR GIESSEL responded that the cost of a medical visit and
medication gets applied to a high deductible. She reasoned that
direct health care agreements benefited the providers and asked
how the agreements benefit patients.
3:56:04 PM
CHAIR WILSON stated that a direct service agreement could
benefit an individual who does not elect employer vision or
dental plans. Direct healthcare agreements provide more options
to consumers.
3:57:09 PM
SENATOR TOBIN asked whether direct health care insurance could
be equivalent to insurance.
CHAIR WILSON deferred the question to Ms. Wing-Heier.
3:57:39 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED) Juneau,
Alaska, replied that the division does not consider direct
health care agreements a substitute for health insurance. She
explained that many families only benefit from their insurance
plan if they reach their insurance plan's deductible. A low
deductible for a family of four is $7,000. A direct care
agreement is a fixed amount that allows individuals and families
to visit a provider as often as needed without paying extra.
Many Alaskans desire the state to offer direct health care
agreements. The agreements are beneficial when primary care
physicians do not accept Medicare.
3:59:27 PM
SENATOR KAUFMAN said he knew of a doctor who could not keep up
with insurance paperwork and decided to retire. He asked if
direct health care agreements would help keep doctors in the
workforce since they would not be bound to the documentary
requirement of insurance companies and the government.
4:00:10 PM
MS. WING-HEIER replied that she could not speak for doctors.
However, previous testimony indicated paperwork contributes to
burnout, and many doctors like that direct health care
agreements would allow them to be effective in their community
without burdensome billing.
4:00:52 PM
DR. JOSH UMBEHR, CEO, Atlas MD Clinics, Wichita, Kansas, said
direct healthcare agreements help patients, doctors, and
employers. He said his clinic had used the same model for 12
years and had never raised prices. The monthly charge for
unlimited primary care is $10 per child and $50, $75, or $100
per adult. Primary care includes office visits, telemedicine, no
copay, in-office procedures, and wholesale costs for medications
and lab work, which is 95 percent cheaper. He opined that direct
healthcare cost agreements reduce emergency room visits, provide
better continuity of care, decrease specialty referrals, and
lower insurance premiums for small employers between 30 - 60
percent. He said direct healthcare agreements create efficiency.
Having enough doctors is not a problem in health care. The
problem is that doctors spend 40 percent of their time doing
non-clinical paperwork. He stated he had helped over 2,000
doctors open more than 800 - 900 clinics.
4:03:40 PM
SENATOR DUNBAR said SB 45 allows doctors to terminate an
existing agreement if they cannot provide a service. He asked if
a doctor could deny an initial contract based on health status.
He wondered if Mr. Umbehr's clinic does screenings for very sick
individuals.
4:04:27 PM
MR. UMBEHR replied that his clinic does not have any constraints
on preexisting conditions. He has never seen a doctor refuse a
patient for not taking medication. He reiterated that the
American Medical Association (AMA) has an established standard
that allows doctors to discontinue a relationship that is not
healthy or productive, such as failure to pay, making staff feel
unsafe, and personality conflicts. A doctor might not enter a
contract if he does not provide a particular service that the
patient wants, such as obstetrics.
4:06:20 PM
SENATOR DUNBAR restated his question and referred to SB 45,
Section 2, subsection (a), which lists reasons a healthcare
provider may not decline to enter a direct healthcare agreement.
He asked whether adding preexisting conditions to the list would
change the healthcare model.
4:07:31 PM
MR. UMBEHR replied that the direct health care model is similar
to other models. It is a business decision that does not affect
ethics. The rules that apply to insurance-based doctors apply to
direct care. Financial arrangements do not affect ethics.
4:08:32 PM
SENATOR TOBIN asked whether a woman would have to pay a
cancellation fee if she became pregnant and wanted to change to
a doctor who did obstetrics.
4:09:07 PM
MR. UMBEHR replied that he could not speak to SB 45, but that is
not how the business model functions; it is a month-to-month
contract. Usually, a patient continues with their primary care
doctor, who assists them in finding an obstetrician.
4:10:57 PM
MR. DIEMER referred to AS 45.45.915 (b) and said that a
healthcare provider could decline to enter into a new healthcare
agreement if the provider cannot provide the patient's required
service. A physician can only take patients that they can serve.
A patient would not have to cancel a direct health care
agreement if a medical need arose that their physician could not
fulfill. A direct health care agreement offers a menu of
services, and the patient could continue to receive those
services while seeing a specialized doctor for other services.
He clarified that SB 45 contains a cancellation fee provision,
not a mandate.
4:13:35 PM
DR. LEE GROSS, Direct Primary Care Provider, Patient Care
Foundation, North Point, Florida, said he has been practicing
under the direct care model since 2012. He noted that he has an
office in the second poorest county in Florida. The hospital
agreed to pay the membership fees for all employees that sign up
for a direct health care agreement. The hospital structured its
self-funded insurance plan around the direct health care model.
It eliminated all copays and deductibles for hospital services,
such as CAT scans and surgeries. His office and the hospital
eliminated all financial barriers to accessing routine and
unpredictable services. He said the arrangement with the
hospital has been in place for four years. In the first year,
the agreement reduced employee premiums by 20 percent, and
employee premiums have not increased. The hospital has seen a
sustained 55 percent reduction in its employee health plan cost,
which has saved it millions of dollars. Rural health care has
many obstacles, such as access. He described services and
situations where the direct health care model allowed his office
to respond to crises faster and more efficiently than providers
who bill insurance companies. Rural hospitals are struggling to
stay open, but the hospital he works with had one of the best
financial years in its history.
4:17:25 PM
CHAIR WILSON asked if SB 45 could help enhance rural hospitals'
business models.
DR. GROSS replied that his business is a four-year proof of
concept. He opined that the concept applies to more than just
rural hospitals. Various socio-economic areas are practicing it.
The variability and flexibility of the direct care model make it
a very powerful tool.
4:18:42 PM
SENATOR GIESSEL asked whether Medicare prevents patience from
paying for their healthcare. She stated her understanding that
providers could only accept what Medicare pays.
4:19:24 PM
MS. WING-HEIER responded that a direct health care agreement is
not insurance, and it is not Medicare. A consumer can
participate in an agreement and receive primary care while not
impacting Medicare. She stated that the department thoroughly
explored this question two years ago.
4:20:00 PM
SENATOR GIESSEL said this could benefit Medicare beneficiaries
who can afford to enter into an agreement.
4:20:29 PM
SENATOR DUNBAR asked why a person on Medicaid cannot enter into
a direct health care agreement as stated in SB 45, page 1,
Section 1.
4:20:53 PM
MS. MARTIN replied that Medicaid is a payer of last resort,
which complicates direct health care agreements. Therefore, it
was requested to be omitted from participation.
4:21:24 PM
SENATOR DUNBAR requested the sponsor provide a more substantive
reason for excluding Medicaid as he is concerned that the
agreements will target healthier and wealthier people and harm
lower-income individuals indirectly.
4:22:22 PM
CHAIR WILSON said SB 45 is primarily to help underinsured
individuals who never reach their high deductible.
4:22:56 PM
MS. WING-HEIER said a payer of last resort is the final
insurance to pay on a claim. For example, an Aetna policy would
pay first, and Medicaid would pay second. If a direct health
care agreement covered an individual's needs, there would be no
secondary payment.
4:23:29 PM
SENATOR DUNBAR responded that direct health care agreements are
not insurance and wondered why Medicaid would be implicated.
4:23:38 PM
MS. WING-HEIER replied that the Department of Health would need
to respond.
4:23:56 PM
CHAIR WILSON asked if Mr. Diemar had any comment.
4:24:04 PM
MR. DIEMER said SB 45 excluded Medicaid for two reasons. First,
direct healthcare agreements deliver healthcare services.
Medicaid's complex rules require compulsory billing and payment
according to its schedules for receipt of healthcare services
for a Medicaid beneficiary, which is then in tension with a
healthcare agreement. Some states have explored Medicaid pilot
programs where Medicaid enters into a direct health care
agreement with providers. Those agreements were between the
state and the providers of defined services. The Department of
Health asked to exclude Medicaid beneficiaries because they will
receive a greater scope of care and services under Medicaid than
through a direct health care agreement.
4:25:35 PM
SENATOR DUNBAR asked if there was a reduction in the number of
physicians accepting Medicaid in the states allowing direct
health care agreements.
4:25:49 PM
CHAIR WILSON stated he was unaware of any studies indicating a
reduction in physicians accepting Medicaid due to direct health
care agreements.
4:25:58 PM
MR. UMBEHR replied that he had not seen any significant drop in
physicians accepting Medicaid. Instead, there has been an uptake
in the number of Medicaid patients able to receive care. He
stated that fewer than one in 11 Kansas doctors were taking new
Medicaid patients a few years ago. He opined that being able to
have a contract with a doctor outside of Medicaid unburdens the
system in ways such as no copays, free telemedicine, and
decreased travel responsibility. He compared it to being able to
use food stamps not only at the grocery store but at McDonald's.
He opined that direct healthcare practices result in a net gain
for Medicaid.
4:27:24 PM
DR. GROSS stated that direct healthcare providers in Florida
could see Medicaid patients. He said he understood the concern
regarding the complexity of Medicaid but suggested the focus
should be on the improved access Medicaid patients experience
due to direct healthcare agreements. In Florida doctors that
previously did not accept Medicaid began accepting Medicaid
patients. He stated that the direct healthcare model does not
create healthcare access obstacles for people experiencing
poverty; it improves it. He said that people who do not have
insurance or frequently need to be seen by a doctor travel many
hours to his clinic and are glad they can be seen for $80 per
month for an adult and $15 per month for a child.
4:28:58 PM
SENATOR GIESSEL asked what the distinction is between Medicare
and Medicaid as payers of last resort.
4:29:10 PM
MS. WING-HEIER replied that she would speak with the Department
of Health and respond to the committee.
4:29:22 PM
SENATOR KAUFMAN asked if direct health care agreements prevent
doctors from working pro bono.
4:29:46 PM
MR. UMBEHR answered no; doctors are more likely to offer
scholarships or discounts to patients because, in a typical
insurance setting, over and under-billing is considered fraud.
The direct healthcare model frees doctors up for charity work
and medical student mentoring. It is a net gain for at-risk
people.
4:31:12 PM
SENATOR TOBIN referenced SB 45, page 3, line 9, and asked if
there is a provision for a patient to decline a continuation of
an agreement if there is a fee increase.
MS. MARTIN replied that there is no such provision in SB 45.
SENATOR TOBIN suggested adding a provision.
4:31:58 PM
SENATOR TOBIN asked what recourse patients with direct health
care agreements would have if mistreated.
4:32:24 PM
MS. MARTIN replied that the recourse for unfair treatment would
be through the Attorney General's Office under acts of unfair
trade practices.
4:32:49 PM
CHAIR WILSON opened public testimony on SB 45; finding none, he
closed public testimony.
4:33:47 PM
SENATOR GIESSEL asked if the Department of Health (DOH) would
come before the committee to discuss the differences between
Medicaid and Medicare as payers of last resort.
CHAIR WILSON replied that he would ask DOH to prepare a response
when they next meet with the committee.
4:34:36 PM
CHAIR WILSON held SB 45 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 45 v S.PDF |
SHSS 2/7/2023 3:30:00 PM SHSS 2/9/2023 3:30:00 PM |
SB 45 |
| SB 45 Sponsor Statement 2.1.2023.pdf |
SHSS 2/7/2023 3:30:00 PM SHSS 2/9/2023 3:30:00 PM |
SB 45 |
| SB 45 Sectional Analysis v. S 2.1.23.pdf |
SHSS 2/7/2023 3:30:00 PM SHSS 2/9/2023 3:30:00 PM |
SB 45 |
| SB 45 v S Fiscal Note.pdf |
SHSS 2/7/2023 3:30:00 PM SHSS 2/9/2023 3:30:00 PM |
SB 45 |