Legislature(2023 - 2024)BELTZ 105 (TSBldg)
03/27/2023 01:30 PM Senate LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB74 | |
| SB75 | |
| SB84 | |
| SB45 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 74 | TELECONFERENCED | |
| += | SB 75 | TELECONFERENCED | |
| += | SB 84 | TELECONFERENCED | |
| + | SB 45 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 45-DIRECT HEALTH AGREEMENT: NOT INSURANCE
[CSSB 45(HSS) was before the committee.]
2:19:29 PM
CHAIR BJORKMAN reconvened the meeting and 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."
He asked Senator Wilson to introduce the bill.
2:19:51 PM
SENATOR DAVID WILSON, District N, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 45, paraphrased the following
sponsor statement:
[Original punctuation provided.]
Senate Bill 45 is necessary to reduce barriers between
Alaskans and their chosen health care provider. This
bill allows patients and health care 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 health care 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 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.
Please contact Jasmin Martin in my office at (907)465-
8165 or by email at [email protected] for more
information. I respectfully ask for your support of
this legislation.
2:22:09 PM
SENATOR GRAY-JACKSON asked if he said that SB 45 eliminates
explanation of benefits (EOBs).
SENATOR WILSON answered no, but somebody who had a direct health
care provider agreement that was outside of insurance would not
receive an EOB because the benefit would be within their health
contract.
SENATOR GRAY-JACKSON commented that she likes receiving
electronic EOBs and sought further clarification.
SENATOR WILSON replied that this is not insurance and would be
separate from getting an EOB.
2:23:13 PM
JASMINE MARTIN, Staff, Senator David Wilson, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for SB 45.
[Original punctuation provided.]
Sectional Analysis
Senate Bill 45 v. U
"An act relating to insurance; relating to direct
health care agreements; and relating to unfair trade
practices."
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 10: Allows a
provider and a patient to enter into a direct health
care agreement. 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 11, through page 2, line 24:
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 and for patients
request to amend the agreement.
(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 25, through page 3, line 1:
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.
Section (d), page 3, line 2 - 12: Sets terms by which
a health care provider may immediately terminate a
DHCA.
Section (e), page 3, line 13 - 15: Specifies that a
patient may terminate a DHCA immediately if a provider
violates the terms of the agreement.
Section (f), page 3, line 16 - 22: Specifies that a
provider may change the fee up to once a year, only
with a written 45-day notice. A patient may cancel
within those 45 days with no penalty.
Section (g), page 3, line 23 - 26: Specifies that a
patient or provider can terminate an agreement with at
least 30 days' notice.
Section (h), page 3, line 27 - 30: Specifies that a
provider may charge a termination fee if the patient
cancels under (c) or (g).
Section (i), page 3, line 31, through page 4, line 4:
Specifies that a patient must pay the periodic fee,
prorated through the date of termination if they
cancel under (f) or (g).
Section (j), page 4, line 5 - 7: Specifies that the
patient is billed by the provider at the end of the
period covered by the fee.
Section (k), page 4, line 8 - 13: 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 (l), page 4, line 14 - 17: 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 (m), page 4, line 18 - 30: Specifies that a
DHCA is not insurance and is not regulated as such.
Section (n), page 4, line 31, through page 5, line 21:
Defines: direct health care agreement, 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 22 - 29: 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 30, through page 6, line 4:
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 6, line 5 - 8: 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 9 - 21: This is a "false
advertising" clause. This section prohibits a provider
from false advertising regarding a direct health care
agreement. It specifically prohibits advertising these
agreements as insurance or as an alternative to
insurance.
Section (e), page 5, line 22 - 28: Defines: direct
health care agreement, health care business, health
care provider, health care service, and health
insurance.
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 29 - 30: 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.
2:30:51 PM
SENATOR MERRICK asked how many providers are interested in
providing this service.
SENATOR WILSON answered that he did not have an exact number.
2:31:36 PM
SENATOR DUNBAR directed attention to the sectional analysis to
Section H, cross-referenced with Section C and Section G. He
asked about the need for allowing the provider to charge a
termination fee. He expressed his understanding of Section C,
that the patient must cover outstanding costs. Regarding Section
G, he noted the equal ability of both parties to sever the
relationship with a 30-day notice. He asked the reason to allow
an additional termination fee.
MS. MARTIN replied that the only scenario in which the provider
is allowed to charge a termination fee is when the patient
initiates the cancellation.
SENATOR DUNBAR commented that patients would need to give a 30-
day notice, potentially paying for a full month of service. He
questioned the reason for allowing providers to charge for an
additional month of service, on top of the initial termination
fee.
MS. MARTIN responded that it might be useful to have the health
care attorney Pete Diemer join the conversation.
2:33:12 PM
SENATOR WILSON added that many entities do the same to recover
the cost. The termination fee allows time to recoup. The fee is
agreed to when the parties sign the contract, so it does not
come as a surprise. Hopefully it will be explained to individual
patients.
2:34:04 PM
MS. MARTIN commented that SB 45 does not require a provider to
charge a cancellation fee. The written agreement must contain
any such fees so the patient would be aware of this before
entering the agreement.
2:34:24 PM
SENATOR DUNBAR said that this is a unique situation in a highly
regulated industry, where a large disparity exists between
information and relative power between providers and their
patients. He suggested that consumers could be protected by
eliminating the possibility of a termination fee.
2:35:26 PM
CHAIR BJORKMAN segued to invited testimony.
2:35:41 PM
PETE DIEMER, Health Care Attorney, Clayton and Diemer, LLC,
Anchorage, Alaska, gave invited testimony on SB 45. He clarified
that SB 45 was not designed to replace insurance, but to be a
safe harbor to providers and patients who desire this
alternative arrangement. It is not designed to replace the
existing robust regulation of health care providers under their
professional licensing rules, but should work in concert with
existing consumer protection rules under the Alaska Unfair Trade
Practices and Consumer Protection Act. He directed the following
answer to Senator Dunbar's question: the concept behind the
cancellation fee is potentially to cover the administrative cost
of onboarding; the cancellation fees are permissive, not
required and cannot be charged were the provider to terminate
the agreement.
2:38:27 PM
SENATOR MERRICK asked why a provider would choose to terminate a
contract.
MR. DIEMER answered that the patient-physician relationship is
governed by existing Alaska regulation which has adopted the
American Medical Association 2016 Code of Ethics. It provides
sideboards for the patient-physician relationship in the event
of termination. Should the relationship become dysfunctional,
this would be the mechanism that would allow a physician to
terminate the relationship.
2:40:08 PM
SENATOR DUNBAR commented that Mr. Diemer's answer about the
termination fee makes sense in terms of the administrative costs
of onboarding someone. He noted that subsection (h) allows a
termination fee in both the onboarding with subsection (c), as
well as in subsection (g), which covers the broader provision
for the patient terminating the relationship. He asked, if the
provider has already recovered their administrative costs, if it
would be harmful to the providers if this were limited to only
subsection (c), not subsection (g). He expressed that he is
trying to protect consumers so they are able to get out of these
relationships in a way that isn't punitive. He prefers to avoid
a gym membership style situation, in which a customer pays a
monthly fee and does not get anything out of it. He asked Mr.
Diemer whether that narrower amendment would be less harmful to
providers.
MR. DIEMER deferred to the bill sponsor, but stated that in his
view, elimination of the permissive cancellation fee within
subsection (g) would not negatively alter the framework. It
would provide greater patient protection. The upfront
administrative costs are incurred early and that's what
subsection (c) would be designed to address. Conceptually, he
agreed that the administrative costs would already be covered
should subsection (g) termination occur.
2:42:52 PM
CHAIR BJORKMAN asked how the relationship currently works
between patients who don't have healthcare insurance and their
health care provider.
MR. DIEMER replied that SB 45 is designed to work in conjunction
with insurance. It would work particularly well with high
deductible plans. If a patient does not have insurance today,
their relationship with the provider is a fee for each service.
The distinction with the direct health care agreement concept is
that it allows a provider to offer a defined menu of services
for a defined periodic fee. This allows a greater breadth of
services at a typically much lower cost than a fee for service
model.
2:44:54 PM
CHAIR BJORKMAN asked how patients who are seeking care know the
difference between health care they are receiving and what would
be covered by insurance.
2:45:27 PM
MR. DIEMER said it depends whether the patient has or does not
have insurance. If the patient does not have insurance, then
there is no insurance to cover anything; in that scenario they
would be "fee for service." In the direct healthcare agreement
scenario, there would be a menu of services for a defined
periodic fee. If the patient has insurance, then the scope of
the services provided by the direct health care provider are
often different than the services that might be covered by the
insurance. These work well with high deductibles. The patient
might be $7,000 away from accessing a service but those same
services might be covered by that periodic fee, providing
greater access to services before the insurance is triggered.
Direct healthcare agreements are designed to increase patient
access to care, particularly in the case of high deductible
plans. In the insurance context, the deductible is designed to
reduce access to care, and this is designed to bridge that gap.
2:47:24 PM
CHAIR BJORKMAN commented that he was struggling with whether the
client with a DHCA can negotiate with their provider. He
summarized that this bill proposes to charge an initiation fee
for someone to have access to a medical provider, then there is
a subscription fee to gain access to a deductible-free menu of
services that can be adjusted according to whatever the provider
and patient decide.
2:49:11 PM
MR. DIEMER disagreed with the characterization of this being a
fee for access. He said this is a fee for a defined scope of
services that may include a whole menu of items such as labs,
wellness checks, and sick checks. This is not like concierge
medicine where one pays for a fee for accelerated line pass, or
access; this is a defined scope of services for a defined fee.
There might be certain services that are outside a direct health
care agreement, such as a specialty service, but it's not a fee
for access.
CHAIR BJORKMAN said he was reading from a statement that says
the patient pays a flat periodic fee, generally monthly, in
exchange for routine visits and access to their health care
provider.
2:50:33 PM
SENATOR WILSON responded that SB 45 is geared toward those who
are underinsured. Most of the patients who have no insurance
will be covered through other state programs. Those on Medicare
or those who have high deductible plans can set up a plan based
on a la carte services where everything is negotiable. This
supplemental plan would not put those patients before or after
other patients in terms of access to services. Some people never
go to the doctor because they wait for catastrophic events to
occur and they can't afford to pay out-of-pocket before their
insurance is available. With a direct health care agreement, the
patient knows the price ahead of time so it could help increase
access.
CHAIR BJORKMAN asked whether someone's membership fee goes
toward their deductible for their insurance policy.
SENATOR WILSON answered no because this is not insurance.
2:53:13 PM
SENATOR DUNBAR commented that in the prior committee of
referral, there was a reference that the fees are often close to
$100. He sought clarification on how a provider makes money at
$100 per month. An a la carte menu implies that a patient is
purchasing services as needed, but the bill describes a
membership fee. He asked if member patients have access to a
certain number of appointments, or if it is unlimited.
SENATOR WILSON replied that $100 was the average national fee
for states that already practice direct healthcare or DHCA
agreements. There are many different health care specialties and
health care providers so it is going to be different for each
health care provider. One's direct healthcare agreement could
have a set price for basic wellness checks, but this might be
the set price per Xray; it depends on the agreement and how
complicated or simple it might be. It is up to the individual
providers to set those agreements.
2:55:29 PM
MS. MARTIN commented that being able to charge low fees is an
example of how much money and time is being wasted on the
bureaucracy of billing different insurances.
SENATOR DUNBAR agreed that there is a lot of bureaucracy in the
health insurance system, especially in Alaska where costs are so
high. He is still concerned that there would be a mismatch
between what consumers are going to expect from SB 45 and what
is going to be provided if fees are that low, especially in
medical services where there is such an asymmetry of information
between consumers and medical providers. Maybe a consumer
thought something was covered, but the thing they needed doesn't
count. He expressed that he is struggling with how these
economics would play out in Alaska.
2:56:59 PM
[The following testimony is garbled and some is indiscernible.]
DR. JOSH UMBEHR, Family Physician, Atlas MD, Wichita, Kansas,
gave invited testimony on SB 45. He said that he has been a
direct primary care physician for 13 years and is one of the
creators of the movement. He opined that the bill has far more
language than necessary. Most states have far less regulation
because direct primary care is in a separate class than other
physicians. This practice falls under all standard state rules
and AMA guidelines. To the Senator's point about cost
effectiveness, he said his clinic charges $10 per month in fees.
[The remainder of the testimony is indiscernible].
2:58:43 PM
SENATOR WILSON agreed with Dr. Umbehr's comments about prices.
Denials Management LLC returns a lot of claims to the providers
which takes staff time to process; it can cost hundreds of
thousands of dollars per year to process denials for just one
small health clinic. Cutting out the middle man and implementing
direct health care agreements will help Alaska get to a better
cost of care.
2:59:53 PM
SENATOR DUNBAR asked Dr. Umbher what his patients get for the
$10 per month fee.
DR. UMBHER explained that the per month fee is $10 for children
aged 0-19, $15.75-$100 per month for adults based on age for
services such as: unlimited home visits, office visits, tele-
medicine visits, no co-pays, any procedure free of charge,
biopsies, injections, ultrasounds, casting, splinting,
medication and labs in house. The total comes out to about a 95
percent savings. It will vary by location due to the cost of
living but is a viable model to drastically reduce the cost of
care which can help small businesses decrease the cost of
insurance.
SENATOR DUNBAR asked Dr. Umbher how he earns money and whether
he is subsidized because $10 per month would not seem to cover
costs.
DR. UMBHER answered that it has proven to be profitable, growing
by about 20-30 clinics per month. Charging $50 per patient per
month averaged across all ages, equals $360,000 per year. There
is one nurse for every two doctors.
3:03:36 PM
CHAIR BJORKMAN held SB 45 in committee.