Legislature(2025 - 2026)BELTZ 105 (TSBldg)
05/14/2025 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 | |
| SB159 | |
| HB121 | |
| SB154 | |
| SB121 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 159 | TELECONFERENCED | |
| + | HB 121 | TELECONFERENCED | |
| *+ | SB 154 | TELECONFERENCED | |
| + | SB 121 | TELECONFERENCED | |
| + | SB 122 | TELECONFERENCED | |
SB 121-HEALTH INSURANCE ALLOWABLE CHARGES
[CSSB 121(HSS) was before the committee.]
3:04:19 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 121 "An Act relating to
settlement of health insurance claims; relating to allowable
charges for health care services or supplies; and providing for
an effective date."
3:04:42 PM
SENATOR CATHY GIESSEL, District E, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 121. She stated that the bill
establishes minimum reimbursement standards for healthcare
services to ensure fair and sustainable payments to providers.
After the repeal of the 80th percentile rule it left no
reimbursement floor, clinics faced severe payment declines. She
said SB 121 guides the Director of Insurance to set and audit
standards requiring insurers to reimburse at least the 75th
percentile of statewide charges or 450 percent of Medicare
rates, using current, market-based data to maintain equitable
and affordable healthcare in Alaska.
3:07:53 PM
SENATOR BJORKMAN announced that Senator Gray-Jackson joined the
meeting.
3:08:01 PM
CHAIR BJORKMAN asked if the bill, to repeal the 80th percentile
rule, included a reimbursement floor set at 300 percent of
Medicaid rates.
3:08:12 PM
SENATOR GIESSEL replied that it was 300 or 350 percent of
Medicare not Medicaid.
3:08:34 PM
CHAIR BJORKMAN announced invited testimony on SB 121.
3:08:58 PM
JEFF DAVIS, Principal, Weston Group Consulting, Wenatchee,
Washington, provided a presentation on SB 121. He stated that
the 2004 regulation was intended to prevent balance billing,
where insurers paid far less than a provider's charge, by
establishing a market-based standard. However, the regulation
also had an unintended consequence, it became a key reference
point in payment negotiations between providers and insurers.
3:10:40 PM
MR. DAVIS moved to slide 2 and spoke to the following:
[Original punctuation provided.]
SB 121: Restores State-defined, Alaska-based standard
for health insurance allowable charges.
Protects Alaskans from large balance bills
Restores balance at bargaining table
Addresses criticisms of the 80th percentile
Require insurers to:
• Set allowable charges, usual, customary & reasonable
(UCR) at 75th percentile of Alaska charges (Reduced
from 80th percentile)
• Entire state is one region, not 4 separate
geographic regions
• Updated not more often than every three years
• Instead of every six months, not less than every
five years
3:11:57 PM
MR. DAVIS moved to slide 3, Why does Alaska need a UCR
replacement. He stated that there are two reasons a replacement
is needed. Insurers don't base payments on provider charges but
on an allowable amount, often referred to as the usual,
customary, and reasonable rate. Someone must determine that
allowable amount. Under the previous rule, it was set at the
80th percentile, roughly 450 percent of Medicare rates. After
the rule's repeal, insurers set their own standards, reducing
allowable payments to about 185 percent of Medicare, a drop of
around 60 percent.
3:12:55 PM
MR. DAVIS moved to slide 4 and provided examples why usual,
customary, and reasonable (UCR) rate matters to patients. He
said if UCR is set too low, patients pay more out of pocket.
When set at market rates, patients receive the full insurance
benefit they're paying for:
[Original punctuation provided.]
Benefit calculation examples:
Benefit with insurer-defined $100 charge for service
low UCR: Patient owes $60. UCR set at $50
80 percent benefit = $40
covered by plan
Patient owes $60
UCR at hypothetical 80th $100 charge for service
percentile: Patient owes $28. 80th percentile = $90
80 percent benefit = $72
covered by plan
Patient owes $28
3:13:26 PM
MR. DAVIS moved to slide 5 and stated that the 80th percentile
rule originally protected consumers when few providers had
contracts, setting a benchmark for reimbursement when no
agreement existed. He said as more providers became contracted,
about 90 percent by 2017, the rule no longer set payment terms
but still served as a key reference point in negotiations.
Providers often accepted slightly lower rates to remain in-
network, benefiting both patients and their practices, yet the
80th percentile continued to guide fair contract pricing.
3:15:39 PM
MR. DAVIS moved to slide 6 and spoke to the following:
[Original punctuation provided.]
Impact: Repeal with no "floor" replacement
No state-defined UCR method after repeal in January
2024
Insurers again used their own definition:
-Largest plans chose 185 percent of Medicare Physician
fee schedule
-185 percent is roughly 40 percent of the 80th
percentile
With UCR defined as 185 percent of Medicare Insurers
demanded steep reductions in contract rates!
-Insurers began demanding steep reductions in existing
contracts
Providers' alternatives:
• Accept reduced terms-not financially sustainable,
eventually close
• Go out-of-network and balance-bill patients
If terminate contract, large balance bills return
new insurers trying to establish network using low
UCR-may cause large balance bills
3:16:19 PM
MR. DAVIS moved to slide 7 and stated that before the repeal, a
provider might accept $80 on a $100 charge when the 80th
percentile was $90. After repeal, that benchmark dropped to
about $35 at 185 percent of Medicare, giving insurers much
greater leverage. He said without a replacement, the repeal
greatly weakened providers' bargaining power in reimbursement
negotiations.
3:17:09 PM
MR. DAVIS moved to slide 8 and explained that the graph shows
data from 13 medical practices comparing insurer payments and
insurance premiums over time. Provider payments remained flat or
declined, while insurance premiums rose about 30 percent. This
demonstrates that rising premiums are not caused by increased
provider reimbursements.
3:18:27 PM
MR. DAVIS moved to slide 9 and stated that repealing the 80th
percentile rule without a replacement created serious financial
strain on providers. Reimbursements have remained flat for years
while practice costs, especially staff wages, have risen by 47
percent since 2016. He said as a result, physicians' take-home
pay in Alaska is now the lowest in the nation. With insurers
seeking further reductions, providers face difficult choices
like closing practices, stopping care for Medicare or Medicaid
patients, or going out of network and balance bill patients,
returning to problems seen before 2004.
3:21:17 PM
MR. DAVIS moved to slides 10-13 and shared a few excerpts from
the many letters received in support of SB 12:
[Original punctuation provided.]
"My office is in danger of closing owing to shrinking
reimbursement. While inflation has occurred every year
and the cost of supplies like sutures, liquid
nitrogen, gauze?and expenditures such as health
insurance has grown exponentially (27 percent increase
in health insurance rates, 2025-2026)?our
reimbursement is CUT each year."
Matthew Cannava, MD, Soldotna
"?I have tried to negotiate with insurance companies
unsuccessfully. I am concerned that in the near future
I may have to close my practice given the
deteriorating financial situation for me in Alaska.
Given the lower reimbursement, it will be more
difficult for me to serve Medicare and Medicaid
patients since my economic situation is declining?I am
the only neurosurgeon in Fairbanks, Alaska and I want
to stay in Fairbanks, Alaska but I do need to operate
with positive margins. Please help me to continue to
do this with passage of Senate Bill 121."
John A. Lopez, MD, Fairbanks
"?Inflation has increased 30+ percent in the last 11
years. Reimbursements on average have DECREASED by 30-
40 percent. It is not sustainable for medical
practices in the state to continue to be able to pay
the cost of doing business with the rates that
Premera, who is setting in-network rates lower than 11
years ago, and out of network rates at 185 percent of
Medicare. The ONLY leverage we had in negotiating any
kind of fair reimbursements was to have a percentile
rule in place that at the very least allowed providers
to negotiate."
Debbie Ryan, Business Manager, Community Chiropractic,
Anchorage
"?As a family physician practicing in Juneau for over
25 years, I have seen a tremendous change in the
status of medical practices in Juneau. Patients have
less selection and options, as a number of independent
practices have closed (or merged into the local tribal
health system). Declining reimbursement and decreasing
income for physician practices are the factors causing
physician practices to become nonviable." Janice
Sheufelt, MD, Juneau
MR. DAVIS said physician practices becoming nonviable is a
serious and urgent situation. Alaska's provider community is at
risk, and losing physicians would have long-term consequences,
as they are unlikely to return.
3:24:15 PM
MR. DAVIS moved to slide 14 and stated that in summary, SB 121
restores Alaska's state-defined standard, protects consumers
from balance billing, and rebalances provider-insurer
negotiations while addressing criticisms of the 80th percentile
rule.
3:24:43 PM
MR. DAVIS moved to slides 15-18 and stated that the appendices
highlight reasons why healthcare costs are high, including cost
shifting from Medicare and Medicaid to private payers, which
raises prices for those patients. The appendices also explain
why premiums rise and why Alaska's healthcare system does not
operate as a true free market, providing context and reference
for common questions.
3:25:52 PM
SENATOR YUNDT asked how other states' laws compare to Alaska.
3:26:00 PM
MR. DAVIS replied that ten states: California, Texas, Florida,
New York, Nevada, Oregon, Utah, Colorado, Kansas, and South
Carolina have laws similar to Alaska's percentile rule, with
eight using the 80th percentile and two using the 90th
percentile.
3:26:29 PM
SENATOR YUNDT noted that it is unusual for payouts to decrease
while insurance premiums rise and suggested that the legislature
must address this issue soon.
3:26:47 PM
MR. DAVIS stated that provider costs make up about 2025 percent
of total healthcare costs, and with 90 percent of providers
under contract, rising expenses are not driven by provider
charges. Instead, costs are increasing due to Alaska's aging
population, the growing share of Medicare/Medicaid patients,
limited provider numbers, expanding medical technology that adds
rather than replaces, and the high cost of new pharmaceuticals.
Overall medical inflation is about 5 percent, though individual
market headlines show higher rates due to unique Affordable Care
Act (ACA) market factors.
3:29:14 PM
NOAH LAUFER, Physician, Medical Park Family Care, Anchorage,
Alaska, testified by invitation on SB 121. He stated that he
agreed with the testimony of Mr. Davis and said the crisis in
healthcare is urgent and more severe than many realize. At
Medical Park Family Care, he has 14 providers, 85 employees, and
3540,000 patient visits annually, reimbursement has been flat
for 10 years. He said the clinic sees about 25 Medicaid patients
a day and provides extensive care that is often uncompensated. It
has no negotiating leverage making its financial stability
tenuous - retirement or incapacity of an owner could force
closure. He said nobody wants to buy a business that doesn't
make a profit. He said the comprehensive coordinated care that
his clinic has offered to generations of patients is at risk.
3:31:53 PM
CHAIR BJORKMAN stated that the 80th percentile rule has been
absent for just over a year, but reimbursements were flat for
the previous 10 years and asked whether the rule had been
ineffective.
3:32:08 PM
MR. LAUFER replied that the 80th percentile rule wasn't critical
for his office because it sees all payers and is not the most
expensive. However, without it, there is no negotiation or
leverage with insurers; the only potential leverage would be
refusing patients and that would likely achieve nothing.
3:32:43 PM
CHAIR BJORKMAN stated that for nine of the last ten years the
80th percentile rule gave providers an automatic price floor
that increased twice a year and allowed providers to set their
minimum price. He asked if the 80th percentile rule worked so
well that providers are now requesting its reinstatement, then
why, given that environment, did reimbursement pay stay the
same.
3:33:18 PM
MR. LAUFER replied that the rule benefited the community by
fostering negotiation, but providers cannot set their own prices
and are paid only what insurers dictate.
3:33:51 PM
WADE ERICKSON, Physician, Capstone Clinic, Wasilla, Alaska,
testified by invitation on SB 121. He stated that up until
around 2017, the 80th percentile rule allowed providers to
negotiate fairly with insurers despite downward market
pressures. After 2018, negotiations ceased, and rates were held
steady. Following the repeal of the rule, insurers quickly set
floors at 185 percent of Medicare, triggering concern as the
safety net the rule provided disappeared. The rule had
maintained a floor that prevented further rate reductions, but
without it, independent practices face downward pressure from
insurers and hospitals, which control both premiums and provider
reimbursements.
3:37:13 PM
MR. ERICKSON stated that it's become difficult to receive
healthcare in the Lower 48, which in turn brings patients back
to Alaska to see their primary care physicians. Since the repeal
of the 80th percentile rule, specialists are leaving, making
recruitment difficult and threatening independent practices.
This could reduce access and quality of care, leaving hospitals
to fill the gap. He asked for immediate legislative action to
restore balance before 2027, or the damage to primary and
specialty care will be significant.
3:40:26 PM
GENE QUINN, Cardiologist, Alaska Heart and Vascular Institute,
Anchorage, Alaska, testified by invitation on SB 121. He said
Envoy Integrated Health is a physician collaborative focused on
improving the quality and reducing the cost of Alaskan
healthcare through coordination and population health. He said
starting with five groups five years ago, it now includes 38
practices, over 300 physicians, and other providers. The
collaborative uses value-based care and created Alaska's first
locally based accountable care organization, saving 67 percent
of Medicare costs, compared to the 1 percent reduction promised
by repealing the 80th percentile rule. He said threats to the
income of physicians, such as, the repeal, reduce investment in
infrastructure, discourage care for vulnerable populations, and
distract from meaningful healthcare improvements. Collaboration
with insurers on cost and quality, not payment disputes, is
essential to advance Alaska's healthcare system.
3:46:04 PM
CHAIR BJORKMAN commended hospitals, care providers, and insurers
for engaging in cost-of-care projects, including SB 133 on prior
authorization. He highlighted the contrast between low-wage
caregivers and highly trained providers, noting the need to
address healthcare costs beyond simply increasing government
funding. He said he supports exploring regulations or standards
to ensure more insurance premiums go toward provider
reimbursement, emphasizing a systemic approach rather than just
distributing more money, which drives premiums up.
3:48:29 PM
CHAIR BJORKMAN held SB 121 in committee.