Legislature(1997 - 1998)

04/29/1998 03:13 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
CSSB 197(RLS)am - REGULATING HEALTH MAINTENANCE ORGS.                          
Number 0732                                                                    
CHAIRMAN BUNDE announced the next order of business would be CSSB
197(RLS)am, "An Act relating to health care services provided by,              
and practices of, a health maintenance organization; providing that            
an enrollee in a health maintenance organization has the right to              
select a treating chiropractor; specifying certain chiropractic                
health care reports, examinations, and limits on treatment; and                
prohibiting health maintenance organizations from limiting free                
speech of health care providers," sponsored by Senator Dave Donley.            
SENATOR DAVE DONLEY informed the committee that CSSB 197(RLS)am                
limits certain practices of health maintenance organizations (HMO).            
First, it prohibits HMOs from initiating the infamous gag rules on             
doctors.  Additionally, it provides that customers shall be                    
informed if there are services that are not covered under a                    
maintenance organization plan to eliminate the element of surprise.            
He said the bill also sets out specific provisions for direct                  
access to chiropractic care rather than requiring all patients to              
go through a gatekeeper, as is the practice that has been developed            
by HMOs in other parts of the country.  CSSB 197(RLS)am also                   
provides for a point of service option for enrollees in HMOs that              
allows an option to choose a different deductible or a higher cost,            
if the enrollee wishes to go to the health care provider of their              
SENATOR DONLEY advised the members he has suggested an amendment,              
which would add language to an existing statute prohibiting unfair             
discrimination against persons who provide a service.  He said it              
would add HMOs into the existing health insurance so the same                  
prohibition that exists in statute for all other kinds of medical              
insurance would also apply to HMOs.  He said Chairman Bunde had                
proposed an amendment which he agrees with, which provides that if             
an HMO or insurance company decides to deny, reduce, or terminate              
a health care benefit to deny payment for a health care service, it            
must be based on the recommendation of a licensed health care                  
provider within that specialty or subspecialty, and also a provider            
who is licensed to practice in Alaska.                                         
Number 0868                                                                    
REPRESENTATIVE GREEN made a motion to move Amendment 1, 0-                     
LS0905\KA.1, Ford, dated 3/18/98.  Amendment 1 reads:                          
     Page 1, following line 7:                                                 
          Insert a new bill section to read:                                   
          "* Section 1.  AS 21.36.090(d) is amended to read:                   
               (d) Except to the extent necessary to comply with               
          AS 21.42.365 and AS 21.56, a person may not practice or              
          permit unfair discrimination against a person who                    
          provides a service covered under a group health insurance            
          policy that extends coverage on an expense incurred                  
          basis, or under a group service or indemnity type                    
          contract issued by a health maintenance organization or              
          a nonprofit corporation, if the service is within the                
          scope of the provider's occupational license.  In this               
          subsection, "provider" means a state licensed physician,             
          dentist, osteopath, optometrist, chiropractor, nurse                 
          midwife, advanced nurse practitioner, naturopath,                    
          physical therapist, occupational therapist, psychologist,            
          psychological associate, or licensed clinical social                 
          worker, or certified direct-entry midwife."                          
     Page 1, line 8:                                                           
          Delete "Section 1."                                                  
          Insert "Sec. 2."                                                     
     Renumber the following bill sections accordingly.                         
REPRESENTATIVE BRICE objected for purposes of discussion.                      
CHAIRMAN BUNDE noted that Senator Donley had explained Amendment 1             
would include HMOs and the list of other physicians and medical                
care providers.                                                                
REPRESENTATIVE BRICE said, "They cannot discriminate."                         
SENATOR DONLEY explained it is already an existing law.  Amendment             
1 adds HMOs to the existing law.                                               
Number 0935                                                                    
CHAIRMAN BUNDE called an at-ease at 3:28 p.m.  He reconvened the               
meeting at 3:30 p.m.  He noted the arrival of Representative Porter            
at 3:29 p.m.                                                                   
REPRESENTATIVE FRED DYSON expressed confusion as to the intent of              
Senator Donley's amendment.                                                    
CHAIRMAN BUNDE explained that Senator Donley's amendment is merely             
adding HMOs to the current statute.                                            
SENATOR DONLEY said the language in Section 1 is all in existing               
law and applies to all other types of health insurance policies.               
The amendment just adds HMOs to the existing law so the same                   
prohibition against unfair discrimination would also apply to                  
contracts issued by HMOs.                                                      
Number 1010                                                                    
CHAIRMAN BUNDE asked if Representative Brice maintained his                    
objection.  Hearing no objection, Amendment 1 was adopted.                     
Number 1020                                                                    
REPRESENTATIVE GREEN made a motion to move Amendment 2 offered by              
Representative Bunde which reads:                                              
     Page 4, after line 6                                                      
          Add a new section.                                                   
               A utilization review decision to deny, reduce, or               
          terminate a health care benefit to deny payment for a                
          health care service because that service is not medically            
          necessary may only be made by a health care provider                 
          trained in that specialty or subspecialty and licensed to            
          practice in the state after consultation with the covered            
          persons's health care provider.                                      
CHAIRMAN BUNDE asked if there is an objection.  There being none,              
Amendment 2 was adopted.                                                       
Number 1032                                                                    
QUINN MCKENNA, Providence Health System, testified via                         
teleconference from Anchorage.  He said he will not argue that                 
managed care companies should not be regulated; obviously they                 
should be.  He will not argue against a legislator aggressively                
reviewing organizations, especially if there is any fear of                    
infringing upon the rights of their constituents.  Nor will he                 
argue against the appropriateness of chiropractic services.  Those             
items he just mentioned are not in question in his testimony.                  
However, he would like to add testimony on where the line should be            
drawn that balances our personal desire to have free and unfettered            
access to any care that a person wants to receive and the cost                 
related to that care.  The only issue he was raising with this                 
legislation is with regard to the mandating of chiropractic                    
coverage by a managed care company.  He recalled back in the early             
90s across the country, our society was screaming about the                    
dramatic increases in health care cost; health care costs were                 
increasing three times the rate of inflation.  He stated                       
"Subsequent to that, managed care had grown quite dramatically, and            
actually health care inflation has come in check during this period            
of time.  In fact, in 1996, health care inflation was just, I                  
believe, 1.6 or 1.9 percent above the inflation rate, quite                    
dramatically down from the double digit inflation of just a few                
years prior.  A lot of that because of the ability of managed care             
companies to come in, do utilization management, promised volume               
for discounts, and leveraged the providers into providing lower                
costs because they could provide that volume discounts."                       
MR. MCKENNA continued his testimony.  "Health care is such a                   
strange service and industry.  In most other industries -- like if             
I were to go buy a car, I would go negotiate with the car salesman             
and I would write a check, or I would go to the bank and pick up               
money, but be obligated to pay that.  In health care we buy                    
insurance, which the insurance company then pays for the health                
care that I receive.  And maybe during the year I pay $4,000 for my            
health care insurance, maybe I only need $1,000 of coverage, or                
maybe I need $100,000.  I am, all of a sudden, taken away from my              
obligation of paying for that service if someone else is paying for            
it.  And we need to be careful when our initial desire as people               
and society is to get as much as we can and demand as much as we               
can and you, as the legislature, need to be careful that we also               
balance the cost of that care because as we saw just less than a               
decade ago, it can easily spiral out of control."                              
MR. MCKENNA urged the committee not to pass this amendment, not                
necessarily because it's so broad, but because it could set a                  
precedent on limiting the ability of managed care organizations to             
help control health care costs for their community.  He asked, "Out            
of all the services that are available - health care services, open            
heart surgery, treatment for diabetic patients, et cetera - how is             
it that this amendment protects chiropractic services and mandates             
that all chiropractors have to be (indisc.) and have to be paid for            
their services?  How is it that out of all of the services                     
available this is the very first one to come to be protected?"  He             
indicated he has not heard testimony that out of all of the                    
services available that chiropractic care is the best one that                 
would provide (indisc.) services the health of all of the                      
communities is going to be increased.  He said he would encourage              
the legislature to go back and say as they start to draw the line,             
is this the best place to draw the line.                                       
Number 1271                                                                    
DR. R. H. BANKS, President, Alaska Chiropractic Society, testified             
via teleconference from Anchorage.  He said he would like to speak             
to the issues just brought up by Mr. McKenna.  He believes Mr.                 
McKenna may be a little confused with the legislation.  He said                
first of all it's not managed care legislation, it is HMO                      
legislation.  Secondly, the bill does not mandate chiropractic                 
care.  He said in a separate clause the first amendment to mandate             
all services, it prohibits discrimination and so the first clause              
in the bill would mandate chiropractic care.  The separate                     
chiropractic clause in the bill is to ensure access to chiropractic            
care.  He reiterated that it does not mandate chiropractic care, it            
assures that there would be access to chiropractic care.  He said,             
"On par with subsistence, health care is the issue on voter's                  
minds.  Voters are concerned with access to quality care.  Voters              
are concerned with the ability to choose a doctor who is concerned             
about them; a professional they can trust.  Patients are demanding             
that their doctors be able to discuss all treatment options                    
available to alleviate their health problems.  .... We may not see             
HMOs in Alaska for several years and now is the time to act on                 
behalf of thousands of Alaskans who signed a petition and sent                 
public opinion messages in support of SB 197."  He urged the                   
committee members to move this bill out of committee today.                    
Number 1400                                                                    
GORDON EVANS, Representative, Health Insurance Association of                  
America (HIAA), came before the committee to testify.  He told the             
committee that HIAA opposes the bill in general because it is                  
unneeded legislation since there are no HMOs in Alaska and no                  
prospects for any in the unforeseeable future.  He said HIAA is                
also concerned about certain managed care initiatives being                    
proposed in this and other legislation and contrary to the                     
testimony of Dr. Banks, this is not only a managed care                        
legislation, it is also a mandate for chiropractors.                           
MR. EVANS referred to Section 2 of CSSB 197 and read into the                  
record, "SB 197 proposes to amend current law to require a carrier             
to include in his evidence of coverage guidelines explaining when              
treatment may be denied.  Managed care plans already offer coverage            
guidelines in their schedule of benefits.  The schedule of benefits            
is a legal document filed with the state Division of Insurance that            
describes in detail what the plan covers, what it does not cover,              
and the rules and procedures governing eligibility, and a copy of              
that schedule of benefits is provided to ensure (indisc.)                      
enrollment.  The schedule of benefits does not provide detailed                
utilization review or quality insurance criteria, which are very               
detailed and, therefore, can be voluminous."  He continued, "Also,             
utilization review and quality insurance criteria are subject to               
change in order to keep up with advancing medical technology.                  
Health insurers are not opposed to providing, upon request of a                
patient or the health care provider, a written explanation of an               
adverse determination, that is a copy of the contract basis or                 
relevant medical rationale used to make that determination."  He               
said he is prepared to offer a proposed amendment to replace the               
current Section 2 with a new Section 2 entitled, "Adverse                      
Determination" together with a new Section 5 which would then add              
a definition of the term "adverse determination."                              
Number 1500                                                                    
MR. EVANS said he has a few comments to elaborate on HIAA's                    
opposition to Section 3 of the bill.  He said that section, among              
other things, would allow an insured direct access to the services             
of a licensed chiropractor of his or her choice without prior                  
approval of the enrollee's health maintenance organization, a                  
gatekeeper, or a primary care physician.  He said this provision is            
a mandated benefit that will directly benefit a specific group of              
providers - chiropractors - and he predicts that it won't stop with            
them.  He said, "Such legislative benefits, as we have noted on                
many occasions before this committee, will simply drive up costs               
and ultimately limiting the affordability of quality care for                  
consumers."  He said for that reason, HIAA has always opposed                  
mandating of benefits.                                                         
MR. EVANS referred to Section 4, stating that CSSB 197(RLS) am                 
proposes to add a new subsection (i) that would prohibit HMOs from             
imposing limits regarding criticism by a provider of health care               
services provided by an HMO; written or oral communications between            
a health care provider and an enrollee regarding health care                   
services; and employment of a health care provider to be terminated            
unless the provider receives written notice of the cause for the               
termination before being terminated.  He indicated HIAA doesn't                
object to all of that subsection, but objects to part of it.  He               
said, "Most managed care firms carefully guard their current                   
customers and information about their plan that they consider to be            
confidential.  Consequently, plans will include contractual                    
provisions asking the health care provider to agree not to                     
disparage the health plan to enrollees or to attempt to induce                 
enrollees to leave a plan or join another plan.  These types of                
contractual provisions are not unique to HMOs, but are imposed by              
many other employers through contracts or employment manuals.  No              
business can tolerate its employees driving customers away.  In                
addition, there are many legitimate business precautions a managed             
care plan must consider when contracting with an independent                   
professional or organization."                                                 
MR. EVANS continued, "These include first, as a general contractor             
employing the provider, health plans could be held jointly liable              
for libelous statements by a provider or spurious claims, which                
impact on other providers' or institutions' business.  Secondly,               
providers who might have mobile contractual arrangements with                  
health plans and facilities could attempt to steer patients to                 
facilities in which the provider has a personal financial stake.               
Lastly, the medical community has very jealously protected itself              
against any disclosure data which compares physicians or facilities            
based upon their clinical outcome.  The same level of analytical               
objectivity should be required in any qualitative statements made              
by contracting physicians."  He noted that HIAA does not believe               
HMOs should limit or manage clinical discussions between physicians            
and their patients regarding treatment options.  In fact, most                 
managed care plans already require language to that effect in their            
agreements.  He said Section 4 would also prohibit carriers from               
denying health care coverage for enrollee unless enrollee has been             
examined by at least two physicians.  It would also prohibit a                 
carrier from imposing financial incentives to be given or offered              
to a provider for denying or delaying health care services.  He                
said denial of health care coverage can occur for a number of                  
reasons:  for instance, a particular benefit may not be covered by             
an insured's policy.  Many procedures are subjected to utilization             
review and quality assurance criteria.  For instance, the most                 
expensive treatment is not always the best and sometimes surgery is            
not the only available intervention.  The insurer is not prohibited            
from seeking a second medical opinion, however, the insurer should             
not be required to subject every denial of health care coverage to             
a second provider's opinion and the law as stated now would require            
Number 1667                                                                    
MR. EVANS told the committee that managed health care plans have               
attempted to create reimbursement systems which reward providers               
for keeping their patients healthy in the most efficient way                   
possible, but do not, of course, encourage over-utilization of                 
scarce health dollars.   If a physician provides too few services,             
that could be just as costly as providing too many.                            
MR. EVANS expressed confusion as to where Amendment 2 would fit                
into the bill.                                                                 
SENATOR DONLEY was of the impression that Amendment 2 added a new              
section to the bill.                                                           
CHAIRMAN BUNDE confirmed that.                                                 
MR. EVANS said the problem with having a licensed practice in this             
state is a problem because there are some specialties that there               
may be only one person licensed in this state.  In that context he             
asked, "Is he going to consult with himself to do that?"                       
CHAIRMAN BUNDE replied, "They don't have to live in this state,                
they just have to be licensed to practice in this state."                      
MR. EVANS said, "I understand, but with the professional                       
utilization review entities that are around the country, they are -            
and they are very good whether - I know that some people don't                 
think they are, but they are."                                                 
CHAIRMAN BUNDE said that's not whose profit line we're looking at.             
MR. EVANS said, "I can't argue with you on that, if that's your                
view."  He indicated that the idea is if a person is licensed in               
the United States, why not have it that way rather than just                   
licensed in this state?  He pointed out the argument was made the              
attorney general can't get to them if they're not licensed in this             
state.  He contends the attorney general isn't going to bring a                
civil lawsuit against them anyway; the patient will file a lawsuit.            
He asked, "Where does the attorney general get involved in it?                 
Jerking their license?"                                                        
Number 1776                                                                    
CHAIRMAN BUNDE responded, "We have our own board that I think                  
Alaskans are more comfortable with having them at our standards."              
MR. EVANS referred to Amendment 1 stating the problem HIAA has with            
it is that particular statute is being used now for everything                 
except what it was intended to when it was originally enacted by               
this legislature.  He stated originally it was intended to be                  
comparing physician "A" with physician "B" and now it's gotten to              
the point where it compares physician "A" with chiropractor "B," or            
if they happen to do the same sort of service, you have unfair                 
discrimination.  He said the best thing the legislature could do               
with that statute is to repeal it and start over from scratch and              
make it back to what it was intended to be in the first place.  He             
pointed out he is not the only one saying that; the Division of                
Insurance has told the legislature that many times, also.                      
Number 1829                                                                    
CHAIRMAN BUNDE announced that public testimony is closed.  In                  
summary, he said health care costs are a challenge.  One way to                
limit that is through volume, the other way is to reduce services.             
He expressed that he understands the concern about limiting health             
care costs and he also understands that insurance companies exist              
to make a profit and can make profits many ways; one way is by                 
reducing services.                                                             
SENATOR DONLEY concluded by stating the concept of repealing the               
whole statute goes way beyond the scope of this legislation.  He               
said obviously we have this existing statute, which is being                   
enforced by the Division of Insurance who is going through the                 
process of developing the criteria to enforce it.  He indicated                
that it seems completely appropriate that it's there and applies to            
health insurance; it should also apply to HMOs.                                
Number 1987                                                                    
CHAIRMAN BUNDE made a motion to move HCS CSSB 197(HES) out of                  
committee.  There being no objection, HCS CSSB 197(HES) was moved              
from the House Health, Education and Social Services Standing                  

Document Name Date/Time Subjects