Legislature(2001 - 2002)

04/10/2002 01:18 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 37 - PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE                                                                             
Number 0858                                                                                                                     
CHAIR ROKEBERG  announced that the  next order of  business would                                                               
be  CS  FOR  SENATE  BILL   NO.  37(FIN),  "An  Act  relating  to                                                               
collective  negotiation  by   competing  physicians  with  health                                                               
benefit  plans,   to  health  benefit  plan   contracts,  to  the                                                               
application of  antitrust laws to agreements  involving providers                                                               
and groups of providers affected  by collective negotiations, and                                                               
to the effect of the  collective negotiation provisions on health                                                               
care providers."                                                                                                                
Number 0889                                                                                                                     
SENATOR PETE KELLY, Alaska State  Legislature, sponsor, said that                                                               
SB 37  is offered  as a  response to the  changing nature  of the                                                               
health  care industry  in the  United States.   In  the past  ten                                                               
years,  the  number of  insurance  companies  has decreased  from                                                               
eighteen - nationwide  - down to about six, and  that number will                                                               
probably continue to decrease, he  suggested.  He opined that the                                                               
number is  not decreasing because  insurance companies  are going                                                               
out of  business; rather,  it is  because companies  are merging,                                                               
and are  consequently gaining more  and more power in  the market                                                               
place.   The problem with  this phenomenon, he remarked,  is that                                                               
it leaves  some of  those who do  business with  [those insurance                                                               
companies] in  the unenviable position  of being  "an unprotected                                                               
David  against a  Goliath  that has  federal  protections as  its                                                               
SENATOR KELLY said that the  federal antitrust provisions work to                                                               
protect "these large [insurance]  companies against these smaller                                                               
doctors that  do business  with them."   What  SB 37  proposes is                                                               
that under  the watchful eye  of the  Department of Law  (DOL), a                                                               
"state  action doctrine"  can be  put  in place  that will  allow                                                               
physicians  to come  together and  discuss terms  related to  the                                                               
health  provider  contracts  that  they  have  with  these  large                                                               
insurance companies.   Currently, he  noted, physicians are  in a                                                               
"take it or leave it" position,  adding that "it is arguable that                                                               
the patient is the one who is suffering as a result of this."                                                                   
SENATOR KELLY, to address concerns that  had been raised as SB 37                                                               
went  through  the  legislative   process,  said  that  the  bill                                                               
specifically prohibits boycotting  or price-fixing by physicians,                                                               
and  that  "it is  completely  voluntary"  in that  the  attorney                                                               
general  can  end  negotiations  or contracts  at  any  time  and                                                               
neither  physicians  nor  insurance  companies  are  required  to                                                               
negotiate.     He  reiterated  that   SB  37   allows  individual                                                               
physicians  to come  together to  discuss "these  things as  they                                                               
face these huge  companies," without getting in  trouble with the                                                               
Federal Trade Commission (FTC).                                                                                                 
SENATOR  KELLY noted  that  there had  been  a concern  regarding                                                               
nurses, but "the  nurses have been removed."  He  also noted that                                                               
he's  heard  that  there  is   a  proposed  amendment  [regarding                                                               
nurses], and  he's been told  that it would not  adversely affect                                                               
SB  37 and  would give  [nurses] more  protection.   He surmised,                                                               
however, that although he did not  object to the adoption of this                                                               
proposed amendment, rather than  giving [nurses] more protection,                                                               
it simply  gives them  "extra language,"  which, he  opined, they                                                               
didn't  need.    He  mentioned  that there  is  also  a  proposed                                                               
amendment  regarding   multiple  employer   welfare  arrangements                                                               
(MEWAs), which he did not object to either.                                                                                     
Number 1110                                                                                                                     
REPRESENTATIVE  JAMES said  that it  seems to  her as  though the                                                               
effects  of  SB 37  would  be  analogous  to  having a  group  of                                                               
neighbors get  together and tell  a fire insurance  company, from                                                               
whom they all buy fire insurance,  what to pay on any forthcoming                                                               
claims.   She  asked for  a  description of  what physicians  are                                                               
going to be negotiating.                                                                                                        
SENATOR KELLY said:                                                                                                             
     Well,  for  one thing,  they  can't  come together  and                                                                    
     discuss any  terms of the  contract they may  have with                                                                    
     ... [an  insurance company].   For instance,  you might                                                                    
     have  a  provision  in the  [contract]  ...  where  the                                                                    
     insurance  company might  say,  "We've  paid this,  but                                                                    
     we've decided  not to after retrospective  review," and                                                                    
     then the physician would have  to pay back the money to                                                                    
     the insurance company.  That  isn't necessarily a thing                                                                    
     that --  that may or  may not be  a bad thing,  I don't                                                                    
     know, the point is, they  can't even discuss that among                                                                    
     themselves  without  the  FTC   coming  down  on  them,                                                                    
     saying,   "No,    you're   violating    the   antitrust                                                                    
     provisions."  The supreme court  said that ... if we're                                                                    
     going to  have these  blanket antitrust  provisions out                                                                    
     there, there are  going to be cases  where ..., through                                                                    
     normal business  practice, some people  need protection                                                                    
     that maybe  goes a little  bit in the  other direction.                                                                    
     The FTC  is there to  protect the people [that]  are in                                                                    
     business competing  with each other, but  the customers                                                                    
     of those businesses aren't necessarily protected.                                                                          
     And the supreme court said  that you can create a state                                                                    
     action doctrine where you have  the Davids of the world                                                                    
     who are trying to do  business with the Goliaths, which                                                                    
     would be these large  insurance companies, and it would                                                                    
     give  them  some protection  that  they  don't have  to                                                                    
     follow  quite to  the absolute  letter of  the law  the                                                                    
     antitrust  provisions that  might  apply  to a  General                                                                    
     Motors  [Corporation] or  an Exxon  [Mobil Corporation]                                                                    
     or somebody like  that.  To put the  physicians in that                                                                    
     same  situation  doesn't  always make  sense,  and  the                                                                    
     supreme court  says there's times  when it's  not going                                                                    
     to  make sense,  so they  allow for  this state  action                                                                    
     doctrine, where  you can create  an oversight  of these                                                                    
     negotiations  by a  state agency  -  the Department  of                                                                    
     Law, in this  case - and they can  allow the physicians                                                                    
     to come  together to discuss  these things, like  I had                                                                    
     just mentioned  to you, without  being in  violation of                                                                    
     Federal Trade Commission rules.                                                                                            
Number 1248                                                                                                                     
REPRESENTATIVE MEYER asked how SB 37 is going to benefit                                                                        
constituents:  "Can we expect better health care; can we expect                                                                 
lower rates; what can we expect if this passes?"                                                                                
SENATOR KELLY said:                                                                                                             
     The  best example  I can  think of,  and it's  probably                                                                    
     what motivates me  on this bill the most:   if you have                                                                    
     an insurance  company [that] comes in  and ..., because                                                                    
     they're so big  they're going to have  contracts with a                                                                    
     major  portion of  the  doctors in  an  area, they  can                                                                    
     require, on  a "take  it or leave  it" basis,  that the                                                                    
     doctors can't even discuss  with their patients higher-                                                                    
     cost alternatives.   So  if someone  comes in  and they                                                                    
     have a  broken leg and  it's handled by an  x-ray, that                                                                    
     would be  pretty normal,  but in  some cases,  maybe it                                                                    
     needs an MRI [magnetic  resonance imaging] or something                                                                    
     -- believe  me, I'm  out of  my league  here as  far as                                                                    
     medical  examples,  but  I'm just  trying  to  give  an                                                                    
     The insurance  companies can say,  "No, you  can't even                                                                    
     discuss that with the patient  because we're only going                                                                    
     to  pay for  that  lower level,"  and  the health  care                                                                    
     provider has to  then choose between the  terms of that                                                                    
     contract, where they can't discuss  these kinds of very                                                                    
     important  details with  their patients  without losing                                                                    
     the contract.   And because  there are becoming  so few                                                                    
     of  these  insurance   companies  and  because  they're                                                                    
     becoming  so powerful,  ... there  again, they're  on a                                                                    
     "take it or  leave it" basis; the  physician's going to                                                                    
     find  himself  in a  bad  situation  between having  to                                                                    
     choose between  business and maybe  what's in  the best                                                                    
     interest of his client.  They  can also go as far as to                                                                    
     have a gag  rule; not only that they  won't provide it,                                                                    
     but, as I  said, they could even require  that there is                                                                    
     a  gag rule  on  them, where  they  can't even  discuss                                                                    
     these kinds of options with the patients.                                                                                  
Number 1334                                                                                                                     
SENATOR KELLY continued:                                                                                                        
     That [the bill] allows  the physicians to come together                                                                    
     and say, "Look,  there's a group of us here  and ... we                                                                    
     want to  do business with you,  but we want to  be able                                                                    
     to discuss whether  those kinds of things  should be in                                                                    
     the contract or not."   The FTC would slam them, before                                                                    
     that,  but  what   they  do  is  they   pick  them  off                                                                    
     individually:  you have all  these physicians out there                                                                    
     and they're saying  ... to this guy, "We're  one of the                                                                    
     biggest  corporations  in  the world;  we're  going  to                                                                    
     offer this contract; take it  or leave it; here are the                                                                    
     terms."   It  gives them  some kind  of market  power -                                                                    
     albeit voluntary because  the insurance companies don't                                                                    
     have to negotiate with them if  they don't want to.  It                                                                    
     gives  them  at least  the  opportunity  to enter  into                                                                    
     these discussions with each other,  and as a group with                                                                    
     the insurance company,  to act in the  best interest of                                                                    
     their client.  ...                                                                                                         
     You've  asked me  [for] an  example.   The example  is,                                                                    
     under current  rules, the  insurance companies  come in                                                                    
     and  they  say,  "Take  it  or  leave  it,  here's  the                                                                    
     contract,   you   can't   even   discuss   higher-level                                                                    
     alternatives  - higher-cost  alternatives  - with  your                                                                    
     patients."   You're  one physician  against ...  one of                                                                    
     the largest  corporations in the  world, and  they have                                                                    
     such market  power in  your area  that you  pretty much                                                                    
     got  to play  ball by  their  rules.   This allows  the                                                                    
     physicians to at least come  together and say, "We as a                                                                    
     group want  to talk to  you about this  provision, this                                                                    
     higher cost  alternative not being  allowed, or  even a                                                                    
     gag  rule where  you can't  even discuss  it not  being                                                                    
     allowed."     And   they   can   talk,  then,   between                                                                    
     themselves;  the physicians  can say,  "This is  what I                                                                    
     was  offered,  and  I  want   to  know  what  you  were                                                                    
     offered," and they can  discuss that amongst themselves                                                                    
     and then discuss it with the insurance companies.                                                                          
SENATOR KELLY said:                                                                                                             
     Under current  Federal Trade Commission  rules, they're                                                                    
     going to get  a letter from the FTC and  possibly get a                                                                    
     fine  for doing  that.   The  Supreme  Court said,  "In                                                                    
     those  cases, we're  going to  allow  states to  create                                                                    
     this state  action doctrine that allows  the doctors to                                                                    
     at least come together  to discuss these things without                                                                    
     getting slapped  by the FTC."   Ultimately,  because of                                                                    
     the way  the bill is  written, no  one is forced  to do                                                                    
     anything.   The  insurance companies,  if they  say, "I                                                                    
     don't want  to deal with  you," that's fine; or  if the                                                                    
     Department of Law says, "No,  ... we don't like the way                                                                    
     the negotiations are  going," then it comes  to an end;                                                                    
     or the doctors can end it as well.                                                                                         
Number 1455                                                                                                                     
REPRESENTATIVE  JAMES recounted  an experience  she had  with her                                                               
insurance company,  Aetna Inc., and  a dentist:  "My  husband had                                                               
his teeth  worked on and  they were  supposed to pay  50 percent.                                                               
And of  course they didn't pay  50 percent; they paid  50 percent                                                               
of what  was their recognized  charge."  When she  questioned the                                                               
insurance  company about  where that  number came  from, she  was                                                               
told,  "Well, because  this is  the  rate that  everyone else  is                                                               
charging in  this district -  99501."   She noted that  since she                                                               
lives  in  the  Fairbanks  area,  not  the  Anchorage  area,  she                                                               
objected to this reasoning.  "I  didn't get anywhere at all," she                                                               
explained, "and I'm  the one that didn't get paid;  it wasn't the                                                               
...  dentist, it  was  me."   "So,  ... what's  this  do for  our                                                               
constituents?" she asked, "What's it do  for me, as a patient, to                                                               
allow the doctors to do this?"                                                                                                  
SENATOR KELLY said he thought he had answered those questions.                                                                  
REPRESENTATIVE JAMES said she did  not believe the assertion that                                                               
doctors  are not  allowed to  recommend appropriate  treatment to                                                               
their patients.                                                                                                                 
SENATOR KELLY mentioned  that such a case  happened in Fairbanks,                                                               
and that  the physicians involved  were threatened with  a pretty                                                               
serious fine.                                                                                                                   
CHAIR ROKEBERG asked  for confirmation that "the  fee or economic                                                               
discussions have been removed" in the HCS CSSB 37(L&C) version.                                                                 
SENATOR KELLY indicated that such had been removed.                                                                             
CHAIR  ROKEBERG said,  "So,  what we're  talking  about is  other                                                               
conditions rather than  the fees themselves, is that  right?"  He                                                               
also noted  that the sponsor  has asserted that the  situation in                                                               
Alaska is acute  because there are only  two insurance companies.                                                               
He  pointed   out,  however,  that  there   are  three  insurance                                                               
companies  that do  business in  the  state that  are present  to                                                               
testify or that  have submitted comments on SB 37.   In addition,                                                               
Chair Rokeberg  remarked, there are 160  insurance companies that                                                               
are registered  to do business in  the state.  He  also mentioned                                                               
that he  did not  agree with the  sponsor's assertion  that there                                                               
were 18  insurance companies, nationwide, that  have since merged                                                               
into 6 companies.  He  suggested that before the bill progresses,                                                               
the sponsor ought to review his statistical assertions.                                                                         
Number 1615                                                                                                                     
MIKE D. WIGGINS; Vice President;  National Accounts; Aetna, Inc.;                                                               
     In  various capacities,  I have  been  involved in  the                                                                    
     health  insurance  market in  Alaska  for  the past  15                                                                    
     years, and  have worked for  Blue Cross, New  York Life                                                                    
     [Insurance Company], and, more  recently, Aetna.  Aetna                                                                    
     has opposed [SB  37] and remains opposed  to the latest                                                                    
     draft  of   the  bill.     While  the  bill   has  been                                                                    
     significantly  narrowed from  its original  version, we                                                                    
     still feel  that it will neither  benefit consumers nor                                                                    
     competition in Alaska for health insurance.                                                                                
     The major  impact of  the bill  is to  allow collective                                                                    
     negotiations [by] physicians  [with] health insurers on                                                                    
     broad contractual terms, which are  listed on page 2 of                                                                    
     the bill.   Aetna and the  Health Insurance Association                                                                    
     of America  [HIAA], which represents most  of the other                                                                    
     insurers in  the Alaska market, agree  with the Federal                                                                    
     Trade Commission that  bargaining on contractual issues                                                                    
     will likely  have a significant  impact on the  cost of                                                                    
     health  care and  therefore is  likely to  increase the                                                                    
     cost  of insurance  in  Alaska.   Since  the bill  only                                                                    
     applies  to  the  privately  insured  market  -  mainly                                                                    
     individuals and small groups -  it will have an adverse                                                                    
     effect on  the part  of the  market that  [already has]                                                                    
     higher  costs,   in  the  market  where   the  [insured                                                                    
     members] are  least able to  afford increases.   As you                                                                    
     are  aware, there  are two  other bills  pending before                                                                    
     the  legislature  this year  which  seek  to find  less                                                                    
     expensive  ways to  provide  health  insurance to  this                                                                    
     sector of the market.                                                                                                      
     During    the   2000    legislative   session,    Aetna                                                                    
     participated   extensively  in   the  House   Judiciary                                                                    
     [Standing] Committee proceedings  on the Alaska patient                                                                    
     protection   Act,    which   ultimately    passed   the                                                                    
     legislature in 2000.   The main focus of  that bill was                                                                    
     to  address  the  same   contractual  terms  for  which                                                                    
     physicians  are now  seeking  the  right of  collective                                                                    
     bargaining.   [That] bill today provides  safeguards in                                                                    
     Alaska law and prohibits many  of the practices such as                                                                    
     "anti-gag  clauses," ...  that  means  talking to  your                                                                    
     [doctor]   about   higher   cost   alternatives,   that                                                                    
     physicians have testified should  be dealt with through                                                                    
     the mechanism of SB 37.                                                                                                    
Number 1725                                                                                                                     
MR. WIGGINS continued:                                                                                                          
     Further,  the Federal  Trade Commission  testified that                                                                    
     physician  groups  are  now  permitted  to  bargain  on                                                                    
     "quality   of   care"   issues   within   the   federal                                                                    
     constraints  on antitrust.   Passing  a state  law will                                                                    
     not change the FTC's  ultimate authority for evaluating                                                                    
     and  prosecuting.    By adopting  differing  state  and                                                                    
     federal statutes  for antitrust actions,  the situation                                                                    
     will become  even more confusing,  not less.   With the                                                                    
     exception  of   Blue  Cross,  in  a   relatively  small                                                                    
     geographical area  of Alaska,  we don't think  that any                                                                    
     insurer  can be  reasonably considered  to have  market                                                                    
     power  in the  private insurance  market within  Alaska                                                                    
     under  the  normal   -  and  under  any   number  of  -                                                                    
     definitions.  If  [SB 37] is intended  to regulate Blue                                                                    
     Cross  in some  fashion,  as  a nonprofit  corporation,                                                                    
     they  are   subject  to   different  sections   of  the                                                                    
     insurance statutes  than the profit insurers,  and your                                                                    
     concerns can  by addressed under  their unique  part of                                                                    
     the Alaska insurance statutes.                                                                                             
     To  address the  previous  testimony  by physicians  on                                                                    
     their inability to appeal claims  that have been denied                                                                    
     for "medical  necessity," I have provided  a summary of                                                                    
     "State   of  Alaska   -  Aetna"   information  to   the                                                                    
     committee, illustrating the small  number of these type                                                                    
     of appeals  and their disposition.   Ultimately, within                                                                    
     the Aetna organization, it  is an independent physician                                                                    
     and  not a  non-physician  that decides  the merits  of                                                                    
     these  appeals.    Thank you  for  the  opportunity  to                                                                    
CHAIR  ROKEBERG asked  Mr. Wiggins  to comment  on Representative                                                               
James's experience.                                                                                                             
MR. WIGGINS  explained that  Aetna's rate  of payment  for dental                                                               
claims is defined in its contract  with the state, and that "they                                                               
define  the data  source."   "So,  as the  administrator, we  are                                                               
paying based upon the fee schedule  [that] the state has set, and                                                               
there  are  three geographical  'R  [Reasonable  Charge] and  UCR                                                               
[Usual, Customary,  and Reasonable Fees]'  areas in the  state of                                                               
Alaska," he added.                                                                                                              
CHAIR ROKEBERG asked:   "Under the third-party appeal  and the UR                                                               
- utilization  review - procedures under  the '[Alaska] Patients'                                                               
Bill of Rights,' would an  economic short payment or something be                                                               
something that could be appealed?"                                                                                              
Number 1839                                                                                                                     
MR.  WIGGINS  said  yes.    He   pointed  out  that  one  of  the                                                               
misconceptions  is  that  non-medical people  make  decisions  on                                                               
medical  appeals.    He  said  that a  handout  he  provided  the                                                               
committee illustrates  that his company  has both a  second level                                                               
and a  third level of appeal;  a second level appeal  is reviewed                                                               
by  a  physician,  as  is  a third  level  appeal,  either  by  a                                                               
physician  within  Aetna  with  the   same  specialty,  or  by  a                                                               
physician at an external review agency.                                                                                         
CHAIR  ROKEBERG  asked  whether  this is  also  the  process  for                                                               
appeals pertaining to the amount of reimbursement.                                                                              
MR. WIGGINS said that it can  be.  Sometimes in Alaska, he noted,                                                               
there are some  "billing inconsistencies from the  Lower 48," and                                                               
there are some other things to  take into consideration.  He said                                                               
that although  he did  not have  the turnover  rates in  front of                                                               
him,  he could  say that  a significant  number of  [cases], once                                                               
they  are appealed  and additional  information is  received, are                                                               
ultimately  resolved  in  favor  of  the  person  initiating  the                                                               
Number 1908                                                                                                                     
PATRICIA SENNER, M.S., R.N., A.N.P.; President, Alaska Nurses                                                                   
Association (AaNA), said:                                                                                                       
     We  would like  to  voice today  our continued  serious                                                                    
     concerns about  [SB 37].   Our main concerns  with this                                                                    
     bill  are  twofold.    First,  we  are  concerned  that                                                                    
     allowing large  groups of  physicians to  band together                                                                    
     to  negotiate with  insurance  companies  will lead  to                                                                    
     exclusion   of   direct  reimbursement   by   insurance                                                                    
     companies of  non-physician health care  providers such                                                                    
     as nurse practitioners and nurse  midwives.  Our second                                                                    
     major   concern  is   that   by  effectively   removing                                                                    
     constraints  on  the  side of  physician-network  joint                                                                    
     ventures such as  individual-practice associations - or                                                                    
     IPAs -  the Alaska health  care consumer will  be faced                                                                    
     with seriously rising costs of care.                                                                                       
     Health care  in Alaska is  provided by a  diverse group                                                                    
     of    professionals,     including    advanced    nurse                                                                    
     practitioners,   certified  nurse-midwives,   certified                                                                    
     direct-entry   midwives,  certified   registered  nurse                                                                    
     anesthetists,     psychologists,    social     workers,                                                                    
     optometrists,  podiatrists,   physical  therapists,  to                                                                    
     name  a  few.    These practitioners  provide  a  broad                                                                    
     spectrum   of   affordable,  accessible,   high-quality                                                                    
     health care services to many  thousands of Alaskans who                                                                    
     want  to  choose the  provider  that  best meets  their                                                                    
     needs.   It  is our  concern that  the physicians  will                                                                    
     negotiate  the  exclusion  of direct  reimbursement  of                                                                    
     these  providers.    If  these  health  care  providers                                                                    
     cannot  receive  direct reimbursements  from  insurance                                                                    
     companies,  they  will  be put  out  of  business,  and                                                                    
     insured  Alaskans  will not  be  able  to choose  their                                                                    
     Current  FTC   regulations  allow  the   formations  of                                                                    
     physician-network   joint    ventures,   with   certain                                                                    
     safeguards.  One  of these is limiting the  size of the                                                                    
     network  in given  geographic locations;  the other  is                                                                    
     that  the  network somehow  has  to  lead to  decreased                                                                    
     costs by  some form of  economy of scale.   In exchange                                                                    
     for allowing physicians to  negotiate together, the FTC                                                                    
     states that  the public has  to receive  some financial                                                                    
     benefit.    Senate  Bill 37  would  effectively  remove                                                                    
     these  constraints.    [Proposed  Sec.  23.50.020(c)(6)                                                                    
     states:   "an authorized third party  may not represent                                                                    
     more  than  30  percent  of the  market  of  practicing                                                                    
     physicians  for  the  provision   of  services  in  the                                                                    
     geographic service area  or proposed geographic service                                                                    
     area, if the  health benefit plan has less  than a five                                                                    
     percent market share".]                                                                                                    
Number 2021                                                                                                                     
MS. SENNER continued:                                                                                                           
     But [if]  I'm reading  this correctly, this  means that                                                                    
     if  a health  benefit plan  has more  than a  5 percent                                                                    
     market  share,  there is  no  limit  on the  [size]  of                                                                    
     physician  networks.    Furthermore,  ...  current  FTC                                                                    
     guidelines  state that  joint ventures  must ...  share                                                                    
     substantial risk  and constitute  20 percent,  or less,                                                                    
     of the physicians in each  physician specialty.  Senate                                                                    
     Bill 37  removes any  reference to  specialty, allowing                                                                    
     all the physicians  in a specialty to  band together to                                                                    
     negotiate with the insurance entity.   We have complete                                                                    
     sympathy with the physicians'  desire to regain control                                                                    
     of  their  practice  and   not  have  health  insurance                                                                    
     companies dictate how they practice  - we deal with the                                                                    
     same difficulties  in our practices -  however, we feel                                                                    
     that [SB  37] tilts the  balance too much in  the favor                                                                    
     of  physician   networks  and  does  not   protect  the                                                                    
     interests of health care consumers.                                                                                        
     In  order [to]  restore this  balance we  recommend the                                                                    
     following changes  to [SB 37]:   Include  language that                                                                    
     would   prohibit   physicians  from   negotiating   the                                                                    
     exclusion  of  direct  reimbursement  by  non-physician                                                                    
     health  care providers,  and ...  [prohibit] them  from                                                                    
     determining  the settings  other health  care providers                                                                    
     deliver services in.   And that ... has to  do with the                                                                    
     nurse-midwives  who  want to  be  able  to continue  to                                                                    
     [have] births  in birthing centers  and in homes.   And                                                                    
     the second [recommendation]  is, maintain the exclusion                                                                    
     of  price  from  the  list  of  items  large  physician                                                                    
     networks  can  negotiate;  by keeping  this  exclusion,                                                                    
     smaller  physician networks  can still  negotiate price                                                                    
     under  current  FTC  guidelines.    We  thank  you  for                                                                    
     considering  our  concerns;   ...  Alaskan  nurses  are                                                                    
     committed  to  providing   quality,  affordable  health                                                                    
Number 2090                                                                                                                     
CATHY   GIESSEL,    M.S.N.,   R.N.,    F.N.P.-C.S.;   Legislative                                                               
Representative, Alaska Nurse Practitioner Association (ANPA),                                                                   
testified via teleconference.  She said:                                                                                        
     I  know that  most  of  [you] sought  to  serve in  the                                                                    
     legislature  of this  great state  in order  to make  a                                                                    
     difference, a  positive difference, for the  people who                                                                    
     live here.   This legislation -  SB 37 - will  not make                                                                    
     circumstances better  for Alaskans.   It will  have the                                                                    
     opposite effect for everyone  who accesses health care.                                                                    
     The only  people who will  benefit are  physicians, and                                                                    
     that will be to increase  their income and control over                                                                    
     health  care   delivery.    I'm  sure   you've  already                                                                    
     reviewed opinions provided to  you by the Federal Trade                                                                    
     Commission, as  well as the two  January, 2001, letters                                                                    
     from Attorney  General Bruce Botelho.   These documents                                                                    
     clearly articulate the legal improprieties of SB 37.                                                                       
     How  will SB  37  harm Alaskans?    Legal opinions  and                                                                    
     experiential examples point to  increased costs for all                                                                    
     consumers    -    whether    privately    insured    or                                                                    
     Medicaid/Medicare -  and limitations  in the  choice of                                                                    
     health  care  providers.     [Senate  Bill  37]  places                                                                    
     physicians  in  a  position to  exclude  the  continued                                                                    
     free-trade practice of  non-physician providers such as                                                                    
     nurse   practitioners  and   certified  nurse-midwives.                                                                    
     There  are  many locations  in  our  great state  where                                                                    
     health   care   is   provided  exclusively   by   nurse                                                                    
     practitioners.   But even in urban  Alaska areas, nurse                                                                    
     practitioners provide care for  people who are declined                                                                    
     care by physicians.                                                                                                        
     A case in point is  Medicare patients.  Many physicians                                                                    
     decline to  accept Medicare patients.   My  own father,                                                                    
     who lived in  Fairbanks since 1948, was  "fired" by his                                                                    
     physician  of  25-plus  years  when  my  father  became                                                                    
     eligible for  Medicare.  Why?   The  reimbursement from                                                                    
     Medicare  was too  low for  physicians.   Where  should                                                                    
     Medicare patients go?  To  emergency rooms?  Now you're                                                                    
     really  talking  high  health  care  costs.    Here  in                                                                    
     Anchorage  there  is  a physician-owned  clinic  and  a                                                                    
     nurse  practitioner-owned  clinic located  within  one-                                                                    
     half mile  of each other.   The cost for a  new patient                                                                    
     visit to  the physician-owned clinic is  twice the cost                                                                    
     of  the  same  visit at  the  nurse  practitioner-owned                                                                    
     clinic for the identical health needs.                                                                                     
CHAIR  ROKEBERG   interjected,  saying  that  there   were  still                                                               
numerous people who  wished to testify, and  inviting Ms. Giessel                                                               
to fax any written testimony that she had to the committee.                                                                     
MS. GIESSEL, to conclude, said:                                                                                                 
     What is  more, the  physician-owned clinic  declines to                                                                    
     accept Medicare  patients and sends  them to  the nurse                                                                    
     practitioner-owned  clinic, who  does accept  Medicare.                                                                    
     In this example,  who is demonstrating - by  action - a                                                                    
     greater concern  for health care  sensibility, quality,                                                                    
     and need?   And who is demonstrating  more concern with                                                                    
     income  and   fee-related  issues?     Please   make  a                                                                    
     difference,  a  positive  difference, for  Alaskans  by                                                                    
     rejecting SB 37.  Thank you.                                                                                               
CHAIR  ROKEBERG  invited  all the  participants  to  fax  written                                                               
testimony to the committee.                                                                                                     
Number 2218                                                                                                                     
CYNTHIA EBELACKER  testified via teleconference.   She noted that                                                               
she is  representing Alaska's  400-plus nurse  practitioners that                                                               
work across  the state - many  in private practice -  that she is                                                               
the  immediate past  president of  the Alaska  Nurse Practitioner                                                               
Association (ANPA),  and that she  owns a  family-practice clinic                                                               
in Eagle River.  She said:                                                                                                      
     At  a time  when  your constituents  are clamoring  for                                                                    
     sound fiscal management and  all Alaskans would welcome                                                                    
     more   affordable  health   care,  your   committee  is                                                                    
     spending  time  and  money considering  an  unnecessary                                                                    
     bill  that  will do  little  to  improve the  so-called                                                                    
     quality  of medical  care, but  which would  eventually                                                                    
     raise  the costs  of such  care.   There is  already an                                                                    
     antitrust  law  that  permits physicians  to  negotiate                                                                    
     legitimate quality-of-care  issues.  It is  a matter of                                                                    
     public [record]  that the American  Medical Association                                                                    
     [AMA] has equated quality of  care with the elimination                                                                    
     of independent  non-physician practitioners.   Powerful                                                                    
     AMA  lobbying and  large  AMA  donations to  government                                                                    
     officials pave  the way  for bills  like this  one that                                                                    
     come before you.                                                                                                           
     Make  no  mistake,  this  bill  is  not  at  all  about                                                                    
     improved health  care quality  or lower  costs.   It is                                                                    
     about   control  by   the  powerful   and  the   unfair                                                                    
     restriction  of  trade  for a  large  group  of  highly                                                                    
     qualified, highly  cost-effective, non-physician health                                                                    
     care providers,  specifically, nurse  practitioners and                                                                    
     nurse-midwives.   The passage of this  bill would allow                                                                    
     physicians and  insurance companies to  restrict third-                                                                    
     party     reimbursement    for     independent    nurse                                                                    
     practitioners.  We are currently  often reimbursed at a                                                                    
     lower  rate than  are physicians  in private  practice;                                                                    
     that cost savings would go  away and insurance premiums                                                                    
     and deductibles will  eventually increase to compensate                                                                    
     for that loss.                                                                                                             
Number 2272                                                                                                                     
MS. EBELACKER concluded:                                                                                                        
     Many of our [businesses] will  not survive, and tens of                                                                    
     thousands  of Alaskans  will  lose  their primary  care                                                                    
     provider, especially ... in ...  rural areas.  Patients                                                                    
     will be  forced to see more  expensive providers, often                                                                    
     at a  distance from  where they live.   Using  the very                                                                    
     gentle   wording  of   this   bill,  physicians   could                                                                    
     negotiate contracts  containing language  about quality                                                                    
     or  safety which  can  be used  to  limit or  eliminate                                                                    
     consumers'  ability to  choose  a non-physician  health                                                                    
     care provider  or keep the  ones they already have.   I                                                                    
     would ask that  you don't become part  of [the] current                                                                    
     health  care  crisis;  we  all need  to  work  on  real                                                                    
     solutions  for  improving  access to  health  care  and                                                                    
     decreasing  the  rising cost  of  care  in this  state.                                                                    
     This bill  will not accomplish  that.  Vote no  on this                                                                    
     bill.  Thank you.                                                                                                          
REPRESENTATIVE JAMES said:                                                                                                      
     The  last two  people have  indicated that  they feared                                                                    
     competition from  the doctors charging more  than nurse                                                                    
     practitioners or  others, and somehow or  other I can't                                                                    
     see  that  that wouldn't  be  already  happening.   ...                                                                    
     Knowing full well  what they go through to  be a doctor                                                                    
     - is  not the same as  a nurse practitioner -  it seems                                                                    
     to me like they would,  naturally, charge more; I don't                                                                    
     see that's where the competition is.                                                                                       
CHAIR ROKEBERG said:  "Well, I think many times they're                                                                         
reimbursed the same amount as doctors if they do the same                                                                       
service.  But maybe not; maybe that's what they fear."                                                                          
MS. EBELACKER, in response, explained:                                                                                          
     We are often  reimbursed at about 15  percent less than                                                                    
     physicians.     That's   Medicaid's   rate,  and   many                                                                    
     insurance companies  follow that same rate.   We're not                                                                    
     worried that  we will be able  to charge less.   We are                                                                    
     worried  that we  will  be  put out  of  business.   If                                                                    
     insurance  companies  are  told that  they  cannot  pay                                                                    
     nurse  practitioners   unless  they   work  out   of  a                                                                    
     physician's  practice,  then independent  practitioners                                                                    
     will receive  no reimbursement.   And 45 percent  of my                                                                    
     population  alone  is  Blue Cross  or  Aetna  or  other                                                                    
     insurance companies, and I would have to fold up.                                                                          
Number 2351                                                                                                                     
CAMILLE   SOLEIL,  J.D.;   Executive   Director,  Alaska   Nurses                                                               
Association (AaNA),  testified via  teleconference and  said that                                                               
as  Senator  Kelly stated,  SB  37  was  created to  address  the                                                               
instances  where negotiations  between physicians  and [providers                                                               
of]  health care  benefit plans  were not  equal.   She remarked,                                                               
however, that  given the  FTC concerns and  the concerns  of non-                                                               
physician providers  in Alaska, [the  AaNA] was prompted  to look                                                               
at  other alternatives  to SB  37 that  would benefit  all health                                                               
care  providers -  not just  physicians -  in their  negotiations                                                               
with  health care  benefit plans;  would  continue a  competitive                                                               
market,  which   benefits  consumers;   and  would  not   add  an                                                               
additional layer of bureaucracy.                                                                                                
TAPE 02-46, SIDE B                                                                                                              
Number 2376                                                                                                                     
MS. SOLEIL  pointed out  that AS  21.07.010, titled  "Patient and                                                               
health care provider protection",  states what provisions can and                                                               
can't be  included in a  contract between a health  care provider                                                               
and a managed care entity.   One of the things that is protected,                                                               
she  explained, is  the  ability  of a  health  care provider  to                                                               
openly communicate with patients  about all appropriate treatment                                                               
options.  She suggested that it  would be possible to expand this                                                               
section  of  current  statute to  include  language  ensuring  an                                                               
equalized  negotiation  process  between  the  provider  and  the                                                               
managed care entity.   Such an alternative to SB  37, she opined,                                                               
would  address concerns  regarding inequitable  bargaining power.                                                               
She  urged members  to support  modification  of [AS  21.07.010],                                                               
rather than  adopting SB 37.   If the  committee does move  SB 37                                                               
forward, however, she asked that  it be modified significantly in                                                               
order to  eliminate the FTC's  concerns and ensure  protection of                                                               
consumers and non-physician providers.                                                                                          
Number 2339                                                                                                                     
BARBARA  E. NORTON,  C.N.M.; testified  via teleconference.   She                                                               
explained that  she is a  certified nurse-midwife with  a private                                                               
practice  in  Anchorage.   She  noted  that she'd  just  recently                                                               
negotiated a contract  with both Blue Cross and  Aetna to operate                                                               
a  preferred-provider  birthing  center;  during  those  contract                                                               
negotiations, contrary to the sponsor's  assertions, she was able                                                               
to negotiate every  part of that contract, including  price.  She                                                               
relayed that  her practice  has collaborative  relationships with                                                               
physicians, but none of those  physicians supervise her practice.                                                               
She explained  that her main  reason for  opposing SB 37  is that                                                               
physicians  would be  able  to restrict  her  practice under  the                                                               
guise of  "quality issues"; for example,  physicians could demand                                                               
that  a physician  be present  at every  birth, that  every birth                                                               
take  place  in  a  hospital,  and that  only  midwives  who  are                                                               
employed by  a physician  and bill  through a  physician's office                                                               
can bill the insurance company.                                                                                                 
MS. NORTON  relayed that  about six  years ago,  when [Providence                                                               
Alaska  Medical  Center  ("Providence")] changed  its  employees'                                                               
health insurance  coverage, it  restricted Ms.  Norton's practice                                                               
for  about a  year by  stating that  employees seeking  midwifery                                                               
services could  only use midwives  who were employed  by doctors.                                                               
She  added that  because  of  this policy,  her  business lost  a                                                               
significant number  of clients.   Thus,  she indicated,  the fear                                                               
that physicians  will attempt  to place  restrictions on  the way                                                               
insurance companies treat non-physicians  is justified:  "it will                                                               
happen, it  has happened."   With regard to what  else physicians                                                               
would be allowed to do under SB 37, Ms. Norton said:                                                                            
     They can  also address style-of-practice issues:   they                                                                    
     could say  that only continuous monitoring  has to take                                                                    
     place.  There are things  that would definitely make it                                                                    
     difficult  for midwives  to  practice  midwifery.   The                                                                    
     AMA, as  [Ms. Ebelacker  has] said, is  actively trying                                                                    
     to restrict  the scope  of practice  of non-physicians;                                                                    
     70 percent of  my clients are insurance  clients, and I                                                                    
     would definitely  have to  close my  doors if  [I] were                                                                    
     not  able  to  be  paid by  insurance  companies.    My                                                                    
     clients, and your constituents,  have a right to choose                                                                    
     their care  provider, and I strongly  oppose this bill.                                                                    
     Thank you.                                                                                                                 
Number 2260                                                                                                                     
KAREN DECKER-BROWN  testified via teleconference.   She indicated                                                               
that she  is enrolled in  a "family nurse practitioner  course of                                                               
study," and  said that there  were three points which  she wished                                                               
to address.   For the first  point, she noted that  Senator Kelly                                                               
spoke  only  of   how  physicians  would  be  aided   by  SB  37;                                                               
physicians, however,  are not the  only health care  providers in                                                               
Alaska.   For  the  second point,  because  Senator Kelly's  wife                                                               
works in a  doctor's office, Ms. Decker-Brown  said she questions                                                               
what his motives  are in sponsoring SB  37.  "I think SB  37 is a                                                               
bill that's  a wolf in  sheep's clothing," she said,  adding that                                                               
according  to her  understanding,  the group  of physicians  that                                                               
brought  this  idea  forward  to   Senator  Kelly  are  the  same                                                               
physicians  that employ  his wife;  thus he  would be  indirectly                                                               
benefiting from passage of SB 37.                                                                                               
SENATOR KELLY pointed out that  his wife is merely a receptionist                                                               
at a  clinic; "it's not  like she's ...  pulling in huge  bucks -                                                               
... we do it mostly for the health care opportunities."                                                                         
MS. DECKER-BROWN continued.   For the third  point, she explained                                                               
that as  a student, a  group of  physicians at a  local Anchorage                                                               
clinic [acted  as her preceptors],  and that at the  time, "they"                                                               
had in place  an exclusive contract with a union.   She said that                                                               
one of  the things that  she noted  while working at  that clinic                                                               
was  that patients  would express  concerns about  the fact  that                                                               
before that  exclusive contract  took effect,  they were  able to                                                               
see  a   variety  of   health  care   providers  such   as  nurse                                                               
practitioners.     She  added  that  that   clinic  only  employs                                                               
physicians; has specifically  stated that it will  not employ any                                                               
nurse practitioners;  and, at the  time that she was  there, only                                                               
employed  male  physicians.   Such  exclusionary  practices,  she                                                               
noted, limit Alaskans in their choice of health care providers.                                                                 
Number 2132                                                                                                                     
STEVE CONN,  Executive Director, Alaska Public  Interest Research                                                               
Group (AkPIRG),  testified via teleconference.   He said  that on                                                               
behalf of  consumers throughout the  state, he was  testifying in                                                               
opposition to SB 37.  He continued:                                                                                             
     I'd like  to use my  two minutes, however, to  relay to                                                                    
     you  an  event  that  [occurred] last  month.    I  was                                                                    
     attending  Consumer Federation  of  America [CFA],  and                                                                    
     they had  invited the head of  the FTC.  In  the course                                                                    
     of his  various listings  of concrete acts,  he pointed                                                                    
     out that he  had sent a letter related to  this bill to                                                                    
     Alaska, and he had sent  one to the state of Washington                                                                    
     [which]   hadn't  responded   to   it  concretely   and                                                                    
     positively.   We would be  deluding ourselves  to think                                                                    
     that passage of this bill  will not result in a Federal                                                                    
     Trade Commission action.                                                                                                   
     So,  in essence,  the Department  of  Law, during  this                                                                    
     period of fiscal  crisis, will not only  be called upon                                                                    
     to monitor the activities as  laid out in the Act, but,                                                                    
     of course, will also  have to prepare major litigation,                                                                    
     on behalf  of the physicians,  against the FTC.   And I                                                                    
     suggest you change the [fiscal]  note so that the other                                                                    
     members of the legislature have  a sense of exactly how                                                                    
     much this bill  is going to cost initially.   We see no                                                                    
     cost   advantage  whatsoever   to  consumers,   and  we                                                                    
     certainly see  a shrinkage of  available practitioners,                                                                    
     both  professional and  lay, and  we would  ask you  to                                                                    
     oppose this bill.  Thank you very much.                                                                                    
Number 2084                                                                                                                     
KATHLEEN  T. MELICAN  testified  via teleconference.   She  noted                                                               
that  she owns  and operates  "a nurse  practitioner group"  that                                                               
runs  a family  practice walk-in  clinic in  the Spenard  area of                                                               
Anchorage.  She said:                                                                                                           
     I have grave  concerns regarding how the  passage of SB
     37 would  affect both  the quality  of health  care and                                                                    
     the economic  impact of health  care on  our consumers.                                                                    
     Many of  my patients do  have a primary  M.D. provider,                                                                    
     but for  various reasons  they are  unable to  get into                                                                    
     see  their M.D.  provider  when  an unexpected  illness                                                                    
     occurs.   Also,  many times  minor problems  occur that                                                                    
     M.D.s do not  choose to deal with such  as tourists who                                                                    
     lose or forget their  prescriptions while far away from                                                                    
     home,  or working  parents who  are unable  to schedule                                                                    
     far  enough  ahead for  their  children's  day care  or                                                                    
     sports  physicals or  immunizations  in  order to  meet                                                                    
     deadlines at  the school department  - failure  to meet                                                                    
     these regulations results in lost school days.                                                                             
     If  this  bill  passes   and  I  need  a  collaborative                                                                    
     physician in order  to stay open, I don't  know where I                                                                    
     would find  one who  would work  for the  percentage of                                                                    
     the  salary that  I and  my fellow  nurse practitioners                                                                    
     work for.  Our profit margin  is very small.  If we are                                                                    
     unable  to  continue  to  provide  the  wide  range  of                                                                    
     medical  services  that  we   do,  at  such  affordable                                                                    
     prices,  I  am  sure   that  many  health  care  needs,                                                                    
     especially   those   that    include   routine   health                                                                    
     screening,  would  be  neglected.   We  all  know  that                                                                    
     neglect of  routine health care  screening and  lack of                                                                    
     ... ongoing  care only lead to  more complicated health                                                                    
     problems and increased costs for us all.                                                                                   
Number 2012                                                                                                                     
LEONARD SORRIN, Assistant General Counsel, Blue Cross Blue                                                                      
Shield of Alaska, testified via teleconference.  After thanking                                                                 
the committee for this opportunity to testify, he said:                                                                         
     As you  know, we  have testified  in opposition  to [SB
     37] in  the past, and  continue to strongly  oppose the                                                                    
     bill.   As  [an] initial  housekeeping matter,  I would                                                                    
     like to point  out that the question  of whether health                                                                    
     plans can and  do regulate the ...  medical advice that                                                                    
     doctors provide  their patients has been  long settled.                                                                    
     I  know of  no health  plan in  the United  States, ...                                                                    
     including  the   state  of  Alaska,  that   limits  the                                                                    
     alternatives  that physicians  can freely  discuss with                                                                    
     their members  - their patients.   In fact,  that issue                                                                    
     was covered  in the  [Alaska Patients'] Bill  of Rights                                                                    
     ...,  and  prior  to the  [Alaska  Patients']  Bill  of                                                                    
     Rights,  our contracts  in Alaska  expressly encouraged                                                                    
     providers  to discuss  the full  range of  options with                                                                    
     each and every one of their patients.                                                                                      
     I would also point out  that, initially, it seems to me                                                                    
     -  and this  may have  been corrected  in a  subsequent                                                                    
     (indisc.) draft  - there are still  references to price                                                                    
     in the  legislative findings, at  the beginning  of the                                                                    
     bill, that are, I  trust, ... an inadvertent oversight,                                                                    
     and I  similarly trust that  price is genuinely  out of                                                                    
     the bill.   The list  of items on which  physicians can                                                                    
     bargain  collectively, in  our  view,  are either  very                                                                    
     competitive  in   nature  -  so  that   if  they  don't                                                                    
     expressly  include price,  they include  very important                                                                    
     terms on  which physicians can and  should compete with                                                                    
     one another  on and, therefore,  have the same  sort of                                                                    
     negative  effect on  the market  place, as  would joint                                                                    
     price negotiations - or, in  the alternative, the items                                                                    
     included in  the laundry  list on  page 2  have already                                                                    
     been  addressed  in  the  [Alaska  Patients']  Bill  of                                                                    
     Rights legislation that we  worked on collectively with                                                                    
     the Alaska Medical Association and  with members of the                                                                    
     committee a year or two ago.                                                                                               
Number 1916                                                                                                                     
MR. SORRIN continued:                                                                                                           
     In addition,  we have some  serious concerns  about how                                                                    
     the process might  work, where a health  plan ... would                                                                    
     end up  negotiating clinical  practice guidelines  - or                                                                    
     coverage criteria - with certain  providers in one area                                                                    
     of  the  state, and  that  coverage  criteria would  be                                                                    
     different than coverage criteria  for your citizens and                                                                    
     constituents in  another area of  the state, or  how we                                                                    
     would  reasonably  negotiate administrative  procedures                                                                    
     in one  area of the  state that  might or might  not be                                                                    
     different  than   administrative  procedures   that  we                                                                    
     negotiate in another part of the state.                                                                                    
     I'm  sure you  can understand  that  ... if  we are  to                                                                    
     manage  our networks  efficiently and  provide low-cost                                                                    
     health  coverage   to  Alaska  citizens,  we   need  to                                                                    
     economize wherever  we can.   And ... Balkanizing  - or                                                                    
     breaking up  - these standards under  which our network                                                                    
     operates  in   Alaska  would  certainly   increase  our                                                                    
     administrative  costs  and  would  increase,  I  think,                                                                    
     costs  and  confusion to  Alaska  consumers.   I  would                                                                    
     simply close by  reiterating the fact that  many of the                                                                    
     most  important things  regarding  patient welfare  and                                                                    
     the  delivery of  health care  to your  constituents is                                                                    
     already addressed in the  "[patients'] bill of rights,"                                                                    
     and  the  protections   purportedly  afforded  by  this                                                                    
     legislation are therefore redundant.                                                                                       
MR. SORRIN concluded:                                                                                                           
     I think  in closing I  would like to emphasize  for the                                                                    
     committee   what   I   have  emphasized   in   repeated                                                                    
     discussions with the Alaska  Medical Association and in                                                                    
     meetings with  members of the legislature,  and that is                                                                    
     that  we regularly  discuss the  full  range of  issues                                                                    
     included  in this  piece  of  legislation with  network                                                                    
     physicians.   While  it  doesn't  amount to  collective                                                                    
     bargaining  with  physicians,  we regularly  take  into                                                                    
     account physician  concerns on a wide  range of issues.                                                                    
     In fact,  our health plans  in the state  of Washington                                                                    
     meet  regularly   with  physicians   collectively,  and                                                                    
     discuss issues  including our "costs on  fee" schedules                                                                    
     and what fee schedules might look like in the future.                                                                      
     Nothing  under  state  or federal  law  prevents  those                                                                    
     sorts  of  discussions from  taking  place  as long  as                                                                    
     they're not a  collective negotiation on price.   And I                                                                    
     would encourage the Alaska  Medical Association and the                                                                    
     proponents  of the  bill  to  consider responding  more                                                                    
     favorably to  our offers to participate  in those sorts                                                                    
     of discussions than they have in the past.                                                                                 
Number 1807                                                                                                                     
REPRESENTATIVE JAMES asked:  "When you're indicating that you                                                                   
want to have these negotiations on everything except price, ...                                                                 
isn't it really price, what you're talking about?"                                                                              
MR. SORRIN, in response, said:                                                                                                  
     I  hope I  didn't  misstate.   We  don't  want to  have                                                                    
     collective negotiations with physicians  on price or on                                                                    
     any  other topic.    We are  happy  to have  collective                                                                    
     discussions  with  doctors   and  hospitals  and  other                                                                    
     providers, including nurse  practitioners and any other                                                                    
     provider type  in our network,  on issues  that concern                                                                    
     them  and  are of  joint  concern  to Blue  Cross  Blue                                                                    
     Shield  of Alaska  and the  providers in  question.   I                                                                    
     think that's  quite a bit  different than  a collective                                                                    
     negotiation.  But  we have, I think, a  long history of                                                                    
     reaching  results for  our state  of Washington  plans,                                                                    
     and  in  Alaska  ...  [of]   reaching  some  degree  of                                                                    
     consensus on  matters affecting the delivery  of health                                                                    
     care to  your constituents.   We're happy to  engage in                                                                    
     those discussions, and we do  so regularly.  The Alaska                                                                    
     [State] Medical Association [ASMA]  has indicated to us                                                                    
     that they  are reluctant  to engage in  any significant                                                                    
     discussions  along those  lines, claiming  they've been                                                                    
     provided legal  counsel that it violates  the antitrust                                                                    
     laws.  It's simply not true.                                                                                               
REPRESENTATIVE JAMES asked:  "Why are you having this discussion                                                                
if it's not going to affect anything you're going to do?"                                                                       
MR. SORRIN replied:                                                                                                             
     I'm  not saying  it won't  affect anything  we do,  but                                                                    
     what the antitrust laws require  is that you can engage                                                                    
     in these collective discussions.   But what happens is,                                                                    
     then, the  health plan -  or the party; whether  it's a                                                                    
     health plan  or a  automobile manufacturer, the  law is                                                                    
     the same  - ... needs to  go back and exercise  its own                                                                    
     independent  judgment whether  the, here's  an example,                                                                    
     fee schedule  would go up,  would go down, how  much it                                                                    
     might increase, and then offer it to the physicians.                                                                       
     That's  very different  than a  collective negotiation.                                                                    
     It's not to say that it  can't be a result, or that you                                                                    
     can't  change a  particular  policy  or procedure  that                                                                    
     governs a  certain part of  your relationship  with the                                                                    
     doctor, but it simply means  that it's not a collective                                                                    
     negotiation.   The  health plan  goes  back, takes  the                                                                    
     provider's  concerns into  account, and  makes its  own                                                                    
     business  decision about  whatever results  it believes                                                                    
     is in  the best interests  of the Alaskan  consumers of                                                                    
     health care.                                                                                                               
Number 1687                                                                                                                     
CLYDE  (ED)  SNIFFEN,  JR.,   Assistant  Attorney  General,  Fair                                                               
Business   Practices   Section,   Civil   Division   (Anchorage),                                                               
Department of Law (DOL), mentioned  that he wanted to first start                                                               
out by explaining  a little more about  the country's fundamental                                                               
policy on competition and why  it's so important for our nation's                                                               
economic health.  He said:                                                                                                      
     It  exists  primarily  through the  nation's  antitrust                                                                    
     laws.   And  there  are exceptions  to antitrust  laws,                                                                    
     which  favor  competition,  but they  allow  exceptions                                                                    
     under certain circumstances  where there are sufficient                                                                    
     safeguards,  through   regulation,  to   allow  another                                                                    
     entity to  control those kinds  of things.  So,  if you                                                                    
     start  with the  premise that  competition is  good, if                                                                    
     you're going  to take competition  away, you can  do so                                                                    
     only if you have sufficient government oversight.                                                                          
     And in this particular  case, the state action doctrine                                                                    
     is  a doctrine  that can  apply  to a  whole number  of                                                                    
     different kinds  of businesses  and entities;  it's not                                                                    
     limited only to  these particular kinds of  facts.  The                                                                    
     state, if it  wants, can enact a  state action doctrine                                                                    
     to allow  negotiations on just  about anything;  it has                                                                    
     to  be  clearly  articulated  and  it  has  to  be  [a]                                                                    
     substitute for  competition.  In this  particular case,                                                                    
     the FTC and our  office have provided extensive written                                                                    
     testimony that  this particular  bill will  not satisfy                                                                    
     the state  action doctrine  because it  doesn't provide                                                                    
     the  level   of  oversight  required  to   satisfy  the                                                                    
     niceties of  that doctrine.   And we have  that spelled                                                                    
     out in  letters and  other things that  we've submitted                                                                    
     to the committee.                                                                                                          
     Having said that,  though, I want to say  that with the                                                                    
     removal of price terms from  this bill, there certainly                                                                    
     is  ... less  of an  impact on  competition, especially                                                                    
     the  impact  that  the  antitrust  laws  are  concerned                                                                    
     about.   And  FTC  director of  [the  Office of  Policy                                                                    
     Planning,  R. Ted  Cruz], testified  before the  [House                                                                    
     Labor  and Commerce  Standing  Committee] that  without                                                                    
     the price  provisions in this  bill, really,  this bill                                                                    
     is  not necessary.   Physicians  can already  negotiate                                                                    
     quality-of-care  issues  with   health  care  insurers;                                                                    
     you've  heard  testimony  from  the  [Blue  Cross  Blue                                                                    
     Shield  of  Alaska]  representative who  explained  how                                                                    
     that already continues.                                                                                                    
MR. SNIFFEN concluded:                                                                                                          
     So without these kinds of  terms, we really do question                                                                    
     the need for  this kind of legislation.   It would just                                                                    
     create another layer  bureaucracy that physicians would                                                                    
     have to go  through in order to engage in  the kinds of                                                                    
     activities  that they  can  already  engage in  without                                                                    
     that level of bureaucracy.   And if this is intended to                                                                    
     create  a  sort  of  safeguard of  some  kind  for  the                                                                    
     physicians  in  the   event  these  negotiations  might                                                                    
     include some price-related  quality-of-care terms, it's                                                                    
     already been  established, at least  by the FTC  and by                                                                    
     our office,  that this structure would  not protect the                                                                    
     physicians  from  that.    So   there  really  isn't  a                                                                    
     safeguard  aspect of  this bill  that has  any purpose,                                                                    
     and if it's simply  to allow quality-of-care issues, we                                                                    
     also submit that it has no purpose.                                                                                        
Number 1546                                                                                                                     
REPRESENTATIVE  JAMES  indicated   that  Mr.  Sniffen's  comments                                                               
reflect her understanding  of how things are  supposed to happen.                                                               
She suggested  that in  actuality, however,  what is  supposed to                                                               
happen doesn't happen.  She asked:   What are patients to do when                                                               
they  can't get  the  doctor to  do  what they  want  them to  do                                                               
because the  insurance company  won't cooperate?   Where  are the                                                               
patients' rights then?                                                                                                          
CHAIR ROKEBERG  opined that those  rights are already  there; "We                                                               
already have them in the bill I passed two years ago.                                                                           
REPRESENTATIVE JAMES said she understood  that concept, but added                                                               
that she didn't think "they're" doing their job.                                                                                
CHAIR  ROKEBERG  noted  that  there  has  also  been  legislation                                                               
adopted that allows  the director of [the  Division of Insurance]                                                               
to follow up on complaints made by individual insureds.                                                                         
REPRESENTATIVE JAMES  said:   "I don't  want to  be argumentative                                                               
here, but there is something that's  not working."  She said that                                                               
as a member of the general public,  "we are being led down a path                                                               
of no choice  for us to even  affect the charges of  the price of                                                               
the insurance  and/or what they  cover, and  the prices go  up on                                                               
the  insurance  and  what  they  pay  goes  down,  and  there  is                                                               
something wrong with that picture."                                                                                             
MR.  SNIFFEN  replied that  he  understood  and appreciated  that                                                               
concern.   He opined,  however, that SB  37 won't  necessarily be                                                               
able  to affect  that  situation.   "If  physicians  are able  to                                                               
collaborate  and negotiate  on certain  things that  might impact                                                               
price, I  think the  end result  would only  be that  your health                                                               
care  premiums  might go  up,  but  there's certainly  debate  on                                                               
that,"  he  added.   He  observed  that Chair  Rokeberg's  Alaska                                                               
Patients' Bill of Rights was an  attempt to address some of those                                                               
issues,  and noted  that there  are  folks from  the Division  of                                                               
Insurance present who could possibly provide additional answers.                                                                
SENATOR KELLY asked  Mr. Sniffen:  "Have you ever  gone through a                                                               
health care provider contract."                                                                                                 
Number 1452                                                                                                                     
MR. SNIFFEN  said he  has been provided  with samples  of various                                                               
contracts from the  state medical association; "I  can't say that                                                               
I've gone through them in any detail, but I've seen them."                                                                      
SENATOR  KELLY  noted  that  during the  three  years  that  this                                                               
legislation of  his has  been going through  the process,  it has                                                               
been  altered "over  and  over  and over  again"  to address  Mr.                                                               
Sniffen's concerns.  He added:                                                                                                  
     You said  there were  problems with  the bill,  but you                                                                    
     wouldn't  provide any  solutions;  well,  you tried  to                                                                    
     early on,  but then  your bosses shut  you down  - I'll                                                                    
     give you credit  for that.  But the fact  is, ... we've                                                                    
     changed  the bill  for you  ..., and  now you  say it's                                                                    
     doesn't ... do anything.                                                                                                   
     The fact  is, I  think if  you had  read some  of these                                                                    
     health care  provider contracts,  you'd see  that there                                                                    
     are plenty of things in  there that deal with non-price                                                                    
     issues  that are  very important  to our  constituents,                                                                    
     that allow  the physicians  to discuss these  things in                                                                    
     negotiating  with  an   insurance  company,  that  have                                                                    
     nothing to do  with price.  But if this  bill wasn't in                                                                    
     place, they would be slapped by the FTC.                                                                                   
SENATOR KELLY concluded:                                                                                                        
     It  does do  something;  it still  does something  even                                                                    
     after all the considerations  for your department.  And                                                                    
     those  are the  things that  really deal  directly with                                                                    
     our  [constituents], and  that is  ...:   What are  the                                                                    
     things  that the  doctor can  stand up  to these  large                                                                    
     insurance companies [on] and  say, "I need to negotiate                                                                    
     in favor  of ... my  patient."  Those things  are still                                                                    
     in here;  they're valuable, and they  allow the doctors                                                                    
     to negotiate  and to just discuss  these things between                                                                    
     themselves,   before   they    negotiate   with   these                                                                    
     companies, without getting slapped by the FTC.                                                                             
Number 1366                                                                                                                     
MR. SNIFFEN responded:                                                                                                          
     I don't  know if there's  a question in  there, Senator                                                                    
     Kelly, but I thank you for  your comments.  I have just                                                                    
     some brief  responses, and I appreciate  everything you                                                                    
     say.   I don't know  that physicians,  currently, could                                                                    
     not negotiate  on some of those  quality-of-care issues                                                                    
     that  you  find  in  those  contracts  now.    You  are                                                                    
     speculating that the  FTC would come down  on them, and                                                                    
     we've heard  testimony from the  FTC before  the [House                                                                    
     Labor  and  Commerce   Standing  Committee]  that  they                                                                    
     could, in fact, negotiate on  some of those issues.  So                                                                    
     it  would  be  up  to them,  I  suppose,  to  determine                                                                    
     whether  or   not  the  kinds   of  things   they  were                                                                    
     negotiating on were, in fact, allowable or not.                                                                            
CHAIR ROKEBERG asked whether Mr. Sniffen could comment on:                                                                      
     The  market  share  percentages:   the  30  percent  of                                                                    
     market  for practicing  physicians, for  the authorized                                                                    
     party;  the  less  than 5  percent  market  share  [to]                                                                    
     determine  number of  covered lives;  and then  ... the                                                                    
     geographic  service  area  consisting of  40  or  fewer                                                                    
MR. SNIFFEN replied:                                                                                                            
     I  can, and  let me  say I  think in  other legislation                                                                    
     that  has   been  passed  in  Texas,   there  are  some                                                                    
     restrictions  on  the   geographic  market  areas  that                                                                    
     providers can negotiate in,  and they have restrictions                                                                    
     on  specialties,   [and]  they  have   restrictions  on                                                                    
     percentage.  I  think in this bill  it says essentially                                                                    
     up to 30  percent of the physicians  can negotiate with                                                                    
     a health benefit plan if  they have more than 5 percent                                                                    
     of the  market share;  if the  health benefit  plan has                                                                    
     less  than   5  percent,   then  100  percent   of  the                                                                    
     physicians in  an area can negotiate;  and the attorney                                                                    
     general  has  some  discretion under  this  version  to                                                                    
     restrict those sizes under certain circumstances.                                                                          
     That might allow, for example,  an area where there are                                                                    
     limited specialties -- and maybe  [in] Juneau there are                                                                    
     only  three allergists;  those allergists  may comprise                                                                    
     100 percent  of the allergy specialty  market for those                                                                    
     services  in Juneau,  but they  might not  ... comprise                                                                    
     ... 30 percent  of the market of physicians  here.  And                                                                    
     those  are  issues that  were  raised  by someone  else                                                                    
     earlier, as well, that are  problematic.  But I have to                                                                    
     say  that if  we're talking  [about] just  negotiations                                                                    
     about quality  of care, these geographic  market issues                                                                    
     are  really  not  as  important  simply  because  those                                                                    
     things can  already be discussed  anyway.  So,  I don't                                                                    
     know  that  under this  scheme,  if  we're not  worried                                                                    
     about whether  or not this  is an  antitrust violation,                                                                    
     if it really makes that much difference.                                                                                   
CHAIR ROKEBERG  remarked that the  attorney general's  office has                                                               
provided a "pretty big fiscal note  on this."  He asked, "Is this                                                               
bill  going to  take an  assistant attorney  general to  bird-dog                                                               
this thing all the time?"                                                                                                       
Number 1219                                                                                                                     
MR. SNIFFEN replied:   "Just a half of one, and  we have 'half of                                                               
ones' around that are certified."   In response to a question, he                                                               
remarked that  in response  to amendments made  to the  bill, the                                                               
fiscal note has been reduced to $113,000.                                                                                       
CHAIR  ROKEBERG  said  there  seems to  be  some  question  about                                                               
"transparency"  in SB  37; he  indicated that  it says  a written                                                               
decision is required from the  attorney general's office if "it's                                                               
disapproved" but not if "it"  is approved.  Therefore, he opined,                                                               
anybody  that disputes  whatever the  decision was  wouldn't have                                                               
"grounds" in terms of a legal  report, and so would not "know how                                                               
to approach any disputation of the  findings."  He asked, "Do you                                                               
think that's an appropriate situation?"                                                                                         
MR. SNIFFEN  said:   "If I understand  your question,  ... you're                                                               
saying that  in the event  that a contract is  disapproved, there                                                               
is  no  mechanism in  the  bill  to  provide an  opportunity  for                                                               
interested persons to appeal that decision...?"                                                                                 
CHAIR ROKEBERG said:  "No; as  I understand it, if you disapprove                                                               
it, doesn't the attorney general have  to ... issue a report with                                                               
the findings on the basis of disapproval?"                                                                                      
MR. SNIFFEN offered that that is his understanding of the bill.                                                                 
CHAIR  ROKEBERG said:   "But  shouldn't it,  conversely, also  be                                                               
that way?"                                                                                                                      
MR. SNIFFEN replied:                                                                                                            
     I've read  those comments by  the FTC as well,  and the                                                                    
     suggestion  there is  that if  it  was approved,  there                                                                    
     should be some basis for  the approval as well, to give                                                                    
     the consumers  an opportunity to understand  why it was                                                                    
     [that]  these competitive  forces were  being adjusted,                                                                    
     according to the negotiated contract.   Yes, I do think                                                                    
     that makes some sense.                                                                                                     
Number 1089                                                                                                                     
BOB  LOHR,   Director,  Division  of  Insurance,   Department  of                                                               
Community &  Economic Development  (DCED), said that  the primary                                                               
mission  of  the  Division  of Insurance  is  to  protect  Alaska                                                               
insurance consumers,  indicating that  to this end,  the division                                                               
opposes SB 37.  He elaborated:                                                                                                  
     We  oppose this  legislation because,  number one,  the                                                                    
     bill   is  simply   unnecessary,   since  the   [Alaska                                                                    
     Patients'] Bill of Rights  already addresses the issues                                                                    
     raised  by  the  physicians regarding  the  quality  of                                                                    
     care.   Second,  it will  increase the  cost of  health                                                                    
     insurance   and  thereby   the   number  of   uninsured                                                                    
     Alaskans.   Third,  it  will  discourage insurers  from                                                                    
     entering  or  remaining  in the  Alaska  market.    And                                                                    
     fourth,  specific problems  regarding health  insurance                                                                    
     [benefits] should be addressed  by the legislature, not                                                                    
     health care  providers, for  the protection  of insured                                                                    
     This  bill  would  apply  to less  than  20  percent  -                                                                    
     actually it's less  than one in four,  about 23 percent                                                                    
     - of  Alaskans:  115,000  out of  a total of  more than                                                                    
     500,000.    [This]  means that  the  remaining  70-plus                                                                    
     percent  are either  uninsured or  covered by  a health                                                                    
     plan that  is not subject to  [SB 37].  This  bill also                                                                    
     does not  apply to federal employee  programs, State of                                                                    
     Alaska, Medicaid,  Medicare, Indian Health  Service, or                                                                    
     other  government  payors,  as   well  as  the  largest                                                                    
     private employer  in the state, which  are self-funded.                                                                    
     This  bill  would harm  those  Alaskans  that are  most                                                                    
     vulnerable, specifically,  small Alaskan  employers and                                                                    
     individual  families  that  purchase  health  insurance                                                                    
     through a health care insurer.                                                                                             
MR. LOHR,  noting that  the proponents  of the  bill have  made a                                                               
number of statements  regarding why SB 37 is  needed, pointed out                                                               
that  written  testimony  provided  by the  division  rebuts,  in                                                               
detail,  each of  those  claims.   With regard  to  the issue  of                                                               
quality of  care, he emphasized that  quality-of-care issues were                                                               
addressed in  the Alaska Patients'  Bill of Rights,  which became                                                               
effective July  1, 2001.   Under  that legislation,  the provider                                                               
contract must protect the ability  of the provider to communicate                                                               
openly  regarding   treatment  options.     There   is  clear-cut                                                               
language,  he noted,  that prohibits  insurers from  imposing gag                                                               
orders   or  discouraging   a   provider   from  discussing   all                                                               
appropriate options, including potentially higher-cost options.                                                                 
Number 0921                                                                                                                     
MR.  LOHR posed  the question:    Why do  insurers contract  with                                                               
providers?   He answered that they  do it primarily to  get lower                                                               
cost  health care  services  for their  insureds  and to  protect                                                               
their insureds by assuring that  a provider they contract with is                                                               
properly  licensed, has  the  proper  credentials, and  maintains                                                               
medical malpractice  insurance.   He noted that  currently, there                                                               
are  no health  maintenance  organizations (HMOs)  in Alaska  and                                                               
only limited health  managed care.  Health insurers  in Alaska do                                                               
not provide  care, he  explained, unlike those  in the  Lower 48;                                                               
they are simply payors, they  are not medical care providers, and                                                               
they  do not  make  medical decisions.    Health insurers  merely                                                               
decide what services will be  covered under an insurance contract                                                               
with an Alaskan insured.   Mr. Lohr indicated that the division's                                                               
written  testimony also  covers  a number  of  other points  that                                                               
rebut proponents' claims.                                                                                                       
CHAIR  ROKEBERG  asked  Mr. Lohr  to  comment  on  Representative                                                               
James's experience  and address  her concerns.   He  posited that                                                               
Representative James  has voiced concerns held  by every consumer                                                               
in the  state, adding  that perhaps those  concerns stem  in part                                                               
from the  fact that the Alaska  Patients' Bill of Rights  did not                                                               
go into effect until just July of 2001.                                                                                         
REPRESENTATIVE JAMES, at  the request of Mr.  Lohr, relayed again                                                               
the  experience she  had regarding  dental  services her  husband                                                               
received.    She  added  that she  objects  strongly  to  Aetna's                                                               
practice  of   using  information  pertaining  to   Anchorage  to                                                               
determine the UCR for Fairbanks, since  the cost of living is not                                                               
the same for those two areas.                                                                                                   
MR. LOHR noted  that UCR is the fancy term  for Usual, Customary,                                                               
and  Reasonable [Fees],  that this  term refers  to an  actuarial                                                               
technique used for determining how  insurance companies set their                                                               
reimbursement levels, and that it is  one of the areas of concern                                                               
about which  the division receives the  most consumer complaints.                                                               
He explained:                                                                                                                   
     Our regulations  in that regard are  largely procedural                                                                    
     in  nature, that  is they  deal with,  "Has the  update                                                                    
     been done  within every six  months, as  required," and                                                                    
     that sort  of thing.   But the  basic notion of  UCR is                                                                    
     somewhat like credit insurance in  that it is perceived                                                                    
     by  costumers as  an  unfair  system of  reimbursement.                                                                    
     But  the purpose  of  it,  as I  understand  it, is  to                                                                    
     contain the  highest cost  providers from  getting full                                                                    
     reimbursement  for their  services, otherwise  there is                                                                    
     no incentive whatsoever to control  the fee set when it                                                                    
     is being reimbursed by an  insurance company.  And what                                                                    
     this does  is use  an averaging mechanism  to establish                                                                    
     the basis for reimbursement.                                                                                               
REPRESENTATIVE   JAMES  pointed   out,   however,  that   service                                                               
providers  merely turn  to their  patients for  any amounts  owed                                                               
beyond  the  UCR  calculation, indicating  that  this  system  of                                                               
reimbursement does  nothing to  contain providers  - there  is no                                                               
incentive for  providers to control  their fees.  She  added that                                                               
in her situation,  she would not have let the  dentist go unpaid,                                                               
and that it was a reasonable charge for the services rendered.                                                                  
Number 0610                                                                                                                     
CHAIR  ROKEBERG  referred  to the  amendment  regarding  multiple                                                               
employer  welfare arrangements  (MEWAs),  and asked  Mr. Lohr  to                                                               
MR. LOHR explained:                                                                                                             
     A MEWA  is an acronym  for a multiple  employer welfare                                                                    
     arrangement.   ... Basically,  it's an  entity designed                                                                    
     to  provide   insurance  coverage  to  more   than  one                                                                    
     employer.  And  it is substantially similar  to some of                                                                    
     the  arrangements  that  are  being  discussed  in  the                                                                    
     Fairbanks area  at this  time.   And the  question that                                                                    
     came  up  ...  from  staff  was,  "Well,  if  Fairbanks                                                                    
     physicians  are promoting  the  bill,  why wouldn't  it                                                                    
     make sense once the bill  takes effect, if it does, for                                                                    
     it to be applicable to  MEWAs - to these organizations?                                                                    
     Why would they want to  be excluded from the provisions                                                                    
     of the  bill?"   And I believe  you raised  a question,                                                                    
     and the division responded to  you by letter, outlining                                                                    
     the  legal rationale  for retaining  coverage of  MEWAs                                                                    
     under this legislation.                                                                                                    
CHAIR  ROKEBERG added:    "In a  nutshell,  it's because  they're                                                               
actually acting as insurance companies.   And there's issues that                                                               
relate  to solvency,  and other  issues that  demand [a]  certain                                                               
modicum of regulation."                                                                                                         
MR. LOHR  said that is correct.   He pointed out  that currently,                                                               
MEWAs are  treated exactly like  insurance companies  under Title                                                               
21; the  Alaska insurance code requires  "substantial capital and                                                               
surplus requirements,"  the same as  is required when  forming an                                                               
insurance company.   "That, to  us, appears to be  excessive," he                                                               
remarked,  noting that  there is  legislation pending  that would                                                               
address  the requirements  regarding the  formation of  MEWAs and                                                               
which would set a more realistic capital reserve level.                                                                         
CHAIR  ROKEBERG asked:    "So you  would agree  that  we need  to                                                               
maintain  the regulatory  control of  your division  over any  of                                                               
these particular amalgams of businesses or other groups?"                                                                       
MR. LOHR said he would agree.   He said he believes the amendment                                                               
regarding MEWAs is an appropriate one.                                                                                          
CHAIR ROKEBERG  said he strongly believes  that a MEWA is  a very                                                               
positive thing  for the  state of  Alaska; he  asked Mr.  Lohr to                                                               
MR.  LOHR said  he agreed  completely, "provided  it is  a proper                                                               
MEWA."   He  noted that  there are  some entities  "outside" that                                                               
have caused havoc  because they have sought to use  the term MEWA                                                               
as a  way to try  to escape  state insurance authority  and claim                                                               
Number 0351                                                                                                                     
BECKY  DEDURA  (ph),  Director,  FTC  Resource  Center  on  State                                                               
Legislation (ph),  American Medical Association  (AMA), testified                                                               
via teleconference in support of SB 37.  She said:                                                                              
     I  basically  just  wanted  to   counter  some  of  the                                                                    
     objections  to the  bill that  you've heard  about from                                                                    
     both  the  FTC and  your  Department  of Law  there  in                                                                    
     Alaska.  I  know one of the key  arguments against this                                                                    
     bill   at  this   time  of   course  is   that  there's                                                                    
     insufficient  active state  oversight; I  know that  in                                                                    
     support  of that  proposition, the  FTC  and the  [DOL]                                                                    
     both have  cited ... the  [Federal Trade  Commission v.                                                                  
     Ticor Title  Insurance Co.] case,  which is  founded on                                                                  
     the  presumption  here  that there  be  inactive  state                                                                    
     oversight  - inappropriate  active state  supervision -                                                                    
     simply by  agreement among private  parties.  And  I do                                                                    
     want  to point  out a  distinction in  the Ticor  case,                                                                  
     which  is   that  it  involved  four   title  insurance                                                                    
     companies,  in four  different  states, that  basically                                                                    
     agreed to some sort of illegal price fixing.                                                                               
     And I  do want to  distinguish that from  the construct                                                                    
     you have  in front of you  in your bill, in  that we're                                                                    
     talking  about two  different  parties  here, not  four                                                                    
     common  (indisc.)  insurance  companies, that  want  to                                                                    
     agree.   In other  words, ...  two different  groups of                                                                    
     physicians that  would want to come  together and agree                                                                    
     to terminology.   Also, the  key proposition  that came                                                                    
     out of Ticor, as well,  was one of the negative option,                                                                  
     which allows for  an approval - a deemed  approval - of                                                                    
     a particular  proposition, in this  case the  rates, if                                                                    
     they didn't hear back from the oversight entity.                                                                           
     In the construct  that you have before you  in [SB 37],                                                                    
     it's very  clear that there  must be  specific approval                                                                    
     by the  attorney general after  a proposed  contract is                                                                    
     agreed  to  by  both  parties.    And  of  course  that                                                                    
     proposed  contract  won't   be  finalized  until  final                                                                    
     attorney general  review and approval.   So, I  do want                                                                    
     to  distinguish that.   Certainly,  in our  opinion, we                                                                    
     ... strongly  believe that  there is  sufficient active                                                                    
     state oversight, ...  [but] I know in  the FTC's letter                                                                    
     there's  ...  reference  to ...  insufficient  attorney                                                                    
     general  authority   to  approve  and   disapprove  the                                                                    
Number 0172                                                                                                                     
MS. DEDURA continued:                                                                                                           
     I do want to point  out that before negotiations can be                                                                    
     entered  into,   approval  must  be  sought   from  the                                                                    
     attorney general,  and there's  a final signoff  at the                                                                    
     very  end,  which  will  alleviate   a  number  of  the                                                                    
     concerns that  we've heard today, both  from the nurses                                                                    
     and  other   concerns  as  well;   if  there   are  any                                                                    
     inappropriate   terms   that    come   out   of   those                                                                    
     negotiations,  that  is  something  that  the  attorney                                                                    
     general will  be looking for,  and that  final contract                                                                    
     will not be approved.                                                                                                      
     I also  want to address  the issue and concern  of this                                                                    
     legislation leading to price  fixing.  As Senator Kelly                                                                    
     pointed  out very  early in  this  hearing today,  that                                                                    
     remains illegal  under this construct;  there's nothing                                                                    
     in  this  bill  that  will permit  price  fixing.    It                                                                    
     remains (indisc.) illegal, and,  quite frankly, we need                                                                    
     to recognize that this is  a construct that's voluntary                                                                    
     in nature.   There will  be no price fixing  absent any                                                                    
     agreement  by the  insurance  companies,  they have  to                                                                    
     volunteer  to come  to the  table,  and whatever  final                                                                    
     contract they  want to negotiate, again,  there must be                                                                    
     agreement,  and, again,  there must  be signoff  by the                                                                    
     attorney general.   ... I  think it's quite  clear that                                                                    
     that's not  a scenario  that can  come about  under [SB
     37],  and  there  are   numerous  layers  of  (indisc.)                                                                    
     processes in place here.                                                                                                   
     I  also want  to address  the arguments  we have  heard                                                                    
     that in  terms of the quality-of-care  issues, there is                                                                    
     already a sufficient construct  in place for physicians                                                                    
     to   address   these   issues  with   their   insurance                                                                    
     companies.  That is something  we have heard about over                                                                    
     the  years:    ...   [that]  physicians  currently  can                                                                    
     negotiate  with insurers  over quality-of-care  issues.                                                                    
     There  has to  be such  a high  level of  integration -                                                                    
     such a high  threshold that's met - that  this makes it                                                                    
     virtually  impossible for  the physicians  to do.   And                                                                    
     that of  course is  why you have  this bill  before you                                                                    
     today;  the  level  of integration  required  currently                                                                    
     under  federal law  requires significant  financial and                                                                    
     legal integration....   It also requires  physicians to                                                                    
     integrate; in  other words,  you don't  have autonomous                                                                    
     practice  by physicians  any more.   And  I think  that                                                                    
     those are not risks that we wanted to take.                                                                                
TAPE 02-47, SIDE A                                                                                                              
Number 0001                                                                                                                     
MS. DEDURA continued:                                                                                                           
     I  know  that physicians  are  able  to basically  seek                                                                    
     letters  [inquiring  whether  or   not]  the  level  of                                                                    
     integration  that  they  are  currently  going  through                                                                    
     would  meet  with  the  [U.S.]  Department  of  Justice                                                                    
     standards;  they  can  receive  some  sort  of  opinion                                                                    
     letter back at some point  in the process.  But, again,                                                                    
     that is not  a blessing for the  Department of Justice;                                                                    
     the  level of  integration  that they  are seeking  for                                                                    
     purposes of  negotiating will  be sufficient  when they                                                                    
     reach the endpoint process.   So after going though all                                                                    
     of  that -  the  significant expenditure  of funds,  of                                                                    
     course - they may still not  be able to negotiate.  And                                                                    
     again,  that  is  something   that  they're  trying  to                                                                    
     address within this bill.                                                                                                  
     I'd be happy  to answer any questions any  of you have,                                                                    
     but  I  was  very  concerned   with  a  number  of  the                                                                    
     arguments  I  saw in  ...  FTC  and Department  of  Law                                                                    
     letters.  These  are arguments we saw both  ... down in                                                                    
     Texas and  in New  Jersey just prior  to both  of their                                                                    
     bills passing.   And  I know  [that] three  years after                                                                    
     Texas's  law [passed],  ... we  have seen  a couple  of                                                                    
     groups go  through the approval process  and we haven't                                                                    
     seen   further  objections   from  the   Federal  Trade                                                                    
     Commission.    I don't  know  if  that means  that  the                                                                    
     process has  now been found  to be sufficient,  but the                                                                    
     actual processes in terms of  pre- and post-approval of                                                                    
     contracts do not  differ significantly.  So,  I want to                                                                    
     point  that  out,  and  let  you  know  [that]  in  our                                                                    
     opinion, this is  a very sound bill,  and certainly one                                                                    
     that  needs  to be  a  construct  of [a]  state  action                                                                    
     doctrine.  Thank you.                                                                                                      
Number 0122                                                                                                                     
CHAIR   ROKEBERG  remarked   that  he'd   raised  the   issue  of                                                               
"transparency."   He asked Ms.  Dedura whether she  sees anything                                                               
wrong with asking the attorney general  to write a report if he's                                                               
approved the negotiations.                                                                                                      
MS.  DEDURA  said   that  although  she  did  not   see  that  as                                                               
problematic, if  something that  both parties  have agreed  to is                                                               
approved, she would hate to  waste the attorney general's time by                                                               
requiring a report to accompany that approval.                                                                                  
CHAIR ROKEBERG  said that it seems  to him that the  public ought                                                               
to  know  what  the  grounds  are,  both  for  approval  and  for                                                               
MS. DEDURA  commented that according  to her understanding  of SB
37, the report  detailing reasons for disapproval  would be given                                                               
to the  parties involved  in case either  party objected  to that                                                               
decision; if a contract is  approved, however, it means that both                                                               
parties are satisfied  with the outcome and so  a detailed report                                                               
would not be necessary.                                                                                                         
REPRESENTATIVE  JAMES  posed  the situation  in  which  consumers                                                               
objected to a contract reached  through this type of negotiation;                                                               
she asked whether the consumer oughtn't  to be able to learn what                                                               
the grounds for approval were.                                                                                                  
MS. DEDURA  said she was not  aware of any mechanism  in the bill                                                               
by which members of the public  - consumers - could object to the                                                               
outcomes of this negotiation process.                                                                                           
REPRESENTATIVE JAMES  pointed out  that the purported  purpose of                                                               
the SB 37 is to protect the public.                                                                                             
Number 0317                                                                                                                     
CHAIR ROKEBERG  agreed.  He  asked, "Is there no  transparency at                                                               
all, even on disapproval?"                                                                                                      
MS. DEDURA said:                                                                                                                
     I'm sorry,  I must  be misunderstanding  your question.                                                                    
     ... Your  concern is whether there  should be something                                                                    
     on record for  the public to observe?   Should there be                                                                    
     objections  by the  public, even  though the  other two                                                                    
     parties have agreed to it?                                                                                                 
CHAIR ROKEBERG said:   "I can't think of  this being proprietary.                                                               
Could it be?"                                                                                                                   
MS. DEDURA replied:                                                                                                             
     I couldn't  think of  a good reason  why that  would be                                                                    
     the  case.   I do  know  that there  are standards;  my                                                                    
     understanding is that there is  a standard by which the                                                                    
     attorney general  will review the proposed  contract in                                                                    
     terms  of looking  at ...  whether the  anticompetitive                                                                    
     benefits outweigh the others.   And if that's the case,                                                                    
     I'm assuming that approval means  that it did meet that                                                                    
     standard.    If there  seems  to  be  a need  for  more                                                                    
     specifics  in drawing  those conclusions,  I personally                                                                    
     wouldn't  find that  objectionable if  that meets  with                                                                    
     your environment there.                                                                                                    
REPRESENTATIVE COGHILL  noted that page  5 of SB 37  contains the                                                               
criteria  regarding approval;  they  are set  out in  subsections                                                               
(f)(g) and  (h).  He  posited that if  there was a  deficiency in                                                               
any  of those  criteria, it  would  be noted  in the  disapproval                                                               
report.   "We could  ask for  report on  [the approval],  but the                                                               
fact is, they've  got go through this filter before  they can get                                                               
an approval, so I think that  it's understood that those would be                                                               
scrutinized," he  added.  He said  that he is satisfied  that the                                                               
criteria will be used to filter through requests.                                                                               
Number 0469                                                                                                                     
MIKE HAUGEN, J.D., M.B.A.;  Executive Director, Alaska Physicians                                                               
& Surgeons, Inc.  (APS); said that his organization,  which is an                                                               
individual  practice  association  (IPA) representing  about  160                                                               
doctors  - a  multi-specialty group  - strongly  supports SB  37.                                                               
Commenting on points raised by opponents of SB 37, he said:                                                                     
     The nurses  had, in  their view,  a valid  concern that                                                                    
     physicians may be  trying to cut them  out of contracts                                                                    
     if this bill were to go  forward.  Senator Kelly put an                                                                    
     amendment  into the  bill on  page 6,  line 9,  several                                                                    
     committees ago, to address the  concern.  And basically                                                                    
     what this amendment said was  that if the physicians or                                                                    
     the health plans tried to  cut any other provider group                                                                    
     out, that  would be,  per se, against  the law,  and it                                                                    
     continues  to  be.    And I  know  you've  got  another                                                                    
     amendment in  front of you today  ... - a two  or three                                                                    
     line  amendment -  that basically  reiterates the  same                                                                    
     point.  The physicians have  no desire cut other health                                                                    
     provider groups out of a  contract, and effectively, if                                                                    
     an  insurer and  a  doctor  try to  do  that, that's  a                                                                    
     conspiracy -  it's against  state law  and it  would be                                                                    
     against  federal law.    That's the  first  point.   So                                                                    
     we've tried to address the nurses concerns.                                                                                
     The second point is that  I firmly believe that there's                                                                    
     great  utility  in  allowing  physicians  to  negotiate                                                                    
     these non-fee- or non-price-related  items.  The Alaska                                                                    
     [Patients'] Bill of Rights was  a great document and it                                                                    
     was  a great  start;  it contained  a  limited list  of                                                                    
     contractual prohibitions that  insurers could no longer                                                                    
     insert  in contracts,  like gag  clauses, for  example.                                                                    
     But  there   are  literally  dozens,   and  potentially                                                                    
     hundreds, of other  examples of non-price-related terms                                                                    
     that are  very important for  physicians to be  able to                                                                    
     negotiate,  on  behalf of  not  only  themselves -  I'm                                                                    
     going to  be upfront  and say there  is a  component of                                                                    
     this  bill  that  addresses physicians'  anger  at  the                                                                    
     current  state of  affairs -  but there  are also  many                                                                    
     non-fee-related issues that will help patients.                                                                            
     For  example,  contracts  are  routinely  written  that                                                                    
     require no  mutual written consent to  change the terms                                                                    
     of the contract.  So if  a doctor did not read the fine                                                                    
     print of a  contract and signed it, what  has he really                                                                    
     got?   Two  months  down  the road,  the  terms of  the                                                                    
     contract  could  be  changed unilaterally.    That  has                                                                    
     happened  with  great  regularity across  the  country.                                                                    
     Another   example  is   unilateral  compensation   rate                                                                    
     changes without  notice.   This is  an area  where non-                                                                    
     fee-related   issues   start    to   blend   into   fee                                                                    
     discussions.    And this  is  one  of the  reasons  why                                                                    
     physicians  need this  kind of  protection.   We're not                                                                    
     talking about a rate  schedule when we're talking about                                                                    
     unilateral changing of what they're  going to get paid,                                                                    
     but the  doctors are often  not even notified,  ... and                                                                    
     they have  no ability to say  no, other than to  try to                                                                    
     cancel the  contract.  There are  credentialing issues,                                                                    
     quality-of-care  issues,   utilization  review  issues,                                                                    
     that directly affect patients.                                                                                             
Number 0673                                                                                                                     
MR. HAUGEN continued:                                                                                                           
     One  of   the  things   that  was   left  out   of  the                                                                    
     "[patients'] bill  of rights" was something  called the                                                                    
     definition of medical  necessity.  Now, that  is a term                                                                    
     of art that basically means who  gets to decide - is it                                                                    
     a physician or  some clerk in [an]  insurance company -                                                                    
     whether or  not a  service is  covered....   Under this                                                                    
     bill,  we  could  actually negotiate  a  definition  of                                                                    
     that, and  advocate for patients.   Doctors simply will                                                                    
     not  negotiate  these  non-fee-related  and  non-price-                                                                    
     related  terms without  some  sort  of protection  like                                                                    
     this, because  the slope is  too slippery  between what                                                                    
     may be construed as  [a] non-fee-related issue blending                                                                    
     into something that might affect price.                                                                                    
     An  example  would  be  medical   necessity.    If  the                                                                    
     physicians were  to advocate for a  very strong patient                                                                    
     oriented  medical  necessity  definition, that  may  in                                                                    
     fact cost  more for  an insurance  company, but  in the                                                                    
     collective  physicians'  opinion,  it  may  be  a  much                                                                    
     better  thing  for  patients.    And  if  an  insurance                                                                    
     company  didn't  like  the way  the  negotiations  were                                                                    
     going, all they would have to  do is pick up the phone,                                                                    
     dial  an 800  number, and  call the  FTC and  basically                                                                    
     anonymously tell  the FTC, "The  doctors are  trying to                                                                    
     affect price - they've gone too far."                                                                                      
     Now,  that's the  reason  the  doctors won't  negotiate                                                                    
     these  terms; unless  you carve  out,  under the  state                                                                    
     action doctrine -  and that's a state's  rights issue -                                                                    
     the ability to  protect the physicians in  this area of                                                                    
     discussions,  the   status  quo   will  remain.     And                                                                    
     ultimately  it's   the  physicians  who   advocate  for                                                                    
     patients, not the  insurance companies.  It's  a one on                                                                    
     one relationship in that office,  and when you're sick,                                                                    
     that's the  one you  go to.   And  right now,  they are                                                                    
        basically gagged, not in the sense of treatment                                                                         
      options but on a whole host of other issues, because                                                                      
     the fear level is just too high.                                                                                           
Number 0790                                                                                                                     
CHAIR ROKEBERG  asked Mr. Haugen  if he  thinks the ability  of a                                                               
group of physicians in a  community to bargain for the definition                                                               
of medical necessity is what SB 37 is all about.                                                                                
MR. HAUGEN  replied that that is  not the only purpose  of SB 37;                                                               
the definition  of medical necessity  would merely be one  of the                                                               
issues that  could be  discussed.   Whether an  insurance company                                                               
would actually  sit down with  a group of physicians  and discuss                                                               
that issue  or any  other is  a debatable  and open  question, he                                                               
added, since SB 37 merely establishes a voluntary process.                                                                      
REPRESENTATIVE JAMES surmised, then, that:                                                                                      
     Because of  the trap ...  that ... doctors would  be in                                                                    
     by even  wanting to discuss  these issues,  ... they're                                                                    
     chilled from doing anything at  all.  And this, as long                                                                    
     as we  have it in  statute, ... we've  established what                                                                    
     they can do, so that gives them protection.                                                                                
MR.  HAUGEN  said:   Exactly;  it  gives  physicians a  lot  more                                                               
protection than they have now, which is effectively none.                                                                       
REPRESENTATIVE JAMES  also surmised,  then, that  although people                                                               
have testified  that doctors "can  do these things  now," because                                                               
it's not  written in  statute, doctors  are under  the impression                                                               
that they cannot do "these  things."  Further, that doctors think                                                               
that "if  they did do  that, they could  be dumped over  the side                                                               
then, into the Federal Trade Commission challenges."                                                                            
MR. HAUGEN said that is correct.                                                                                                
SENATOR KELLY said:  "It happened."                                                                                             
CHAIR ROKEBERG clarified that the  FTC has already investigated a                                                               
group of  Fairbanks physicians.   After noting  that no  one else                                                               
wished to testify on SB 37, he closed public testimony.                                                                         
Number 0944                                                                                                                     
CHAIR ROKEBERG moved  to adopt Amendment 1,  which read [original                                                               
punctuation provided]:                                                                                                          
     Page 7, Line 15, after "include,"                                                                                          
       Delete:  "a multiple employer welfare arrangement                                                                        
CHAIR ROKEBERG,  noting that there were  no objections, announced                                                               
that Amendment 1 was adopted.                                                                                                   
Number 0950                                                                                                                     
CHAIR ROKEBERG moved to adopt Amendment 2, which read:                                                                          
     Page 2, line 13, following "subsection":                                                                                   
          Insert ", but may not negotiate the exclusion of                                                                      
     providers   who   are   not  physicians   from   direct                                                                    
     reimbursement  by a  health benefit  plan, and  may not                                                                    
     negotiate the  setting in which  providers who  are not                                                                    
     physicians deliver services"                                                                                               
CHAIR ROKEBERG,  noting that there were  no objections, announced                                                               
that Amendment 2 was adopted.                                                                                                   
CHAIR ROKEBERG  announced that SB  37 [as amended] would  be held                                                               
over so that he could look at the "transparency issue."                                                                         

Document Name Date/Time Subjects