Legislature(1995 - 1996)
04/26/1995 03:22 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 266 - HEALTH CARE PREFERRED PROVIDER PROGRAMS Number 099 CHAIRMAN KOTT announced the first order of business would be the continuation of HB 266, "An Act relating to preferred provider agreements offered by hospital or medical service corporations." He said testimony had been given on the bill the previous Monday. REPRESENTATIVE NORMAN ROKEBERG interrupted to make a motion to bring another bill, previously heard, before the committee. HB 266 - HEALTH CARE PREFERRED PROVIDER PROGRAMS Number 564 The next order of business was HB 266, "An Act relating to preferred provider agreements offered by hospital or medical service corporations." CHAIRMAN KOTT said the bill had been heard the previous Monday and there was quite a bit of testimony both for and against the bill. He noted there are a couple of people who have signed up to testify. ROBERTA COUGHNOUR, Employee Relations, Municipality of Anchorage, testified via teleconference from Anchorage. Ms. Coughnour explained that they have approximately 2,500 employees and about 250 retirees and their families who are covered under a group insurance plan. About 1,500 are covered by collective bargaining agreements. Under the group insurance plan for the municipality, they use preferred provider organizations (PPO) as a way to control costs rather than eliminating benefits. They use hospital PPOs and managemental health PPOs. MS. COUGHNOUR said in 1994, their PPO savings exceeded $1 million. Since the Municipality of Anchorage has a (indisc.) premium plan, that money stays with the municipality and doesn't go to the insurance company. Employees who have a co-pay, pay on the reduced amount and not on the full amount that they would normally pay (indisc.) PPO. MS. COUGHNOUR explained that during 1995, the municipality will be negotiating with their four bargaining units. A major part is that they are trying to negotiate PPO provisions into their plan. One represented group has approved a new agreement. It contains a PPO agreement and projections for future premiums which were based on the PPO provisions remaining in the plan. Savings from implementation of the PPOs were used in determining the amount of funds that would be available to fund increases in wages over the term of the contract. Similar strategies are being used with their other three bargaining units. MS. COUGHNOUR informed the committee if PPO requirements included any willing or (indisc.) provider provision, it would eliminate the ability of insurance (indisc.) to negotiate a passive discounts and allow (indisc.) by the municipality to control claims costs without (indisc.) benefits. She said she would be happy to answer any questions the committee may have. Number 601 CHARLIE MILLER, Lobbyist, Alaska Regional Hospital, said his clients position on the PPOs is that the mechanism is very effective at helping contain costs in certain markets, but they contend that the market requirements don't really fit in Anchorage or in Alaska. The basis is a small population both of providers and patients. Mr. Miller explained that most successful manage care markets contain large numbers of patient's insurance and large numbers of providers. So a healthy competitive atmosphere exists that if you were to lose one competitive bid, you could tighten your belt, sharpen your pencil on the next bid and still survive. Therefore, the competitive efficiencies would come into play. MR. MILLER explained that in a market where we have very few patients and providers, conditions exist that don't exactly enhance the competition, but (indisc.) adverse conditions for competition. Mr. Miller said in their particular area of the market, hospital care, there is only two in Anchorage and there is a negotiation between the parties involved and they're not invited to bid. What significance that could bring about as far as more reduced costs, they don't know. If it were a competitive bid, perhaps the rates would even be lower. That is not the case and hasn't been the case. The Alaska Regional Hospital has tried to address that and have never been invited to the table. MR. MILLER said if you take the relatively small population and involve the patients, subtract Indian health care, federal CHAMPUS(Sp?) military programs, etc., the population becomes even smaller than it appears at first. Then we look at having a limited number of providers and if the providers aren't allowed to bid, then your fighting competition and you are not enhancing it. The possibility exists that you'll even have less providers in the future and there is absolutely no incentive to discount when you get to the point where there aren't enough providers to participate in active bidding if that were to occur later. MR. MILLER referred to volume discount and said it is a very valid argument, but once again in a large market it comes into play. In a smaller market where there hasn't been competitive bid to date, it does really seem to fit. The significance of any cost increases is in question because there hasn't been bids or competition. The speculation is that it would be a large increase in costs. He said Alaska Regional Hospital doesn't feel that is the case any more then they could say for sure that the price would go down if there were competitive bids. MR. MILLER said previous testimony seems to imply that if any willing provider was passed in this market, that it would be an all or nothing situation as far as cost containment. He said the Alaska Regional Hospital doesn't believe that would be the case. To say there was a PPO negotiated, it saved $1 million, and if any (indisc.) came in, there would be no savings... END OF TAPE TAPE 95-45, SIDE B Number 000 MR. MILLER continued ...and negotiation were to expand to include more providers, there would definitely be discounts. To say that there is all kinds of cost savings involved without this and there will be no cost savings involved if it passes, the Alaska Regional Hospital doesn't believe that to be true. Mr. Miller referred to his facility paying over $1 million a year in property taxes to the Municipality of Anchorage and they aren't allowed to sit at the table and bid the job to pay for the health care that their taxes help to provide. It seems awkward to have to come here and ask to be allowed to participate in something when they pay taxes and can't bid the jobs the municipality provides MR. MILLER explained another issue brought up was the control of quality providers. Alaska Regional Hospital decided that they needed to address that and when they went through their last accreditation, they made a sincere effort to show the quality of the facility. They received the highest qualification you can get from the accreditation people. Mr. Miller said there are other tools available to payers to keep out bad providers. He said he thinks mechanisms already exist to control (indisc.) bad positions in facilities if need be. MR. MILLER referred to the other cost containment measures and said all of those would stay in place. Utilization review is very well established in the industry. Preauthorization for surgical treatments for hospitals stays, utilization review to prevent self referral by patients to a higher level of care than necessary, etc., will still remain in place. It is always a dynamic situation. Sometimes people contest not being allowed to self refer, but these mechanisms are well established and will stay in place also. So there still will be cost containment. MR. MILLER said in previous testimony on mental health, it was mentioned that what could happen if the bill passed is that a patient could self refer him or her self to a psychiatrist. With utilization review, that just wouldn't happen. The patient wouldn't be reimbursed at full schedule because they would call and talk to the payer, the payer would inform them that they would have to go through perhaps a mental health counselor for assessment. MR. MILLER explained another aspect is whether or not there is a place for the legislature or for the law to get involved in this market. Actually, the government is very well involved in this market. Certificate of Need prevents facilities from (indisc.) capital expenses that would allow a facility, physicians clinic or a particular provider to provide services that the department feels are already provided and it would be unnecessary equipment. If you have certain programs, other people that want to just spend money to get into the market and compete with you, it is very difficult to achieve the approval to get these things. That is definitely government involvement. There is a tax exempt status for certain payers and facilities that others don't enjoy, regardless of their own charity care provision in the community. He said his facility provides a considerable amount of charity care and they also pay a considerable amount of taxes. If that isn't government intervention, he isn't sure how else it could be defined. MR. MILLER said his organization doesn't believe it is inappropriate for the legislature to address this. We have to keep focused on the real issue which is, "What market are we dealing with here?" We're not dealing with Southern California, Puget Sound, or some of the really large markets that these things work in. We're working in Alaska's market and Mr. Miller's client feels very strongly that this measure is appropriate for this market. He urged to the committee to consider the bill and move it through the process. Number 104 REPRESENTATIVE ROKEBERG referred to a proposed amendment that had been drafted and asked Mr. Miller if he has had the chance to review the amendment. MR. MILLER said he has reviewed the amendment. He said unfortunately he has been rather confused as far as last year when we tried to address the issue and a legislative attorney had the opinion that (indisc.) Aetna disability group plans were already under restrictions that didn't allow PPOs. There was further discussion this year in the Senate Labor and Commerce Committee on a related matter. There was a memorandum distributed in reference to that testimony that the Division of Insurance, at that time, felt that PPOs were allowed under 21.87, the medical and hospital service corporations, but not under the other types of health plans. He said before the Monday hearing, he was given a copy of the Attorney General's (AG) opinion which goes the other way. He said it would appear that the AG's opinion says that the bill, if it is going to have the effect intended, should address both major payers which is the medical and hospital service corporations and the other insurers. REPRESENTATIVE ROKEBERG said that is the intent of the amendment. He indicated he has concern. He said HB 266 is a very important piece of legislation that deserves a full review by all parties involved. Representative Rokeberg said he would prefer HB 266 go to a subcommittee to be reviewed. Number 143 REPRESENTATIVE ELTON asked Mr. Miller if he is saying that he doesn't expect that the savings will disappear under HB 266. He said Mr. Miller seems to be saying that savings within the health care system may be expanded because you're expanding the savings that are there for the preferred providers to other providers. MR. MILLER said what he was trying to say was in the hospital area of the market, if there was a competitive bid process, there could be savings that haven't yet been realized because no one knows what discounts are available if there isn't a competitive bid. If more facilities or providers are enfranchised into the system, he doesn't feel that it is an all or nothing savings as far as the savings from the PPOs. He said he doesn't anticipate prices going down or up significantly if both of those things come into play. He noted there are very limited major payers in the state and perhaps negotiations would lead to good discounts that were available to both facilities. That is a possibility. It is hard to say. If you don't have a competitive bid, you're not sure you have the best price. Mr. Miller said that is what he is trying to say. He said he doesn't mean to say that if any willing provider happens, you're going to see immediate expansions in the discount. Number 181 REPRESENTATIVE ELTON said he is interested in what the current process is when somebody goes out for a PPO agreement. He said he is trying to figure out what room full of animals could ever design a bid process in something as complex as the medical field. He said he doesn't see how you write a bid. MR. MILLER explained in most managed care markets that have PPO networks, and these sort of arrangements, they do bid. He said he'd be glad to tell Representative Elton he knows how that works, but his organization has never sat at the table to negotiate on or have been given a bid package. He said he doesn't know exactly how that would work. REPRESENTATIVE ELTON asked Mr. Miller if he is saying that he doesn't know the shape of the table because he has never been in the room. MR. MILLER said they have attempted, at different times, to speak with the major payers, but they haven't been allowed to negotiate at least a portion of the contracts. He said his client has been frustrated in those efforts. Number 206 CHAIRMAN KOTT said the bottom line is that Mr. Miller is suggesting that if the bill were to pass, it would instill greater competition and probably have an affect at lowering the prices. MR. MILLER said with out a doubt in the long run, that would be the case. In a small market, if you manipulate the market so that only certain players are allowed to play, soon you'll have a smaller number of players. Number 227 DOUGLAS BRUCE, Chief Executive Officer, Providence Health System in Alaska, was next to come before the committee to give his testimony. He explained his organization operates Providence Alaska Medical Center, formally Providence Hospital; and Providence Extended Care Center, formally Our Lady of Compassion. He noted they are in the development of Providence Horizon House which will be the first assisted living facility for Alaskans. MR. BRUCE said his organization is very concerned about the proposed bill. Approving the "any willing provider" legislation would have a very detrimental affect on the cost of health care in the state. Preferred provider contracting, that is an agreement between a provider of health care, a purchaser and individual company or insurance company has been the key tool to reduce or at least slow the spiraling cost of health care in Alaska. The provider in their case, Providence Alaska Medical Center, agrees to provide a discount in return for volume. Both insurance companies and employers came to them and asked, "If we send you all our Anchorage employees who need hospital care, will you provide us a discount in return for the volume?" Mr. Bruce said they have responded to those requests and he believes that the committee will find that it has benefitted all parties and has kept the cost of health reasonable, as evidenced by previous testimony. If any willing provider is allowed to come into the picture offering the same discounts, volume is disbursed. Without offsetting volume, those discounts are impossible to sustain. Nobody would offer the same price for a service if the volume is expected to be able to be disbursed to competitors. Therefore, instead of being competitive, it is an anticompetitive legislative move. MR. BRUCE said there have been questions about the ability of employers being able to choose their health care providers. In Alaska, the choice of hospital providers used to work where employers purchase insurance at the going rate for their employees, paying all or most of the premiums. There were no incentives for using a particular hospital. Now a number of employers, either through a select insurance plan or by direct contract in the case of self funded programs, are making these preferred provider arrangements to better manage their organizations health care costs. If these purchasers of health care desired and believed that it was in their interest to include Alaska Regional in their bidding processes, they would. They do not believe it is in their interest. Mr. Bruce noted he would explain why later. MR. BRUCE explained the employers usually pay all or a majority of the premium costs for the employee. As the purchasers feel they have the right to define the parameters of the benefit package, the employee subscriber still has a choice of which hospital to use but, of course, they have to be willing to pay the difference in deductibles to honor the plan. These PPO arrangements have not historically, in the state of Alaska, involved physicians. They have been strictly arrangements with hospitals. MR. BRUCE said several issues have been raised by the initiators of the bill say they are unable to compete on a level playing field because as a for profit organization, they have to pay taxes in Providence and a not for profit hospital does not have to pay taxes. He said to that, they have responded. They have the option of being a not for profit organization. (Indisc.) there is a very good reason they have decided not to be. They are in the business and they do. In contrast, the Sisters of Providence see the provision of health care as a ministry and not as a revenue generator. All earnings are kept in the state in the further development of services to Alaskans. Certainly, Providence must make sure their annual net revenue exceeds expenses and are to remain viable. All revenue goes either to provide charity care, community health care needs or to support capital needs. MR. BRUCE said we've also heard that this legislation is an attempt to even the playing field between the large and small hospitals. In response, he would like to remind the committee that their competitor, Columbia, is the largest health care corporation in the world. It is also the most profitable health corporation in the world. HB 266 has been introduced because Alaska Regional, which has earnings of about $4.5 million a year, has not been willing to reduce its non competitive rates to purchasers. Specifically, in the 1993 cost report, Alaska Regional's average charge per adjusted discharge was $14,241. That is the charge to the purchaser. MR. BRUCE said, "Providence was $11,838 with costs to Alaska Regional, do to having a lesser case mix index, and when I say lesser case mix index Providence does more difficult cases like open heart surgery and other things which raises the cost up, of more than $15,000 per average discharge less than Providence." Mr. Bruce said insurance companies look at statistics and if your average charge, per discharge, to an insurance company is $14,000, a competitors is $11,000, one of the factors is why would you invite that person to negotiate with you if it is not in your interest. Mr. Bruce said insurance companies, as do businesses, do what is in their interest, in the public interest and in the interest of what is going to further the fulfillment of their business needs. MR. BRUCE said Providence feels this issue is one which should be worked out in the market place and not in the legislature. He said they are not crazy about the way the health system works in this country. They would much prefer collaboration rather than confrontation in delivery of health care, but because they must respond to the proposed legislation, they ask the legislators to not interfere with one of the few tools to make health care affordable in this state. Both hospitals have been very successful serving Alaskans. Number 343 REPRESENTATIVE KUBINA referred to Mr. Bruce saying all his organization's earnings are kept in the state. He said he has heard otherwise. He has heard that where they don't have profits, the extra funds they do have over and above operating costs, are shipped out. MR. BRUCE said that is very inaccurate. All earnings and net income is plowed back into local services and expansion of their facilities. He noted the Sisters of Providence keep that commitment in every state and community that they're in because it is what they are all about. They don't personally gain from this endeavor. Number 353 REPRESENTATIVE ELTON said he thinks the most compelling part of Mr. Bruce's testimony was the discharge cost and the comparisons between Columbia and Sisters of Providence. He said there has been a suggestion that perhaps a part of the difference in discharge cost may be overhead. He asked how much of the difference in discharge costs could be attributed to difference in overhead because of taxation and other differences between a nonprofit and a for profit corporation. MR. BRUCE said it is a very small amount, it is in the 4 percent range for that specific item when you're talking about total revenues. However, as a not for profit, Providence Health System in Alaska is community benefit services way in excess of what we would pay in property taxes. REPRESENTATIVE ELTON asked if that was charity work. MR. BRUCE said it is charity work and the range is usually $6 million to $8 million a year. One of the services that is a service to the state of Alaska is their thermal unit for burn patients. They are the only ones who provide that service. It is a loser but it does contribute overall. That loss is in lieu of paying taxes. Number 392 REPRESENTATIVE SANDERS said when he first saw the bill he was under the impression that this contract had been bid and that the other hospital had lost the bid and now they were coming back trying to get in on it. Then he understood this was not bided but was negotiated. He asked why it wasn't bid. He asked Mr. Bruce if he would mind if it was bid. He asked how it could be bid. MR. BRUCE referred to previous testimony that bid prices would automatically lower the cost that is (indisc.) itself, particularly for the reason that he stated. In a small confined market, as in all businesses, if you're in the trucking business and two trucking companies each have a price for five units of trucking and one of the shippers says, "By the way, if I could give you seven of the units instead of five and the other one would get three of my shipping cartons, could you give me a better price?" Mr. Bruce said you could do it because it is units, unit cost and units equals the price where you are able to do it. REPRESENTATIVE SANDERS asked why it is not bid. He said he missed that part. MR. BRUCE said it is not necessary. If the insurance companies, Carrs, BP Exploration, etc., can right now through Aetna and Blue Cross say we choose to have it bid. They can do that but they don't because in their judgement, the costs would be greater if it was bid than if it wasn't bid. Number 440 REPRESENTATIVE ROKEBERG indicated he had a letter from the Alaska State Medical Association that he had received today and said he would give a copy to Mr. Bruce. The letter was from Doctor Donald R. Layman(Sp.?). It said the State Medical Association is in favor of this particular bill. He said in prior testimony, many physicians support the bill because they are concerned about the relationship between the doctor and the patient, and also the matter of choice among patients. He asked Mr. Bruce cares to comment. MR. BRUCE said under any willing provider, it is a different aspect for physicians than it is for the institutions. Mr. Bruce stated the most expensive thing in health care is a thing called choice. If you have ultimate choice in purchase, you will pay more than if you have restricted choice, adequate choice of physicians, adequate choice of hospitals. Any time you can choose whoever you want to go to in the case of doctors, you will not necessarily get the best quality or the best choice. In any of deliver of health care there is what is called "outcome variance." For the exact same kidney operation, open heart, etc., you have what is called the "outcome variance." What you want is a very narrow variance of what occurs to you and at what price. The more you don't have managed care and the more you have of the individual's choice, you have larger variances which is more costly. He said that doesn't make it good or bad. You do have to give up a little freedom for a lot of cost differences. REPRESENTATIVE ROKEBERG asked that it be put on the record that he is a long time supporter of Providence Hospital. He had his tonsils out in 1953, at Ninth and "L" street. Number 475 REPRESENTATIVE PORTER referred to having spent a short period of time in business in the private sector and he has spent a long time in the public sector and said he knows the difference between bidding in the public and private sectors. He said you have all sorts of options in the private sector for constructing the type of bid you want to put out. He asked Mr. Bruce what, in his mind, is the reason that an insurance company is not structuring a bid so as to say, "Please give me a quote in these areas with these confined restrictions," and then allowing the winner of that bid to sit down and negotiate a final contract. MR. BRUCE said they make judgements on what is the average cost and what is the out come. They do consumer referral pattern studies. In other words, they find out who would be the provider of your choice. They go to their customers and say, "If I'm going to be signing up and answered your question around the table," one of the factors is they say, "Which provider in this community, consumer, would you like us to have a relationship with?" In Anchorage, more people choose Providence. Number 530 REPRESENTATIVE KUBINA referred to Mr. Bruce saying that his organization provides open heart surgery but the other institution doesn't. He asked if there are things that the other institution provides that Mr. Bruce's organization doesn't. MR. BRUCE said the answer is no. He noted the other organization is active in trying to get into doing open heart surgery. Mr. Bruce said he is strongly opposed to. He said they are the only open heart program in Alaska and they do about 300 hearts a year. Anytime that you get less than 175 hearts in any program, the quality, due to the need for the frequency of the numbers and the training of the nurses and physicians, is reduced. He indicated Alaska Regional Hospital has just announced that they are going to start up a competing open heart program, but the number of hearts in this state are not sufficient to have two programs. MR. BRUCE discussed how Alaska Regional Hospital got the contract for the Veterans Administration (VA). He noted that his organization was slightly under them on the bidding, however, the VA built the facility on their campus. They were given the contract based on other criteria other than cost. MR. MILLER said his organization recently announced that they are going to start a heart unit. Number 543 REPRESENTATIVE ELTON said he wants to make sure he understands the essence of the argument. He said Mr. Bruce is saying that under any willing provider system, if it is open to a completely free and competitive bid, there is no real incentive to do a low bid. He said, "Simply because so what if the competition gets it, if you're allowed to match it..." MR. BRUCE interjected, "...or lose money." REPRESENTATIVE ELTON said there is no real incentive under that kind of a system for somebody to come in with a low bid. MR. BRUCE indicated that is correct. REPRESENTATIVE ELTON referred to the competitive situation with hospitals and said he has recently received some phone calls from Human Affairs. He referred to the argument of why come in with a low bid if you can just match later on, and asked if that works in the Human Affairs agreement that they have with the state or is the logic somewhat different. MR. BRUCE referred to Human Affairs and said he assumes Representative Elton is talking about he mental health portion. He said Human Affairs is a form of "gatekeeper" or "certification program," so that patients in mental health don't self refer to physicians and have bills. That program is attachable to any PPO or any non PPO. It is an independent thing. REPRESENTATIVE ELTON said there would be no reason that anybody could be a provider at that point as long as that person had the appropriate professional certification. MR. BRUCE said no matter who is going to be providing the service, the first gatekeeper will ask is, "Do you need the service." If you get by that, whatever negotiated price you have negotiated - that is what happens. Where Human Affairs makes the savings for its purchasers, it prevents unnecessary usage of at whatever rate you've negotiated. Number 583 MS. COUGHNOUR said they contracted with Human Affairs for their employees. This is a managemental health program. They do have a select group of providers and that is how they get volume discounts for their referrals. In a sense, they are a PPO of mental health professionals. She said she also wanted to make it clear that municipality does spread their insurance program and their PPO is contracted through their insurance carrier. If Alaska Regional or any other hospital wanted to bid on the municipality's business and they were partners with an insurance carrier, they would have the opportunity to bid. She said as far as the municipality is concerned, they have not eliminated anybody from bidding on their business. Number 614 CHAIRMAN KOTT said he has a proposed CS for HB 266. He said it is language that was suggested to him by the Division of Insurance. It is CS "F," dated 4-26-95. Number 635 MARIANNE K. BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, said she was provided a copy of the amendment. She said on Monday, Don Koch did provide some suggested language which was included in the amendment. CHAIRMAN KOTT informed Ms. Burke that the committee was dealing with the CS and not the amendment. TAPE 95-46, SIDE A Number 000 CHAIRMAN KOTT said page 1 is the same as the original bill, but subparagraphs 1, 2 and 3 have been added. MS. BURKE said the CS does agree with her division's recommendations on some proposed compromised language. CHAIRMAN KOTT asked MS. BURKE to explain the affect of the new language. MS. BURKE said the affect is to say that if a provider is willing to meet the terms and conditions of a preferred provider agreement, and the terms cannot be denied to a willing provider. She referred to testimony that has already been given that the contractual relationship that is entered into by the provider includes not only the discount for volume but it also imposes on that provider as part of the contractual relationship. The financial responsibility that is in lieu of the solvency of a regulator (indisc.). She continued to give an example. REPRESENTATIVE KUBINA asked if the state of Alaska goes out to bid with Aetna, Blue Cross, etc. MS. BURKE said the placement of the state of Alaska insurance is done through the Division of Retirement and Benefits, Department of Administration and she isn't familiar with their process. She noted it is her understanding that it does go out to bid. Number 078 REPRESENTATIVE PORTER asked if she is saying, "If hospital A bids or is awarded a PPO and hospital B agrees to meet the prices and specifications of that contract, then hospital B may receive patients from the provider or from the group. But that if it does, it must main -- it must -- hospital B must maintain that services regardless of whether they are making money or not on it or hospital A." MS. BURKE said, "If the contractual arrangement, lets say that -- choose the state of Alaska because I can't imagine it running out of money. Lets just say employer A has entered into a PPO arrangement with hospital A. This language would then say `If hospital B is willing to meet the terms and conditions of this contract then they would not be denied the ability to receive patients.' And what I am suggesting, it is important to keep in mind, it is not only the upside of this contract which means the volume that you're going to get in exchange for the discount, it is also the potential downside. If employer A does not have sufficient funds or for some reason this contractual arrangement does not have the sufficient funds to provide that level of payment, then hospital B has agreed to provide this service even if the cost is higher at that -- on the agreed upon rate. Hospital C also agrees to the same terms and conditions of the contract." REPRESENTATIVE PORTER asked who is running out of money. MS. BURKE said, "Lets say hospital B's cost of doing this procedure increases 45 percent. They're still stuck with providing the procedure at the same price. They are a party to the contract. They can't back out of it." Number 140 REPRESENTATIVE ELTON said he would like to know whether Ms. Burke thinks that the approach taken in HB 266 will affect the cost of health care delivered in the state of Alaska. He also asked whether that cost would go up or down if the bill is passed. MS. BURKE said in the lower 48 where preferred provider arrangements have been put into place, there have been decreases in cost. The testimony offered at the meeting today is quite valid. She said we are not Southern California. We do not have a unlimited number of providers. We do not have the same competitive environment that is enjoyed in other areas. Ms. Burke said from a economic point of view, it would appear that if you can take it to the free market and bid on providing a service, you are also on the hook for providing that service whether you can make money on it or not. It would seem to her that the free market would very carefully evaluate and come in at a price that they felt they could make a profit. Ms. Burke said she believes that the PPO concept will save money. REPRESENTATIVE ELTON asked if the adoption of HB 266 would mean that we would no longer have a PPO environment in the state of Alaska. MS. BURKE said she doesn't think so. Number 188 REPRESENTATIVE ROKEBERG referred to the amendment that was brought forward and asked Ms. Burke to comment in terms of the intent to cover the insurance companies and not just the other portion of the insurance sector MS. BURKE said she isn't sure she understands the question. REPRESENTATIVE ROKEBERG said because of the AG's opinion, the intent was to bring in premium paying companies, stock and mutual companies. MS. BURKE said the AG's opinion did state that although there is no enabling legislation currently on the books. A stock company or other indemnity companies can form PPOs. REPRESENTATIVE ROKEBERG asked if that was the intent of the amendment and if that is what has caused confusion. MS. BURKE said the legislation that is currently in place permits PPOs. What the amendment does is it says that if a provider is willing to meet the terms and conditions, then it is open. She noted she is referring to the CS. Ms. Burke said she would like to point out that this is in AS 87, which is specific to the hospital and medical service corporations. She said as she has mentioned, the AG's opinion does state that any provider can enter into a preferred provider arrangement. Number 223 REPRESENTATIVE ROKEBERG made a motion to adopt CSHB 266(L&C), Ford, 3-26-95. Hearing no objection, it was so ordered. REPRESENTATIVE ROKEBERG said he has given the committee a proposed amendment which clearly causes confusion. He said he hasn't seen the AG's opinion and, therefore, he would recommend that the bill be moved to a subcommittee which he would be willing to chair. CHAIRMAN KOTT said he believes the recommendation by Representative Rokeberg is appropriate. He said the amendment Representative Rokeberg is offering goes beyond the far reaches of the original intent of the bill. Chairman Kott said it would be his recommendation that the CS and the proposed amendment be forwarded to a subcommittee of three consisting of Representatives Rokeberg, Elton and Masek. REPRESENTATIVE ELTON OBJECTED for the purpose of a comment. He referred to the provision of the Human Affairs contract and said he may need the mental health services afterwards. REPRESENTATIVE KOTT said the bill would be referred to a subcommittee.
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