Legislature(1997 - 1998)
03/23/1998 03:21 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 300 - ALASKA PATIENTS' BILL OF RIGHTS Number 0107 CHAIRMAN ROKEBERG announced the committee's first item of business would be HB 300, "An Act relating to health insurance; and providing for an effective date," sponsored by Representative Bunde. Chairman Rokeberg noted the bill would not move out of committee at this hearing, but it is his intention to conclude the public hearing. He called on Mr. Jordan to testify. Number 0158 JIM JORDAN, Alaska State Medical Association, informed the committee, via teleconference from Anchorage, that he would answer any questions regarding the written testimony that was previously provided to the committee. Number 0222 ED BURGAN, Employee Benefits Consultant, Brady and Company, testified via teleconference from Anchorage. He stated HB 300 would either stifle or eliminate the use of health maintenance organizations (HMO) or preferred provider organizations (PPO) in Alaska by insured clients. Although we don't currently have HMOs, there are numerous PPO agreements and they would be stifled. Mr. Burgan informed the committee members the cost of health in Alaska is currently among the highest in the nation. He continued to read the following testimony into the record: "Insurance companies do not mandate the type of coverage you wish to regulate. They offer policies to plan sponsors, and these plan sponsors can either purchase a policy, some with and some without a preferred provider agreement. The majority of benefit plan sponsors have some form of contractual agreement with hospitals, physicians and dentists using the clout of joint purchasing on behalf of the employees to help maintain or increase benefits. Generally speaking, benefits are increased, not decreased when a PPO agreement is adopted by a plan sponsor. Employees are advised in advance of implementing a PPO agreement not 'when they come to use the plan' as stated in the sponsor statement. "I believe the guaranteed results of the legislation will be to do several things. One, substantially increase costs in Alaska to employers or plan sponsors, or equally reduce benefits to Alaska employees currently needing to ensure their benefits and are now using some form of PPO. It will be financially damaging to small or medium size employers. It will not have any material impact on larger or self-insured plans. It would benefit the provider community; i.e., hospitals, physicians and dentists. It would eliminate incentives to providers to be competitive with other Alaska or other Lower 48 providers on both costs and quality of service if a patient does not have an incentive to buy through the PPO network. It will force employers to move toward self-funded plans governed by ERISA [Employee Retirement and Income Security Act] and federal statutes, thereby avoiding or eliminating the state of Alaska mandated benefits and legislation of this nature. "At the very least, I would like to suggest that someone contact some experts on the pricing of this legislation to determine the adverse cost impact it could have across the state of Alaska. Thank you." Number 0430 REPRESENTATIVE JOHN COWDERY asked Mr. Burgan if he is aware of anybody in Alaska who is being hurt by the present system. MR. BURGAN stated that he doesn't know of anybody being hurt by the present system. He said, "If you're referring to plan sponsor in uses in insurance contracts and also as a preferred provider agreement in place, generally speaking, I have not encountered major problems with that type of an arrangement." REPRESENTATIVE COWDERY referred to a possible situation where a person was in an accident and was taken to the emergency room without any say in their ability to have a choice. He said in that situation, even the fact that they had insurance or not would not be a factor. He asked if there would be an impact on that kind of a situation if HB 300 was enacted. MR. BURGAN responded that he has been in the business for about 30 years and has never encountered a situation where in an emergency a person could not go to any facility proximate to render the service and do so without penalty. He stated that he would presume that type of arrangement would continue under current insurance contracts because it's impossible to enforce and it's punitive to the employee. Number 0550 CHAIRMAN ROKEBERG referred to Mr. Burgan's comment that the committee should contact some experts who know how to estimate the costs and the actuarial impacts of this type of legislation and asked if he could recommend anybody to contact. MR. BURGAN responded that there are probably a number of national consulting firms to do the study. He said he could recommend several names. CHAIRMAN ROKEBERG asked him to fax his testimony along with a list of recommended names to the committee. Number 0621 ROSEMARIE KALAMARIDES, Administrator, Alaska Teamster-Employer Welfare Trust, testified via teleconference from Anchorage. She read the following statement into the record: "Good afternoon, my name is Rosemarie Kalamarides and I'm the administrator of the Alaska Teamster-Employer Welfare Trust. I've worked with the Teamster Trust funds for 18 years and I understand that the issues facing this body are complex. I also know that many competing interests will provide compelling testimony making your task even more difficult. "The sponsors of this bill are attempting to legislate patient choice. This is a noble goal. Unfortunately, this bill is misguided and while it may initially give the patients more choice, ultimately, it will increase the patient's health care costs. "Make no mistake; this legislation will force medical costs up. And who will pay the additional costs? Not the employers who are struggling to compete in a tight marketplace. They will shift the added costs to the employees, your constituents, many of whom are already struggling to make ends meet. "Here is how it works. Employers pool their health care dollars and either purchase health insurance or self-fund benefits for their employees. Smaller employers tend to purchase insurance contracts while larger employers, with the economics to do so, self fund their benefits. "Our trust funds the health care benefits of approximately 8,000 covered lives, most of them in Alaska. Under our health care plan, over 100 employees have pooled their health care dollars and assigned the task of providing meaningful benefits with the dollars available. "It is then our job to plan steps within the limited dollars and as effectively as possible. One way is to enter the marketplace and negotiate reduced medical costs with providers, these are commonly called PPO arrangements, provider groups or hospitals. The way these preferred arrangements are negotiated is quite simple. For volume referrals, providers and hospitals agree to discounted rates. They will only negotiate reduced rates with some assurance that they will receive volume referrals in exchange for their discounts. "This legislation may sound good on the surface, typically called 'Any Willing Provider Legislation,' it says that we must pay any willing provider the amount that we would pay the preferred provider. The irony is that plans will not be able to negotiate preferred arrangements if this legislation is passed. Why would a provider agree to discounted rates or fees for services if the volume is not sufficient to cover the deep discounts? They won't. There is no way to assure volume if this legislation is passed. "As an administrator, I would prefer not to steer our members to certain hospitals or certain doctors. But, without these arrangements in place, I would be telling them that their coverage is no longer 90 percent for preferred providers or even 80 percent for non-preferred providers, but 50 percent because misguided politicians passed ill thought-out legislation which undermined the ability to negotiate reduced medical rates. "This legislation makes no sense in Alaska. Alaska providers and consumers have agreed that there is a reasonable balance between quality care and affordable care, that patient-centered care is everyone's goal. Patient-centered care can only be attained through the teamwork of the doctor, the patient and the health care payer. "This legislation attempts to solve very complex problems with simplistic, uninformed solutions. This legislation is a step backward. It is hostile. "Several years ago, I testified against similar legislation. You've heard from several doctors and their employees who support this legislation under the manner of consumer choice, but they are not the consumers. "You did hear from a consumer. On Friday, you heard from Debbie Dumman. She recognizes that this legislation would shift health care dollars from the pockets of consumers into the pockets of doctors and hospitals. It will not improve their health care. It may give them more choice, but at too high a price. "You heard from folks who fund health care. Employer, Walter Hickel, Jr., put it very well when he said, 'There are not many options for Alaska businesses to adequately manage the cost of health insurance benefits for their employees.' "The employers who fund health care will tell you that they cannot remain competitive and pay more for medical costs. This means that their employees, your constituents, will have to pay the additional costs. "The message this legislation sends to Alaska is simple, doctors and hospitals do not have to negotiate with anyone. They can set the price and Alaskans must pay. This legislation is a thinly veiled protectionist law, which benefits a few wealthy individuals and a huge, very profitable, national hospital chain. "This legislation is anti-competition. It is all about regulating the free marketplace. Proponents will tell you this legislation gives choice to consumers. That is baloney. If you pass this legislation you will accomplish one thing; you will drive health care costs up, and in doing so you will shift dollars from the pockets of hardworking Alaskans, and increase the incomes of a few doctors and hospitals. Thank you." Number 0902 REPRESENTATIVE CON BUNDE explained Ms. Kalamarides said health care costs will increase if the legislation becomes law. He asked if she could give him any assurance that health care costs wouldn't go up if the bill doesn't become law. MS. KALAMARIDES responded that she couldn't give him that assurance but she hopes that she can go out into the marketplace and negotiate agreements to try to control those costs. If the bill is passed, it would certainly hinder her ability to do that. REPRESENTATIVE BUNDE asked Ms. Kalamarides if she agrees that one way to control costs would be to decrease the level of service. MS. KALAMARIDES said that if doctors and hospitals are not required to contain their costs, the only thing that a health plan can do, with limited dollars, is to unfortunately cut services. Number 0979 CHAIRMAN ROKEBERG asked Ms. Kalamarides if the Teamsters are self- insured or if they bargain a contract under a PPO. MS. KALAMARIDES stated that they are self-insured, which means the legislation wouldn't currently affect them. She noted they always have a concern that Congress could allow state law to preempt ERISA and that could change everything. CHAIRMAN ROKEBERG said as a self-funded, self-insured organization any of the mandates that the state legislature passes, or any bill such as HB 300, would not affect her organization as it is presently configured. MS. KALAMARIDES responded in the affirmative. Number 1053 JACK McRAE, Blue Cross of Washington and Alaska, testified via teleconference from Seattle. He noted Jeff Davis, the executive director of the Alaska market, was also with him. Mr. McRae said he has a real concern about the cost driver that has been mentioned. There are a number of small businesses that are very marginal and the cost drivers could cause a lot of the small businesses to make a decision not to insure their employees. Mr. McRae said he is concerned that with the passage of HB 300, there will be a constant shift for everyone in Alaska, and the amount of uninsured people could increase substantially. CHAIRMAN ROKEBERG asked for a description of any corporate changes that Blue Cross of Washington and Alaska has undergone over the last year. He also asked what his organization's plans and activities are in the state of Alaska. Number 1116 JEFF DAVIS, Executive Director, Alaska Market, Blue Cross Blue Shield of Alaska, explained they have increased their physical presence in Alaska. He explained he became the executive director in November, 1997. Staff in the Anchorage office has been increased. They are currently doing business as Blue Cross Blue Shield of Alaska. Mr. Davis informed the committee that all of the changes are designed to help them become closer to the Alaska market, to understand the unique needs and to see how they might bring additional value to their members in Alaska. MR. McRAE interjected that they have been in Alaska prior to statehood and are very committed to the Alaska market. Number 1168 CHAIRMAN ROKEBERG asked Mr. McRae if he could explain the name change and what effect, if any, that has on activities in Alaska. MR. McRAE said they see it as a marketing advantage in Alaska. "Blue Cross Blue Shield of Alaska," rather than "Blue Cross of Washington and Alaska" will give more identity in Alaska. He said, "The second part of it is the way the shield and the cross is established is through an association that we belong to, and we are given the right to use the shield and the cross. We're all independent stand-alone Blue Cross and Blue Shield plans, but the association oversees the use of the cross logo and the shield logo. We have had the authority to use the shield logo in Alaska ever since we've been in Alaska, but we have not used it. And we were concerned about another competitor seriously coming in and taking a look at that shield and being able to tell the association that we're not using the shield and that they would like to use it in Alaska as a marketing approach." He pointed out that there are two reasons they changed the name. One is to reemphasize their input in Alaska; and two, to reinforce the licensing of the shield which they have been granted in Washington. CHAIRMAN ROKEBERG asked what the difference is between Blue Cross Blue Shield of Alaska and the organization of Blue Cross of Washington and Alaska. He asked if they are now separate organizations. MR. McRAE explained they have been doing business as (dba) Blue Cross Blue Shield of Alaska. The holding company of that dba is Blue Cross of Washington and Alaska. Over 1998, they will be phasing out Blue Cross of Washington and Alaska. They will then be known in Alaska as Blue Cross Blue Shield of Alaska. Number 1290 CHAIRMAN ROKEBERG said, "Because you have the license to do business in the state of Alaska under the names Blue Cross and Blue Shield and that gives you the exclusivity to operate under our state statutes as a -- how do you define it? There is a special portion of our state chapters that -- special health organization, is that correct?" MR. McRAE explained the association authorizes the license use of the shield and the cross. He stated they have the license use, approved by the association, to do business in Alaska as the shield and the cross. For example, in Washington State, they have license to use the cross but they don't have a license to use the shield in all parts of the state. Mr. McRae stated that parts of the state are a blue shield plan which are direct competitors with them. CHAIRMAN ROKEBERG said he isn't concerned what the name of the business is, but is concerned with how the business is operated. He said, "You are a nonprofit type organization operating under the laws of the state of Alaska. Is that correct?" MR. McRAE responded in the affirmative. Number 1355 CHAIRMAN ROKEBERG asked Mr. Davis what the number is of individual policyholders they cover in the state of Alaska. MR. DAVIS responded that they have approximately 100,000 Alaskans covered under their coverages. CHAIRMAN ROKEBERG asked if that is under group or individual plans. MR. DAVIS said it is a combination of both. He noted there are approximately 13,000 under the individual plan, and approximately 87,000 under group plans. Number 1389 CHAIRMAN ROKEBERG asked Mr. Davis who is competitive with his firm in terms of writing individual policies in the state. MR. DAVIS explained that there are several competitors in the individual market. He said, "There is Golden Rule and several others who write policies in that market, but it's fairly limited." CHAIRMAN ROKEBERG stated that Golden Rule has been an underwriter for a long time in Alaska. He pointed out that according to the 1996 Comprehensive Health Insurance and Payment Reform Act (CHIPRA) assessments, they have less than 1 percent of the business in the state of Alaska. He asked if they write under different names. MR. DAVIS responded none that he is aware of. CHAIRMAN ROKEBERG said, "So somebody that has less than 1 percent of the health insurance coverage in the state of Alaska you consider a major competitor?" MR. McRAE responded, "Sometimes out in the individual market, especially we have ... the majority of the individual market in Alaska." MR. DAVIS noted that in the group market they have a number of substantial competitors. MR. McRAE offered to send Chairman Rokeberg those numbers as he didn't have the numbers with him. CHAIRMAN ROKEBERG said he would appreciate receiving the numbers. He said he has the numbers of the 1996 CHIPRA assessments for the high-risk pool. He asked Mr. McRae what premiums they will be responsible for in 1997 and what percentage of the share is of that. MR. McRAE indicated he would have to guess as he didn't have the numbers before him. Presently, before the change in the state's contract, they were paying about one-third of the Alaska Comprehensive Health Insurance Association (ACHIA) pool. After the state's contract went self-insured, he estimates they will be paying about 50 percent of that pool. Mr. McRae said under the one-third scenario, their payments have been in the area of $400,000 to $500,000 over the last couple of years. CHAIRMAN ROKEBERG said, "In 1996, you had 32.2819 and you paid $485,000. But I understand that there is because of kind of a anomaly that the gross premium requirements for the pool are down for 97 and 98 and, therefore, your dollar amount won't go up to meet your 50 percent - won't be as much or do you have a handle on that yet?" MR. McRAE stated that he can't speak on the premium issue, but the pool does fluctuate every year as to how much money is paid out. The amounts paid for different years has fluctuated. He said he doesn't know what they will end up paying for 1997, as he hasn't looked at the numbers yet. CHAIRMAN ROKEBERG asked Mr. Davis if he has a goal for 1998 for their market share. MR. DAVIS responded that they don't have a specific market share goal, but they are certainly looking to increase their membership. He noted they expect fairly modest growth in 1998. He said he understands that United Health Care is a competitor in the Lower 48 and is looking to enter into Alaska. He said NYLCare has been very active in Alaska and there are a number of other companies that are very competitive in the market. CHAIRMAN ROKEBERG asked if United Health Care is an HMO. MR. DAVIS said he understands that United Health Care offers a variety of products from HMO to (indisc.). CHAIRMAN ROKEBERG asked, "Did you not recently make an announcement about developing a PPO type program? And does basic one or traditional program - do they represent any type of a PPO program?" MR. DAVIS stated they do not. He said, "We actually have PPO programs already in existence in Alaska. The majority of our members are in some type of PPO, either hospital - serious (indisc.) in a hospital only type PPO, but the individual program plans that you referenced, the basic one and the individual traditional plan, do not include a PPO component at this time. We would like to offer one and we're working to develop that and file it with Division of Insurance as a way to offer additional choices for individual members. And the intent is to be able to offer the (indisc.) members a product that is less expensive, therefore, more affordable." Number 1678 CHAIRMAN ROKEBERG asked Mr. Davis if his testimony is that they are working on a PPO for individuals to provide a lower premium for the Alaska market. MR. DAVIS responded that is correct. He stated he doesn't know what the exact difference will be but that is their intent. CHAIRMAN ROKEBERG asked if there wasn't an investigation of Blue Cross of Washington and Alaska three years ago regarding the amount of overhead and effects of the overhead in their organization on the policy payers in the state of Washington. Number 1713 MR. McRAE informed the committee members he has been with the organization since 1994, and doesn't remember an article that was directed toward high overhead or anything like that. He stated their overhead costs currently are not high or low. CHAIRMAN ROKEBERG referred to Washington State passing their health care reform legislation and asked if their rates didn't go up substantially in the state of Washington. MR. McRAE responded, "In 1993, when the Health Care Act passed, yes, they went up substantially and they continue to go up in the marketplace, even though in 1995, the legislature did modify the 1993 law, which relieved some of the pressure on that. (Indisc.) did go up substantially and continue to go up in Washington State." CHAIRMAN ROKEBERG asked how that affects Alaska policyholders. MR. McRAE stated that when they established prices in Alaska, they established rates in Alaska based on Alaska costs and the Alaska marketplace. The establishment of those rates didn't have anything to do with Washington's rates. There has also been a substantial amount of litigation in Washington pertaining to the insurance commissioner's office in Washington State. The Alaska insurance commissioner is aware of that and has watched the audits so that Alaska is only paying Alaska costs. Number 1819 REPRESENTATIVE BUNDE said, "As your revision of health care in Washington took place you said premiums went up substantially and then there was a roll back. When they rolled back the premiums, did you take a roll back in profits then also?" MR. McRAE said the insurance reforms changed in 1995 from the 1993 act. He referred to the 1993 act and said some of reforms had been implemented and some had not. When the 1995 act became law, some of those reforms were made that had not been implemented yet. He said they didn't roll back rates after the 1995 act. Mr. McRae said things just haven't gone into place as of yet. Other parts of the reform have gone into place and that is where they are seeing a lot of the cost increases. REPRESENTATIVE BUNDE referred to increasing health care costs and said it is safe to say that profits have remained stable. MR. McRAE responded in the negative. He said they have been running in the red for the last three years as Blue Cross of Washington and Alaska. They see the same thing happening in 1997. That is due mainly to the Washington State marketplace. Mr. McRae pointed out that there has not been a new carrier that has come into the Washington State marketplace selling in the individual market since 1993. REPRESENTATIVE BUNDE asked how they can maintain a viable business if they're running in the red. Most shareholders would have some real concerns about that. MR. McRAE explained they have had rate increases and they currently have rate increases pending. They have drawn reserves down. The Alaska director of insurance has audited them twice over the last year, and she is comfortable that they are in a very solvent position and are working very hard to turn that around. Number 1923 REPRESENTATIVE BUNDE said he has information that says they have an asset surplus of $128 million, and assets of $393 million. He said it's difficult to be in the red with those kinds of assets. MR. McRAE stated the main thing they look at is the reserves requirement, months of reserves or weeks of reserves. If they were to close the company today, how long could they pay the bills that are still coming in. Those reserve requirements are what is being drawn down. He noted they are still in compliance of the association and state law, both in Alaska and Washington in relation to those reserve requirements. Number 1964 CHAIRMAN ROKEBERG asked if they have to request a premium increase and approval from the director of the Division of Insurance to be able to raise their premium. MR. McRAE said they do. They apply for a premium increase with all the actuarial information that goes along with that to justify why the increase is needed. The actuarial representatives from the insurance departments, whether it's Washington or Alaska, reviews that information to confirm whether it's justified or not. CHAIRMAN ROKEBERG asked if they will have a separate and distinct asset base for Alaska operations. MR. McRAE responded, "We have had a continuing co-mingled. There is one asset base for both Alaska and Washington State, and we see that continuing. The only way that would change is if we went to the point where we establish a separate board of directors in Alaska and separate company in Alaska." Number 2041 CHARLIE MILLER, Lobbyist, Alaska Regional Hospital, came before the committee. He stated, "Basically we support the concept contained in HB 300, but the reasons are the size of market and the uniqueness of the Alaska market as opposed to the concept as applied in the states. In a lot of markets, the corporation that owns Alaska Regional wouldn't support this measure, but those markets differ quite a bit from the Alaska market. We have a limited number of covered lives and a limited number of providers and we feel that with a small amount of both, the market can't use the same mechanisms that are used in a larger market where managed is successful. With a HMO or a PPO or a P for service choice available to the patients and to the purchasers of insurance products or self-insurance, you give the patients a range of choice in the initial plan. I don't that happens very often in Alaska. Usually you're given a plan with your employer and that's it. They don't usually give you the choice there, so that restricts the patients choice. As far as the providers, there are very few competitive markets in the state. Usually there is one surgery center or hospital in a community. The incentive for discount is already pretty slim, but despite that the payers are able to negotiate discounts. So to say that there would be no incentive to discount to a large payer, if this bill passes, I don't think is quite accurate. Large payers will always be able to discount, and if there is a lack of providers to compete for the business then I'm not quite sure where the incentive is anyway other than the fact that a large payer brings a lot to the table." MR. MILLER explained that in Fairbanks there is a CON (ph) in place for a stand-alone surgery center, which would compete with Fairbanks Memorial. If they're not allowed to access patients, there won't be any competition for day surgery in that town. He said if Fairbanks Memorial is successful in getting all the PPO business, there will be no competition. There will be an anti- competition situation if the other facility can't come online. Mr. Miller informed the committee members that Anchorage has a stand- alone surgery center and two hospitals and that is a competitive market. Currently, both hospitals will accept PPO business and write off the additional fee to the patient. He said, "We won a PPO a few years back for the teacher's contract, which we have since lost, but at the time Providence put up flyers saying that they would gladly take the business and waive the additional fee to the patients." Mr. Miller said if a payer were to come to both facilities and say, "This is what we think it's worth to pay," it would still be a discount, but perhaps not as steep as direct competition. Both facilities could compete for the patients on quality of service and different factors, and they would both still have access to this. If they both stay in business, there would be more competition. Mr. Miller stated they have supported this measure in the past and they continue to do so, but it's an awkward spot to be in because there is no other market where you could compare the results of this type of legislation. Mr. Miller stated, "We think that this is, in the long term, better for the market competition, even though in the short term it may cost an indeterminate amount of money for the purchasers of health care. We do feel, in the long run, that will balance out." Number 2304 CHAIRMAN ROKEBERG announced the next witness to testify would be Gordon Evans. GORDON EVANS, Lobbyist, Health Insurance Association of America (HIAA), came before the committee. He informed the committee members HIAA is a national trade association of about 255 about smaller commercial health insurance companies. He noted Blue Cross not AETNA is a member. Mr. Evans read his statement into the record: "HIAA opposes HB 300 for a number of reasons, and not the least of which is that its provisions include an 'any willing provider mandate,' a consequence of which, in the long run, would be to increase the cost and reduce the efficiencies of managed care. An integral part of managed care is the provider network. When a managed care plan enters into a contract with a particular provider, whether it's a hospital, a physician or some ancillary provider, it seeks to accomplish several purposes. One of these purposes is to establish a long-term relationship with the provider that enhances the plan's market attractiveness and its ability to provide access to quality health care. "A second purpose of a managed care plan is to establish a method of reimbursement with the provider that improves the plan's ability to manage its health care costs effectively. "Managed care plans attract providers by guaranteeing access to a specified pool of enrollees, and if all providers in a community are required to be included in the plan, or if an enrollee is allowed to seek health care services from providers who are not participating in the plan, there is no economic incentive for any provider to enter into an alternative delivery or reimbursement system. Any willing provider laws erodes savings. As the costs increase, savings can no longer be passed along to consumers and the value of the plan for consumers is lost. Any willing provider legislation also hurts consumers by hindering the ability of health insurers and PPOs, and I will not mention HMOs since Alaska does not have HMOs and likely never will have, but it hinders our ability to construct delivery systems that can guarantee specified standards of care to meet the needs of their members. To serve its enrolled population efficiently, a health care insurance plan must be allowed to establish its own credentialing standards, and to decide on the optimal number and speciality of providers to be included. "Increasing the network of providers beyond its ideal size increases the cost of administering the network. HIAA believes that managed care systems should be able to limit their networks of providers and to alter reimbursement systems to reward efficient providers in their network. Insurers should be free to negotiate reimbursement schedules with providers to contain health care expenditures. "HIAA is opposed to legislation that would restrict the ability of an insurer, or other entity, to contract with providers and would require the insurer to accept any provider in a particular service agreement. "Buyers of insurance plans, and not state government, should dictate what services and which provider groups should be covered. The Federal Trade Commission has determined that any willing provider mandates are anti-consumer and may discourage competition on providers, in turn raising prices for consumers and unnecessarily restricting consumer choice and prepaid health care programs without providing any substantial public benefit. "In addition, the National Governor's Association has gone on record as opposing any willing provider mandates at both the state and federal levels. They believe these laws can undermine the access, cost containment and quality assurance benefits provided by effective managed care organizations. "Finally, Mr. Chairman, with reference to proposed Section 21.42.390(a)(2) at the bottom of page 1 of this bill, HIAA agrees that managed care plans should not limit or manage clinical discussions between physicians and their patients regarding care or...." TAPE 98-36, SIDE B Number 0001 CHAIRMAN ROKEBERG thanked Mr. Evans for his testimony and asked if there were questions. REPRESENTATIVE JOE RYAN referred to all the rhetoric about saving money and said the money is not going away, it's remaining in somebody's pocket, either the guy who is paying the premium or the physician or hospital that would be receiving it. Number 0061 REPRESENTATIVE JERRY SANDERS referred to the way things currently are and asked if everyone doesn't have a choice of where they want to go. MR. EVANS said, "Yes, unless you belong to one of the PPOs that limits your payment - I mean who you go to as far as how much they'll pay." REPRESENTATIVE SANDERS said that is a choice of how much you're going to pay. He said they can go anywhere they want to. Representative Sanders said to him the bill is about who is going to pay for that choice. He said, "If they want to make that choice, they pay for it. If we institute this bill and if they want to make that choice, I pay for it." MR. EVANS asked it would be him as a consumer. REPRESENTATIVE SANDERS said the people pay for someone to make a choice. MR. EVANS stated that is exactly the point. Somebody is going to end up paying for the extra that's not covered by the policy. REPRESENTATIVE COWDERY asked if he is correct to say that the rates are established by actuarial decisions, and if more or less benefits are given it reflects the cost. MR. EVANS said that is correct, and especially if the benefits are mandated. He stated if it is a mandated offering, that means the insurance company has to offer it and they can charge depending on how many people take it. If it's a mandated benefit, they have to offer it and that's where the increase in prices comes in because they have to underwrite the costs. They have to do all the actuarial figuring of how much is will cost to actually offer these. Number 0197 CHAIRMAN ROKEBERG asked how many companies in HIAA actually writes insurance in the state of Alaska. MR. EVANS responded that it has varied. He said he believes approximately 40 HIAA companies actually writes policies in Alaska. He noted that Principle is a member of HIAA. New York Life is a member, but NYLCare is a just a third-party administrator and that doesn't count. CHAIRMAN ROKEBERG asked Mr. Evans if he has any idea of what market share HIAA represents in Alaska. MR. EVANS said he doesn't know. He noted that Golden Rule is not a member of HIAA. He stated that HIAA's top company in Alaska is probably in the same range as what Golden Rules writes. CHAIRMAN ROKEBERG said he believes Principle is about 5 percent higher. He asked Mr. Evans if any of the companies he represents writes point-of-service type payment reimbursements as opposed to policies that restrict the use under a PPO plan. MR. EVANS responded that he couldn't answer that question. He pointed out that he represents the association and each of the insurance companies has their own procedures of what they do. Number 0234 CHAIRMAN ROKEBERG said Mr. Evans had earlier referred to a portion of the bill and asked him to review that again. MR. EVANS referred to the bottom of page 1, subsection (2), and said, "For some reason it's cropped up this year as one of these no-gag rules, I believe is the term people had used - no-gag clauses rather. And apparently somewhere along the line there must be some HMOs, I think I've read in some of the national news magazines that some HMOs tell a provider if they want to work for them, they cannot tell a patient if there is a better deal he can get or what his other options are for better treatment. And I just wanted to say that HIAA is on the record as opposing any such instruction to a provider. In fact, under our considerations, most managed care plans do not gag a provider and tell them they cannot tell a person that they can get better treatment or that there are other options for their treatment. We don't have any problem with that one particular paragraph is what I'm saying. We don't approve or don't care for the part that says that any willing provider can belong to a managed care plan." Number 0209 REPRESENTATIVE COWDERY asked Mr. Evans if he knows the percentage of Alaskans that are uninsured. MR. EVANS responded that his recollection from several years ago when Senator Duncan introduced a number of comprehensive health care bills was that the figure was as high as 25 percent of the population was uninsured. He said HIAA never agreed with that figure, but that was the figure that was made. CHAIRMAN ROKEBERG asked if HIAA came up with an alternate figure. MR. EVANS responded, "No, except that the figures that were put out by Blue Cross, by AETNA, by what the Division of Insurance had, it was a much lower figure, but we never came up with an exact figure." Number 0358 REPRESENTATIVE COWDERY asked Mr. Evans if he knows whether the Native Health Service was included in Senator Duncan's figure. MR. EVANS stated that his recollection is that they weren't included because if you were an Alaskan Native, you could go to the Indian Health Service and get coverage. REPRESENTATIVE RYAN referred to a Legislative Research Report, 98.056, March 15, 1998, and stated that it talks about 14,000 Natives who don't have medical coverage or are thought to be insured by the Indian Health Service. CHAIRMAN ROKEBERG announced Marianne Burke was next to testify. Number 0503 MARIANNE BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, testifying via teleconference from Anchorage, stated she didn't have formal testimony but is available to answer questions. CHAIRMAN ROKEBERG asked Ms. Burke who actually administers CHIPRA. He asked if they have to report to the division because they collect premiums. MS. BURKE responded that the board acts as a management policy organization. It is similar to any other insurance company. They collect the premiums, the Division of Insurance serves as an ex- officio member of the board. CHAIRMAN ROKEBERG stated his concern is that in 1996, AETNA Life Insurance Company had 42.47 percent of the market share in the state of Alaska, $1.5 billion worth of policies being written. He said, "Because of the change in the state going to self-insurance, do you have any idea, just as a ballpark, what market share they're going to have. We've heard an estimate from Blue Cross that they went from 32 up to 50 percent. Do you have any idea what AETNA is going to be doing?" Number 0599 MS. BURKE responded that to the best of her knowledge, the amount of premiums written will be reduced by about $110 million as a result of the state being self-insured. She noted she has not worked out the resulting percentages, but it significantly decreases the position AETNA would have in the state. It increases all of the other remaining writers. CHAIRMAN ROKEBERG asked Ms. Burke if she had any knowledge about the premiums and costs for the CHIPRA pool going down substantially. MS. BURKE stated that the costs are going down. However, she is aware of the fact that there are some extremely expensive procedures that are on the horizon such as kidney transplants, which are very expensive. Although the trend seems to be down, she is aware of the fact that there can be significant increases on a one-time basis. CHAIRMAN ROKEBERG asked Ms. Burke if he would be correct to say that the Division of Insurance doesn't have a statistical method of determining individual versus group health insurance underwriting in Alaska. MS. BURKE stated that is correct. CHAIRMAN ROKEBERG asked how that could be fixed. MS. BURKE responded that the information that is provided to the Division of Insurance lumps a number of different kinds of health policies together. She said they could request that providers write their individual (indisc.) out. She said she is sure they would object because of the additional work, but that data is available and the state could get it. Number 0720 REPRESENTATIVE ROKEBERG said he believes the state needs to know that particularly as it relates to who is writing those policies and what kind of a situation we're getting ourselves into. Representative Rokeberg stated that he has been reviewing the issue of who is covered. He said he believes it is clear to everybody that if you're a self-insured, self-funded plan, under ERISA you're completely exempt, under the exemption clause, from federal law. It seems to be split in case law about whether states have the ability to regulate the business of insurance and the issues that relate to the state mandates. Representative Rokeberg asked Ms. Burke if she cares to speak to this topic. MS. BURKE informed the committee members that the subject of state- mandated benefits has been litigated and there is substantial case law that supports the fact that for ERISA self-insured plans that the state cannot mandate the benefits. However, under HIPAA [Health Insurance Portability and Accountability Act] that came into effect July 1, 1997, a non-federal governmental plan, such as our state plan, could be mandated to provide state benefits unless they have received a waiver. The waiver is provided in HIPAA and is separate from any of the insurance legislation. It would rest entirely with the state plan itself of whether or not they applied for and received the HIPAA exclusion. She said she couldn't testify as to whether or not the state has that at this point. She said at the time the state plan was transferred from fully-insured by AETNA to self-insured administered by NYLCare, the plan was in compliance with all of the mandated state benefits. Ms. Burke stated she is not aware of the state changing or eliminating any of those mandated benefits, hence since there has been no legislation mandating additional benefits since that time, the state's plan should still be in compliance. Number 0918 CHAIRMAN ROKEBERG pointed out there currently is a bill before the legislature mandating contraceptive pills. He asked what the status of that would be. He also asked how many people she would estimate would be affected by legislation such as that, and the bill currently before the committee. MS. BURKE referred to the bill that would mandate the contraceptive coverage and said, "Any non-federal, and that's a very important distinction there, non-federal governmental plan of the state that was self-insured or have not asked for and been granted a waiver from HIPAA would have to provide that coverage. As to how many of them have, I'm sorry I don't have that information. I would not -- it would be a federal activity, it would be a waiver that would go through HIPAA without touch of the division. It would affect not just the state plan, which I understand is about 30,000 people, it would also affect other non-federal governmental plans such as school districts, cities, boroughs, that had not received this waiver, and I have no numbers for how many people would be impacted." CHAIRMAN ROKEBERG asked if the state of Alaska has been exempt from the mandates because the state is self-insured. He also asked if it is voluntary that the state accept the legislative statutory mandates. MS. BURKE responded that the state could choose to be exempt from any state-mandated benefit. While the state was an insured plan, they were mandated to have any benefit that the legislation passed into law. Number 1083 CHAIRMAN ROKEBERG referred to HB 300 and asked how many people or plans would it affect in the state of Alaska. He also asked who would be exempt in terms of the population of the state percentage- wise. MS. BURKE stated that any plan, such as British Petroleum, ARCO, Fred Meyer, Carrs, Carr Gottstein, and any of those large employer plans that are self-insured, would not be subject to the provisions of either HB 300 or any of the state mandated benefits. In addition, the federal government plans would also be exempt from the provisions of HB 300 or any of the mandates. Ms. Burke informed the committee members that the Indian Health Service is a governmental plan and would also be exempt from the mandates or the provisions of HB 300. She said, "To the best of our knowledge, we would have at most 30 percent of the state individuals who are covered by one form of insurance or another. And for the record, I include the Indian Health Service as a plan that is covering individuals, similar to an insurance plan. But only about 30 percent of the remaining -- or 30 percent of the total population would be impacted by this legislation." CHAIRMAN ROKEBERG indicated there were no further witnesses to testify and closed the public hearing. He announced that HB 300 would be held over for further consideration.
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