02/09/2009 03:15 PM House LABOR & COMMERCE

HB 104-WORKERS COMP. MEDICAL TREATMENT FEES                                                                                   
                                                                                                                                
3:18:10 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE BILL NO. 104, "An  Act adjusting certain fees for treatment                                                               
or  services  under  the  Alaska  Workers'  Compensation  Act  to                                                               
reflect changes  in the Consumer  Price Index; and  providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
3:19:04 PM                                                                                                                    
                                                                                                                                
LINDA HALL,  Director, Division  of Insurance,  Anchorage Office,                                                               
Department of  Community &  Economic Development  (DCCED), stated                                                               
that  HB 104  is "the  medical fees  bill."   She explained  that                                                               
Alaska  Statutes (AS)  23,  Workers'  Compensation provides  that                                                               
charges for medical  treatment and services are  regulated by the                                                               
Workers' Compensation Board.   She related that  standards set by                                                               
the  board  are  listed  in  the physician  fee  schedule.    She                                                               
provided a  history of the  physician fee schedule.   She offered                                                               
that  legislation passed  in 2005  that repealed  the methodology                                                               
for setting  maximum medical fees,  and froze the  2004 physician                                                               
fee  schedule.   Additionally, in  2007, legislation  passed that                                                               
extended the  2004 physician fee  schedule until March  31, 2009,                                                               
and  applied  a  consumer  price   index  (CPI)  increase.    She                                                               
highlighted that in  March 2009, the physician  fee schedule will                                                               
expire.   The effect will be  to remove the cap  on medical fees.                                                               
She further explained  that the overall impact is  detailed in an                                                               
attachment  in   committee  member's  packets  prepared   by  the                                                               
National Council  on Compensation Insurance, Inc.  (NCCI), titled                                                               
"Analysis  of the  sunset of  the Alaska  Physician Fee  Schedule                                                               
Effective March  31, 2009.   She related  the handout  provides a                                                               
fairly technical analysis of what the "fee cap" means.                                                                          
                                                                                                                                
MS. HALL explained  that the NCCI makes "lost  cost filings" with                                                               
the  Department of  Commerce, Community,  & Economic  Development                                                               
(DCCED) Division  of Insurance (DOI).   These  filings ultimately                                                               
generate  workers'  compensation  premiums,   she  stated.    She                                                               
referred to  the last page  of the analysis provided  in member's                                                               
packets, page 16,  which she said covers the period  from April 1                                                               
through December 3l, 2009.  She  explained that the lack of a cap                                                               
on physician fees would have a  5.2 percent impact on the overall                                                               
Workers' Compensation  system costs  in Alaska.   She interpreted                                                               
that to  mean that Workers'  Compensation premiums would  be that                                                               
much higher.   She offered that this analysis  provides one piece                                                               
of  the filing  that the  DOI approved  for the  January 1,  2009                                                               
rates.  In the event this  cap is reenacted, the potential exists                                                               
that rates  could be  decreased, she opined.   Ms.  Hall stressed                                                               
that she would  like to see the physician fee  cap extended.  She                                                               
further explained that the projected increase is 5.2 percent.                                                                   
                                                                                                                                
3:22:40 PM                                                                                                                    
                                                                                                                                
MS.  HALL provided  some 2006  statistics regarding  the Workers'                                                               
Compensation  premiums.   She pointed  out that  an Oregon  study                                                               
indicates  that  Alaska's  premiums  were  rated  highest.    She                                                               
highlighted that  Alaska still is  ranked number one in  the 2008                                                               
ranking,  which  means that  Alaska's  employers  on average  are                                                               
paying higher workers' compensation  premiums than any place else                                                               
in nation.   She pointed  out costs of the  Workers' Compensation                                                               
benefit  system.   She  offered  that in  2007,  medical fees  in                                                               
Alaska comprised  71 percent of the  entire Workers' Compensation                                                               
benefit cost.   "I'm not talking about premiums, but  the cost of                                                               
the  system,  71  percent  goes   to  medical  fees,"  she  said.                                                               
However,  during   that  same  time   period  in  2007,   of  the                                                               
approximately  35  NCCI states,  the  percentage  averages at  59                                                               
percent.  Thus, Alaska's medical  fees are 12 percent higher than                                                               
other  NCCI states.   She  expressed concern  over high  employer                                                               
rates.    She highlighted  that  if  the physician  fee  schedule                                                               
expires, those rates could potentially rise.                                                                                    
                                                                                                                                
MS.  HALL offered  her  belief  that HB  104  applies a  straight                                                               
forward solution.   She recalled that  the change in the  bill is                                                               
identical to  the 2007  legislation that  passed, which  kept the                                                               
current  physician  fee schedule  and  applied  a consumer  price                                                               
index  (CPI) percentage  increase applicable  from 2004  to 2008.                                                               
She  directed  members  to  an index  in  their  packets,  titled                                                               
"Consumer  Price  Index,  Medical  Care  Component  -  All  Urban                                                               
Consumers;  U.S. City  Average".   She explained  that each  year                                                               
contains a medical  care component increase.   She explained that                                                               
the  physician  medical  fee  schedule  would  increase  by  that                                                               
amount.  She pointed out that  the DOI is not requiring providers                                                               
to forego  an increase in  fees.   Ms. Hall highlighted  that the                                                               
issue this  bill addresses  is time  sensitive since  the current                                                               
schedule expires on March 31,  2009.  She stressed the importance                                                               
of passing HB 104 prior to  that date to ensure that the schedule                                                               
does not expire.                                                                                                                
                                                                                                                                
MS. HALL  opined that the solution  is not perfect.   She pointed                                                               
out that it does not  include common procedure terminology codes,                                                               
which  would entail  listing several  thousand codes  for various                                                               
medical procedures, such  as the codes that  most medical offices                                                               
currently  use.     She  explained  those   codes  are  typically                                                               
considered billing codes,  which is how the old  fee schedule was                                                               
organized, she stated.   However, she explained  that new billing                                                               
codes  are also  generated each  year.   Thus, the  physician fee                                                               
schedule itself and the billing codes  are not updated by HB 104,                                                               
since  the bill  does not  create a  standard billing  and coding                                                               
system.    Therefore, this  bill  does  not provide  a  permanent                                                               
solution.   However,  she offered  her  belief that  HB 104  does                                                               
provide some  control over medical  costs and buys some  time for                                                               
stakeholders to work  towards a permanent solution.   She related                                                               
that currently the DOI's biggest  concern is the cost of workers'                                                               
compensation coverage,  which is  driven by  the cost  of claims.                                                               
She urged members to support HB 104.                                                                                            
                                                                                                                                
3:26:57 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON informed  members that  a companion  bill should  be                                                               
introduced in the Senate sometime this week.                                                                                    
                                                                                                                                
3:27:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NEUMAN asked  for the effect this  bill would have                                                               
on specific fees that doctors charge patients.                                                                                  
                                                                                                                                
MS. HALL  answered that under  the CPI increase, doctors  will be                                                               
allowed to  charge higher  fees, but  this bill  places a  cap on                                                               
fees  that doctors  can charge.    She explained  the formula  is                                                               
similar to compound interest.                                                                                                   
                                                                                                                                
MS.  HALL, in  response  to Representative  Coghill, referred  to                                                               
page 2, line  6 of the bill, and explained  that the December 31,                                                               
2010  date  would  act as  a  sunset  date  for  the bill.    She                                                               
explained that at  that time, the physician fee  schedule and the                                                               
CPI  increases proposed  by HB  104  would expire.   She  further                                                               
offered that  the DOI  generally holds a  public rate  hearing in                                                               
September of each year for rates  to be effective on January 1 of                                                               
the following  year.  Thus,  the March expiration date  listed in                                                               
the 2007 legislation  is awkward since it does not  mesh with the                                                               
rate-making cycle, she stated.                                                                                                  
                                                                                                                                
3:31:13 PM                                                                                                                    
                                                                                                                                
ROD  BETIT,  President,  Alaska State  Hospital  &  Nursing  Home                                                               
Association, stated  that the Alaska  State Hospital  and Nursing                                                               
Home Association offers  its support for HB 104.   He stated that                                                               
without passage  of HB 104,  prices would  automatically increase                                                               
since the State  of Alaska (SOA) does not have  the discretion to                                                               
set a different reimbursement mechanism.   Thus, the effect would                                                               
be  to  cost  insurers  more,  as  well  as  increase  employer's                                                               
Workers' Compensation premiums.   He opined that  the bill offers                                                               
a temporary  solution by  extending the  date an  additional year                                                               
and a  half.  He recalled  that former Senator Seekins  created a                                                               
task force charged  with finding a permanent  solution.  However,                                                               
that  task force  dissolved when  his term  expired.   He related                                                               
that  currently the  responsibility for  medical fees  rests with                                                               
the  Department of  Labor &  Workforce Development  (DLWD), along                                                               
with  a medical  review committee.   He  said he  hopes that  the                                                               
medical  review   committee  will  make  recommendations   for  a                                                               
permanent reimbursement for the legislature to consider.                                                                        
                                                                                                                                
3:32:35 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON  offered  that  his  office  has  not  received  any                                                               
opposition  to the  bill.   After first  determining that  no one                                                               
else wished  to testify, Chair  Olson closed public  testimony on                                                               
HB 104.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  COGHILL stated  his  interest in  finding a  more                                                               
permanent solution.  He suggested  that the committee may wish to                                                               
work with  the DLWD  to tackle the  issue during  the legislative                                                               
interim.                                                                                                                        
                                                                                                                                
3:33:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COGHILL  moved  to  report HB  104,  Version  26-                                                               
LS0427\R  out of  committee with  individual recommendations  and                                                               
the accompanying fiscal notes.   There being no objection, HB 104                                                               
was  reported   from  the  House  Labor   and  Commerce  Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
3:34:08 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:34 p.m. to 3:36 p.m.