Legislature(2011 - 2012)BARNES 124
02/11/2011 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB13 | |
| HB12 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 13 | TELECONFERENCED | |
| *+ | HB 12 | TELECONFERENCED | |
HB 13-WORKERS' COMPENSATION: MEDICAL FEES
3:21:02 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 13, "An Act relating to fees and charges for
medical treatment or services as they relate to workers'
compensation; and providing for an effective date."
3:21:56 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, on behalf of the prime sponsor, stated that HB 13
relates to fees and charges for medical treatment or services as
they relate to workers' compensation. In 2005, the legislature
amended AS 23.30 and expanded the makeup and scope of the
Medical Services Review Committee (MSRC). Its new mission was
to assist and advise the Department of Labor (DOL) and the
Workers' Compensation Board (WCB) in matters involving the
appropriateness, necessity, and cost of medical related
services. The MSRC met a number of times during 2009 and
produced a 62-page report in November 2009. He referred to
pages 11-12 of the report, in members' packets, which discusses
the need for a new medical fee schedule for the state. He
explained that the current fee schedule is out of date and has
been extended two times thus far. The current extension would
have expired on December 31, 2010 but was extended by emergency
regulation until June 30, 2011. This bill proposes that the
full fee schedule be adopted. He presented a sectional analysis
of HB 13. Section 1 would amend AS 23.30.097(a) by establishing
a fee schedule, which would be adopted by the WCB and would
include many new fee codes for medical supplies, injections,
emergency transportations, and other medically related services.
Section 2 of HB 13 would provide for an effective date, he said.
3:24:33 PM
LINDA HALL, Director, Division of Insurance (DOI), Anchorage
Office, Department of Community & Economic Development (DCCED),
stated that in 2004, the medical fee schedule had been frozen,
but since then two consumer price index increases have been
issued. The DOI needs a sustainable schedule, she said. She
referred to pie charts in members' packets. The first was
titled "Medical Benefits Constitute the Majority of Total
Benefit Costs in Alaska." The point of this chart, obtained
from the National Council on Compensation Insurance, is to show
Alaska as compared to the region and nation. She related that
$.75 of every dollar of system cost in Alaska goes toward
medical cost. The countrywide cost of medical costs is 58
percent, and the regional average is 67 percent. Alaska medical
costs are the highest in the nation. Medical costs are the cost
drivers for the Workers' Compensation premiums and health
insurance premiums. She said one of the reasons that it is
critical to have a sustainable fee schedule is that Alaska has
increasingly high medical costs.
3:26:39 PM
MS. HALL referred to the second chart titled "Alaska Medical
Average per Case vs. Countrywide," which shows the average cost
per case versus a countrywide comparison. She said the latest
data is from 2009 and indicates that the average cost for
Workers' Compensation claim cases is $37,000, as opposed to an
average countrywide cost of $27,000. These costs are
approximately 37 percent higher in Alaska per case.
MS. HALL referred to the 2010 Oregon Workers' Compensation
Premium Rate Ranking Summary, also in members' packets. She
explained that Oregon conducts an annual study on premium rate
ranking. She pointed out that Alaska is ranked number 2, which
is the first time in six years that Alaska has not been in the
number 1 spot. While this is an improvement it is still not
good. It means that Alaska's costs have been reduced somewhat
in comparison to at least one other state. She stressed the
need for a fee schedule that Alaska can count on. In addition
to the CPI increases, the state has lost a number of medical
fees. She offered that medical procedures are coded.
Currently, about 7,000 codes exist for procedures that are
performed medically, for health insurance or for treating
Workers' Compensation injuries. The current procedure code
schedule is missing about 2,000 codes so the base fee schedule
is 'woefully' incomplete.
3:29:06 PM
MS. HALL referred to Workers' Compensation premiums. In 2009,
for Workers' Compensation premiums totaled $250 million in
premiums, which represents a big part of the industry. The cost
of medical care plays a role in the amount of the premiums
charged. In 2006, Alaska had a high of almost $338 million, but
fees have been reduced for a variety of reasons. She stressed
the importance that Alaska has a fee schedule that is complete
and allows a method to cap its medical costs. She explained the
process to establish fee schedules. The Department of Labor
(DOL) uses an outside vendor, Ingenix, to gather data across the
country, but use Alaska bill charges to build an Alaska fee
schedule. Ingenix collects charges and arranges them from high
to low and uses the 90th percentile in its fee schedule. Thus,
90 percent of the bill charges fall under that cap, she said.
3:30:50 PM
MS. HALL explained that Ingenix also develops its fee schedules
based on geographical areas. She emphasized that this schedule
is the same type of fee schedule as the 2004 schedule, which is
based on Alaska charges and geographical zip codes, called geo
zips. The medical fee caps are not based on what it costs to
provide services in California or Louisiana, but on Alaska
costs. The fee schedule is a statistically credible profile.
Many health insurance companies use this same vendor for their
charges. The DOI has some oversight ability to review the work
Ingenix performs. The Division of Workers' Compensation would
obtain the information to be approved by the Workers'
Compensation Board. The board has the ultimate authority to
adopt a fee schedule but there is a need to authorize them in
statute to do so. Lastly, this brings in transportation costs.
She suggested members may have heard stories about out of
control transportation costs, and the intent is to bring those
under the fee schedule, as well.
3:32:51 PM
CHAIR OLSON asked for the difference between HB 13 and a bill
previously before the House Labor and Commerce Standing
Committee last legislature.
MS. HALL explained that HB 13 does not contain changes to fraud
and other issues that caused controversy, but only contains the
fee schedule.
CHAIR OLSON recalled that the previous bill passed the House
last year by 37-0.
3:33:43 PM
REPRESENTATIVE JOHNSON recalled the fee schedule does not
currently contain the appropriate codes.
MS. HALL stated that the fee schedule is missing new procedure
codes that have been developed since 2004. In further response
to Representative Johnson, she answered that since the codes are
not part of the fee schedule the fees are paid at 100 percent.
3:34:32 PM
REPRESENTATIVE JOHNSON asked for clarification that with the fee
schedule updated, the fees would be paid at 90 percent and this
bill addresses that aspect.
MS. HALL agreed.
REPRESENTATIVE MILLER referred to statistically credible data.
He asked for the definition and how it is compiled.
3:35:31 PM
The committee took an at-ease from 3:35 p.m. to 3:43 p.m.
3:43:36 PM
REPRESENTATIVE MILLER asked again for a definition of
statistically credible data.
MS. HALL responded that it is an actuarial term, which requires
that a certain number of data elements are necessary to build
charges to make it valid as a predictor. In the event that an
adequate figure is not available in Alaska data, Ingenix reviews
the countrywide data and uses a multiplier to establish a
credible value. That value is then recognized as a valid fee
charge. She recapped the typical ratemaking process, including
that the DOI includes Alaska and other states' data that is
accurate for an insurance company to use. She explained the data
is valid because enough data exists for it to be credible. She
added that one health insurance company in Alaska has sufficient
data to use its own database since enough elements exist to make
their data credible. Most companies do not have enough Alaska
data to do so, she said.
3:45:54 PM
REPRESENTATIVE SADDLER referred to the fiscal note of $75,000
per year. He asked for the reason for the ongoing cost and
whether the fee schedule is updated annually.
MS. HALL answered yes, that a new fee schedule is created each
year. She explained that procedure codes and bill charges would
be updated for accuracy. In further response to Representative
Saddler, she answered that the vendor updates the schedule. The
Workers' Compensation Board would make the request and adopt it
in time to be effective on January 1 of each calendar year.
3:47:22 PM
REPRESENTATIVE SADDLER asked for clarification of the December
31, 2010 date.
MS. HALL answered that was when the last fee schedule expired.
3:47:47 PM
REPRESENTATIVE MILLER recalled that part of the reason for HB 13
is to place a cap on medical costs besides updating the medical
fee schedule. He asked for clarification.
MS. HALL answered that this bill refers to reimbursements to
medical care providers such as doctors, hospitals, or medical
services for injured workers.
3:48:53 PM
REPRESENTATIVE MILLER remarked that he is shocked at price
increases for insurance premiums. He asked for the reason
premiums are rising.
MS. HALL answered that ratemaking, which this bill does not
cover impacts premiums because fees that are charged for medical
services ultimately turn into claims cost. The claims cost in
the Workers' Compensation system are taken into account when the
ratemaking occurs. Collecting claims data is part of the
ratemaking process. The DOI reviews historical claims costs.
She related the process. Generally Workers' Compensation
premium costs are effective January 1 to allow time for
contractors to bid. The DOI begins the process sometime in
July, August, or September, with a filing from the National
Council on Compensation, Inc. (NCCI). The NCCI reviews three
years of claims costs, then performs "trending" to predict the
costs when the policy will go into effect. The DOI holds an
annual public rate hearing in September, to determine "lost
cost" since it also considers other factors. She explained that
the rate is approved by November 2010 for policies effective on
January 1, 2011. The DOI would predict costs not only for 2011,
since it must also consider that for those with serious
injuries, the medical costs may continue for up to 20 years.
Thus, the DOI is not just computing a three year average of
claims costs since adjustments are required to balance the
premium with claims cost. "Ideally they would come out to one,"
she said. In Alaska, claims costs can be $1.54 per every $1
collected. For the last five years, the state has experienced
rate decreases in Workers' Compensation rates. She
characterized the process as a fairly complex one.
3:52:32 PM
REPRESENTATIVE MILLER asked whether HB 13 is good for injured
workers.
MS. HALL answered yes, since the state wants to be certain
injured workers have access to good medical care. She offered
her belief that when the fee schedule is set at the 90th
percentile, it is higher than any other fee schedule. Many
insurance companies use the 80th percentile and some self-
insured plans use the 70th percentile. This bill would dictate
a high level of reimbursement for medical providers, which gives
access to quality care for injured workers. She related that
the purpose is to ensure that injured workers have access. She
remarked that if the state only allowed Medicare charges for
providers, not many doctors would be willing to treat injured
workers.
3:53:51 PM
REPRESENTATIVE THOMPSON asked how emergency Medivac costs can be
maintained or made reasonable, given that he has heard that
Medivacs can cost $60,000 to $175,000.
MS. HALL agreed, noting she has heard the same anecdotal stories
with respect to Medivac costs. She explained that the DOI
currently does not regulate Medivac charges. This bill attempts
to bring these charges under the new fee schedule. The Centers
for Medicare and Medicaid Services (CMS) have fee schedules that
include procedure codes and promulgate fees. She said she hopes
the state can bring these transportation entities under this fee
schedule but she was uncertain that it could easily be done.
She pointed out that transportation costs are not limited to
Medivacs, but include costs to transport injured or ill
consumers, and have become extremely expensive. These costs are
an important component in ratemaking, in terms of the costs
being paid out. She expressed concern over the high
transportation costs as are a number of individual companies and
self-insured groups, who are very concerned about the costs they
are paying for those services. She said she thought these costs
are federally regulated to a great extent. "This isn't a first
attempt to work at that issue," she stated.
3:55:54 PM
REPRESENTATIVE SADDLER related his understanding that this bill
would provide that whatever fee schedule the Workers'
Compensation Board adopts would include the usual, customary,
and reasonable fees for treatment for category I, II, and III
medical services. It would also adopt a separate standard the
health care procedure coding system for supplies, injections,
emergency transportation, and other medically related services.
He asked whether this provides for emergency transportation.
MS. HALL answered yes.
REPRESENTATIVE SADDLER asked for clarification on the cost
process to arrive at the 90th percentile.
MS. HALL explained that Ingenix sets the fees. She related a
scenario, in which there are 10 charges for knee surgery, which
range from $100 to $20. She explained that 9 of 10 fees would
be covered under the 90th percentile, and one outlier would be
capped. It is set at the 90th percentile so that the majority
of charges billed in Alaska would be covered. If it were set at
the 80th percentile, only 8 out of 10 would be covered. The
schedule is based on actual billed charges for the procedure
code performed in Alaska. In further response to Representative
Saddler, she confirmed that it covers the amount billed.
REPRESENTATIVE SADDLER asked whether that was a generous amount.
MS. HALL answered yes, that the amount is set higher than
normally seen in health insurance industry.
3:58:23 PM
CHAIR OLSON related that the way the rates are promulgated the
state will not have four years of historical costs at the end of
this calendar year. He asked whether the state would enjoy some
savings on premiums by the end of the third year.
MS. HALL offered her belief that this may not be a premium
savings bill. She did not view this as reducing fees, but more
likely to keep fees stable.
3:59:08 PM
CHAIR OLSON commented that this bill would impact rates, perhaps
by slowing down the premium increases or keeping them at a
stable level.
MS. HALL clarified that the way rates are calculated as costs
increase the billing charges increase, and ultimately the fee
schedule will also rise.
3:59:35 PM
REPRESENTATIVE SADDLER recalled 2,000 procedure codes are not
contained in the current fee schedule so as Workers'
Compensation injured workers receive services that fall under
the 2,000 missing procedure codes, the services are paid at the
full cost. He asked whether adopting the 90th percentile for
costs would result in some savings as it filters through the
system.
MS. HALL agreed.
4:00:08 PM
FRED BROWN, Executive Director, Health Care Cost Management
Corporation of Alaska (HCCMCA), recapped that in the past six
years, Alaska has had the highest premium rates in the United
States and in the most recent Oregon report, that Alaska has
"traded places with Montana." He explained that his
organization reviewed costs. He stated that the Alaska State
Chamber of Commerce is drawing attention to a 2010 CNBC cable
news report, that Alaska is the least competitive state in the
union for conducting business. A component of this ranking is
based on high Workers' Compensation premium rates. In short,
his organization is a coalition of Taft-Hartley funds and self-
insured benefit funds that covers approximately 10 percent of
Alaska's population. He offered support for the efforts to
control medical costs and the 90 percent fee schedule in HB 13.
However, the HCCMCA referencing the MSRC report, stressed that
much more dramatic steps must be taken to reverse the trends in
the high Workers' Compensation health care costs. He remarked
that 90 percent of an increasing rate is still a high number
which keeps Alaska at or near the top of the premium rate
charts.
MR. BROWN related that his coalition is currently working with
Alaska AFL/CIO, the Alaska State Chamber of Commerce, and the
National Electrical Contractors Association to garner support
for passage of a bill in Alaska which has had similar versions
passed in 12 other states. He offered his belief that members
may have seen drafts of the proposed bill, which is commonly
referred to the alternative dispute resolution (ADR) Workers'
Compensation "carve out" bill. He briefly explained that this
bill would allow parties to a collective bargaining agreement to
privately agree to opt of the state Workers' Compensation.
These parties would select labor and management trustees in a
Taft-Hartley type trust, who would choose a plan administrator
and arbitrators to help resolve Workers' Compensation disputes.
This process alone would help hold down Workers' Compensation
medical costs given the added efficiency this program could
bring to the system, he said.
4:04:24 PM
MR. BROWN referred to proposed Section 2 of the aforementioned
bill, and stated the trustees would be allowed to choose the
best providers to deliver Workers' Compensation medical
treatment. The trustees would also be allowed to establish a
preferred provider organization (PPO) pricing system. He again
referred to the MSRC report.
CHAIR OLSON advised that the bill before the committee is HB 13
and not the bill he is referring to today.
MR. BROWN again referred to the MSRC report in members' packets
that describes the frustration the MSRC committee members felt
by the inability to implement a PPO process in Alaska. He
wanted to alert the House Labor and Commerce Standing Committee
members to a provision in an upcoming bill. In summary, he
offered support for HB 13, and to alert the committee about a
proposed bill that may soon be introduced to further accomplish
the goals articulated in the MSRC report.
4:06:31 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 13.
REPRESENTATIVE SADDLER said he thought he understood the bill,
which scares him.
4:07:07 PM
REPRESENTATIVE JOHNSON moved to report HB 13 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 13 was reported from the
House Labor and Commerce Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB13 ver A.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 13 |
| HB13 Supporting Documents - Letter NFIB 1-31-2011.pdf |
HL&C 2/11/2011 3:15:00 PM SFIN 4/16/2011 10:00:00 AM |
HB 13 |
| HB13 Sponsor Statement.pdf |
HL&C 2/11/2011 3:15:00 PM SFIN 4/16/2011 10:00:00 AM |
HB 13 |
| HB13 Sectional Analysis.pdf |
HL&C 2/11/2011 3:15:00 PM SFIN 4/16/2011 10:00:00 AM |
HB 13 |
| HB13 Supporting Documents 2010 NCCI AK Med.pdf |
HL&C 2/11/2011 3:15:00 PM SFIN 4/16/2011 10:00:00 AM |
HB 13 |
| HB13 Supporting Documents OR Rate Study Comparison.pdf |
HL&C 2/11/2011 3:15:00 PM SFIN 4/16/2011 10:00:00 AM |
HB 13 |
| HB13 Fiscal Note-DOLWD-WC-1-24-11.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 13 |
| HB12 Sectional Analysis.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 12 |
| HB12 Sponsor Statement.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 12 |
| HB12 ver A.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 12 |
| HB12 Fiscal Note-DOLWD-WC-2-3-11.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 12 |
| HB12 Supporting Documents - Email Clare Hiratsuka 2-1-2011.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 12 |
| HB12 Supporting Documents - MSRC Report - Nov 2009.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 12 |
| HB12 Supporting Documents-Letter WCCA 1-20-2011.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 12 |
| HB114 Draft Proposed Amendment ver A.4.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 114 |
| HB114 Supporting Documents - Spreadsheet of AK Elec Coops 2-11.pdf |
HL&C 2/11/2011 3:15:00 PM |
HB 114 |
| HB13 Supporting Documents - Letter PSPA 2-8-2011.pdf |
HL&C 2/11/2011 3:15:00 PM SFIN 4/16/2011 10:00:00 AM |
HB 13 |