Legislature(2011 - 2012)BARNES 124
03/28/2012 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB275 | |
| SB125 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 275 | TELECONFERENCED | |
| += | SB 125 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 275-RETIREE BENEFITS:COLORECTAL/DRUG BENEFITS
3:26:35 PM
CHAIR OLSON announced HOUSE BILL NO. 275, "An Act requiring that
a policy of group health insurance offered by the state and
certain local governments include coverage for colorectal
screening, allow retirees to choose between brand-name and
generic drug products, and limit certain prescription drug
benefit payments to an amount based on the cost of the generic
drug product."
3:27:17 PM
REPRESENTATIVE BOB LYNN, Alaska State Legislature, sponsor of HB
275, stated a U.S. Supreme Court decision by a vote of 5-4 vote
which basically ruled that generic drug companies do not have
the same level of legal responsibilities as the manufacturers of
brand name drugs. He related federal law mandates that generic
drugs be chemically equivalent to brand name drugs. It also
would require that generic manufacturers use the same labels as
brand name products, such as drug use, dosages, and risk. Since
generic drug manufacturers don't have control over their labels,
the U.S. Supreme Court ruled they cannot be sued for failing to
alert patients of the risk beyond the federally-required
labeling on brand name drugs. However, brand name companies can
be sued for inadequate warnings, which means generic drugs may
be chemically the same as brand name drugs, but the legal remedy
is not the same. He expressed concern over the decision. He
understood the importance of the substantial savings, but he is
concerned about the lack of legal remedy. On the other hand
early detection of colorectal cancer will save lives, needless
suffering, and money. He concluded that he wanted to bring this
to the committee's attention.
3:29:57 PM
REPRESENTATIVE SADDLER asked which case he referred to.
3:30:46 PM
MIKE SICA, Staff, Representative Bob Lynn, Alaska State
Legislature, answered that there were several cases: one
related to brand names and the second to generic drugs. He
pointed out the court determined different outcomes in several
cases. He highlighted that many states have mandatory generic
drug programs and millions of generic drugs are dispensed daily
with few problems. He understood the court decision is related
to this bill, but he did not think it specifically changes the
question.
3:31:42 PM
CHAIR OLSON asked him to provide the court citations for the
cases to the committee.
MR. SICA offered to do so.
3:31:52 PM
REPRESENTATIVE LYNN thought Alaska's Congressional Delegation
may wish to find a resolution for this.
3:32:31 PM
MR. SICA recapped HB 275, which would extend coverage for
colorectal screening, a preventive procedure, to public
retirees, including the Public Employees Retirement System
(PERS), the Teachers Retirement System (TRS) and other public
employees. The second part of the bill would increase the use
of generic drugs by public employees by allowing them to choose
generic drugs, but only generics would be fully covered. He
related that a doctor or pharmacist would need to state in
writing that the prescription authorizes it or if there is not
any generic equivalent.
REPRESENTATIVE LYNN stated he also has some dramatic examples of
cost differences between brand name drugs and generic drugs. He
recalled some costs for brand name drugs were $3,000 while the
generic drug equivalent cost $10-20.
CHAIR OLSON recalled that the committee received a schedule.
3:33:51 PM
BECKY HULTBERG, Commissioner, Department of Administration
(DOA), thanked the sponsor for raising this important issue.
She suggested that the DOA may have different approach on how to
reach the end goal, but noted the end goal is the same. She
explained that health care and health care costs are probably
one of the most important issues to address during her tenure.
She reported that the DOA spends over one-half billion dollars
per year for the combined active and retiree health care plans.
She pointed out these costs are built into the personnel costs
in all departments, which becomes part of the unfunded liability
that the administration has been working to pay off over time.
These are real costs that are not directly seen in the budget
process but are costs which are absorbed. The retiree health
care plan represents the vast majority of the expenditures of
the two plans. She offered to provide the figures to the
committee. She said that the growth rates for the plans has
been about eight percent per year although the state had such a
good plan year in 2011 that it was able to reduce the growth
rate for the last decade from over nine percent to eight
percent. She clarified that health care costs are growing at
double the rate of inflation. She predicted that health care
costs will consume more and more of the general fund budget
unless the state gets those costs under control. She explained
that working to reduce health care costs is one of her primary
objectives.
3:36:21 PM
COMMISSIONER HULTBERG predicted that good management of our two
plans and working together with Alaska's provider community can
have a positive impact on the growth rates. She provided some
background information on the retiree health care plan,
including that the retiree health care plan was established in
the 1970s. The retirees' health care plan is covered by the
diminishment clause in Alaska's Constitution, which essentially
says that retirement benefits cannot be diminished. That clause
has been interpreted to mean change a plan which reduces a
benefit would be considered a diminishment, which is expressly
not allowed. Thus the plan has been changed very infrequently,
and often any changes have been litigated. She described the
process as difficult. She acknowledged that Alaska does not
have a best in class modern health insurance plan. She
indicated that typically insurance plans are meant to evolve as
coverage changes, health care changes, and the economic
environment changes, but this plan does not have the ability to
adapt. She said this plan is considered a rich plan, with $150
deductible and an $850 out-of-pocket maximum, but preventive
care is not covered. She emphasized that the health care
environment in the 70s is very different from today. Further,
it's not just colorectal screening that is not covered, but
other preventive measures, such as a physician's preventive care
visit. She noted the retirees' health care plan does not
contain many provisions that are considered standard in a
regular health care plan. She noted that dependents up to the
age of 26 are not covered as they are in the active health care
plan. She pointed out that many retirees would like dependents
covered up to age of 26; however, that would just result in
another cost which would become an unfunded liability.
3:38:45 PM
COMMISSIONER HULTBERG stated that the state cannot enforce
steerage. She pointed out that retirees cannot be forced to use
the network, which is problematic since health plan contracting
is based on steerage to a facility. Thus if the state cannot
demonstrate it can move a volume to a specific facility it is
difficult to obtain discounts. She indicated that members also
have a $2 million per member limit to coverage. She reported
that some members in the retiree plan have exceeded this limit
so they no longer have health insurance. She suggested this is
also an area the state needs to consider because as health care
costs grow, more people will exceed the static limit.
Additionally, the plan does not offer any proactive wellness
services. She characterized the plan as a high-cost plan, which
is one that does not provide good value per dollar spent. She
reiterated the sponsor's point that there is not any requirement
or additional copay for using brand name drugs. Thus retirees
do not have any incentive to choose generic drugs.
3:40:20 PM
COMMISSIONER HULTBERG provided a view of the retiree plan and
noted there are differences between the state's plan and others
that members might be exposed to, as well as identifying what
should be changed. She highlighted that the plan needs to be
modernized; however, it needs to be done in such a way as to
improve members' health while controlling costs. She cautioned
against adding costs to a plan that is already very expensive.
She indicated that modernizing the plan will require careful
actuarial and legal analysis. She again thanked the sponsor for
raising this important issue. She related that the DOA has been
considering colorectal screening and realizes the need for
changes to the health care plans. She said that the sponsor is
absolutely correct that preventive services need to be added to
the retirees' plan. Additionally, the sponsor is also correct
that enhancements to the plan need to be balanced with cost
savings measures so members and the state receive better value
for the plan. She emphasized that the administration needs to
do more than what is mentioned in the bill in order to modernize
the plan. She offered her belief that the plan changes can be
made administratively and will not require legislative action.
3:41:32 PM
COMMISSIONER HULTBERG asked members to give the DOA an
opportunity to make the changes the bill suggests, which will
include evaluating the concern over generic drugs and to seek
appropriate legal remedy. She reiterated that the DOA would
like to address these changes administratively as part of a
broader package to modernize this health plan.
3:42:02 PM
CHAIR OLSON related his understanding that the DOA is interested
in addressing both parts of the bill, which includes colorectal
screening and a generic drug component.
COMMISSIONER HULTBERG answered that the department has not fully
evaluated the generic drug mandate. The department would want
to perform additional analyses on the generic drug mandate. She
suggested that another route may be to increase the copay for
brand name drugs. She was unsure that the department would
select that as an outcome to pursue; however, she could commit
to adding preventive care to the plan. She reiterated the
department will be adding preventive care into the retirees'
health care plan. She expressed that the department will review
the plan comprehensively to seek balance within the context of
the legal constraints.
3:43:04 PM
COMMISSIONER HULTBERG also indicated that the state is making
changes to the state's active health insurance plan. She
outlined some of the changes, including that the department will
in FY 13 cover preventive care at 100 percent. This will
include all tests without requiring a deductible or copay, which
will help demonstrate the department's belief in the importance
of preventive care. Further the active plan will cover tobacco
cessation at 100 percent, including any pharmaceuticals a doctor
recommends. The state will be changing wellness vendors and will
add a more robust wellness feature to the plan that will include
more benefits for plan members. She cautioned that the state
must proceed more carefully on the retirees' health care plan
due to the legal constraints she previously mentioned; however,
she reiterated the DOA's commitment to doing so and
characterized it as one of the department's first priorities
after session.
3:44:17 PM
REPRESENTATIVE HOLMES remarked that she liked what the
commissioner was saying and is very sympathetic as she also
understands the legal constraints. She further understood that
colorectal screening has been on the DOA's radar screen for
several years. She asked for further clarification on whether
the colorectal screening would be included in the general plan
coverage for everyone or if it would require additional premiums
be paid by retirees.
COMMISSIONER HULTBERG answered that the problem can be
approached in several ways, and while the department has not yet
reached a decision on its recommended approach she offered her
belief that the best and optimal way will be to change the basic
plan to make the services available to everyone. However,
another option would be to create a stand-alone plan that is a
choice for members. Thus if a member wanted to choose
preventive care a member could choose one plan, but perhaps
members would also pay a little more if the member selects an
out of network provider. She stressed that the department has
not made any decision yet, but she used it as an example. She
related her understanding that there are several ways to address
the issue. One would be to offer a wellness service members
could purchase for an additional premium, but she did not
advocate that approach since the goal is to get people to use
these services. She pointed out that creating additional costs
to members for wellness and preventive care creates a barrier.
She outlined the department's goal is to remove any barriers,
which is what the DOA is currently doing in the active health
insurance plan. She indicated the department is working to
remove barriers to incentivize preventive care. She suggested
that currently the department's preference would be to look at
complete plan changes, but if it proves too difficult, the
department would consider side-by-side approach as the next best
option and lastly would be to have members purchase additional
services for a premium, which would be the department's third
choice.
3:46:50 PM
REPRESENTATIVE HOLMES asked whether the department has
considered if this would be subject to same limitations and if
there would be a dollar cap or additional deductibles or copay
necessary. She acknowledged that the commissioner has already
addressed this a little bit.
COMMISSIONER HULTBERG answered that the department's initial
approach - which is made without any necessary detailed analysis
- would be to provide the coverage within the context of
members' regular coverage and not assess any additional copay.
She reiterated that good plan management includes ways to
incentivize people to obtain primary care and preventive care.
Further she suggested a good plan would not necessarily remove
barriers, but would consider disincentives if members use care
inappropriately. She pointed out that some plans require
members must pay additional copay fees, such as fees of $100,
when their members use the emergency room for non-emergency
care. She clarified that this is not currently in the state's
health care plans and she is not suggesting adding it in;
however, she noted that a good plan contains incentives for
appropriation care pathways and barriers for inappropriate use
of care.
3:48:20 PM
REPRESENTATIVE HOLMES said she mirrors Commissioner Hultberg's
comments. She said she comes from the Chicago school which
embraces writing policies and laws that encourage behavior you
want to see and discouraging behaviors you don't want to see.
She asked whether Commissioner Hultberg is considering other
screening that is recommended in national guidelines.
COMMISSIONER HULTBERG responded yes, that she is aware the U.S.
Preventive Care Task Force has recommended a list of preventive
tests. She said that the department will consider whether to
adopt the recommendations for coverage for services, but is not
quite ready to do so for the active state health insurance plan,
although the department will try to apply those concepts to the
retirees' health care plan. She indicated the department will
take a more active role with respect to the health plans and how
to help people obtain a better health status. She emphasized
that the plan is not to just provide coverage for illness, but
it is also to improve their overall health.
3:49:51 PM
REPRESENTATIVE HOLMES pointed out that many of the legislative
committees have identified rising health care costs as a main
issue and problematic. She agreed that trying to make people
healthier and more productive results in less lost work and
helps people, and controls costs. She offered her belief that
it is also a problem for the private sector. She inquired as to
whether the department has a specific timeline in mind, noting
that the bill would place a certain timeline on the department.
She stated that the department is asking for time to implement
the proposal to add colorectal screening in the retirees' health
care plan.
COMMISSIONER HULTBERG answered she did not have a specific
timeline, although she identified adding colorectal screening to
the retirees' health care plan is one of the department's
highest priorities. She reported the department has held
numerous conceptual discussions. She informed members that the
DOA has let an request for proposal (RFP) for health management
consultants and one reason for the RFP is to assist the
department in identifying and making plan changes for the active
and retiree health care plans. She indicated that the retirees'
health care plan is the department's first priority. She
suggested that the department would likely have a draft plan
within several months and certainly before the next legislative
session. She was unsure about any legal analysis or actuarial
analysis that needs to be done, in particular, since these
processes can be time-consuming. She said she wants to get this
done as quickly as possible and the department has made a
commitment to do so since it is important, but she is not able
to give a specific date for implementation.
3:52:00 PM
CHAIR OLSON stated that he has chaired the House Labor and
Commerce Standing Committee for six years and this is the second
time a department has come forth with such an offer. He
inquired as to whether the department would have a proposal by
late fall to allow the committee to meet during the interim to
address any legislative components by the next legislative
session.
COMMISSIONER HULTBERG welcomed the committee's engagement. She
offered her belief that by this fall the DOA could either share
a draft plan or an update on the process. She related her
understanding that the health care plan changes can be made
administratively, but due to the significance of the retiree
plan and the legal constraints the department must proceed
cautiously. She committed to producing a work product or to
assess the progress the department has been made.
3:53:58 PM
CHAIR OLSON offered his belief that part of the problem with the
current colorectal screening is coverage depends on how the
doctor submits the bill so if the doctor presents it in one
manner receives coverage and another patient is denied.
COMMISSIONER HULTBERG responded that Chair Olson is absolutely
correct. She agreed that when the doctor submits the claim as
purely preventive care - noting colonoscopies are recommended
for those reaching the age of 50 - healthy patients undergoing
colonoscopies will not be covered under the plan, however, if
the procedure is coded as diagnostic due to a concern it will be
covered as a medical procedure and not a preventive procedure.
She emphasized that this creates an untenable position for
retirees and for the medical community. She reiterated her
commitment that the department is going to fix this issue. She
characterized this as a complicated issue, but the department
will move on this quickly to make the necessary changes to
improve the plan. She highlighted that the changes need to be
made for general preventive care and to address the $2 million
limit.
3:55:34 PM
CHAIR OLSON inquired as to whether the colorectal coverage is
the higher priority versus implementing generic drugs.
COMMISSIONER HULTBERG answered absolutely. She emphasized that
the department's goal is not just to add colorectal screening,
but to address the multitude of preventive care issues that are
not currently covered. She pointed out that this is not an
optimal position since the department wants conditions such as
high blood pressure and high cholesterol diagnosed. She said
that the preventive aspect of this plan is the highest priority,
but due to diminishment clause the department also wants to have
the ability to make changes that will improve quality of care
and still lower costs at same time.
3:56:49 PM
REPRESENTATIVE SADDLER related his understanding that the
department's approach was to rework the main health care plan,
or consider a side by side option. He inquired as to the third
option under consideration.
COMMISSIONER HULTBERG answered that one option would be to
provide a package of preventive care options a retiree could
purchase for a premium, but she expressed concern about this
approach since the department wants to remove barriers to
preventive care and cost can be a barrier. In further response
to Representative Saddler, she pointed out that the downside is
that it is important to review all elements and taking a
piecemeal approach won't result in the best overall impact. She
explained that adding in preventive care is an enhancement to
the plan. She suggested that the department must add
enhancements to offset any diminishments. Thus adding
enhancements through legislation would reduce the department's
ability to make other adjustments without compromising the
health care that retirees receive.
3:58:58 PM
REPRESENTATIVE SADDLER asked for the reason this issue has not
been addressed to date.
COMMISSIONER HULTBERG answered that she does not know. She
pointed out that the DOA has worked closely with Commissioner
Streur on health care costs.
3:59:46 PM
CHAIR OLSON interjected that a portion of this has been before
the committee twice, but has had a significant fiscal note. He
offered his belief that since the sponsor came in with balanced
approach helped make the process more feasible. He pointed out
that the commissioner's approach is to address it on a more
holistic basis, which makes sense. He suggested that one reason
the prior bills did not pass is that it did not address the
entire problem.
4:00:42 PM
REPRESENTATIVE SADDLER asked for speculation on how closely
together the active state employees' health care and retiree
plans may end up.
COMMISSIONER HULTBERG answered that in the ideal world the state
would have the best of class plan, which is evidence-based and
represents best practices. She pointed out that the Alaska
Constitution may be a barrier. She did not want to suggest that
the plans would be completely aligned. She indicated that per
member costs are significantly less for retiree health care
plan. She was unsure that they would be totally aligned, but
she thought more alignment would happen on best practices in
plan management and overall health management. She emphasized
the need for alignment on preventive care. She further
emphasized the need for more alignment on networks and
encouraging people to use networks to more effectively manage a
health plan. She reiterated that the department will work
towards better alignment on certain elements.
4:02:53 PM
PAT LUBY, Advocacy Director, AARP, expressed the AARP's concern
that retirees under the age of 65 are not entitled to receive
preventive care for colorectal cancer screening. He pointed out
that Medicare embraces colorectal screening as one of 19
preventive aspects in Medicare program since it makes sense and
saves money. He offered his belief that the commissioner has a
come up with a good plan and the AARP will support it.
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 275.
CHAIR OLSON remarked that one other time a department suggested
an administrative fix, related to firefighters, and the solution
was accomplished much more timely and broadly than if it had
been accomplished through legislation.
4:05:08 PM
REPRESENTATIVE LYNN related that he is pleased with the overall
direction the process has taken. He stated that the best part
has been that it has brought the concern to everyone's
attention. He said there is a tremendous disparity between
generic drug and brand name drugs. His goal as sponsor is not
to pass the bill, but to solve the problem. He emphasized that
the problem needs to be solved, whether it is accomplished
through administrative action or legislation. He concluded that
Commissioner Hultberg has given a pretty firm commitment to move
forward with this and the administration has heard testimony on
colonoscopy screening and generic versus brand name drugs. He
thanked the committee and the administration since he believes
this issue has moved forward considerably. He said he was happy
with the result.
CHAIR OLSON anticipated an update by the department this fall.
[HB 275 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB275 Supporting Documents-Letter AARP 3-12-12.pdf |
HL&C 3/28/2012 3:15:00 PM |
HB 275 |