Legislature(1993 - 1994)

03/11/1994 01:37 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 CHAIRMAN RIEGER called the Senate Health, Education and Social                
 Services (HESS) Committee to order at 1:37 p.m.  He introduced  SB
 201  (INSURANCE RATES & BENEFIT COORDINATION) as the first order of           
 business before the committee.                                                
                                                                               
 FRANK THOMAS-MEARS, Multiple Risk Managers, Inc., testified on                
 behalf of the prime sponsor, Senator Kelly.  He stated that SB 201            
 addresses, in order for the public to understand, how a health care           
 insurer determines "usual, customary and reasonable fees" (U.C.R.)            
 and the meaning of that process.  SB 201 also addresses how                   
 insurance companies coordinate benefits between themselves when               
 more than one insurance policy applies to a claim.  He suggested              
 that less ambiguous language would end many of the current                    
 complaints.  He also suggested that a more specific contractual               
 U.C.R. provision would help dismiss the common misconception that             
 a U.C.R. payment mechanism means claims settlement will be based on           
 the full amount charged by medical care providers for a certain               
 procedure.  He noted a trend towards ambiguous language.  He stated           
 that the attempts to correct these problems have not resolved them.           
 SB 201 would clearly communicate the meaning of the U.C.R.                    
 provision to the purchaser and user of the insurance.                         
                                                                               
 Mr. Mears referred to a 1990 report of nationally recognized                  
 experts in insurance and actuarial science provided to the National           
 Association of Insurance Commissioners which addressed similar                
 abuses of the "usual, customary and reasonable fees" concept.  The            
 report cited two specific inconsistencies:  the purchaser cannot              
 ascertain that two programs identified as U.C.R. may produce                  
 materially different levels of reimbursement for the same services,           
 and beneficiaries under these programs do not understand that a               
 reimbursement level identified as reasonable and customary is based           
 on the carriers definition of those terms which may differ                    
 substantially from the common meaning or other carriers meanings of           
 those terms.                                                                  
                                                                               
 Mr. Mears said that currently, the Division of Insurance only                 
 enforces the birthday rule which is no longer sufficient.  He noted           
 that the Division of Insurance have technical changes which he                
 believes are reasonable.  He recognized the need to assist                    
 consumers with filing and collection of insurance benefits,                   
 although, that adds considerably to the cost of running the                   
 insurance companies.  That assistance would increase consumer                 
 access to health care.  He concluded that if SB 201 does not move             
 forward, it would probably result in physicians not accepting                 
 insurance benefits and the consumer will have to pay for the                  
 service and file the claim themselves.                                        
                                                                               
 Number 116                                                                    
                                                                               
 ROBERT ROBINSON, Chairman of the State Board of Dental Examiners,             
 viewed SB 201 as a freedom of information, a right to benefits and            
 access to health care necessary to the public.  SB 201 is essential           
 to the consumer and the employer.  He pointed out that SB 201 would           
 allow the public to know their coverage from the beginning.  He               
 explained that the coordination of benefits of SB 201 establishes             
 rules for multiple coverage.  Currently, the system practically               
 penalizes those who have multiple coverage.  He expressed concern             
 that if SB 201 does not pass, some of the dentists would return to            
 a cash up front payment system which would leave the patient to               
 file and obtain their insurance.  The coordination of benefits in             
 SB 201 would ease that problem and help increase the access of                
 public health care.  He did not believe that SB 201 mandates                  
 prices for insurance companies; SB 201 only requires public                   
 disclosure, freedom of information to employees and employers                 
 regarding their policies.                                                     
                                                                               
 DAN PITTS, general dentist and Alaska Dental Society                          
 representative, supported SB 201.  SB 201 is an information bill              
 which should avoid a lot of confusion and streamline patient                  
 treatment.  He spoke to the coordination of benefits.  He urged               
 passage of SB 201.                                                            
                                                                               
 CHAIRMAN RIEGER held SB 201.  He placed  SB 270  (COMPREHENSIVE               
 HEALTH CARE) and  SB 284  (COMPREHENSIVE HEALTH INSURANCE ACT) before    re   
 the committee for discussion.                                                 
                                                                               
 Number 194                                                                    
                                                                               
 DAVID WALSH, Director of the Division of Insurance, stated that he            
 did not have the final fiscal note on SB 201.  The draft fiscal               
 note shows zero impact.  He explained that he was not capable of              
 any further statements.  He thanked everyone who was willing to sit           
 down with the division and work on SB 201.                                    
                                                                               
 CHAIRMAN RIEGER asked if SB 201 tied into review and approval of              
 rates.  DAVID WALSH said that they do not tie in with SB 201.                 
                                                                               
 SENATOR SHARP asked what was the Division of Insurance's policy or            
 state regulations regarding coordination of benefits and                      
 determination of primary and secondary coverage; would it be                  
 similar to what is in SB 201.                                                 
                                                                               
 DAVID WALSH said that each policy could be different.  If one has             
 two full coverage group policies, generally the primary coverage              
 would be the one in force the longest.  He noted that sometimes               
 large employers will have a policy stating that they are to be the            
 primary coverage.  That is often the result of a collective                   
 bargaining agreement.  He clarified that normally the policy in               
 effect the longest would be the primary coverage.                             
                                                                               
 SENATOR SHARP mentioned the problem with the 90 day filing                    
 expiration.  An individual cannot hold claims in order to save the            
 expense of processing; they expire after 90 days.  DAVID WALSH                
 agreed that was a problem for the insurance company and the                   
 individual.  The insurance companies would like the claims in a               
 timely manner so they can be processed and their reserves can be              
 paid.  Mr. Walsh also acknowledged that there is a consumer                   
 protection issue.  Mr. Walsh explained the possibility of having              
 uncoordinated benefits between a group policy and an individual               
 policy, which could make money for an ill individual if both                  
 policies were full coverage policies.  That loophole is not good              
 for the system as a whole.  Mr. Walsh stated that they would be               
 working towards a more global solution for the coordination of                
 benefits.  He specified that the Division's efforts are not a                 
 statement of pro or con regarding SB 201.                                     
                                                                               
 SENATOR SHARP pointed out the coordination of benefits problem when           
 both policies require that their individual deductibles be met.               
                                                                               
 CHAIRMAN RIEGER asked how would this work under the coordination of           
 benefits; would each policy have its own deductible as it does for            
 its reimbursement.  DAVID WALSH said that it depends upon the                 
 specific language of the policy and whether the policy speaks to              
 the deductible when that policy becomes the secondary coverage.               
                                                                               
 Number 274                                                                    
                                                                               
 CHAIRMAN RIEGER directed the committee to the issues of review and            
 approval of rates and charges regarding   SB 270 and SB 284.                  
                                                                               
 SENATOR DUNCAN said that under SB 284 the regulation of private               
 insurance rates is on page 4 of the bill.                                     
                                                                               
 DAVID WALSH noted that both bills contain prior rate approval.                
 Under SB 270 the Division of Insurance would do the actuarial work,           
 but the Commission would give ultimate approval.  Under SB 284 the            
 Division of Insurance would do the actuarial work and give the                
 final decision as well.                                                       
                                                                               
 Mr. Walsh explained that currently, there is no rate approval                 
 regarding rate filings by health insurers.  Except for health                 
 insurance rates, Alaska uses the prior approval mechanism for rate            
 approval which means that companies must file their rates with the            
 Division of Insurance.  The Division of Insurance has thirty days             
 to review the rates and make a decision.  He noted the extension              
 provision which allows another thirty days for the division to                
 review the rates.  The prior approval mechanism is the most                   
 stringent type of review from a consumer protection point of view.            
                                                                               
 Mr. Walsh discussed the various other rate approval mechanisms.               
 The file and use mechanism means that the rates must be filed with            
 the Regulatory Authority before one could use it.  Then the thirty            
 day review begins and the rates can be recalled if they are not               
 approved.  He explained the use and file mechanism which is the               
 opposite of the file and use mechanism.  The last rate approval               
 mechanism is open rating which does not require any review by the             
 Regulatory Authority at all.  He noted that health insurance in               
 Alaska does not have rate approval which is essentially classified            
 as an open rating while all other insurance uses the prior approval           
 mechanism.                                                                    
                                                                               
 Mr. Walsh stated that both SB 270 and SB 284 bring the approval of            
 health rates in Alaska in line with the regulatory review of other            
 forms of insurance.  The mechanism proposed differs in each bill.             
 Under SB 270 the health rates would be filed with the Division of             
 Insurance who would do the actuarial and market work.  They would             
 make a recommendation to the Health Commission who would then hold            
 public hearings and decide to approve or disapprove the rate                  
 change.  He explained that under SB 284, the method of review would           
 be the same as under SB 270; however, the Division of Insurance               
 would make the final decision.                                                
                                                                               
 SENATOR DUNCAN asked what difference there would be regarding the             
 work load for the Division of Insurance under these bills.  DAVID             
 WALSH said there would not be a significant difference in the work            
 load under either of the bills.                                               
                                                                               
 Number 352                                                                    
                                                                               
 SENATOR DUNCAN restated Mr. Walsh's belief that the work load for             
 the Division of Insurance under both bills would be about the same            
 for rate review.  He reviewed the components of the fiscal notes              
 for SB 270 and SB 284.  He asked why the fiscal note for SB 284 was           
 higher than the fiscal note for SB 270 if the work load was the               
 same.                                                                         
                                                                               
 DAVID WALSH pointed out that the difference was the consumer                  
 complaint positions.  The fiscal note for SB 284 includes the                 
 consumer complaint specialists due to the Division of Insurance's             
 additional requirements of handling consumer complaints which are             
 not present under SB 270.                                                     
                                                                               
 SENATOR DUNCAN asked if the three consumer complaint specialists in           
 SB 284 deal with rate approval, why are those positions under the             
 rate approval section of the fiscal note for SB 284 and not SB 270.           
 He cited other discrepancies in the components of each fiscal note            
 when the work load was the same.                                              
                                                                               
 BARBARA THURSTON, Chief Actuary of the Division of Insurance,                 
 explained that under SB 284 the Division of Insurance makes the               
 final decision of rate approval which means that consumer                     
 complaints would be directed to the Division of Insurance.  Under             
 SB 270 the consumer complaints would be directed to the Health                
 Commission since the Commission makes the final decision.  She                
 acknowledged other contractual and equipment differences between              
 the fiscal notes.  She said that those differences were due to the            
 number of people posed in each fiscal note; if more people are                
 added those costs increase.                                                   
                                                                               
 SENATOR DUNCAN maintained that there would be complaints no matter            
 who makes the final decision, therefore, consumer complaint                   
 specialists would be needed under either bill.  He suggested that             
 the fiscal note for SB 270 should have three consumer complaint               
 specialists for the Health Commission; now SB 270 does not have any           
 consumer complaint specialists.  He determined that the fiscal note           
 for SB 270 must be understated.                                               
                                                                               
 DAVID WALSH said that neither he nor Ms. Thurston could comment.              
 He clarified that they could only comment on their portion of the             
 fiscal note with regard to its effect on the Division of Insurance.           
                                                                               
 SENATOR DUNCAN expressed the need for the fiscal note on SB 270 to            
 ask the same questions that the Division of Insurance asked of                
 SB 284.  He reiterated that the consumer complaint specialist would           
 have to be present in SB 270 under the Commission or the Division             
 of Insurance.  He stated that the fiscal note for SB 270 lacks the            
 same intense scrutiny and credibility of the fiscal note for                  
 SB 284.  He asked if Mr. Walsh agreed that there should be consumer           
 complaint specialists.                                                        
                                                                               
 DAVID WALSH agreed that those positions are essential because any             
 time there is approval of rates some people will not be pleased.              
                                                                               
 CHAIRMAN RIEGER asked how the number of consumer complaint                    
 specialists under SB 284 would compare to the number in the                   
 Division of Insurance.  DAVID WALSH informed the committee that               
 currently, the division has four full-time consumer complaint                 
 specialists and a clerk.  They are now handling more complaints               
 than ever.  Mr. Walsh explained that the fiscal note was in draft             
 form because a significant amount of work needs to be done at all             
 levels.  He recommended that the fiscal note stay in draft while              
 these problems are addressed.                                                 
                                                                               
 Number 436                                                                    
                                                                               
 SENATOR DUNCAN asked Mr. Walsh if he was asked by the preparers of            
 the fiscal note for the Commission to prepare a fiscal note for the           
 Commission.  DAVID WALSH said no.  SENATOR DUNCAN asked if Mr.                
 Walsh had been asked by the Governor's office what effect rate                
 approval would have on the Commission activities.  DAVID WALSH said           
 that he did not believe so.                                                   
                                                                               
 CHAIRMAN RIEGER asked if Mr. Walsh favored rate approval and if so            
 which of the two approaches.  DAVID WALSH favored rate approval.              
 Mr. Walsh supported SB 270.  Mr. Walsh explained that there should            
 be some type of approval, but who makes that approval would                   
 ultimately be the decision of the Governor and the Legislature.               
                                                                               
 CHAIRMAN RIEGER asked how other rate approval costs of the Division           
 of Insurance were paid.  DAVID WALSH noted that Alaska was one of             
 the few states with no filing fee; however, there is an expensive             
 certificate of authority fee.  Every year every company pays $2500            
 in order to do business in Alaska.  Mr. Walsh indicated that the              
 lack of a filing fee is a bargain for companies who write a lot of            
 insurance in Alaska.  Mr. Walsh explained that a filing fee would             
 become a costly administrative burden.  The cost has been shifted             
 to those companies who want to be admitted in all fifty states                
 which would benefit companies who serve Alaskans.  All of the                 
 Division of Insurance's budget comes through license and                      
 certificate of authority fees.                                                
 CHAIRMAN RIEGER asked if there are other aspects of the regulation            
 of insurers, besides rate approval, that the division has authority           
 over.  DAVID WALSH stated that they have full sovereignty                     
 regulation of the companies which would be essential to any                   
 regulatory entity.  He said that it was only a question of rate               
 approval.                                                                     
                                                                               
 SENATOR ELLIS inquired as to who would have more expertise in rate            
 approval issues; the Division of Insurance or the Commission.  He             
 asked Mr. Walsh to characterize rate review in SB 270 and SB 284.             
                                                                               
 DAVID WALSH stated that the Division of Insurance employees do a              
 good job.  He noted the difficulties in comparing the                         
 qualifications of people he knew to those of the proposed                     
 Commission.  He asserted that the Legislature and the Governor                
 would have the ultimate decision.  He explained that whatever the             
 Governor and the Legislature decide the Division of Insurance would           
 regulate.                                                                     
                                                                               
 Number 490                                                                    
                                                                               
 CHAIRMAN RIEGER expressed concern with giving regulatory powers of            
 the state to another commission.  He said that he was inclined to             
 keep this in the Division of Insurance.                                       
                                                                               
 SENATOR SHARP asked how review and approval of rates would work if            
 the ability to approve rates was present while there would be no              
 control of expenditures.                                                      
                                                                               
 DAVID WALSH clarified Senator Sharp's concerns.  The regulation of            
 premiums that accompany charges should be part of the fees medical            
 communities charge.  He did not have an answer.  He explained that            
 from a regulatory view, insurance consumers are best protected with           
 rate review authority and approval.  Most states now regulate                 
 health premiums.  He noted that due to Blue Cross' non profit                 
 status the Division of Insurance has more rate authority than with            
 other providers.                                                              
                                                                               
 CHAIRMAN RIEGER asked why health coverage is commonly excluded                
 while other types of insurance are included in rate review.  DAVID            
 WALSH said that he did not know.  A large portion of that response            
 could be due to the historical decisions made by the legislature at           
 the time.                                                                     
                                                                               
 SENATOR SHARP discussed the problems that California faced when               
 they required mandatory auto insurance; major auto insurance                  
 companies pulled out of the market.  He asked what would stop such            
 a situation in Alaska.                                                        
                                                                               
 DAVID WALSH agreed that was a serious issue.  In Alaska there are             
 three companies, AETNA, Blue Cross and Great West, who write                  
 approximately 80 percent of the business.  He noted the four auto             
 insurance companies who also have about 80 percent of that market.            
 He said the Division of Insurance's goal was to increase the number           
 of players in the market because the Division believes that would             
 lead to more stability and lower rates.  There has been success               
 with such an approach.  He did not know what effect rate approval             
 would have on the Alaskan market.  He believed that rate approval             
 was needed and probably would not have a drastic effect on the                
 Alaskan market.                                                               
                                                                               
 Number 554                                                                    
                                                                               
 NANCY USERA, Commissioner of the Department of Administration,                
 spoke to the differences in approach and cost of the two bills.  SB
 270 recognizes current fiscal constraints and attempts to do things           
 on an incremental basis.  She explained that the rate approval                
 portion of SB 270 intended to address the lack of process for                 
 verifying the rates that insurance companies present.  As an                  
 employer, she expressed interest in having an independent third               
 party review to verify and approve or disapprove the insurance                
 companies' rates.  The Commission would not duplicate the Division            
 of Insurance's work.  She said that the work of the Commission and            
 the Division should enhance each other because of the information             
 derived from the rate review process as well as enhancing the                 
 public process through public hearings.                                       
                                                                               
 Ms. Usera maintained that SB 270 did not anticipate the consumer              
 complaint issue.  She noted the key difference in the bills; one is           
 general and the other more explicit.  She explained that they would           
 suggest amending SB 270 if that was necessary for rate approval to            
 be minimally effective.  She reiterated that SB 270 wants to move             
 forward while recognizing financial constraints.                              
                                                                               
 TAPE 94-17, SIDE B                                                            
 Number 594                                                                    
                                                                               
 SENATOR DUNCAN stated that rate approval should be done whether               
 there is any reform at all.  He asked if Ms. Usera supported rate             
 approval and was it something that must be in SB 270.  NANCY USERA            
 said no.  Without rate approval, there are still other good things            
 in this bill.  Ms. Usera acknowledged that rate approval is an                
 important piece.  Ms. Usera explained that SB 270 has pieces that             
 would stand alone to advance health care reform, unlike the package           
 approach of SB 284.                                                           
                                                                               
 SENATOR DUNCAN pointed out that rate review and approval of charges           
 are very specific; however, the fiscal note of SB 270 does not                
 reflect the explicit charges to the Commission on this issue.  He             
 asked if Ms. Usera had requested that the Division of Insurance               
 report what might be involved in rate review and approval.  He                
 stated that the merits of a bill are nothing without funding to do            
 the tasks.  He emphasized the need to treat the bills fairly                  
 regarding the fiscal notes.                                                   
 NANCY USERA noted that SB 270 uses "may" which is permissive                  
 language.  The permissive approach of SB 270 was built-in due to              
 the belief that a lot of latitude for growth must be in place.  She           
 said that the Division of Insurance was asked what their piece                
 would be in the fiscal note; however she did not know the specific            
 instructions or assumptions.  She asserted that the cautious                  
 attitude of SB 270 was intended to provide various options and                
 still be financially responsible.                                             
                                                                               
 SENATOR DUNCAN scrutinized the permissive language of SB 270 and              
 pointed out that the Commission is charged with issuing a decision            
 on the filing which could be approved or disapproved.  A decision             
 is made which does not seem to support Ms. Usera's interpretation             
 of the permissive language.  He asked if the administration was               
 committed to rate approval.                                                   
                                                                               
 NANCY USERA emphasized that every provision in SB 270 is important            
 and each of them could stand alone.  She stated that if rate                  
 approval was omitted from the bill, the Governor would continue to            
 support SB 270.  She acknowledged that they believed SB 270 was a             
 better bill when rate review and approval were included.                      
                                                                               
 SENATOR DUNCAN requested a legal opinion on the permissive language           
 of SB 270.  He asserted that only the approval portion of the rate            
 review section was permissive, the other aspects use the word                 
 "shall" which is mandatory language.                                          
                                                                               
 Number 523                                                                    
                                                                               
 SENATOR SALO asked if under rate approval, would the Commission               
 deal with "usual, customary and reasonable" fees.  NANCY USERA                
 informed the committee that an amendment was adopted in House HESS            
 which provides for disclosure.  That moves toward more consumer               
 interest.  Ms. Usera said she would share the House CS.                       
                                                                               
 SENATOR ELLIS asked if there is currently a problem with doctors              
 refusing to provide rates for their services.  He did not feel that           
 was a problem.                                                                
                                                                               
 NANCY USERA said that as a consumer, shopping for a procedure is              
 very difficult.  The House Amendment requires rate disclosure of              
 normal procedures and a consumer estimate before an actual                    
 procedure is conducted.  She noted the fine placed on a provider              
 who does not follow the amendment which makes providers accountable           
 to their consumers.                                                           
                                                                               
 SENATOR ELLIS recognized that informed consumerism is an incredible           
 force to be used in moderating the rates.  He felt much more could            
 be done.                                                                      
                                                                               
 SENATOR DUNCAN asked how disclosure of rates would benefit a small            
 community such as Fairbanks.  He inquired of the intent or of the             
 benefit of the House Amendment.  NANCY USERA said knowing the                 
 options would empower the consumer when making decisions.                     
                                                                               
 SENATOR SALO was concerned that often consumers do not find out               
 until afterwards that their insurance does not consider a procedure           
 "usual, customary and reasonable."  For some this would be a                  
 problem.  She asked if there is any enforcement for a provider to             
 come close to an estimate given when there is prior approval.                 
                                                                               
 DAVID WALSH agreed that was a problem.  Currently, the insurance              
 company and the health care provider work that out.  He explained             
 that companies use prior approval in order to get an estimate that            
 hopefully the provider would stay with that target.  On the other             
 hand, sometimes there are complications that would raise costs from           
 the original estimate.  He stated that part of the problem was                
 making the estimates stick, which is beyond the division's ability.           
                                                                               
 SENATOR SALO suggested that health care providers should be made              
 more accountable for their estimates.                                         
                                                                               
                                                                               
 Number 446                                                                    
                                                                               
 CHAIRMAN RIEGER referred to page 5, lines 23 & 24, when addressing            
 the community rates provision of SB 284.  He inquired as to how               
 prudent a policy that would be or should there be a differentiation           
 of rates at least for those things in the control of the                      
 individual.  He emphasized that the community rates provision seems           
 to eliminate a lot of individual responsibility.  He asked why that           
 provision was present and if that provision was a good policy.                
                                                                               
 SENATOR ELLIS suggested that Mr. Walsh explain community ratings              
 and experience ratings.                                                       
                                                                               
 DAVID WALSH explained that experience ratings break down the                  
 different segments of the population based upon activities,                   
 lifestyles, etcetera.  The theory of experience ratings is that an            
 individual should pay related to that individual's demographics.              
 He posed auto insurance as an example of successful experience                
 rating.  From a public policy view of experience ratings, an                  
 individual should only pay for the risk they are incurring.  He did           
 recognize that experience ratings could lead to reverse                       
 discrimination because companies would tend to write policies for             
 only safe risks.  A pool of individuals who do not fit a                      
 demographic profile are left without coverage.  He informed the               
 committee that fiscal restraints lead to tighter demographic                  
 profiles which also leads companies to cover only the best risks.             
                                                                               
 Mr. Walsh stated that community rating has been limited to the                
 health insurance field.  If one believes that health care access is           
 a public policy right and some type of insurance system would be a            
 good vehicle, then because everyone pays for individual lifestyle             
 risks, community ratings would be suitable.  He explained that the            
 theory behind community ratings is that there is a cost for health            
 care which would be divided on a per capita basis.  That would even           
 out marketplace fluctuations and take care of those at the bottom.            
 He emphasized that the issue of uncompensated health care must be             
 addressed.                                                                    
                                                                               
 Mr. Walsh discussed a Fairbanks example someone had testified on at           
 a previous hearing.  A 3 1/2 percent bad debt ratio in a retail               
 service provider would not be considered bad.  He asserted that in            
 handling uncompensated care, realizable goals should be reviewed.             
 Historically the experience rating has been proven inadequate for             
 a major portion of the population, which leaves the Legislature and           
 the Governor to determine how best to handle the situation.  He               
 recognized some progress with the small employer and high risk                
 pools.  He stated that both bills attempt to address the issue, but           
 they begin with different points of view regarding how, when, and             
 in what manner it would be done.                                              
                                                                               
 Number 349                                                                    
                                                                               
 CHAIRMAN RIEGER asked if SB 284 used a community rating approach              
 and SB 270 used an experience rating point of view.  DAVID WALSH              
 did not believe that SB 270 took a position on the type of rating             
 approach.                                                                     
                                                                               
 CHAIRMAN RIEGER questioned the merit of the community rating point            
 of view which does not create incentives or penalties for health              
 factors within the control of the individual.                                 
                                                                               
 SENATOR SALO pointed out that accounting for those factors is                 
 almost impossible.  There is no way to police people regarding                
 those health risks.                                                           
                                                                               
 CHAIRMAN RIEGER asked what would happen if someone who had checked            
 the non smoker box on a life insurance policy layer died of lung              
 cancer.  DAVID WALSH said that if it can be proven that the person            
 smoked two or three packs a day, then the insurance would be                  
 negated because that would amount to lying.                                   
                                                                               
 SENATOR ELLIS asked for an example of those at the bottom of the              
 pool.                                                                         
                                                                               
 DAVID WALSH described the first type of individual as one with a              
 genetic condition which would omit them from the demographics                 
 through no fault of their own.  The second type of individual at              
 the bottom of the pool would be an individual who chose an                    
 inherently dangerous consequence or lifestyle.  He stated that it             
 is difficult to design a system acceptable to the general                     
 population while the system takes in dangerous activities and                 
 lifestyles with no premium for healthy lifestyles.  He described              
 the third type of individual in this category as children of                  
 families without coverage or individuals who do not take out                  
 coverage.                                                                     
                                                                               
 Number 275                                                                    
                                                                               
 SENATOR ELLIS asked for examples of businesses who pay                        
 disproportional rates based on occupations.  DAVID WALSH pointed              
 out the timber industry, some health care providers and the fishing           
 industry as examples.                                                         
                                                                               
 SENATOR ELLIS reiterated the question clarifying that he was                  
 referring to unexplainably high rates for certain occupations such            
 as ministers.  DAVID WALSH noted a fencing company with this                  
 difficulty as well as small transportation companies.  SENATOR                
 DUNCAN informed the committee of the list of such industries.                 
 Senator Duncan explained that most of these businesses were low               
 paid, high turnover jobs with a high administrative cost with which           
 the insurance companies do not want to bother.                                
                                                                               
 SENATOR SALO believed that this discussion was time well spent.               
 She stated that many things under an experience rating system seem            
 inherently unfair and the decisions would be difficult.  She stated           
 that we all pay in the end and she would rather start with the                
 community rating philosophy.                                                  
                                                                               
 CHAIRMAN RIEGER noted that at the national level individual                   
 responsibility is high on the list.  He expressed reluctance to               
 give anyone a free ride when they engage in a lifestyle that                  
 increases health costs.  He read lines 23 & 24, on page 5 of SB 284           
 as saying that people with dangerous lifestyles are not dealt with            
 separately, they receive the same premium as everyone else.  That             
 would be poor public policy in his opinion.                                   
                                                                               
 SENATOR SALO stated that there are other ways besides the insurance           
 rate to compensate or not compensate for lifestyle choices.  She              
 indicated that the Clinton plan's individual payment for doctor's             
 visits could be a way to penalize those who chose a dangerous                 
 lifestyle since such lifestyles often result in more doctor visits.           
                                                                               
 SENATOR ELLIS agreed that community rating made sense in order to             
 capture everyone; however, risk factors can be taken into account.            
 There should be incentives for healthy lifestyles and Senator Ellis           
 noted that those incentives are not precluded in SB 284.  He                  
 welcomed discussion on SB 284 becoming more specific on healthy               
 lifestyles.                                                                   
                                                                               
 Number 161                                                                    
                                                                               
 NANCY USERA corrected her previous testimony on insurance rate                
 approval.  She explained that rate approval was required with                 
 "shall" language.  She asserted that her other testimony was                  
 consistent.  SB 270 is based on incremental steps.  She reiterated            
 that if SB 270 has miscalculated due to an inherent assumption that           
 they had not included in their process they could review the issue.           
    SB 270 does not intend to design elaborate bureaucracies.                  
                                                                               
 SENATOR ELLIS said that rate review authority was the most                    
 important portion of the data collection of SB 270.  Rate review              
 acquires the data on health insurance that the Department of Health           
 and Social Services needs.  He believed that rate review would be             
 the quickest thing that could be done for consumers.                          
                                                                               
 NANCY USERA felt that rate review or a portion of it could be done            
 without consumer complaint specialists.  She did not believe that             
 rate review and consumer complaint specialists have to go together.           
                                                                               
 SENATOR ELLIS clarified that the consumer complaint specialists of            
 SB 284 would not create an elaborate bureaucracy.  NANCY USERA said           
 that she was not being comparative.                                           
                                                                               
 SENATOR DUNCAN observed that if the consumer complaint specialists            
 were not needed then those positions could be eliminated in SB 284.           
                                                                               
 SENATOR SALO asked if Ms. Usera meant that without consumer                   
 complaint specialists, the appeal process would be in the courts.             
 NANCY USERA explained that appeal for an insurance company                    
 provision places the appeal in the courts.                                    
                                                                               
 SENATOR DUNCAN noted that Ms. Usera had said she would re-evaluate            
 the rate review language.  NANCY USERA stated that she would review           
 that language and the fiscal note.                                            
                                                                               
 Number 073                                                                    
                                                                               
 CHAIRMAN RIEGER referred to page 5, lines 27-31 of SB 284 when                
 asking how the claims processing section would fall under                     
 regulations or laws governing other forms of insurance.  DAVID                
 WALSH believed that the section was similar, except for the time              
 period.  In response to Chairman Rieger, Mr. Walsh clarified that             
 other forms of insurance process claims by regulations and laws.              
                                                                               
 CHAIRMAN RIEGER asked for a description of the standardized claims            
 form and how the form would work under SB 270.                                
                                                                               
 NANCY USERA pointed out that section 44.19.628 on page 5 of SB 270            
 addresses this issue.  SB 270 directs the Division of Insurance to            
 consult with the Commission in order to determine the type of                 
 information necessary to aid the data collection process.  The                
 Division would provide regulations which adopts that and all the              
 health insurers should comply with the use of the universal claims            
 form.  CHAIRMAN RIEGER asked if the standardized claims form                  
 already exists.  NANCY USERA noted that many providers use fairly             
 standard claims forms through an electronic system.  She explained            
 that a uniform claims form would contain useful information                   
 regarding the collection of data.  The same approach is anticipated           
 in the public health sector.  Ms. Usera stated that they do not               
 anticipate the Commission collecting data from individual claims              
 forms nor that the forms would be sent directly to the Commission.            
                                                                               
 TAPE 94-18, SIDE A                                                            
 Number 002                                                                    
                                                                               
 DAVID WALSH said, in response to Chairman Rieger, that whether                
 there is a commission or not there is a national push to have a               
 universal claims form.  He suggested that the form would exist in             
 a few years probably using the Medicare, Medicaid form as a                   
 template; however, with some changes.  He believed that this                  
 universal form could be achieved in a finite time.                            
                                                                               
 SENATOR DUNCAN stated that both bills essentially do the same                 
 thing, create and implement a uniform claims form.  DAVID WALSH               
 agreed.  SENATOR DUNCAN asked why the difference in costs of the              
 claims form in the fiscal notes; SB 270 does not have costs listed            
 for the claims form.  DAVID WALSH did not know the answer.  Mr.               
 Walsh said that their fiscal note on SB 284, assuming the Division            
 of Insurance would do such things as the claims forms, was prepared           
 on their experience and the experience of other states who were               
 facing the same issues.                                                       
                                                                               
 SENATOR DUNCAN pointed out that the Division of Insurance was                 
 charged under SB 270 to do the claims form; why then would the                
 creation of this uniform claims form not cost them anything under             
 SB 270.  DAVID WALSH said that he would have to review the draft.             
 Mr. Walsh noted that there probably were different priorities                 
 considered regarding SB 270 and SB 284.                                       
                                                                               
 SENATOR DUNCAN asserted that the uniform claims form was yet                  
 another example that SB 270 would cost more than the draft fiscal             
 note projects.                                                                
                                                                               
 Number 077                                                                    
                                                                               
 SENATOR SALO suggested that part of the problem was that the fiscal           
 notes were done in two different places at two different times by             
 two different people.  DAVID WALSH agreed with Senator Salo.  He              
 said that he would review the fiscal notes and inform the committee           
 of the results.  SENATOR SALO requested that the fiscal note                  
 drafters get together and review both the fiscal notes.                       
                                                                               
 NANCY USERA expressed the importance to clearly state the                     
 assumptions of each bill when dealing with the fiscal notes.  She             
 believed that the major difference was the assumptions applied to             
 each bill and their fiscal note.                                              
                                                                               
 SENATOR DUNCAN did not understand how there could be different                
 assumptions present if both bills require establishment of a                  
 uniform claims form within a specified time.  He agreed with                  
 Senator Salo and suggested that SB 270 should have the same in                
 depth fiscal note that SB 284 has now.                                        
                                                                               
 CHAIRMAN RIEGER asked if the uniform claims form provision of                 
 SB 270 was also the data collection section or is data collection             
 a separate section.                                                           
                                                                               
 NANCY USERA noted that page 2, line 13, addresses the purpose of              
 the Commission.  She explained that SB 270 considers the uniform              
 claims form a tool, but not necessarily the source of the                     
 information that the Commission collects and analyzes.  SB 270 uses           
 the uniform claims form as a processing convenience, an                       
 administrative streamlining of the process, and also requires                 
 certain information that could be collected in aggregate.  She said           
 that the data collection is not specifically set out as to how that           
 would be done under the Commission.                                           
                                                                               
 SENATOR DUNCAN was impressed with the detail of the fiscal note.              
                                                                               
 Number  162                                                                   
 CHAIRMAN RIEGER noted that the last issue before the committee                
 regarding SB 270 and SB 284 was the fiscal notes of each.                     
                                                                               
 SENATOR DUNCAN agreed that the data of the universal claims form              
 may be used for two different purposes under SB 270 and SB 284;               
 however, the development of the claims form will still cost.  He              
 pointed out that the fiscal note for SB 284 dealt with the cost of            
 development of the form and the use of its data separately.                   
                                                                               
 SENATOR ELLIS asked if Ms. Usera's previous point was that the                
 universal claims form would be developed because it was easy to               
 use, but that the form would not be used for data collection and              
 analysis to better health care.                                               
                                                                               
 NANCY USERA said no.  The use of the universal claims form has a              
 duo-fold purpose:  assist in the more efficient processing of                 
 claims, and certain information on the form can be used as a tool             
 for getting information.  She explained that if she were filing a             
 claim with her provider on this universal claim form, she nor her             
 provider would have to send a copy to the Commission.  She said               
 that they anticipated that the provider would aggregate the                   
 information and provide it in a periodic report.   The universal              
 claims form would be a vehicle for acquiring information.                     
                                                                               
 SENATOR ELLIS indicated that SB 270 stops short and does not                  
 specify what would be done with the data collected while SB 284               
 goes further to state what would be done with the data and                    
 therefore would be more expensive.                                            
                                                                               
 NANCY USERA said that she understood that SB 284 would require the            
 individual to file the claims form which the Corporation would                
 receive.  SENATOR ELLIS clarified that the process was electronic.            
                                                                               
 Number 229                                                                    
                                                                               
 CHAIRMAN RIEGER said that on Monday he planned to review data                 
 collection, publication of fees and anti-trust provisions, and also           
 the claims clearinghouse at Senator Duncan's request.                         

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