Legislature(2013 - 2014)ANCH LIO Rm 220
06/25/2013 10:00 AM House ADMINISTRATIVE REGULATION REVIEW
| Audio | Topic |
|---|---|
| Start | |
| Impacts of the Affordable Care Act on Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
ADMINISTRATIVE REGULATION REVIEW COMMITTEE
Anchorage, Alaska
June 25, 2013
10:04 a.m.
MEMBERS PRESENT
Representative Lora Reinbold, Chair
Senator Cathy Giessel, Vice Chair
Representative Geran Tarr
Senator Hollis French
MEMBERS ABSENT
Representative Mike Hawker
Senator Gary Stevens
OTHER LEGISLATORS PRESENT
Representative Shelley Hughes (via teleconference)
COMMITTEE CALENDAR
IMPACTS OF THE AFFORDABLE CARE ACT ON ALASKA
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DEBORAH ERICKSON, Executive Director
Alaska Health Care Commission
Department of Health and Social Services (DHSS)
Anchorage, Alaska
POSITION STATEMENT: Presented during the discussion of the
Impacts of the Affordable Care Act on Alaska.
SENATOR FRED DYSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions during the presentation on
the Impacts of the Affordable Care Act on Alaska
REPRESENTATIVE WES KELLER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified during the presentation on
Impacts of the Affordable Care Act on Alaska.
BRET KOLB, Director
Division of Insurance (DOI); Anchorage Office
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented during the discussion of the
Impacts of the Affordable Care Act on Alaska.
REPRESENTATIVE KURT OLSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of the
Impacts of the Affordable Care Act on Alaska.
JEFF DAVIS, President
Premera Blue Cross, Blue Shield of Alaska
Anchorage, Alaska
POSITION STATEMENT: Presented during the discussion of the
Impacts of the Affordable Care Act on Alaska.
ILONA FARR, M.D.
Alaska Family Medical Care
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of the
Impacts of the Affordable Care Act on Alaska.
ACTION NARRATIVE
10:04:10 AM
CHAIR LORA REINBOLD called the Administrative Regulation Review
Committee meeting to order at 10:04 a.m. Representatives Tarr
and Reinbold and Senators French and Giessel were present at the
call to order. Also in attendance was Representative Shelley
Hughes (via teleconference).
^Impacts of the Affordable Care Act on Alaska
Impacts of the Affordable Care Act on Alaska
10:07:10 AM
CHAIR REINBOLD announced that the only order of business would
be a presentation regarding the impact on Alaska of the federal
Patient Protection and Affordable Care Act (PPAACA) also known
as the Affordable Care Act (ACA).
10:08:20 AM
DEBORAH ERICKSON, Executive Director, Alaska Health Care
Commission, Department of Health and Social Services (DHSS),
offered to explain key provisions of the Affordable Care Act
(ACA), briefly outline the ACA's projected impact on Alaska, and
to address the legal challenges and political realities with
respect to implementing the act on both the state and federal
levels [slide 2]. She explained that the ACA is based on two
federal laws with several amendments. The ACA's structure
consists of 10 titles, although most of the media coverage has
been focused on health insurance system changes [slide 3]. It's
important to note that numerous provisions in the Act address
many other aspects of the healthcare delivery system, including
workforce development, prevention and public health, and fraud
and abuse.
MS. ERICKSON stated the main goal of the federal law is to drive
or address increased health insurance coverage for Americans.
The federal law attempts to provide insurance coverage through
various strategies, including provisions that reform the way the
insurance market operates, such that individuals and businesses
must carry or offer health insurance or pay a penalty [slide 4].
The ACA also has created a health insurance exchange, which is
referred to as the health insurance "marketplace." The federal
law was intended to require states to expand their eligibility
for Medicaid programs, which is now an option. She acknowledged
that her presentation would be "a mile wide and an inch deep"
since there is significant ground to cover. She offered to
provide information on some new rules for the private insurance
market, including that there is now a prohibition on excluding
certain preexisting conditions [slide 5]. For example, if
someone with diabetes applied for an insurance plan, that person
may previously have been prohibited from participating in an
insurance plan; however, under the ACA, insurance companies have
been prohibited from excluding patients with preexisting
conditions soon after the law passed in 2010. Additionally, she
indicated this prohibition will take effect in 2014 for adults.
The ACA also contains significant restrictions regarding the
proportion of premium dollars insurance companies are allowed to
spend on costs other than medical claims. Further, the ACA
provides new rules with respect to how premium rates are set.
Additionally, some changes are not really reforms, but are new
programs or additional activities related to the health
insurance market. For example, a temporary high-risk health
insurance pool has been created for adults, which is meant to
bridge the period from 2010 - when the law passed - and 2014,
when the prohibition on preexisting exclusions will take effect
[slide 6].
10:13:26 AM
MS. ERICKSON said the ACA created new non-profit organizations
supported by loans and grants from the federal government meant
to be consumer-operated plans, which essentially will create new
insurance plans for states. Additionally, the ACA insurance
market reforms include multi-state health plans and health
choice compacts for state insurance commissioners to work across
state lines. These compacts will essentially equalize or
"share" regulations and facilitate cross-state insurance plans.
In addition, funds have been made available for states to
increase their capacity to review health plan premiums and
provide state consumer-assistance programs. She turned to
individual mandates, which require individuals to either have a
qualified health plan or pay a penalty [slide 7]. She indicated
this requirement is scheduled to take effect in January 2014,
with a penalty for those who do not have a qualified health plan
of $95 per year, per individual, or 1 percent of the household
income, whichever is greater. She advised members that the tax
penalty will be phased-up until 2016 at $695 per year, per
person, or 2.5 percent of the household income. She reported
that after 2016, the amount will be adjusted based on inflation.
MS. ERICKSON outlined exemptions for the individual insurance
mandate, including financial hardship, religion, American Indian
and Alaska Natives, or those who can prove that the lowest cost
option will be greater than 8 percent of their family's income
[slide 7]. She turned to individual subsidies, which for low-
income individuals come in the form of both premium support or
advance tax credits made available through the health insurance
exchange or marketplace [slide 8]. These tax credits would
apply to individuals with incomes between 133 percent and 400
percent of the federal poverty level. She directed attention to
the 2013 Federal Poverty Level (FPL) guidelines for Alaska,
noting that Alaska and Hawaii have higher thresholds for the
federal poverty level than most other states.
10:16:30 AM
MS. ERICKSON pointed out that to qualify for an individual
premium an employee must be an employee of a firm that offers
minimal essential coverage - deemed to meet the federal
threshold - such that the employee's share does not exceed 9.5
percent of their income. If an employee has an option to
purchase a qualified health plan from his/her employer and it
meets the other [ACA] conditions, then the employee will not
qualify for an FPL premium through the exchange. She noted that
subsidies are provided on a sliding scale based upon income,
which would mean the level of subsidy eligibility that
individuals and families qualify for is based on an economic
sliding scale. Of course, those at a higher level will receive
fewer funds. Furthermore, she said that the amount of the
subsidy will be capped based on the second lowest-level cost
plan at the "silver level." The plan caps the maximum amount
based on actuarial values at different levels, such as bronze,
silver, and gold with 60 percent being the lowest level.
10:18:26 AM
MS. ERICKSON turned to employer mandates and subsidies, and with
regard to requirements, explained that businesses with 50 or
more full-time equivalent employees are required to provide
minimal coverage or be subject to a tax penalty [slide 9]. She
said it's important to understand that under this mandate an
employer would only be required to pay the penalty if one of
their employees receives a subsidy through the exchange. The
penalties will differ depending on whether the employer offers
coverage, but an employee qualifies for a subsidy - and obtains
a subsidy - through the exchange. She directed attention to the
example on the slide that indicates if an employer does not
offer coverage, the employer would be required to pay $2,000 per
full-time equivalent (FTE), with the first 30 FTE's excluded.
For example, an employer with 100 FTE's that met this condition
would pay - with 30 exclusions - $140,000 in tax penalties. In
the event an employer offers coverage but an employee does
qualify for a subsidy through the exchange the payment structure
would differ, with the penalty at $3,000 per subsidized
employee, which is capped at the higher level, as outlined in
committee members' handouts.
MS. ERICKSON noted that very small employers are able to qualify
for a tax credit if they provide coverage for their employees.
Beginning in 2014, businesses with 25 or fewer FTEs, with
average annual wages of $50,000 or less would be eligible for a
tax credit of up to 50 percent of the employer's contribution to
the employees' premiums. The health insurance exchange would
create electronic marketplaces for purchasing insurance in every
state [slide 10]. Thus, each of the 50 states must have a
health insurance marketplace. The ACA initially provided
funding for state governments to create their own state-based
exchanges with provisions to allow states to partner to create a
multi-state exchange; however, there was also a provision for
states to opt-out of establishing their own exchanges. In
instances in which states opted out, the U.S. Department of
Health and Human Services (USDHSS) would create an exchange for
them.
10:21:40 AM
MS. ERICKSON reported enrollment will begin on October 1, 2013,
and changes will take effect for health plan benefit years
beginning January 1, 2014. Again, beginning October 1, 2013,
people can begin enrolling in health plans in each of the 50
states. Also important to keep in mind is that the threshold
differs depending on the provisions. For example, the employer
requirement threshold to provide employee health benefits is 50
FTE employees, but the threshold for employers receiving a tax
credit is 25 employees and the threshold to participate in the
initial health exchange is based on 100 employees or less.
Therefore, firms with more than 100 employees would not be
eligible to purchase insurance through the exchange or offer the
insurance to their employees until 2017. Beginning in 2017, any
size employer would be able to participate in purchasing
insurance through the electronic marketplace.
MS. ERICKSON also pointed out that the federal law requires
health insurance exchanges to be self-sustaining by 2015. In
the first year the federal government will be supporting
implementation of the exchanges, but starting in 2015 the self-
sustainability requirement will begin. For example, in 2015,
the health insurance exchange might need to charge insurance
plans a fee to participate or to charge consumers to purchase.
10:24:17 AM
MS. ERICKSON highlighted that the Medicaid expansion was
initially intended as a requirement for state governments to
expand eligibility for everyone up to 133 percent of the federal
poverty level (FPL) [slide 11]. However, various reports
describe the eligibility level at 138 percent of the FPL. She
explained one requirement for determining eligibility is that
states must apply a 5 percent income disregard when determining
eligibility, effectively rendering the threshold at 138 percent.
Also, until 2017, the federal government will fully fund the
state's portion, at which time the state's share will phase in,
which she believed would be at 2 percent and reach a maximum of
10 percent by 2020.
MS. ERICKSON assumed members knew that a year ago the U.S.
Supreme Court ruled it was overly coercive on the part of the
federal government to require states to participate in the
expansion as a condition of continuing the entire Medicaid
program. Therefore, it's now optional for states to participate
in the Medicaid expansion. Since that ruling, U.S. Department
of Health and Human Services (U.S. DHHS) Secretary Kathleen
Sebelius has issued guidelines to state Medicaid programs. Some
states are testing the flexibility of the law, including
requesting 100 percent expansions, which Secretary Sebelius has
indicated would not be permitted; however, the deadline for
states to make expansion decisions has not yet been established.
Furthermore, U.S. DHHS Secretary Sebelius noted one option
states will have will be to discontinue the Medicaid expansion
at a later date.
10:26:45 AM
MS. ERICKSON pointed out a couple of key points related to
changes to Medicaid, which are not tied to the Medicaid
expansion, including changes for eligibility determinations. In
2014, regardless of whether the states expand their Medicaid
programs, there will be a significant change in the methodology
for determining program eligibility and all state Medicaid
programs will be required to coordinate eligibility
determination with the health insurance exchange through the
marketplace.
10:27:34 AM
MS. ERICKSON, moving beyond changes to health insurance
coverage, offered to cover other provisions of the ACA that are
intended to change the way healthcare is paid and delivered
[slide 12]. Referring to [slide 12], she indicated that a
series of provisions have been made to change payment for
healthcare away from a fee for service model to other models
that focus on outcomes and the value of healthcare. She pointed
out a number of demonstration pilot programs are specifically
authorized in the federal law. Additionally, the federal Center
for Medicare and Medicaid Innovation in the U.S. DHHS was
created to implement the federal goal of how healthcare is
provided. This means some new programs will be implemented that
were not specifically authorized under the ACA to reach the
federal goal.
MS. ERICKSON said most of the programs listed provide additional
payments, such as the Federally Qualified Health Center Advanced
Primary Care Provider Demonstration project, noting the
Anchorage Neighborhood Health Center is participating in that
program. She highlighted that these services are intended to
fund support for patient-centered medical homes or more advanced
primary care service delivery for Medicare patients served
through federally-qualified health centers. Additionally, in
2012, provisions affecting hospitals include the Medicare
hospital readmission reduction program, which penalizes
hospitals for exceeding a certain threshold for readmission
within 30 days of patient service by reducing their level of
Medicare payments. Another provision took effect in 2012 that
will tie payment levels to hospitals meeting certain quality
metrics. In 2011, one provision became effective that will
prohibit payments for services provided in healthcare facilities
for conditions required as a result of the treatment. For
example, when someone is hospitalized for a procedure and later
contracts an infection as a result of the procedure, the Center
for Medicare and Medicaid Innovation will prohibit payment for
the services required to treat the infection.
10:32:05 AM
MS. ERICKSON turned to other key provisions [slide 13]. She
explained that 32 provisions address fraud prevention. For
example, the Medicare Recovery Audit Control Program (RACP),
which currently contracts with auditors to audit organizations
to recover payments that were made inappropriately, will be
expanded to state Medicaid programs. Additionally, all state
Medicaid programs are currently implementing the recovery audit
programs, as well. Also, a number of programs, such as the
emergency medical services for children - in effect for 20 years
- have been reauthorized and funded under the ACA. Thus, an
entire title specifically addresses prevention and public
health. While some programs have been in existence, the ACA
also creates a new prevention and public health fund intended to
fund public health and prevention programs. Another title has
been devoted to workplace development; however, little funds
were appropriated to implement the program, although some
components were funded. In Alaska, for example, the Department
of Labor & Workforce Development (DLWD) received a small grant
several years ago to develop a statewide healthcare workforce
development plan. The program collaborated with the Alaska
Health Workforce Coalition to develop a plan using funding under
this provision. She stated that the Alaska National Health
Service Corps was significantly expanded, which has resulted in
an increase in personnel serving in underserved sites in Alaska.
10:34:36 AM
MS. ERICKSON pointed out an expansion of the federal
government's role in implementing protections for seniors, such
that the Elder Justice Act was authorized under the ACA. She
mentioned that the Indian Health Care Improvement Act was
reauthorized, plus it has been permanently authorized under the
ACA, thereby significantly impacting the tribal health system in
rural Alaska. Further, the ACA has instituted a number of new
Internal Revenue Service (IRS) requirements for providers and
hospitals. For example, nonprofit hospitals will be required to
conduct community health needs assessments every three years and
must create an organizational strategic plan based upon that
assessment.
MS. ERICKSON explained that a number of provisions are designed
to address increased home and community-based services and
supports for long-term care, which is being done to help
facilitate a move away from facility-based nursing home care.
Referring to her presentation, she mentioned an entire title has
been devoted to identify and create new revenue streams to help
the ACA support itself, as well as to identify other cost
savings [slide 14]. The Congressional Budget Office determined
that the overall effect of the ACA will be a budgetary cost-
savings. In this regard, a series of new taxes will be
implemented, including a new sales tax on indoor tanning and a
"Cadillac" tax, which will apply to "very rich" health plans.
Additionally, some of the payment reforms will lead to
reductions for Medicare budget and other federal program. She
pointed to a list of fees and taxes scheduled to take effect
under Title 9 of the Act [slide 15].
MS. ERICKSON stated that the Health Care Commission contracted
with the University of Alaska's Institute of Social and Economic
Research (UAA-ISER) after the law passed to obtain a high-level
assessment of the overall impact of the ACA, which predates the
U.S. Supreme Court ruling and assumes a Medicaid expansion;
however, it does analyze how healthcare spending might be
expected to change [slide 16]. The ISER estimated the impact
would be an increase in overall spending in the state by $289
million, assuming that Medicaid expansion. The ISER also
estimated increased healthcare spending for federal, state, and
individual households.
10:38:42 AM
MS. ERICKSON said based on the models the increased insurance
coverage, including the Medicaid expansion, represents an
overall increase of 53,000 Alaskans. The slide shows the
distribution by changes in type of coverage. The U.S. Supreme
Court ruling upheld the state's challenge - Alaska was 1 of 26
states who participated in the lawsuit that questioned the
constitutionality of the law; however, the U.S. Supreme Court
upheld that the individual mandate requiring individuals to
purchase health insurance or pay a penalty was constitutional.
[slide 17]. She noted that states have a role in determining
"how" not "if" provisions are being implemented - depending on
the extent the state is participating [slide 18].
MS. ERICKSON stated that in recent months federal government
funding reductions - the tightening of the belt - has had an
impact on the ACA. For example, one of the provisions that
would have created a national long-term care insurance program
was repealed under what she characterized as the "fiscal cliff
deal," through political negotiations [slide 19]. Additionally,
nearly $2 billion was cut from the program that would have
provided loans for the consumer-oriented and operated health-
plan programs. Further, she related that a number of provisions
were impacted in the sequester that took effect in March 2013.
To date, she relayed, there have been billions of dollars
awarded by the federal government in grants, as well as over
10,000 pages of regulations promulgated [slide 20]. A number of
new offices, boards, committees, and councils have been formed.
Referring to slide 21, entitled "State Implementation To-Date",
she reported that 17 states are planning to operate their own
state-based exchanges, with the remainder defaulting to the
federal government. There are provisions for states that choose
to allow the federal government to operate their exchange to
participate more actively in consumer assistance and rate
reviews. Additionally, seven states will participate in a
partnership exchange. She indicated that the Medicaid expansion
decisions do not have any deadlines, but the earliest date is
2014. She reported that as of June 20, 2013, 24 states have
decided to expand their Medicaid programs in 2014 and 21 states
have decided not to implement the expansion at this point; there
are a few states in which the debate is still ongoing.
MS. ERICKSON directed attention to slide 23, entitled "Timeline"
to the major provisions that will take effect on January 1,
2014.
10:42:32 AM
SENATOR FRED DYSON, Alaska State Legislature, asked for the
impact of the ACA on the union health trust and if the rules
will be different for government employees.
MS. ERICKSON offered to provide that information at a later
date, but noted that there is a change in the level of the
health savings account, which is the level that individuals can
contribute to a health-savings account in order to be able to
receive a tax savings under the Act. For the most part, state
governments are not exempt as employers, but the insurance rules
vary. She offered her understanding that the main type of plan
is grandfathered and is not necessarily fully required to comply
with all provisions of the Act, such as for retiree plans.
However, she indicated that the Department of Administration
(DOA) could better answer that specific question. In further
response to Senator Dyson, she related her understanding is that
the definition of a grandfathered health plan isn't tied to
whether the plan is a government or union plan, but she deferred
to the Division of Insurance or Jeff Davis, Premera, to respond.
REPRESENTATIVE WES KELLER, Alaska State Legislature, asked for
the timeline for other key programs, including the Quality
Measurement & Improvement program and the Recovery Audit
Contractor program (RCAP). He surmised it may already be in
place since the DHSS contracted with an auditor. He recalled
that the audit required the state to pay back a huge dollar
figure as an adjustment, which he deemed was "quite blatant."
MS. ERICKSON explained that most of the fraud and abuse
provisions took effect in 2011, including the state Medicaid
RCAP. Again, she deferred specific questions to the DHSS and
surmised that others could better address how the programs are
working and how well they align with other fraud and abuse
programs already in place in state law.
10:46:50 AM
SENATOR FRENCH referred to slide 8 and asked, in the absence of
a Medicaid expansion, where the uninsured people who fall
between 100 and 133 percent of the federal poverty level will go
for an insurance policy. He asked for clarification on whether
they would go to the exchange with a 100 percent voucher or if
something else would occur.
MS. ERICKSON offered her understanding that it would depend on
the cost of the plan versus the person's income level, and thus
the affordability question arises. This group would not
necessarily be subject to a tax penalty for not having insurance
if they could demonstrate financial hardship or if the lowest
cost option exceeds 8 percent of their income. To hone in and
answer the question, she responded that this group would be able
to buy a plan through the insurance exchange provided they could
afford to do so.
SENATOR FRENCH understood the ACA envisioned this group becoming
Medicaid recipients through the Medicaid expansion. He recalled
the U.S. Supreme Court indicated it was an option. Thus it
seemed to him there would be a bit of a gap for those people at
the 100 percent to 133 percent of the federal poverty guideline
for Alaska.
MS. ERICKSON concurred that the Act envisioned that the
aforementioned gap would be covered under the Medicaid program.
10:48:51 AM
CHAIR REINBOLD, referring to slide 7, asked whether the
individual tax penalty of 2 percent household income for years
2015 and 2016 would be in pre-tax dollars.
MS. ERICKSON answered she was unsure of the IRS rules at this
time, although she offered to research that issue further.
CHAIR REINBOLD indicated that since it is 2 percent or greater,
it could result in a big impact. She then referred to slide 9,
and asked whether the penalty for employers assessed at $2,000
per subsidized employee would be applied annually.
MS. ERICKSON answered yes. In further response to a question,
she agreed the first 30 employees are excluded.
10:50:14 AM
REPRESENTATIVE TARR noted that some assumptions have been made
that businesses would choose the penalty since it would be
financially advantageous to do so. She said it seemed that
might be the case. For example, an employer with 70 employees
would potentially have a $140,000 penalty. She surmised that
since insurance could easily range from $800 to $1,000 per
employee per month, it could be significantly less expensive to
take the penalty. She asked where members could obtain more
information for evaluation purposes.
MS. ERICKSON suggested that some information on that issue
specifically might be provided by other testifiers since they
have more information on employer impacts. Additionally, a
number of larger organizations have been working with employee
benefits consultants to provide detailed analysis.
10:51:42 AM
The committee took an at-ease from 10:51 a.m. to 10:52 a.m.
CHAIR REINBOLD advised members that the federal government is
still in the process of drafting regulations.
10:56:13 AM
BRET KOLB, Director, Division of Insurance (DOI); Anchorage
Office, Department of Commerce, Community & Economic Development
(DCCED), referring to the ACA, remarked that the primary
challenge the division faces is attempting to review over 10,000
and eventually 20,000 pages of regulations. Even with the
amount of information available, many of the basic questions
have not been answered. He highlighted that the biggest concern
is the cost to consumers, small businesses, and the impact on
the insurance industry [slide 1]. He advised members that the
Division of Insurance has not performed a formal study of the
cost to individuals; however, the division has been tracking
various studies to become knowledgeable about the impacts for
them going forward. He referred to an implementation timeline
provided by the National Association of Insurance Commissioners
[slide 2]. As previously mentioned, the decision has been made
that it was in the best interest of the state to select a
federally-facilitated exchange also known as a marketplace. In
fact, the exchanges stand out as the significant change that
will take effect in 2013. Most people are interested in the
impact of the marketplace on themselves or their families. He
pointed out that October 1 is the date when open enrollment is
scheduled to begin, but many other things underlie that date.
He stated that rates would still be filed with the division
under the ACA and the marketplace. In fact, the division would
continue to review the insurance rates. He reported that
insurers interested in participating in the exchange must apply
by July 31, 2013. He informed members the DOI is on track to
complete the reviews for the insurers and submit them to the
federal government.
10:59:19 AM
MR. KOLB stated the second concern relates to the review and
approval by the DHHS for plans that will be offered in the
federally-facilitated marketplace. He indicated he has heard
that by early September the federal government will make
determinations as to which companies have been approved to be
offered on the marketplace. The third and largest hurdle will
be to create the marketplace, which is sometimes considered as a
portal or web access site. The portal will provide access to
the marketplace for consumers to shop and determine which policy
or plan may be best for them. In fact, in order to accommodate
open enrollment by October 1, 2013, the portal must be up and
available by that date. He reiterated that this is what's being
created by the federal government for the federally-facilitated
marketplace. The marketplace would only cover some of the high-
level items of coordination between the states, federal
agencies, and insurance companies, but all of these activities
are being done in preparation of meeting deadlines.
MR. KOLB turned to the question of the cost to the consumer
[slide 4]. He noted that according to a report produced by the
U.S. House and Energy Commerce Committee, just released in May
2013, the members of the Energy and Commerce Committee sent
letters to 17 of the largest insurers - health insurance
companies - requesting their analysis of the impact of the ACA's
policies, mandates, taxes, and fees on health insurance
premiums. He referenced the source of the information, which is
available on the U.S. House, Energy, and Commerce Committee's
website, which is [http://energycommerce.house.gov/rate-shock].
Referring to slide 5, entitled, "Individual Marketplace
Components of 2014 Rate Impact", he explained that many of the
components are in ranges or estimates. The full-year data will
not be made available for the rate-making process until the 2016
plan year. In fact, it may take several years before enough
information has filtered through to provide a full year's worth
of data for anyone to review. Estimates will likely be refined
and tightened up as the 2016 plan year approaches, but currently
only broad estimates are available.
MR. KOLB pointed out that the mission of the Division of
Insurance is to regulate the insurance industry to protect
consumers. Specifically, the division is very aware of its
mission and how the division impacts consumers. In 2012 alone,
the individual market provided coverage for over 13,500 Alaskans
in the state. Some of these individuals or families may qualify
for subsidies after January 2014 or may be served by plans in
the federally-facilitated marketplace. So regardless of where
an individual obtains coverage, research seems to indicate the
cost of individual insurance is going to rise.
11:03:36 AM
MR. KOLB stated that benefits, cost sharing, and guaranteed
issues are all factored in and outlined on slide 5. He referred
to a "rate shock" chart and explained that this reviews the
impact on individual markets for a young healthy male [slide 6].
Again, this report was provided to the U.S. House, Energy, and
Commerce Committee, but it illustrates a projected increase of
180 percent. However, there is not any subtraction for
subsidies and it is possible individuals might qualify for
subsidies. Thus, the example might need to be adjusted to take
into account the average subsidy, which he has heard may be
around 40 percent. Still, he characterized the impact as being
huge and the result is this will impact people trying to
purchase insurance.
11:04:27 AM
MR. KOLB discussed the cost to small businesses [slides 7-8].
In 2012 alone, the small group market covered approximately
17,000 Alaskans. Referring to a chart similar to the one for
individuals, he identified the headings: small group (SG) fully
insured, large group (LG) fully insured, and administrative
services only (ASO) - the Employee Retirement Income Security
Act (ERISA) types of arrangements. In 2014, the SG would be
significantly impacted, thus, he would primarily focus on this
group. Since the 1990s Alaska has required guaranteed issue in
the small group market. In addition, the group health market
tends to have richer benefits available than the individual
market and that those two things taken together will result in a
smaller increase on the overall cost. He predicted the impact
to the small group market will likely be less than the impact to
the individual market. He anticipated that some employers will
attempt to take on some of the risk themselves. He noted that
he has heard that some employers, even small employers, are
considering self-funding in order to avoid some costs under the
ACA, in particular, to meet some of the mandates.
MR. KOLB stated that division will be monitoring increases in
stop-loss insurance, which is the insurance that backs up this
type of self-risk. In 2015, employers will be required to
report health coverage to the IRS. He recalled tax credits were
discussed in the earlier presentation, which he will not
discuss. He pointed out administrative factors that small
employers will be subject to which cannot yet be taken into the
overall calculation and cost.
MR. KOLB turned to the cost to insurers [slide 10]. He
explained that insurance companies are businesses, which will
continue to incur additional costs associated with the ACA
compliance. For example, this would include both costs
associated with creating and pricing new plans, as well as the
many different taxes and fees previously discussed. As with
other businesses, the cost of the business is factored in and in
the case of insurance, the costs will be passed on in the form
of a premium increase. Since January 1, 2012, insurers writing
health insurance in Alaska have been required to file their
rates with the division. These rates are reviewed and by
statutes, cannot be approved if they are excessive, inadequate,
or unfairly discriminatory. He concluded that numerous new ACA
taxes will impact consumers and the division is currently
reviewing rates.
11:08:01 AM
MR. KOLB reported that Alaska has been deemed by the federal
government as an effective rate review state. Therefore, the
federal government will rely on Alaska's review of rates for
purposes of determining whether a rate increase is reasonable.
The federal authority must only disclose unreasonable rate
increases or possibly not allow sale on a federally-facilitated
marketplace. Technically, the federal government does not have
"disapproval" authority. Furthermore, with regard to forms, the
federal agencies have indicated they will rely on the division
with respect to compliance for mandates in Alaska, as well as
for components of the federal mandates.
MR. KOLB said that to date, no specific ACA statutes or
regulations have been adopted in Alaska. Again, the authority
to review rates currently exists so the division will continue
to review rates as it has in the past. Referring to estimated
pricing impacts, he said it doesn't matter whether it is the
individual market, the small group market, or the large group
market, since all groups will be impacted. However, the ACA
will also provide benefits and access for some people, but he
offered his belief that it will undoubtedly add cost to health
insurance and to the population as a whole. Everyone buying
insurance will be touched by this in some manner, he opined.
11:10:03 AM
MR. KOLB, in closing, provided the committee with some sources
that have performed studies and directed attention to the
division's website, which now contains links to ACA resources as
a repository to obtain information.
11:11:01 AM
CHAIR REINBOLD, on behalf of Representative Saddler's office,
asked for the impact of the ACA on specific diagnoses for
conditions such as autism.
MR. KOLB explained that one of the components of the ACA is the
essential health benefits, and one which must be included is
coverage for mental healthcare. He pointed out that autism
benefits fall under that coverage. Therefore, as of January 1,
2014, plans are required to have essential health benefits, and
thereby will offer coverage for autism.
11:11:56 AM
REPRESENTATIVE KURT OLSON, Alaska State Legislature, referred to
slide 8 of his presentation. He asked for clarification on The
Patient-Centered Outcomes Research Institute (PCORI), which is
listed under taxes and fees.
MR. KOLB answered that PCORI is part of the funding mechanism
that refers to effectiveness research.
REPRESENTATIVE OLSON asked who is responsible to make sure
commissions and fees are not bundled, for example, brokers could
charge fees and also receive a seating commission from companies
for placing the reinsurance.
MR. KOLB answered that the current licensing falls under the
purview of the division so as people gain commissions, the
division will be reviewing the activity. However, he clarified
that navigators - those assisting someone else in the process -
are not eligible for commissions.
REPRESENTATIVE OLSON asked whether navigators will be licensed
by the division.
MR. KOLB answered that the division does not anticipate adding
licensing responsibility for navigators since they are being
identified by the federal government to work through the
federally-facilitated marketplace. At this point he did not
envision any additional licensure responsibility for navigators.
11:14:16 AM
SENATOR FRENCH offered his understanding that the ACA has
provisions that allow states to pool insurance. For example,
Alaska could pool insurance with another state with a larger
population. He asked what research the division has done to
determine any options the state has for pooling, for example,
for states with similar issues including Idaho or Montana.
MR. KOLB acknowledged pooling is conceptually available, but to
date he's not heard of many states seeking to pool; however, a
state would want to take on the risk of the new state. For
example, Idaho would want to have the medical cost and risk
Alaska has pooled in with their costs and risks. However, in
many instances, it might result in a worse situation. These
states also encounter regulation of insurance at their state
level. State regulations and programs also differ, such that
one state may regulate one thing and the other state might
mandate benefits in a different manner. Certainly, Alaska would
like someone to take on its risk, but to date it has not
happened.
The committee took an at-ease from 11:16 a.m. to 11:18 a.m.
11:18:36 AM
JEFF DAVIS, President, Premera Blue Cross, Blue Shield of Alaska
(Premera) began his presentation. He offered to focus on
context and impact since it is important to understand the
context in which all of this is happening. He said that
healthcare as it existed in March 2010 was unsustainable and
costs have continued to rise [slide 1]. He highlighted the
elements of the crisis, pointing out the graph depicts all non-
interest spending including social security, which is flat, but
adding in health spending presents a different picture [slide
3]. Additionally, once interest on the debt is added in it gets
to be "pretty scary" and by 2014 will be the equivalent of 35
percent of the gross domestic product (GDP). The amount would
be totally unsustainable by 2080. He identified the underlying
base problem, which is that healthcare costs are rising faster
than GDP and as costs continue to rise consume more of the GPD.
He spoke to the rapidly escalating situation. In 1982, when he
was in graduate school eight percent of GDP was for healthcare,
but by 2013 has risen to 18 percent.
MR. DAVIS said healthcare spending in Alaska is significantly
higher than in other parts of the country. In fact, Ward
Hurlburt, M.D; Deputy Director, Department of Health and Social
Services; Chair of the Alaska Health Care Commission indicated
the U.S has the highest healthcare costs in the world and Alaska
has the third highest in the nation. Therefore, Alaskans are
paying the third highest healthcare costs in the world.
MR. DAVIS compared Alaska's spending to other markets, in terms
of small group premiums. Alaska's small group premiums are $650
per person per month, which is $2,600 for a family of four
[slide 4]. For reference, in Washington [state] the premiums
are approximately half the cost. Thus, Alaska's employers and
individuals are being crushed under the financial burden. He
said it is not likely that the ACA will fix the problem. He
indicated the ACA would initially apply to groups of 2-50
persons, although some implications will occur for larger groups
[slide 5].
11:21:46 AM
MR. DAVIS said the major implications from an insurance
perspective happen on January 1, 2014. He explained that
guarantee issue and no preexisting condition waiting periods go
together, which means is that anyone coming to an insurer,
regardless of health condition must be given a policy without
any waiting periods for preexisting conditions. He offered his
belief that this will have a significant impact on health
insurance costs. He characterized this as being similar to
someone purchasing homeowners' fire insurance after his/her
house has burned down or a person needs coronary bypass surgery
and then purchases healthcare insurance after the surgery.
Essentially, beginning January 1, 2014, an insurance company
must provide for immediate coverage and he predicted the effect
of the mandatory coverage will increase insurance rates.
MR. DAVIS said that federal subsidies in the healthcare exchange
for individuals will begin on January 1, 2014, which also
represents a "really big" market change. Somewhat hidden in the
midst of the reform is the minimum essential benefit package,
which requires a minimum actuarial value of 60 percent. In
fact, a 60 percent plan is a richer plan than most people
purchase today. For example, if one were to compare it to car
insurance, a party who has a deductible of $1,000 but wants $100
deductible would expect the policy will be more expensive. He
offered his belief that the minimum essential benefit package
will increase insurance costs the most. He pointed out about
11,000 pages of regulations have been promulgated to date.
MR. DAVIS emphasized that these changes are market-changing
forces and of course no one knows for certain what will happen.
He characterized the ACA as being on a roller coaster. For
example, companies were required to file rates on April 30, 2013
for 2014 without knowing the population. Further, in April
2014, companies must file rates for 2015, without yet knowing
much about enrollees. He ventured that by 2015-2016, the
companies ought to know the population enrolled and a "new
normal" will emerge.
11:26:04 AM
MR. DAVIS said individual insurance costs and prices will depend
on several factors, such as the person, his/her age, what type
of current plan, if any, and whether the person is eligible for
any federal subsidy. He advised that Premera's actuaries
believe the average impact for individuals will be between 21
and 79 percent. For example, a 50-year-old with a fairly rich
healthcare plan today, paid out-of-pocket at 399 percent of
federal poverty, will likely pay significantly less out-of-
pocket for the plan in 2014 due to the federal subsidy.
However, a "20-something" with a high deductible plan today, at
401 percent of federal poverty could face rates that have
doubled. However, the range of impact for individuals depends
on substantial information, although the range of impact for
small groups would likely have less impact, as Mr. Kolb
mentioned; however, some impacts will occur.
MR. DAVIS estimated that about half of the 10,000 individuals
Alaskans would be "grandfathered in" because they have not made
any significant changes to their coverage since March 23, 2010.
Those who are "grandfathered in" would have an option to keep
their plan and represents the group that will be largely
sheltered. In fact, about half of the groups Premera covers
will be "grandfathered in" and will have an option to wait to
see what happens. He assured committee members that Premera has
been trying to shelter its members from the effects of the Act.
He turned to the health insurance dollar [slide 6]. He
mentioned substantial information has been formulated during the
debate that indicates healthcare costs are estimated at 40
percent administrative costs with 30 percent profit. Having
said that, he questioned what business could operate under that
model since businesses with those costs and profits would not
operate for long.
11:29:30 AM
MR. DAVIS reported that in 2012, for every dollar Premera
received - based on approximately 1.7 million people receiving
coverage, primarily in Washington and Alaska - it spent six
cents on administration. He pointed out that Premera is a
taxable non-profit company and currently has a profit of one
percent. He advised members that this one percent profit gets
reinvested in the company to build reserves to provide for
future needs of its clients and to build the capability of the
company. He further reported that Premera has hired an
additional 245 people to its traditional 3,000 staff to
implement aspects of the Act, which represents a huge impact on
Premera. Healthcare consumes 91 percent of all of the dollars,
he said.
MR. DAVIS indicated that the U.S. still has a problem in that
the Act reforms insurance but not healthcare itself. He
discussed where the healthcare money goes [slide 7]. The
Division of Insurance approves rates, whose standards are
adequate but not excessive. This provides Alaskans with
consumer protection. Studies point to 30-40 percent of all
health care in the U.S. as being considered waste, he asserted,
and he offered examples of [fraudulent practices]. He estimated
that the U.S. spends $3 trillion on healthcare so therefore
about $1 trillion represents waste. This represents the area in
which Premera believes opportunities exist to reduce waste by
improving quality [slide 8]. He suggested that this can be done
by engaging and empowering consumers and rewarding them for
being educated. He indicated "choosing wisely" is a model from
the medical associations, who point out 5-10 standards, for
example, for obstetrical care or asthma. He indicated these
standards are found on the consumer reports' website as well.
Essentially, if 30 percent is waste, as a consumer he would want
to avoid doing things that contribute to waste and become
educated how not to do so. He pointed out that Premera works on
cost transparency and uses integrated health management.
MR. DAVIS turned to what employers are doing about costs [slide
9]. He stated that the focus is on personal health status
improvement. Approximately 75 percent of the cost of healthcare
is spent on chronic disease and a third of that is related to
lifestyle-related choices, including exercise and food choices.
MR. DAVIS stated that high deductible plans reduce people's
willingness to just buy things "willy-nilly" and to research
options. He said that consumers who buy their own plans consume
about 30 percent less in claims with no difference in health
status. He further said that employers have been working on
cost transparency and hold worksite clinics to help integrate
wellness and reduce workers' compensation, to improve health
status with significant reductions in consumption of services.
He pointed out that employers are also interested in medical
tourism, which he said would not be debated today unless the
committee wishes to do so.
MR. DAVIS turned to the delivery system transformation [slide
10]. He stated that more needs to be done to empower primary
care. He suggested that paying primary care physicians more and
putting them in charge of their patients can be very effective
in reducing waste; however to do so, the doctors need tools,
including data. He said that Premera has created "Global
Outcomes Contracts" but he believed this effort needs to be
provider-led with carrier support.
11:34:20 AM
MR. DAVIS summarized that the current healthcare system is
unsustainable and the ACA won't fix it [slide 11]. According to
an article in Forbes ["Rate Shock: In California, Obamacare To
Increase Individual Health Insurance Premiums By 64-146 percent"
dated 5/30/2013], California anticipates a 64-146 percent impact
to implement the ACA, whereas Washington estimates a 34-80
percent impact. He reported some statistics from Oregon and
Washington, with respect to the federally-facilitated
marketplace, including that Oregon has allocated $300 million in
federal dollars and has delivered 50 percent of the requirements
for the exchange, with 50 percent in draft form; and Washington
has spent $150 million in federal dollars and has delivered 25
percent of the requirements, with 40 percent in draft form. In
Alaska, zero percent of the requirements have been met, 30
percent are in draft form, and 70 percent have not yet been
received. He was unsure of how it would all work out, but said
Premera Blue Cross will do what it needs to do for its clients.
CHAIR REINBOLD relayed that she was impressed and alarmed by the
information he'd provided.
REPRESENTATIVE KELLER said he has been outraged by the ACA, in
particular, as it relates to preexisting conditions. He asked
how Mr. Davis's company is going to change as a result. He
further asked whether the company is moving more towards
healthcare management. He predicted that insurance will no
longer be insurance as it is known today. He also asked Mr.
Davis to predict what Premera Blue Cross would look like in five
years.
MR. DAVIS indicated that his company will be performing "pre-
funding" rather than insurance services. As mentioned last
week, two things make something an insurable event. One, it is
not a desirable event. Second, it is not predictable to the
individual. However, once a person has already been diagnosed
with something it would fall under "receiving care," and becomes
predictable to the person. Thus Premera would not be "risk
selectors" but would function as "risk managers." He said that
Premera's mission is to create a sustainable health care
environment which would translate into "all hands on deck and
nothing 'is' off the table." Certainly, Premera would be making
changes, adding his belief that everyone has a role to play in
reducing healthcare costs, for example, choosing to lose weight.
He pointed out his diverse roles, including that he serves as a
health insurance executive, a health care commission member, an
individual, and as a father.
MR. DAVIS said that Premera has focused on what it can do in
integrated health management to help primary care physicians
become empowered, and to help employees and employers in terms
of worksite wellness. Certainly, the risks will happen, and the
company can't control them, but it can work to reduce overall
health care costs.
MR. DAVIS reported that actuarial science around wellness shows
that reducing the body mass index (BMI) by a meaningful amount
translates into health care expenditure reductions almost
immediately, within a matter of months. Thus, employers
understand wellness as a strategy and really embrace that
aspect, including the recognition that a healthy workforce is a
more productive one.
11:41:02 AM
REPRESENTATIVE TARR recalled testimony that it is difficult to
determine the cost of individual coverage since it is an
uncertain population. She said the [committee] has seen
estimates that identified who would be covered under Medicaid
expansion. She asked whether there would be more certainty if
the state had selected Medicaid expansion since Premera could
exclude a certain number of Alaskans, which would whittle down
the number of new individuals that would be covered.
Additionally, she recalled the ACA did not require companies,
such as Premera, to participate or offer a plan through the
federal exchange. She questioned if it is so cost prohibitive
why Premera would participate and offer a plan through the
federal exchange. It made sense to her that an economic
decision would be made on the part of Premera and she asked for
clarification on these points.
MR. DAVIS, with respect to reasons Premera would participate,
answered that Premera believes if it did not act, that an
individual insurance market would not be available in Alaska.
The Premera board has been committed to create a sustainable
health care situation and without coverage, the market would go
in the opposite direction. Fortunately, Premera believes it has
sufficient reserves to carry it through the uncertain times.
With respect to the uncertainty to new entrants into the
marketplace, he offered his belief that most of these people are
currently uninsured, so nothing is known about them in terms of
risk factors. He estimated that approximately 120,000 Alaskans
are uninsured. The state predicts that in 2014 approximately
44,000 people will be covered under the exchange, which will
increase in 2017 to 66,000. He said Premera does not believe
that Medicaid expansion would really be a part of it since
either the expansion would occur or the group would not be
eligible for subsidies; therefore, not many would fall into the
affordable insurance situation.
SENATOR FRENCH opined that Premera is one of the outstanding
companies operating in the healthcare arena. He commended
Premera for its low administrative costs. He turned to
insurance pooling, noting that Washington has substantially
lower healthcare costs than Alaska does. He pointed out it
would be to Alaska's advantage to pool with Washington. He
suggested that policymakers should be exploring this
aggressively.
MR. DAVIS attempted to clarify that the one percent profit is
achieved over its 1.8 million members. He predicted that
Premera will receive a rebate because profits were greater than
expected. In terms of a state compact, he responded that he has
grimaced when he's heard about it. Since Premera has worked in
Alaska since 1952, the company must make costs work in Alaska.
If Premera must compete with someone based on Washington's
costs, it would be difficult. For example, the federal employee
plan averages prices across Alaska. Further, compacts have
problems, since the costs are different in different locales.
He said the Alaska Health Care Commission explored some of the
reasons for higher costs and information is on its website.
While it would be advantageous for Alaska to pool, it would not
be benefit Washington until Alaska can bring down its healthcare
costs. The concept behind the state compact is that somehow
there is extraordinary profit or waste in the insurance
marketplace that would be driven out by an across-state
competition; however, for Premera, which is a company without a
lot of waste in administrative costs or profit, it is all about
healthcare. He identified the main issue is that healthcare
simply costs more in Alaska than in Washington, so it's hard to
imagine how this can be a "win-win."
11:48:12 AM
REPRESENTATIVE TARR asked whether Premera has considered
expanding its healthcare practice for healthcare providers as a
means to reduce costs.
MR. DAVIS responded that Premera's work with primary care is not
an expansion of licensure, but works to the extent of licensure.
He said Premera believes that the primary care physician is in
the best place to evaluate a patient holistically. Premera's
focus has been to consider paying primary care physicians more
to reduce waste and improve quality.
11:49:15 AM
REPRESENTATIVE OLSON questioned how it would work if Premera is
prevented from underwriting older people with health care issues
and the premiums are being doubled for clients in their 20s and
30s, which is the group that is typically the "gold standard"
for the industry.
MR. DAVIS answered that the individual mandate was intended to
keep everyone in the marketplace, but he has two sons and he
wondered how to encourage them to understand the value of
staying in the system. Again, some people will be subsidy
eligible, others will pay significantly more. He predicted that
health insurance premiums will have to go up and will be
extremely costly. While the process will evolve over time, he
predicted it will be extremely costly.
The committee took an at-ease from 11:51 a.m. to 11:55 a.m.
CHAIR REINBOLD introduced her sister.
11:56:18 AM
ILONA FARR, M.D., Alaska Family Medical Care, after mentioning
she is the head of a group of 16 family practice private
practitioners, explained that substantial impact will occur in
Alaska due to the implementation of the ACA. She acknowledged
other changes are due to rules adopted under former President
George W. Bush's administration with some changes due to the
stimulus bill. She offered her belief that many of the changes
do not affect government agencies as much as the changes affect
physicians in private practice.
DR. FARR said she started working in health care in 1997 with
the late U.S. Senator Ted Stevens to try to impact federal
regulations. At the time, the federal government attempted to
increase the documentation for physicians. She figured out she
would need to write 180,000 words per year to meet the
documentation. While the regulations were kept at bay for some
time, they are now in place. She predicted it will dramatically
increase provider costs since more needs to be documented. She
said other rules and regulations have occurred, decreased
reimbursement from Medicare and Medicaid, relative to costs.
She reported that Medicare reimbursements on claims were at 34
percent and Medicaid at 80 percent. She also said her practice
breaks even with Medicaid and loses money on Medicare, but it
takes six paying patients to offset the losses from one Medicare
patient.
DR. FARR stated in 2008 the Bush administration mandated ICD-10
codes [the 10th revision of the International Statistical
Classification of Diseases and Related Health Problems (ICD)],
which are due to start in October 2014. According to various
studies the estimated cost to implement the codes ranges $1.5 to
$8.3 billion with providers facing a minimum expense of $83,000
for private practitioners up to $2.7 million for large clinics
[slide 2]. She estimated the medical classification list will
increase from 10,000 codes to 140,000 alphabetical and numeric
codes. She further estimated that 36 percent of the codes will
correspond to the new codes. Therefore each physician will need
to use the new system or have coders do this. She predicted it
would be cost prohibitive for many physicians, taking an
additional five minutes for each patient, which increase her
fees by $50. Some places estimate more physician time; however,
she estimated it would add 1.5 hours to her day under the new
system.
11:59:36 AM
DR. FARR related some people think the impact of the changes
will be more drastic than the housing bubble. Further this will
come at a time when the country has a shortage of medical
providers.
11:59:50
DR. FARR said the federal ACA/Stimulus bills entail several
pieces of legislation [slide 3]. The Independent Payment
Advisory Board, or IPAB, will define fees for providers after
examining fees for five years. Therefore, the state will not
know the impact of this for several years. She identified the
Agency for Healthcare Research and Quality's (AHRQ) as a federal
program that provide patient and physician educational
materials, but looks at studies and is making recommendations to
the Federal Coordinating Council for Comparative Effectiveness
Research (FCCCER) committee, who will help determine which
services should be provided as physicians. She expressed
concern that some of the boards and committees are using older
research and it may slow down the progress being made in health
care.
DR. FARR expressed further concern that the process may
interfere with the physician and patient interactions. For
example, in her practice, 50 percent of breast cancer patients
were diagnosed before the age of 50. According to the task
force guidelines, she should not be performing mammograms on her
patients before they reach 50; however, that would mean half of
her patients would potentially have died.
12:01:48 PM
DR. FARR indicated that breast and cervical cancer rates are
much higher in Alaska. Again, she stated she has concerns about
the federal government setting rules and regulations. She
offered her belief that these decisions should be made between
the individual patients and their providers. She stated that
there have been over 159 committees, and 20,000 new rules and
regulations. She emphasized the difficulty in trying to keep
up. She reiterated it would be virtually impossible to keep up
with the enormity of the proposed changes.
DR. FARR identified 18 different audits the federal government
can impose, including Medicare RAC audits, which are audits paid
on commission and auditors can extrapolate findings over the
whole practice. These audit practices have tremendous negative
implications for practitioners. She offered her belief that the
majority of the audits are conducted by "fly by night"
operations. Most people in private practice are not committing
the fraud on the scale being discussed at the national level.
She hoped the Medicaid audits at the state level can be
influenced so it will not drive practitioners away from taking
Medicaid patients. Additionally, her practice must comply with
75 Healthcare Effectiveness Data and Information Set (HEDIS)
quality measures and the National Committee for Quality
Assurance (NCQA) [which is an independent 501(c) (3) non-profit
organization]. She noted her practice sends bills to 120
different entities and potentially any one of the companies
could request an audit. She pointed out audits and
documentation take away significant time from her practice and
patients.
DR. FARR turned to Medicaid [slide 4]. She noted that the
biggest study done by the University of Virginia found Medicaid
surgical patients are 97 percent more likely to die than
surgical patients with private health insurance and 13 percent
more likely to die than those without insurance. She stated
that one reason for this is due to the limited formula.
Medicaid patients generally receive less time with providers, in
particular, since the providers typically earn little or lose
money with Medicaid patients so doctors generally tend to
restrict visits with those patients. Further, there are limits
on services, decreased reimbursement, increased audits, and more
rules and regulations with Medicaid patients plus the
preauthorization takes time. She reiterated her concerns,
noting that between 26 and 40 percent of physicians nationwide
are not taking Medicaid patients due to the governmental
restrictions and interference with their medical practices. She
noted that in the past physicians often took charity cases;
however, Medicaid and Medicare have restricted the amount of
charity care physicians can perform. She encouraged members to
visit U.S. Senator Tom Coburn's website, M.D., for information.
DR. FARR also encouraged members to visit the University of
Virginia's study. She expressed considerable concern about the
proposed expansion of Medicaid due to the potential decrease in
the quality of health care in Alaska.
DR. FARR turned to the ACA [slide 5]. She highlighted some
positives of implementing ACA, including the Alaska Native
Tribal Health Consortium (ANTHC) funding and coverage for
children up until the ages of 26.
12:06:47 PM
DR. FARR said she found coverage of preexisting conditions to be
a "mixed bag." In some ways coverage of preexisting conditions
is good for patients, but in other ways it will drive up private
insurance premiums. She predicted that people will buy
insurance when they are ill and then drop it. She recalled Mr.
Bush's prior testimony on ACHIA, in which people drop the
program once they receive services. She anticipated the effect
of ACA will increase insurance costs. She pointed out there
would be a 40 percent tax on the insurance premiums estimated to
effect 100 percent of the private Alaska market by 2018.
Additionally, it will eliminate health savings accounts. She
offered her support for HSA's since the patient actually sees
the cost of services and are much more likely to shop wisely.
Indiana conducted a study, and actually subsidized some of the
health savings accounts for specific individuals. She reported
taxes will increase from $95 or 2.5 percent of income for
businesses. She indicated that she hasn't been able to figure
out what services to provide her employees even though she would
like to comply. In fact, it will take small businesses time to
sort through.
DR. FARR stated that the marketplace exchanges will start in
October 2013. At this time, she was only aware of two
providers, Premera Blue Cross and ODS Health Plan, Inc. [now
Moda Health), who will participate. She reported that the
application form instructions consist of 20 pages for
individuals and 65 pages for companies.
DR. FARR offered her understanding of how this will affect
patients [slide 6]. She predicted that insurance premiums will
increase. One provision she is seeing in her practice is non-
coverage of spouses. She said employees are suffering cutback
in employment hours and some insurance companies are "pulling
out of the market" and taxes are increasing. She recapped that
18 new taxes will help pay for the ACA. She was unsure of
whether some provisions of the Act that may or may not have been
repealed, or that might be repealed in the future.
12:10:21 PM
DR. FARR, according to a survey conducted by the Physicians
Foundation in 2012, sent out e-mails to 600,000 physicians, and
received 13,500 responses. She characterized the survey as
"being fairly accurate". She said the survey indicated 60
percent of physicians would retire now if they could afford it,
that 26 percent would not take Medicaid. However, Alaska has
one of the better Medicaid reimbursement systems and is the
highest or second highest in the state [slide 7]. She reported
that 52 percent of physicians have limited access to Medicare
patients due to low reimbursement rates, while 50 percent of
physicians plan to cut back on patients, work part-time, switch
to concierge medicine or reduce patient access to services. The
more paperwork and preauthorization takes physicians away from
their patients. In fact, the more paperwork that physicians
must fill out would be reducing patient access
DR. FARR again said that providers now spend over 22 percent of
their time on non-clinical paperwork. However, she noted her
time is actually closer to 25 percent. She reported that 59
percent of physicians indicated the passage of the ACA has made
them less positive of the future of healthcare, 47 percent have
significant concerns about EMR. Most physicians in primary care
felt that electronic health records decrease the number of
patients they can see. She summarized that basically,
physicians are experiencing increased workload, decreased
reimbursement, including 16 percent fewer patients than in
20018. As mentioned previously, preauthorization and audits
take physicians away from patients.
12:13:09 PM
DR. FARR reported that she conducted an informal survey of 400
physicians in Anchorage in 2008. At that time, 67 percent of
providers planned to opt out of Medicare/Medicaid if ACA was
enacted. She characterized this survey as a "telling" survey
that indicated the level of concern about federal regulations
going into effect. Further, a 2013 survey by Merritt Hawkins
just released this month indicates - nationwide - 60 percent of
facilities are short of primary care physicians, which is a
significant problem. The American Association of Medical
Colleges recently released a study that showed a nationwide
shortage of providers of over 91,000 by 2020. She predicted
that there will be a tremendous shortage of providers. She said
57 percent of providers are choosing to be employed through
larger entities to help them through the transition. She
estimated that approximately 33 percent of physicians are in
private practice, in part, due to the increased cost, increased
regulations, and student loan debt. She reported that in the
1950s, 75 percent of medical doctors belonged to the American
Medical Association (AMA), which is now reduced to 15 percent.
She mentioned this since people think the AMA represent all
physicians. She surmised that 10 percent of the AMA's
membership dropped once it supported the ACA.
12:16:26 PM
DR. FARR touched on potential solutions [slide 9]. She
suggested that health savings account (HSA) systems should be
allowed for all ages. First, she emphasized the importance of
the HSAs, which she thought should be birth to death account and
part of the Medicare options. Second, she supported legislation
before the Congress such as U.S. Senator Coburn's bill on
patient choice. She said he is 1 of 17 physicians in the
Congress. She also supported U.S. Senator Lisa Murkowski's
Medicare bill, which would allow patients whose physicians have
opted out to receive Medicare reimbursements for some out-of-
pocket expenses. Third, she supported having fewer rules and
regulations. She indicated additional documentation or
requirements add to the costs. Fourth, she offered her belief
that educational and not punitive audits are needed. Fifth, she
supported concierge medicine. Basically, this would allow a
patient to pay a physician a monthly amount to be a patient. It
gives providers financial certainly, which could help rural
providers. She pointed out that liability reform is always an
issue. Finally, she supported the Washington, Wyoming, Alaska,
Montana, and Idaho program (WWAMI) program, and increasing
resident slots since it helps students attend medical school.
DR. FARR concluded by reminding members that mandates for
physicians takes them away from patient care. She emphasized
that the amount of time patients spend with providers impacts
outcomes.
12:18:45 PM
SENATOR DYSON asked whether it's true that the liability laws
are among the best in the nation. He indicated several
physicians he knows are concerned about the security of meeting
the Health Insurance Portability and Accountability Act of 1996
(HIPPA) requirements due to electronic records.
DR. FARR answered that both are valid points. With respect to
the security of electronic health records, she said she has
shared the concerns and does not use electronic records except
to scan in chart notes in PDF file formats. She acknowledged
that the information is stored on servers or in "clouds" and
physicians don't have any control over the record. She reported
that HIPPA allowed 2 million entities access to electronic
health records.
SENATOR DYSON asked about the liability.
DR. FARR answered yes; but she believes the courts have reversed
some of the liability provisions, although she was uncertain of
the details.
SENATOR DYSON asked how the legislature could fix the liability
issues.
DR. FARR recalled that the Alaska State Medical Association has
been focused on this issue. She offered to put Senator Dyson in
touch with one of the association members.
SENATOR GIESSEL commended Dr. Farr as a practicing physician
with the most knowledge on the ACA. She noted that providers
other than doctors provide healthcare services, including nurse
practitioners, nurse midwives, and naturopaths, who focus on
wellness. According to Alaska Health Care Commission, Milliman
Client Report [Physician Payment Rates in Alaska and. Comparison
States] pointed out doctors are charging very high fees. She
asked what physicians are doing to address the astronomical
charges. She questioned that staff and supply charges causes
Alaska's health care costs to be twice or four times as much as
other states in the Pacific Northwest.
DR. FARR indicated that some specialties charge more than other
places; however, she recalled primary care rates were at 127
percent, which she thought was pretty consistent with other
service industries. She was unsure what the cost drivers were,
but some technology will reduce costs, such as patients having
the ability to monitor lab work and other tests. She predicted
"a whole revolution" will actually bring healthcare costs down
considerably if the devices meet federal approval. She agreed
the rules and regulations apply not only to physicians but other
healthcare providers.
12:24:00 PM
REPRESENTATIVE KELLER recalled a physician's testimony before
the Alaska Health Care Commission who said the only way he could
envision surviving was "concierge" medicine. He asked for a
definition and further direction for the legislature.
DR. FARR opined that [concierge medicine] would help; however,
she has heard "mixed reviews" on this. She recalled previous
insurance commissioners questioned implementing this in Alaska
since Alaska pre-collects and is considered an insurance entity.
She said she thinks it's important to work with the insurance
companies since basic care is provided in "our offices." She
suggested that the attorney general should research that issue,
since it may help retain primary care physicians. She noted
some places are using concierge services, such that the patient
comes in and pays a $2,500 lump sum for a physical, which
entitles the patient to four free visits the rest of the year
instead of charging a monthly fee. She added that she would
like to see the legislature work on the issue. Further, she
suggested that health care freedom bill would help. This would
allow any patient or provider to make a decision on services.
For example, in Canada a patient cannot pay for an individual
service, but this should be allowed in the U.S.
REPRESENTATIVE KELLER appreciated her taking time from her
practice to testify.
DR. FARR estimated it cost her $800 to participate in this
committee hearing.
REPRESENTATIVE TARR related her understanding that the medical
home model that has been implemented at Anchorage Neighborhood
Health Center is the direction the [medical community] is
taking. She questioned whether, in terms of private individual
providers, there was general agreement that the state is moving
away from that model. As the medical home model is integrated
more fully, she asked whether some of the issues will be
resolved and if this is more of a transition period since her
impression was that primary care providers would not have their
own offices.
DR. FARR acknowledged this has been the trend although she
totally disagrees with it. She said she has been the medical
home for her patients for many years and is able to totally
focus on her patients. She pointed out the Alaska Academy of
Family Practice has had several presentations on the medical
home models. She identified the problem as one that it takes so
much time away from the individual provider since the provider
is supervising all of the other services. She pointed out that
overhead increases since the physician is overseeing other
services. She recalled testimony from a Colorado provider who
said he/she is now performing Botox and dermatology treatments
for patients. She offered her belief that she is trained to
treat diabetes and hypertension, but not esthetician services,
which she would object to doing. In fact, she predicted the
medical home model would increase costs. Instead, she believes
the focus should be on primary care physicians and allowing them
to work best, whether in a private office, an established
clinic, or at the Alaska Native Medical Center. She concluded
that the model does not work in her practice since she is the
medical home and she essentially provides concierge medicine
although she is not in that fee model.
DR. FARR suggested Mr. Davis could provide testimony on Alaska
Comprehensive Health Insurance Association (ACHIA).
CHAIR REINBOLD opened public testimony and noted that the
committee would accept comments through October 1, 2013.
12:31:27 PM
MR. DAVIS recalled the comments Dr. Farr referred to are ones he
made at the Alaska Health Care Commission recently. He noted
that he has the privilege of being the chair of the Alaska
Comprehensive Health Insurance Association (ACHIA) also known as
the high-risk pool. With the passage of the ACA, the federal
government created a Pre-Existing Condition Insurance Plan
(PCIPs). Governor Parnell asked ACHIA to set up and administer
the federal preexisting condition pool alongside the ACHIA plan
- with a firewall between them. The ACHIA began doing this July
2011, but it will go away as of December 31, 2013. He explained
that the preexisting pools are stop gap measures anticipating
guarantee issue and no preexisting condition exclusions in 2014.
In essence this allows someone who has been uninsured for six
months to come into the federal pool with no preexisting
conditions exclusions, limitations, or waiting periods. He
reported that the plan has had 40 patients at any one time,
which he characterized as being a churning enrollment since
people move in and out of the plan. He offered an example of a
patient who acquired the preexisting insurance just for a
particular service, a total knee replacement, for $250,000, paid
premiums for three months and then dropped her coverage. He
reported that she paid approximately $3,000 in premiums for the
service. He characterized her as "a house on fire" type of
patient. He recalled the Forbes article mentioned a patient in
Washington [state] in the 1990s who said she had enrolled in the
health plan during pregnancy, but dropped out once the baby was
born. That patient commended the service and indicated she
would be back if she gets pregnant again. This illustrates what
Premera Blue Cross anticipates will happen under the new rules.
The Premera Blue Cross actuarials refer to this as "jumping and
dumping" since the patient jumps in when he/she needs service
and dumps it when the service is no longer needed. He recalled
Representative Olson mentioning that this will create financial
pressure upwards on rates and it is yet to be seen how that will
play out.
12:34:46 PM
REPRESENTATIVE TARR asked whether an opportunity exists to make
changes to how the pool will be applied.
MR. DAVIS offered his belief that this will evolve over time,
for example, some rules could be placed with respect to the
ability to "jump in" and "jump out" provisions. It may allow
people to "jump in" during open enrollment, but if coverage is
dropped the person must be out for a set time, perhaps two years
to discourage people from the aforementioned behavior. He
predicted the ACA rules will evolve over the next 10-15 years.
12:36:26 PM
CHAIR REINBOLD indicated that the committee's work on this issue
would be ongoing.
12:37:48 PM
ADJOURNMENT
There being no further business before the committee, the
Administrative Regulation Review Committee meeting was adjourned
at 12:38 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| ARRC Agenda 6.25.2013.pdf |
JARR 6/25/2013 10:00:00 AM |
|
| ARRC Division of Insurance.pdf |
JARR 6/25/2013 10:00:00 AM |
|
| ARRC Dr. Ilona Farr.pdf |
JARR 6/25/2013 10:00:00 AM |
|
| ARRC Premera Blue Cross.pdf |
JARR 6/25/2013 10:00:00 AM |
|
| ARRC Agenda 6.25.2013.pdf |
JARR 6/25/2013 10:00:00 AM |
|
| Alaska Health Care CommissionOverview.pdf |
JARR 6/25/2013 10:00:00 AM |