Legislature(1997 - 1998)

03/20/1998 03:45 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
    HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                
                   March 20, 1998                                              
                     3:45 p.m.                                                 
MEMBERS PRESENT                                                                
Representative Norman Rokeberg, Chairman                                       
Representative John Cowdery, Vice Chairman                                     
Representative Jerry Sanders                                                   
Representative Joe Ryan                                                        
MEMBERS ABSENT                                                                 
Representative Bill Hudson                                                     
Representative Tom Brice                                                       
Representative Gene Kubina                                                     
COMMITTEE CALENDAR                                                             
HOUSE BILL NO. 300                                                             
"An Act relating to health insurance; and providing for an                     
effective date."                                                               
     - HEARD AND HELD                                                          
HOUSE BILL NO. 304                                                             
"An Act relating to the location of the convening of the                       
legislature in regular session; repealing provisions relating to               
student guests of the legislature; and providing for an effective              
     - MOVED HB 304 OUT OF COMMITTEE                                           
(* First public hearing)                                                       
PREVIOUS ACTION                                                                
BILL: HB 300                                                                   
SHORT TITLE: ALASKA PATIENTS' BILL OF RIGHTS                                   
SPONSOR(S): REPRESENTATIVES(S) BUNDE, James                                    
Jrn-Date    Jrn-Page           Action                                          
01/12/98      2023     (H)  PREFILE RELEASED  1/2/98                           


01/12/98 2023 (H) HES, LABOR & COMMERCE 02/19/98 (H) HES AT 3:00 PM CAPITOL 106 02/19/98 (H) MINUTE(HES) 02/24/98 (H) HES AT 3:00 PM CAPITOL 106 02/24/98 (H) MINUTE(HES) 02/25/98 2423 (H) HES RPT CS(HES) NT 1DP 2DNP 2NR 02/25/98 2423 (H) DP: BUNDE; DNP: PORTER, VEZEY; 02/25/98 2423 (H) NR: DYSON, GREEN 02/25/98 2423 (H) ZERO FISCAL NOTE (DCED) 02/25/98 2423 (H) REFERRED TO L&C 03/20/98 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 304 SHORT TITLE: MOVE LEGISLATURE TO ANCHORAGE SPONSOR(S): REPRESENTATIVES(S) GREEN, ROKEBERG, Ryan, Cowdery, Hodgins Jrn-Date Jrn-Page Action

01/12/98 2024 (H) PREFILE RELEASED 1/2/98


01/12/98 2024 (H) STA, L&C, FINANCE

01/15/98 2056 (H) COSPONSOR(S): RYAN

01/27/98 (H) STA AT 8:00 AM CAPITOL 102

01/27/98 (H) MINUTE(STA)

01/28/98 2167 (H) COSPONSOR(S): COWDERY

01/30/98 2189 (H) COSPONSOR(S): HODGINS 02/11/98 2277 (H) STA RPT 2DP 2DNP 3NR 02/11/98 2278 (H) DP: DYSON, HODGINS; DNP: ELTON, VEZEY 02/11/98 2278 (H) NR: JAMES, BERKOWITZ, IVAN 02/11/98 2278 (H) FISCAL NOTE (GOV/ALL DEPTS) 02/20/98 (H) L&C AT 3:15 PM CAPITOL 17 02/20/98 (H) MINUTE(L&C) 02/27/98 (H) L&C AT 3:15 PM CAPITOL 17 02/27/98 (H) MINUTE(L&C) 03/11/98 (H) L&C AT 3:15 PM CAPITOL 17 03/11/98 (H) MINUTE(L&C) WITNESS REGISTER PATTI SWENSON, Legislative Assistant to Representative Con Bunde Alaska State Legislature Capitol Building, Room 106 Juneau, Alaska 99801 Telephone: (907) 465-6824 POSITION STATEMENT: Presented HB 300 on behalf of Representative Bunde. TIM WOLLER, DDS, President Alaska Dental Society 3529 College Road, Number 205 Fairbanks, Alaska 99709 Telephone: (907) 479-6747 POSITION STATEMENT: Testified in support of HB 300. TOM HIPSHER, DDS Alaska Dental Society 800 East Dimond Boulevard Anchorage, Alaska 99515 Telephone: (907) 349-5585 POSITION STATEMENT: Testified in support of HB 300. LYNN HARTZ, Family Nurse Practitioner Alaska Nurse Practitioner Association 3104 Brookside Drive Anchorage, Alaska 99517 Telephone: (907) 248-4877 POSITION STATEMENT: Testified in support of HB 300. KAREN DECKER-BROWN 2200 Shore Drive Anchorage, Alaska 99515 Telephone: (907) 522-2254 POSITION STATEMENT: Testified on HB 300. KATHY ODEGARD, Senior Operations Director NYLCare Health Plans Northwest, Incorporated 1400 One Union Square 600 University Street Seattle, Washington 98101-1158 Telephone: (800) 654-3250, extension 627 POSITION STATEMENT: Testified against HB 300. KATHY VOLZ, President Alaska Physical Therapy Association 2031 Saratoga Avenue Anchorage, Alaska 99517 Telephone: (907) 274-6897 POSITION STATEMENT: Testified in support of CSHB 300(HES). ROSS BLAKER AETNA U.S. Health Care 4300 "B" Street, Number 205 Anchorage, Alaska 99503 Telephone: (907) 563-0433 POSITION STATEMENT: Testified on HB 300. TERRY ALLARD, Chairperson Health Committee Southern Alaska Life Underwriters Association 1600 "A" Street, Number 300 Anchorage, Alaska 99501 Telephone: (907) 277-1616 POSITION STATEMENT: Testified against HB 300. MARY VEALE, Legislative Liaison Alaska Chapter American Physical Therapy Association P.O. Box 240286 Douglas, Alaska 99824 Telephone: (907) 364-2164 POSITION STATEMENT: Testified in support of HB 300, recommended change to CSHB 300(HES). LINDA FINK, Assistant Director Alaska Hospital and Nursing Home Association 319 Seward Street Juneau, Alaska 99801 Telephone: (907) 586-1790 POSITION STATEMENT: Testified against HB 300. MARIANNE BURKE, Director Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 Telephone: (907) 465-2515 POSITION STATEMENT: Testified on HB 300. DIRK WHITE, Pharmacist 705 Halibut Point Road Sitka, Alaska 99835 Telephone: (907) 747-8006 POSITION STATEMENT: Testified in support of HB 300. DEBRA DUMMANN, Member International Brotherhood of Teamsters Local 959 6721 Saint Ives Place Anchorage, Alaska 99504 Telephone: (907) 337-6014 POSITION STATEMENT: Testified against HB 300. SHELBY STASTNY, Chief Financial Officer NANA Regional Corporation 1001 East Benson Boulevard Anchorage, Alaska 99508 Telephone: (907) 265-4159 POSITION STATEMENT: Testified against HB 300. TOM TIERNEY, Director Employee Relations Municipality of Anchorage P.O. Box 196650 Anchorage, Alaska 99519-6650 Telephone: (907) 343-4399 POSITION STATEMENT: Testified against HB 300. QUINN McKENNA, Operations Administrator Providence Health Systems in Alaska 3400 Providence Drive Anchorage, Alaska 99508 Telephone: (907) 261-3134 POSITION STATEMENT: Testified against HB 300. GREG STOKES, Administrator, Alaska Electrical Trust Fund Health Care Cost Management Corporation of Alaska 2600 Denali, Suite 200 Anchorage, Alaska 99503 Telephone: (907) 2761246 POSITION STATEMENT: Testified against HB 300. BRUCE GALE, Account Executive Willis Corroon Corporation of Anchorage 4300 'B' Street Anchorage, Alaska 99503 Telephone: (907) 275-9118 POSITION STATEMENT: Testified against HB 300. CHUCK O'CONNELL, Business Manager Alaska State Employees Association; American Federation of State, County and Municipal Employees 3510 Spenard Road Anchorage, Alaska 99503 Telephone: (907) 277-5200 POSITION STATEMENT: Testified against HB 300. JAMIE SLACK, Officer VECO Corporation 813 West Northern Lights Anchorage, Alaska 99503 Telephone: (907) 264-8127 POSITION STATEMENT: Testified against HB 300. JIM CASE, Pediatric Dentist 880 'N' Street Anchorage, Alaska 99518 Telephone: (907) 274-2525 POSITION STATEMENT: Testified in support HB 300. DAVID LOGAN, President-elect Alaska Dental Society 6205 Glacier Highway Juneau, Alaska 99801 Telephone: (907) 780-6066 POSITION STATEMENT: Testified in support of HB 300(HES). JERRY REINWAND, Lobbyist Blue Cross of Washington and Alaska 2 Marine Way, Suite 219 Juneau, Alaska 99801 Telephone: (907) 586-8966 POSITION STATEMENT: Testified on HB 300. ACTION NARRATIVE TAPE 98-33, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:45 p.m. Members present at the call to order were Representatives Rokeberg, Cowdery and Sanders. Representative Ryan arrived at 4:00 p.m. HB 300 - ALASKA PATIENTS' BILL OF RIGHTS Number 0051 CHAIRMAN ROKEBERG announced the committee's first order of business would be HB 300, "An Act relating to health insurance; and providing for an effective date." He noted a quorum was not present at the beginning of the bill hearing but said the committee would begin taking testimony. Number 0104 PATTI SWENSON, Legislative Assistant to Representative Con Bunde, sponsor of HB 300, came forward to present the bill. She stated the bill version before the committee is the House Health, Education and Social Services Standing Committee substitute, CSHB 300(HES), labeled 0-LS1248\L. Ms. Swenson stated, "This House bill concerns the rights of patients to choose who will provide their medical care. This legislation also supports health care providers by giving some recourse to physicians if their patients' treatments are denied. House Bill 300 holds implications for all health care consumers. Managed care organizations as well as preferred provider organizations [PPOs] have traditionally limited their enrollees' choice of provider by imposing a closed panel or closed network of providers. By enabling consumers to choose their provider, the closed panel will expand to meet the consumers' needs. Choice is important to consumers; it's an arbiter of quality and lets them get the care they need which may otherwise be limited by managed care organizations. These limits are due to the built-in incentive to reduce medically inappropriate and unnecessary care, as well as what is actually needed. Many people think that managed care, PPOs and other similar plans contain costs without sacrificing medical benefits or attracting intrusive governmental regulation. However, it is the health care consumers that are making the sacrifice. Insurers promise preferred providers a high volume of patients in exchange for charging lower rates for their services. The idea is that, as the medical costs rise, they have to contain costs to maintain affordability and access to health care." Number 0235 MS. SWENSON continued, "The reality is insurers are using health care consumers as bargaining chips without their knowledge or consent. Because [of] the ... insurers bargaining, health care consumers now face restrictions on the type of care they receive and where they can get it. The optimism about cost containment is misplaced. Managed care and PPO contracts are subject to the same upward pressure on costs resulting from new technology and rising wages that other providers also face. Unable to control these forces, managed care providers have used the few means they have available to keep costs below those of fee-for-service providers. They accomplish this by using fewer hospital days, denying newer and perhaps more expensive treatments for patients, and by reducing access by limiting the number of providers in a PPO. The strategy delays treatment to the point that it may not be done or it forces the patient outside of the plan where remuneration for treatment is lower ... than that paid under the PPO. As more patients go outside the preferred provider organization, the cost savings through the managed care or PPO appears to be greater than would be [for] fee-for-service. Consumers have to ask if their medical care has improved or become more efficient since the beginning of managed care. Many consumers say they can't see the physician they wish to see, they spend less time with the physician they go to see and they feel rushed out of the hospital when they're very ill. Physicians, on the other hand, say they can't afford to spend much time with patients. Many tests that they would like to do for diagnosis of medical conditions are denied by insurance companies, their patients are not approved of for time in the hospital and the physicians have very little recourse, and the insurance companies are not paying for the care in a timely manner." Number 0375 MS. SWENSON said, "In our state, I think and I hope, an unintended effect of PPO is the ruination of some small businesses that are involved in providing health care in rural areas of Alaska as well as in urban areas of Alaska. There are dentists, chiropractors, nurse practitioners, pharmacists and medical supply businesses that are being forced out of business because they cannot compete, and are not able to become of a PPO. The ramifications of the loss of health care providers such as these is enormous in a state with such vast geography. ... Is this the efficient, low-cost system we are told to expect when insurers were touting managed care? Consumers are putting more money out of their pockets at each doctor's visit than ever before, only to find that their claim is denied after months of waiting, ... or they are finally reimbursed for some of their expenses. When insurers wish to contain costs they simply use less medical service or force consumers outside of the program, and this bill, House Bill 300, will go a long way to help consumers and physicians. I urge the committee's positive consideration of this legislation." Number 0463 MS. SWENSON noted she had passed copies of some articles and letters to the committee members, noting she included two letters from states that had very broad patient rights or "any willing provider" bills. She stated HB 300 was not an "any willing provider" bill. She indicated the committee members had a list of those states in their bill packets and she had contacted a few of those states with demographics similar to Alaska. She said she had received letters back saying there had been had no adverse effects on consumers or insurance companies when this same type of bill was passed. Ms. Swenson noted an article had also been included about how technology would eventually force the cost of health care upward. Number 0519 CHAIRMAN ROKEBERG said he noted Ms. Swenson equated the PPO-type contractual relationships with managed care and asked her if that was correct. MS. SWENSON replied that they were both the same. Number 0540 CHAIRMAN ROKEBERG noted she said HB 300 was not an "any willing provider" and asked how she would make the distinction. MS. SWENSON said she believes there was a dentist present to testify on that and explain further. She stated HB 300 was a patients' rights bill; it stood up for patients and it says what the insurance companies can not do. Number 0573 CHAIRMAN ROKEBERG indicated he had glanced at the description of Idaho's legislation from that state's health insurance coordinator, noting there seemed to be a difference between what Idaho has and what HB 300 provides for. Chairman Rokeberg indicated this was in the sense a health care provider in Idaho who met the requirements could be brought into an organization; it was not a straight fee for service. MS. SWENSON stated the chairman was right; she said Idaho has an "any willing provider" law and HB 300 is different from that. She indicated the reason she included information on Idaho was because many people in Alaska thinks HB 300 is "any willing provider" legislation. Ms. Swenson indicated she had been told repeatedly "any willing provider" legislation would increase the cost of insurance in Alaska, and she noted it did not in Idaho. Number 0637 CHAIRMAN ROKEBERG asked if she wished the committee to wait for further description of the distinction from the witnesses MS. SWENSON answered in the affirmative. CHAIRMAN ROKEBERG said he would assume, then, that this was "any willing provider plus." MS. SWENSON answered in the negative. Number 0655 CHAIRMAN ROKEBERG indicated the committee would take witness testimony for as long as possible at this meeting. He stated it was not his intention to take formal action on HB 300 at this time, indicating a further hearing on HB 300 is scheduled for March 23, 1998. Chairman Rokeberg noted there were many witnesses signed up to testify, asking witnesses to also submit their testimony in writing to the committee. Number 0799 TIM WOLLER, DDS, President, Alaska Dental Society ["association" stated on tape], came forward to testify. He stated he wished to address the difference between this bill and an "any willing provider" bill. Dr. Woller stated, "In an 'any willing provider' bill, any provider who goes and meets the criteria that have been negotiated by the insurance company has to be accepted as a provider, and then that remuneration for the patient is accepted just the same as it would be in the PPO .... This bill does not do that. [In] this bill, people outside the plan have their own fee schedule for private individuals. If a person who is under a PPO elects to go outside the plan, they then have to go ahead and receive money from the managed care provider and then pay the difference to the outside person. In the case of Delta Dental and also in the case of United Concordia [ United Concordia Companies, Incorporated] which operate in Fairbanks, when a person goes in and has theirs done by a preferred provider, they're remunerated at one level. When they step outside the plan they only get about 60 percent of that amount of money." Dr. Woller stated the winner there is the insurance company because the company had contracted to receive and pay out that amount of money for each patient. He indicated the company was economically rewarded when a patient steps outside the plan. The Alaska Dental Society believes each patient should have the same dollar amount of remuneration no matter who performed the work. He said the patients would still have economic incentive to stay in the PPO because that would provide 100 percent coverage, or a coverage at a negotiated lower rate. Even with the same dollar amount of remuneration, once the patients step outside of the PPO they would have to pay some money out-of-pocket. Dr. Woller indicated the Alaska Dental Society did not think the managed care company should be economically rewarded because the plan failed to meet that individual's expectation or treatment needs. He noted that was the difference between "any willing provider" and HB 300. Number 0933 CHAIRMAN ROKEBERG asked it if was Dr. Woller's testimony that if a member of a PPO-type plan used a health care provider outside the plan's provider list, that consumer would be reimbursed at a lesser rate. DR. WOLLER confirmed that was correct. Number 0955 CHAIRMAN ROKEBERG asked if that was peculiar to dental practitioners or other healing arts practitioners. DR. WOLLER said he knows it happens in other parts of the country in dental, but did not know if it was specific to dental. Number 0975 CHAIRMAN ROKEBERG mentioned a previous amendment to the bill and said he was not sure where the language was located in the bill which did what Dr. Woller was talking about. Number 0992 DR. WOLLER indicated he was referring to Section 2, subsection (c)(1) of the bill. Dr. Woller noted Section 1, subsection (a)(1) read, "(a) A health care insurer may not include in the health care insurance plan or contract a provision that (1) prohibits a person from obtaining health care services from a health care provider of the person's choice, including a specialist;" He stated that would allow the person the freedom to go outside the plan. He then quoted Section 2, subsection (c)(1), which read, "(1) directly or indirectly reimburse a covered person at a different rate because of the person's choice of provider;". Number 1030 CHAIRMAN ROKEBERG said he appreciated that, but asked, "Is it also your testimony that ... a fee-for-service provider outside a plan would not be allowed to be mandated to be paid whatever his requested fee is." Number 1048 DR. WOLLER replied, "No, he would not be allowed to mandate his requested fee. The patient would only receive that same dollar amount to pay toward that. In other words, they would receive the same dollar amount whether they are under the plan or if they ... went outside." Number 1066 CHAIRMAN ROKEBERG said he wanted to make sure these points were well-understood by the committee and that was the reason for his questions. Number 1083 DR. WOLLER indicated the other portion of the legislation has to do with a person's ability to receive full disclosure of any treatment. He stated, "Under some of the provisions of very restricted HMOs [health maintenance organizations] people have actually had 'gag' clauses where they were not allowed to be able to be told about more expensive procedures. We think that a patient ... has the right to have full disclosure of all - all given procedures, all procedures that are pertinent to their treatment whether that's a covered expense or not. They still need to know that it's available." Dr. Woller asked the committee to consider limiting Section 2, subsection (b) to "Alaska-licensed physician, dentist or consultant." Section 2, subsection (b) read, "(b) A health care insurer may not deny, reduce, or terminate health care benefits for a covered person unless the denial, reduction, or termination is approved by a physician who is licensed to practice in the United States." He commented, "The reason is not because we believe our hands are anointed, it's because this gives legal recourse for the patient through the attorney general's office, through the state after review, back to that individual. If you have an individual at an insurance company who is acting in bad faith and doing these things this does give some legal recourse to the patient toward that individual, and that's why we'd ... ask that that provision be put in there. Other provisions are allowing them to challenge the insurance companies under this - this Act and not be disciplined for it." Number 1172 REPRESENTATIVE JOHN COWDERY asked if Dr. Woller believed a consumer group should be allowed to negotiate for the best possible price and service. DR. WOLLER answered in the affirmative. Number 1189 REPRESENTATIVE COWDERY noted, "Price is the bottom of everything of cost." He commented he is on the public employees insurance plan and indicated he did not think he was limited as far as his choice of providers. DR. WOLLER said Representative Cowdery has a traditional indemnity plan. REPRESENTATIVE COWDERY asked Dr. Woller if he thought the cost of insurance coverage to the consumers, who utilize the same plan as Representative Cowdery, would be affected. Number 1232 DR. WOLLER indicated people would stay with a plan designed by the health maintenance organization or by the actual insurance company that met their needs and would have an economic incentive to do so. He indicated that if a plan was not providing quality service, a few people would be going outside the plan whether the plan paid that dollar amount to a preferred provider or to another provider. It's still the same dollar amount, there should be no change. Dr. Woller noted "the rub" would come in if large numbers of people started leaving the plan for one reason or another. The plan's operators would then lose their bargaining power with their preferred providers and that could make a difference. However, Dr. Woller said he would submit that if large numbers of people were leaving their plan then something was wrong with the plan and it would need to be examined. He commented holding people as economic hostages in a plan that was not providing good service was not to the benefit of patients. Number 1311 REPRESENTATIVE COWDERY indicated he believed rates for employees and employers were set through studies and actuaries, using every consideration. DR. WOLLER said he would assume so. REPRESENTATIVE COWDERY questioned whether there was a problem out there he hadn't seen, asking for details and noting the world was not perfect. Number 1352 DR. WOLLER replied the problem in Alaska is fairly low, noting there were currently not a lot of dentistry PPOs in the state. He said he thought that having guidelines in place would make these things easier to tolerate as they proliferated. Dr. Woller indicated the members of the Alaska Dental Society are aware of the kinds of problems that could come up because their colleagues in other states are having them. He said it was currently happening on a smaller scale, noting, for example, many of the military dependents in the Fairbanks area are under a PPO. Number 1399 REPRESENTATIVE COWDERY asked if that was state or federal. DR. WOLLER replied it was federal, mentioning United Concordia Companies again. Number 1415 REPRESENTATIVE JOE RYAN asked if that was TRICARE [TRICARE-Active Duty Family Member Dental Plan] or if it was the old CHAMPUS with the military. DR. WOLLER confirmed it was United Concordia, indicating the company had contracted nationally with the military. Number 1440 TOM HIPSHER, DDS, Alaska Dental Society, came forward to testify next. He noted that besides being a dentist, he is also a registered civil engineer in Alaska and the owner of software development company which marketed software for health care benefit plans throughout the 50 states. Dr. Hipsher indicated he would say, as a dentist, what HB 300 was, and then what it was not. He noted there are people present who would probably try to make this an issue about cost which it is really not. He stated they are not attempting to set fees or premiums for insurance policies, but he commented they would be led to believe this would probably cause insurance rates to increase. Dr. Hipsher reiterated that HB 300 is not "any willing provider" legislation. He stated they are not attempting to eliminate closed panels, eliminate or undermine managed care, eliminate utilization reviews or outcomes assessments. He indicated he thought all of those things played a very important role in overall patient health. Dr. Hipsher indicated HB 300 is not necessarily about hospitals and the cost or services provided by hospitals. He stated it is not about tort reform as had been suggested by some legislators in prior committees. It is not about doctors, doctors' fees, pharmaceutical companies, pharmaceutical products or the cost of pharmaceutical products. Number 1527 DR. HIPSHER stated, "This bill is about patient rights; it's about you and I as health care consumers wanting nothing more than to be able to make choices about the health care that we receive and not be penalized for making those choices." He said HB 300 is strictly about patients; it is about eliminating discrimination with regards to the care patients receive, eliminating discrimination in the treatment that is recommended, and eliminating discrepancies in payment for the reimbursement to the patients for the treatment received. He continued, "This bill is about you and I as patients having the freedom to seek medical and dental care from whatever doctor we choose. It's about patients having the right to receive all of the treatment options available to them for their particular situation and having the right to choose the treatment that is most appropriate to their needs without being penalized for doing that." Number 1573 DR. HIPSHER continued, "As a practitioner, I believe in the concept of free enterprise and competition. In my business the only way that I can attract patients is ... by providing the highest quality oral health care that I can at ... a reasonable cost. The fees that I charge for my care are based on what it costs me to run a practice in ... Anchorage, Alaska. There are no guarantees for me in my business. I have to rely on my expertise as a dentist, I have to rely on the fact that my patients will trust me as a dentist, so all of this tends to make me a better dentist. If they aren't satisfied with what I charge or if they aren't satisfied with the type of work I do or my bedside manner or any of that, they have the freedom to go anywhere they want. The decisions that are made about their care are ultimately made by themselves. ... I have to provide them with all of the options available to them, and the cost of those options vary greatly, so ... it's their choice as to what the treatment they want that is most appropriate for their needs. And ... most importantly, is the treatment that I render for my patients is I accept full responsibility for ... that care. ... The insurance industry is in the business to make money and I realize that that is a valid point, and I respect their efforts to ... help keep costs low. However, in the process of the day-to-day business, I feel that things get so bottom-line oriented that they forget about the human elements involved. It's my job, as a health care provider, to make sure that the human element is cared for by providing treatment that is appropriate, that is unbiased, and that is at ... a cost that is as reasonable as I can provide it." Number 1671 REPRESENTATIVE COWDERY asked, "What percentage ... do you feel of our society is under insurance?" DR. HIPSHER said he would say that probably 90 percent of the people he saw were under an insured plan, noting he could only speak from his practice. REPRESENTATIVE COWDERY asked if the uninsured 10 percent of Dr. Hipsher's patients came to his practice because of his ability or good looks. Number 1695 DR. HIPSHER said all of his patients came to him strictly through word-of-mouth, noting he did not advertise and indicating his fees were not lower than standard. Number 1708 CHAIRMAN ROKEBERG said, "Doctor, your testimony was that what this bill is, it's not a duck, even though it may look like one." He asked if it would be Dr. Hipsher's contention that this would not raise costs. DR. HIPSHER said he did not feel it would raise costs. CHAIRMAN ROKEBERG asked if he thought it would lower costs or keep costs the same. Number 1719 DR. HIPSHER said he would assume costs would remain the same unless they saw patients that were unhappy with their current situation. He indicated HB 300 was about allowing patients under managed care or PPO plans who were not being treated correctly by their provider to be able to go to another provider and be reimbursed at the same rate they would have been reimbursed for under their plan. Number 1755 LYNN HARTZ, Family Nurse Practitioner, Alaska Nurse Practitioner Association, testified next via teleconference from Anchorage. She spoke from a prepared statement: The Alaska Nurse Practitioner Association is pleased to support HB 300. This bill provides important consumer protections including the right to full disclosure regarding treatment options and assuring Alaskans continued access to their clinician of choice. This bill also protects health care providers from discrimination. I refer to that part which states, "A health care insurer may not (1) directly or indirectly reimburse a covered person at a different rate because of the person's choice of provider." Now, this section has particular resonance for us because it's the Blue Cross Federal Employee Program's discrimination against their own nurse practitioner preferred providers since the beginning of this year. Currently, nurse practitioners with a preferred provider agreement with Blue Cross are not reimbursed for their services until the patient has met a $200 calendar year deductible. Physicians with a preferred provider agreement with Blue Cross are paid in full after a $10 copayment for each office visit. This policy has led to ridiculous situations in practitioner- physician practices in which patients are forced to decide whether to see the nurse practitioner whom they may have seen for years and pay $200 before their insurance kicks in, or see the physician in the same office and pay $10. In response to questions, so far Blue Cross has not explained the rationale behind this policy and to date has just forwarded complaints to their Washington, D.C., office. This is not about cost. The Blue Cross Federal Employee Program in this case is actually providing financial incentives for their subscribers to see more expensive providers and directing them away from less expensive providers who are all preferred providers. They are also practicing discrimination against a subgroup of their own preferred providers without warning or explanation. There are about 18 small solo nurse practitioner practices and 4 nurse practitioner-owned health clinics in Anchorage and Eagle River. Insurance company policies similar to that of Blue Cross will seriously affect their business, if not put them out of business. The Alaska Nurse Practitioner Association believes that this example provides ample evidence that HB 300 is needed. We need your help. Providing high quality, cost-effective health care is apparently not enough to save us from insurance company policies like that of the Blue Cross Federal Employee Program, a policy that is not based on cost savings, nor does it have anything to do with appropriate use of health care. We strongly support HB 300 and hope that the Labor and Commerce Committee will support it also and move it forward. MS. HARTZ asked if there was enough time to read two paragraphs from a pediatric nurse practitioner who had not been able to be there. Number 1889 CHAIRMAN ROKEBERG said in the interests of time it would probably be best if she faxed the statement to the committee, and he provided the number, or if she gave it to the teleconference monitor. He said it might be most appropriate for anyone on teleconference who has any testimony to fax their written comments to the committee, then summarize those comments in their verbal testimony. The statement Ms. Hartz spoke of was conveyed to the committee. It was from Catherine A. Stange, MS ANP, and read: I am a nurse practitioner working in a large group pediatric practice in Anchorage. I am directly affected in my practice by the inconsistency of benefits provided to me as a nurse practitioner and that of the pediatrician. Many of my patients I have cared for since birth and therefore have a relationship with them and their families. Presently, they are required to pay a $200.00 annual deductible to see me but for the SAME service could see the pediatrician in my office with only a $10.00 co-pay. This encourages very poor continuity of care as well as inappropriate use of the physician in a collaborative practice, when both of the providers are Preferred Providers. Incidentally, I have been a preferred provider with Federal Blue Cross for several years, in private practice, prior to joining this group practice. Financially, the discrimination against nurse practitioners does not make sense. By the inappropriate use of physicians in the practice, patients will see them instead of the nurse practitioners, and therefore, Federal Blue Cross will be paying out much more in funds for medical coverage to their clients. I also see that by this discrimination, nurse practitioners' practice is being restricted which is unconstitutional. I am convinced that this discrimination has been an oversight after many changes in the last 2 years of Benefit plans with Federal Blue Cross and hope that this issue will be addressed as soon as possible. Thank you for your consideration in this matter. Number 1911 KAREN DECKER-BROWN testified next via teleconference from Anchorage. She stated she was testifying from a consumer point of view and spoke from a prepared statement: The consumer should have the right to choose any health care provider, and that means not just physicians but (indisc.) example use a nurse practitioner or a dentist or whoever that they need for health care coverage. It goes against all the principles ... our forefathers fought for to make America free to have insurance companies dictate who we can see for health care, what services we are allowed, and limiting coverage for individuals with certain problems. In the book Animal Farm [by George Orwell] there is a phrase that goes something like this, "All animals are equal, it's just some are more equal than others." This is what we will have with managed care and health maintenance organizations here in Alaska. Of great concern to me is that the insurance industry is no longer wholly owned by American companies. Some of the wealthiest and largest businesses in the United States are in the insurance industry. They are great companies to invest in, and personally I have stock in insurance companies, but not at the expense of the American and Alaskan people. It is my understanding that companies such as New York Life and Equitable are owned by the Japanese, if not wholly, then in part. We defeated the Japanese from taking over our land and it is of great concern that they are now buying America and dictating the quality of life and health care of the American people. It is by small bits over time great changes take effect. It is almost imperceptible at the time, but our choices and coverage will be greatly eroded for financial gain of an overseas conglomerate. What has that got to do with the here and now? It is looking at the larger picture of which we are a small bit. It is for this reason I support action relating to patients' right under the health insurance and to prohibit insurance companies' restrictive treatment practices. Thank you. Number 2004 KATHY ODEGARD, Senior Operations Director, NYLCare Health Plans Northwest, Incorporated (NYLCare), testified next via teleconference off-network from Seattle. She stated NYLCare is the administrator of the state of Alaska's employee benefit plan. Ms. Odegard testified that as the administrator of the state plan NYLCare is well aware of budget pressures, et cetera. She said HB 300 will remove the current tools NYLCare has to assist the state in managing the rapidly escalating cost of health care. She noted the bill does not take into account a lot of the care that has historically gone outside Alaska to the Lower 48. She said that in NYLCare's reading, the current discounts applying to state of Alaska employees would be eliminated, increasing cost to the state, and could ultimately end up increasing costs to the consumer. She noted the bill also did not appear to distinguish between the geographical differences within or outside the state. She asked, "Does this imply one rate for everyone, no matter where the services are provided? Who actually benefits from this bill? Is it the Alaska employers, the employees of the state of Alaska, state of Alaska taxpayers? As we see it, the bill protects the income of health care professionals against the economic pressures (indisc.--coughing) the state today. In no other service industry are employers or employees prohibited from shopping for the best price or value. We don't see where health care ... shouldn't be the same. ... It is our opinion that if this bill passes, it will rapidly escalate the cost of health care. It also limits plan design and provides a competitive disadvantage in a market. I heard talk about Blue Cross and Blue Shield, as we read the current bill we're not convinced it applied to the Blue Cross Blue Shield Associations at all." Number 2087 CHAIRMAN ROKEBERG noted NYLCare is the third-party administrator of the state's plan and said it is his understanding the state's plan was exempt under ERISA (Employment Retirement and Income Security Act) from any state statute because it is a self-insured plan. He asked her if that was her understanding as well. Number 2100 MS. ODEGARD agreed but said it has been the state plan's practice to adopt whatever regulations were passed for the state of Alaska. Number 2114 REPRESENTATIVE RYAN commented this seemed like an obvious question, but he asked, "Are not the benefit package that the employees receive a negotiated portion of their compensation for the service they perform in their job?" Number 2131 MS. ODEGARD said she would say yes but thought he should direct the question to the state, noting, "Usually a benefit plan is definitely a part of their whole compensation package. REPRESENTATIVE RYAN confirmed the employees receive the benefit plan in lieu of financial compensation, noting that was all he wanted to establish. Number 2143 CHAIRMAN ROKEBERG indicated there is a provision in the bill requiring a health care professional, qualified for the particular service, to provide whatever utilization review is appropriate. He asked how that would affect the contract and practice of NYLCare in providing services and what impacts there would be on costs. Number 2158 MS. ODEGARD said, "If you're referring to the piece that indicates the services done by someone licensed within the state of Alaska, and we already have a medical director that is associated in the state ... lives there and practices there, ... we don't believe it would have an impact." Number 2171 CHAIRMAN ROKEBERG asked if NYLCare did not have a provision for some utilization review procedures and preauthorizations as part of its contractual obligation with the state. MS. ODEGAARD replied, "Yes, but ... we believe the bill states that ... we would still do that, we would just -- the actual utilization review and services would -- we have people in Alaska today that do that as well .... It won't impact the cost as we understand it." Number 2203 KATHY VOLZ, President, Alaska Physical Therapy Association, testified next via teleconference from Anchorage. Ms. Volz stated, "I'm here on behalf of my organization, which is 180 licensed health care practitioners, just to say, in summary, that we are in support of the current version of this bill recognizing rights to the consumers and providers as well." Number 2228 ROSS BLAKER, AETNA U.S. Health Care (AETNA), testified next via teleconference from Anchorage. Mr. Blaker commented he wanted to keep it brief but indicated they feel health care costs are high and are continuing to increase. He stated, "Insurers and employers and consumers are all seeking some cost control in one of the greatest human resource expenses. This bill really seems to limit a health plan and an employer can define a health benefit package to control one of his fastest rising costs. It also seems to apply to insured plans only, not to the large self-insured plans, and therefore, the small employers typically insured is gonna be the target of ... this legislation. This (indisc.) group is typically subject to the most mandated legislation as far coverage and level of benefits is concerned. PPOs have been in Alaska for a number of years now and - and they seem to be a viable financial alternative to straight indemnity plans. PPOs are very popular in the marketplace and many, if not most, of the plans being purchased now are structured in the PPO model. They're popular because they're the most effective towards controlling costs. In the PPOs that AETNA U.S. Health Care offers, there's a meaningful benefit for nonuse of a PPO provider. There's a better benefit for the use of the PPO provider, assuming the member has coverage for that particular service in question and they do have meaningful benefit if they're outside the network. By eliminating the PPO differential I offered a credentialling providers is undermined. There will be no benefit differential and, therefore, no network. Credentialling providers to quality cost to service is basic to building a cost-effective PPO network. I really don't have a problem with Section 390(b) [see Number 1083, Dr. Woller's testimony]. We think that 390(e) could probably be reworded a little bit, and I think in summary it seems to -- It seems hard for us to see how this bill would benefits consumers of medical care and we think it would be detrimental to insured plans." Number 2307 CHAIRMAN ROKEBERG noted AETNA did approximately $160 million in health insurance in Alaska in 1996 and had 43 percent of the state's market, but AETNA had the state of Alaska's contract at that time. He asked Mr. Blaker what the premium amount was and what percentage AETNA had of the health care underwriting in Alaska for calendar year 1997. MR. BLAKER replied he could not currently tell the chairman that. He said it shrank very, very substantially when the state of Alaska went to NYLCare and became self-insured. CHAIRMAN ROKEBERG asked for a guess. MR. BLAKER indicated he couldn't even provide that. CHAIRMAN ROKEBERG asked if it was from something like $160 million down to $10 or $20 million. Chairman Rokeberg stated, "It's all public record, you have to do it for CHIPRA [Comprehensive Health Insurance and Payment Reform Act], so we'll get it eventually." Number 2350 MR. BLAKER replied, "(Indisc.) comprehensive health insurance association, but I really don't know because ... that premium is based on AETNA having ... the state of Alaska insured for half of the year. So, I presume what you're looking for is - is our premium income as of ... December 31st, and I'm sorry, I just don't know that." Number 2364 CHAIRMAN ROKEBERG asked him to try to obtain that or provide the information to the committee whenever the quarterly or annual report comes out. He said the committee would very much like to know because of the position AETNA previously had in the state. He added he hopes AETNA would be remaining in the state as a provider of health insurance. He asked Mr. Blaker if his firm currently writes any individual policies in Alaska. MR. BLAKER answered in the negative, stating it was strictly group benefits. Number 2385 REPRESENTATIVE RYAN asked for confirmation AETNA would be buying NYLCare so they could get back in the state's market. MR. BLAKER said he understood that the boards of directors of both companies had approved it and it is now up to the regulators. Number 2396 CHAIRMAN ROKEBERG asked why AETNA did not choose to write individual policies in Alaska. MR. BLAKER said AETNA had individual policies up until approximately eight or ten years ago. He said he thought AETNA decided it wanted to target the employee benefit field rather than the individual field, and sold its "book of business" to Mutual of Omaha Insurance Company. Number 2425 TERRY ALLARD, Chairperson, Health Committee, Southern Alaska Life Underwriters Association, was next to testify. Ms. Allard spoke mainly from her prepared statement, noting they were concerned, as agents representing employer groups purchasing benefit plans for their employees, about the impact of HB 300 on their employer clients. She said carriers would lose the ability to negotiate favorable pricing on behalf of consumers and purchases by being required to pay all providers the same fee, and that this would increase the premiums by eliminating the carriers' ability to control or at least help mitigate cost increases through use of their networks. Ms. Allard stated, "Employers currently providing preferred provider health plans can expect to see costs increases of 10 to 15 percent due to the carriers' inability to steer patients to preferred facilities where they have discounts negotiated, and this would be in addition to the increases that we're seeing of in the neighborhood of 6 to 10 percent that are due just simply to inflation. ..." [TESTIMONY INTERRUPTED BY TAPE CHANGE] MISSING TESTIMONY TAKEN FROM MS. ALLARD'S WRITTEN STATEMENT SUBMITTED TO THE COMMITTEE: "It is estimated that approximately 80 percent of more of the employers in the Anchorage area are currently providing PPO plans for their employees. 2) Deny purchasers the choice of products ..." TAPE 98-33, SIDE B Number 0001 MS. ALLARD continued, "... choice of products that contain incentives to use these provider networks. The price increases are going to continue to escalate. There are options in the market for employers today. They do have a choice of buying a PPO plan or a traditional indemnity-type plan, and this has been stated by people testifying prior to me. Employers are making the choice to buy PPO plans because of the economy of purchasing that plan, and those plans do provide a mechanism for somebody who chooses not to use a preferred provider, to go outside of that network, and they still have a benefit, they're choosing consciously to make - to utilize services from another provider and they're paying the difference out of their pocket. By passing this bill you would be taking away the ability for an employer to make a choice to buy that plan because if the carrier can't continue to negotiate the pricing, the ... discounted plan that they're purchasing is going to away and that's where those 10, 15 percent rate increases are going to come in." Number 0048 MS. ALLARD stated, "We also fear that this is gonna increase carrier administrative costs because of the provisions requiring Alaska licensure for all medical professionals conducting utilization review in Alaska and create an unfavorable environment here for doing business by placing these restraints on carriers and exposing them to increased liability. It's also my understanding, as it's been expressed by someone prior to me, ... that the way this legislation is worded, it's only going to affect plans that are fully insured. The people that are out there are currently on plans that are self-insured are not gonna be impacted by this legislation. So, plans like the Blue Cross Federal Employee program are not going to be impacted by this." Number 0086 MARY VEALE, Legislative Liaison, Alaska Chapter, American Physical Therapy Association, came forward to testify. She stated the association strongly supports this bill, indicating the association felt it was an important protection of Alaskan patients' rights for patients to be able to choose their physical therapist. She also recommended a change to Section 2, subsection (b)of CSHB 300(HES), which currently read: (b) A health care insurer may not deny, reduce, or terminate health care benefits for a covered person unless the denial, reduction, or termination is approved by a physician who is licensed to practice in the United States. MS. VEALE requested more specific language stating the review be made by a health care provider who is licensed and competent to perform the service under review instead of physician denial. Ms. Veale commented on Alaska's types of patient populations, like commercial loggers, that physicians in the continental United States might not be as familiar with, giving the example of a physician without a specialty in rehabilitation medicine denying benefits. She said she also thinks it would be cheaper for insurance companies in the long run if the individual health care provider was doing a review, noting a physical therapist reviewer would cost the company less than a physician reviewer. Ms. Veale additionally commented she had been unhappy with some of the things she had seen relating to HMOs and PPOS when she worked in Seattle, Washington. She said there were quite a few of those types of organizations there and she noted many of her coworkers were quitting and not working for these organizations because they felt they could not offer the same quality of care as in an autonomous practice. She said they felt limited by the amount of time they could see the patient. Number 0162 REPRESENTATIVE RYAN commented, "For a person to maintain a practice ... when it's a reduced pay, they have to push people through like animals in a box car or else ..." MS. VEALE agreed, and she said she felt the patients are the losers in a situation like that. REPRESENTATIVE RYAN asked if that affected her profession. MS. VEALE replied very much so, noting there were places in Seattle before she left that she would not work because of the association mostly with HMOs. She indicated physical therapists were limited to very short time intervals with patients and she felt the amount of time allowed was inadequate to do thorough evaluations and treatments. She indicated she did not find this situation so much in Alaska. Number 0186 CHAIRMAN ROKEBERG asked Ms. Veale if she moved to Alaska to get away from an HMO environment. MS. VEALE indicated she moved mostly to get away from traffic. Number 0199 REPRESENTATIVE RYAN noted he had a rhetorical question for Chairman Rokeberg. He said, "You've heard all this testimony, this money hasn't gone away, it's still in somebody's pocket. Who's got the money?" CHAIRMAN ROKEBERG replied that was the issue here, "Whose pocket does the money go in?" Number 0216 LINDA FINK, Assistant Director, Alaska Hospital and Nursing Home Association, came forward to testify. She said the association represents all of the community hospitals in the state and strongly opposes HB 300, specifically Section 21.42.390(a)(1) and (c)(1), in Section 2 of CSHB 300(HES). She stated the bill will take away one of the few options Alaska businesses have, contracting with hospitals for volume discounts, to manage the cost of offering health insurance benefits to their employees. She stated the bill interferes with the right of a business to fully define the benefit package it would offer and also interferes in the contracting relationship between purchasers and providers. Instead of providing choice, they believe it will reduce the variety of health plan options on the market; the net results would be higher health costs for everyone in Alaska, and more people losing health insurance. Number 0254 REPRESENTATIVE JERRY SANDERS asked if patients currently have a choice to go anywhere they wish. MS. FINK replied she believes they do. REPRESENTATIVE SANDERS said then the only difference is in who pay for it; if the patients exercised their choice, they pay for it. MS. FINK replied she thought it depended on what kind of insurance they had. REPRESENTATIVE SANDERS indicated if HB 300 was passed, that when the patients exercised their choice, he would pay for it. He noted that was his understanding. MS. FINK answered, "Yes" She said she thinks it depends on what kind of insurance they have. Number 0295 REPRESENTATIVE RYAN commented there was a point he was trying to get clear. He asked Ms. Fink if it was her understanding the benefit package offered to the employees of the association's hospitals, along with actual monies for services performed, was part of the employees' compensation package. He indicated the association's members were in a competitive job marketplace. MS. FINK indicated it was her understanding insurance coverage was part of an employee's compensation package in most cases. REPRESENTATIVE RYAN noted that and said, "Then, if utilization review comes along and denies them, has not whoever did this utilization review and denied them, stolen something of value from them - taken something without compensating them some other way in cash money?" Number 0321 MS. FINK replied she thought most plans had specific things they compensate for and it was not blanket or carte blanche. REPRESENTATIVE RYAN indicated he had received a bill for a couple of hundred dollars because his wife had surgery from a provider who was covered under her plan but the surgery was done at a facility other than Providence Alaska Medical Center. MS. FINK indicated some of the other witnesses might be able to address that better than she could. REPRESENTATIVE RYAN indicated his comments were not directed specifically at her. Number 0357 CHAIRMAN ROKEBERG asked if Ms. Fink knew if Bartlett Regional Hospital in Juneau has any PPO arrangements. MS. FINK said she did not know. Number 0385 MARIANNE BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, came forward to testify next. Ms. Burke indicated she had received a letter dated March 13, 1998, from the committee requesting certain information. She said the specific questions raised by Chairman Rokeberg addressed points touched on that day. Ms. Burke noted one question was the number of health insurers licensed to do business in Alaska. She stated her information was based on calendar year 1996, noting the 1997 information was not due in to the state until March 1. She said there are literally thousands of reports being processed and that data is being compiled. Ms. Burke stated there were 142 insurance companies who held a certificate of insurance and had the authority to write group health coverage in Alaska. There were also other insurers who had what was known as specialized authority to write other nontraditional health care or managed care policies; she gave the examples of cancer or disability coverages. She noted 226 insurers in total held certificates of authority in Alaska and Alaska additionally had two medical service corporations, nonprofit entities, Blue Cross Blue Shield Alaska and "Alaska Vision." Number 0490 MS. BURKE added that although the question was not asked she would like say that there are no HMOs in the state of Alaska. Although the state does have enabling legislation, no HMO has applied for a license in Alaska. The premium volume by carrier is available in the division's annual report, and she noted she has provided selected pages to the committee. The premium volume is on calendar year 1996. The total dollars of premium written in Alaska was $269,271,000. She stressed that is insured plans and does not include plans that are ERISA self-insured. She indicated the division does not have the authority to gather that data and the data is not available, it is proprietary to the entities and the division is precluded by federal law from requesting that data. She said the committee's letter also asks for information about the types of policies underwritten particularly as it relates to individuals. Currently, Blue Cross [Blue Cross Blue Shield Alaska] writes approximately 90 percent of the individual policies written in the state of Alaska. Since 1995 Blue Cross has experienced a steadily declining number of policy holders. Fewer people are seeking individual health insurance. This is for a number of different reasons, not the least of which is that the premiums for individual health insurance have been steadily rising. There are some fixed costs that remain as the number of individuals decreases, so there are fewer people to spread that cost over. In addition, there has been significant increase in the cost of health care and delivery in Alaska as in a number of other states. Number 0614 MS. BURKE said the remaining 10 percent of insurers writing individual policies were scattered over 10 to 12 different companies, none of which had a significant amount. She added in many cases that health insurance was more or less written as an accommodation to the insurance company's client who might have a very large portfolio of other insurance. Ms. Burke indicated the March 13 letter also requested her to specifically address a December 3, 1997, memorandum written by legislative counsel Michael Ford which said it was the author's opinion state mandates could apply to ERISA self-insured plans. Ms. Burke indicated Signe Anderson, an assistant attorney general assigned to the Division of Insurance, had responded and the committee has been provided with a copy. Ms. Burke said there is 24 years of case law, all over the country, which clearly says states are preempted from mandating any coverage to an ERISA self-insured plan. She commented that has been challenged all over the country and it has never been overridden. According to the information the division was voluntarily provided, Alaska's larger employers such as ARCO Alaska, Incorporated; BP Exploration (Alaska) Incorporated; Carr- Gottstein and Fred Meyer were all self-insured. Ms. Burke indicated HB 300 would not apply to these employers or to the Blue Cross Federal Employees plan mentioned previously. She said that was a federal plan and they have no authority over it. Number 0728 REPRESENTATIVE RYAN commented the testimony had said PPOs were giving substantial discounts to get business. He said providers were rushing patients through in an attempt to make enough money to pay the overhead, but premiums are going up. Representative Ryan asked who is making the money. Number 0753 MS. BURKE replied the division has had no such complaints of patients being rushed or about PPOs with the exception of very isolated situations. She said in those cases more often than not the problem had not been the reimbursement itself, but either the time the reimbursement took or other matters. Ms. Burke noted the premium that has been determined and which employers pay in did not contemplate 100 percent of any service was going to be paid, that all individuals were going to have equal amounts of claims. She said, referring to Representative Cowdery's remarks, this was actuarially determined and was based on the provisions of the plan. For example, if there was a PPO plan, it was assumed in the actuarial assumptions that the amount to be paid out would be in accordance with the discounted or negotiated cost. Therefore, the amount of money coming in for the coverage was less than if an indemnity plan had been negotiated which contemplated the rates could vary and be higher. Ms. Burke noted it was a choice. Number 0833 CHAIRMAN ROKEBERG indicated he has some questions for Ms. Burke which he hopes can be answered and discussed at the March 23, 1998, hearing. He said he wanted to follow-up on the question about whether Ms. Burke believed and the statistical evidence showed that the availability of individual health insurance plans in Alaska was in jeopardy. He noted this was a separate issue from HB 300. He additionally asked, "Secondly, ... whether the - the issues that revolve around the status of ERISA as it relates to state mandates and the split case law on that. ... Thirdly, what the state's relationship to CHIPRA and the entire availability of health insurance in the state is because of the - the shifting companies' ownership and the availability of their ability to underwrite individual and/or group plans in the state." Number 0900 DIRK WHITE, Pharmacist, testified next via teleconference from Sitka. Mr. White stated he was a community practice pharmacist, and he and his wife, also a pharmacist, own and operate the two pharmacies in Sitka. He said they had approximately 22 full-time employees and they pay for a health insurance program for those employees. Mr. White said he supports HB 300. He stated, "Before the onset of the health care issues made front-page news, you could go and see the doctor or dentist of your choice. They'd provide care for you and they might write you a prescription which you could then take to your favorite pharmacist to fill. Well, then the insurance companies got involved and now you need to ask them who you can see and where you can go to get your prescription filled -- after they designate that it's okay that you see the particular health care provider that's gonna write that prescription. I want to know why we've given that right away to them, why they've that taken that right from us or why we've allowed it to happen. Also, my concern is that myself and other pharmacists like me will be forced out of business by the current practices of these insurance companies. In the last five years, the three biggest pharmacy benefit managers, those being mail-order houses, have been bought by drug companies. PCS, which is Prescription Card Services of Scottsdale, Arizona, is owned by Eli Lilly [Eli Lilly and Company]. Med-Co ... Cost Containment Company is owned by Merck [DuPont Merck Pharmaceutical Company]. Diversified Pharmaceuticals is owned by Smith Kline Beecham." He noted he does not own stock in any of those companies and would not buy it. Number 0979 MR. WHITE said those three pharmacy benefit managers (PBMs) controlled, or were under contract by insurance companies to provide mail-order pharmacy services to over three-fourths of the insured lives in America. He expressed concern about the overall health of his community and his profession, stating, "Unless we stop these practices, your pharmacist probably will soon become your mailperson." He gave a recent example of a patient who needed a prescription for antibiotics but was covered under a plan Mr. White said he wasn't even given the option to join. He said the person could not afford the prescription but had to be in Ketchikan for work about a week later, and had the prescription filled at the Carrs Quality Center there. Mr. White commented about possible worsening of the patient's condition because of the delay in receiving medication which would have cost the insurance company more and kept the patient from going to work when he reached Ketchikan. He indicated the healthy community and their health care rights were why he was testifying in support of HB 300, urging the committee's support. He stated, "Our insurance reps do not use the word 'negotiate.' They tell us what they'll pay us for our services and we can take it or leave it and those rates have not gone up in ten years -- well my insurance premiums certainly have to cover my employees." Number 1081 CHAIRMAN ROKEBERG referred to his conversation with Mr. White the previous week. He mentioned previous written comments Mr. White had provided to the committee and commented on a statistic he found in the bill packet indicating a number of states had the "any willing provider" provisions but they only really related to pharmacy. He asked Mr. White if he was familiar with other states that have this particular provision that only relates to pharmacies. He asked Mr. White if he could follow up on that and get back to the chairman at a later date. Number 1117 REPRESENTATIVE RYAN asked if it was correct that an insurance company paid Mr. White a particular fee for filling a prescription over the wholesale - the generic rate of the drug. MR. WHITE answered in the affirmative. REPRESENTATIVE RYAN asked how much money was that in Alaska. MR. WHITE asked if he was talking about the welfare rate. REPRESENTATIVE RYAN said what Mr. White could get paid over, what the generic cost of the drug was if Mr. White could buy it at that cost. MR. WHITE replied the problem was that the insurance companies' reimbursement rates for pharmacy are currently well below Alaska's welfare rate. He said the Alaska's welfare rate was set up in 1989 to provide pharmacists $0.25 profit on every prescription. He noted they were paying about $18 per hour for pharmacist and the current rate is now $29 per hour. REPRESENTATIVE RYAN asked if Mr. White could buy those drugs at a wholesale or generic rate like a large company like Carr-Gottstein Foods Company can. MR. WHITE answered in the negative, commenting, "Nowhere near." REPRESENTATIVE RYAN asked Mr. White if he gained or lost, in effect, on the rate he was paid by the insurance companies. MR. WHITE replied he lost. REPRESENTATIVE RYAN observed that all of Alaska's insurance laws had been given to them to pass by the insurance companies. He stated, "We don't know diddley-squat about insurance law but we just take it and pass it, and we wind up with this kind of stuff." MR. WHITE agreed. Number 1190 CHAIRMAN ROKEBERG asked if there was anything preventing Mr. White, as an independent pharmacist in Alaska, from forming a buying network. MR. WHITE replied there are anti-trust laws, indicating there are both federal and state anti-trust laws. He said he doesn't discuss his prices with other pharmacists at all, noting they have been told by insurance companies they would be taken to court if they did. CHAIRMAN ROKEBERG said the committee would look into that further, noting he was sure buying networks existed elsewhere. MR. WHITE injected he had misunderstood. He stated there are cooperatives allowing them to pool their purchasing ability, but he said even then they still could not get the optimal rates nonprofit hospitals and government can obtain. He indicated he would check into the "any willing provider" state laws regarding pharmacy Chairman Rokeberg had mentioned. Number 1248 CHAIRMAN ROKEBERG confirmed there was no one who wished to testify via teleconference from Fairbanks at that time. Number 1278 DEBRA DUMMANN, Member, International Brotherhood of Teamsters Local 959, testified next via teleconference from Anchorage. She stated she is a member of the International Brotherhood of Teamsters Local 959, a consumer and a mother. Ms. Dummann spoke from a prepared statement: I am concerned after reading House Bill 300 that the Act which says the Preferred Provider Arrangement may be legislated away. I'm a 24-year union member of Teamsters Local 959. I've participated in our union/employer negotiations, have been on the Teamsters Health and Welfare Task Force Committee for 3 years, along with some other 15 members from around our state. I was recently asked to participate in a parent advisory board at one of our local hospitals. My husband and I were recently elected to share one board position for the National Mucopolysaccharide Society [MPS Society] which is the group of disorders of which our youngest son suffers from. However, put all that aside, I feel that my greatest knowledge in the health care field comes from being a mom. I am an informed, aware consumer and must oppose your HB 300. I also feel that our 5,000 plus statewide Teamster Union members are informed consumers and they all have a voice to express their questions or concerns when it comes to using PPOs. Our task force members, as well as shop stewards work in the trenches with their fellow members on a daily basis statewide. If their questions, concerns or opinions by which the task force member or shop steward is unfamiliar, these members can phone their business agents, the local trust offices or continue up the ladder. The members' comments are listened to and acted upon accordingly. As an example, our Trust discontinued using an insurance provider in 1996 because of poor service, but more importantly because of the concerns that were raised by our members. The task force was formed to look into these important health issues and we mailed some 5,000 questionnaires, statewide, to our members. We were shocked and amazed to receive over 3,500 informative questionnaires back. These respondents didn't hold back, and yes, they participated in obtaining a new insurance provider. Because of this, I know that our statewide membership has a voice which is a valuable tool when it comes to our union negotiating with our employers to save 'me the consumer' money. The negotiated PPO arrangements, which I am familiar with, are negotiated to obtain a higher level of care for less money. Makes sense. However, if this negotiated arrangement is legislated away, that will result in higher costs to our Welfare Trust, our employers, employees and passed down to our families. An even worse scenario would be higher costs, with reduced coverage. Instead our union has been on track to keep the rising costs of health care down and to provide the utmost in quality care that our members deserve. However, as I'm writing this - reading this, I guess - I can see the issue goes even beyond being a Teamster. What about retirees in general that have other insurance and their own negotiated PPOs? These are people who lived on fixed incomes. How can you legislate away their PPOs? How can you contain their costs? Who is going to look out for them? The PPO arrangements at least have a negotiated cost fixed for a specific period of time to edge out the continuous rise in health care costs. Last but not least, I'm disappointed at the notion that I am trading chip in the insurance world and I continue to oppose HB 300. I do have a choice. We all have a voice. CHAIRMAN ROKEBERG said he would recess the hearing on HB 300 for a moment to take up another order of business. HB 304 - MOVE LEGISLATURE TO ANCHORAGE Number 1473 CHAIRMAN ROKEBERG announced the committee would briefly take up HB 304, "An Act relating to the location of the convening of the legislature in regular session; repealing provisions relating to student guests of the legislature; and providing for an effective date." Number 1495 REPRESENTATIVE COWDERY made a motion to move HB 304 out of committee with individual recommendations and the attached fiscal note. There being no objection, HB 304 was moved out of the House Labor and Commerce Standing Committee. HB 300 - ALASKA PATIENTS' BILL OF RIGHTS Number 1519 CHAIRMAN ROKEBERG announced the committee would return to the public hearing on HB 300. Number 1529 SHELBY STASTNY, Chief Financial Officer, NANA Regional Corporation (NANA), testified next via teleconference from Anchorage. He spoke from a prepared statement: In a recent study it was determined that NANA accounts for 2,000 jobs and $80 million in annual payroll - all within the state of Alaska. Now, NANA is a self-insured organization and so the provisions of this bill won't necessarily affect directly NANA, but we believe that it will affect ... significantly the ability of others in the economy, and indirectly us through the lessened competition. In order to stay competitive and continue to be a strong positive economic force in the community, it's imperative that we and our other businesses seek ways to control costs. NANA is also an employer that cares about its employees. Many of our employees are in positions that do not require high levels of education or experience, thus are not at the top of the economic pay scale. We continually seek ways to provide benefits for our employees to improve their quality of life, while still remaining competitive in our low margin businesses. As health care costs have risen in the last few years, it's been tougher and tougher to meet our desire to provide reasonably priced health coverage for our employees. A group of our managers, along with our insurance consultants, have worked for the last several months to provide health coverage to the families of more of our less highly compensated employees while remaining competitive to our customers. Effective April 1, in less than two weeks, we begin our new program. A larger number of our employees' families will have coverage because it will be more affordable. An integral part of our ability to provide this coverage has been our ability to hold down hospitalization costs through the use of a preferred provider network of hospitals. As a purchaser of medical services, our cost will be reduced significantly by a volume purchase agreement arranged through our insurance administrator. Virtually all hospital service providers in Alaska were given the opportunity ... to participate, however, not all responded. Our employees are not required to receive services from the preferred providers. They are free to choose the provider of their choice. If, however, they choose another provider, it's gonna cost NANA more money, since we do not have the discount arrangement. As an incentive for the employee to utilize the service that will cost NANA the least amount of money, the employee pays a higher share of the cost in a non-preferred hospital. There is no credible evidence that the preferred hospitals provide a lower quality of service. We object to the passage of HB 300 since it interferes with ours and other businesses' right to appropriately manage health care costs and provide the highest level of health care service possible for our employees at a reasonable cost. Number 1691 REPRESENTATIVE COWDERY asked if Mr. Stastny knew of anyone who had been hurt by the present system. MR. STASTNY replied not to his knowledge, but said he was not an expert in the area. Number 1704 CHAIRMAN ROKEBERG commented, "But Shelby, as ... one of my former accountants, you'd say that the cost containment benefits of a - a contractual relationship you've entered into is - is beneficial, is that correct?" MR. STASTNY replied it would save them hundreds of thousands of dollars a year and these savings have allowed them to cover more of their employee families. He noted NANA has always covered the employees themselves. Number 1736 REPRESENTATIVE RYAN commented "what seems to be the hook in this thing" is there is no determination of the value of the benefit package. He stated, "It's given as compensation to compete in the job marketplace, to hire people, but nobody puts value on it for the employee." Representative Ryan mentioned three possible different benefit levels - "first class," "ordinary-type," "in the back door" - and said he thought perhaps they needed look at tightening that up in statute that these benefit packages were part of compensation and people had a right of legal recourse receive the value of that compensation. MR. STASTNY said he guessed that was one way of looking at it, noting NANA provided its employees with the knowledge of what it cost NANA to provide the employees' benefits. REPRESENTATIVE RYAN said he understood, noting the employees just have to be able to receive that value when they went use that benefit. Number 1800 CHAIRMAN ROKEBERG checked again to see if anyone was on teleconference in Fairbanks. There being no reply, he confirmed there were no other teleconference sites with witnesses waiting beside Anchorage. Number 1815 TOM TIERNEY, Director, Employee Relations, Municipality of Anchorage, testified next via teleconference from Anchorage. He commented the municipality has approximately 2,900 employees covered; there are approximately 8,000 total lives including spouses and children. In 1997, the city's claims were in excess of $16 million of which inpatient hospitalization was $5.7 million, out-patient medical services were $7.5 million, prescription drugs were $0.5 million, dental care was $2.3 million and vision care was $0.4 million. Mr. Tierney said the municipality has had rapidly escalating cost increases over the past many years, like most other businesses in Anchorage, in Alaska and throughout the country. In the face of this problem the municipality had, before he got there, taken many actions in attempts to mitigate those increases. In 1987 the municipality began utilization review. In 1990, utilization review began for mental health care. In 1991, the municipality instituted the joint cost containment committees with its bargaining groups. In 1993, the municipality approved AETNA's use of a PPO as a cost containment tool. He said equally important during this period was that the municipality had a continuing and intensive review of plan design, including level of copayments and deductibles. In short, he said, the municipality had left no stone unturned in its attempts to control its medical costs. He said that, unfortunately, costs have risen, and as costs rise they have to be borne by someone, either the municipality's employees or its taxpayers. He stated, "Make one thing clear, on our system they're not paid by the insurer carriers. I think the insurance carriers -- I'm not gonna defend them here today, but the cost of increased medical care are not borne by the insurance carriers, they're borne by taxpayers and by employees. The responsibility for the health care of our employees is one we take seriously and it's a very personal matter for each of us, but it's also a business and that brings us to the present legislation." Number 1970 MR. TIERNEY stated the municipality feels it is essential to continue to have the ability to negotiate with providers of health care on behalf of its employees in order to achieve the maximum value for the employee and the taxpayer's health care dollar. Mr. Tierney said the legislation would severely restrict the municipality's ability to do this and, therefore, the municipality opposes HB 300. He commented on the well-known benefits of using purchasing power to negotiate better deals and said restricting municipality's ability to do this shifts the balance of power in favor of the health care providers and against individual users of their services for those employees of the municipality. He stated HB 300 is called a patients' bill of rights. If it results in increased costs to consumers, and they think it will, then it will be an empty bill of rights. He said there could be no question that certain of the rights of the municipality's employees had been restricted but medical costs would bankrupt every employer and government entity in the state if left unchecked. Mr. Tierney stated the municipality's employees understood this and complaints about the municipality's PPO had been almost nonexistent. He noted they did not think this was an area which needed to be fixed. Number 2045 CHAIRMAN ROKEBERG noted the committee had Mr. Tierney's March 6, 1998, letter but asked him to provide that additional report. MR. TIERNEY replied he would. CHAIRMAN ROKEBERG confirmed the municipality uses an insured PPO but is not self-insured. Number 2066 MR. TIERNEY agreed, noting the municipality was not totally self- insured; there was an insurance component of its plan. He said the employee has a choice on some of the municipality's plans, noting they could go with a non-PPO option which cost the employee more and he said it is not a very popular option. CHAIRMAN ROKEBERG asked whether there is a list of physicians or if an employee was assigned to specific providers. MR. TIERNEY replied that the PPO is with respect to hospital care and he confirmed the employees could select their own physicians. Number 2126 REPRESENTATIVE COWDERY asked if a municipal employee covered by another plan could waive the municipality's coverage and receive additional financial compensation. MR. TIERNEY replied that the question did not come up because the municipality's coverage covered so much. REPRESENTATIVE COWDERY said he is covered under the municipality's plan and has waived coverage available to him in Juneau with the state. Number 2204 CHAIRMAN ROKEBERG asked if the municipality's PPO was with "Providence" or "Alaska Regional HCA Columbia" [Columbia/HCA is the parent company of Alaska Regional Hospital, recently renamed from Columbia Alaska Regional Hospital]. MR. TIERNEY answered with "Providence." CHAIRMAN ROKEBERG asked if that meant the municipality employees could not go to "Alaska Regional HCA Columbia." MR. TIERNEY answered in the negative, indicating he knew of some employees who choose to go to Alaska Regional Hospital. Speaking from personal experience, he said the municipality has made special fee arrangements neutralizing the adverse effect of going through the PPO. He said he has been told this was no longer being done, but knew it had been done in the fairly recent past. Number 2266 CHAIRMAN ROKEBERG asked if he had ever considered that the municipality was exempted by ERISA from any state mandates generated by the legislature because it is a large group. MR. TIERNEY replied, "We're not, sir, at least we don't think so. The municipality did not believe it was exempt. The mandates, interestingly enough, always seem to cost us more money ... which is interesting in the sense that many of our collective bargaining agreements are, like, four-year agreements so the costs have to be -- you normally have caps with a sharing above that for collective bargaining groups." Number 2333 REPRESENTATIVE RYAN observed that with 250,000 people in Anchorage and 2,900 municipal employees, there is 1 employee for every 86 people. He asked Mr. Tierney if that makes him comfortable and gives him some security. MR. TIERNEY stated, "Their health care needs are well-cared for, sir." TAPE 98-34, SIDE A Number 0014 QUINN McKENNA, Operations Administrator, Providence Health Systems in Alaska, testified via teleconference from Anchorage. He stated Providence Health Systems in Alaska opposes HB 300 and he encouraged the committee not to pass it. They believe it would increase health care costs for the community, limit choice of the number of insurance plans available to the community and decrease competition. He said he agrees with other testimony provided, indicating other states have addressed the issue of "any willing provider" legislation and that he does view HB 300 as "any willing provider" legislation. He noted "any willing provider" means any patient can go to any provider and that is exactly what HB 300 provides for. Mr. McKenna indicated Montana passed an "any willing provider" bill in 1991 and then let it sunset in two years. He said Montana asked the United States of America Federal Trade Commission (FTC) to give the state an opinion on its legislation which Mr. McKenna noted was very similar to HB 300. He quoted from the February 4, 1993, letter to the attorney general of the state of Montana from the FTC, "By preventing PPOs from limiting the panel of providers the law discourages contracts with providers in which lower prices are offered in exchange for the assurance of higher volume. Although the law may be intended to assure consumers greater freedom to choose where they obtain services, it appears likely to have the unintended effect of denying consumers the advantage of cost-reducing arrangements and limiting their choice in the provision of health care services. The commission has observed that competition among third party payers and health care providers can enhance the choice and availability of services for consumers and can reduce health care costs. In summary, we believe that 'any willing provider' requirement may discourage competition among providers, in turn raising prices to consumers and unnecessarily restricting consumer choice in prepaid health care programs without [Mr. McKenna commented he emphasized the next point] providing any substantial public benefit." He stated FTC's primary purpose is to prevent unfair methods of competition and it is the FTC's opinion that legislation like this would increase costs, decrease competition and limit choice. Number 0230 CHAIRMAN ROKEBERG noted that letter was in the committee members' packets due to Mr. Reinwand's efforts. He indicated the committee would next hear from Mano Frey. THE TELECONFERENCE MONITOR at the Anchorage Legislative Information Office (LIO), informed the chairman that Mr. Frey would be return for the Monday, March 23, hearing. Number 0280 GREG STOKES, Administrator, Alaska Electrical Trust Fund, Health Care Cost Management Corporation of Alaska, testified via teleconference from Anchorage. He said his organization provides benefits for the International Brotherhood of Electrical Workers (IBEW), statewide. He noted they are a member of the Health Care Cost Management Corporation of Alaska, which has approximately 19 members. Plans represented are mainly in the construction industry and they represent over 30,000 households in Alaska. Mr. Stokes said they oppose HB 300 and agrees with previous speakers who testified against the bill. The legislation would greatly limit their ability to exercise cost containment efforts. He thanked the committee for allowing him voice his concerns. CHAIRMAN ROKEBERG asked what the purpose is of his organization. MR. STOKES responded that they are a health care cost coalition that collectively negotiates PPO discounts. CHAIRMAN ROKEBERG asked if his business and the other businesses are just under one umbrella organization for the purpose of negotiating a single contract with a single PPO provider. MR. STOKES responded in the affirmative. Number 0424 BRUCE GALE, Account Executive, Willis Corroon Corporation of Anchorage, was next to testify via teleconference from Anchorage. He informed the committee his business is an insurance brokerage and health care consulting firm. Many of their clients are corporate clients who are their employers. Their clients purchase health care services through the purchase of employee benefit plans, some of which are insured and some of which are self- insured. Mr. Gale said he would like to indicated their displeasure with HB 300. In their opinion, the employer comes to Willis Corroon Corporation of Anchorage and asks them to reduce health care costs. He explained there are basically three alternatives. Mr. Gale said they can reduce benefits, pass on more of the employer's costs to the employee or they can use managed care techniques to drive down the cost of claims by virtue of agreements that will include discounted costs from providers. Mr. Gale stated that HB 300 will eliminate the possibility of the use of managed care in any way, shape or form on insured contracts. He said they also believe that even though it will not affect self- insured clients, the elimination of the possibility of using managed care in the insured market is going to hinder efforts to establish managed care plans in the Alaskan economy. CHAIRMAN ROKEBERG asked Mr. Gale what the nature is of his business. MR. GALE stated they are an independent brokerage and consulting firm. He noted they would work with all licensed insurers in the state of Alaska. CHAIRMAN ROKEBERG asked Mr. Gale how many underwriters he works with that writes individual health policies in the state of Alaska. MR. GALE responded that they work with Blue Cross and United Omaha. CHAIRMAN ROKEBERG asked how many other underwriters they have for property, casualty, et cetera. MR. GALE said he couldn't answer that question as he works exclusively on benefits. Number 0600 CHUCK O'CONNELL, Business Manager, Alaska State Employees Association (ASEA); American Federation of State, County and Municipal Employees (AFSCME), testified via teleconference from Anchorage. He stated he strongly opposes HB 300 and is speaking on behalf of 7,500 members in the general government bargaining unit. He said it is the policy of the state of Alaska to engage in competitive bidding in an effort to extend the state's resources in a way that is fiduciarily responsible. Mr. O'Connell stated HB 300 would remove competitive bidding from the health care industry. He referred to Section 21.42.390 (b) and said it seems that it would preclude insurance companies from having a maximum level of benefits. The language says you cannot terminate benefits for any reason. He said, "If somebody has a $1,500 maximum on a dental plan, you might have just quadrupled that." Mr. O'Connell informed the committee members that he is also opposed to Section 21.42.390 (c)(1), which has to do with directly or indirectly reimbursing a covered person at a different rate because of the person's choice of provider. In the state of Alaska, they do not have preferred provider agreements with their medical benefits. The NYLCare plan has not yet consummated any preferred provider arrangement. He pointed out that the only place they are really available is in Anchorage. Mr. O'Connell referred to the opening testimony on the bill which made reference to preventing HMO abuses and stated there aren't any HMOs so there aren't abuses. If the legislation is passed, it would destroy any opportunity to manage health care costs in Alaska. He respectively asked that the committee members all vote to kill the bill. Number 0814 CHAIRMAN ROKEBERG said, "Mr. O'Connell, as the executive director of the largest government employee union in the state, do you think if you were involved in negotiations with the state of Alaska - if they were to offer you a choice of a lower cost PPO type plan, vis- -vis a self-insured NYLCare fee for service plan - what do you think your membership would prefer to have?" MR. O'CONNELL stated he doesn't think it makes any difference. He said they have two very good hospitals in Anchorage. If one hospital were to agree to provide a level of service at one rate and the other hospital does not, he wouldn't have a problem encouraging the members to go to where they'll receive the best level of benefit. Mr. O'Connell stated they have experienced significant health care claim cost increases and they are looking at trying to get into preferred provider arrangements. If they do so, it will save about $4 million in the general government unit in terms of the state's premium costs. If that is done statewide, it could save about double that amount. CHAIRMAN ROKEBERG said, "If NYLCare could figure out how to write a check in a timely fashion and/or there was another third party provider for the state's self-insured plan, if that particular provider could arrange for a PPO style contract, you believe that your union members - because of the cost containment measures in savings - would prefer to go along with that? Like, for example, take a cut in their cost of their medical benefits in order to offset and increase their regular pay. Would that be a fair assessment?" MR. O'CONNELL stated that health claims have a fiscal note. If health claim costs are increasing at a very high rate - it is currently about 7.5 percent to 8 percent, there are very few options. One option is to pay more money for insurance. The second option is to negotiate preferred provider agreements. He referred to the first option and said it would increase the cost to the employer and/or the employee, or both. He stated that HB 300 would hurt the 100 largest employers in the state of Alaska. It would have a disastrous effect on them. Number 0992 REPRESENTATIVE RYAN said, "Don't you, as a strategy when you're negotiating for your members, and you fit an impasse as to what hard money you can get, isn't the next strategy to go for a better benefit plan to try to bring home a little something more to present to the membership for ratification?" MR. O'CONNELL responded that is a strategy, yes. There is pretax benefits and post-tax benefits. CHAIRMAN ROKEBERG asked if some of the bargaining groups have a problem with the state's contract because they failed to anticipate the increase of costs, and therefore, there is an issue about who is paying for what because of a cap that was bargained for. MR. O'CONNELL responded that they are engaged in a major dispute with the state. That dispute comes out of a situation where the state wasn't paying its full premium costs and they underpaid the premium over a period of time. He said, "As far as we're concerned, they owe about $3.36 million to the plan." Number 1079 JAMIE SLACK, Officer, VECO Corporation, was next to testify via teleconference from Anchorage. He informed the committee members that he is responsible for employee benefits for the company. As stated earlier, there really are only three choices in this matter as it relates to cost. You either absorb the cost and go back to the provider to try to negotiate discounts, pass the costs on to the employees or reduce the benefits. Mr. Slack stated that is the struggle VECO Corporation deals with every year in regards to increasing costs. Last year, they had to ask for a 25 percent increase on the level that their employees are paying for their health insurance because VECO Corporation was in a position where they didn't want to have to turn back benefits. Mr. Slack stated VECO Corporation is against HB 300 as they feel there isn't an advantage to it. He agreed with previous comments against the bill. CHAIRMAN ROKEBERG asked Mr. Slack if they have a dental plan. MR. SLACK responded in the affirmative. CHAIRMAN ROKEBERG asked if employees can select their own dentists. MR. SLACK responded they can select their own dentists as they don't have a PPO with dentists. He noted the only PPO provision they have relates to hospitalization. CHAIRMAN ROKEBERG asked who underwrites their PPO. MR. SLACK responded that they are a self-insured program, but the program is funded through Great West. He noted their broker is Willis Corroon of Anchorage. CHAIRMAN ROKEBERG said they're a third party administrator and VECO Corporation is self-insured. MR. SLACK responded, "Yes, to a certain limit." Number 1166 CHAIRMAN ROKEBERG asked if they are exempt from ERISA requirements. MR. SLACK informed the committee members there is some argument about the real interpretation of that because there is eventually an insurance layer in there. He said their feeling is that whether they are exempt or not, they certainly feel that competition is what built the United States and Alaska, and to be in a position where competition would not be allowed in the medical arena would do nothing but increase costs and eliminate the quality of care. Number 1226 JIM CASE, Pediatric Dentist, testified via teleconference from Anchorage in support of HB 300. He informed the committee members of several organizations that he is a member of, and noted he was the first pediatric dentist in Alaska in which there are now nine pediatric dentists. Dr. Case said, "I have a general feeling here after listening to much of the testimony that what we may be facing here is a case where dentistry is sitting over on the side and decisions are made in health case on the basis of what happens over in what we call 'medicine.' And those filter over into the little dentistry corner and create all kinds of problems for patients and for the profession. I do know of people who I think have been hurt by the current system. To echo a question I heard asked, 'Who has been damaged?' Well I believe that some kids have damaged who have stayed with dental practitioners and not been referred to specialists because that's what their plan said need to happen, or there was an economic disincentive to their parents. The general dentist wanted to refer to me (indisc.) specialist, but the parents were at an economic disadvantage in their plan to follow up on that referral. I don't believe that the -- or (indisc.) the parent was damaged because they did follow up on the referral but it cost them more. So their pocketbook was damaged where if -- or a certain procedure that an insurance company was providing 'X' amount to whatever willing provider there was, the patient and parent would have had the freedom. I don't believe the Alaska people want to give up their economic and regulatory rights to choose a practitioner just so that employers can do the volume negotiation that we've been hearing about." CHAIRMAN ROKEBERG thanked Dr. Case for his testimony. MR. CASE said he had something else to say. He stated from his view as a specialist, he thinks people are often not aware that as a specialist, many specialists can do treatment cheaper than the general dentist. Dr. Case said specialists often knows how to handle situations with less treatment. They can do it faster and more efficiently with lower overhead because of their experiences of doing that. He stated he is not a referral specialist as most of his clients come out of the population by word of mouth from patients. Number 1415 CHAIRMAN ROKEBERG asked Dr. Case if he has had an experience where he has had patients that may have wanted to come to him, but have not because of the way their insurance is structured. DR. CASE responded in the affirmative. He added that he has had patients who have delayed coming to him, but eventually came to him. He said patients have told him they wished they had come a lot earlier. CHAIRMAN ROKEBERG asked Dr. Case if he is aware of other types of insurance policies that apply to the practice of dentistry that usually provide over $1,000 or $2,000 worth of case per year. DR. CASE responded, "No, you're talking what covers almost all, if not all, plans. That's the arena we're talking about here in dentistry." CHAIRMAN ROKEBERG stated he doesn't understand why there are restrictive elements here when there is almost very little disincentive or incentive to move one way or the other unless you have a PPO situation where you're given greater levels of care as a benefit within your contract or within you're plan. He said he isn't sure how HB 300 will impact dentists. DR. CASE said, "Say the service costs $125 and if that preferred provider -- the company will pay $110, and in my office they'll pay $70. It's not a large amount, but it's an amount that people will make their decisions on." Number 1599 DAVID LOGAN, President-elect, Alaska Dental Society, came before the committee members to give his testimony. He informed the committee members that he is a practitioner in Juneau. Dr. Logan stated HB 300 is a patient rights bill. Patient rights are what people should have regardless of what type of insurance coverage they have. They should have the right to choose who they seek for their health care. They should have the right to know who is reviewing their health care and what their qualifications are, and they should have the right, if they choose, to see somebody, a health care provider, to be paid at the same rate, regardless of who the choice is. Dr. Logan pointed out that there has been a great deal of testimony regarding costs and how, if the bill becomes law, costs are going to increase. He stated he protests that, he does not believe that and believes it is completely totally false. He referred to the testimony that PPOs will die if the bill is passed and stated they will succeed very well and there are very good reasons why PPOs will succeed. He said, "If you have a PPO, all we're asking is that no matter who you see, you get paid the same amount regardless of whether you're participating in the PPO or not. For the patient, I think that is a very valuable right. If the patient chooses to see a provider outside of the PPO network, they will have increased costs. They will have to pay the difference, if there is any, between what the PPO will reimburse at and what the provider will charge. That isn't always the case that there is a difference. I can speak to a dental plan, United Concordia (ph.). For instance, their fee schedule under their PPO network, of which I am not a provider, is about 125 percent, for the most part, of what my fee schedule is. However, if one of my patients is participating in the United Concordia, (indisc.) they get paid at 80 percent of my rate, not the rate that they would normally be reimbursed at if they see a provider within the United Concordia network. PPOs will not go away on this, people will not lose their bargaining power. If there is nothing to prevent employers from negotiating rates, the only difference here is that when a patient goes to somebody who is participating in a PPO or does not go to somebody who is participating in a PPO, they will receive the same reimbursement from the insurance company. The difference is they will pay extra possibly to see somebody outside the PPO network." Number 1749 DR. LOGAN explained the bill will not set a rate for any plans. He pointed out that Blue Cross, AETNA, et cetera, does not pay at the same rate within all their plans. The insurance companies will set the rates and reimbursement according to what they set for premiums. It is a (indisc.) that they turn, they turn it up forward when they pay more on their premiums, they pay less under other plans. It's a negotiated benefit depending upon the particular plan you sign up for. DR. LOGAN stated HB 300 would not affect self administered plans. There seems to be a giant misconception out there that if the bill passes, it will somehow affect what is happening with ERISA plans. It will not. There is pending national legislation, the Parker bill, that could possibly affect that but at this time there is nothing. He thanked the committee for listening to his testimony. Number 1809 REPRESENTATIVE COWDERY asked Dr. Logan if all the dentist rates are on the same level. DR. LOGAN indicated he didn't have that knowledge. He noted there was an article in the Juneau Empire last year which discussed some dental rates in Juneau and there was a huge spread. He said he believes that he was one of the lowest. REPRESENTATIVE COWDERY asked Dr. Logan that because he was one of the lowest, does he think the quality of his service is any less than anybody else. DR. LOGAN said he doesn't believe that. He stated he charges what he feels is a fair fee for the service he provides. It is based on the time it takes him, the materials he uses and the time that it has taken him to acquire the knowledge to deliver that care. It is not based on any sort of pre-mandated profit margin. REPRESENTATIVE COWDERY asked Dr. Logan if he makes a profit. DR. LOGAN responded that he does. Number 1867 CHAIRMAN ROKEBERG said it seems to him that the disparities between what is typically written in a dental insurance plan in the state of Alaska is really minor. He asked if that is a fair assumption. DR. LOGAN stated he believes that there is similarity between most of the plans, but there is still a wide range. There are some plans that are fairly minimal plans. They'll cover some of the basic preventative services, but are minimal for restorative or none at all. There are some more traditional plans that will have a cap at $1,000 or $1,500. Occasionally, there is a cap of $2,000, with a sliding rate fee depending on the services provided. Number 1922 CHAIRMAN ROKEBERG said, "If you have a heart bypass, you're going from $35,000 to $60,000. There was not one doctor here today and there was a letter from AMA [American Medical Association]. Are the dentists the stocking oars here for the medical profession? Or why are you not advocating for a dental only type (indisc.).: DR. LOGAN stated he can only speak to the dental end of things. He is not a physician, he has minimal contact with hospitals, he doesn't know the inner workings of hospitals. Dr. Logan said he cannot say what the physicians or hospitals are feeling. He said he can only speak to the dental end of things. Dr. Logan asked the committee to move the bill out of committee. He noted that in speaking for the General Executive Council of the Alaska Dental Society, they support the bill in its present form and urged it be passed. If the committee has problems with the present form, he would ask that the committee members make whatever changes are necessary to move the bill out of committee. CHAIRMAN ROKEBERG said it seems that there would be a better opportunity for movement of the bill if it was more dental specific. He asked Dr. Logan if he discussed that with his colleagues. DR. LOGAN explained it has been a general topic of discussion. It seems there is relatively broad-based support without the health care providers. It is a global bill and perhaps some parts of it may not be as appropriate for medicine and hospitals as others are. Number 2120 JERRY REINWAND, Lobbyist, Blue Cross of Washington and Alaska, was next to address the committee. He said, "The effect of the bill is really any one provider. I mean whether that was the intent or not, that's the effect of the bill." Mr. Reinwand stated he can assure the committee members that the director of the Division of Insurance reviews all the rate filings. He said Blue Cross of Washington and Alaska actually is audited substantially. Mr. Reinwand said he doesn't think that there are political excess profits being garnered by insurance companies, at least not under the current director. He referred to rates of pay and said there 600 pages in the insurance statute. Mr. Reinwand said, "I frankly wish it were true, I wish the insurance industry had written a code. It would look a lot different than it does now. We haven't -- you can see what happened on -- just some of our concerns about unfair discrimination that hasn't been addressed, it still continues to be an issue. So there are lots of things that can be regulated that were talked about that really had nothing to do with this bill. It (indisc.) any willing provider bill. Again, I'm not saying that's the intent of the author, but that's the effect of it and we have serious concerns about it. I got lots of paperwork I could give you, but I won't bother you today, we can come back to that tomorrow. And Mr. Chairman, I'd like to say I think you hit on an important point looking about what's available out on the market. These kinds of controls apply to a smaller and smaller and smaller segment of the population of Alaska over time simply because so many people are going self-insured to get away from this kind of stuff. So you hit on a very good point and we'd like to participate in that discussion when you come back to that." Number 2203 CHAIRMAN ROKEBERG inquired whether anybody from Blue Cross of Washington and Alaska would be available to testify at the next meeting the following Monday. MR. REINWAND indicated there would be somebody available. CHAIRMAN ROKEBERG stated that there is information in the committee packet which includes the rate structures of the two different types of plans that Blue Cross of Washington and Alaska is currently offering in Alaska. He asked Mr. Reinwand if one of the plans is PPO type of a plan. MR. REINWAND said that could be true. He noted he hasn't seen the package of information that Chairman Rokeberg is talking about. CHAIRMAN ROKEBERG stated he is concerned because of the change of percentages of payments into the CHIPRA which is actually their only source of information that we've been able to identify. He pointed out that in 1996, Blue Cross of Washington and Alaska had approximately 35 percent of the market. He said he is curious as to what happened in 1997. He said he would like to know the shift of their business between the number of individual policies written versus group. Chairman Rokeberg said he would like to be made aware of any name and financial changes in their prospects for servicing the people of the state of Alaska. MR. REINWAND indicated there would be people available to testify regarding the questions Chairman Rokeberg had. [HB 300 was held over.] ADJOURNMENT CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee meeting at 6:00 p.m.

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