Legislature(1999 - 2000)
02/16/2000 03:25 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 16, 2000
3:25 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative Andrew Halcro, Vice Chairman
Representative Lisa Murkowski
Representative John Harris
Representative Tom Brice
Representative Sharon Cissna
Representative Jerry Sanders
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 211
"An Act relating to liability for providing managed care
services, to regulation of managed care insurance plans, and to
patient rights and prohibited practices under health insurance;
and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 314
"An Act clarifying the requirements for limited liability
companies and partnerships to qualify for the Alaska bidder's and
disability preferences under the State Procurement Code; and
providing for an effective date."
- HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE
PREVIOUS ACTION
BILL: HB 211
SHORT TITLE: MANAGED HEALTH CARE INSURANCE
Jrn-Date Jrn-Page Action
4/22/99 914 (H) READ THE FIRST TIME - REFERRAL(S)
4/22/99 914 (H) L&C, JUD, FIN
5/10/99 (H) L&C AT 3:15 PM CAPITOL 17
5/10/99 (H) HEARD AND HELD
5/10/99 (H) MINUTE(L&C)
10/22/99 (H) L&C AT 10:00 AM ANCHORAGE LIO
10/22/99 (H) MINUTE(L&C)
2/04/00 (H) L&C AT 3:15 PM CAPITOL 17
2/04/00 (H) -- Meeting Canceled --
2/16/00 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 314
SHORT TITLE: PROCUREMENT PREFS:PARTNERSHP/LTD LIAB CO
Jrn-Date Jrn-Page Action
1/24/00 1987 (H) READ THE FIRST TIME - REFERRALS
1/24/00 1987 (H) L&C, JUD
1/24/00 1987 (H) ZERO FISCAL NOTE (ADM/ALL DEPTS)
1/24/00 1987 (H) GOVERNOR'S TRANSMITTAL LETTER
1/24/00 1987 (H) REFERRED TO LABOR & COMMERCE
2/16/00 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JANET SEITZ, Staff
to House Labor and Commerce Standing Committee
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801
POSITION STATEMENT: Explained changes made in HB 211, Version H.
JIM JORDAN, Executive Director
Alaska State Medical Association
4107 Laurel Street
Anchorage, Alaska 99508
POSITION STATEMENT: Testified on HB 211, Version H.
MIKE HAUGEN, Executive Director
Alaska Physicians & Surgeons, Incorporated
4120 Laurel Street, Number 207
Anchorage, Alaska 99508
POSITION STATEMENT: Testified on HB 211, Version H.
JACK MCRAE, Senior Vice President
Premera Blue Cross,
2550 Denali Street, Suite 600
Anchorage, Alaska 99503-2737
POSITION STATEMENT: Testified on HB 211, Version H.
JEROME SELBY
Providence Health Systems of Alaska
P.O. Box 1962
Kodiak, Alaska 99605
POSITION STATEMENT: Testified on HB 211, Version H.
RICHARD BLOCK
Christian Science Committee on Publication
for the State of Alaska
360 West Benson Boulevard, Suite 301
Anchorage, Alaska 99503
POSITION STATEMENT: Testified on HB 211, Version H.
VERN JONES, Chief Procurement Office
Division of General Services
Department of Administration
P.O. Box 110210
Juneau, Alaska 99811-0210
POSITION STATEMENT: Testified on HB 314.
JOE KENNEDY, Physical Therapist
for Dr. John Bursell
Alaska Physical Therapy Association
2583-3 Douglas Highway
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 211, Version H.
BOB LOHR, Director
Division of Insurance
Department of Community and Economic Development
P.O. Box 110805
Juneau, Alaska 99811-0805
POSITION STATEMENT: Explained fiscal note for HB 211, Version H.
ACTION NARRATIVE
TAPE 00-12, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 3:25 p.m. Members present
at the call to order were Representatives Rokeberg, Halcro,
Murkowski, Brice and Cissna. Representatives Sanders and Harris
arrived as the meeting was in progress.
HB 211-MANAGED HEALTH CARE INSURANCE
CHAIRMAN ROKEBERG announced the first order of business would be
HOUSE BILL NO. 211, "An Act relating to liability for providing
managed care services, to regulation of managed care insurance
plans, and to patient rights and prohibited practices under
health insurance; and providing for an effective date."
CHAIRMAN ROKEBERG indicated he would like to hear public
testimony on HB 211, recess to take up another bill, then
reconvene to hear further testimony on HB 211. It is not his
intention to move HB 211 from the committee today. There is a
good deal of interest in the bill, which has certain
controversial elements.
Number 0167
REPRESENTATIVE HALCRO made a motion to adopt the proposed
committee substitute (CS) for HB 211 [Version H, 1-LS0472\H,
Ford, 2/14/00].
CHAIRMAN ROKEBERG asked if there were any objections. There
being none, Version H was adopted as a working draft.
JANET SEITZ, Staff to House Labor and Commerce Standing
Committee, came forward to explain the changes in HB 211, Version
H. She noted there is an amendment to the title referencing
Alaska Rules of Appellate Procedure. This title change is
necessitated by a change in the bill that sets a limit on when a
suit may be filed after the final decision of the external appeal
agency. The next change is on page 3, line 10, which is the same
as in Version G that added working to describe days and some
binding arbitration provisions.
MS. SEITZ indicated that in the original bill there was a split
subsection 5, which included subparagraphs (A) and (B). She said
provision (A), dealing with utilization review, was added back
into Version H. In this provision, the time was changed from
three days to 72 hours. Working days do not include Saturdays,
Sundays or holidays. She explained that the medical necessity
language and "clinical trial" were reinserted. On page 6, the
language "including specific exclusions" was reinserted, and
language was added to update the formulary guide annually. In
Sec. 21.07.030, subsection (e), paragraphs 1 and 2, definitions
for "appropriate referral procedures" and "specialty care" were
added.
MS. SEITZ stated that Sec. 21.07.040 on page 8, lines 8 through
15, is identical to Version G. This section has two subsections;
one relates to confidentiality and the other relates to the
adoption of regulations by the director. Page 12, lines 4
through 5, includes language pertaining to the time limit on the
filing of an appeal of a final decision of an external appeal
agency.
MS. SEITZ explained that this is why the court rule exists in the
title. A new section is added (Sec. 21.07.060) on pages 12
through 14, relating to the qualifications of external appeal
agencies. This section adds that the director of the Division of
Insurance, Department of Commerce and Economic Development, will
provide a process for certification and periodic recertification.
It also adds that the director may establish fees for certifying
these external appeal agencies.
MS. SEITZ explained that in Sec. 21.07.250, beginning on page 12,
relating to definitions, the definitions of "clinical peer" and
"clinical trial" were added. Sec. 21.42.390, beginning on page
16, relating to required health insurance coverage provisions,
reinserts language from the original version of the bill that
lists what a health care insurance contract may not include in a
plan and that a health care insurer may deny health care payments
because a service is not medically necessary unless determined
otherwise by a licensed health care provider trained in that
specialty or subspecialty. This section also includes language
which states that an insurance company may not take action
against the insured when the insured asserts any rights provided
for in this legislation. In addition, a covered person may bring
civil action against the insurer to enforce the person's rights.
Definitions for "health care provider" and "health care services"
are also provided in this section.
MS. SEITZ noted that Section 5, page 17, lines 13 through 18, is
a new section providing for an indirect court rule amendment.
Section 6 on page 17 is a conditional effect; it only applies if
the court rule change passes. The effective date in the bill is
July 1, 2000, which is the same as in the original bill.
REPRESENTATIVE HALCRO asked who requested this bill.
CHAIRMAN ROKEBERG replied that it was requested by the Alaska
State Medical Association.
Number 0701
JIM JORDAN, Executive Director, Alaska State Medical Association,
came forward to testify on HB 211, Version H. He indicated he
had previously provided to Chairman Rokeberg a side-by-side
analysis between the original HB 211 and Version H. He noted
that the Alaska State Medical Association (ASMA) is pleased with
Version H for the most part. He said there are recommendations
contained in the comparison with respect to amendatory language.
He would not go into details, given the time limit and number of
testifiers. With him today is Mike Haugen, Executive Director,
Alaska Physicians & Surgeons, Incorporated.
CHAIRMAN ROKEBERG asked which letter is the comparison letter.
MR. JORDAN referred to a letter dated February 11, 2000, included
in the bill packet. He said:
I anticipate that you are going to hear some testimony
today in [regard] to what the costs impacts may be of
adopting some version of HB 211. There have been a
number of studies done regarding what the potential
costs impacts could be. And they frankly go all over
the ballpark. Last year in the original hearing we
provided testimony that included some of the evidence
from those studies.
I believe that one study which was done in [regard] to
the Texas version of this measure, which was passed in
1997, which is relatively similar to this, was
estimated to cost about 34 cents per month per insured.
I don't think that's a significant cost. Another
aspect that will no doubt be testified on is the
potential adverse impact in [regard] to the section of
the bill that allows managed care entities to be sued.
Again, I will refer to Texas. Their law became
effective in 1997. To date there have been five
lawsuits filed. And in a jurisdiction the size of
Texas I don't think that's a great number. And,
frankly, if there are entities that are making medical
decisions, it is the medical association's opinion and
most physicians' opinions in general that as physicians
are responsible for the medical decisions that they
make, so should these entities be responsible for the
decisions that they make.
This particular measure would allow these suits to take
place in state court. I would like to mention that I
think that this would be preferable to some of the
other venues for such lawsuits. As you may be aware
of, there have been class-action lawsuits filed against
various segments of the insurance industry. And these
are lawsuits that are essentially dealing with very
novel theories of liability that in essence would
circumvent all of the tort reforms that we've enacted
in this state. And it's a result that I wouldn't like
to see.
MIKE HAUGEN, Executive Director, Alaska Physicians & Surgeons,
Incorporated, came forward to testify on HB 211, Version H. He
explained that Alaska Physicians & Surgeons, Incorporated (APS)
is an association of 165 physicians in the Anchorage area. They
are an independent practice association (IPA). APS provides
different services to doctors, one of which is to act as an
intermediary between insurance companies and the physicians. He
commented:
I'd just like to thank you for the opportunity to
provide this testimony in support of HB 211. At any
given time, APS, my association, is in discussions with
between six to eight insurance carriers that would like
to do business in the state of Alaska. We have heard
rumors that one of the results of the passage of this
legislation may be that some of the larger carriers in
the state might decide to pull up shop and leave, but
they could not economically afford to do business in
this state.
Number 1033
I'm here to tell you that I talk to carriers every day
who would love to do business in this state, but
because of the economics of trying to penetrate this
market, it's prohibitively expensive for them at this
time to do so. The best way to address some of the
specific provisions of HB 211 is answer to the question
of why it's important is to ask some questions. Among
them are: Isn't the patient's best interest of managed
care contracts contain things like gag clauses which
bar physicians from informing patients about better
treatment options or a different type of health plan
that may cover a medical service that they need? Is it
in the patient's best interest to deny a patient a
point-of-service option whereby a patient could seek a
physician outside of the network, provided that patient
will one day pay the extra cost? Is it in the
patient's best interest to deny the use of a prudent
lay person standard for emergency room services?
I've heard anecdotal stories of these types of
contracts containing provisions that define emergency
whereby unless a patient is admitted to the hospital
it's not considered an emergency service. And I've
heard stories of doctors describing patients coming in
with, say ,a bone stuck in their throat. They're
choking to death. Well, the emergency people remove
the bone, the patient is discharged, and under that
kind of contract, that's not considered an emergency
service. Those are just ridiculous types of provisions
in contracts. A lay person standard would identify an
emergency as anything you or I consider to be an
emergency. If we had a child that was hurt and brought
it in to the emergency room, that's the lay person
standard. Is it in the patient's best interest to deny
a timely internal and neutral external appeals process
for denied claims based on medical necessity
determinations? And finally, who's in a better
position to determine what is medically necessary? Is
it a physician or a non-physician? In some of these
contracts, non-physicians make the determination. And
the list goes on.
HB 211, in our opinion, would standardize the
contracting process with third-party payers and remove
many of the most contentious contracting issues. It
would protect patients. It would give physicians a
feeling of operating on a much more level playing
field. And we feel that's just good public policy.
CHAIRMAN ROKEBERG asked if Mr. Haugen's organization, as an IPA,
would be considered a managed care organization and be subject to
the provisions of the bill.
MR. HAUGEN replied no. He explained that the contracts he
receives are predominately preferred provider organizations
(PPOs). If the bill is passed, the bill would require that the
language in those contracts include the provisions in the bill.
He would take the contracts and give them to his members. His
members would decide individually whether or not they want to
sign those contracts.
CHAIRMAN ROKEBERG wondered, "Your form of organization would be
in many jurisdictions besides Alaska?"
MR. HAUGEN stated that Alaska is unique. He noted that many IPAs
across the country administer capitated contracts whereby they
receive lump sums of money to handle a given population because
there are no health care management organizations (HMOs) in
Alaska.
Number 1238
REPRESENTATIVE HALCRO commented:
Mr. Jordan, you talked about there being an unsure
negligible cost incurred if this legislation's passed.
There's a letter in our packet that references [letter
dated 02/02/2000, from Jack McRae, Blue Cross/Blue
Shield of Alaska] a study done by Milliman & Robertson
with [regard] to the pending federal legislation and
some potential Washington State legislation. It says
that studies show that it has the opportunity to
increase premiums as much as 4 percent. In addition,
this would be on top of the 12 percent that the ...
Alaska state's health benefit consulting firm of Watson
Wyatt has projected. So that's a 16 percent increase,
conservatively, for the State of Alaska in health care
costs. Do you have any numbers that would refute that
or any opinion on that?
Number 1280
MR. JORDAN indicated he was not familiar with the studies. He
wondered if this was a study of the federal legislation.
REPRESENTATIVE HALCRO replied yes. He added, "In Washington
State. In addition, it seems that the state has retained a
consulting firm to look at their potential health cost exposure
on this."
MR. JORDAN responded:
First of all, there was a study done by William and
Mercer (ph), and that was provided you last year in the
State Medical Association's testimony. And I believe
that the range of costs in that were about 1.8 percent
to 2 percent. I believe also the Milliman and
Robertson study, I think, was somewhat predicated on
the federal Office of Budget and Management study. I
believe that one of the major assumptions made in that
study had to do with the cost associated with the
additional number of lawsuits expected under that
particular element that would allow managed care
entities to be sued for the medical decisions that they
make.
I believe ... - and I don't have this with me, but I
can get this information to you - that based upon what
the experience has been - for example, in Texas, as I
cited earlier, there were five cases - it would appear
that that assumption was greatly overstated.
Number 1370
REPRESENTATIVE HALCRO noted that Version H is similar to
legislation considered last year (HB 121) which eliminated PPO
options for dental coverage. He stated:
And part of the concern during the testimony at that
hearing was there wasn't really a problem. I mean,
this was a solution looking for a problem. Are you
telling me, with this comprehensive legislation, that
there are these specific problems existing now in
Alaska - with our people being denied coverage and
having not as good of quality of care, not being able
to sue when they've been misdiagnosed - are you telling
me that those currently exist here in the state of
Alaska?
MR. JORDAN responded that the problems exist in Alaska to a
certain extent. He explained that it varies. Managed care is a
continuum ranging from full-blown HMOs that own their own
hospitals to insurance contracts that include elements of managed
care. Some of the elements addressed in the bill have not been
experienced in this state. He thinks it needs to be viewed, to
some degree, as preventative medicine.
Number 1473
REPRESENTATIVE HALCRO referred to Mr. Jordan's comments regarding
the impenetrability of the market. He wondered if Mr. Jordan was
aware that over the last six years there has been a 53 percent
increase in the amount of licensed physicians. He noted there
has been a tremendous swelling in the pool of physicians, but
there has not been a corresponding increase in the amount of
health care providers. He is curious why people are not getting
quality health care.
MR. HAUGEN said he is not quite sure and asked Representative
Halcro to rephrase the question.
REPRESENTATIVE HALCRO said there are 20 pages of patients' bills
of rights and more doctors than ever. He imagines that health
care is not only available but readily available, and there
should not be any problems whatsoever. He does not understand
why the market is impenetrable when there is a huge base of
100,000 people being served.
MR. HAUGEN explained that when a new company comes into the
market, it incurs substantial marketing costs because it is
selling a product. In starting from scratch, it is like any
other business. If there are entrenched, well-established
carriers in Alaska who dominate a market, there has to be a
mechanism for the new carriers to feel that they can make a go of
it. He commented, "Under the current set of rules we're
operating under, and under the lack of provisions contained in HB
211, it is very difficult for these new carriers to get a
foothold in this state."
Number 1599
MR. JORDAN directed his comments to Representative Halcro:
You know, you said there was a 53 percent increase in
the number of physicians. Now, that could presume that
... before the 53 percent increase that there was a
sufficient number of physicians in this state. And I
don't know that that's the case. There may have been a
53 percent increase, and I don't doubt your statistics
at all, but it may be that that increase of physicians
was necessary in order to serve the population of this
state.
REPRESENTATIVE HALCRO said he understands that. He still
questions why a sweeping regulation is needed when there are more
doctors satisfying the demand. He stated:
Nobody is being excluded from coverage. That's what
I'm saying. And it seems to me that - ... as we
discussed earlier this afternoon - if you have
employers, ... their only means of providing coverage
for their employees is based on the ability to
negotiate with a carrier, thereby extending some
discount to the employer to allow them; it seems to me
that you would want that and you would want to foster
that, ... especially with more physicians than ever
practicing in this state. And it's kind of at odds.
... I would understand if we had a smaller pool of
doctors and you wanted to increase access for folks who
needed quality care, but there seems to be a sufficient
amount of doctors, as referenced by the occupational
licensing department, and so I'm curious with all this
supply out there and the demand to obviously go along
with it, why do we need this?
CHAIRMAN ROKEBERG said the issue relates to the choice of the
consumer and not the number of doctors in the state.
REPRESENTATIVE HALCRO said he understands that. He explained:
But it gets back to the root of my question, whereby
similar to the dentist bill, if you have a company or
mental health parry that we discussed last year, if you
have a company that can barely afford coverage for
their employees, as we discussed, 86 percent of the
businesses in this state are 20 or fewer employees.
So, if you have an employer who's barely hanging on and
can offer a health care package to their employees, why
would we not want to foster the ability to go out and
negotiate contracts, negotiate these PPOs, to at least
provide something for their employees? That's the
question.
Number 1725
MR. HAUGEN said he does not understand how Representative Halcro
thinks this bill would inhibit the ability to negotiate
contracts.
REPRESENTATIVE HALCRO said he thinks the bill is a cost driver to
the private-pay market. He is concerned about putting small
employers in a position where they will have to forego coverage
for their employees or eat the cost increase.
Number 1750
MR. JORDAN commented:
You have to understand that physicians are not the only
player in the health care market. The percentage of
the health care expenditures attributed to physician's
charges is about 16 percent, I believe. There are a
lot of other factors that drive the cost in the health
care market, technology being one. Would you want to
outlaw new technology because it may increase the cost?
I would venture the answer to that question is "No."
There are also brand-new pharmaceuticals that are
coming on the marketplace. Last year I believe there
were 166 new drugs that came online. The cost of
putting a new drug online is between $400 and $800
million, another driver in the market place. Another
driver in the market place, I'm a prime example. Look
at my gray hair. I'm part of that bulge in the python,
and as we age, we need more health services.... I can
personally attest to that, having had five surgeries in
the last year. So, I think there are a lot of other
drivers to the cost of health care that go beyond what
this bill may provide for, that are much more
significant, that we would not want to outlaw.
CHAIRMAN ROKEBERG said the issue revolves around the point of the
service option being a cost-driver per se. He indicated
Representative Halcro had brought up an interesting question that
elicits a need for an answer. He stated:
When you're talking about a presumed 1.8 to 2 percent
increase because of the bill generically, on one hand,
and then another party saying it could be as much as 4
percent, there's a difference there, 2 percent, which
is a substantial 200 basis points and the distinction
between what component of the point-of-service option
drives versus the amount of litigation, because you
made a distinction, Mr. Jordan, between the amount of
litigation and its resulting cost, and the amount of
point-of-service options or the choice provision in the
bill within a PPO. I would say that I believe the 12
percent increase that Representative Halcro is talking
about is the medical inflation cost, which is a push;
it's notwithstanding this bill or not, so this bill is
not going to cost 16 percent more. I mean, is that how
you took it, Representative Halcro?
REPRESENTATIVE HALCRO replied yes.
CHAIRMAN ROKEBERG said there is clearly some cost driver that
would be driven by this bill. He is curious about it and thinks
it is one of the key issues here. He explained that he would not
be sponsoring this bill if he thought it would drive costs up and
hurt small businesses.
MR. JORDAN referred to the point-of-service issue and stated that
the bill very clearly allows any additional costs required to be
paid by the insured patient. This would not necessarily directly
flow through the employer.
CHAIRMAN ROKEBERG answered, "That's everybody's Pollyanna that
it's going to cost more, and that's the issue. Having a point-
of-service option menu, does that really drive up costs?"
Number 1980
JACK MCRAE, Senior Vice President, Premera Blue Cross, testified
via teleconference from Seattle, Washington, regarding HB 211,
Version H. He noted that Premera Blue Cross is the holding
company for Blue Cross/Blue Shield of Alaska. He handles
government relations for the organization. He indicated that his
organization is not opposed to a patients' bill of rights
concept. He stated:
But we are very concerned about the language that's in
it and how it's drafted, and a lot of the concepts that
are in this bill. A prudent lay person, for example,
we support. The gag rule we support. Through the
National Committee for Quality Assurance (NSQA) and
through Blue Cross/Blue Shield association licensing
requirements, we support timely and accurately appeals
processes. So, there's a lot of this bill that we do
support.
Our concern about this piece of legislation is we want
to make sure that what does pass adds value to the
health care system and just doesn't add additional cost
... As you know, nationally the uninsured number is
going up substantially. It's over 50 million now. I
know in Alaska it's over the national average, but
that's a quirk, I believe, because you've got some
unique things in Alaska, but I think it is over the
national average.
And the other thing we're seeing throughout the whole
nation - and I assume it's paralleled itself in Alaska
- is more and more employers are dropping insurance
because the costs are just going up. So, what we're
concerned about is that anything that does pass ...
adds value to the health care system and doesn't layer
more administrative or more costs on the system without
bringing better health care to the consumer ...
There's a lot of parallel between this and what they
call the Norwood-Dingell Bill in Washington, D.C.
There's both a Senate and a House bill, and there's a
lot of overlap between; the language is similar. And
we were talking a minute ago about costs, and I agree
with Mr. Jordan that cost figures are all over the
place when it comes to legislation like this. But the
Congressional Budget Office just came out six days ago
with some cost estimates pertaining to both the Senate
bill and the House bill in Washington, D.C.
Like I said, the House bill is very similar to your
Alaska drafted bill, and they say the estimate they
have for the costs for the federal bill is 4.1 percent
increase in health care costs. And the Senate bill,
which doesn't have liability, it's not as expensive as
the House bill in Washington, D.C. It's a 1.3 percent
increase. But whether it's 1.3 or it's 4 or it's 2,
there's no doubt about it that this will drive the cost
of health care up, and that's what our real concern is,
without getting a beneficial return to the consumer in
all cases.
CHAIRMAN ROKEBERG asked, "What do you attribute even the Senate
1.32 [percent]? Is that a point-of-service option also?"
MR. MCRAE replied:
Well, no, most of that ... is in two areas. Mainly I
use liability, liabilities of mean cost drivers. And
they've put a fairly high number on the external appeal
process and what that will cost to health care.
Now, Blue Cross/Blue Shield of Alaska, we are going to
be implementing an external review appeal system
effective the end of March. We're in the process of
implementing it down here. What it will allow is a
consumer that is denied a claim to appeal a claim and
to go to an outside external review organization, and
we will bind the decision on what the external review
organization says. We will not second-guess that
external review organization.
Now, you have similar language to this in your
legislation, in HB 211, but we have committed to do
this already. We're going to do it, and we don't see
the cost driver that strong in the external review
processes as we do in a liability process.
A couple other things, and you know we do polling quite
a bit, and we've done it in Alaska, and we're seeing
very strong numbers pertaining to whether people are
pleased with their health care system and whether
they're pleased with their insurance; and most people
are.
But when we ask the question about higher premiums, ...
57 percent of the respondents said they would not be
willing to pay a higher premium in order to have an
appeals decided by people not associated with health
insurance. So, as we tailor this appeal process, I
think it's very important that we try to keep the cost
as low as we can in that appeal process.
When we started talking about costs, I'm not sure if it
was my letter that was quoted, ... we've seen that
steady increase in Alaska in health care costs, and we
don't have the distinct figures to know whether the
employers are dropping insurance.... We don't have the
figures to really take a good close look at that. We
know that the uninsured rate is higher than the
national average.
The other thing we're concerned about is that uninsured
number. Like I said earlier, the uniqueness of Alaska
is that I think, because [of] the Indian health care
system, there are some numbers that I don't think are
exactly accurate in Alaska. I think the uninsured
number is probably lower than what is really reflected
in the Census Bureau numbers. But we do know that
anytime you increase costs, those small employers out
there of 10, 20, 5 employees, they have to make that
decision on whether they can continue to provide health
insurance for their employees. So, we're very
concerned that any cost driver will take the small
employer, which is the most fragile part of the market,
along with the individual market and people who just
say, "I just can't afford insurance. I'm going to have
to pay that heat bill instead of paying for the
insurance."
A number of my comments went to the bill directly and
to different portions of it, and I'm not sure this is -
over the phone like this - would be appropriate. It
might be if I was there, but I'm not sure going through
each section of the bill with some areas would be
appropriate over the phone like this....
We will support Patients' Bill of Rights. We are
concerned about the drafting of it and the different
aspects of it, but I don't want to leave the impression
at all that it isn't something that we'd be receptive
to. A concern we do have, like I said, is the cost
driver. And right now we're in the middle of a federal
bill.... They were going to go to conference committee
last week on the federal bill, and that was postponed.
It will be going to conference by the 28th, I believe
it is, and we could end up with a system where, for
example, if we take the appeals procedure, it could be
a different appeals procedure in Alaska than what would
be required by the federal system, so you'd have, say,
60 percent of the ERISA [Employee Retirement Income
Security Act] covered.
Subscribers in Alaska have a different appeals
system.... So, we would like to ask that consideration
be given to taking a look at what the federal
government will do before laws are passed in Alaska,
because I think it will be confusing to a consumer. ...
We'll have to keep two different systems working....
The other area of concern in this bill: it's my
understanding ... that it does not include all areas in
Alaska. All it includes is the insured market. So, it
really wouldn't include the ERISA plans. My
understanding is it wouldn't include state employees.
It wouldn't include the Native network. So, there are
some areas that I think, if Alaska is going to look at
doing something in the area of Patients' Bill of
Rights, that they need to make sure that they cover as
many individuals in Alaska as possible. ... They have
to look at who's really being covered by this piece of
legislation.
CHAIRMAN ROKEBERG asked Mr. McRae what he estimates to be the
cost of the utilization review appeal process that is being
implemented in March.
Number 2383
MR. MCRAE said that was an excellent question, but he did not
have any figures in front of him.
CHAIRMAN ROKEBERG asked Mr. McRae to get back to him with the
figures.
MR. MCRAE indicated it would cost $600 per review done. The cost
would be borne by Blue Cross/Blue Shield of Alaska and would not
be a subscriber cost.
CHAIRMAN ROKEBERG wondered what the incidence of actual appeals
would be that would reach that point.
MR. MCRAE said he would find out that information.
Number 2410
CHAIRMAN ROKEBERG pointed out that last year the committee passed
legislation requiring accountability and reporting of the health
insurance in the state, to try and determine the number of
covered lives that are in non-ERISA substitute mandates and
ERISA-type plans, and to determine the number of uninsureds in
the state. He said he was meeting tomorrow with the Department
of Health and Social Services and the Department of Community and
Economic Development regarding those numbers. He noted that
these numbers are being pulled together so that people in Alaska
can understand what can happen and who is affected. He asked Mr.
McRae to explain the distinction between an ERISA plan and a non-
ERISA plan. He offered his impression that there are limitations
with the federal law.
MR. MCRAE said it would be hard to explain. There are different
portions of both the [federal] Senate and House bills. Some of
the portions will only cover ERISA, and other portions will cover
all insured products. The external appeal procedure in the
[federal] House bill covers all insured products. There are
other portions in the [federal] Senate bill that do not cover all
insured products. Under Version H [of HB 211], he stated that 60
percent of the market would not be covered, along with the cities
and boroughs.
CHAIRMAN ROKEBERG surmised that the actual percentage right now
is about 25 percent. He wondered if the federal legislation
would cover self-insureds.
MR. MCRAE replied yes.
TAPE 00-12, SIDE B
Number 0048
JEROME SELBY, Providence Health Systems of Alaska, came forward
to testify on HB 211, Version H. He stated:
We have some concerns about this bill. Let me speak to
them first of all as an employer of close to 3,000
people, because it really gets at the cost issue, I
think, because, again, we've heard all sorts of
numbers, too, about ... what this does to insurance.
And we struggle with covering 3,000 employees with
health insurance benefits, not unlike a lot of other
people in the state, because, as we all know, it is a
serious cost for any employer in the state of Alaska as
well as in the United States.
So, the cost issue is a very important issue. Now,
it's important to us for a couple of other reasons.
First of all, we are also very concerned, then, about
the number of people of uninsured people. And if, in
fact, this bill creates a retrenchment, if you will,
and more people becoming uninsured, that's a very
serious impact on us financially as an organization,
because that number is growing for us.
In the last three years, I believe it is, our red ink
that we (indisc.) has gone up from about $12 million to
$25 million a year that we're writing off for uninsured
and uncollectible kinds of care. That's a fairly heft
jump in just a three-year time period, and, needless to
say, it's gotten our attention and we were very
(indisc.). Let's make sure that this bill doesn't have
an adverse effect on all of us that is not intended
here and resulting in even more people becoming
uninsured in Alaska.
CHAIRMAN ROKEBERG interjected to say the bill will not move if
that occurs.
MR. SELBY continued:
But we just want you to know that we have a concern
there, and so, please, let's look very carefully at
this. Then the third thing, of course, is that we
don't want to become part of the problem, because if
those things continue to escalate for us, obviously
we've got to get that money from somewhere. And as a
health care provider, ultimately, where we're going to
go get it is from our charges out to folks who are
seeking health care. We don't want to do that, and we
don't want that to be an unintended result of trying to
do something here that we all can support and laud, and
that's patients' rights, obviously. Nobody in their
right mind is going to be opposed to trying to do
something positive about making sure that patients'
rights are protected and treated as they appropriately
should be, but let's be careful that we don't have some
unintended side results here is our concern with it.
Now, with regard to the bill itself, we've got some
specifics. I'll just tick through a couple of these
quickly, Mr. Chairman, just so that you folks can take
a look at them. First of all, on page 2, line 7, we
feel you need to put some definition on the failure to
provide that's listed there kind of casually about
what that really means, because as we all know, that
can lead to a lot of litigation, and different
attorneys are going to have a lot of different opinions
about what a failure to provide means, and it's not
included in the definitions....
It would seem that there's a little bit of an
inconsistency on the bottom of page 2 and the top of
page 3 on line 3, where a prospective and current
review of a proposed medical treatment is defined in
this bill as a treatment decision. And we think there
is a little inconsistency that a proposed treatment
where nothing's been done yet is defined as a treatment
decision. Again, we think that there may be some real
issues, that that needs to be looked at.
Further down on page 3, on item 4, line 18, this rate
thing I think we need to take a look at, in terms of
what you're doing here, requiring that all the
compensation rates each provider be clearly stated; we
don't know what that means in terms of some of the
federal anti-trust laws and the potential of some
information that you could lead to collusion charges
and all that kind of stuff. And, again, that's not my
area of expertise, but when you start talking about
putting all these things out there, we do need to be
aware that federal anti-trust laws really are fairly
stringent on some of these thing, and just would
suggest that that be reviewed before it be completed in
the bill.
CHAIRMAN ROKEBERG asked whether Mr. Shelby suggests that the
federal government would prohibit the posting of an actual price
to the consumer so he/she knew what was being paid for .
MR. SELBY indicated that would not be inconsistent with the
federal government. He said that needs to be clarified so that
the bill doesn't run into problems with the federal government
right off the bat. He stated:
On page 5, line 25, we just suggest some clarification
on item 3, there, where copayment requirements that are
uniform between different types of health care
providers -- I'm not sure what that means myself, Mr.
Chairman, because on the one hand I don't think it's
good business if, in fact, you're saying that you're
going to lump primary care and specialty care and
everything together so there's one uniform rate.
Because I don't think one size necessarily fits all
care.
What that normally has done - and I'd defer to the
insurance folks [Division of Insurance, Department of
Community and Economic Development] and some of the
other folks that know a lot more about that - ... but
normally I'd think you'd ... compare primary care stuff
and then specialty care stuff and not necessarily be
trying to make one size fit all, because I think that
runs into some problems with that.
At the bottom of page 5, there on line 27, item 4, this
one is fairly troubling for me for Alaska because it
appears that if you can't provide the covered health
care service in the community, I would assume that it
implies you're not going to provide the coverage. And
that troubles me because -- let me take a case of very
bad burn victims: we don't have a capacity in Alaska,
really, treating those folks, and we basically fly them
all out of state. I don't think your intention here,
Mr. Chairman, was that bad burns (indisc.).
CHAIRMAN ROKEBERG said that was not the intention.
MR. SELBY further stated:
So, I think just to be careful about how this is stated
because I think ... what we don't want to do is have
some important coverages, some of which can be very
expensive, such as burns, dropped out of all of our
insurance plans in Alaska because of, again, something
that was well intended, but when we look at how it's
applied, we don't want to, in fact, lose that coverage
for the people in Alaska.
Again, on page 6, line 24, item 9, a provision that
describes the covered service area -- and we weren't
sure what the purpose of having to describe the covered
service area, because in Alaska, as we all know, it
kind of is, in many cases, a statewide service area,
depending on a particular specialty; and so I'm not
sure if we really want to say you have to define --
which would tend to exclude people, not include them
because, again, Mr. Chairman, I'm reading this bill on
the intention that you want to be inclusive of folks,
not excluding folks out, and so this one may have,
again, a reverse result from what we're after if we
aren't careful about what we're doing with it...I think
the big issue is the cost issue for most of us and for
the health care system here in Alaska.
Number 0367
CHAIRMAN ROKEBERG said he appreciated Mr. Selby's testimony. He
would appreciate Providence's input on the bill and any
suggestions. He asked if Providence has an opinion on the
emergency room provisions with respect to the layman standard of
care issue.
MR. SELBY informed the committee that it is not an issue for
Providence.
RICHARD BLOCK, Christian Science Committee on Publication for the
State of Alaska, testified via teleconference from California.
He had been asked by the Christian Science churches in Alaska to
keep an eye on the environment in which Christian Scientists
practice their religion, which includes a reliance on prayer for
healing. He commented:
The reason that we are interested in this bill is that
historically Christian Scientists, of course, do not
utilize physicians, generally speaking, or hospitals.
And it's put them in kind of an usual position when
they are an employee at a company that provides a
health care benefit plan, oftentimes in lieu of a
certain portion of their salary, maybe, and where the
Christian Scientist is not really able to take
advantage of that health care plan because they don't
utilize its benefits. And typically what has happened
in the past, particularly under indemnity plans, is
that the health insurer has willingly allowed the
Christian Scientists to receive a benefit for payment
of a Christian Science practitioner, whereas others
would be indemnified for their physicians' costs and to
indemnify Christian Scientist, who may go to a
Christian Science nursing facility, where others would
be indemnified for others costs at a hospital. There
hasn't been a great deal of problem with that, and no
need for legislative recognition of it, because it's
been a matter of contract and accommodation in comity
with the employer [and] with the health insurer.
Number 0522
But as was mentioned, I believe by Mr. Jordan in his
testimony, there has been in the last several years a
fee change in the way in which health care is provided
and the cost thereof is paid -- to situations -- there
is a rather complex regime established or even
determining entitlement to benefits including requiring
a physical examination, ongoing monitoring by the
health care provider, and a whole lot of other things
that are very different in this managed care regime
than it was under the older system, where the payment
was simply indemnified and the benefits provided.
What HB 211 is doing is introducing a new chapter into
the insurance code that begins to outline, with some
specificity, how a managed care plan is to be
structured, what the language in the contract is
supposed to look like, and providing, as it seems to be
the essence of this, a variety of protections for ...
the person who is to be benefited by the health care
plan.
It is our view that, if there's going to be this kind
of specific regulatory regime established in the
insurance code, what we would like to do is to see that
there is language included that at least recognizes the
permission of the health insurer, the managed care plan
provider and the other entities that make up this new
method of providing the care, that allows them to
provide care to those that rely exclusively on prayer
for healing by recognizing what we call the religious
non-medical facility, and recognizes that because they
are a religious approach, a prayerful approach, to
healing and a non-medical approach, that a lot of the
accouterments that are part of the normal managed care
plan would be irrelevant and not really practical to
include in the way that the benefit is provided.
About a week or so ago, I sent to your staff person,
Janet Seitz, a proposed amendment and a letter going
into more detail about how this would work and what it
would do. Janet informs me that the proposed amendment
is on the desk of the committee members. And I am
really not sure whether the letter went with it. The
letter kind of, I think, says everything that I would
choose to say and rather than take time at this point,
I would all the letter to stand as my testimony. [The
letter may be found in the bill packet for HB 211.]
Number 0660
CHAIRMAN ROKEBERG indicated that all the committee members have
of copy of Mr. Block's letter and proposed amendment.
REPRESENTATIVE HALCRO asked, "Does this absolve them of any
liability?"
MR. BLOCK said his amendment does not speak to the issue of
liability and, therefore, there would be not an absolving from
liability.
CHAIRMAN ROKEBERG recessed the hearing on HB 211, Version H, in
order to hear testimony on a different bill.
HB 314-PROCUREMENT PREFS:PARTNERSHP/LTD LIAB CO
CHAIRMAN ROKEBERG announced the next order of business would be
HOUSE BILL NO. 314, "An Act clarifying the requirements for
limited liability companies and partnerships to qualify for the
Alaska bidder's and disability preferences under the State
Procurement Code; and providing for an effective date."
Number 0823
VERN JONES, Chief Procurement Officer, Division of General
Services, Department of Administration, came forward to testify
on HB 314. He stated that HB 314 clarifies the Alaska bidder's
and disability preferences section of procurement statutes
regarding limited liability partnerships (LLPs) and limited
liability companies (LLCs). He said the procurement code was
written in 1987 and became effective in 1988. This was before
the inception of LLCs and LLPs, which were allowed to organize in
the mid-1990s. The preferences section in the procurement code
do not reference LLPs or LLCs. HB 314 inserts language which
specifically mentions these types of businesses in the
preferences sections and stipulates the qualifying factors
required to receive those preferences. It is believed that this
clarification is necessary and furthers the legislative
objectives of the procurement code by ensuring that bonafide
Alaskan businesses do receive preferences that are set out in
statute.
CHAIRMAN ROKEBERG asked, "Mr. Jones, there's nothing substantive
here other than adding the LLC and LLP concept? Is that
correct?"
MR. JONES replied, "Exactly."
Number 0897
REPRESENTATIVE HALCRO pointed out that he does not have a problem
with the intent of HB 314. He referred to Section 1, paragraph
3, which reads:
["Alaska bidder" means a person who] has maintained a
place of business within the state staffed by the
bidder or an employee of the bidder for a period of six
months immediately preceding the date of the bid.
He said there are national companies who place one sales
representative in an office somewhere and who receives Alaska
preference when the majority of the work is done somewhere
outside of the state. It is his opinion that there has to be a
way to factor in more of an Alaska bidder preference. He thinks
many Alaskan businesses are losing out.
MR. JONES said that complaint has been heard before. When bids
are received from businesses that are questioned, the division
does extensive research on these businesses. The businesses have
to have operated in the state for six months, which is different
than having a post office box, a phone or a fax machine. Several
vendors have been disqualified for trying to claim that
preference by having office space but not operating a business in
that space. He has yet to hear a better definition of an Alaskan
business. He thinks the notion of lengthening the time for
operating a business in Alaska could be entertained. He
cautioned it needs to be recognized that the qualifying factors
which currently exist sometimes disqualify bonafide Alaskans.
For this reason, the division is very careful about changing the
length of time.
REPRESENTATIVE HALCRO wondered about the possibility of mandating
that a certain percentage of the work or product be completed in
Alaska.
MR. JONES said the makes sense in concept. The difficulty of
that idea comes into play with the analysis required each and
every time quotes are received, even on a small procurement,
because the bidder preferences are applied by policy. He
commented:
What we try and do is make this fairly bulletproof,
black-and-white decision for procurement folks to make
out there. The way our procurement system is
distributed, or rather decentralized, a lot of times we
have state employees conducting procurements that
aren't necessarily experts in procurement. They're
doing this as something off to the side, aside from
their regular duties, because of the decentralized
nature we have a very small central procurement staff
in general services. And we try and make these things
as simple as possible. It's a six month rule. You
qualify or you don't. Something along the lines of
what you suggested would complicate things
substantially which goes against the trend that we're
trying to develop or maintain. But it is worth looking
at, I suppose.
CHAIRMAN ROKEBERG asked Representative Halcro what he suggested.
Number 1153
REPRESENTATIVE HALCRO responded:
Well, here's the situation. I have a constituent of
mine who owns a printshop, and he regularly bids on
state business through competitive bid process. Well,
he has a competitor that prints basically everything
out of state. He has one sales rep[resentative]. He
gets the Alaska bidder's preference so he gets the
work, sends it to Salt Lake City, it's printed and
comes back to the state. Meanwhile, this guy has all
the equipment and all the employees and doesn't get a
lion's share of the work.
Furthermore, there's been several cases. As a matter
of fact, he had an administrative hearing last year
that he appealed where you have some procurement; As
Mr. Jones says it's kind of a decentralized process so
you have people that don't normally do the procurement
doing the procurement. And there have been proven
times where certain friendships or relationships exist
where, you know, the Alaska bidder preference really
isn't, it's not fairly applied. I mean I would think
that Alaska bidder preference means that it's printed
or built or whatever the case may be in Alaska with
Alaskan employees not just one sales rep who then in
turn forwards the PO [purchase order] to Salt Lake City
or Denver.
CHAIRMAN ROKEBERG asked Representative Halcro if he would like
the bill to go to a subcommittee.
REPRESENTATIVE HALCRO responded that he would prefer that.
MR. JONES pointed out that there are a number of issues that his
division has long been concerned with the Alaska bidder
preference. The foremost concern is that it would cost Alaska
more money. He explained:
We have some situations, for example, we have
microcomputer contracts which are large contracts, very
big numbers of expenditures. We have Alaskan firms.
By virtue of them having an office in Alaska who get a
markup, only by virtue of this preference, they never
see the computers that we buy from them. We place our
order. They call down South. They relay the order.
They collect the money. They skim the bidder
preference off the top. You or I as an individual
could call any of these companies direct and get a
better price on certain brand computers than we as the
state can because of this preference. So, I'm not
defending the preference. I'm just saying there are a
lot of different issues that if we're going to look at
this we may want to consider some of those other issues
as well. I don't have a solution for that particular
one, but we might be able to write up something.
CHAIRMAN ROKEBERG appointed a subcommittee on HB 314 with the
following members: Representative Halcro, Chair; and
Representatives Harris and Cissna. [HB 314 was held over.]
HB 211-MANAGED HEALTH CARE INSURANCE
CHAIRMAN ROKEBERG resumed the hearing on HB 211, Version H, which
had begun earlier in the meeting.
JOE KENNEDY, Physical Therapist for Dr. John Bursell, came
forward to testify on HB 211, Version H. He stated:
I'm here to do my best to represent the American
Physical Therapy Association as well as the state
chapter of the American Physical Therapy Association.
And you'll have to excuse me, I kind of got nominated
for this kind of late. I've looked through the most
current working draft. I'm not really familiar with
all of the legislation to this point. What I would
like to do is to thank you Representative Rokeberg for
sponsoring this bill and also for adding back in the
peer review process. I guess at one time that was
considered to be taken out and has been added back in,
is my understanding.
Number 1411
The other thing I'd like to do is point out that the
Alaska chapter of the American Physical Therapy
Association [APTA] has established four guidelines that
they are trying to promote around the country in
different state bills as far as the structure of bills
such as patient right bills; one of them being the
point of service and the non-network option in this
bill definitely does satisfy what APTA is looking at.
The gag rule elimination is another thing that the APTA
supports as well as accountability and promotion of the
advocacy of the treating health care provider. Those
four concepts are well established in HB 211. And we
would like to support that.
One thing I would like to add is that on page 15, line
10, the section involving preventative treatments, is
very forward thinking, and I'd like to thank the
committee for taking on any bill that promotes
preventative treatment; especially as a physical
therapist, you see that a lot with patients who really
need to have that as part of their health care plan.
It's very important.
I did come up with some concerns. On page 8, line 26,
the $25 filing fee for external review: although the
amount is very small and refundable, it may still serve
as a barrier for some folks even if they're not
considered indigenous as stated in the bill. And I'd
like to see all barriers lifted that would keep people
from being able to appeal, or make an appeal on a
denied case. I guess it can be argued how significant
$25 is for a filing fee.
Number 1534
The other question I have is page 5, line 15, the
definition of a health care provider. And more so,
there I have a question as far as what exactly it means
for a person to be licensed in the state of Alaska or
in any other state in the United States - why that
bears significance where that person in licensed and
why it's not just dealing with Alaska licensed health
care providers. And the other questions I had have
already been answered in previous testimony.
Another thing I would like to see the committee
consider is to not allow in these health care contracts
arbitrary limits on either dollarwise or number of
visits annually for services such as physical therapy,
occupational therapy, speech therapy, what's considered
the allied health, because that is the case in some PPO
and HMO contracts I'm aware of, and that's often very
detrimental to the quality of patient care without
having any significant scientific support for having
such limits. But that should be between the health
care provider, be it the allied health practitioner and
the referring physician, I think should have more of a
bearing on limits and what is medically necessary
versus what is written in a contract.
Number 1628
Something I would like to respond to, a question that
Representative Halcro mentioned earlier about, and it's
been brought up many times, cost drivers and the
effects that this might have. As a provider myself and
an employee of a small practice and also being
relatively new to the state, I'd just like to say that
if a health care provider feels that they can work
outside of the restrictions of some of these managed
care contracts, then they can provide high quality
care, that that could attract more health care
providers to the state, thus increasing the competition
that you mentioned earlier, helping to overall lower
the costs of providing care if one feels that they can
work in the state without arbitrary restrictions. And
that really concludes my testimony.
REPRESENTATIVE HALCRO asked how long Mr. Kennedy has been in
Alaska.
MR. KENNEDY said he has been in Juneau, Alaska, for 18 months.
CHAIRMAN ROKEBERG asked if he came from an area that had managed
care and HMOs.
MR. KENNEDY explained that he was trained in Nebraska, one of the
highest managed care states. He lived and worked in Texas for
one year, where there was also highly managed care. He said a
high majority of his patients are covered under workers'
compensation insurance. He also has a fair number of self-
insured patients as well as people who are just on a Blue Cross-
type plan.
Number 1799
BOB LOHR, Director, Division of Insurance, Department of
Community and Economic Development, came to forward to explain
the fiscal note for HB 211, Version H. He stated:
The bill makes multiple references to regulations the
director is required to develop to implement the
Patient Bill of Rights and those are specified.
They're set out in the text at the bottom of the fiscal
note, so I won't repeat that unless you'd like
(indisc.-coughing), but basically there's various
provisions that require or authorize regulations by the
division. And it is our view that establishing these
regs will be complex and controversial. For example,
the requirement to do regulations concerning
confidentiality, actually to development the provisions
for authorized access to otherwise confidential patient
information to make the system work. That's one of the
requirements.
We found that the federal government, Congress, was
unable with a three-year time line to develop its own
bill dealing with this subject, and instead the
Administration came in and proposed 600 pages of
regulations that deal with only a portion of that
assignment. I'm by no means suggesting that that's any
sort of mark to attempt to imitate, but it is a complex
area.
We know this also because under the Gramm-Leach-Bliley
Act, the financial services modernization legislation
last November, has a requirement that federal agencies
develop privacy regulations by May 12. And those have
just been promulgated in draft form for comment, and
states also will have responsibility in that area, but
this is by no means a slam-dunk set of regs where you
simply go and find a model and adopt them. I think it
would involve extensive public comment much along the
lines of what you're seeing on the merits of the
(indisc.) itself.
That's one example. I won't go into each one with that
same degree of specificity. But, bottom line, what
we're ... requesting is a paralegal, range 16 position,
to be a regulations specialist for the division, [to]
develop the draft regulations that are needed, to draft
the language, and to conduct the public hearings
necessary under the Administrative [Procedure] Act.
We recognize that once those regs are adopted, the
ongoing responsibility of the division is quite
limited. It would deal primarily with certifications
and recertifications of these independent appellate
tribunals. But there's quite a bit of detail required
in that exercise, also, to do the audit sampling, to
determine their fairness, their lack of bias and so
forth. Those provisions will require some ongoing
responsibility by the division, which we believe we can
absorb. And so the ... salient thing is the range 16
paralegal specialist for two years, and then phased out
halfway in the year, three part-time positions and
finally going to zero in year four.
CHAIRMAN ROKEBERG asked Mr. Lohr to look over the bill and give
the committee a heads-up where costs might be reduced by taking
the regulatory component out of the loop. He said he would not
like to give up the confidentiality provisions. He referred to
the external appeals situation and asked if that burden could not
have been placed in statute so that provider are required to have
that form of appeal.
MR. LOHR indicated that would be one approach. Another approach
that has been considered is the possibility of using the
procurement process to get some of the requirements that are
specified. He said:
For example, finding a contractor without a conflict of
interest or a bias is a quite typical requirement of
many RFPs [Request for Proposals], and we could also
consider these in that process to make sure that they
have adequate staff capability to meet the timeliness
requirements of the independent reviews.
So, we will explore options like that to try to
recommend ways to bring the costs down of doing this.
I don't know if it's going to be possible to get to
zero because some of the places where you talk about
standards in here, my understanding from what the
attorneys tell me, is that would require us to do
regulations. We can't do it as policy if it affects
the public.
Number 2196
REPRESENTATIVE MURKOWSKI wondered if passage of federal
legislation would provide some parameters or guidelines, and
would perhaps bring costs down somewhat.
MR. LOHR said he thinks that is a possibility. If they followed
the lead of federal agencies in this area, they could benefit
from their drafting and pick up where they start. In his
experience in these areas, there are still too many unfunded
federal mandates out there. This would likely be another one
where states would not be funded to do the kind of regulations
that might be required to avoid federal preemption.
TAPE 00-13, SIDE A
Number 0006
JIM JORDAN, Executive Director, Alaska State Medical Association,
came forward to testify on HB 211, Version H. He stated that one
of the major differences between the version of the Patients'
Bill of Rights that the U.S. House passed versus the U.S.
Senate's version, has to do with impact on what is in place in
the various states. This is because there was some discussion
about having to duplicate systems. The U.S. House version [HR
2990] does not provide for preemption of what the various states
do. He does not know that there would necessarily be
duplication, but it would provide a floor level of patient
protection that the states could build above, and would not
remove those that some of the other states have already enacted.
He believes the U.S. Senate version does do some preemption. He
further commented:
There was some question as to applicability of this
particular bill to ERISA plans versus non-ERISA plans,
if I may use that simplistic distinction. This bill
might apply to ERISA plans. I say "might" because what
has happened is that ERISA plans have essentially been
preempted from being regulated by the various states
under ERISA.
However, what has occurred in the last several years is
that preemption has been found to be less and less
certain. And I am greatly simplifying this. This
involves some very complex legal arguments that are way
beyond me. But, to put it simplistically, what the
federal courts have been finding is that increasingly
the states have been allowed to regulate aspects of
ERISA health and welfare plans that deal with quality
of care. They are maintaining the ERISA preemption of
state regulations for those aspects of ERISA health and
welfare plans that deal with quantity or the
administration of those plans. So, it may be that
there are further impacts of this bill than just the
non-ERISA plans, ... but this is a very complex issue
and it's a moving target.
CHAIRMAN ROKEBERG stated:
Frankly, the Alaska State Medical Association and its
supporters are going to have to justify the point-of-
service ... option provisions of the bill and their
survivability within the legislation as to what its
true cost impacts are, and also breaking out the
litigation aspects and any other cost drivers that
might presumed to be in the bill.
I think it's incumbent upon you and your people to look
at the legislation in that regard and bring back to
this committee contra arguments to some of these cost
issues because I'm not entirely convinced.... The
charge that by providing a point of service option
within the PPO type plan with a closed panel actually
drives costs up.... Nobody has come up with anything
like empirically demonstrating that. It's a little
hard for me to see that. With what I know about
health, on the face of it, you'd think it would, but
when it's given as an option, when you underwrite for
this, requires, the way it's drafted, that the
insurance underwriter be paid more or less for -- the
consumer has to make up the difference.... The only
thing that I think would come into play would be like
contractual bargaining between the providers and the
insurance underwriter when they're putting together the
whole package for a particular group and/or individuals
in the case of Blue Cross which I think does sell
individually a PPO plan.
MR. JORDAN said he believes it also includes point of service.
CHAIRMAN ROKEBERG added that it is ironic that Blue Cross and
Aetna have implemented an internal review appeal process already.
He asked Mr. Haugen to provide him with a list of insurers in
Alaska.
MIKE HAUGEN, Executive Director, Alaska Physicians & Surgeons,
Incorporated, came forward to testify on HB 211, Version H. He
stated that his organization is currently speaking with ADMAR,
Principal Life, First Choice Health, First Health, Blue Cross,
Great Western, Aetna, GAIA (ph), and Private Health Care Systems.
CHAIRMAN ROKEBERG wondered if Aetna is writing private coverage
in the Anchorage area.
Number 0535
MR. HAUGEN replied that his organization has not spoken with
Aetna in about a year. He said, "But my predecessor, the one who
was actually talking to them, had."
CHAIRMAN ROKEBERG stated, "You gave the committee the impression
that these people weren't here. Are they not in the state?"
MR. HAUGEN answered that to a greater or lesser extent they have
insured folks in Alaska. For example, ADMAR is about to start a
fairly extensive marketing campaign in Alaska to build their
network out. There are several others who would love to
penetrate the market in Fairbanks.
CHAIRMAN ROKEBERG asked Mr. Haugen to clarify whether or not
ADMAR would is about to start marketing.
Number 0621
MR. HAUGEN said he believes they currently have a contract with
Providence Hospital and are building their network in Alaska.
CHAIRMAN ROKEBERG wondered if it would be a PPO style closed
panel.
MR. HAUGEN said he was not sure if it will be a closed panel at
this point, but they are working on building as big of physician
network as possible.
CHAIRMAN ROKEBERG asked, "As an IPA that you work with, how do
they interrelate with the PPO plans?"
MR. HAUGEN stated that his organization operates under a
messenger model. Because all of their physicians are
independent, they are prohibited by anti-trust law from actually
negotiating on their behalf. They act as an intermediary between
the physicians in the group and the carriers. Through a series
of surveys conducted, they gather and aggregate the opinions of
the physicians about different contract provisions. The
information is given to carriers and the carriers then modify
their contracts however they want. He sends those back to his
physicians and they individually decide whether or not they want
to participate. We're trying, with some legislation in the
Senate, to allow for direct negotiations, but it's a very
cumbersome process at this point. And, quite frankly, it's
really stifling. It's really limited the number of other new
carrier's ability to come up here and to really compete with the
established third-party payers up here. It's difficult to build
a panel when you have to deal with this kind of process.
CHAIRMAN ROKEBERG said it is astounding that that can be done.
He asked, "Your organization is based on what a premises and
other operating cost type efficiencies you can get by working
together.... How do you exist and why?"
Number 0756
MR. HAUGEN answered that it is possible because his organization
is also a purchaser of services. They have contracts with group
purchasing organizations and can provide substantial discounts to
their doctors for things such as pharmaceutical supplies and
medical supplies. This is how they justify their existence on a
cost basis, but they also have a legislative and lobbying
component. The primary service is to provide services to
members.
REPRESENTATIVE HALCRO stated:
I am incredibly nervous when we go, especially in a
state where, as I said, 86 percent of all the
businesses are under 20 employees, and we start
dictating how they can buy or procure coverage for
their employees or what kind of coverage. And my point
was that the great HMO debate, and the complaints have
been around seven, eight years, and in the same time
where people have been crying for changes in the Lower
48, if you will, due to HMO and managed care, we've
seen a significant increase in the number of
physicians.
These folks like Mr. Kennedy who testified earlier
who've just been here 18 months obviously must have
seen a good environment to open a practice, a good
place to do business, and so now we have the market
saturated, if you will, if you can call it that, but we
have a significant increase in the number physicians.
And now we're, I don't want to get into a situation if
this is in fact where it is, where we're trying to
break down existing walls because there are so many
physicians out there and they take, maybe they have
issues with the fact that certain people can negotiate
PPOs or certain coverages. The bottom line is I don't
care about health insurance companies, I care about
patients and I care about small employers who provide
coverage for their employees and that's my biggest
concern.
CHAIRMAN ROKEBERG reiterated that he has not been shown that the
point-of-service option is really that much of a cost driver. He
would like this demonstrated to him if it is. [HB 211 was held
over.]
ADJOURNMENT
Number 0998
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:16 p.m.
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