03/14/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB203 | |
| HB282 | |
| HB230 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 203 | TELECONFERENCED | |
| += | HB 282 | TELECONFERENCED | |
| += | HB 230 | TELECONFERENCED | |
| += | HB 316 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 14, 2014
3:20 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mike Chenault
Representative Bob Herron
Representative Dan Saddler
Representative Andy Josephson
MEMBERS ABSENT
Representative Lora Reinbold, Vice Chair
Representative Charisse Millett
Representative Craig Johnson
COMMITTEE CALENDAR
HOUSE BILL NO. 203
"An Act relating to payment or reimbursement of health care
insurance claims."
- HEARD & HELD
HOUSE BILL NO. 282
"An Act relating to the rights and obligations of residential
landlords and tenants; and relating to the taking of a permanent
fund dividend for rent and damages owed to a residential
landlord."
- HEARD & HELD
HOUSE BILL NO. 230
"An Act allowing the Alaska Industrial Development and Export
Authority to issue bonds for an oil or gas processing facility;
and creating the oil and gas infrastructure fund to finance
construction or improvement of an oil or gas processing
facility."
- HEARD & HELD
HOUSE BILL NO. 316
"An Act relating to workers' compensation fees for medical
treatment and services; relating to workers' compensation
regulations; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 203
SHORT TITLE: REIMBURSEMENT OF HEALTH INSURANCE CLAIMS
SPONSOR(s): REPRESENTATIVE(s) KELLER BY REQUEST
04/10/13 (H) READ THE FIRST TIME - REFERRALS
04/10/13 (H) L&C, FIN
03/14/14 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 282
SHORT TITLE: LANDLORD AND TENANT ACT
SPONSOR(s): REPRESENTATIVE(s) ISAACSON
01/29/14 (H) READ THE FIRST TIME - REFERRALS
01/29/14 (H) L&C, JUD
02/28/14 (H) L&C AT 3:15 PM BARNES 124
02/28/14 (H) Heard & Held
02/28/14 (H) MINUTE(L&C)
03/14/14 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 230
SHORT TITLE: AIDEA BONDS FOR PROCESSING FACILITIES
SPONSOR(s): REPRESENTATIVE(s) SEATON
01/21/14 (H) PREFILE RELEASED 1/10/14
01/21/14 (H) READ THE FIRST TIME - REFERRALS
01/21/14 (H) L&C, FIN
02/21/14 (H) L&C AT 3:15 PM BARNES 124
02/21/14 (H) Heard & Held
02/21/14 (H) MINUTE(L&C)
03/14/14 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
JIM POUND, Staff
Representative Wes Keller
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 203 on behalf of the sponsor,
Representative Wes Keller.
LEONARD SORRIN, Vice-President
Congressional Legislative Affairs
Premera Blue Cross
Seattle, Washington
POSITION STATEMENT: Testified in support of HB 203.
MARTIN HESTER, Director
Division of Insurance (DOI); Juneau Office
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 203.
MIKE HUMPHREY, Chief Executive Officer
The Wilson Agency
Anchorage Alaska
POSITION STATEMENT: Testified in support of HB 203.
JAMES BROOKS, Physician;
Executive Director; Providence Anchorage Anesthesia Medical
Group (PAAMG)
POSITION STATEMENT: Testified in opposition to HB 203.
RICK WATSON, Chief Executive Officer
Orthopedic Physicians Anchorage
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 203.
BRENDA HEWITT, Staff
Representative Doug Isaacson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented Version O on behalf of the prime
sponsor of HB 282.
PAMELA COOK, Property Manager
MB Management
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 282.
ANTOWETTE BREWER, Property Manager
Realtor; Coldwell Banker
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 282.
KIRK MAYNARD, Owner; Broker
Coldwell Banker
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 282.
RICHARD BLOCK, Manager
Mellen Investment Company, LLC
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 282.
REPRESENTATIVE PAUL SEATON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of HB 230.
TED LEONARD, Executive Director
Alaska Industrial Development & Export Authority (AIDEA)
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 230.
EMILY NAUMAN, Legislative Legal Counsel
Legislative Legal and Research Services
Legislative Affairs Agency (LAA)
Juneau, Alaska
POSITION STATEMENT: Answered questions as the drafter of HB
230.
ACTION NARRATIVE
3:20:49 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20 p.m. Representatives
Chenault, Herron, Saddler, Josephson, and Olson were present at
the call to order.
HB 203-REIMBURSEMENT OF HEALTH INSURANCE CLAIMS
3:21:19 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 203, "An Act relating to payment or reimbursement
of health care insurance claims."
3:21:31 PM
JIM POUND, Staff, Representative Wes Keller, Alaska State
Legislature, stated that HB 203 makes a change in the health
care insurance policy in Alaska. It adds a step to the process
for insurers to make payments to out-of-network providers. It
requires in most cases that out-of-network providers receive
payments made out to both the patient and the provider. The
effect is two-fold. First, the patient would obtain information
on how much the procedure costs. Second, providers would
receive an incentive to become part of the network. He referred
to members' packets to the State of Alaska's health care
program, Alaska Care, to show the difference in cost between
"In-Network" and "Out-of-Network" providers that began in
January 2014. He stated that this transfers into savings for
insurers and for the patients. The goal of the bill is to
create a market basis for insurance coverage and increase
incentives for providers to become part of a network.
3:23:09 PM
LEONARD SORRIN, Vice-President, Congressional Legislative
Affairs, Premera Blue Cross, reading from a prepared statement,
stated that Premera provides coverage to over 100,000 Alaskan
residents including individuals, small groups, and large groups,
as well as offering services for large self-insured groups. He
offered support for HB 203 as a measure that is critical in
Alaska's ongoing struggle to moderate its extremely high health
care costs. Current Alaska law requires health plans to pay
non-contracted providers directly for care. This requirement
removes a significant incentive that providers have to enter
into negotiated contracts with health plans at lower rates. He
said that direct payment from the health plan is one of the
major benefits that providers obtain from contracting with
health plans.
MR. SORRIN said that HB 203 will rebalance that contracting
dynamic in Alaska by allowing health plans to issue a joint
check made out to both the member and the provider. This should
lead to more negotiated agreements with health plans which can
help moderate Alaska's health care costs. In fact, Alaska has
the second highest health care spending per capita of any state
in the nation. He provided some "eye-catching examples" which
included that Alaska has the highest average annual cost for
employee health benefits in the nation, at $11,926 per employee,
which is twice what employers in some other states pay.
Further, it is getting worse. In the last decade, health care
costs in Anchorage increased at a rate of 70 percent above the
national average.
3:25:01 PM
MR. SORRIN stated that the problem extends across the full range
of care in Alaska. He shared examples based on "Milliman's
report" which was prepared for the Alaska Health Care
Commission. This report examined costs across Alaska and
compared them to reference states. He related that physician
reimbursement in Alaska is approximately 160 percent of the
average compared to reference states of Idaho, Oregon,
Washington, and Wyoming. Cardiologists in Alaska charge an
average of 83 percent higher; hip replacement costs 350 percent
more in Alaska; and diagnostic colonoscopies cost 150 percent
more in Alaska than Washington.
MR. SORRIN said that additional data shows that certain
specialty services in Alaska are over 500 percent of Medicare
reimbursements. For example, musculoskeletal services in Alaska
are 600 percent of Medicare and cardiovascular services are 62
percent over Medicare reimbursement.
MR. SORRIN asked what the state can do about this cost crisis in
Alaska. He stated that the Alaska Health Care Commission (AHCC)
made several suggestions, including some related to pricing
power in Alaska. The AHCC recommended doing away with the
direct pay requirement. While the direct pay requirement has
certainly increased costs, these cost increases have been
aggravated by the 80th percentile requirement that mandates
health plans pay non-contracted providers at least 80 percent of
the usual and customary rate (UCR). He explained what ends up
occurring in certain communities and specialties is that
providers are able to dictate their own UCR by simply increasing
their own rates to whatever level they wish. This leaves health
plans and Alaska consumers with only the hope of a negotiated
contract as a means to moderate health care costs in Alaska. He
offered his belief that this is where a change in the direct pay
requirement would have a substantial impact on Alaska's health
care costs. For evidence, he referred to Premera's recent
experience with the Federal Employee Program (FEP) health plan
in Alaska, which he said covers a fairly healthy proportion of
Alaskan citizens. The FEP program instituted a joint check
policy in July 2012 exactly as proposed in HB 203.
3:27:45 PM
MR. SORRIN said the result of that change is that Premera Blue
Cross almost immediately saw 11 new contracts negotiated with
providers after only having one in the previous couple of
months. Further, one sole source community hospital entered
into a negotiated agreement with Premera Blue Cross after five
years of non-contracted status. This means that more consumers
have access to broader network without the risk of higher out-
of-pocket costs. He concluded that it's clear a co-payee check
system worked for FEP in Alaska and it will work in the
commercial insured market as well. He predicted that the bill
will immediately interest more providers in joining thousands of
their colleagues who have contracts with Premera Blue Cross and
other carriers across the state allowing Alaskans and employers
to access more affordable care and increasing access for
everyone. He thanked members for their time.
3:28:27 PM
REPRESENTATIVE JOSEPHSON said this is useful information to
know. He related his understanding that fundamentally this bill
is designed to send a payment to the patient rather than the
physician when the physician is not in the network.
MR. SORRIN answered yes.
REPRESENTATIVE JOSEPHSON said it seemed that in some instances
the check is written to two payees.
MR. SORRIN answered that under HB 203, the check would be made
out as a co-payee check with provider as the first payee and the
member as the second payee in every instance.
3:29:40 PM
REPRESENTATIVE JOSEPHSON asked whether the person would need to
drive to the doctor's office to obtain a signature.
MR. SORRIN answered that what typically happens is the member
will endorse the check and send it to the provider, who will
endorse it and deposit it as payment for the services.
3:30:19 PM
REPRESENTATIVE JOSEPHSON asked what happens if the patient fails
to do so and if the patient will be sued.
MR. SORRIN answered that if the consumer doesn't forward the
check, the provider would bill the consumer. He offered that in
Premera Blue Cross's view this bill will allow the company to
send the check to the person with whom they have an agreement or
the benefit contract for health care contract. These people
have purchased coverage through Premera Blue Cross. He
explained that in instances of non-contracted care, Premera Blue
Cross would send the check to the person that has an agreement
with them. These consumers should send the check on to the
provider. Typically, members would receive education on this,
but it is intended to allow patients to endorse the checks and
send them on to the provider. If not, the provider would
collect from the member. In fact, avoiding this necessity
provides exactly the type of incentive for health care providers
to enter into network contracts with health plans. He offered
his belief this should balance the contracting dynamic between
physicians and health plans in Alaska.
3:31:35 PM
REPRESENTATIVE JOSEPHSON said it sounds like at the outset it
could be a "headache" for the consumer even though Premera
believes in the long run rates will be reduced since more
physicians will subscribe to the preferred provider option.
MR. SORRIN answered yes; that the intent is to expand the range
and number of contracted providers in Alaska to provide more
people care at lower cost. He reiterated that the significant
incentive is that it is far easier and quicker for the provider
to obtain payment from Premera Blue Cross, depending on whether
the provider wants to bill the member directly or wait to obtain
the co-payee check from the member. It may or may not cause a
consumer to get billed for that cost of care, but since the
member has already received a check from Premera Blue Cross,
that if they are later billed the patient would simply forward
that check to the provider in payment.
3:32:55 PM
REPRESENTATIVE JOSEPHSON asked whether many patients would
prefer not to know except that they receive an explanation of
benefits (EOB) at the end. He asked from the consumer
perspective if this is an easier way for the payment to occur.
MR. SORRIN acknowledged that in one instance it might be easier;
however, he offered his belief that it would rob the health
plans in the health care market of a significant tool in
combination with the 80th percentile regulation. He said it
denies a significant tool to create more balanced health plan
negotiating leverage with providers in Alaska, which would lower
health care costs over time for everyone.
CHAIR OLSON remarked it is about behavior modification.
3:34:02 PM
REPRESENTATIVE JOSEPHSON said, based on his own experience, that
at the office visit, the doctor's staff informs him that his
copay is $100. He wondered what his experience will be under
this bill.
MR. SORRIN answered that he cannot predict how specific
providers may handle this; however, he hoped that rather than
asking for $7,000 at the time of service that the provider would
wait to receive the endorsed co-payee check from the member.
REPRESENTATIVE HERRON asked whether there is any opposition to
the bill.
CHAIR OLSON answered yes; that he anticipates hearing from some
testifiers.
3:35:39 PM
REPRESENTATIVE SADDLER moved to adopt the proposed committee
substitute (CS) for HB 203, labeled 28-LS0682\C, Wallace,
2/3/14, as the working document.
CHAIR OLSON objected for the purpose of objection.
3:36:09 PM
MR. POUND reviewed the changes in the proposed committee
substitute, Version C. He related Section 1 makes changes to
existing language that permits healthcare insurance payments to
be made directly to out-of-network hospitals and eliminates out
of network providers upon written request. Paragraph 5 provides
language that permits payment to an out-of-network provider by
issuing a check made out to both the patient and the provider.
He related that the network providers are called preferred
providers. He referred to page 3, Section 2, which makes
changes to existing statute that eliminates provider but
maintains hospital when it comes to direct payments. He
suggested that this narrows the definition so the funds go to
the hospital or out-of-network hospital and not to the
practitioner. He characterized these changes as a "clean up."
3:38:43 PM
REPRESENTATIVE SADDLER asked whether the purpose of Sections 2
and 3 is not to narrow the scope of medical service providers
that can receive direct payment. He asked whether it is
technical or a narrowing provision.
MR. POUND acknowledged that the language does narrow it from
providers to hospitals.
3:39:55 PM
MIKE HUMPHREY, Chief Executive Officer, The Wilson Agency,
stated that his company specializes in human resource and
benefits consulting in Alaska. He said he is testifying in
support of HB 203. He stated that he spent 20 years as the
system-wide director of benefits for the University of Alaska
(UA). In that capacity, he set the strategic direction for the
UA's benefit program, including health plans, wellness, and
retirement. The prime focus of UA and for his clients was to
help find ways to slow down the escalation of health care plan
costs, which is the biggest cost for nearly every employer.
Employers really only have about three tools to address health
care plan costs, including plan redesign - shifting costs to
employees; asking providers to join the network; and using
wellness programs to change the health status of the employees.
He said it takes three to five years for wellness programs to
show a return. His preference is to work with the medical
professionals to develop incentives for them to join a provider
network. Over the years he has held many conversations
surrounding networks and to eliminate the fear of joining he has
demonstrated the impact on top 20 procedures and illustrated the
impact on the cash flow; however, his efforts resulted in few
providers joining the network. In fact, he couldn't offer proof
of a change in the turnaround from submitting bills to insurance
and receiving reimbursement. Instead, he was offering them a
reduced reimbursement in exchange for an increase in the number
of patients. However, HB 203 has been designed to provide
incentives to encourage providers to join the network and to
help control costs.
3:43:03 PM
REPRESENTATIVE SADDLER referred to the three aforementioned
options for health care containment. He recalled that
increasing the network had the quickest turnaround. He asked
for clarification on whether that option will provide the
largest savings or if the wellness or plan redesign represents
the best option for cost savings.
MARTIN HESTER, Director, Division of Insurance (DOI), Juneau
Office, Department of Commerce, Community & Economic Development
(DCCED), answered that plan redesign has an immediate impact on
the employees but it doesn't take costs out of the health care
plan. He explained that wellness programs are a long-term
initiative to manage the population's health so the most
immediate return would be for a provider to accept a discount by
joining a network.
3:43:49 PM
JAMES BROOKS, Doctor; Executive Director, Providence Anchorage
Anesthesia Medical Group (PAAMG), stated that he is opposed to
this bill because of its impact on members' constituents and his
patients. He said that his patients have same the right to
efficient claims adjudication and remittance of payments to
providers whether they are served by a participating provider or
a non-participating provider. These patients should also be
afforded the same rights as hospitals that are staffed with
teams of health care professionals to process claims and
payments. The entire health care industry is implementing
electronic health records, electronic claims submission, and
being paid with electronic remittance to reduce costs and
complexity of care for the patients. This proposed bill, HB
203, will use a two-party paper check system for remittance of
monies due to providers. He said, "To me, this defies logic."
He offered his belief that HB 203 will increase the complexity
of payment for services. Patients will now have to act to
convey a check from themselves to the providers of services.
Patients with guardians, surrogates, and other third parties
assisting in their care may struggle to get the process
accomplished. This process will initially confuse some
patients, as was testified to earlier and it would definitely
increase the amount of paperwork and the communications
necessary after having received health care. He stressed that
it would also delay reimbursement from patients to providers.
Once it delays reimbursement and increases the accounts
receivable cycle, it will elevate costs. As it elevates costs
some providers may "sign networks" but other providers will pass
the cost on to others. He also said, "Frankly, I just think it
is bad legislation; it's illogical legislation, and it's a step
back to how business was done 20 or 30 years ago." However,
it's not the pattern for increasing efficiency in the whole
business side of health care. He argued that this bill imposes
a risk of failure on patients and if patients are out of town
for any number of reasons and don't process their mail they will
risk having payments due to a provider sitting somewhere or be
lost. Yet the patients will ultimately still be responsible for
the payments. He concluded that this bill shifts the burden to
patients and to constituents in order to benefit an insurance
network. He thanked members for the opportunity to testify.
3:47:02 PM
REPRESENTATIVE JOSEPHSON commented that when he thinks of a
company such as Premera Blue Cross, he is unsure whether he is
dealing with a corporation with a profit motive or a coop. He
said if he knew this it would assist him in determining how he
feels about this bill.
CHAIR OLSON responded that question is not part of the bill
before the committee at this time; however, he suspected someone
could provide him with that information.
3:47:45 PM
REPRESENTATIVE SADDLER understood him to say this will move the
state backwards to using checks, but that electronic health
records (EHR) is the trend. He asked whether EHR currently
envision solely electronic transfer of payments between patients
and insurers.
DR. BROOKS answered that the [PMAAG] currently has electronic
health records. Currently, PMAAG submits the vast majority of
their claims electronic so no paperwork is processed by most
entities or payers. Finally, most insurance companies
electronically remit payments and these payments are posted. He
emphasized that this process is totally transparent to his
patients. He reported that he is a participating provider with
[Premera] Blue Cross Blue Shield (PBCBS). He said that if every
company operated as PBCBS does that he wouldn't be concerned
with much of the bill; however, other insurance companies do
business in this state and "let's just say they are very
corporate." Thus some insurance companies have a "bottom line"
incentive in terms of how this check process will work. Every
company doing business in this state is not Premera Blue Cross
Blue Shield and is not represented by [patients] testifying
today. Some insurance companies are already sending out paper
checks and defying the state's law. He indicated he became
aware of this since some of his employees receive these checks
to be used to pay for their services and it is already affecting
providers. He said, "I think you can't take a quality company
like [Premera] Blue Cross Blue Shield and assume that everybody
that's doing business in this state is going to operate the way
Jeff Davis and his team of people would operate." He surmised
other companies operate in Alaska who may be far less ethical.
3:49:46 PM
REPRESENTATIVE SADDLER asked whether he is a member of the
PBCBS.
DR. BROOKS stated that he does not have any economic "skin in
the game" when it comes to PBCBS. He emphasized that there are
a lot of other insurers in this state that he would not sign a
contract with for anything, not because of economics, but due to
the horrible terms imbedded in their contracts.
REPRESENTATIVE SADDLER understood he is a participating member
of PBCBS. He understood he is a network provider. He asked
whether he is required to submit claims electronically.
DR. BROOKS agreed he is a network provider. He was unsure of
whether he is required to submit claims electronically, but that
is how he does business with them and PBCBS remits payments
electronically back to the Providence Anchorage Anesthesia
Medical Group (PAAMG).
3:50:38 PM
REPRESENTATIVE HERRON said he believes he understands his
concern. He said that what's being proposed is a paper process.
He asked whether within the electronic transfer a system could
be developed in which the patient must electronically
acknowledge that "this is true" and the care provider would then
be paid. He asked whether PAAMG would prefer that method.
DR. BROOKS was unsure of how that process would work. He said
that PAAMG receives hundreds of payments for hundreds of
different patients sent by different providers, including
Medicaid, Medicare, and PBCBS, among others. These payments are
posted in a mass production method. He was unsure how this
would function if he must wait for every patient to
electronically sign for the payments. He reported that PAAMG
takes care of numerous patients that don't even know how to use
e-mail, who will struggle to contend with another step in the
process. He indicated that the legislature authored the Health
Care Decision Act. The legislature is aware that guardians and
surrogates currently act on behalf of patients with limitations.
He was unsure about complicating the process for these patients
and how they would deal with the additional process.
3:52:33 PM
CHAIR OLSON asked him to assess the impact of HB 203 on his
"back office staffing."
DR. BROOKS said that [the proposed bill] would cost money since
it will require him to "chase patients" to bring him one payment
at a time and sign off on it. He anticipated he would need more
staff. For example, currently, significant problems exist with
payment of claims and processing of claims by Medicaid. He has
already had to expand his staff to contend with the problems.
When a health care financial cycle changes because the process
changes, like rolling out a new information system, they are
putting another step in the process, it will cost the providers
of the state money. He indicated that PAAMG is on par with
PBCBS. He said, "I promise you many other practices will have
to hire more people to deal with this and chase down patients
and try to get the check either mailed in or brought to the
office and get them signed appropriately."
3:53:43 PM
RICK WATSON, Chief Executive Officer, Orthopedic Physicians
Anchorage, stated that Orthopedic Physicians Anchorage (OPA)
consists of a group of 31 providers specializing in orthopedic
surgery and rheumatology in Anchorage. Most of the orthopedic
surgeons in Alaska, including his group, are non-contracted out
of network providers. The OPA has no contractual relationships
with commercial insurance carriers. Our concern with HB 203 is
primarily for the effect it will have on patients. When
patients come to the OPA for care, OPA offers to verify their
insurance benefits, obtain required pre-authorizations for them,
file claims with their insurance company for them, and notify
them when their insurance pays. He said, "We do this as a
courtesy." Insurance companies refuse to tell OPA what will be
paid in advance so OPA provides patients estimates and explain
the actual amount that they will owe will be unknown until the
insurance company pays. He acknowledged that patients are
understandably frustrated by this process and readily assign
their insurance benefit payments to OPA so insurance companies
will pay OPA directly so they do not have to deal with it.
3:55:29 PM
MR. WATSON stated that payments on claims are frequently delayed
for long periods as insurance companies routinely request more
and more information. Patients and insurance companies have
come to expect this from providers "even those of us who are not
contracted with them." Consequently almost no patients
understand this process or are prepared to do it on their own.
As a courtesy OPA deals with the providers to spare patients the
time, the frustration, and the worry, so they can focus on
getting better. He indicated that OPA consistently finds that
patients don't understand their insurance policies or the
contractual relationship they have with their insurance company.
Many patients mistakenly think that the insurance company will
pay it all and they will owe nothing. He said, "We are
dumfounded why insurance companies make so little effort to help
their enrollees understand these things and expect us to do the
explaining. We shudder to think what would happen to patients
if we billed them 100 percent direct and if they had to file
their own claims, and get their own preauthorizations and try to
get reimbursed." He offered his belief that HB 203 proposes to
strip patients of their right to assign insurance benefits to
their physicians by allowing insurance companies to write checks
to both the patient and the non-contracted provider, require co-
signatures on those checks and not require formal assignment of
benefits. Further, HB 203 makes the State of Alaska complicit
in misleading patients to think that a formal contractual
relationship exists between their insurance company and their
non-contracted providers when one does not exist. He offered
his belief that this will further confuse patients.
MR. WATSON said, "As referenced earlier by Mr. Sorrin, several
months ago federal Blue Cross stripped patients of their right
to assign benefits to their non-contracted providers." All
reimbursement checks are now sent directly to the patient and
not the provider as HB 203 proposes. Many of those patients
still don't understand why they are receiving those checks.
Many hold them not knowing what to do. Some patients misplace
the checks while others sense a windfall and cash the checks and
spend the money. When the bill arrives the patient no longer
has the funds to pay their physician. As a consequence of this,
non-contracted providers were forced to require up to 50 percent
advance deposits from those patients. He expressed concern that
with HB 203, many more patients will not have means to afford
such deposits and their care will be delayed. He related that
OPA has other concerns with HB 203. For example, if the
insurance company overpays he asked whether the patient will be
required to cosign the reimbursement check in the same way they
did with the initial payment. If the insurance underpays, will
the patient need to become involved to "make it right." He
asked for the reason that it is important to preserve patient
rights, to assign benefits to hospitals, but not their physician
or a surgery center. He offered his belief that HB 203 drives
another wedge between patients and their non-contracted
providers. It further increases patient confusion, draws
patients into administrative role they clearly don't want,
understand, or are prepared to take. Finally, it imposes a
financial risk on patients that could delay their care and
increase their debt. He thanked members for listening.
3:59:03 PM
CHAIR OLSON removed his objection. There being no further
objection, Version C was before the committee.
[HB 203 was held over.]
3:59:37 PM
The committee took a brief at-ease.
HB 282-LANDLORD AND TENANT ACT
4:00:54 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 282, "An Act relating to the rights and
obligations of residential landlords and tenants; and relating
to the taking of a permanent fund dividend for rent and damages
owed to a residential landlord."
CHAIR OLSON removed his objection. [Version O was before the
committee.]
4:01:24 PM
BRENDA HEWITT, Staff, Representative Doug Isaacson, Alaska State
Legislature, stated that this bill would provide landlords and
tenants a mutual basis for the condition of the property and
should alleviate some of the load on the legal system. The bill
would add protections for domestic violence victims, allow
landlords to require an additional pet deposit, changes methods
of returning damage deposits, and differentiates between service
and comfort animals. She highlighted that the sponsor worked
with Alaska Network on Domestic Violence & Sexual Assault
(ANDVSA) on an amendment. She indicated that landlords who fall
under federal regulations must follow federal law. She noted
that a wonderful booklet has been published to assist landlords
and tenants and she anticipated that it will incorporate HB 282
changes to the landlord tenant law. In response to a question,
she said Version O contains one amendment.
4:04:50 PM
REPRESENTATIVE SADDLER made a motion to adopt an Amendment 1,
labeled 28-LS0930\O.1, Bullock, 2/28/14, which read, as follows:
Page 12, line 28, following "housing":
Insert ";
(9) occupancy by an individual who is a
victim of trauma from a sexual assault or domestic
violence and who is receiving housing assistance from
a victim counselling center; in this paragraph,
"victim counselling center" has the meaning given in
AS 18.66.250"
REPRESENTATIVE OLSON objected for the purpose of discussion.
4:05:05 PM
MS. HEWITT stated that the [Alaska Network on] Domestic Violence
& Sexual Assault (ANDVSA) asked that the language be added. She
read Amendment 1. She explained that if a man and his children
are victims of domestic violence and need housing they can't be
housed at the [women's] shelter, but are placed in housing paid
for by the ANDVSA. In those instances the assistance will fall
under transient housing.
REPRESENTATIVE JOSEPHSON anticipated that these victims would be
released from their tenant contract.
4:06:11 PM
CHAIR OLSON removed his objection. There being no further
objection, Amendment 1 was adopted.
4:06:32 PM
PAMELA COOK, Property Manager, MB Management, stated that she is
a licensed realtor, but works as a property manager. She stated
that she supports the changes to HB 282. She related that she
specifically supports changing the security deposit return date
from 14 days to 30 days. She said that this typically spans two
weekends so the effect is 10 days - less if a holiday falls
during the week. This additional time will give the property
manager time to attend to any issues. For example, when the
property typically is checked during the inspection, the carpets
are clean and the place smells like cleaning products, which may
mask smoke or pet odors that reappear in a few days. In the
event that any carpets or dry wall need replacing it takes extra
time. She works hard to return the deposit prior to the 14
days. She has also returned deposits to military tenants at the
inspection if they are ready to deploy. Additionally, the
landlord tenant act allows tenants up to 15 days to remove
property. The water companies often don't read the meter to
generate bills until two weeks after the tenant leaves, which
means that the property manager will need to estimate the
billing. She related his understanding that many other states
have a 30-day deposit return requirement. She said it doesn't
mean property managers will hold the check for 30 days, but it
would allow them additional time to "do it the right way." She
supported the pet fee increase since so many people arrive in
Alaska with pets.
4:11:12 PM
MS. COOK said that requiring "professionally cleaned" carpets at
the end of tenancy has been challenged by tenants. She thinks
of this as being a common courtesy, but often the tenants don't
have the money since they are paying for security deposits and
other expenses. She said if the rentals are professionally
cleaned prior to occupying the rental, the tenants should
professionally clean the carpets when they leave. She offered
her belief that this is covered in proposed Section 13, too.
She understands normal wear and tear, but appreciated having a
definition in the bill.
4:12:20 PM
MS. COOK related she had questions on occupancy. For example, a
family of seven may wish to move into a one-bedroom apartment.
She acknowledged occupancy is covered but says "by applicable
law" and she could not find any reference in state and federal
law. She would like to be able to turn these tenants away
legally since seven occupants represent too many for a one-
bedroom apartment.
CHAIR OLSON suggested that perhaps this is covered by the city
ordinances. He recalled that the city and borough ordinances
cover this in Kenai and Anchorage.
4:13:17 PM
ANTOWETTE BREWER, Property Manager and Realtor, Coldwell Banker,
understood that getting out of the situation is important for
victims of domestic violence. She asked whether the landlord
will be provided paperwork, such as a police report if one party
is staying and one is leaving.
4:14:36 PM
CHAIR OLSON said he was not sure. He suggested that she raise
the issue with the sponsor.
MS. BREWER asked whether drug use was covered. She related a
scenario in which a furnace repairman reported when he fixed the
furnace he noticed drug paraphernalia and pipes. Tenants
typically are not forthcoming about drug use and will not admit
to it.
4:16:00 PM
KIRK MAYNARD, Owner and Broker, Coldwell Banker, stated he will
discuss his concerns about the amendment for early termination
for victims of domestic violence with the sponsor. He offered
his support for the testimony by Ms. Cook and said he has the
same concerns.
4:16:47 PM
RICHARD BLOCK, Manager, Mellen Investment Company, LLC, stated
that Mellen Investment Company manages over 110 properties. He
apologized since he recently discovered the bill, but he
immediately began discussions with the sponsor's staff. He said
has reviewed Version O. He indicated he has written a position
paper which he urged members to review [letter of March 14,
2014, 5 pages]. Although the bill has many provisions worthy of
consideration and adoption, a number of things raise serious
questions that warrant slowing down to work out some of the
"kinks." He offered to discuss 2 of 16 recommended changes. He
referred to proposed Section 6 of the bill, to the inclusion of
"normal wear and tear." The question becomes what is that
standard that landlords expect tenants to return the apartment
in at the time they vacate. He expressed concern over "normal
wear and tear" since it could become a lightning rod for
litigation. One person's idea of "destruction" might be viewed
as "normal wear and tear." He offered his belief that should
not be the standard. Under the bill, the landlord tenant law
would require a pre-tenancy condition statement signed by the
landlord and the tenant. He suggested that the "pre-tenancy
condition statement" becomes the standard for what the apartment
should look like at the end of the tenancy and make no allowance
for excuses that denting in the walls, holes in the doors, and
stains in the carpet are a result of reasonable wear and tear.
He said that there may be a way to fix the definition and
offered to work on this but he found it to be unsatisfactory.
4:20:19 PM
MR. BLOCK turned to the second item - the issue of victims of
abuse being able to unilaterally terminate a lease. He
understood the problem from the victim's perspective; however,
he is uncertain that it is the responsibility of the landlord.
The landlord has made the space available and the parties have
signed an agreement for the finance and occupancy obligations.
There shouldn't be any way a tenant can unilaterally abrogate
those responsibilities. He pointed out that if two people
occupy a residence and are buying the residence, but one person
has to leave [due to domestic violence], the departing occupant
cannot write a letter to the bank to indicate he/she will no
longer make payments on the note. The buyers must make payment
no matter what the situation. He acknowledged there could be
some harmonious mid-ground to find a way to allow an abused
tenant to leave; however, it must be with provisions that
maintain that tenant's legal obligation up until the termination
of the tenancy, including returning the property in its previous
condition. He stated while some landlords may have been
involved in the process that he did not see any indication that
the bill takes into consideration those with a financial
investment in the real estate. He would like an opportunity to
participate in that process.
4:22:44 PM
CHAIR OLSON said the sponsor is shaking his head yes, and
determining no one else wished to testify, closed public
testimony on HB 282.
[HB 282 was held over.]
4:23:46 PM
The committee took an at-ease from 4:23 p.m. to 4:26 p.m.
HB 230-AIDEA BONDS FOR PROCESSING FACILITIES
4:26:23 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 230, "An Act allowing the Alaska Industrial
Development and Export Authority to issue bonds for an oil or
gas processing facility; and creating the oil and gas
infrastructure fund to finance construction or improvement of an
oil or gas processing facility."
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, offered to
provide a brief refresher on HB 230. He stated that the purpose
of the bill is to increase the throughput in Trans-Alaska
Pipeline System (TAPS). He noted water constraints on some of
the processing facilities on the North Slope and difficulties
accessing others mean some small producers the ability to put
oil in TAPS. This bill provides a means to finance processing
facilities on the North Slope to increase the flow through TAPS.
4:28:07 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 1,
[labeled 28-LS1053\U.1, Nauman, 2/24/14], which read
Page 4, line 23:
Delete "loan"
CHAIR OLSON objected for the purpose of discussion.
4:28:18 PM
REPRESENTATIVE SEATON explained this will delete the word "loan"
that was inadvertently put into the Alaska Industrial
Development and Export Authority (AIDEA) revolving fund. It is
not a loan fund.
CHAIR OLSON removed objection. There being no further objection,
Amendment 1 was adopted.
4:28:50 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 2,
[labeled 28-LS1053\U.2, Nauman, 2/24/14], which read:
Page 5, line 2:
Delete "(1)"
Page 5, line 3:
Delete ";"
Insert "."
Page 5, lines 4 - 8:
Delete all material and insert:
"* Sec. 6. AS 44.88.900 is amended by adding a new
paragraph to read:
(18) "oil or gas processing facility" means
a project that is a facility that separates and cleans
crude oil or natural gas by separating impurities to
make the product suitable for transport through a
pipeline or a facility that chemically converts
natural gas to a liquid form; "oil or gas processing
facility" does not include a facility that uses phase
conversion of natural gas to liquid form."
Renumber the following bill section accordingly.
CHAIR OLSON objected for the purpose of discussion.
4:29:03 PM
REPRESENTATIVE SEATON explained this amendment moves the
definition of "Oil and Gas Processing Facility" from this
section statute to AIDEA's general statute. This change is
technical and does not change the definition.
CHAIR OLSON removed his objection. There being no further
objection, Amendment 2 was adopted.
4:29:37 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 3,
[labeled 28-LS1053\U.4, Nauman, 2/24/14], which read as follows:
Page 2, line 16, through page 3, line 12:
Delete all material and insert:
"* Sec. 2. AS 43.20.049(e)(3) is amended to read:
(3) "qualified oil and gas service industry
expenditure"
(A) means an expenditure directly
attributable to an in-state manufacture or in-state
modification of tangible personal property used in the
exploration for, development of, or production of oil
or gas deposits;
(B) means an expenditure for the
construction or improvement of an oil or gas
processing facility, flow lines, or other
infrastructure of the facility north of 68 degrees
North latitude;
(C) [, BUT] does not include components or
equipment used for or in the process of that
manufacturing or modification.
* Sec. 3. AS 43.20.049(e) is amended by adding a
new paragraph to read:
(4) "oil or gas processing facility" has
the meaning given in AS 44.88.168."
Renumber the following bill sections accordingly.
CHAIR OLSON objected for the purpose of discussion.
4:29:57 PM
REPRESENTATIVE SEATON explained that Amendment 4 deletes the
repetition of the tax credit language and refers to the tax
provisions in SB 21 and keeps the provisions the same.
4:30:12 PM
REPRESENTATIVE JOSEPHSON asked for explanation of Amendment 3,
which is "U.4." He asked for clarification of subparagraph (B)
in terms of its direct economic benefits to Alaskans.
REPRESENTATIVE SEATON responded that this envisions that the
components for a facility being constructed on the North Slope
might be manufactured outside the state and those components
would not qualify for tax credit. He clarified that if the
module was made in Alaska, it would qualify for tax credits, but
if it is made outside the state it would not qualify for the tax
credits. He characterized the construction process as being a
combination resulting in a completed processing facility.
4:31:35 PM
REPRESENTATIVE JOSEPHSON expressed concern that litigation might
arise from the suggestion that the tax credits should apply. He
wondered whether the tax credits are "tight enough" to reflect
the sponsor's intent. He asked whether he had any concern.
REPRESENTATIVE SEATON answered no. It seems to be well
understood that the goal is building a processing facility. He
highlighted that subparagraph (A) relates to tangible personal
property and wouldn't relate to the structure. Thus, it would
be necessary to segregate out parts of the processing facility.
He related that this doesn't relate to intangible property but
subparagraph (B) does include the entire processing facility;
however, it is limited to expenditures made in Alaska.
4:33:32 PM
REPRESENTATIVE JOSEPHSON, with respect to Amendment [3], said
that the existing statute, listed in subparagraph (A), relates
to in-state manufacture or in-state modification of tangible
personal property; however, subparagraph (B), does not do so.
He said he likes this bill, but is curious about that aspect.
TED LEONARD, Executive Director, Alaska Industrial Development &
Export Authority (AIDEA), Department of Commerce, Community, &
Economic Development (DCCED) related that this issue was
previously discussed, although AIDEA can't answer questions on
the tax credit itself. He recalled that the Department of
Revenue (DOR) previously testified. He clarified that this
statute is not under Alaska Industrial Development and Export
Authority (AIDEA).
4:34:57 PM
REPRESENTATIVE SEATON recalled that this was discussed with the
Legislative Legal and Research attorney. He stated that this
language was already adopted in SB 21 and is merely inserted in
this section of statute.
4:35:55 PM
The committee took an at-ease from 4:35 p.m. to 4:43 p.m.
4:43:50 PM
REPRESENTATIVE JOSEPHSON referred to Amendment [3], which
includes language for the definition of a qualified oil and gas
service industry expenditure. He asked when an audit or
accounting is completed whether it would be deemed legally
significant that [subparagraph] (A) refers to in-state
manufacturers and modification and [subparagraph] (B) doesn't.
4:44:35 PM
EMILY NAUMAN, Legislative Legal Counsel, Legislative Legal and
Research Services, stated that she was unsure from an auditing
perspective; however, she agreed that it is true [subparagraph]
(A) requires the taxable or tax credit event to occur in the
state whereas the new language in [subparagraph] (B) does not
require the activity to occur in state. She deferred to the DOR
to answer any questions on auditing.
REPRESENTATIVE SEATON pointed out that this refers to facilities
north of 68 degrees North latitude. He suggested that it could
specify Alaska, if necessary.
4:45:39 PM
REPRESENTATIVE SADDLER referred to page 2, line 2 [of Version U]
to a reference to the "pipeline." He asked whether it is
necessary to specify the TransAlaska Pipeline System on page 2
and again on page 4 to similar references.
MS. NAUMAN noted this is legislative intent language so it is
not legally binding; therefore, it might not need to be as
specific but it could be clarified.
REPRESENTATIVE SADDLER stated that the sponsor said it was
acceptable.
4:46:51 PM
REPRESENTATIVE SADDLER made a motion to adopt Conceptual
Amendment 1 on page 2, line 2, to change pipeline to "Trans-
Alaska Oil Pipeline" and any other place in the bill that it is
necessary to clarify the pipeline to the Trans-Alaska Oil
Pipeline.
REPRESENTATIVE SADDLER withdrew his amendment since procedurally
an amendment was already on the table.
4:47:31 PM
CHAIR OLSON withdrew his objection to Amendment 3.
There being no further objection, Amendment 3 was adopted.
REPRESENTATIVE SADDLER made a motion to adopt Conceptual
Amendment 1, on page 2, line 2, remove the word "pipeline" and
insert "Trans-Alaska Oil Pipeline" and again on page 2, line 4,
and any place else in the bill where it is necessary to make
that clarification.
There being no objection, Conceptual Amendment 1 was adopted.
4:48:39 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 4,
labeled 28-LS1053\ U.5, Nauman, 3/11/14, which read as follows:
Page 5, lines 14 - 16:
Delete "The processing facility, flow lines, and
other surface infrastructure for the facility shall be
used to secure bonds issued under this section."
Page 5, line 17, following "exceed":
Insert "the sum of"
Page 5, line 18:
Delete "may include"
Delete "other"
Insert "the"
Page 5, lines 19 - 22:
Delete "Notwithstanding AS 44.88.140, an oil or
gas processing facility, flow lines, and other surface
infrastructure for the facility constructed or
financed by the oil and gas infrastructure fund
(AS 44.88.168) are subject to taxes and special
assessments of the state or a political subdivision of
the state."
Page 5, following line 22:
Insert new subsections to read:
"(b) The bonds authorized in this section may be
(1) issued as either bonds that are a
general obligation of the authority or as revenue
bonds payable exclusively from the income and other
money derived from the oil and gas processing
facility, as the authority considers appropriate;
(2) used to provide financing under another
program of the authority.
(c) Notwithstanding AS 44.88.140 and
AS 29.45.030(a), an oil or gas processing facility,
flow lines, and other surface infrastructure for the
facility constructed or financed by the oil and gas
infrastructure fund (AS 44.88.168) are subject to
taxes and special assessments of the state or a
political subdivision of the state."
Reletter the following subsections accordingly.
Page 5, line 23, following "AS 44.88.095(g).":
Insert "The bonds authorized in this section may
not be considered in calculating the authority's 12-
month bonding limitation under AS 44.88.095(a)."
Page 5, lines 24 - 27:
Delete all material.
4:49:15 PM
CHAIR OLSON objected for the purpose of discussion.
REPRESENTATIVE SEATON stated that AIDEA recommended the language
in Amendment [4]. He explained that AIDEA was concerned that it
might limit revenue bonds; and depending upon the rates, it's
important to have the flexibility to issue revenue and general
obligation bonds as their normal process and AIDEA would use the
most financially beneficial bonding for the project.
4:49:59 PM
REPRESENTATIVE JOSEPHSON, with respect to Amendment [4], asked
about the first deletion. He related his understanding that
under existing law facilities could be used to secure bonds, but
now they cannot be used.
REPRESENTATIVE SEATON answered that is not intent of Amendment
4. He suggested the Legislative Legal and Research attorney
could further explain. He reiterated that the intention is to
insert suggested language from AIDEA to allow either type of
bonds to be used.
MS. NAUMAN responded that omitting the language does not mean
that the processing facility flow lines or other infrastructure
for the facility can't be used to secure bonds. Instead, this
section is silent and leaves the option open.
4:51:28 PM
REPRESENTATIVE JOSEPHSON assumed the idea is to give AODEA more
flexibility on financing.
MS. NAUMAN answered that is her best guess about the purpose.
4:51:56 PM
REPRESENTATIVE SEATON referred to a letter from Ted Leonard,
executive director of AIDEA stating what he believed
Representative Josephson just said.
4:52:18 PM
MR. LEONARD responded that the deletion is to assure that AIDEA
has the flexibility to use either GO bond or revenue bond. He
indicated that AIDEA's financial advisors indicate that rating
agencies and the parties buying the bonds would assume it
referred to a revenue bond based on the current language. Thus,
Amendment 1 deletes the language and inserts the new subsection
that indicates that AIDEA could fund this based on the revenues
and project. He referred to page 2, line 19 of Version U, to a
general description. He reiterated that the bonds issued could
be either GO bonds of the authority or a revenue bond.
CHAIR OLSON removed his objection. There being no further
objection, Amendment 4 was adopted.
4:54:58 PM
REPRESENTATIVE JOSEPHSON asked if the goal is to give credit on
corporate taxes but not production taxes, up to $10 million.
REPRESENTATIVE SEATON answered yes. He explained that Amendment
4 would give a 10 percent credit to stimulate in-state work and
faster "flow" into the Trans-Alaska Pipeline System (TAPS).
4:55:33 PM
REPRESENTATIVE JOSEPHSON asked whether the purpose of the bill
is to aid independent [producers] more than others.
REPRESENTATIVE SEATON answered that HB 230 is not a subsidy, but
the purpose is to incentivize a more rapid build out of
processing facilities to allow additional oil into TAPS. He
offered his belief that it may affect one project or more. He
related that he was aware of one smaller independent [producer]
that this could aid; however, there are other independent
[producers] and major producers that may have some use, as well.
The legislature has already adopted the in-state manufacture
credit. This ensures that it is applicable to processing
facilities to promote production to TAPS.
4:56:57 PM
REPRESENTATIVE CHENAULT expressed concern about tax credit. He
asked what else the bill will do, for example, does it eliminate
AIDEA's capacity for bonding.
REPRESENTATIVE SEATON answered no. He explained that AIDEA has
a $400 million general cap on bonds. This bill would establish
a separate $200 million for oil and gas processing facilities in
addition to the $400 million.
4:57:42 PM
REPRESENTATIVE CHENAULT asked whether AIDEA's bond capacity is
limited to $600 million or if it removes the limit for bonding
capacity for the processing facilities.
REPRESENTATIVE SEATON answered that it does not remove the
limit. It would give [AIDEA] a $200 million [bonding capacity]
for oil and gas processing facilities. He explained that AIDEA
could not take the $200 million and invest in some other kind of
project other than oil and gas processing facilities. He
acknowledged that it is someone limited in that respect, such
that it does not increase their general bonding limit; however,
removing the $200 million from their bonding authority would
"squeeze" many other projects around the state.
4:58:40 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 230.
[HB 230 was held over.]
4:59:26 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:59 p.m.