HB 47-DIRECT HEALTH AGREEMENT: NOT INSURANCE  3:04:03 PM CHAIR PRAX announced that the first order of business would be HOUSE BILL NO. 47, "An Act relating to insurance; relating to direct health care agreements; and relating to unfair trade practices." 3:04:47 PM REPRESENTATIVE KEVIN MCCABE, Alaska State Legislature, as prime sponsor, presented HB 47. He read the sponsor statement [included in the committee packet], which read as follows [original punctuation provided]: House Bill 47 establishes guidelines for direct health care agreements between medical providers and patients. Direct Health Care (DHC) is a subscription for health care services in which patients or employers pay primary care providers a flat, simple periodic fee in exchange for access to a clearly established broad range of health care services. DHC removes some of the financial barriers patients encounter in accessing routine primary care, including preventive, wellness, and chronic care services. With a DHC plan, health care providers aren't burdened with time-consuming insurance paperwork, leaving more time to spend with patients. Under DHC agreements (there are currently over 1,400 direct primary care practices in 48 states), patients typically get same day access or next day visits and the option to call or text their clinic 24/7. Health outcomes for patients improve under direct health as there is a focus on routine and preventative health care. Patients also feel less restrained from interacting with their provider and typically seek care before their symptoms become serious. House Bill 47 clearly spells out the elements of a DHC agreement and emphasizes consumer protections against discriminatory practices. Further, the bill clearly defines that Direct Health Care agreements are not insurance. They do, however, lower the hurdles to access for many Alaskans. Alaskans spend more on health care per capita than any other state in the union. At a time when many Alaskans fear the uncertainties of the economy, pandemic, and global instability, direct health care agreements can provide an option for quality healthcare at an affordable rate. Please join me in supporting this health care option for Alaskans. 3:06:18 PM CHAIR PRAX opened public testimony on HB 47. After ascertaining there was no one who wished to testify, he closed public testimony. 3:07:05 PM REPRESENTATIVE SADDLER directed attention to language on page 2, line 13, regarding complaints from a patient or representative of a patient, and he pointed out that this is the only instance where just the patient alone was referenced; all other references referred only to representative of a patient. He inquired whether the language was deliberately omitted in this one instance. 3:07:57 PM BUDDY WHITT, Staff, Representative Kevin McCabe, Alaska State Legislature, on behalf of Representative McCabe, prime sponsor of HB 47, referred to page 1, lines 5-11 of the proposed legislation, as this addresses direct health care agreements as something that a patient, or someone on behalf of the patient, can enter into. He said that language on page 2, line 19, directs what these health care agreements must include. He said the issue might be in the drafting, and how the law works, as someone may enter into a direct health care agreement on behalf of the patient, with the rights of the patient focused on in the mechanism of the agreement itself. He requested that Peter Diemer further elaborate. 3:09:33 PM PETER DIEMER, Lawyer, Clayton and Diemer, LLC, concurred with the explanation. He listed subsection (b), paragraphs (2) through (5) as using different terms. He concurred with the Legislative Legal Service's methodology, as it fits in the framework, and the language allows a complaint to be brought forward by either the patient or the patient's representative. 3:10:38 PM REPRESENTATIVE SADDLER asked about language allowing providers to charge for services that are not part of the periodic fee. He offered his understanding that should a health care agreement be terminated under HB 47, the one who initiated the termination would have to pay a prorated cost of the monthly service fee, as well as additional fees for services not included. He further offered the understanding that direct health care agreements would cover all services. He asked whether a person would be obligated to pay any fees on services outside of the agreement. MR. WHITT answered that a direct health care agreement would charge a fee for a specified number of services. He said there could be services provided by a health care provider that are outside of what is included in the set fee. He invited other speakers to address the health care model. 3:12:26 PM MR. DIEMER responded that, within the framework of the legislation, there would be a requirement that all the services included in the periodic fee must be stated within the agreement. He said this ensures the patient knows the scope of the services to be received for the periodic fee. He added that on the occasion where the medical service required falls outside of the agreement's scope, it would be considered a traditional fee for service. 3:13:26 PM WADE ERICKSON, MD, Capstone Family Medicine, explained that the agreements would be written in such a way to include laboratory services to a certain amount, and if the patient requires more specialty services not available in the clinic itself, then these would be billed to a laboratory company and passed through to the patient. 3:14:59 PM REPRESENTATIVE MINA asked for an outline of the cost-saving aspects of the bill. REPRESENTATIVE MCCABE posed the following hypothetical: a person wants to pay for [the continuation of health coverage] through the Consolidated Omnibus Budget Reconciliation Act (COBRA), where COBRA family services would cost more than $1,000 a month. He opined that with a direct health care agreement, this person could establish an agreement with a medical clinic at a rate of $100 a month, covering everything in the agreement. He suggested the savings would be immense for a person who lost their job, or a younger person who cannot afford medical care. 3:18:25 PM DR. ERICKSON added that the direct health care payment model allows for access to primary care in the Lower 48, as well as dental and optometry, at a reasonable monthly rate. He said that, while it is not insurance, it is another method of payment for certain services; it is recommended that people still apply for insurance or catastrophic plans, on top of the direct plan. He said the savings to the health care would be through heightened access to primary care, and costs would be decreased in light of the decreased severity of disease, as it may be discovered sooner. REPRESENTATIVE MINA questioned how many providers would be interested in pursuing such agreements. 3:21:30 PM REPRESENTATIVE MCCABE responded that he has spoken to three different providers who are interested. DR. ERICKSON explained that anytime there is an additional option for patients to pay for services, there will be an uptick, and each practice will determine what its capabilities are. He suggested that some are already making these agreements "under the radar;" therefore, the proposed legislation would allow providers who have not been doing this to offer a similar service. He stated that this payment model would allow physicians or practitioners to skirt standard fee-for-service administrative burdens. REPRESENTATIVE MCCABE offered his understanding that as of 2020, 1,969 practices in 48 states are doing direct primary care, with physicians or groups of physicians owning all these practices. Furthermore, 32 states had legislation like HB 47 in 2020, with 12 pending. 3:25:16 PM REPRESENTATIVE RUFFRIDGE read page 4, line 25, of the proposed legislation, which read as follows: "health care business" means a business licensed by the state that is 25 entirely owned by health care providers; REPRESENTATIVE RUFFRIDGE asked whether this would be limiting to the state, as not all health care businesses are owned by health care providers. MR. DIEMER answered that the definition of health care business was intentional, as it is designed to be for businesses completely owned by health care providers and is accusatory to any type of business ownership structure. He said the definition ensures that health care businesses that offer direct health care agreements and are owned by licensed health care providers would be subject to the state's professional licensing and board regulations. He explained that this adds a layer of patient protection because all the providers are subject to such regulations. REPRESENTATIVE RUFFRIDGE shared that in his district many clinics were small and operated by a couple of individuals; however, over time a larger hospital system acquired the clinics. He asked whether a hospital system that owns separate clinics operating primary care would be prohibited from offering a direct health care agreement. MR. DIEMER responded that the answer depends on the ownership structure of the hospital. He said that some hospitals are physician owned, while some are operated by nonprofit corporations and do not have a physician-ownership structure that would meet the proposed definition. 3:29:45 PM MR. WHITT directed attention to page 4, line 28 of the proposed legislation, which gives the definition of "health care provider" in AS 21.07.250, as follows: (6) "health care provider" means a person licensed in this state or another state of the United States to provide medical care services; MR. WHITT said that medical care services are not limited just to a doctor, as someone who is licensed to provide medical care services is considered the medical care provider and would be able to enter into agreements. 3:30:43 PM REPRESENTATIVE SUMNER asked whether the term "person" in this context would include corporate personhood. 3:31:05 PM CHAIR PRAX added to the question by posing a hypothetical in which individuals not licensed as health care providers form a corporation or a partnership but employing a licensed health care provider. He asked whether the bill would allow this situation. 3:31:50 PM REPRESENTATIVE MCCABE answered that the language was put in place as patient protection. He said a concern was raised at a previous meeting that businesses, as they grow and become moneymaking businesses, would be taken over by big health care consortiums. He stated that HB 47 would seek to return to the physician-patient relationship rather than "corporate medicine." He surmised that the language was added into the proposed bill for this reason. 3:33:39 PM CHAIR PRAX offered his view that the language opens the door to more providers, and if it is not opening the door wide enough, the language can be fixed later. 3:33:53 PM REPRESENTATIVE SADDLER sought confirmation that the bill would allow the patient or the provider to cancel an existing health care agreement on a no-fault basis. 3:34:19 PM REPRESENTATIVE MCCABE responded in the affirmative and asked Mr. Diemer to explain. 3:34:43 PM MR. DIEMER confirmed that Representative Saddler is correct, in that either party can terminate the agreement with the appropriate notice. Regarding the composition of a health care business, he said it is restricted to natural persons who are licensed health care providers. REPRESENTATIVE SADDLER asked about the suggestion that it is possible to have a direct care service agreement, as well as catastrophic medical insurance. He asked how many providers are likely to have patients who are dually insured. DR. ERICKSON responded that the majority of those in the Lower 48 are doing health care this way, where there is a big plan on top and a direct health plan underneath. 3:36:58 PM REPRESENTATIVE MINA asked what the status would be of catastrophic care in Alaska if the state were to implement a direct health care model. REPRESENTATIVE MCCABE answered that he has a neighbor who has a catastrophic policy and is interested in [direct health care] plans because he recognizes that he does not have any health coverage. 3:38:10 PM MR. WHITT pointed to a study by the John Locke Foundation [included in the committee packet] regarding direct primary care. He stated that the study relates to implementation and results [of direct health care] in North Carolina. He conveyed the study's findings regarding an average direct primary care agreement, as follows: 55 percent are those that have one chronic disease and substantial insurance coverage and are on a direct care agreement and 44 percent are considered low risk and have a care agreement as a supplement to their current insurance. He referenced the Primary Institute of Public Policy Research, which covers research on direct health care agreements. He stated that it has found that those most impacted by direct health care agreements are low-income working families. REPRESENTATIVE MINA asked whether the implementation of direct health care agreements in other states has changed the rate of people shifting from the individual market to these agreements. MR. WHITT responded that he has not seen any indication that there has been full-scale movement from the individual market to direct health care agreements. He said that data suggests that such agreements are made as add-ons to existing insurance policies. REPRESENTATIVE MINA commented that, as a benefit of an agreement, the contract incentivizes consumers to have more access to a provider. She asked for a comparison between those who have agreements and do annual visits with those who use a traditional fee-for-service model. 3:43:37 PM DR. ERICKSON explained that in the Lower 48 the impetus is on the provider to have the patients be seen as quickly as possible for an evaluation, as this would get the person assessed early in the contract. He pointed out that direct primary care providers in the Lower 48 reach out proactively so that patients would visit sooner and start their care. 3:45:56 PM MR. DIEMER said that deductibles in insurance are designed to be implemented to reduce consumption; direct health care is the opposite, as it is designed to decrease consumption of health care for a fixed cost, while increasing access. He explained that those who have a high deductible insurance plan would benefit from these agreements, as a host of services can be provided to families at a price not even close to the deductible. Furthermore, in the event of a catastrophic injury, people would then have catastrophic insurance in place. He said that insurers embrace the model because it improves access and results in a healthier patient population, thereby reducing claims. He elaborated that the patient benefits from health care access at a fixed fee for a defined scope rather than a fee-for-service with the uncertainty of cost. 3:48:40 PM CHAIR PRAX opined that the bill would correct the misconception of insurance, in that, insurance is financial protection, and since people are choosing lower and lower deductibles, it becomes prepaid medical; therefore, driving up the cost of medical care because of the extra paperwork. He said that the health insurance contracts separate that, making insurance return to being financial protection, and the contract becomes a lower way to provide the same level of medical service. 3:49:45 PM REPRESENTATIVE RUFFRIDGE moved to report HB 47 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 47 was reported out of the House Health and Social Services Standing Committee.