SB 83-TELEHEALTH REIMBURSEMENT RATES 4:14:49 PM CHAIR DUNBAR reconvened the meeting and announced the consideration of SENATE BILL NO. 83 "An Act relating to health care insurance; relating to insurance reimbursement for health care services provided through telehealth; and providing for an effective date." 4:15:08 PM SENATOR MATT CLAMAN, District H, speaking as sponsor of SB 83 introduced the legislation: [Original punctuation provided.] Thank you Chair Dunbar and members of the Senate Health & Social Services Committee. For the record this is Matt Claman, Senator for District H in West Anchorage. Senate Bill 83 was brought forward by health care providers in my district who provide both in-person and telehealth services to Alaskans across the state. SB 83 will ensure pay parity for telehealth, requiring health care insurers to reimburse at the same payment rate for telehealth services as in-person care. Telehealth reduces barriers to care and allows patients to receive timely and convenient care from the comfort of their own homes. In Alaska, barriers to care affect individuals in rural areas, those with disabilities, and those with limited transportation options. Telehealth is especially important for chronic disease management, mental health services, and preventative care. The COVID-19 pandemic highlighted the critical need for telehealth access, prompting the Centers for Medicare & Medicaid Services (CMS) to temporarily implement telehealth parity. While this federal mandate has expired, some telehealth provisions remain in place. What was once a temporary need is now standard practice, and many states have made efforts to solidify permanent access to these services. Over 33 states have enacted similar legislation to SB 83 to ensure fair reimbursement for telehealth services. Alaska's Medicaid program already has telehealth pay parity. This legislation builds upon that existing framework to require the same parity by private insurers. Passage of this legislation will expand access to care, improve and maintain quality of care, and incentivize continued telehealth utilization. 4:16:50 PM SARENA HACKENMILLER, Staff, Senator Matt Claman, Alaska State Legislature, Juneau, Alaska, Provided the sectional analysis for SB 83. Senate Bill 83  Sectional Analysis Version N  Section 1 AS 21.42.450. Coverage for telehealth. Establishes a new section requiring health care insurers to reimburse health care providers for telehealth services at the same rate as for in-person services. Section 2 AS 21.42.599. Definitions. Adds new paragraph (9) for the definition of "telehealth" as given in AS 47.05.270. Section 3 AS 29.10.200. Limitation of home rule powers. Adds new paragraph (68) "AS 29.20.420 (health care insurance plans)" to the list of provisions which apply to home rule municipalities. Section 4 AS 29.20.420. Health care insurance plans. Establishes a new section requiring a home rule or general law municipality offering a group health care insurance plan to meet the requirements of AS 21.42.450 (Section 1). Provides the definition of "health care insurance plan" as given in AS 21.52.500. Section 5 AS 39.30.090(a). Adds a new subsection (13) requiring a policy or policies of group insurance covering state employees and other specific employee groups under the Department of Administration to meet to the requirements of AS 21.42.450 (Section 1). Section 6 AS 39.30.091. Authorization for self- insurance and excess loss insurance. Amends this statute to require those employers with a self-insured group health insurance plan covering active state employees to meet the requirements of AS 21.42.450 (Section 1). Section 7 AS 21.42.422(b)(2). Coverage for telehealth. Subsection (b), paragraph (2) is repealed. Section 8 Establishes an effective date of July 1, 2025. 4:19:09 PM SENATOR TOBIN asked what SB 83 repeals on page 5, line 2. 4:19:36 PM MS. HACKENMILLER replied that Section 7 updates a definition and in Section 2 points to a different statute. SENATOR TOBIN asked for the definition. MS. HACKENMILLER provided the definition of AS 47.05.270(e), "In this section, "telehealth" means the practice of health care delivery, evaluation, diagnosis, consultation, or treatment, using the transfer of health care data through audio, visual, or data communications, performed over two or more locations between providers who are physically separated from the recipient or from each other or between a provider and a recipient who are physically separated from each other. 4:21:02 PM SENATOR HUGHES recalled that during the COVID-19 pandemic, legislation addressed telemedicine by allowing its use and possibly establishing payment parity. She expressed uncertainty about whether the change long-term. She asked if anyone could clarify what was ultimately decided. SENATOR CLAMAN stated that he did not specifically recall what was decided regarding telehealth under COVID-19 regulations but offered to follow up. He noted that a telehealth bill sponsored by Representative Spohnholz passed recently and described it as the first significant telehealth legislation from the last session. He mentioned that his office had introduced a related bill focused on specialized care through coordinated care teams for individuals with amyotrophic lateral sclerosis (ALS) and similar disabilities. He characterized SB 83 as a follow-up or adjustment to earlier telehealth legislation and part of broader efforts to promote medical innovation and cost savings. SENATOR HUGHES expressed concern about the cost structure of telehealth services. She stated that while telehealth was a valuable innovation during COVID-19providing convenience, access, and the hope of affordabilityshe is disappointed it has not lowered healthcare costs as expected. She emphasized that, unlike in-person visits with higher overhead costs such as staff, facilities, and maintenance, telehealth appointments require fewer resources. She questioned why telehealth services are being reimbursed at the same rate as in-person care and urged further explanation to help her understand the justification for payment parity. 4:24:47 PM SENATOR CLAMAN stated that invited testimony would be provided by economist Dr. Rebitzer who authored the book "Why Not Better and Cheaper?" He said Dr. Roberts is better qualified to address the question. 4:25:10 PM CHAIR DUNBAR announced invited testimony on SB 83 and asked that testifiers keep in mind the question regarding telemedicine costs. He said he would also like to know which states have addressed telehealth similar to SB 83. 4:25:55 PM JAMES REBITZER, Professor of Economics, Management and Public Policy, Boston University, Boston, Massachusetts, testified by invitation on SB 83 and said: [Original punctuation provided.] My name is James Rebitzer and I am the Peter and Deborah Wexler Professor of Economics, Management and Public Policy at the Questrom School of Business, Boston University. I am also a Research Associate at the National Bureau of Economic Research. My area of research and teaching is primarily in the area of health economics. In addition to teaching university classes in applied microeconomics, managerial economics and health economics, I have published many academic papers about the economics of the U.S. healthcare system. I also recently published a book on innovation in healthcare published by Oxford University Press. It is called Why Not Better and Cheaper? Healthcare and Innovation. I am here to testify about a new piece of legislation regarding reimbursement for telehealth services. The bill requires a health insurer to reimburse for telehealth services on the same basis and at least at the same rate as comparable healthcare services provided in person. Let me begin with my conclusion: This is a reasonable piece of legislation worthy of your support. However, my reasoning may be of more interest to the committee than my conclusion. As an economist who studies management, I normally don't think that a state legislature should determine how much private insurers contract to pay for services. As a rule, legislatures lack key information and incentives and move too slowly to set relative reimbursement rates. Better to leave that to negotiations between insurers and providers. However, telehealth may be the exception that proves the rule. Mandating equal payment can help solve an economic problem that private parties can't solve on their own. Like every new treatment modality, telehealth requires providers to develop new capabilities to deliver distant care. Payers may be willing to pay something to induce providers to make these costly investments, but will they pay enough on their own? Maybe not. In our fragmented payment system, each provider treats patients from many different payers: Medicare, Medicaid, The State of Alaska, Private Insurers, Private Employers. And this diversity of payers creates the opportunity for free-riding. 4:28:41 PM MR. REBITZER continued his testimony: Suppose a provider deals with 10 different payers, each paying $50 for a telehealth visit. Suppose providers are happy to invest adequately in telehealth capacity at this price. What would happen if one payer decided to pay $40 for a telehealth visit? Providers might still be willing to deliver telehealth care to this payer because they have already borne the upfront cost of developing the telehealth capacity. The insurer who pays $40 would, in effect, be "free- riding" on the other payers' generosity. That would be annoying to the other payers. If the rest followed suit, the result would be an inadequate investment in telehealth capacity or, in the extreme case, no investment at all. You can see where this is going. The proposed bill can help because it makes it harder for a single insurer to free-ride on other payers because it makes it more costly to cut rates on telehealth. There is no guarantee that the "parity" required by the bill gets relative telehealth reimbursements exactly right, but it makes free-riding less likely. Since the cost of delivering telehealth care is partly determined by what else providers could do with their time, parity also has the advantage of not making telehealth more expensive relative to in-person care. 4:30:10 PM MR. REBITZER continued his testimony: Although I am not an Alaskan, I am impressed by the vast distances healthcare providers must travel to reach all Alaskans. The cost of underinvestment in and under provision of telehealth is especially severe for Alaska, so the proposed legislation's value is likely to be high. 4:30:40 PM SENATOR HUGHES questioned the claim that providers must make costly investments in telehealth capacity. She stated that most clinics already have broadband and secure systems, which are not comparable to purchasing expensive medical or surgical equipment. She argued that parity concerns should focus on consistency among telemedicine payers rather than equating telemedicine with in-person visits, since the two have different costs and overhead. She concluded that she remained unconvinced by the reasoning for payment parity between telemedicine and in- person care, as the modalities differ significantly. 4:33:26 PM MR. REBITZER explained that the true cost of telehealth is not only the setup, training, and maintenance of systems but also the opportunity cost of what providers are not doing while delivering telehealth. He stated that if compensation for telehealth falls too far below that of other services, providers may stop investing attention and resources, leading to infrastructure decline. He warned that this free-riding problem could reduce telehealth capacity in Alaska. He emphasized that, given Alaska's large distances and the high value of telehealth, reducing capacity would be a serious mistake. 4:35:15 PM SAMMY MACK, Co-owner, Alaska Telepsychology, Anchorage, Alaska, testified by invitation on SB 83. She said she is a clinical psychologist and supports SB 83: [Original punctuation provided.] In 2018, our company became the first private Alaskan mental health practice to offer mental health services through HIPAA encrypted videoconferencing. Over the past 7 years we have provided psychotherapy, psychological testing, and psychiatric care via Telehealth and also maintain an in-person office space for patients if they come to town. Our practice includes clinical psychologists, social workers, professional counselors, marriage and family therapists, and a psychiatric nurse practitioner. We are in-network with most major insurance providers, and nearly all of our providers have a waitlist-- the demand for our services is great. For many, Teletherapy is their only option for accessing timely, high-quality mental health care. For most, paying out- of-pocket is a financial impossibility, and therefore insurance billing is a must. Unfortunately, many Alaskan mental health providers are requiring payment in full at the time of service because negotiated insurance reimbursement rates have failed to keep up with the rising cost of living and inflation. A further complication is a lack of parity between Telepsychology and in-person services. Providers are disinclined to provide Telehealth services when these are reimbursed at lower rates than in-person care. Inadequate Telehealth coverage drives patients toward large, nationwide online therapy platforms, where they experience inconsistent care and a revolving door of therapists unfamiliar with the unique challenges of life in Alaska. 4:37:22 PM MS. MACK added that this relates to what Senator Hughes' mentioned regarding seeing more patients on telehealth. Many national platforms crank out many sessions in a day and provide inadequate care because they are overburdened. 4:37:44 PM MS. MACK continued reading her testimony: [Original punctuation provided.] Pay parity will allow providers to offer high-quality, accessible mental health services without financial disincentives. Without pay parity, we risk losing providers to cash-pay models or losing them altogether - a particularly acute problem in rural Alaska where rates of suicide and abuse are among the highest in the nation. As a lifelong Alaskan, I am proud to own Alaska Telepsychology and to provide services to Alaskans across our state. Please support pay parity so that Alaskans from Savoonga to Dillingham to Sitka, Alaskans regardless of location, can access high- quality mental health care moving forward. Thank you for your time and consideration. Please let me know if you have any questions. 4:38:45 PM CHRISTINE SAGAN, Nurse Practitioner, Vitae Integrative Medical Center, Anchorage, Alaska, testified by invitation on SB 83. She said she is in strong support of the bill and commented that her experience as a nurse practitioner since 2007 and in private practice since 2015 showed the importance of telemedicine, especially during COVID-19. She explained that reimbursement parity matters because, while care quality and effort remain the same, insurers such as Blue Cross paid 40 percent less for telemedicine visits, which forced her clinic to bring patients back in person despite ongoing pandemic concerns. She noted that telemedicine improved compliance, reduced no-shows, increased access, and lowered indirect costs for patients by saving travel time and expenses. She emphasized that clinics still carry overhead costs such as staff, electronic medical records, billing, and facilities, and argued that paying 40 percent less for telemedicine undermines continuity of care in Alaska, where distance makes access difficult. 4:44:48 PM CHAIR DUNBAR thanked the testifiers, acknowledging the time and cost burdens for medical providers. He noted that he had answered his own earlier question regarding other states' practices. He stated that a document provided in the bill packet showed 21 other states required payment parity for telehealth services on a permanent basis, according to the American Medical Association. He clarified that this information was from 2023 and may have changed. He invited Ms. Wing-Heier to come forward to answer questions. 4:45:24 PM LORI WING-HEIER, Director, Division of Insurance, Department of Commerce, Community, and Economic Development, Juneau, Alaska, answered questions on SB 83. She put herself on the record. CHAIR DUNBAR stated that he did not see any statements from the division, aside from a possible zero fiscal note. He asked what the anticipated impact on rates would be from a bill like SB 83. 4:45:53 PM MS. WING-HEIER stated that conversations with insurers revealed a disconnect between providers and payers. She explained that the insurers the division spoke to believe they are paying at parity for telehealth and in-office visits, with only minor exceptions. She acknowledged that Senator Claman had received constituent concerns about a lack of parity but said she had not been able to find exactly where it is. She added that both commercial insurers affirmed parity and neither submitted a letter of opposition to the bill. CHAIR DUNBAR observed that if the bill had a significant financial impact, insurers would likely have submitted comments, but they had not. He noted this could also suggest the bill simply codifies existing practice. He then asked whether there could be any unintended consequences from passing the bill. 4:47:06 PM MS. WING-HEIER stated she could not predict future actions by insurers but emphasized the state's ongoing effort to reduce health care costs. She noted that parity is not currently in statute and acknowledged uncertainty about the source of the reported disconnect. She referenced a testifier's claim of a 40 percent difference in payment and expressed interest in reviewing the billing code used to investigate the discrepancy further. She reiterated the difficulty in forecasting how insurers might respond when negotiating future rates with providers. 4:47:46 PM CHAIR DUNBAR noted that at least 21 states had adopted payment parity legislation as of 2023. He asked if there were any known trends or impacts on rates in those states following the adoption of similar legislation. 4:48:00 PM MS. WING-HEIER stated that parity for telehealth and behavioral health is an ongoing issue in many states. She confirmed awareness that several states have adopted similar legislation. She added that there have been no reports of negative impacts from states that have already passed such laws. 4:48:16 PM CHAIR DUNBAR asked whether the concern mentioned referred to a lack of payment parity or to the payment parity laws themselves. 4:48:22 PM MS. WING-HEIER clarified that the concern is about a lack of payment parity, which is being addressed in various states. 4:48:35 PM SENATOR TOBIN stated that her main question was what problem SB 83 aims to fix, a question more appropriate for the bill sponsor than the division. She noted that both the Division of Insurance and the Department of Retirement and Benefits submitted zero fiscal notes. She sought clarification that the SB 83 would have no impact on AlaskaCare and no fiscal impact to the state unless renegotiation occurs. 4:49:06 PM MS. WING-HEIER stated she could not speak officially for the Department of Retirement and Benefits but, based on her conversations with them, they indicated they are currently paying at parity. She acknowledged the possibility of some losses within the plan but said the Department believes it is meeting the intent of the statute. 4:49:37 PM SENATOR HUGHES asked whether there was a rough estimate of the percentage of appointments conducted via telehealth versus in person. She suggested that if telehealth visits were reimbursed even 10 percent less than in-person visits, AlaskaCare could potentially reduce health care costs. She noted this could lead to savings for both consumers and the State of Alaska. She asked if such a percentage is known and whether it is reasonable to assume that lower telehealth reimbursement could help reduce overall costs. 4:50:44 PM MS. WING-HEIER responded that she did not currently have data on the percentage of telehealth visits compared to in-person visits but would work to gather that information. She emphasized that the division is actively seeking ways to reduce health care costs without harming the overall system. She stated that any opportunity to save money is being considered for inclusion not only in plans regulated under Title 21 and the Division of Insurance but also in AlaskaCare and other plans across the state. She acknowledged that Alaska's health care costs are high and that employers are struggling to manage them. 4:51:31 PM SENATOR HUGHES posed a hypothetical policy scenario in which telehealth visits are reimbursed at 90 percent of in-person visit rates. She asked whether, if private insurers and AlaskaCare adopted this approach, it would result in reduced health care costs for Alaskans. 4:51:58 PM MS. WING-HEIER stated her belief that such a policy would have to result in reduced health care costs. 4:52:15 PM CHAIR DUNBAR concluded invited testimony on SB 83. 4:52:37 PM SENATOR CLAMAN responded to questions raised by Senator Hughes and offered a perspective that differed from Ms. Wing-Heier's. He stated that while paying telehealth at 90 percent of in- person rates might appear to save money if focusing solely on per-visit costs, this view overlooks the broader economic impact. He referenced testimony from Alaska providers who emphasized that telehealth improves access and consistency of care, which can reduce costly emergency and complex care. He argued that paying parity enables preventive care that lowers total health care spending, and that analyzing costs per visit without considering overall patient outcomes and system-wide expenses presents a flawed understanding. 4:54:31 PM CHAIR DUNBAR stated that affordability is a key priority for both the committee and the administration regarding health care costs, but noted that quality, effectiveness, and availability are equally important. He emphasized that the testimony from the second provider highlighted availability as a critical benefit of telehealth. He shared that delays in accessing care can negatively affect both physical and psychological health. 4:55:16 PM SENATOR HUGHES emphasized the value of preventive care, noting that early intervention reduces long-term health care costs. She acknowledged that parity in telehealth increases patient compliance, particularly in remote areas, but pointed out that this also increases provider income, as more visits are completed and reimbursed at full rate. She expressed concern that this dynamic may unintentionally increase overall health care spending in Alaska. She underscored the financial burden on businesses, school districts, and families, and urged the committee to prioritize consumer affordability. She advocated for a compromisesuch as reimbursing telehealth at 90 or 95 percentto maintain access while achieving some cost savings. 4:58:27 PM CHAIR DUNBAR held SB 83 in committee.