HB 92-DIRECT HEALTH: NOT INSUR; ADD TO MEDICAID  4:01:30 PM CO-CHAIR ZULKOSKY announced that the next order of business would be HOUSE BILL NO. 92, "An Act exempting direct health care agreements from regulation as insurance; establishing a direct care payment program for medical assistance recipients; and providing for an effective date." 4:01:44 PM ERIN SHINE, Staff, Representative Jennifer Johnston, Alaska State Legislature, paraphrased the Sponsor Statement [Included in members' packets], which read: HB 92 amends the state insurance code by exempting direct care agreements from the definition of insurance. It also, includes conditional language for the Department of Health and Social Services to apply for a State Plan Amendment with the Centers for Medicare & Medicaid Services to allow for direct care agreements for and, if approved, requires that providers accept Medicare and Medicaid patients up to 20 percent of their patient population. This bill does not mandate that direct care practices be formed; it only exempts them from regulation by the division of insurance. Direct care agreements consist of a practitioner or group of physicians who contract with individual patients to provide care outlined in a contract for a monthly, quarterly or semiannual fee. The relationship between physician and patient is contractual and the contractual relationship can be altered or amended by the same means that already govern existing contractual relationships. Through this arrangement patients gain access to as much care as they need. Under existing care models, a patient sees a doctor and then the doctor bills the patient's insurance. In a direct care practice, no bill is submitted to a third-party payer. The only money exchanged is the patient's monthly, quarterly or semi-annual membership payments. This arrangement liberates the physician from all involvement with insurance and are relieved from paperwork required by payers. Physicians have more time to spend on direct patient care. The American Academy of Family Physicians "Principles for Reform of the U.S. Health Care System" holds that: "Less complicated administrative systems are essential to reduce costs, create a more efficient health care system, and maximize funding for health care services." HB 92 creates an environment where a new market for the delivery of health care can exist and grow by allowing direct care agreements to create a less complicated administrative system. 4:04:20 PM REPRESENTATIVE DRUMMOND asked if the requirement that doctors accept Medicare and Medicaid patients for up to 20 percent of their patient population would increase the availability of primary care providers to those patients. MS. SHINE offered her belief that this would create an avenue to access care and that a provider with a direct care agreement practice would be one more provider accepting Medicare and Medicaid patients. 4:05:14 PM REPRESENTATIVE JACKSON asked if this offered practitioners and physicians the opportunity to set up a co-op for affordable care between the physician and the patient. MS. SHINE replied that it allowed patients to pay a revolving fee to a provider or a group of providers for access to care as outlined in a contract. She pointed out that this was not insurance and that the proposed bill exempted them from the definition of insurance. REPRESENTATIVE JACKSON stated her support for legislation that would allow physicians to have direct payment from patients as an alternative for those without insurance. She asked about making this mandatory for physicians to accept Medicaid and Medicare patients. MS. SHINE said that providers who accepted Medicare and Medicaid patients could continue as status quo, whereas the proposed bill would allow a provider to set up a different form of health care delivery. This would allow a contract directly with the patient and not with a third party. The proposed bill stated that a physician who chose to set up this type of practice must accept Medicare and Medicaid patients. 4:08:01 PM REPRESENTATIVE CLAMAN expressed concern that the proposed bill would provide access to middle class whereas those with "much tighter financial situations really would never be able to take advantage of this kind of situation." He asked how this would work with medical savings accounts. MS. SHINE offered her belief that this was an affordable way for the patients in 25 states to access primary care. She opined that Alaska would be the first state to open-up for other forms of care, and not direct that this be primary care. She said that the use of medical savings accounts was a grey area and that there were testifiers who could more adequately answer the question. REPRESENTATIVE CLAMAN asked what areas beyond traditional primary care did the bill propose to offer. MS. SHINE explained that this had been left broad to determine whether this was a good model for access to care in a more efficient manner. She offered her assumption that most providers would set up an agreement practice for primary care as most general surgery could not charge enough on a monthly basis. REPRESENTATIVE CLAMAN asked if there were specialties more likely to be interested in this beyond primary care. MS. SHINE offered her belief that some states were currently trying to expand the scope beyond primary care. 4:12:18 PM REPRESENTATIVE DRUMMOND asked about statistics, history in the states where the program is allowed, and the cost to consumers for the direct care agreements. She asked if those other states with direct care agreements contained the Medicare and Medicaid percentage requirement. MS. SHINE offered her belief that about 25 states had direct primary care agreements, although she did not know anything about the cost of care. In response, she opined that, although no other states included the proposed Medicare and Medicaid percentage requirement, that was not to say that Medicare and Medicaid patients did not access this form of care. REPRESENTATIVE DRUMMOND offered her belief that it was difficult to find primary care physicians that accepted Medicare in Alaska, even as Medicare accepting physicians were much more available in other states while being reimbursed at a better rate. She opined that this could also be true for Medicaid. 4:14:35 PM LEE GROSS, MD, Epiphany Health, reported that he was a full-time practicing family doctor. He stated that this model could simplify health care delivery, reduce the cost of care, lower barriers to access, reduce physician burn-out, and restore the central focus of the health care system to the patient. He shared the history of his practice, noting that the name, Epiphany Health, evolved from the question for why to insure primary care as this created far too many barriers between the doctor and the patient. He stated that health insurance was being used incorrectly. He declared that routine health care should be made affordable for everyone, with predictable, price transparency, that insurance should be a hedge against catastrophic loss, and not to pay for basic, essential care. He reported that, in 2010, his practice had created a membership based primary care program for patients aged five years and older with a flat monthly fee of $60 per month for an adult, which covered all the services his practice provided. He added that a child was $25 per month, with each additional child in the family for $10 per month. He pointed out that there were not any co-pays for any services which could be done in the office. He explained that, in order to practice outside a traditional third-party payment system, he had reached out to independent labs, image services, and others to secure wholesale prices. He compared the prices of these services to those through a traditional office visit. He reported that, currently, there were about 1,000 of these practices with a direct primary care model. He added that some of these practices also offered wholesale dispensing of medications to allow affordable access. He reiterated that there were 25 states with legislation to protect this practice model, pointing out that no states had regulated against the provision of direct primary care services. He noted that he did oppose provisions in the proposed bill that set quotas for Medicare and Medicaid, pointing out that no other states set these quotas, and that portion of the proposed bill would be the first in the nation to mandate participation in Medicare and Medicaid. He stated his enthusiastic support for the rest of the proposed bill. 4:20:04 PM CO-CHAIR SPOHNHOLZ asked how the rates were developed. DR. GROSS replied that, as the cost for routine care was cheaper than a cell phone plan, they had determined that this was a reasonable price. He added that this had also stabilized the finances for his practice. He noted that prior to shifting his practice model, his office was not a Medicaid provider, but with his new primary care model, he did have Medicaid patients as they could afford the services provided. CO-CHAIR SPOHNHOLZ asked about the risks to the consumers if a patient became too expensive to care for. DR. GROSS replied that, under existing law, a doctor could drop a patient for any reason, adding that the provision in the proposed bill which allowed for cancellation by either party with two months' notice was longer than the notice which existed in current law. He pointed out that the model was designed to attract people with chronic diseases, heavier utilizers, although it was not always the same utilizer each month. He stated that these were the people a practice should keep. CO-CHAIR SPOHNHOLZ asked how many patients he had let go in the last year. DR. GROSS replied that he had not terminated anyone, and that he had a three month wait list for new patients to his practice. CO-CHAIR SPOHNHOLZ asked how this practice model made money without culling the expensive patients. DR. GROSS explained that this practice was not financially viable as a fee for service insurance-based practice because of all the expenses necessary to provide medical care through the insurance companies, which included proprietary software, staffing, and the other 60 percent of overhead necessary to bill the insurance companies. He noted that his overhead was now some of the lowest in the country, between 20 - 30 percent. He shared some of the costs, noting that there was little incentive to cull the high utilizers. 4:25:20 PM DR. GROSS, in response to Representative Claman, said that the main office for his practice was in North Fork, Florida, with an expansion office in rural Florida where there was a 50 percent uninsured rate with a median income of $25,000 per year. He added that they had integrated with the critical access rural hospital an employee benefit into their health plan as an option to a traditional health plan. He reported that 80 percent of the hospital employees signed up for membership with his practice, a projected savings of more than $1 million in the first year for the hospital while also reducing employee premiums 20 percent and eliminating their network restrictions, co-pays, and deductibles for routine care. REPRESENTATIVE CLAMAN asked how many physicians were in his main clinic. DR. GROSS replied that there were two doctors and a nurse practitioner. In response to Representative Claman, he acknowledged that he was one of the doctors. REPRESENTATIVE CLAMAN asked about Medicaid payments. DR. GROSS explained that his practice did not take any money directly from Medicaid as the Medicaid patients paid his practice directly. He reported that, because the State of Florida had a Medicaid share of cost with a high patient deductible which reset every month, the patients could not afford access to chronic care management. REPRESENTATIVE CLAMAN asked if the State of Florida offered any reimbursement to Medicaid recipients for payment to his practice. DR. GROSS replied that it was most likely easier for Medicaid recipients to pay his monthly fee out of pocket instead of trying to work through the Medicaid system for routine primary medical services. He declared that it was difficult to find a doctor in Florida who took Medicaid. REPRESENTATIVE CLAMAN asked if the monthly fee included prescription medications. DR. GROSS said that his practice encouraged patients to have insurance for non-routine and catastrophic expenses. He reiterated that the monthly fee only included services provided in his office. He reported that some practices did offer medications as a path through cost directly to the patient, and he shared the prices of some generic drugs used to manage chronic conditions. He noted that often it was more expensive for a patient to use their insurance to pay for the medications instead of paying cash. REPRESENTATIVE CLAMAN asked if medication services as a pass- through cost did not add to the base monthly fee and was only reimbursed to his office. DR. GROSS agreed that there would be a pass-through cost for the wholesale cost for the medication. REPRESENTATIVE CLAMAN asked how many providers similar to his clinic were in Florida. DR. GROSS offered that there were about 60 providers, and that the legislation had only just passed about one year prior. He added that the Florida legislature was already looking to expand this. 4:31:21 PM REPRESENTATIVE JACKSON stated that she thought this was a great idea and asked if the current laws under the Patient Protection and Affordable Care Act (PPACA) recognized this process. DR. GROSS said that Section 1301 of the PPACA did contain a provision that specifically allowed direct primary care with a wrap around catastrophic plan to qualify as minimal coverage in order to avoid the tax penalty. 4:32:58 PM REPRESENTATIVE DRUMMOND asked if the prescriptions for a Type II diabetic counted as a heavy utilizer in his practice. DR. GROSS said that the Type I and Type II diabetics were the ideal patients in his practice because they came in for visits "five, six, seven times a year." He noted that, as the A1C test for the three-month average blood sugar monitoring, was administered in his office there was no charge for the point of care testing. He explained that these patients could be managed over the phone, by text, or by e-mail. He reported that one diabetic patient could no longer afford to see the endocrinologist because of the $600 per visit. REPRESENTATIVE DRUMMOND asked about the cost of the insulin, as it had skyrocketed in the last few years even though the medication had not changed. DR. GROSS expressed his agreement that the new pricing for insulin was a national problem. He said they did the best they could given the available resources and would often work directly with the manufacturers. He noted that sometimes, given the income level of his patients, they did not have to pay anything for medications. REPRESENTATIVE DRUMMOND asked how diabetic patients could afford the best insulins. She asked if these prescriptions were covered by insurance. DR. GROSS said that patients who did have insurance would use it to pay for the prescriptions, although his practice would work with the manufacturers for patients without insurance. He reported that Type II diabetics required more time to teach them lifestyle changes and wean them away from the medications. He declared that it took 3 minutes to prescribe a medication but 30 minutes to not prescribe a medication. REPRESENTATIVE DRUMMOND asked if the manufacturers supplied free insulin forever to a Type I diabetic who could not live without insulin. DR. GROSS replied, "at the moment, they do. Forever, I can't certainly tell you that." He explained that, if a patient was not eligible for a government program such as Medicare, Medicaid, or benefits, and they were not presently getting health insurance, then, in most cases they would qualify for free insulin based on income. He expressed his desire to see federal changes to the pharmacy benefits management as it could not be fixed at the direct primary care level. 4:40:34 PM CO-CHAIR ZULKOSKY shared concern that an exemption for direct care agreements from insurance regulations would remove consumer protections, and ultimately limit patients to contractual items contained in the care agreements. She asked about the regulation of rates and the guaranteed coverage allowed through the various care agreements ensuring that clients who may get sick outside the contracts were able to receive coverage. DR. GROSS explained that they were not asking for physicians to not be regulated, but that physicians should not be regulated as insurance companies. He declared that physicians were very heavily regulated and that would not change for direct primary care. CO-CHAIR ZULKOSKY asked if regulations of these direct care agreements were managed through contractual law in the State of Florida. DR. GROSS replied that this law managed the actual agreement; whereas, the conduct of the practice, the practitioner, and the delivery of care was monitored through the State Medical Board. CO-CHAIR ZULKOSKY asked if the Division of Insurance had conducted an analysis for the impact on consumer protections in Alaska with the exemption of direct care agreements from insurance regulations. 4:43:06 PM ANNA LATHAM, Deputy Director, Juneau Office, Division of Insurance, Department of Commerce, Community & Economic Development, said that the division had not analyzed any impact to consumers should these agreements occur. She directed attention to a report by the Office of the Insurance Commissioner in the State of Washington. She said that Washington had been groundbreaking in direct care practices, with 41 direct care practices currently exempted from the insurance code. She noted that direct care and concierge medicine had been prevalent in Washington since the early 2000s and were exempted in 2007. She reported that part of the regulation required an extensive report to the Office of the Insurance Commissioner. She suggested that this report could have some analysis for the consumer impact. She pointed out that these agreements were very transparent for what services were provided. CO-CHAIR ZULKOSKY asked for the history to the management and regulation of rates and coverages within the direct care agreements. She suggested that they were managed largely by the provider groups and not through regulation by the Division of Insurance. MS. LATHAM explained that the rates were set by the practices. She offered some information to the variance of the rates in the past two years. From 2016 - 2018, 11 practices increased fees, 6 decreased fees, and 5 offered no changes in fees. According to the Direct Primary Care coalition, the median fee was about $70 per person per month, or $165 per month for a family of four. CO-CHAIR ZULKOSKY asked about the percentage of average increase. MS. LATHAM said that she could provide the Office of the Insurance Commissioner report. REPRESENTATIVE CLAMAN asked if Health Savings Accounts could be used to pay the fees. MS. LATHAM offered her belief that the use of Health Savings Accounts was not allowed for these plans. She noted that there had been some federal effort in 2017 to allow for this but the bill did not pass. DR. GROSS expressed his agreement that Health Savings Accounts could not be used to pay for direct care contracts, as they were not eligible under federal code. DR. GROSS, in response to Representative Jackson, said that the Health Savings Accounts had to be used with a qualifying high deductible health plan. He pointed out that these high deductible health plans could not cover direct primary care as it was first dollar coverage. He offered his belief that most people believed that direct primary care membership should qualify under the Internal Revenue code. 4:49:34 PM CO-CHAIR ZULKOSKY opened public testimony. 4:49:58 PM CO-CHAIR ZULKOSKY closed public testimony. [HB 92 was held over.]