HB 176-DIRECT HEALTH AGREEMENT: NOT INSURANCE  3:50:15 PM CO-CHAIR SPOHNHOLZ announced that the next order of business would be HOUSE BILL NO. 176, "An Act relating to insurance; relating to direct health care agreements; and relating to unfair trade practices." 3:50:57 PM REPRESENTATIVE SARA RASMUSSEN, Alaska State Legislature, as prime sponsor, introduced HB 176, which would establish direct health care agreements for medical providers to provide direct primary care to patients. She emphasized that direct health care agreements do not take the place of insurance. 3:52:21 PM CRYSTAL KOENEMAN, Staff, Representative Sara Rasmussen, Alaska State Legislature, presented the sectional analysis of HB 176 on behalf of Representative Rasmussen, prime sponsor, which read as follows [original punctuation provided]: Section 1: AS 21.03.025 Direct health care  agreements. Adds a new section to AS 21.03 creating direct health care agreements.  Subsection (a) outlines that a direct health care agreement is between a health care provider and a government entity, individual patient, employer of a patient, or a representative of a patient. The health care agreement must: ? Describe the services to be provided by the health care provider; ? Specify the fees associated with the agreement; ? Prominently state that the agreement is not health insurance and that it does not meet health insurance mandates that may be required by federal law; and ? Prominently state that patients under the agreement are not entitled to the protections under existing state insurance statutes.  Subsection (b) allows for the policy to be terminated after a 30-day written notice from either party.  Subsection (c) provides that the direct health care agreement and health care services provided under the agreement are subject to other consumer protection statutes and regulations. Section 2: AS 45.45.915 Direct health care  agreements. Adds a new section under Trade Practices.  Subsection (a) prevents health care providers from declining or terminating direct health care agreements based on a patient's protected class under federal or state law that prohibits discrimination.  Subsection (b) provides that a provider may decline or terminate a direct health care agreement if the provider is unable to provide the level or type of care the patient requires. The provider shall ensure the patient is transferred to a health care provider who is able to provide the level or type of care required and agrees to provide said care.  Subsection (c) provides definitions for a "direct health care agreement" and a "health care provider." Section 3: AS 45.50.471(b) Unlawful acts and  practices. Updates definitions for "unfair methods of competition" and "unfair or deceptive acts or practices" to include violating direct health agreements under AS 45.45.915. 3:55:40 PM REPRESENTATIVE SNYDER noted that the sponsor statement uses the term "direct primary care" but the text of the proposed legislation uses the term "direct health care", which she thought may broaden the care provided beyond primary care. REPRESENTATIVE RASMUSSEN responded that it was her understanding that a prior version of the proposed legislation was considered during the Thirty-First Alaska State Legislature but that there was the need to expand the proposed legislation to include other healthcare providers such as chiropractors and dentists. MS. KOENEMAN clarified that both terms are used interchangeably within the healthcare industry. CO-CHAIR SPOHNHOLZ recalled understanding that the restriction to primary care was the policy decided upon during the Thirty- First Alaska State Legislature, and that the sponsor statement is not consistent with the text of the proposed legislation. 3:57:41 PM REPRESENTATIVE SNYDER asked whether additional regulation would be needed to enforce and monitor the implementation of the program under the proposed legislation. REPRESENTATIVE RASMUSSEN deferred to Ms. Koeneman. 3:58:30 PM MS. KOENEMAN replied that Representative Rasmussen's staff is working on the questions of implementation and enforcement. 3:59:28 PM RENEE GAYHART, Director, Division of Health Care Services, Department of Health & Social Services, said that Medicaid is considered to be "comprehensive health coverage," and providers bill Medicaid for services. She said that the idea is for Medicaid to be exempt from HB 176. CO-CHAIR SPOHNHOLZ expressed that there seems to be no clear regulatory authority, and if the proposed legislation is to cover areas of health care beyond primary care, then every board that regulates a health care provider could be involved. 4:00:55 PM LORI WING-HEIER, Director, Division of Insurance, Department of Commerce, Community, and Economic Development, expressed agreement that various boards would be involved in regulation and oversight of the provisions under HB 176. She said that the Special Litigation and Consumer Protection section of the Office of the Attorney General would likely be involved to oversee consumer protections. 4:02:05 PM REPRESENTATIVE NELSON asked for an explanation of how an individual would use the health care agreement. 4:02:44 PM WADE ERICKSON, MD, Owner, Capstone Clinic, explained that a direct health care agreement is an alternate payment model. A patient pays a defined amount of money on a subscription basis, and the health care provider provides the defined service. He said that primary care has a fee of approximately $100 per month, and the service includes "relatively unlimited access" with reduced additional costs. He said that the provider's overhead is reduced by approximately 25 percent, and hospitalizations, as well as visits to emergency rooms and urgent care centers, have been reduced significantly. He said the likely users of such agreements would be the uninsured population or those with high-deductible insurance plans, and some states are testing the model for their Medicaid programs. 4:05:28 PM REPRESENTATIVE NELSON asked about the difference between a direct care agreement and urgent care. DR. ERICKSON explained that urgent care is a type of primary care, usually offered by primary care physicians and defined by "open access" and extended hours. He said that agreements may or may not include urgent care, and that the defined agreement is an important aspect of the proposed legislation. 4:07:03 PM REPRESENTATIVE MCCARTY asked whether a statute would be required in order to participate in direct care agreements. DR. ERICKSON responded that's correct. He said that the current regulations under AS 21 are vague enough that it could be construed that the provisions are regulated by the Division of Insurance. The purpose of the proposed legislation is to exclude that type of regulation, he said, because direct care agreements are intended to not replace or be a form or insurance. REPRESENTATIVE MCCARTY asked about the difference between paying "out-of-pocket" and having a direct care agreement. DR. ERICKSON answered that the difference is access. The current system is a "fee-for-service" model, existing on a cash basis. When insurance companies are involved, he said, the price offered to the insurance company is different from the price offered to the patient, especially when factoring in copays, coinsurance, and deductibles. REPRESENTATIVE MCCARTY asked whether direct care agreements could free health care providers from being locked into contracts with insurance companies. DR. ERICKSON replied that there are several ways in which providers and patients could enter into direct care agreements. He said that Capstone Clinic would be working on a hybrid model, accepting Medicare and Medicaid patients, and other types of patients. He said that insurance companies mandate that providers cannot have concurrent agreements with insured patients. REPRESENTATIVE MCCARTY directed attention to the text of the proposed legislation, page 1, lines 10 through 14, which read as follows: The health care provider may not assess charges or receive compensation other than the periodic fee for health care services and additional fees specified in the agreement. However, a patient may submit a health care insurance claim and the health care provider may assess charges or receive compensation for health care services not included in the agreement. REPRESENTATIVE MCCARTY expressed that the text may give the provider the option to bill insurance, and he mentioned "superbills." DR. ERICKSON replied that an insurance policy and a direct care agreement may cover different services, and that a patient may be reimbursed by insurance for services not covered by the direct care agreement. REPRESENTATIVE MCCARTY said that he went to Costa Rica to have a hip replacement. He then summed up his understanding of the concept of direct care agreements, and asked what services would be offered. DR. ERICKSON responded that HB 176 is, from a contractual standpoint, intentionally vague. He said that the goal of the proposed legislation is to define direct health care agreements outside of the provisions under AS 21, subsequently allowing the free market to both define the services, and determine who provides them. He then addressed Representative Snyder's earlier note about consumer protections, and he clarified that the Department of Law would handle consumer protections, and individual provider governing boards would be in the charge of the practices. 4:14:51 PM REPRESENTATIVE SNYDER pointed out that some states exempt direct primary care agreements from the statutory insurance code. She asked whether exempting direct care agreements from the provisions under AS 21 would streamline the regulatory process. MS. WING-HEIER responded that doing so would make the process more complicated for the providers; they would have to file a certificate of authority with the state, provide financials and operating practices, and be subject to taxes. 4:17:05 PM CO-CHAIR SPOHNHOLZ opened invited testimony on HB 176. 4:17:30 PM DR. ERICKSON, having previously responded to to questions, now testified in support of HB 176. He said that the proposed legislation would benefit employers and patients, especially those with high-deductible insurance plans, and that it would increase access to care for individuals experiencing financial barriers. 4:19:01 PM REPRESENTATIVE MCCARTY asked whether the agreements would be put in place by the clinic or by a third party. DR. ERICKSON replied that he believes most individual clinics, like his, would be handling their own agreements. REPRESENTATIVE MCCARTY asked, "What's a bonding element to know that those facilities are going to be good for ... the money that's being paid out?" DR. ERICKSON asked for clarification. REPRESENTATIVE MCCARTY asked how to ensure that a facility will provide the service for which it's being paid instead of taking money from consumers and leaving the state. DR. ERICKSON replied that agreements have termination clauses. He said that if a clinic doesn't have a good reputation, it won't get many enrollees in its plan. 4:21:17 PM CLINT FLANAGAN, MD, Founder & Chief Executive Officer (CEO), Nextera Healthcare, described a history of patients experiencing difficulty in accessing health care, as well as paying high co- pays or deductibles, and physicians spending time on administrative paperwork instead of taking care of patients. He said that his clinics began instituting care agreements, in which patients' primary and urgent care needs would be met in exchange for a regular, monthly fee. He explained that insurance could still be used for catastrophic health needs such as an emergency room visit or surgery, but regular care was handled through the agreement. He said that Nextera Healthcare has 30 clinics in Colorado and nearly 80 clinics across the country, and that approximately 84 percent of its members are employers. DR. FLANAGAN pointed out that insurance is not billed for primary care. He said that in a fee-for-service practice, a doctor might see 35 patients per day, while in a care agreement practice a doctor might spend up to an hour with a patient, seeing 10 to 15 patients per day. He said that because fee-for- service doctors see more patients and don't spend as much time with them, those patients tend to see specialists more often and to have more visits to the emergency room or urgent care. He pointed out that the term "direct primary care" was defined by primary care physicians, and he stressed that a direct primary care agreement is not health insurance. He said that the doctors are board certified and licensed through the state, and that he's never heard of a doctor taking money for an agreement and then leaving the state. He said that the client retention rate of over 95 percent. 4:26:43 PM REPRESENTATIVE SNYDER asked for a breakdown of who ultimately pays for the agreements. DR. FLANAGAN responded that most of the care recipients at Nextera Healthcare have memberships through employers, and that the employers typically pay 100 percent of the cost for the employee, often including dependents. He said that approximately 20 percent of the members pay for their own memberships out of pockets, and that they are often insured, with high-deductible plans. He said the average patient hits their insurance deductible once every seven years, so the care agreement members use the agreement for regular primary care and urgent care, and they use their insurance for any catastrophic health issues. He said that their doctors are available for same-day urgent care appointments, as well as after-hours care and telehealth. 4:29:14 PM BRANDON OUSLEY, Chief Executive Officer (CEO), Anchorage Fracture & Orthopedic Clinic, shared that he is an advocate for health care savings. He said that direct care agreements allow management of health care facilities to budget, provide better service to employees, and track productivity. He said that he sees direct care agreements as proactive, prepaid medical care, and he expressed that surgery outcomes for direct primary care patients are better than those for fee-for-service patients. He said that patients in direct primary care agreements are better able to maintain their health care and remain more engaged than fee-for-service patients, who would need to pay a co-pay for every visit. 4:32:46 PM REPRESENTATIVE MCCARTY stated that he is trying to understand the details. He expressed the opinion that by having insurance, someone is "prepaying" for health care. He asked how a direct primary care agreement would help an individual manage their health. MR. OUSLEY explained that when health care is prepaid, the level of engagement is different, and the patient and provider are more of a team. A patient who has regular insurance, he said, may hesitate to make a doctor's appointment due to high copays or unmet deductibles. With direct primary care, it's much easier to text the clinic or set up a telehealth appointment when the bill has already been taken care of, he said. He said that surgical outcomes tend to be better because the level of engagement is higher; after a surgery the doctor and patient are able to check in often. 4:36:19 PM CO-CHAIR SPOHNHOLZ added that surgeries have improved outcomes because people with direct care agreements address their underlying health issues, not because the surgeon uses the agreements. MR. OUSLEY replied, "That is correct." 4:36:53 PM REPRESENTATIVE MCCARTY asked how direct care agreements benefit providers. 4:37:47 PM DR. FLANAGAN explained that direct care agreements mean higher fixed revenue. In a fee-for-service insurance setting, he said, the type of revenue makes it very difficult to run a clinic. During COVID-19, he said, primary care practices saw a 50 to 75 percent decrease in revenues because providers were not seeing patients face-to-face. In fixed revenue circumstances, he said, providers are spending time with patients instead of on the administrative work that goes with dealing with insurance companies. CO-CHAIR SPOHNHOLZ noted that instead of spending time on all of the tasks that surround billing, the clinic just charges a credit card every month. 4:40:04 PM REPRESENTATIVE MCCARTY expressed frustration with insurance billing. 4:40:27 PM CO-CHAIR SPOHNHOLZ announced that HB 176 was held over.