COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 256(HES) "An Act relating to regulation of managed health care and allowing physicians to collectively negotiate with a health benefit plan that has substantial market power." This was the second hearing for this bill in the Senate Finance Committee. BECKY CERNEY, Director of State Legislation, American Medical Association based in Chicago, Illinois testified to the alarming trend with the increased number of unfair contracting provisions that hamper the ability for physicians to provide proper care. She said some of the contract provisions related to the ability to refer patients to specialists, administer certain medications and interpreting what medically necessary care is in the best interest of the patient. Ms. Cerney shared that the efforts to correct these provisions have been unsuccessful resulting in 13 states, including Alaska, that have introduced legislation to permit physicians to enter into contract negotiations as a collective group. Ms. Cerney told the Committee it might hear from representatives of the insurance industry saying that physicians are already permitted to negotiate over contracts. That is not true, she stressed, citing that two or more physicians are prohibited under the anti-trust law from coming together to negotiate over contracting provisions. She suggested the representatives could be referring to the ability of independently practicing physicians to come together. She remarked that this provision was ineffective because it asks physicians to give up "their practice autonomy" for the purpose of coming together to discuss these matters. She said that the cost of forming these units was over $1 million. Ms. Cerney asserted that physicians needed to be allowed another way to negotiate for provisions that are most affective for their patients. She stated that this bill would enable physicians to deliver the care that is most proper to their patients. Ms. Cerney spoke to the strong trend in the nation with to adopt statewide regulations to address this matter. She added that six additional states were "watching and waiting" and that this was a good opportunity for Alaska to help its patients. Senator Green asked if any practices currently in place in Alaska were based on the Medicare model with restrictions on provided services, unauthorized prescriptions, etc. Ms. Cerney would have to defer to someone in Alaska's medical industry. Senator Green commented that a major concern of many physicians related to Medicare restrictions and she wanted to know if the insurance companies' restrictions were nearly as egregious as those were. Ms. Cerney spoke to her experience with Medicare provisions and stated that said some are much more favorable than those imposed by some private sector insurance providers. Co-Chair Parnell noted the primary criticism of this bill is that the health care costs would rise and asked the witness to address the matter. Ms. Cerney asserted that argument is raised for every legislation pertaining to managed care regulation. She admitted there is a provision in this bill that would submit the oversight entity, the attorney general, to impose a fee to cover the administrative review. If this bill were to result in premium increases, she said she would be "astounded" and that other threats of increased costs have proven untrue. Co-Chair Parnell asked which states or studies should the Committee refer to with regard to increase costs. Ms. Cerney answered there are a number of studies that came out of the managed care liability legislation that can be applied to other types of legislation. She cited a study for the Kaiser Family Foundation that projected cost increases associated with liability legislation would be between three to 13 cents per member per month. She said the actual outcome of the liability legislation were even less because there has been less litigation than expected. Senator P. Kelly asked what would be the affect on cost of a state action doctrine that did not include fees He had heard that a similar doctrine had been attempted elsewhere. Ms. Cerney replied that it was impossible to separate the two issues from any bill. She explained that whenever contractual items were negotiated, it would be necessary to look at the contract in its entirety. She stated there are a number of instances of the Federal Trade Commission (FTC) pursues physicians for negotiating over an individual provision because it is assumed that any negotiations would affect the physicians' reimbursement. Co-Chair Torgerson noted those on teleconference. Co-Chair Torgerson asked Senator P. Kelly to prepare a committee substitute that incorporates all five submitted amendments rather than having the Committee act upon each one. [Copy of amendments on file.] Co-Chair Torgerson ordered the bill HELD in Committee.