HB 158 CIVIL LIABILITY CHAIRMAN ROBIN TAYLOR called the Senate Judiciary Committee meeting to order at 1:30 p.m. All members were present. The committee took up CSHB 158(FIN) am(ct. rls pfld)(efd fld). REPRESENTATIVE BRIAN PORTER, prime sponsor of HB 158, responded to four amendments proposed by committee members. Senator Ellis' amendment would relieve a hospital from indemnification against contract employees if those employees do not have a minimum of $5 million in liability coverage. To his knowledge, hospitals already require such coverage, the amount of coverage required is something that will work itself out among professionals. SENATOR TAYLOR commented that several hospital administrators are supportive of the amendment because of the Jackson v. Powers case. There is no current established policy requiring independent contracting doctors to carry a specified level of malpractice coverage and in some hospitals independent contracting doctors have no coverage. Without the amendment, the bill would grant immunity to hospitals but does not require independent contracting doctors to maintain liability coverage. Number 080 REPRESENTATIVE PORTER explained that when this issue was considered earlier, it was concluded that most doctors have their own discipline and are not subject to the supervision of a hospital unless the hospital actually employs them. It would be difficult to hold somebody accountable for something they did not have the supervisory right to dictate policy to. SENATOR TAYLOR stated the other alternative is to address whether hospitals should be granting privileges. Most hospital administrators want to retain that ability. REPRESENTATIVE PORTER felt it is appropriate for hospitals to be responsible for providing reasonable care and granting privileges, which is required in the bill. REPRESENTATIVE PORTER addressed Senator Taylor's amendment requiring mandatory arbitration in certain circumstances. He stated that concept was considered earlier in the process with no objection. The idea was dismissed only to keep the bill manageable in length and complexity. REPRESENTATIVE PORTER explained that Senator Adams' first amendment would allow the court to consider allocating a portion of the fault to a person not named as a party to the suit. If that person was outside of the statute of repose, the apportionment of fault would be allocated among other parties. SENATOR TAYLOR stated he refers to it as the "empty chair." REPRESENTATIVE PORTER felt it does not need to be empty since the plaintiff has the opportunity to sue whomever he or she chooses. SENATOR TAYLOR said that is true unless the plaintiff is banned from doing so by law. This bill will dramatically change the law on the subject of architects and engineers. He explained that if a party is 80 percent liable, but outside of the statute of repose, the plaintiff could only recover 20 percent of the damages. Whenever possible, the defendants will blame the "empty chair." Number 147 REPRESENTATIVE PORTER discussed the review of this provision last year. The possibility that the design fault would be noticed after eight years, making no recovery possible, was considered unlikely. After eight years, maintenance completed by the owner would be the responsibility of the owner, as well as any damages that occur. SENATOR TAYLOR disagreed unless this amendment is adopted, because the owner will try to put the responsibility on the designer. REPRESENTATIVE PORTER felt the amendment would make the intent of the original draft clear. REPRESENTATIVE PORTER took issue with the last amendment, which contains an effective date requiring a ten percent reduction in insurance rates. He felt such a goal to be unreasonable because the ongoing cases will affect insurance rates for years to come. Additionally, many of the provisions in the bill would be challenged for constitutionality while the ongoing cases are resolved. No insurance company would substantially reduce rates without resolution of the legal questions. Number 178 SENATOR ADAMS, sponsor of the rate reduction amendment, stated the intent of the amendment is to assure a reduction in insurance rates by providing a timeline to review whether the bill does what it was designed to do. SENATOR TAYLOR commented that this bill has been advertised, especially to small businesses statewide, as a way to reduce rates. Because this bill makes major changes to help the small business owners obtain affordable insurance, this amendment would hold the insurance industry accountable. Regarding Representative Porter's argument that ongoing cases will affect the rates during this time period, the insurance industry is a claims-made industry. The amendment would only affect claims made after the effective date of this Act. The insurance companies have already calculated actuarially how much money each one of the provisions in this Act will save them. That computation should be reflected immediately in claims made in the future. Ongoing cases have already been reserved for under existing law. Number 207 SENATOR MILLER disagreed because the ten percent discount would take effect four years before the Act takes effect. If the rates could be discounted ten percent without the Act in effect, there would be no need for the Act. SENATOR ADAMS explained the amendment would ensure the Act would only take effect if the rates have decreased ten percent. SENATOR MILLER felt if enactment of the Act is the catalyst for rate reductions, it must take effect before rates can decrease. The amendment requires a rate decrease under the existing system before the Act can take effect. Number 229 REPRESENTATIVE PORTER noted the cost of litigation for unsettled cases will still need to be borne by the insurance companies, therefore they will have future costs associated with unsettled claims. Future claims would be affected if the industry were assured that all of the provisions of the bill would remain in place, and not be legally challenged and successfully dropped. That concern could limit their ability to reduce rates. SENATOR TAYLOR asked if there is any percentage rate reduction Representative Porter would be comfortable with. REPRESENTATIVE PORTER was opposed to any required rate decrease for the following reason. Over an eight year period, California adopted a comprehensive tort reform bill. The insurance rates in that state, during that period, increased 80 percent. Insurance rates across the rest of the United States increased 200 per cent. In Alaska, the increase was closer to 500 percent. Although there was not a reduction in rates in California, there was an overall reduction in the percentage increase. Number 273 TERESA WILLIAMS, representing the Department of Law, summarized CSHB 158 (FIN)am from a legal perspective. Sections 2 and 4 remove tolling from minors, but not for mentally disabled persons, in personal injury or death cases, both from the statute of repose and statute of limitations. Tolling is a procedure that allows minors and incompetent persons an additional period of time to go to court when the condition, which prohibits them from going to court, passes. Removing the tolling provision for minors but not for mentally disabled persons raises a due process issue. SENATOR TAYLOR asked Ms. Williams if she thought that provision would violate the Constitution. She thought it raises an issue because minors will not have access to the courts, except through their parents or legal guardians. Whether those rights can be taken away from the minor is questionable, as well as the rights of children in state custody. For children in state custody, there could be a case against the state for having failed to file a personal injury action on behalf of the minor. The tolling provision only applies to personal injury torts, not to economic torts. The economic tort could be brought against the state for the personal injury case not brought by the state. There is also an equal protection argument because persons who are disabled as a result of mental incapacity are protected, but not minors. MS. WILLIAMS stated another concern with Section 2 is with the statute of repose. She questioned whether due process would be violated if a person was barred from bringing an action before the action accrued, or before the injury happened. She explained if a roof collapsed ten years after it was built, the action could not have been brought before it occurred. SENATOR MILLER asked how other states address that problem. MS. WILLIAMS was not aware of how other states have dealt with the due process question under the statute of repose. Number 329 SENATOR GREEN asked for an example of the problem. MS. WILLIAMS explained that if a roof collapsed ten years after it was built, and was designed to last 20 years, no action could be brought against the designer because the action was not brought before the statute of repose expired, within eight years. SENATOR MILLER noted a 15 year statute of repose passed the legislature two years ago. MS. WILLIAMS stated an earlier statute of repose was found unconstitutional. The law that passed two years ago has not been tested yet. SENATOR TAYLOR asked what the difference is between the two statutes. MS. WILLIAMS was unsure. SENATOR TAYLOR stated if the only difference was the length of the time limit, whether Ms. Williams was basing her opinion on the question of whether any statute of repose in that field would be found unconstitutional. MS. WILLIAMS replied the Turner Construction Case deals specifically with that question, and addresses the concern of a loss without a remedy. A second case, [indisc.] Helicopters found it profoundly unfair to the litigant of his right to bring a lawsuit before he has had any reasonable opportunity to do so. For those reasons, it is likely the Alaska Supreme Court would have serious concerns about the statute of repose provision. Number 370 SENATOR ADAMS asked Ms. Williams for her opinion of his amendment requiring a decrease in insurance rates. MS. WILLIAMS responded that she does not perceive any problems with that amendment. MS. WILLIAMS continued with her analysis of Section 2. Regarding subsection (d), the definition of "substantial completion" of construction implies that when the owner occupies the structure, even though a particular part of the construction may not have begun, the structure is substantially complete. She questioned how that definition would affect long term projects, and whether continuing improvements would fall under the statute of repose. SENATOR TAYLOR discussed the effect that definition would have on a facility like the Ketchikan Pulp Mill which is constantly undergoing major repair and remodelling jobs. He asked if the statute of repose would apply from the time a new piece of construction is completed upon the building, since each construction project might be completed under a separate contract. MS. WILLIAMS explained because the definition contains an "or" clause it means if the area can be occupied, it is considered to be substantially completed. SENATOR TAYLOR commented that definition is too vague to cover either situation, and needs to be clarified. He discussed the problem of providing coverage for canneries, which are often completely rebuilt over a number of years, and may not apply under this definition. Number 435 SENATOR GREEN asked if under this measure, gross negligence, fraud, deceit, and defective products are excepted from the statute of repose. MS. WILLIAMS replied they are, but most tort cases are based on negligence, rather than intentional misconduct. Defective products are not included as this provision only applies to facilities. Gross conduct is not limited by the statute of repose. MS. WILLIAMS questioned why Sections 3 and 4 have been separated. Additionally, the division of the torts between the two sections is not a clean division. There are economic torts are both sides, and there are certain intentional torts on both sides. The phrasing used in the two sections is different, which implies they are meant to have a different application or effect. She recommended that the sections be combined, or the phrasing be standardized. MS. WILLIAMS stated the Civil Rule 58 amendments in Sections 8 and 9 did not pass the House floor. Had those sections passed, the statute would conflict with the civil rule. Number 480 SENATOR MILLER discussed the balance of power question when the court determines a policy which is the function of the legislature. MS. WILLIAMS replied the Department of Law recommends that the citizens should be able to read a statute and presume that statute governs, for the sake of consistency. SENATOR TAYLOR clarified that the passage of a law, in direct conflict with a civil rule, creates a constitutional confrontation between the legislative and judicial branches. If the separation of powers question needs to be resolved, it can only be resolved by a constitutional confrontation. SENATOR MILLER commented civil rules are based on law, therefore if those laws are changed, the Supreme Court should be changing the civil rules to reflect new laws. SENATOR TAYLOR noted that if the legislature chooses to change the statute, it is inviting a constitutional challenge. Number 515 MS. WILLIAMS reviewed Section 10, regarding collateral benefits. She felt the section needs to be rewritten to be understandable and gave the following example to illustrate the mechanism created in Section 10. Under current law, if a person fell while in Green Grocers, his health insurance company would reimburse him 80 percent of his $10,000 medical expenses. He then sues Green Grocers, and is awarded over $10,000. His health insurance company would be repaid its 80 percent. Under this bill, the jury would be told the health insurance company paid the victim $8,000. The jury could only award the victim $2,000 to pay the balance of medical expenses. The health insurance company would be precluded from being reimbursed, the victim would receive an amount to cover the 20 percent portion of medical expenses only, and Green Grocers will not have paid anything for the injury. Many health insurance companies operate with contracts that allow them to be reimbursed for expenses from jury awards, therefore constitutional problems would occur if existing contracts are impaired. Also, the fact that the victim has insurance will be admissible before the jury; the fact that Green Grocers has insurance will not be admissible, which may raise due process or equal protection issues regarding admissible evidence. MS. WILLIAMS informed committee members Section 13 contains a civil rule which will conflict with the statute. MS. WILLIAMS last comment was on Section 17, the medical expert witness qualification provision. This provision only governs when a medical practitioner is sued for malpractice, and limits who could testify in such a proceeding. The criteria set out in Section 13 is too restrictive for any witness to meet. Some subspecialists do not have boards of certification, so that if a general practitioner, for example, was sued, only a board-certified general practitioner could testify in the case. There are no board certifications for general practitioners therefore no one could meet both requirements. More importantly, if a nurse were sued, the person testifying against that nurse would have to be a board- certified nurse, certified by a board approved by the state medical board. There are not many board certifications in the field of nursing. This requirement covers many specialty fields without board certifications for example audiologists, acupuncturists, dentistry, etc. This section also raises the question of whether a person educated in one school of training for physicians could testify against a person schooled in the other (O.D.s and M.D.s). SENATOR GREEN asked if Ms. Williams was referring to different specialties or different degree types. MS. WILLIAMS clarified she is referring to degree types. TAPE 96-7, SIDE B Number 000 SENATOR ELLIS asked Ms. Williams if she could comment on the Jackson v. Powers case in relation to his amendment requiring hospitals to ensure subcontractors carry liability coverage. MS. WILLIAMS was not sure whether the amendment would totally shift liability, but she did not see any problem with the amendment. Number 571 JEFF BUSH, Deputy Commissioner of the Department of Commerce and Economic Development, stated he would be following the policy aspect of the legislation for the Administration. At present the Administration has taken a neutral position. He offered his assistance to the committee regarding specific questions. SENATOR TAYLOR stated his intent is to discuss the amendments today and take action on them, if the committee desires. The process will be similar at the next hearing, amendments will be distributed so that people have time to address them, and the bill will be marked up. SENATOR ADAMS asked MR. BUSH if the Administration has any amendments or recommendations to bring before the committee at this time. MR. BUSH replied not other than what Ms. Williams' testimony reflected. The Administration does feel the legal questions and ambiguities need to be minimized as a starting point. SENATOR TAYLOR commented his intention is to invite any interested party to submit proposed amendments to the committee before the next meeting for review and discussion. Number 547 GRANT CALLOW, a Uniform Law Commissioner, stated the proposed amendments are good, but do not fix what is fundamentally wrong with the bill in terms of what it does for certain special interests, the effect it has on the denial of rights of children, and how it penalizes those who buy health insurance. People who buy health insurance will be penalized because their health insurers will not be able to get fair compensation from the injured party. He agreed with Ms. Williams' testimony. He believes Senator Adams' amendment, mandating a rate rollback, to be one of common sense. Because the bill creates so much relief for the insurance industry, the people of Alaska should get something in return. The amendment would require the insurance industry to have a track record on rate rollbacks, before the bill would take effect. Regarding Ms. Williams' testimony about minors, he shared her concern about equal protection and due process. The bill, as drafted, makes a distinction between incompetence and children, and children, by their very nature, are considered unable to make their own decisions. In a circumstance where parents might not be aware of causes of action, or are incapacitated, it is conceivable that a child might bring a cause against the parents for not bringing a cause of action on the child's behalf. MR. CALLOW discussed the statute of repose. The theory behind that statute is that design problems should be obvious within eight years of construction. He questioned how many homeowners would know whether there is a structural problem when it is hidden from view, or how to consider snow loads when assessing whether a design was negligent. The statutes of repose that have been in place for long periods of time start the clock from the time a person finds out about a faulty design or should have known there was a problem. It is more fundamentally fair to provide a time limit for bringing a suit from the time of discovery. He reiterated the fact that he does not support the bill, and although he supports the amendments, they do not fix the bill. PAM LABOLLE, President of the Alaska State Chamber of Commerce, testified in support of CSHB 158 (FIN)am, a top priority of the State Chamber of Commerce. In a recent survey of 500 randomly selected Alaska voters, 78 percent believed tort reform would benefit small businesses the most, and negatively affect people filing frivolous lawsuits and personal injury trial lawyers. Fourteen survey questions were directed toward court rule changes, nine changes are addressed in the bill. The majority of responses were in favor of the nine changes in the bill. The other five were also favored, one of which was Senator Taylor's amendment requiring arbitration under certain conditions (supported by 73 percent). Businesses are suffering under the current system because of the cost of insurance as well as the cost of legal defense. The State Chamber is in the process of collecting data on cases settled out of court. She discussed a small business bankruptcy case occurring in Senator Taylor's district. Number 396 SENATOR TAYLOR disagreed with Ms. LaBolle's assessment of the bankruptcy case, and felt the question of why bars are uninsured for third party liability needs to be addressed. He discussed the cost of such insurance and how several frivolous lawsuits were effectively handled by the court system. He asked that the committee be provided with evidence of a case filed in which civil damages were being sought for an injury occurring while the plaintiff was in the process of committing a felony. He did not believe such cases were being filed in Alaska. MS. LABOLLE felt the perception of the business community is that the high cost of liability insurance is the result of businesses having to defend themselves in frivolous lawsuits. They believe people are encouraged to sue for anything and everything and that the costs are driven by the system. Number 311 SENATOR ADAMS asked if the survey contained a question that directly asked whether full compensation should be prevented from being awarded for an injury. MS. LABOLLE replied that any poll can be considered slanted, if one does not agree. The State Chamber hired a nationally respected company to conduct the poll because it conducted polls on tort reform in other states. The company recommended certain questions be excluded because they would bias the survey. SENATOR ADAMS repeated his question as to whether respondents were directly asked whether they would support a bill that would reduce full compensation for an injury. MS. LABOLLE questioned why the State Chamber would suggest that should be in the bill. SENATOR ADAMS replied the bill limits compensation for injuries. MS. LABOLLE stated she did not agree with that assessment. Number 275 SENATOR TAYLOR asked MS. LABOLLE to provide committee members with a letter and resolution from the State Chamber of Commerce passed last year. He stated that he does not question the validity of the poll referred to by Ms. LaBolle, however it is the function of the Judiciary Committee to review technicalities. He noted his concern with polls, in general, on a subject as complex as tort reform, is that they can be used by lawmakers to decide whether to change a person's rights. They can also reflect mob hysteria at a given time. He stated he believes he could draft a poll that would elicit opposite responses to the one cited by Ms. LaBolle. MS. LABOLLE responded that in regard to the problem of mob hysteria, the first question on the poll asked respondents their opinion of the overall business climate in Alaska. Most respondents felt the climate to be good. The second question asked whether they believe there to be problems in the legal system and asked what the problems are. The primary concern was that too much money is being rewarded, the second concern was that new laws are necessary, and the third concern was that it is too easy to file lawsuits. Most respondents had not been exposed to recent information that would influence their responses. Number 209 SENATOR TAYLOR requested Ms. LaBolle to ask the State Chamber's members to provide the Committee with examples of the outrageous settlements alluded to in its resolution, when they are repolled. He stated if, in fact, outrageous settlements are occurring, he would like specific information about those cases, especially by district, because the committee should be reviewing how and why those settlements are justified. With only rhetoric to go on, and without such information, the committee has little basis with which to make changes to the tort reform system. SENATOR TAYLOR commented the provision in the bill on non-economic damages would allow for an Exxon-Valdez bailout in the Cordova District Fishermen's Union case. He did not believe that provision was the intent of the bill's supporters yet he has not found a way to prevent that from occurring while maintaining some of the original intent of the bill. To date he has not found a way to draft a provision that is not violative of constitutional provisions. MS. LABOLLE responded the Exxon-Valdez fishing issue was under the control of federal law, therefore the bill would not impact such a case. SENATOR TAYLOR explained there were state lawsuits filed at the same time by Alaskan citizens. The Cordova Fishermen's Union raised the question of the elimination of non-economic damages contained in this bill. Attorneys on both sides of that suit agree that this bill would eliminate that compensation. Number 112 MS. LABOLLE assured committee members she would provide them with a list of examples of outrageous settlements. SENATOR ELLIS also requested Ms. LaBolle to poll her membership about support for the rate rollback provision. He believes most businesses are assuming rates will decrease if tort reform occurs. DR. DAVID JOHNSON, representing the Alaska Medical Association, gave the following testimony. He believes the purposes set forth in CSHB 158 (FIN)am are incongruent with the provisions contained within the bill. Two insurance carriers that cover the bulk of physician policies in Alaska are not-for-profit, physician-owned, mutual companies based in California (MIAC and NORCAL). Both companies use the same actuarial staff. The rates paid by California physicians are approximately one-half the rates paid by Alaska physicians. The lower California rate is the result of the Medical Insurance Reform Act of 1973 (MICRA). That legislation was passed in response to a crisis in California. The heart of that legislation is a limitation to non-economic damages. The problem with jury awards is the intersection of the litigation system and the insurance system. Insurance is a shared risk. Where the scope of a loss is not known, any insurance company is statutorily required to maintain reserves to cover an eventuality. If an insurance company has ten judgments in one year, nine for $100,000 and one for $10 million, the prudent director will have to set rates accordingly. To require that insurance rates decrease starting at or before day one is unrealistic given the court system, because the MICRA legislation started making a difference in California about ten years after passage, only after MICRA had been appealed through the court system and the appeal was finally denied by the U.S. Supreme Court. At that point in time, rates were affected. DR. JOHNSON stated in regard to the arbitrariness of the dollar amounts determined for pain and suffering, that arbitrariness is part of living in an orderly society, and is the price we pay for having insurance available. On the question of the limitation of the rights of minors, he believed those who care for children have a lot more confidence in parents, school personnel, and neighbors. Regarding the statute of repose for childbirth injuries, those injuries are detected before age eight. DR. JOHNSON discussed the complexity of emergency room issues. Physicians who work in emergency rooms, and hospitals that maintain emergency rooms, are mandated to provide services. The potential for litigation in that setting is enormous. Emergency room charges must account for patients who do not pay, and for programs that pay less than the full bill. The present tort system requires every patient in Alaska to be an involuntary participant in a lottery which adds costs. He repeated his concern that if arguments with the purposes stated in the legislation exist, they must be reviewed. He applauded the committee's effort to look at the specifics of the legislation and the unintended consequences. The environment for practicing medicine in Alaska has a reputation for being an unfriendly place in respect to professional liability. The Alaska Medical Association is looking for legislation that will accomplish the purposes, help people be more responsible, and compensate individuals. Number 120 SENATOR MILLER asked Dr. Johnson's view of Senator Ellis' amendment, regarding hospital liability, and asked the average amount of liability coverage carried by a doctor. DR. JOHNSON responded some specialists practicing high risk specialties, such as neurosurgery, may carry a limit of $5 million. He did not think most doctors in smaller communities carry policies that large. SENATOR TAYLOR stated everyone wishes to address the Jackson v. Powers situation. He asked if hospitals are going to be granted immunity, is it reasonable to require them to carry some level of minimum coverage for the negligent acts of subcontracting physicians. DR. JOHNSON replied that is a public policy question. SENATOR TAYLOR asked whether Dr. Johnson believed there should be an amount, and if so, how much. DR. JOHNSON replied if the legislature were to require individual physicians to be insured with rates as high as they are, the majority of those providing obstetric services without insurance would leave the state. SENATOR TAYLOR asked why they would leave when the hospital, or someone else, is picking up the tab for them now. DR. JOHNSON stated it would affect a physician without a hospital practice. SENATOR TAYLOR replied that physician would not have a Jackson v. Powers problem. The physician would not be practicing at a hospital therefore would not be jeopardizing a hospital. He explained this amendment would allow a hospital to claim immunity under Jackson v. Powers if it showed a policy in force in that amount on file, from the physician. DR. JOHNSON reiterated that is a public policy question which is currently being answered throughout the state in different ways by different hospitals. Some hospitals do require professional liability insurance of their physicians, some do not. SENATOR TAYLOR repeated the question of whether $5 million is too high of an amount to require. DR. JOHNSON replied $5 million would be substantially higher than most hospitals outside of Anchorage carry. Number 165 SENATOR TAYLOR commented that at present, hospitals may require a physician to have a policy, yet the hospital is still liable, therefore two policies are in effect. One may be subrogated to another, but they both share the responsibility. This bill would remove responsibility from the hospital and place the responsibility entirely on the doctor. He explained that is why it is difficult to determine a fair amount of coverage. DR. JOHNSON suggested that given the peculiar nature of emergency rooms, which are mandated to provide care, the workers compensation program could provide a public policy analogy, since employers are mandated to provide workers compensation coverage at a certain level. Because emergency rooms are mandated to provide care by a public policy decision, it would be logical to make a public policy decision to restrict their liability for providing that care. SENATOR TAYLOR stated the amendment creates a policy which totally eliminates the hospital from liability for any acts, whether it be emergency room care or not. It also removes responsibility from the hospital for who it hires. Number 250 DR. JOHNSON commented when requirements other than competence are added, such as liability insurance, that action will force some physicians to leave the state. SENATOR TAYLOR agreed that in general, hospitals seem to favor the amendment, but are concerned about losing physicians. The legislature does not want to set the amount of liability insurance so high as to drive independent physicians out of the state, so that only hospital-employed physicians can remain. Number 285 SENATOR ELLIS requested committee staff to survey doctors to find out what amount is reasonable. SENATOR TAYLOR suggested working through the Alaska Medical Association to poll its members as to the type and level of coverage they carry, as well as hospitals. DR. JOHNSON felt it would be hard to get a number from physicians, except in an aggregate sense. Reviewing rate structures will reveal what is available. He added the premium for a $5 million liability policy would exceed his annual salary substantially. SENATOR TAYLOR asked if premiums have changed dramatically in the last year. DR. JOHNSON replied they have remained fairly stable for the past four years. SENATOR TAYLOR stated it was his understanding from testimony by the insurance commissioner that medical malpractice premiums had decreased by 25 percent in the previous five years. DR. JOHNSON noted the problem lies in that there are 15 or 20 different bands of premiums. The premiums for the same amount of coverage for a neurosurgeon and a doctor who practices outpatient general psychiatry are enormously different. Therefore a small change in a large premium will make the aggregate number change, but in terms of individual lines of insurance, they have not decreased by 25 percent across the board. Number 320 SENATOR ELLIS asked Dr. Johnson if he believes that most emergency room patients do not differentiate between subcontractors and staff physicians. He stated most people expect a hospital to have reasonable coverage. DR. JOHNSON stated that it has only been in the last few years that there have been hospital-employed physicians in Ketchikan. Until six years ago, hospital-based physicians, such as anesthesiologists and radiologists, existed; all other physicians were in private practice, and the general public was aware of that. The distinction is beginning to blur. SENATOR ELLIS stated if a person was taken to an emergency room due to an accident, the distinction would be very confusing. The state licenses these facilities, the doctors have privileges there, therefore it is completely reasonable public policy to expect that everyone associated with the hospital in providing patient care carry a reasonable amount of liability insurance. DR. JOHNSON stated the other side of that argument is that emergency room medicine is defensive medicine of necessity. Everything imaginable must be documented which drives costs much higher. To cut costs, a public policy call could be made granting emergency rooms absolute immunity since they are mandated to provide care. The level of care would remain the same, the amount of unnecessary defensive medical practices would drop substantially. Number 377 SENATOR ELLIS stated he would need to be convinced the standard of care would remain the same. He asked if it would not be advantageous to a for-profit hospital corporation to bring in less competent doctors. DR. JOHNSON replied the opposite is true. The more services a hospital can order in an emergency room, the more money it makes. SENATOR ELLIS asked if Dr. Johnson was arguing that his amendment was unreasonable. DR. JOHNSON replied that if the legislature is looking at ways to provide care efficiently as a public policy matter, given that there is a requirement to provide the care, absolute immunity might be in order because of the mandate. SENATOR ELLIS asked if physicians resent the fact that they are mandated to deliver care to people who cannot pay. DR. JOHNSON answered the mandate is federal, and doctors do not resent that mandate. The problem lies in the fact that about two- thirds of emergency room bills are paid, therefore rates must be higher to compensate for the one-third who cannot pay. Number 395 SENATOR ELLIS asked Dr. Johnson to clarify his statement about the legislative purposes stated in the legislation. DR. JOHNSON stated he believes if the legislature agrees with the purpose statements, then it needs to look to ways to accomplish those purposes. The title of the bill has been changed considerably, so that to whatever extent it is getting away from the original purposes, it is important that it be brought back to those purposes. SENATOR ELLIS stated there are other higher public purposes. DR. JOHNSON suggested the place to start with revisions in the bill is with changing the purposes. SENATOR TAYLOR thanked Dr. Johnson for his testimony and asked him to provide information regarding the amounts of liability policies carried by medical professionals in the state to the committee. He adjourned the meeting at 3:35 p.m.