SB 41-HEALTH INSURANCE INFO.; INCENTIVE PROGRAM  2:05:16 PM CHAIR COSTELLO announced the consideration of SENATE BILL NO. 41 "An Act relating to health care insurers; relating to availability of payment information; relating to an incentive program for electing to receive health care services for less than the average price paid; relating to filing and reporting requirements; relating to municipal regulation of disclosure of health care services and price information; and providing for an effective date." She noted that this was the third hearing and there was an amendment for the committee to consider. She asked Mr. Whitt to refresh the committee's recall of the bill. 2:05:48 PM BUDDY WHITT, Staff, Senator Shelley Hughes, Alaska State Legislature, Juneau, Alaska, summarized that SB 41 incentivizes people to find in-network or out-of-network providers who can save the insured and insurer money. He noted that the greatest savings typically would be from out-of-network providers since in-network providers generally negotiate rates that are similar across the provider network. This has been implemented in several other states and the sponsor believes would be a productive policy for Alaska to consider. CHAIR COSTELLO asked if the states that have similar legislation have reported on realized savings. MR. WHITT said there isn't much data since this is a relatively new program, but he would look at the available analyses and provide that information to the committee. 2:08:56 PM SENATOR MICCICHE moved to adopt Amendment 1 to SB 41, work order 32-LS0247\I.2. 32-LS0247\I.2 Marx 3/4/22 AMENDMENT 1 OFFERED IN THE SENATE TO: CSSB 41(L&C), Draft Version "I" Page 4, line 10, following "regulation.": Insert "Except as provided in (e) of this section, the total amount of incentive payments a health care insurer provides to a covered person in a calendar year under this subsection may not exceed the amount of the covered person's cost sharing in the calendar year by more than five percent." Page 4, line 15: Delete the first occurrence of "of" Insert "as provided in this subsection. Except as provided in this subsection and (e) of this section, the incentive a health care insurer provides the covered person must be" Page 4, line 18, following "service.": Insert "Except as provided in (e) of this section, the incentive a health care insurer provides to a covered person in a calendar year under this subsection may not exceed the amount of the covered person's cost sharing in the calendar year." Page 4, following line 24: Insert a new subsection to read: "(e) For a dental insurance policy or a vision insurance policy, the incentives a health care insurer provides to a covered person in a calendar year may not exceed the amount of the dental benefits or vision benefits provided to the covered person under the dental insurance policy or the vision insurance policy." Reletter the following subsection accordingly. Page 6, following line 10: Insert a new paragraph to read: "(1) "cost sharing" means a deductible, coinsurance, copayment, or similar expense owed by a covered person under the terms of the covered person's health care insurance policy;" Renumber the following paragraphs accordingly. CHAIR COSTELLO objected for an explanation. 2:09:05 PM SENATOR MICCICHE stated that the amendment addresses his concern with the original version of the bill that people could be well compensated for making poor decisions about who would provide the medical care for specific procedures. The amendment would provide the insured who shops around a benefit of five percent more than their out of pocket costs. The amendment does not incentivize people for making potentially damaging decisions based on the profit that was available. CHAIR COSTELLO asked for a detailed explanation of what the amendment does and an example of the profit potential in the earlier draft of the bill. 2:11:07 PM SENATOR MICCICHE explained that the earlier version allowed the covered person to receive 30 percent of the savings, which potentially could have been tens to hundreds of thousands of dollars more than the cost of the medical procedure. The amendment clarifies that the insured will be paid five percent more than their out-of-pocket costs. He provided a personal example to demonstrate the profit potential without the amendment. One of his daughters had a heart condition that was monitored for a year. When it was determined that treatment was necessary, he and his wife shopped around for the most cost effective option. The right medical care at the right time was the primary concern. However, if the original version of the bill had passed, he could have pocketed $16,000. He posited that some families may make a less than responsible choice for the best medical outcome if they know that a particular choice will put $16,000 in their pocket. 2:13:30 PM SENATOR STEVENS asked where the money for the incentive comes from. SENATOR MICCICHE offered his understanding that it is money that the insurance company would not longer need to pay. He deferred further explanation to the sponsor. 2:14:15 PM At ease 2:14:46 PM CHAIR COSTELLO reconvened the meeting and asked Mr. Whitt to respond to Senator Stevens' question. 2:15:13 PM MR. WHITT explained that the savings is shared either 50/50 between the insured and the insurance company or three ways between the employer who pays for the insurance, the insured employee who sought the medical treatment, and the insurance company. Regardless, the insurance company pays the incentive. SENATOR STEVENS asked how the bill affects Medicare. 2:17:52 PM LORI WING-HEIER, Director, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), Anchorage, Alaska, explained that Medicare, Medicaid, Alaska Care, and union trusts would not be affected should the bill become law. SB 41 would only apply to insured plans that fall under Title 21, which is just 18-20 percent of the state. SENATOR STEVENS asked if deductible payments would be affected. MS. WING-HEIER replied deductible payments are part of the out- of-pocket maximum. Should the bill pass, the most an insured who uses the incentive could receive is five percent more than their total out of pocket maximum. CHAIR COSTELLO said the underlying concept is good, but it doesn't seem to improve cost transparency because the insured probably won't know the total cost of a procedure until months after it happened. Should the bill pass, she said a patient will have to try to extract the information about cost from the physician's office and share that with the insurance company. She wondered whether another bill might be needed to address transparency. 2:20:49 PM MS. WING-HEIER acknowledged that there will be a learning curve. For example, somebody who is having a knee replaced might call a second facility to compare price, but they would also have to look at the cost of the surgery center, the anesthesiologist, and the other doctors that might be involved. The insurance companies will have to work with the policy holders to look at all the costs because a savings in one area might be offset by a higher cost in another. Further, it adds to the cost if the surgery is more complicated than anticipated. She noted the federal legislation that requires providers to give consumers good faith estimates, but warned that it will be the consumer's responsibility to get cost estimates for all the different parts of the procedure. SENATOR MICCICHE expressed concern that a provider may give an estimate that is based on a best case scenario and the consumer might make a decision that results in complications that lead to much higher medical bills later on. He posited that SB 41 might not do what it's purported to do. He said Amendment 1 eliminates just one of the many concerns he has with the bill. 2:24:45 PM CHAIR COSTELLO said she would like to finish working on the amendment. SENATOR GRAY-JACKSON asked when she should raise questions unrelated to the amendment. 2:25:05 PM At ease 2:25:52 PM CHAIR COSTELLO reconvened the meeting and removed her objection to Amendment 1. Finding no further objection, Amendment 1 was adopted. SENATOR GRAY-JACKSON asked if AlaskaCare is a self-insured plan. MS. WING-HEIER answered yes SENATOR GRAY-JACKSON offered her understanding that SB 41 would affect only those insurance plans that are not self-insured. MS. WING-HEIER agreed. SENATOR GRAY-JACKSON posed a hypothetical example of somebody who shops for a procedure and selects an option that saves $16,000. She asked why the savings are split. MS. WING-HEIER explained that when the insurance company receives half of the $16,000 savings, the overall cost of health care goes down by $8,000. The notion is to encourage the insured to shop for providers that can do the procedure for less than the network plan. SENATOR GRAY-JACKSON asked for further clarification on the savings. MS. WING-HEIER replied the only savings in the example is the $8,000 that the insured doesn't have to pay the provider. SENATOR GRAY-JACKSON continued to question the savings. MS. WING-HEIER replied this is new territory, but the division will do its best to ensure it works for both consumers and insurance companies, should the bill pass. 2:30:01 PM SENATOR STEVENS asked if Aetna would receive any benefit if it were able to reduce the price of a procedure. MS. WING-HEIER explained that in an employer sponsored plan, the savings would be split three ways between the employer, the plan sponsor, and the employee. In the example, the employer and the insurance company are the same because Aetna administers the plan for the state. She assumed that Aetna is paid on a per person per month charge. SENATOR STEVENS commented that he was now confused at a higher level. 2:31:38 PM SENATOR MICCICHE clarified that in the personal example he gave, the $16,000 would have been his share as the insured so it saved the state $48,000. He said he understands the concept in theory but he struggles with it philosophically because he believes people should make choices for the best medical outcome at the lowest cost possible. 2:32:29 PM CHAIR COSTELLO questioned whether the bill might drive increased medical tourism and if that is happening in states that passed similar legislation. MR. WHITT said he had anecdotal data that people crossed the state line to seek treatment when New Hampshire passed similar legislation. He also shared that the sponsor traveled to Idaho for a major medical procedure and that drastically reduced her out of pocket in-network savings. MR. WHITT addressed the earlier question about transparency, noting that Ms. Wing-Heier pointed out that federal legislation passed and was being implemented about transparency and giving people information about the cost of procedures. He directed attention to the provision in Section 4 that stipulates that insurance companies operating in the state must provide a mechanism by which insured persons can see the cost of medical procedures. MR. WHITT maintained that the bill would not incentivize people to select lower quality care. Rather, it would incentivize a shopping mentality for more affordable care. The bill simply says that when the playing field is even and there is a drastic difference in pricing, Alaskans should be able to realize some of the savings that an insurance company would receive for selecting the lower cost option. 2:39:15 PM CHAIR COSTELLO opened public testimony on SB 41. 2:39:43 PM ED MARTIN JR., representing self, Kenai, Alaska, said he likes that SB 41 talks about transparency in getting cost information about medical procedures. He offered his belief that medical procedures in this state are too costly and he and his wife likely would travel out of state to seek less expensive options since they have never purchased insurance under the Affordable Care Act. He opined that "there shouldn't be a profit margin when it comes to health," regardless of whether it's the individual, the insurance company or the doctors. He asserted that the number of specialists throughout the country was out of control. He recalled the time when children were born in Palmer at the Valley Hospital for $350. Regarding the bill, he said disclosure is fine, but the profit section is too complicated. "If anybody should profit from it, it should be the individuals." He said he didn't care about the insurance companies and he will travel outside to receive health care because costs are too high in this state and it is the legislature's fault for not getting rid of Certificate of Need and allowing competition. CHAIR COSTELLO thanked him for his testimony and clarified that if the bill were to pass, the savings would be shared with the insured person. 2:42:51 PM BETHANY MARCUM, Chief Executive Officer (CEO), Alaska Policy Forum, Anchorage, Alaska, offered suggested changes and recommendations during the hearing on SB 41. She read the following testimony: Price transparency is an essential component of markets that work, but health care is not most markets. Its pricing system is extremely complicated and one primary reason for this complexity is the presence of third-party payers for routine care. In most market transactions, payment is made from the person or entity receiving the good or service to the entity providing the good or service. In those instances, consumers typically shop around for the best product or service at the best price. But some form of health insurance, either private or government provided has become the middle man in nearly all the health care transactions today. Some patients only receive services, but most do not directly pay for services; instead paying for insurance premiums, copays, or deductibles. Patients have much less incentive to shop for the best service at the best price. In fact, most Americans don't shop for health care services in our current environment. So while transparent pricing for health care services is important, this alone will not have a significant effect on the market as long as third-party payers are involved. We have evidence of this from transparency initiatives, which have occurred in other states. MS. MARCUM continued to read: Our 2020 report found that Alaska health care expenditures per capita has grown significantly faster than the national average over the past 30 years and are now higher than every other state. In order to bring down these costs, Alaska must create a competitive marketplace. To truly make a difference in our third-party payer health care system, three key elements must be included. First, is that for patients to make true price comparisons, they must know what their own insurance plan pays for the service. California implemented a payers' bill of rights years ago and that required disclosure of charge master rates. But later studies found little to no observable effect on the end result. So listing the undiscounted price or even an out-of-pocket estimate is not sufficient to give consumers the information they need to make life choices. The second and most important element is an incentive. I mean, after all if only your insurance company stands to gain from a patient choosing a lower cost provider, why would patients do the extra footwork to shop around? However, if they personally get a cut of the savings, patient engagement with transparency tools has shown to increase elevenfold. So some kind of shared savings program is a vital component of any transparency initiative. Some have expressed concern that such an incentive program would push patients to always choose the lower-cost provider and thus affect quality and outcomes. But that surely presumes that Alaskans are not smart enough to balance cost with quality or to make their own health care decisions in direct consultation with providers. MS. MARCUM continued to read: The final required element is loosening restrictive in-network requirements. If patients are only encouraged or incentivized to shop around within the network, the network providers may keep costs high knowing they have a captive audience. Patients should be allowed to use lower priced services outside the network if they so choose. Lastly I would like to make a couple of specific policy recommendations: 1. A provision should be included for a discounted cash price to also be disclosed by providers and facilities. 2. Language should be added to establish that insurers cannot deny referrals to in-network providers from out-of-network providers if the patient went there for a lower cost. 3. All the federal rules that have been enacted in the last five years related to price transparency should be codified into this bill. And that is regarding federal regulations 26, 29, and 45. MS. MARCUM thanked the committee for the opportunity to testify. 2:46:51 PM CHAIR COSTELLO closed public testimony on SB 41. She asked the committee if there were any comments on the suggested changes. SENATOR REVAK said he would like the sponsor to comment on the suggestions and recommendations. 2:47:24 PM MR. WHITT pointed out that insurance companies that participate in the incentive would be required to report the number and amount of the incentives they paid, and the department would also be required to submit a report to the legislature so changes could be made to the program if they were needed. Responding to the public testimony, he clarified that the majority of individuals in the state who are insured through the individual market with healthcare.gov don't pay anything for insurance. For those people, the result of Amendment 1 is they have no incentive to shop for a lower cost procedure. Their incentive is limited to five percent above out-of-pocket costs, and they have no out-of-pocket costs to recoup. MR. WHITT restated that the sponsor believes SB 41 is good policy. It has the potential both to bend the curve on health care costs and change the minds of Alaskans about how to look for health care. 2:49:25 PM At ease 2:51:09 PM CHAIR COSTELLO reconvened the meeting and recognized Senator Micciche. 2:51:20 PM SENATOR MICCICHE said he felt compelled to respond to Ms. Marcum's comment that concerns about the incentive program as initially drafted presumes that Alaskans are not smart enough to balance cost and quality and make a good health care decision. He said he believes Alaskans are smart enough to make good choices whether they're paying the bill or not. His concern was specifically focused on the cash incentive. 2:52:07 PM CHAIR COSTELLO held SB 41 for future consideration.