SB 45-DIRECT HEALTH AGREEMENT: NOT INSURANCE   [CSSB 45(HSS) was before the committee.] 2:19:29 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of SENATE BILL NO. 45 "An Act relating to insurance; relating to direct health care agreements; and relating to unfair trade practices." He asked Senator Wilson to introduce the bill. 2:19:51 PM SENATOR DAVID WILSON, District N, Alaska State Legislature, Juneau, Alaska, sponsor of SB 45, paraphrased the following sponsor statement: [Original punctuation provided.] Senate Bill 45 is necessary to reduce barriers between Alaskans and their chosen health care provider. This bill allows patients and health care providers to enter into direct health care agreements (DHCA). A direct health care agreement is a contractual agreement between a patient and a provider for health care services. The patient pays a flat, periodic fee (generally monthly) in exchange for routine visits and access to their health care provider. These agreements are only between a provider and a patient. Unlike the insurer-patient-provider trifecta, in a DHCA agreement, no third-party is directly participating in or profiting from the provider- patient relationship. Doctors currently spend about half their working hours on paperwork including paperwork for third party insurance. Direct Health Care (DHC) reduces bureaucracy by allowing patients to pay a flat fee for routine care instead of billing insurance for every doctor's visit. The reduction in administrative burden leads to reduced costs and more time in the day for doctors to spend with their patients. While a person with private health insurance may elect to obtain a DHCA to supplement their current health insurance such as a high deductible plan, but these models are not health insurance nor do they replace it and should not be regulated as such. This bill will clearly exclude qualified DHCA from Title 21, or insurance regulations, and will clear up any confusion regarding the legality of direct health care agreements thereby improving the public's access to lower cost, high quality health care. Please contact Jasmin Martin in my office at (907)465- 8165 or by email at Jasmin.Martin@akleg.gov for more information. I respectfully ask for your support of this legislation. 2:22:09 PM SENATOR GRAY-JACKSON asked if he said that SB 45 eliminates explanation of benefits (EOBs). SENATOR WILSON answered no, but somebody who had a direct health care provider agreement that was outside of insurance would not receive an EOB because the benefit would be within their health contract. SENATOR GRAY-JACKSON commented that she likes receiving electronic EOBs and sought further clarification. SENATOR WILSON replied that this is not insurance and would be separate from getting an EOB. 2:23:13 PM JASMINE MARTIN, Staff, Senator David Wilson, Alaska State Legislature, Juneau, Alaska, presented the sectional analysis for SB 45. [Original punctuation provided.] Sectional Analysis  Senate Bill 45 v. U    "An act relating to insurance; relating to direct  health care agreements; and relating to unfair trade  practices."  Section 1: Adds a new section (.025 Direct health care  agreements) to AS 21 (Insurance) .03 (Scope of Code).  Section (a), page 1, line 5, through 10: Allows a provider and a patient to enter into a direct health care agreement. This section also stipulates that Medicaid recipients under AS 47.47 and those receiving assistance for catastrophic illness and chronic or acute medical conditions under AS 47.08 are not eligible to enter a DHCA. Section (b), page 1, line 11, through page 2, line 24:  Specifies what a DHCA must contain. (1) It must describe the services a patient is entitled to for payment of a periodic fee. (2) It must specify: the amount of the periodic fee, the length of period the fee covers, any additional fees the provider or business may charge. (3) It must include contact information for a representative of the provider or business that is responsible for patient complaints and for patients request to amend the agreement. (4) It must state that the agreement is not health insurance. (5) Prominently state that the patient is not entitled to protections under Patient Protections Under Health Care Insurance Policies or Trade Practices and Frauds (AS 21.07 and 21.36 respectively). Section (c), page 2, line 25, through page 3, line 1:  Specifies that a patient may terminate an agreement within 30 days. Requires any fees and payments, less payments made for services the health care provider has already performed that are not included in the periodic fee. Section (d), page 3, line 2 - 12: Sets terms by which a health care provider may immediately terminate a DHCA. Section (e), page 3, line 13 - 15: Specifies that a patient may terminate a DHCA immediately if a provider violates the terms of the agreement. Section (f), page 3, line 16 - 22: Specifies that a provider may change the fee up to once a year, only with a written 45-day notice. A patient may cancel within those 45 days with no penalty. Section (g), page 3, line 23 - 26: Specifies that a patient or provider can terminate an agreement with at least 30 days' notice. Section (h), page 3, line 27 - 30: Specifies that a provider may charge a termination fee if the patient cancels under (c) or (g). Section (i), page 3, line 31, through page 4, line 4:  Specifies that a patient must pay the periodic fee, prorated through the date of termination if they cancel under (f) or (g). Section (j), page 4, line 5 - 7: Specifies that the patient is billed by the provider at the end of the period covered by the fee. Section (k), page 4, line 8 - 13: Allows an employer to pay the periodic fee on behalf of an employee. This does not mean the employer is a health insurance provider or business. Section (l), page 4, line 14 - 17: Specifies that a DHCA is not subject to AS 21.07 (Patients Protections Under Health Care Insurance Policies) or AS 21.36 (Trade Practices and Frauds) but is subject to other consumer protections and regulations. Section (m), page 4, line 18 - 30: Specifies that a DHCA is not insurance and is not regulated as such. Section (n), page 4, line 31, through page 5, line 21: Defines: direct health care agreement, health care business, health care insurance, health care insurer, health care provider, health care service, health insurance, health maintenance organization, and medical services corporation. Section 2: Adds a new section (.915 Direct health care  agreements) to AS 45 (Trade and Commerce) .45 (Trade  Practices).  Section (a), page 5, line 22 - 29: Specifies that a provider may not decline to enter or terminate a DHCA solely based on a patient's status within a protected class. Section (b), page 5, line 30, through page 6, line 4:  Specifies that a provider may decline to enter an agreement if they are unable to provide the care the patient needs, or their practice is at capacity. Section (c), page 6, line 5 - 8: Specifies that a provider may terminate a DHCA with a current patient based on their health status only if the providers is not able to provide the services the patient requires or in accordance with AS 21.03.025 (section 1 of this legislation). Section (d), page 5, line 9 - 21: This is a "false advertising" clause. This section prohibits a provider from false advertising regarding a direct health care agreement. It specifically prohibits advertising these agreements as insurance or as an alternative to insurance. Section (e), page 5, line 22 - 28: Defines: direct health care agreement, health care business, health care provider, health care service, and health insurance. Section 3: Adds a new paragraph to AS 45 (Trade and  Commerce) .45 (Trade Practices) .471 (Unlawful acts  and practices).  Section (58), page 6, line 29 - 30: Adds violations of AS 45.45.915 (section 2 of this legislation) to the list of unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or commerce that are declared to be unlawful. 2:30:51 PM SENATOR MERRICK asked how many providers are interested in providing this service. SENATOR WILSON answered that he did not have an exact number. 2:31:36 PM SENATOR DUNBAR directed attention to the sectional analysis to Section H, cross-referenced with Section C and Section G. He asked about the need for allowing the provider to charge a termination fee. He expressed his understanding of Section C, that the patient must cover outstanding costs. Regarding Section G, he noted the equal ability of both parties to sever the relationship with a 30-day notice. He asked the reason to allow an additional termination fee. MS. MARTIN replied that the only scenario in which the provider is allowed to charge a termination fee is when the patient initiates the cancellation. SENATOR DUNBAR commented that patients would need to give a 30- day notice, potentially paying for a full month of service. He questioned the reason for allowing providers to charge for an additional month of service, on top of the initial termination fee. MS. MARTIN responded that it might be useful to have the health care attorney Pete Diemer join the conversation. 2:33:12 PM SENATOR WILSON added that many entities do the same to recover the cost. The termination fee allows time to recoup. The fee is agreed to when the parties sign the contract, so it does not come as a surprise. Hopefully it will be explained to individual patients. 2:34:04 PM MS. MARTIN commented that SB 45 does not require a provider to charge a cancellation fee. The written agreement must contain any such fees so the patient would be aware of this before entering the agreement. 2:34:24 PM SENATOR DUNBAR said that this is a unique situation in a highly regulated industry, where a large disparity exists between information and relative power between providers and their patients. He suggested that consumers could be protected by eliminating the possibility of a termination fee. 2:35:26 PM CHAIR BJORKMAN segued to invited testimony. 2:35:41 PM PETE DIEMER, Health Care Attorney, Clayton and Diemer, LLC, Anchorage, Alaska, gave invited testimony on SB 45. He clarified that SB 45 was not designed to replace insurance, but to be a safe harbor to providers and patients who desire this alternative arrangement. It is not designed to replace the existing robust regulation of health care providers under their professional licensing rules, but should work in concert with existing consumer protection rules under the Alaska Unfair Trade Practices and Consumer Protection Act. He directed the following answer to Senator Dunbar's question: the concept behind the cancellation fee is potentially to cover the administrative cost of onboarding; the cancellation fees are permissive, not required and cannot be charged were the provider to terminate the agreement. 2:38:27 PM SENATOR MERRICK asked why a provider would choose to terminate a contract. MR. DIEMER answered that the patient-physician relationship is governed by existing Alaska regulation which has adopted the American Medical Association 2016 Code of Ethics. It provides sideboards for the patient-physician relationship in the event of termination. Should the relationship become dysfunctional, this would be the mechanism that would allow a physician to terminate the relationship. 2:40:08 PM SENATOR DUNBAR commented that Mr. Diemer's answer about the termination fee makes sense in terms of the administrative costs of onboarding someone. He noted that subsection (h) allows a termination fee in both the onboarding with subsection (c), as well as in subsection (g), which covers the broader provision for the patient terminating the relationship. He asked, if the provider has already recovered their administrative costs, if it would be harmful to the providers if this were limited to only subsection (c), not subsection (g). He expressed that he is trying to protect consumers so they are able to get out of these relationships in a way that isn't punitive. He prefers to avoid a gym membership style situation, in which a customer pays a monthly fee and does not get anything out of it. He asked Mr. Diemer whether that narrower amendment would be less harmful to providers. MR. DIEMER deferred to the bill sponsor, but stated that in his view, elimination of the permissive cancellation fee within subsection (g) would not negatively alter the framework. It would provide greater patient protection. The upfront administrative costs are incurred early and that's what subsection (c) would be designed to address. Conceptually, he agreed that the administrative costs would already be covered should subsection (g) termination occur. 2:42:52 PM CHAIR BJORKMAN asked how the relationship currently works between patients who don't have healthcare insurance and their health care provider. MR. DIEMER replied that SB 45 is designed to work in conjunction with insurance. It would work particularly well with high deductible plans. If a patient does not have insurance today, their relationship with the provider is a fee for each service. The distinction with the direct health care agreement concept is that it allows a provider to offer a defined menu of services for a defined periodic fee. This allows a greater breadth of services at a typically much lower cost than a fee for service model. 2:44:54 PM CHAIR BJORKMAN asked how patients who are seeking care know the difference between health care they are receiving and what would be covered by insurance. 2:45:27 PM MR. DIEMER said it depends whether the patient has or does not have insurance. If the patient does not have insurance, then there is no insurance to cover anything; in that scenario they would be "fee for service." In the direct healthcare agreement scenario, there would be a menu of services for a defined periodic fee. If the patient has insurance, then the scope of the services provided by the direct health care provider are often different than the services that might be covered by the insurance. These work well with high deductibles. The patient might be $7,000 away from accessing a service but those same services might be covered by that periodic fee, providing greater access to services before the insurance is triggered. Direct healthcare agreements are designed to increase patient access to care, particularly in the case of high deductible plans. In the insurance context, the deductible is designed to reduce access to care, and this is designed to bridge that gap. 2:47:24 PM CHAIR BJORKMAN commented that he was struggling with whether the client with a DHCA can negotiate with their provider. He summarized that this bill proposes to charge an initiation fee for someone to have access to a medical provider, then there is a subscription fee to gain access to a deductible-free menu of services that can be adjusted according to whatever the provider and patient decide. 2:49:11 PM MR. DIEMER disagreed with the characterization of this being a fee for access. He said this is a fee for a defined scope of services that may include a whole menu of items such as labs, wellness checks, and sick checks. This is not like concierge medicine where one pays for a fee for accelerated line pass, or access; this is a defined scope of services for a defined fee. There might be certain services that are outside a direct health care agreement, such as a specialty service, but it's not a fee for access. CHAIR BJORKMAN said he was reading from a statement that says the patient pays a flat periodic fee, generally monthly, in exchange for routine visits and access to their health care provider. 2:50:33 PM SENATOR WILSON responded that SB 45 is geared toward those who are underinsured. Most of the patients who have no insurance will be covered through other state programs. Those on Medicare or those who have high deductible plans can set up a plan based on a la carte services where everything is negotiable. This supplemental plan would not put those patients before or after other patients in terms of access to services. Some people never go to the doctor because they wait for catastrophic events to occur and they can't afford to pay out-of-pocket before their insurance is available. With a direct health care agreement, the patient knows the price ahead of time so it could help increase access. CHAIR BJORKMAN asked whether someone's membership fee goes toward their deductible for their insurance policy. SENATOR WILSON answered no because this is not insurance. 2:53:13 PM SENATOR DUNBAR commented that in the prior committee of referral, there was a reference that the fees are often close to $100. He sought clarification on how a provider makes money at $100 per month. An a la carte menu implies that a patient is purchasing services as needed, but the bill describes a membership fee. He asked if member patients have access to a certain number of appointments, or if it is unlimited. SENATOR WILSON replied that $100 was the average national fee for states that already practice direct healthcare or DHCA agreements. There are many different health care specialties and health care providers so it is going to be different for each health care provider. One's direct healthcare agreement could have a set price for basic wellness checks, but this might be the set price per Xray; it depends on the agreement and how complicated or simple it might be. It is up to the individual providers to set those agreements. 2:55:29 PM MS. MARTIN commented that being able to charge low fees is an example of how much money and time is being wasted on the bureaucracy of billing different insurances. SENATOR DUNBAR agreed that there is a lot of bureaucracy in the health insurance system, especially in Alaska where costs are so high. He is still concerned that there would be a mismatch between what consumers are going to expect from SB 45 and what is going to be provided if fees are that low, especially in medical services where there is such an asymmetry of information between consumers and medical providers. Maybe a consumer thought something was covered, but the thing they needed doesn't count. He expressed that he is struggling with how these economics would play out in Alaska. 2:56:59 PM [The following testimony is garbled and some is indiscernible.] DR. JOSH UMBEHR, Family Physician, Atlas MD, Wichita, Kansas, gave invited testimony on SB 45. He said that he has been a direct primary care physician for 13 years and is one of the creators of the movement. He opined that the bill has far more language than necessary. Most states have far less regulation because direct primary care is in a separate class than other physicians. This practice falls under all standard state rules and AMA guidelines. To the Senator's point about cost effectiveness, he said his clinic charges $10 per month in fees. [The remainder of the testimony is indiscernible]. 2:58:43 PM SENATOR WILSON agreed with Dr. Umbehr's comments about prices. Denials Management LLC returns a lot of claims to the providers which takes staff time to process; it can cost hundreds of thousands of dollars per year to process denials for just one small health clinic. Cutting out the middle man and implementing direct health care agreements will help Alaska get to a better cost of care. 2:59:53 PM SENATOR DUNBAR asked Dr. Umbher what his patients get for the $10 per month fee. DR. UMBHER explained that the per month fee is $10 for children aged 0-19, $15.75-$100 per month for adults based on age for services such as: unlimited home visits, office visits, tele- medicine visits, no co-pays, any procedure free of charge, biopsies, injections, ultrasounds, casting, splinting, medication and labs in house. The total comes out to about a 95 percent savings. It will vary by location due to the cost of living but is a viable model to drastically reduce the cost of care which can help small businesses decrease the cost of insurance. SENATOR DUNBAR asked Dr. Umbher how he earns money and whether he is subsidized because $10 per month would not seem to cover costs. DR. UMBHER answered that it has proven to be profitable, growing by about 20-30 clinics per month. Charging $50 per patient per month averaged across all ages, equals $360,000 per year. There is one nurse for every two doctors. 3:03:36 PM CHAIR BJORKMAN held SB 45 in committee.