HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE March 16, 1994 3:00 p.m. MEMBERS PRESENT Rep. Cynthia Toohey, Co-Chair Rep. Con Bunde, Co-Chair Rep. Gary Davis, Vice Chair Rep. Al Vezey Rep. Pete Kott Rep. Harley Olberg Rep. Bettye Davis Rep. Tom Brice MEMBERS ABSENT Rep. Irene Nicholia (Excused) OTHER LEGISLATORS PRESENT Sen. Jim Duncan Sen. Suzanne Little Rep. Nordlund COMMITTEE CALENDAR HB 414: "An Act creating the Alaska Health Commission; relating to the delivery, quality, access, and financing of health care; relating to review and approval of rates and charges of health insurers; relating to certain civil actions against health care providers and health insurers; repealing Alaska Rule of Civil Procedure 72.1; and providing for an effective date." HEARD AND HELD WITNESS REGISTER MIKE FORD, Attorney Legislative Legal Counsel Division of Legal Services Legislative Affairs Agency 130 Seward St. Juneau, Alaska 99801 Phone: (907) 465-2450 Position Statement: Answered questions on the CS for HB 414 NANCY USERA, Commissioner Department of Administration P.O. Box 110200 Juneau, Alaska 99811-0200 Phone: (907) 465-2200 Position Statement: Answered questions on HB 414 BARBARA THURSTON, Actuary Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, Alaska 998011-0805 Phone: (907) 465-2573 Position Statement: Testified on HB 414 PREVIOUS ACTION BILL: HB 414 SHORT TITLE: COMPREHENSIVE HEALTH CARE SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/28/94 2182 (H) READ THE FIRST TIME/REFERRAL(S) 01/28/94 2182 (H) HES, JUDICIARY, FINANCE 01/28/94 2182 (H) -2 FISCAL NOTES (GOV, DCED) 1/28/94 01/28/94 2183 (H) GOVERNOR'S TRANSMITTAL LETTER 02/15/94 (H) HES AT 03:00 PM CAPITOL 106 02/15/94 (H) MINUTE(HES) 03/04/94 (H) HES AT 03:00 PM CAPITOL 106 03/04/94 (H) MINUTE(HES) 03/09/94 (H) HES AT 03:00 PM CAPITOL 106 03/09/94 (H) MINUTE(HES) 03/12/94 (H) HES AT 01:00 PM CAPITOL 106 03/12/94 (H) MINUTE(HES) 03/16/94 (H) HES AT 03:00 PM CAPITOL 106 ACTION NARRATIVE TAPE 94-52, SIDE A Number 000 CHAIR BUNDE called the meeting to order at 3:08 p.m., noted members present and announced the calendar. He brought HB 414 to the table. HB 414 - COMPREHENSIVE HEALTH INSURANCE ACT CHAIR BUNDE stated there were a number of amendments to address and brought Amendment 9 to the table. He then indicated that Commissioner Usera, Commissioner Lowe, Dr. Nakamura and Senator Duncan were present. Number 094 REP. B. DAVIS asked if she could make a statement. She said she understood that a considerable amount of work had been done on HB 414, but stressed that much more work needed to be done. She asked Chair Bunde if HB 451 would be heard again in committee and suggested that the two bills be addressed at the same time. She then asked if HB 451 could be addressed when committee work has been finished on HB 414. Number 154 REP. TOOHEY explained that HB 451 had been heard previously and it was decided then that because of budget restraints, HB 414 would be a more effective vehicle. REP. B. DAVIS asked what Rep. Toohey's intent was. REP. TOOHEY said she wanted to see HB 414 move forward. REP. B. DAVIS asked if portions of HB 451 could be brought back in the form of amendments. REP. TOOHEY stated that the reason HB 414 was the preferred bill was because "it is the only one on the floor that has funding." REP. B. DAVIS asserted that HB 414 needs a considerable amount more funding to make it effective. She felt that the provisions in one bill should not be ignored because the other bill was cheaper. Number 189 REP. TOOHEY maintained that the issue was not which bill was cheaper, it was which one has funding to begin with. CHAIR BUNDE observed that if either bill "costs new money," they will not pass out of committee. REP. B. DAVIS said the issue was new money. CHAIR BUNDE asked Rep. Toohey to move Amendment 9. REP. TOOHEY moved Amendment 9 for purposes of discussion. CHAIR BUNDE asked Rep. Toohey to address the amendment. Number 223 REP. TOOHEY indicated that the work draft (version 8- GH2024\E) was dated 3/14/94. CHAIR BUNDE said the latest version of the work draft for HB 414 was dated 3/14/94, version E. REP. TOOHEY said her committee substitute (CS) was dated 3/11/94 but indicated that the committee would work from version E, 3/14/94. She indicated that on page 2, line 5, the word "all" would be inserted before the word "Alaskans." CHAIR BUNDE questioned if there was a difference between "all Alaskans" and "Alaskans." Number 288 REP. TOOHEY felt there was no difference. She continued on to say that the words "market-based" would be inserted before the word "single" on page 13, line 16. CHAIR BUNDE said the phrase would be, "is based on a market based single payor..." REP. TOOHEY stated the language was contradictory. CHAIR BUNDE said he would recommend that the language remain. Number 322 REP. B. DAVIS asked who the person was that submitted the amendment and why the committee wanted to address the amendment. She asked if Rep. Toohey had reviewed the amendment and felt that the changes indicated should be made. REP. TOOHEY said she also had just received the amendment. Number 325 REP. B. DAVIS asserted that the committee should have time to review the proposed amendment so that any undesirable changes can be omitted. REP. TOOHEY asked if any of the proposed amendments had been reviewed by the committee. REP. B. DAVIS stated that there were several members who had reviewed the amendments. REP. TOOHEY said that all the proposed amendments that were before her, she had never seen until right then. REP. B. DAVIS said it was her understanding that the purpose of the meeting was to review the changes that had been made previously. CHAIR BUNDE indicated that the work draft had been available to all committee members and asked if Rep. B. Davis had any questions or concerns. REP. B. DAVIS said no. She said she was unsure if the committee had enough time to review. Number 374 CHAIR BUNDE suggested that perhaps Rep. Toohey could highlight the changes and then the committee could move on to the amendments. REP. TOOHEY agreed. CHAIR BUNDE suggested that Rep. Toohey withdraw her motion to adopt Amendment 9. REP. TOOHEY withdrew her motion. CHAIR BUNDE, after prolonged discussion, asked Mr. Ford to address the changes that were made previously on Saturday, March 12, 1994, to HB 414. He also invited Commissioner Usera to join the discussion. Number 428 MIKE FORD, Attorney, Legislative Legal Counsel, Division of Legal Services, Legislative Affairs Agency, testified on the CS for HB 414. He stated that there were two provisions changed as a result of the meeting held on Saturday. He said the changes both relate to the commission. He referred to page 14, lines 11-14, and said it related to a limitation on the composition of the commission whereby not more than one member can be a health care provider or employed by a health insurance company. CHAIR BUNDE indicated that the other change pertained to page 13, line 20. MR. FORD indicated that the new language requires that benefit packages must include coverage without an existing condition exclusion. He said those were the only changes made. Number 476 REP. BRICE asked if page 13, line 19, Section A was new. MR. FORD said the change was made to the end of line 20 and then lines 20 and 21. REP. BRICE referred to page 14 and said the change focused on the composition of the commission. MR. FORD concurred. REP. B. DAVIS said during Saturday's meeting, Commissioner Usera indicated that she had only just received the work draft for that day and was completely unfamiliar with some of the changes that were made to that particular draft by Legal Services. She said it was her understanding that the purpose of today's meeting was to go through the changes that were made prior to Saturday. She also indicated that there was no one present from the Division of Insurance on Saturday and that the committee was assured that there would be a representative present today. Rep. B. Davis said she thought those issues would be addressed in the meeting. Number 522 CHAIR BUNDE asked Mr. Ford to address the changes that were made prior to Saturday's meeting. MR. FORD stated that when the first CS work draft was produced, the bill was changed in a manner to conform with drafting requirements. He indicated that there were a number of provisions in the bill that did not comply with the drafting manuals, and the bill was changed accordingly. He explained that the changes were not substantive but were technical changes made to comply with drafting style. MR. FORD further indicated that there were a couple of provisions that were omitted in the bill that actually should have been included. He said those provisions have been added and they start with Section 2 and Section 3 where "we have simply removed a reference that is affected by a change in the governor's bill." He said it should have been done initially but was not. He explained that the change relates to the arbitration of medical malpractice actions. Mr. Ford asserted that now that the bill has been amended to provide for mandatory arbitration, there were sections that became obsolete and had to be deleted. He further indicated that the changes made were added and renumbered accordingly. He said he did not like to see dated material contained within the provisions being amended so they have been moved to a transition section that conforms with drafting style. MR. FORD addressed questions that he had raised in a memo. He said the first question pertains to Section 24 (b) which allows the governor to extend deadlines and indicated that the provision creates a problem. He said, "...in fact, allowing the governor to do that amounts to an impermissible delegation of legislative authority." Number 611 CHAIR BUNDE said Mr. Ford was referring to page 22. (Chair Bunde indicated that Rep. Kott arrived at 3:25 p.m.) CHAIR BUNDE clarified by saying that the delegation of power would be unconstitutional. MR. FORD agreed and said it would probably be a separation of powers, as well. CHAIR BUNDE asked Commissioner Usera her opinion on the matter. Number 620 NANCY USERA, Commissioner, Department of Administration (DOA), testified on HB 414. She stated that she does not have legal background and said she would defer to some one in the Department of Law to make that determination. She indicated that the directors of the administrators who were attorneys in the Department of Law did not identify that problem. She said a more thorough analysis could be done. CHAIR BUNDE said that would be appropriate. COMMISSIONER USERA said a written response would be submitted. CHAIR BUNDE asked Mr. Ford to address the next question. MR. FORD explained that question two pertains to the provision on page 17, line 28. He said if the director of the Division of Insurance adopts a regulation and the regulation is inconsistent with a law that has been passed by the legislature, the adopted regulation would supersede the legislative law. He felt that would be unconstitutional. He said regulations flow from laws, not the other way around. Number 673 COMMISSIONER USERA indicated that she would have the Department of Law review the issue. MR. FORD said, "I think lastly, there were some provisions in here that we believe affect court rules. So, we have simply added those references to the bill in compliance with the uniform rules and the constitution." CHAIR BUNDE asked if there was someone from the Division of Insurance present. He was told there was. He indicated that insurance rate regulation and review would be addressed. He asked for further questions. He then asked Barbara Thurston to testify. Number 718 BARBARA THURSTON, Actuary, Division of Insurance, Department of Commerce and Economic Development (DCEC), testified on HB 414. She stated that the division has prior approval authority over almost all rates written for property casualty insurance; i.e., auto, home owners and workman's compensation. She said the division has much less authority for the life and health types of coverage. She indicated that the division currently reviews and approves rates for Blue Cross, which is not technically an insurance company, Medicare supplements, and smaller lines like credit insurance. She indicated that the division does not have prior approval over regular disability insurance which is addressed by HB 414. MS. THURSTON stated that the legislation would require companies to file their rates with the division which would then review the filing and make a recommendation to the commission as to the appropriateness of the submitted rates. The commission, after public hearings, would then make the final decision of whether to approve the rate or not. Number 757 REP. BRICE asked Ms. Thurston how the DCEC views the possibility of taking over the review process of insurance rates for health care. MS. THURSTON indicated that the division supports the idea because more data would be accessible. REP. BRICE pointed out that his Amendment 10 addresses that issue. CHAIR BUNDE said there had been discussion that the review would be the middle ground between setting rates and having little or no overview. He asked Ms. Thurston if the division reviews Blue Cross rates but not other health insurers. MR. THURSTON said yes. Number 786 CHAIR BUNDE asked Ms. Thurston if the bill requires the division to set rates, not to review. MS. THURSTON said it was her understanding that the insurance companies would file their rates with the division and then the division would review them. CHAIR BUNDE explained that there has been suggestions that the bill should require that rates be set by the division. He asked her to address that issue. MS. THURSTON maintained that it was the first time she had heard of that suggestion. She felt it was not the division's position that they want to set rates. The division only wants to review. CHAIR BUNDE asked what the regulatory role of the division is regarding other types of insurance. MS. THURSTON explained that regarding property casualty lines, the companies file their rates with the division. The rates must be filed and approved before they are used. She indicated that sometimes the division questions assumptions and the insurance company will either file for a higher or lower rate. CHAIR BUNDE asked if rate approval is not the same as rate setting. MS. THURSTON disagreed that approving is the same as setting a rate because the division does not have the authority to specify what the rate will be. The division does have the authority to disapprove a filing which would leave the company to use their most recent rate. Number 828 CHAIR BUNDE observed that if a new insurance company that has had no previous base rate filed for approval of their new rates and was disapproved, they would be out of business. MS. THURSTON said that is correct. She also indicated that there are limits on the division's authority and that companies can request public hearings if their rates are disapproved. CHAIR BUNDE asked if the division would be comfortable with the approval of health insurance rates. MS. THURSTON felt that either the division or the commission could carry out that responsibility. CHAIR BUNDE said, "From our previous discussion if the commission approves rates, they are basically setting rates." REP. TOOHEY offered that there are only ten states that have the approval process for rates. MS. THURSTON said she was not familiar with the exact number. REP. TOOHEY stated that she disagrees with Chair Bunde that approval means rate setting. Number 877 CHAIR BUNDE asked if Rep. Toohey would consider disapproval to mean rate setting. REP. B. DAVIS asked Ms. Thurston what impact the additional responsibilities would have on the division. She also asked what the division felt the strong and the weak points of the bill are. MS. THURSTON asserted that the division supports the bill. REP. B. DAVIS said she understood that, but asked what type of impact the legislation would have on their budget. MS. THURSTON said there would be an increase in budget. Number 900 REP. B. DAVIS asked when the increase would be identified. MS. THURSTON replied that the increase was in the fiscal note. She explained that the legislation would call for one additional rate analyst and a clerk. REP. B. DAVIS questioned Ms. Thurston as to what the division would be doing differently that it was not doing now. MS. THURSTON explained that the division would review the health insurers rate filings. She said the legislation would not change the division's authority regarding solvency. Number 920 REP. B. DAVIS asked if the division took over rate review, would there be any increase in work load or funding. MS. THURSTON reiterated that there would need to be funding for one additional person, which was reflected in the fiscal note. REP. B. DAVIS indicated that in the present bill the rate review would be done by the commission. MS. THURSTON explained that as the bill is written the division reviews the rates and makes a recommendation to the commission which would conduct further review and then either approve or disapprove the rates. She said the extra person is needed for the division's portion of the review. REP. B. DAVIS asked what the impact would be on the division if the amendment is adopted. MS. THURSTON said she was unsure of the impact. Number 945 CHAIR BUNDE clarified by saying the division's fiscal note of $139,300 reflects the intent of the bill in its present state, which requires the division to review the rates first and then pass recommendations on to the commission who would perhaps then duplicate some of the work done by the division. MS. THURSTON said she assumed that the commission would not duplicate any procedures and would focus on other points. CHAIR BUNDE said the fiscal note would increase to accommodate the proposed amendments. MS. THURSTON said she was unsure of what the financial impact of the upcoming amendments would be. CHAIR BUNDE asked Ms. Thurston if in her opinion, when the division finished their portion of the review, would further work be required. MS. THURSTON responded by saying that the commission fulfills a public policy need by allowing more public participation and that was the reason the division supports the bill. Number 978 REP. BRICE asked that Ms. Thurston be available for further questions pertaining to the amendments to be considered. CHAIR BUNDE said, "It sounds as if at this point we're asking the Division of Insurance to do some work and the commission to rubber stamp it, and maybe there's some consolidation that could take place here." REP. BRICE asked if the committee could address Amendment 9. CHAIR BUNDE proposed to hold Amendment 9 until there was someone who would like to "champion" it. CHAIR BUNDE then brought Amendment 10 to the table. REP. BRICE made a motion to adopt Amendment 10. CHAIR BUNDE objected for purposes of discussion. REP. OLBERG asked if Amendment 9 would be addressed. CHAIR BUNDE indicated that Amendment 9 would be addressed at a future date by someone who was familiar with its intent. REP. BRICE stated that Amendment 10 consolidates the rate review within the Division of Insurance. He said the legislation would help to eliminate duplicative services. He explained that he would feel more comfortable with the division's staff and expertise in insurance rate review. Number 048 CHAIR BUNDE indicated that Mr. Ford drafted the amendment and asked him to come forward to answer any questions. REP. BRICE explained that Amendment 10 applies to the work draft dated 3/14/94 (version E). CHAIR BUNDE said to Mr. Ford that it is Rep. Brice intention to move the responsibility of rate review to the division. He said, "It puts people from insurance in a difficult position because to agree or disagree is to agree or disagree with the governor, who has proposed this bill. So, perhaps we need to have a neutral disinterested third or a neutral third party to discuss this." He then asked Mr. Ford if he had any legal concerns regarding the amendment. Number 080 MR. FORD stated that the amendment would delete the rate review and approval authority of the commission and would leave intact those sections of the bill that require additional information to go to the Division of Insurance. He explained that approval and rate review process would be left with the division. He said if it was the policy choice of the committee to not have the commission involved in rate review and approval, the amendment should be supported. REP. BRICE suggested that the process would be streamlined and more coherent if it were within the Division of Insurance. He then asked if the division would explain the review and approval process. CHAIR BUNDE said he shared Rep. Brice's concern regarding duplication of efforts. He then asked Commissioner Usera to respond to the proposed amendment. Number 110 COMMISSIONER USERA said there was tremendous debate while drafting the HB 414 regarding where the final authority should rest for rate review and approval. She stated that it was felt that there would be added value in having the commission make the final decision, but also indicated that the administration would have no objection to Division of Insurance making those decisions. She explained that the commission would enhance their visibility by being the final decision maker and would also give further opportunity for public process. TAPE 94-52, SIDE B Number 000 COMMISSIONER USERA further indicated that the cost of the commission would be reduced if the division were to be wholly responsible for rate review and approval. She said it would be the desire of the administration that the division be required to share their findings and information with the commission. CHAIR BUNDE asked Commissioner Usera, if the bill remains unchanged, would the commission have to hire people with actuarial skills? He also asked what value would be added if the commission was to make the final decisions. COMMISSIONER USERA replied that she anticipated that the commission would hold public hearings associated with rate filing. She explained that at a public hearing the division would present the information. She then said, "Thinking of this in terms of a more global view toward health care systems, then other aspects of health care systems can come into play and be discussed within that context of health insurance premiums." She asserted that the staffing for the commission would include analysts, but she did not anticipate those analysts as being actuaries. COMMISSIONER USERA referred to a prior statement that said the commission would only rubber stamp the director of the Division of Insurance's recommendations and indicated that was probably true as the Division of Insurance would not submit recommendations of disapproval, but would advance recommendations for approval. She said there would have to be very compelling reasons for the commission not to take the recommendation under advisement. She reiterated that it is the process that benefits when the final decision is made by the commission. Number 080 CHAIR BUNDE said, "I could understand and support that the report comes to the commission. And then, the commission reviews it and then either concurs or disagrees and then we start all over again. But, I wouldn't, as my question anticipated, wouldn't want rehashing of the issue." He then questioned the benefits of a public hearing as he felt that rate payers would be saying the rate is too high; insurance companies would say no they are not and that they're going broke, and eventually it would be the experts who would say the rate is either justifiable or not. COMMISSIONER USERA responded by saying it was her feeling that the more information that consumers have, the better consumers they become. If they have a better understanding of what the rates are based upon, they will understand that the rates are arbitrarily too high or too low. She said the focus is to have the public take an interest in the issues. Number 131 REP. TOOHEY asked Commissioner Usera if all types of insurance policies would have to be reviewed by the Division of Insurance or by the commission. COMMISSIONER USERA explained that all licensed insurance companies would have to submit their rates for review and approval under the terms of HB 414. She said there are not that many carriers. Number 140 REP. TOOHEY said there are many policies. She observed that there would be an increase in personnel and asked if there would be duplicated costs. Number 170 MS. THURSTON indicated that with HB 414, as it is currently written, the workload would require one more staff person. She said if Amendment 10 was to be adopted, it would require somewhat of an increase in staff, but not much more. REP. BRICE asked what the current process of approval is for other types of insurance. He also asked if there is a public process for approving car insurance rates. MS. THURSTON said, in general, there is no public process. However, she said that the division has the authority to call hearings and exercises the option periodically. She asserted that there is not a public meeting for every filing. Number 227 REP. BRICE suggested that because the commission would not necessarily have staff that has actuarial background, the approval process should be handled by the Division of Insurance. CHAIR BUNDE interjected and said that one of the primary concerns is the public process and indicated that there are already public hearings. He said he envisioned one public hearing but said there may be many and asked what the cost would be. MS. THURSTON said she could not address the specific cost. She asserted that the division is equipped to handle the process but there would be additional costs resulting from increase travel if Amendment 10 is adopted. Number 271 REP. BRICE stated that because the commission would not necessarily have the expertise necessary to make some of the determinations, they will have to hire staff with the appropriate expertise. He felt that the division would only have to hire one or two people but would not have to duplicate efforts. He agreed with a former statement that there might even be a decrease in cost. REP. OLBERG asked if HB 414 was to become law with Amendment 10 adopted, what would the Division of Insurance be doing that it is not doing now? MS. THURSTON explained that the division would be receiving rate filings for all of the health care and disability insurance. REP. OLBERG asked if that is not done currently. MS. THURSTON said no. REP. OLBERG asked who currently handles the procedure. MS. THURSTON maintained that nobody approves those rates and the insurance companies set their own rates. REP. OLBERG asked, if the division takes on the task of approval, what will the health commission do that the division won't be doing? MS. THURSTON replied that the commission would bring in more public involvement. Number 322 CHAIR BUNDE observed that the cost would be the same for both the Division of Insurance and the commission to hold public hearings if that portion of the bill is essential to its passage. He said the question is whether the meetings are a necessary expenditure. REP. OLBERG said, "...I think you've already predicted what these meeting are going to sound like." REP. TOOHEY asked if there were four insurance companies in the state and they all submit rates, would the state choose the best premium. COMMISSIONER USERA said, "The state still has to put that out to bid. So, it would be a question of what insurance companies would bid on the state book of business and what the terms and conditions were." REP. TOOHEY explained that Blue Cross and Blue Cross are nonprofits and asked if they would be under the same regulations as the rest of the field. MS. THURSTON said they would be under the same rules as everyone else. She said they are currently being reviewed, so there would be little impact on them. CHAIR BUNDE observed that there was only one company that bid for the state health insurance policy and if there were other companies vying for the policy, circumstances could be much different. Number 386 REP. OLBERG asked if the division would review the rates of the single bidder who proposes to sell insurance to the state of Alaska. MS. THURSTON said yes. REP. OLBERG then asked Commissioner Usera if the Department of Administration would also review those rates. COMMISSIONER USERA said the department would not review them in a regulatory sense. REP. OLBERG asked if the health commission would review the rates. MS. THURSTON said under HB 414 the commission would. COMMISSIONER USERA concurred. CHAIR BUNDE asked for further discussion of Amendment 10. Number 421 SEN. JIM DUNCAN said, "I actually support the amendment. I just had a question for clarification. I wanted to be sure that all the information is the same. This same proposal is in the Senate side, Senate Bill 284, and also in the House bill. But, this one doesn't prepare the bill in rate approval. It removes rate approval all to the Division of Insurance. That doesn't track with what's being testified to, and I just wanted clarification because on 284 they indicate that in addition to the investigator there will be the three consumer complaints specialists at a cost of $135,600 that we need." He asked for further clarification. MS. THURSTON said she felt there would be an increase in cost and part of it may cover some consumer complaint people. REP. TOOHEY quipped and said, "Mr. Chairman, we might have a better bill than you do." SEN. DUNCAN jokingly responded, "It's very unlikely." He then stated that Rep. Brice's amendment should be adopted and that the costs being reported to the body should be accurate and include the cost of consumer complaint experts. CHAIR BUNDE said he would expect a revised fiscal note that would reflect those changes if the amendment passes. Number 481 REP. BRICE said, "I would assume that those costs should be within 414 as it's currently written as well, if the amendment isn't passed any way, because they would still be..." CHAIR BUNDE interjected and pointed out that HB 414 would not be paid for by the general fund and that the fiscal note from the division would be. REP. BRICE said that could be changed. COMMISSIONER USERA stated that Sen. Duncan was correct in that there are some inconsistencies and indicated that the administration would like Chairman Rieger to give the administration the opportunity to readdress those issues. She said she wanted to be sure that everything is priced correctly and there already were people working on revised fiscal notes for the Senate. She indicated that she would be reporting to the Senate the following Wednesday with regard to those provisions. COMMISSIONER USERA further stated that the funding source of the governor's bill was premium tax, which currently is going into the general fund. She asserted that the administration is not proposing an increase in the premium tax to pay for the legislation. CHAIR BUNDE clarified and said that the funds are a subset of the general fund. (Chair Bunde stated for the record that Rep. G. Davis arrived at 4:05 p.m.) Number 534 CHAIR BUNDE related to Rep. G. Davis that the committee was addressing Rep. Brice's Amendment 10 which would locate the responsibility of rate review and approval in the Division of Insurance. He then asked for further testimony or questions regarding Amendment 10. REP. B. DAVIS stated that although representatives of insurance companies had testified previously against rate review, they felt that if there was going to be rate review and approval, it should be done by the Division of Insurance. She urged the committee to support the amendment. CHAIR BUNDE reminded the committee that Commissioner Usera had said that Amendment 10 would be acceptable. He then asked the pleasure of the committee. REP. BRICE made a motion to adopt Amendment 10. REP. TOOHEY objected. Number 576 CHAIR BUNDE called for the vote. Reps. Kott, B. Davis, and Brice voted "Yea" and Reps. Toohey, Bunde, G. Davis, and Vezey voted "Nay." Chair Bunde indicated that Amendment 10 was not adopted. REP. B. DAVIS asked Ms. Thurston if she felt that the legislation clearly defines the roles of both the Division of Insurance and the commission, and if not, what were her areas of concern. MS. THURSTON said she had no areas of concern. REP. B. DAVIS asked Ms. Thurston if she felt that everything was clearly outlined in the bill. Number 625 CHAIR BUNDE stated that his vote against Amendment 10 did not indicate that he would like the health commission to "get into the actuarial business." He said the commission would concur with the decisions of the division and also conduct public meetings. REP. B. DAVIS asked Ms. Thurston if the division has authority over the self-insured. MS. THURSTON said no. REP. B. DAVIS asked who will have that authority. MS. THURSTON indicated that a federal waiver would have to be obtained to include the self-insured. REP. B. DAVIS asked Commissioner Usera if the only way would be by obtaining a waiver. COMMISSIONER USERA maintained that a federal waiver would have to obtained. REP. B. DAVIS asked which section of the bill addresses the matter. COMMISSIONER USERA indicated that on the previous Saturday meeting an amendment was adopted that addressed the issue. REP. B. DAVIS asked which section it was in and also indicated it was never clearly discussed. CHAIR BUNDE indicated that page 16, line 9, addresses federal waivers. He then brought Amendment 11 to the table. REP. BRICE made a motion to adopt Amendment 11. REP. KOTT objected. CHAIR BUNDE asked Rep. Brice to address the amendment. He then indicated that Rep. Jim Nordlund was present and asked him to join the committee. REP. BRICE explained that the amendment would expand the commission to make it a public commission versus a professional commission, which would subsequently reduce the cost of the commission significantly. He said the members would be allowed a $400 a day per diem as opposed to paying each person a range 26, salary which is a commissioner's salary. He felt the commission would then more adequately represent the consumer. CHAIR BUNDE observed that considerable discussion had taken place pertaining to the composition of the commission. He indicated that to keep costs down, it was decided that three people would aptly handle the responsibility. He then asked Rep. Brice if he had a fiscal note to compare costs. Number 725 REP. BRICE stated that the commission would perhaps work a total of two months versus establishing three full time state employees. He anticipated a savings if the amendment was adopted. He pointed out that it would cost almost $340,000 annually for three state commissioners. CHAIR BUNDE asked how the comparison would look if the commission, as proposed in Amendment 11, had to work year round. REP. BRICE deferred to Commissioner Usera for the answer. REP. KOTT interjected and said a grade 26C is $72,000 per year or $6034 per month plus $8000 in per diem monthly. He said it is a substantial increase. REP. BRICE added that there would also be 40% benefits. COMMISSIONER USERA said the amendment would fundamentally change the entire approach to the commission. She felt the amendment would increase costs. She stated that if the people are not working full time on the issues, somebody must be paid who is. She said a range 26 is equivalent to that of a division director or a program manager and is consistent with similar commissions after which the health commission is modeled. She further explained that to change the commission into an advisory board of seven people would increase costs considerably. Commissioner Usera felt that it would be a very difficult workload dealing with complex issues. She explained that not only would there be per diem costs for the seven people, but there would also be travel expenses. She maintained that those costs would be in addition to the work that would be done at staff level. SEN. DUNCAN stated that he supports Amendment 11. He said the amendment reflects the structure that had been agreed upon by the work group that met throughout the interim. He indicated that the group was made up of insurance and health providers, constituents, consumer groups, and various legislators. He maintained that the work group decided that there needed to be as much broad-based public involvement as possible in any type of health care system and regarding any type of reform. SEN. DUNCAN felt that a narrow commission made up of only three high paid members would limit the ability for the public to be involved in the decision making process. He further explained that the structure of the commission as proposed in Amendment 11 is comparable to that of the Permanent Fund Board of Trustees. Sen. Duncan stated that the members of the board are compensated exactly as is specified in the proposed amendment and there is much public involvement. He said the board hires staff to do the technical work as they are not necessarily experts. He felt the process would be no more expensive than what is being proposed in HB 414. SEN. DUNCAN stated that HB 414 allows for any necessary staff to be hired along with three "highly paid" individuals. He said, "...the governor is proposing, if you really do the job right, under the governor's bill, for example what it does say in the governor's bill is, in addition to these three highly paid individuals, they can employ other staff as necessary. Now, the fiscal note says it's going to be one analyst, a secretary, I guess, or whatever else. But, that's not realistic if you're really going to do the job." SEN. DUNCAN reiterated that he supported Rep. Brice's amendment because it is structured after that of the Board of Trustees for the Permanent Fund with seven members representing broad-based public involvement. He also stated that the amendment would ensure that those individuals who are appointed to the commission are committed to designing a health care system that will serve the needs of the Alaskan people. SEN DUNCAN then said, "All of us have been around this process for a long time. On the other hand, if you have high paid political appointees, that's what you get -- political appointees. And, those jobs become political plumbs." He further indicated that there are other commission members that have worked for the person who became governor and subsequently became political appointees. Number 911 REP. TOOHEY indicated that she was on the work force during the interim and said many people did not agree on the issues. She said, "I believe firmly that if you involve nurse practitioners, mid-wives, psychologists, doctors, nurses, or everybody in the world, you'll get nothing done. We need a small commission that is focused on the economy of the state because that's what's going to drive this health insurance. It's going to be the economy. Who pays for it? And, it's not going to be someone that wants to give all these wonderful benefits to everybody because we can't afford them. You can't afford personally, nor can the state afford it. So, there are two opinions out there. And, for you to sit there and say that I was a part of that group, and you didn't say my name, but I was a part of that group, and I did not agree with probably half of what went on." Number 931 SEN. DUNCAN said he did not mean to imply that Rep. Toohey had agreed with his positions. He said there was broad- based agreement on the issue of the commission and also indicated that there was a list of ten or twelve organizations that endorsed the concept. TAPE 94-53, SIDE A Number 000 SEN. DUNCAN further indicated that the amendment does not require that all different provider groups be represented on the commission. He explained that Amendment 11 requires the majority of the members be experts in health care issues that fairly represent the general public as well as the providers. He reiterated that there would be no additional costs and suggested that it would be less costly. Number 046 REP. TOOHEY said she envisioned the three member committee to be completely removed from the medical community and would hold public hearings that would include the general public and the medical community. She then questioned as to how many people would be vying for the seven seats on the proposed commission. SEN. DUNCAN said there would be as many vying for three seats. REP. TOOHEY said, "That's why I'm saying a nonmedical person." SEN. DUNCAN explained that as the bill is written it requires that not more than one member be from the medical community. He further indicated that a person can be an expert in health care and not be a physician, nurse, health care provider, or insurance provider. He then suggested that the word "knowledgeable" should be used instead of "expert" in Amendment 11. He felt it would relieve the concern that the member must be a provider. Number 143 REP. B. DAVIS explained that she too had participated in the meetings during the interim and there was a general consensus that supported HB 451. She indicated that she too did not support many issues and said it was her vision that the commission's structure would be similar to the Public Utility Board, where members make approximately $67,000 and work full time. She felt the commission should be expanded and composed of people who are knowledgeable about health care. Number 193 SEN. DUNCAN indicated that there are people who have been appointed at range 26C to other commissions in the state and have no background in the area that they're serving. REP. B. DAVIS asserted that the majority of the commission should have backgrounds in health care. She said she could support the amendment as written but that there would be an overload of work for only three people. CHAIR BUNDE pointed out that the page and line number references used in Rep. Brice's Amendment 11 are incorrect. REP. BRICE said he was just about to change the references. CHAIR BUNDE said to correct the page and line references, change page 3, line 21, to page 14, line 10. The second reference would be changed from page 3, line 23, to page 14, line 11. Change page 4, lines 5-9, to page 14, lines 27-31. He further indicated that the last reference should be changed from page 4, line 14, to page 15, line 4. He then asked Commissioner Usera to respond to the amendment. Number 270 COMMISSIONER USERA said she appreciated Sen. Duncan's comments regarding political appointees. But, she indicated that if the "legislature is going to confirm political packs, there's more than one culprit here." She said she can appreciate the other models for the commission used in other legislation, but as a member of the Permanent Fund Board of Trustees, there is no substitute for the intensive day to day work that must be done, particularly on a start- up basis. COMMISSIONER USERA reiterated that extensive discussions had taken place regarding the composition of commission. She said, "But, I'm going to say one more time for the record Mr. Chairman, that one of the overriding concerns when we developed this bill is what can we afford to do? How can we start moving this forward in a way that is affordable to get the subject moving and get a focus moving on the attention. And, this is the model that we think best serves that intent." Number 354 REP. B. DAVIS said she understood Commissioner Usera's position considering the financial constraints facing the legislature, but she felt the mark is being missed in terms of what health care is about. She asserted that the costs for health care are increasing each year and are becoming less affordable. She further indicated that if the state keeps "pinching the nickels and dimes based upon the fact that we can't afford it now, we won't be able to afford health care five years from now either." She felt a system needs to be in place and that if it is not, she asked what the legislature would have accomplished. CHAIR BUNDE observed that the discussion before the committee pertains to Amendment 11. REP. B. DAVIS said she understood, but felt the issue should be addressed. Number 390 COMMISSIONER USERA said there is no funding to address health care in the manner that Rep. B. Davis would like to see. She explained that either one of two things could be done. The state can wait and do nothing for the next few years until there is funding or find a spending plan. She said the administration recognizes that HB 414 isn't "everything" but indicated that the administration believes the state is not financially ready to undertake the entire issue of health care all at once. Number 437 CHAIR BUNDE reminded the committee again that Amendment 11 was on the table for discussion. REP. TOOHEY asked Commission Usera if there was a termination date for the commission in the original bill. COMMISSIONER USERA said, "Sunset date -- five years with the sunset year being the sixth year. And, just to reiterate our concept here is we believe that this is the first iteration of this commission. That in fact what we will see is this process. I mean, if we go into comprehensive reform, it may very well be that a different model and a different structure of a commission would make a lot more sense down the road." CHAIR BUNDE asked Rep. Brice to speak again to his amendment. REP. BRICE referred to Rep. Toohey's comment and indicated the concerns that Mr. Ford had regarding the governor being able to extend the sunset date without legislative approval. Number 475 CHAIR BUNDE indicated that his constituency would not be happy if another state employee is added. He then called for the vote to adopt Amendment 11. Reps. Olberg, B. Davis and Brice voted "Yea" and Reps. Bunde, G. Davis, and Toohey voted "Nay." The amendment failed. CHAIR BUNDE brought Amendment 12 to the table. REP. BRICE made a motion to adopt Amendment 12. He also indicated that he had additional changes referencing the appropriate pages. REP. OLBERG said, "Point of order. Did the Chair define the fate of Amendment 11?" CHAIR BUNDE stated that Amendment 11 failed to pass. He then indicated that Amendment 12 had been moved. He objected for discussion purposes. Number 523 REP. BRICE clarified the reference changes. He explained that the amendment would establish a public hearing process for the development of the health care plan itself. He said the commission would design, implement, and maintain an extensive community-based involvement process. He stated that the provisions would keep the people of Alaska informed. CHAIR BUNDE said there was a problem with Rep. Brice's page and line references. REP. OLBERG said there is already a Section 44.19.635 in the bill and asked Rep. Brice if he was making a substitution. REP. BRICE indicated that he wanted to renumber the sections appropriately. MR. FORD indicated that the reference should be page 20, line 17, and there would be a new Section 44.19.636. REP. OLBERG asked if the change would start after line 16. CHAIR BUNDE, after some discussion, asked Rep. Brice to further address the amendment. Number 593 REP. BRICE reiterated that Amendment 12 would establish a public education process which would include the citizens of Alaska in the process and would keep them informed of health care services, financing options, revenue sources, cost- sharing options, and the administration of the health care plan. CHAIR BUNDE asked if there would be one meeting a week, a month, or a quarter and at what cost. REP. BRICE suggested that there be continuing meetings that would specifically address the aforementioned points of the amendment. COMMISSIONER USERA stated that the term "extensive community-based" is fodder for lawsuits as it is difficult to define what is extensive. She said she was more concerned with the costs associated with those three words. She indicated that the administration would be supportive of the amendment if the term "extensive community-based" was deleted. Number 667 REP. BRICE disagreed and said there still needed to be a public "push" on the commission and that perhaps Mr. Ford could address the matter. MR. FORD said more specific criteria could be substituted for the term. He said it could be up to the commission to determine what is extensive. He further stated that the term could be narrowed, deleted or further defined. CHAIR BUNDE stated that the House body recently had much discussion as to what the legislative intent was of legislation passed several years ago. He said he had a strong concern as to what "extensive community-based" means. He asked if meetings would be held in every "fish camp" or in three major communities. REP. BRICE said, "I would suggest more than three major communities and less than every fish camp." REP. G. DAVIS said he would like to amend Amendment 12 by deleting the term "extensive community-based" and inserting the word "a" before the word "public." He then moved the amendment to Amendment 12. REP. OLBERG objected. REP. BRICE indicated that Rep. G. Davis' suggested amendment was a friendly amendment. REP. OLBERG maintained his objection. Number 738 (Chair Bunde acknowledged the presence of Senator Suzanne Little.) REP. OLBERG said he felt the committee would be amending a bad idea and would prefer to vote only on Amendment 12. REP. G. DAVIS said he still maintained his amendment to Amendment 12. CHAIR BUNDE indicated that the committee was voting on an amendment to Amendment 12 that would remove the term "extensive community-based" and the sentence would read in part, "...and maintain a public involvement process..." CHAIR BUNDE then called for the vote. Reps. G. Davis, B. Davis, and Toohey, and Bunde voted "Yea" and Reps. Olberg and Brice voted "Nay." Chair Bunde indicated that the amendment to Amendment 12 had been adopted and then called for the vote to adopt Amendment 12 as amended. Reps. B. Davis, Brice, and G. Davis voted "Yea" and Reps. Olberg, Toohey, and Bunde voted "Nay." Chair Bunde indicated that Amendment 12 had not been adopted. Number 802 CHAIR BUNDE brought Amendment 13 to the table. He then corrected the line and page references. He said page 5, line 6, should be changed to page 16, line 10, Section 8. REP. BRICE stated that the amendment would address long term care. He felt that long term care should be included in the health care reform. REP. TOOHEY said she "personally" objected to the amendment and felt the issue should be addressed by the commission. CHAIR BUNDE asked for further discussion. COMMISSIONER USERA reminded the committee that in the previous meeting on HB 414, fairly comprehensive language regarding public health and the health of senior citizens in the state had been adopted in an amendment. She felt that the concept of long term care falls explicitly within the purview of public health. Number 866 REP. BRICE suggested that long term care should be an issue that is discussed separately and given specific focus within the commission. REP. G. DAVIS agreed that long term care should be included as it is a greatly neglected issue. He felt that if the issue is not addressed now, "it's going to come back to bite us." REP. OLBERG asked if a motion had been made to adopt Amendment 13. CHAIR BUNDE said the motion had been made. He asked for further testimony. There being none, he then called for the vote. Reps. B. Davis, Brice, and G. Davis voted "Yea" and Reps. Olberg, Toohey, and Bunde voted "Nay." Chair Bunde declared that Amendment 13 was not adopted. Number 923 REP. BRICE asked if the committee was going to act under the recommendations of Mr. Ford regarding the sunset date of the commission. CHAIR BUNDE explained that the committee would first need feedback from the Department of Law before the issue could be further discussed. He further indicated that Amendment 9 would be addressed at the next meeting on HB 414. REP. OLBERG asked Commissioner Usera if approximately $1 million would be spent on the health commission annually. COMMISSIONER USERA said yes, for the first year. REP. OLBERG asked what the state will have and know then that the state does not have and know now. COMMISSIONER USERA said in a year's time the state will have an incremental improvement to the current system; i.e., a universal claim form, nonbinding arbitration, and extensive data collection for pool insurance and rate approval. She also indicated that there would be an implementation plan for comprehensive reform. CHAIR BUNDE added that he hoped something would be in place before the federal plan is unveiled. Seeing no further business before the committee, CHAIR BUNDE adjourned the meeting at 4:55 p.m.