HOUSE LABOR AND COMMERCE STANDING COMMITTEE April 27, 1998 3:28 p.m MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative Bill Hudson Representative Jerry Sanders Representative Joe Ryan Representative Gene Kubina MEMBERS ABSENT Representative John Cowdery, Vice Chairman Representative Tom Brice COMMITTEE CALENDAR HOUSE BILL NO. 300 "An Act relating to health insurance; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 486 "An Act relating to the Alaska Securities Act; and providing for an effective date." - MOVED CSHB 486(L&C) OUT OF COMMITTEE HOUSE BILL NO. 350 "An Act requiring that the cost of contraceptives and related health care services be included in health insurance coverage." - HEARD AND HELD Confirmation Hearing for Boards and Commissions - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 300 SHORT TITLE: ALASKA PATIENTS' BILL OF RIGHTS SPONSOR(S): REPRESENTATIVES(S) BUNDE, James, Rokeberg Jrn-Date Jrn-Page Action 1/12/98 2023 (H) PREFILE RELEASED 1/2/98 1/12/98 2023 (H) READ THE FIRST TIME - REFERRAL(S) 1/12/98 2023 (H) HES, LABOR & COMMERCE 2/19/98 (H) HES AT 3:00 PM CAPITOL 106 2/19/98 (H) MINUTE(HES) 2/24/98 (H) HES AT 3:00 PM CAPITOL 106 2/24/98 (H) MINUTE(HES) 2/25/98 2423 (H) HES RPT CS(HES) NT 1DP 2DNP 2NR 2/25/98 2423 (H) DP: BUNDE; DNP: PORTER, VEZEY; 2/25/98 2423 (H) NR: DYSON, GREEN 2/25/98 2423 (H) ZERO FISCAL NOTE (DCED) 2/25/98 2423 (H) REFERRED TO L&C 3/20/98 (H) L&C AT 3:15 PM CAPITOL 17 3/20/98 (H) MINUTE(L&C) 3/20/98 (H) MINUTE(L&C) 3/23/98 (H) L&C AT 3:15 PM CAPITOL 17 3/23/98 (H) MINUTE(L&C) 4/27/98 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 486 SHORT TITLE: ALASKA SECURITIES ACT SPONSOR(S): LABOR & COMMERCE BY REQUEST Jrn-Date Jrn-Page Action 4/16/98 3014 (H) READ THE FIRST TIME - REFERRAL(S) 4/16/98 3014 (H) LABOR & COMMERCE 4/24/98 (H) L&C AT 3:15 PM CAPITOL 17 4/24/98 (H) MINUTE(L&C) BILL: HB 350 SHORT TITLE: INSURANCE COVERAGE FOR CONTRACEPTIVES SPONSOR(S): REPRESENTATIVES(S) CROFT, Phillips, Bunde, Green, James, Berkowitz, Davies, Elton, Kemplen, Rokeberg; SENATOR(S) Wilken Jrn-Date Jrn-Page Action 1/26/98 2133 (H) READ THE FIRST TIME - REFERRAL(S) 1/26/98 2133 (H) HES, L&C 2/04/98 2223 (H) COSPONSOR(S): ELTON 2/10/98 (H) HES AT 3:00 PM CAPITOL 106 2/10/98 (H) MINUTE(HES) 2/16/98 2336 (H) COSPONSOR(S): KEMPLEN 2/19/98 (H) HES AT 3:00 PM CAPITOL 106 2/19/98 (H) MINUTE(HES) 2/20/98 2380 (H) HES RPT 3DP 2DNP 1NR 2/20/98 2380 (H) DP: GREEN, BUNDE, KEMPLEN; DNP: DYSON 2/20/98 2380 (H) PORTER; NR: BRICE 2/20/98 2380 (H) LETTER OF INTENT WITH HES REPORT 2/20/98 2381 (H) ZERO FISCAL NOTE (DCED) 4/24/98 (H) L&C AT 3:15 PM CAPITOL 17 4/24/98 (H) MINUTE(L&C) 4/27/98 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER REPRESENTATIVE CON BUNDE Alaska State Legislature Capitol Building, Room 104 Juneau, Alaska 99801 Telephone: (907) 465-4843 POSITION STATEMENT: Sponsor of HB 300. PATTI SWENSON, Legislative Assistant to Representative Con Bunde Alaska State Legislature Capitol Building, Room 106 Juneau, Alaska 99801 Telephone: (907) 465-6824 POSITION STATEMENT: Answered questions on the proposed CS for HB 300. JACK McRAE Blue Cross of Washington and Alaska (Address not provided) Telephone: (Not provided) POSITION STATEMENT: Testified on the proposed CS for HB 300. KATHY VOLTZ, Physical Therapist President, Alaska Chapter American Physical Therapy Association P.O. Box 140351 Anchorage, Alaska 99514 Telephone: (Not provided) DR. ROBERT H. BANKS, President Alaska Chiropractic Society (Address not provided) Telephone: (Not provided) POSITION STATEMENT: Testified in support of HB 300. TOM TIERNEY, Director Employee Relations Municipality of Anchorage (Address not provided) Anchorage, Alaska Telephone: (Not provided) POSITION STATEMENT: Testified against the proposed CS for HB 300. DR. ROBINSON (Address not provided) Wasilla, Alaska Telephone: (907) 373-0747 POSITION STATEMENT: Testified in support of HB 300. CYNTHIA DODGE Alaska Psychological Association 2550 Denali Street, Suite 1606 Anchorage, Alaska 99503 Telephone: (Not provided) POSITION STATEMENT: Testified in support of CS for HB 300. JACQUELINE HUTCHINS (Address not provided) Anchorage, Alaska Telephone: (907) 345-2063 POSITION STATEMENT: Testified on CS for HB 300. DR. MICHAEL SAGE, Dentist (Address not provided) Anchorage, Alaska Telephone: (907) 243-3810 POSITION STATEMENT: Testified on CS for HB 300. DR. GEORGE M. HANSEN, Retired Dentist (Address not provided) Anchorage, Alaska Telephone: (907) 563-7518 POSITION STATEMENT: Testified on CS for HB 300. ROSS BLAKER AETNA Health Care 4300 "B" Street, Suite 500 Anchorage, Alaska 99503 Telephone: (Not provided) POSITION STATEMENT: Testified on CS for HB 300. QUINN McKENNA, Operations Administrator Providence Health System 3200 Providence Drive Anchorage, Alaska 99508 Telephone: (907) 261-3055 POSITION STATEMENT: Testified in opposition to CS for HB 300. TOM HIPSHER, Dentist Alaska Dental Society 800 East Dimond Blvd. Anchorage, Alaska 99515 Telephone: (907) 349-5585 POSITION STATEMENT: Testified in support of CS for HB 300. ED BURGAN Brady and Company 9960 Lone Tree Drive Anchorage, Alaska 99516 Telephone: (907) 346-1991 POSITION STATEMENT: Testified on CS for HB 300. MANO FREY, President Alaska AFL-CIO 2501 Commercial Drive Anchorage, Alaska 99501 Telephone: (907) 272-4571 POSITION STATEMENT: Testified in opposition to CS for HB 300. TERRY ELDER, Senior Securities Examiner Division of Banking, Securities and Corporations Department of Commerce and Economic Development P.O. Box 110807 Juneau, Alaska 99811-0807 Telephone: (907) 465-2521 POSITION STATEMENT: Testified in support of HB 486. GORDAN EVANS, Lobbyist Health Insurance Association of America 211 Forth Street, Suite 305 Juneau, Alaska 99801 Telephone: (907) 586-3210 POSITION STATEMENT: Testified in opposition to CS for HB 300. MARIANNE BURKE, Director Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 Telephone: (907) 465-2515 POSITION STATEMENT: Answered questions on CS for HB 300. TOM ATKINSON, Researcher to Representative Eric Croft Alaska State Legislature Capitol Building, Room 430 Juneau, Alaska 99801 Telephone: (907) 465-4998 POSITION STATEMENT: Presented HB 350 on behalf of Representative Eric Croft. ACTION NARRATIVE TAPE 98-52, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:28 p.m. Members present at the call to order were Representatives Rokeberg, Hudson, Ryan and Sanders. Representative Kubina arrived at 3:28 p.m. HB 300 - ALASKA PATIENTS' BILL OF RIGHTS Number 0211 CHAIRMAN ROKEBERG announced the first order of business would be HB 300, "An Act relating to health insurance; and providing for an effective date," sponsored by Representative Bunde. REPRESENTATIVE CON BUNDE came before the committee. He thanked the committee for hearing the bill again. He stated that the bill, in its current form, CSHB 300(HES), allows consumers to hold organizations liable that are negligent in making medical decisions for patients. It puts some protections in place for health care providers who participate in managed health care plans. It protects small business owners and consumers with respect to emergency room visits, pharmacy needs, dental services and gives recourse if claims are denied. He stated the legislation ensures the availability of point-of-service plans for all consumers if they want that type of coverage, and makes sure consumers can obtain information about the availability of medical treatment options and utilization review decisions that must be reviewed by a physician or a medical practitioner licensed in Alaska. He pointed out that he has worked to accommodate concerns that other organizations, including Providence Hospital and unions, have regarding the legislation. Representative Bunde noted that organizations that are covered by the Employee Retirement and Income Security Act (ERISA) would not be affected by the bill. Number 0422 REPRESENTATIVE BILL HUDSON made a motion to adopted Version J, 0- LS1248\J, dated 4/27/98. There being no objection, Version J was before the committee. PATTI SWENSON, Legislative Assistant to Representative Con Bunde, Alaska State Legislature, came before the committee to explain the changes in the committee substitute in comparison to the original version of the bill. She stated the only section that is the same is Section 1, "SHORT TITLE. Section 4 of this Act may be known as the Alaska Patient's Bill of Rights." Ms. Swenson explained that Section 2 is the liability section. If a managed care organization acts negligently, they would take on some liability if something happens to a patient. She referred to Section 3 and said it adds a new regulation of health care insurance plans which is a new Chapter 7. The section gives managed care providers some protection as well as patients. She referred to line 22, (5)(A) through (E), and said all health care services to be provided must clearly be identified. Health care services will be provided by contractors. She noted that which health care services provided by contractors has to be clearly identified. Provider compensation rates, termination procedures and usual and customary reimbursement schedules must be clearly identified to both the patient and the provider. Ms. Swenson explained under Section 21.07.020, regarding required contract provisions, a health insurance plan offered to residents of the state must provide coverage for medical procedures that have been preapproved. She noted that in previous testimony, there was a lot of complaining over people going to a doctor or any health care provider and having a procedure done, and then later the preapproval was taken back, and the doctor or provider was not paid at all. The section would fix it so that once it is approved it can't be changed. Also, included in the section is emergency room visits for people who reasonably believe they should go the emergency room. They will be covered. That would assist in that if you were out of town, got in an accident, and went to an emergency room that is not covered by your managed care agreement, or if you're really sick and you go to the emergency room, they can't say that it wasn't necessary to go to an emergency room. Number 0759 MS. SWENSON referred to the wording on page 3, line 4, "(3) copayment requirements shall be uniform between health care providers;", and said the wording was added because the nurse practitioners have recently been notified by their insurance group that in order for a patient to see them, there is a $200 copay. In order for the patient to see a doctor, there is a $10 copay. The bill was changed so that copayment requirements shall be uniform. Number 0833 REPRESENTATIVE JOE RYAN questioned the justification for that. MS. SWENSON responded that she was not able to get any justification for that. MS. SWENSON referred to page 3, line 6, "(4) pharmacy and dental services shall be located in the community in which the covered person resides." She said she believes Chairman Rokeberg has an amendment he would like to offer. Number 0904 CHAIRMAN ROKEBERG stated his amendment would change the word "located" to "provided", because in certain instances there may not be dental or pharmacies in the area. MS. SWENSON explained that page 3, line 8, (5), is utilization review language. She stated a consumer can't have their benefits reduced or their health care insurance terminated unless there has been a conversation with another physician or another trained health care provider in that specialty. There has been testimony that health care providers are getting on the telephone to talk to utilization review organizations, and the only person they get to talk to is somebody at the front desk with a check list. That person says, "Well it doesn't meet the requirements on this check list, so these benefits are denied." She said hopefully (5) will keep that from happening. There has to be a peer review. They have to be able to speak to an equal person trained in that specialty or close to it. Number 1048 MS. SWENSON referred to the next section, "Choice of health care provider," on page 3, line 13. She said insurance plans will now need to offer a point-of-service plan that will allow people to go outside of their preferred provider network. They don't have to pick that plan. It doesn't say anything about it costing more or less, but the point-of-service should be offered. Ms. Swenson stated the next section, page 3, line 30, is definitions. She referred to Section 4, page 4, line 27, "Required health insurance coverage provisions, "(a) A health care insurer may not include in the health care insurance plan or contract a provision that (1) prohibits a covered person from obtaining health care services from a health care provider of the person's choice, including a specialist;". She stated this doesn't say that they would have pay more if they went outside the plan. It just says that they would have their choice. Ms. Swenson referred to page 5, line 1, (2), and said it would prevent anybody from not being able to talk about what the treatment options are with the patient. She indicated page 5, line 4, (b), is utilization review. The language says, "licensed to practice in the state", which was added so that utilization review would remain in the state for some specialities. Number 1228 MS. SWENSON referred to page 5, line 8, "(c) A health care insurer may not directly or indirectly reimburse a covered person at a different rate because of a person's choice of provider;". She said that relates to the nurse practitioners. She read the wording on page 5, line 15, (d), "A covered person may bring a civil action against a health care insurer to enforce the person's rights under this section." She said that stands for itself. MS. SWENSON referred the committee to page 4, line 31, and said Chairman Rokeberg has requested an amendment. Following "specialist," insert "This paragraph does not apply to a health care insurance plan or contract if the covered person signs a written waiver of the provision of this paragraph." If a person was offer a preferred provider organization (PPO) plan, they could sign or waive this provision of they wanted to. It may be in statute that they would have their choice, but a person can sign a separate waiver and says they would waive this right. Number 1411 CHAIRMAN ROKEBERG stated the purpose is to allow the PPO plans to exist, survive and be able to provide that form of managed care. He asked if it is not true that the definitions section of the managed care, Chapter 7, provisions would include a PPO type of a plan as defined as managed care. MS. SWENSON responded in the affirmative. CHAIRMAN ROKEBERG asked if the provisions under AS 21.42.390 actually applies to all health insurance. MS. SWENSON responded in the affirmative. CHAIRMAN ROKEBERG asked for a motion to adopt Amendment 1. Number 1508 REPRESENTATIVE HUDSON moved and asked unanimous consent that Amendment 1, J.1, Ford, be adopted. On page 3, line 6, delete "located" and insert "provided". There being no objection, Amendment 1 was adopted. CHAIRMAN ROKEBERG noted the amendment would allow for those pharmacy and dental services that aren't available in a community to be obtained elsewhere. You would have to use the local services unless they're not available. Number 1618 REPRESENTATIVE HUDSON moved and asked unanimous consent that Amendment 2, J.2, Ford, be adopted. On page 4, line 31, following "specialist", insert, "This paragraph does not apply to a heath care insurance plan or contract if the covered person signs a written waiver of the provisions of this paragraph." CHAIRMAN ROKEBERG objected for the purpose of discussion. He said he asked the staff of the sponsor to look into the potentiality as far as this allowing PPO-type structures in insurance to be allowed, but there would have to be consent on the part of the individual. He indicated he finds the entire Section 4 troublesome because of its far-reaching impacts on all type of insurance in the state. Chairman Rokeberg then withdrew his objection. There being no further objection, Amendment 2 was adopted. Number 1821 REPRESENTATIVE RYAN referred to page 4, line 2, regarding the health care services definition, and said it talks about injury and illness. He asked if it includes mental health or if it just relates to just physical health. MS. SWENSON said she believes it includes all health care services. REPRESENTATIVE BUNDE said currently many insurance plans do not provide parity. While mental illness is covered in the bill, it's not covered under parity and that's yet to be addressed. CHAIRMAN ROKEBERG asked Representative Bunde if his testimony is that it doesn't include mental health. REPRESENTATIVE BUNDE responded that it does include mental health, but mental health is not yet at parity. CHAIRMAN ROKEBERG questioned where it is included in the definition. Number 1926 MS. SWENSON said, "It doesn't specifically say that." REPRESENTATIVE BUNDE explained mental health and mental services are included in various insurance programs. JACK McRAE, Blue Cross of Washington and Alaska, testified via teleconference. He said, "The concept of any willing provider ... we've opposed that consistent throughout the nation, and feel that there is such a possibility and reality of increasing health costs that we believe strongly that any time we do that we push people out of the insured marketplace. (Indisc.) type of legislation like that. There is also some other issues with the amendment that [HB] 300, that in our opinion, makes it more onerous for us than what it was before, dealing with the liability issue." CHAIRMAN ROKEBERG noted the committee substitute is substantially different. However, it does provide the point-of-service for a PPO type plan. KATHY VOLTZ, Physical Therapist, President, Alaska Chapter, American Physical Therapy Association, testified via teleconference from Anchorage. She stated her organization supports HB 300. She informed the committee that they work to establish good communication between a patient and a therapist. Ms. Voltz referred to contract provisions and said she believes it is an excellent idea for utilization review decisions to be made in consultation with health care providers trained in that specialty. She commended the legislature for establishing fair rights for patients. Number 2455 DR. ROBERT H. BANKS, President, Alaska Chiropractic Society, testified in support of HB 300 via teleconference. He said he believes the legislation is the most significant legislation relating to health care this year. The abuses of managed care are atrocious. He pointed out that the American Chiropractic Association has a web site that documents the abuses of managed care. Dr. Banks said the major argument that insurance companies are using against the legislation is that it is too expensive to implement, and this is simply untrue. The Patient Access to Responsible Care (PARC) bill is currently before the U.S. House of Representatives. The PARC bill is an extremely comprehensive bill and it is much more complex than HB 300. Kaiser (Indisc.) is perhaps the largest managed care corporation in the country has estimated that the PARC legislation will only cost less than 1 percent to implement. Mr. Banks referred to those people against HB 300, whose insurance company plans are administered by nonprofit corporations, and said, "Your plans are exempt from this legislation. You're plans are protected by federal ERISA laws. You're being manipulated by pawns to defeat legislation that does not affect you." Mr. Banks thanked the committee for allowing him to testify. CHAIRMAN ROKEBERG asked if the chiropractors in the Alaska are currently denied reimbursement for any kind of PPO or managed care plans that may currently exist. MR. BANKS responded that he believes there is a PPO that pertains to Providence employees that will not allow for chiropractic services. Number 1755 TOM TIERNEY, Director, Employee Relations, Municipality of Anchorage, was next to testify via teleconference from Anchorage. He stated that any change that the legislature decides to make to existing law may have a significant impact to both the tax payer of Anchorage, as well as the municipality's employees. He referred to wording on page 3, (2) [he stated page 4], of the proposed CS, "all emergency room services shall be covered if the person covered reasonably believes the services are required;". Mr. Tierney said, "I heard the explanation that was given. On the other hand, that means, the way I read it, that if Ms. Jones goes into the emergency room at Providence Hospital and she feels that an x-ray ought to be taken and no matter what she feels, the doctors do not get a vote in the matter because the ... patient is going to be totally in control of the deal and that is contrary to the way the rest of our plan works." Mr. Tierney referred to (3), regarding the copayment requirements, and said that is directly opposed to their existing PPO. He referred to (4), regarding pharmacy and dental services, and indicated concern that it may require that all the dental work must be provided in the community. Mr. Tierney referred to page 5 and said there is wording that says a health care provider has to be trained and be licensed to practice in Alaska. He pointed out their utilization review firm is in the Lower 48. He said, "They do this for a living, they're quite good at it and we're pleased with it. While we're occasionally had some complaints, it has clearly, we think, saved us a great deal of money and I see no reason to change that." He stated the Municipality of Anchorage is opposed to the legislation. REPRESENTATIVE HUDSON asked if the municipality and the employees pay the monthly premiums. MR. TIERNEY indicated it varies. He stated they have five bargaining groups plus a plan for non-bargaining groups. Each plan is a little different. In some cases, the municipality pays 100 percent of the premium. In some cases the employees pay a portion. CHAIRMAN ROKEBERG referred to the wording regarding the emergency services and asked Mr. Tierney if that is too broad. MR. TIERNEY pointed out that his reading of the language is that the patient is going to be able to say, "Well I want this, or I want that," whether it's medically necessary or not. At times, a patient may not be in the best position to always determine what the level of care ought to be. Number 3746 REPRESENTATIVE BUNDE asked if the Municipality of Anchorage is partially self-insured and partially insured. MR. TIERNEY responded in the affirmative. REPRESENTATIVE BUNDE asked how ERISA affects their self-insured portion. MR. TIERNEY stated they are not affected by ERISA. Number 3816 DR. ROBERT ROBINSON was next to testify via teleconference from Wasilla. He spoke in favor of HB 300. He said he has heard comments that the legislation is an any willing provider bill and he believes that it is not. He said, "We are not trying to limit anyone's ability to form a closed panel. I do not see how this will raise insurance rates. If the insurance company has agreed to pay a discounted rate, then the premium should stay the same. I do feel that is an employee's benefit and if they elect, themselves, to pay the difference, that should be their choice. It will not raise the premium because the insurance company is paid the same amount. I do believe, especially in the case that I just heard testify, that if an employee is paying part of the premium, they have that right. And as far as the discounts of $2 million that I heard testified, again, ... the insurance company would not be out any additional money. The patient has a right to pay the difference and the incentive for keeping them into a closed panel is that there is not a difference, they receive a discount. So, again, I would like to speak totally in favor of this bill." Dr. Robinson referred to the person that reviews utilization and said they should be licensed in Alaska. They don't have to be located in the state, nor do they have an office in Alaska, but they should be licensed in Alaska. Number 4019 CYNTHIA DODGE, Alaska Psychological Association, testified via teleconference from Anchorage in support of CSHB 300, Version J. She referred to comprehensive health care and said the association would like to have mental health services to be included. She said the Alaska Psychological Association would support legislation even without mental health being included. Ms. Dodge said the association is particularly pleased to see the planned service option. In terms of mental health, the legislation is very important because the consumer (indisc.) have let their health insurance companies know that they are particularly interested in choice when it comes to their health care services. Trust is critical to the the patient/provider relationship. When relationships are established, and businesses switch insurance plans, they want the option to continue a relationship with the provider they have come to trust and count on. Ms. Dodge referred to the wording regarding emergency room services and said she doesn't see anything that would suggest that consumers would be allowed to dictate the level of care or determine medical necessity. She said, "If they show up to the emergency room asking to be seen, and there are complaints to be heard, that they have the opportunity to do that without being charged additionally for showing up and turning out to knock out a serious complaint. In terms of mental health, again I would just speak to a common problem which is panic disorder, and patient who has panic attacks, who don't know what they are often misinterpret those symptoms and assume that they're having a heart attack and frequently go to the emergency room looking for care for potential heart attack. And occasionally it turns out that they did indeed have a panic attack. We would not want them to be penalized for misdiagnosing - coming in for something that was deemed unnecessary or not an emergency." She said she would answer any questions the committee may have. Number 4350 JACQUELINE HUTCHINS came before the committee to testify. She informed the committee members she has lived in Alaska for eight years. Ms. Hutchins said when she chooses a health care provider, she goes to the hospital and asks for recommendations for doctors. She also talked to friends. She stated she tries to find somebody that she is comfortable with and is going to give her the care she needs. Sometimes when she gets to their office, she finds out they are a PPO provider, sometimes they're not. She said she is willing to pay the 80/20 after her deductible because those are the people who are going to meet her needs. She explained when she came to Alaska, she chose a dentist who wasn't in a PPO arrangement, but now he is. He was forced into a PPO arrangement, through the backdoor, by the insurance company. It isn't working out real well because the insurance company doesn't like to reimburse him any more quickly than 90 days after services are received. She stated she believes that is unreasonable, but that is often required of health care providers who are in the arrangements. Insurance companies don't like sharing information such as usual and customary reimbursement schedules and provider compensation rates with patients. She said she likes to see those kinds of things so she can make better choices in terms of dollars and cents and in terms of the people who are helping her. She stated an informed patient is a patient who makes good decisions. TAPE 97-52, SIDE B Number 0022 MS. HUTCHINS referred to page 3, line 6, and said it talks about care being provided or being available in the community where the person is covered. She said there are a lot of small communities in Alaska. Ms. Hutchins stated that she had an experience with this in California which is not a small community. She said she had a friend who was very ill, who was part of Kaiser (Indisc.) and she had to drive for an hour. She spent three and a half hours in a managed care office where she didn't even see the person who had seen her previously. People shouldn't be put through that when they're ill. They should be able to have somebody in their community to take care of them. She informed the committee that she has a problem with the provision on page 4, Section 4, line 30, "(1) prohibits a covered person from obtaining health care services from a health care provider of the person's choice, including a specialist;". If you're preferred provider network does not have a specialist who is listening to you or is capable of taking care of your problem, you need to be able to go outside. The insurance company should not be able to say to you, "Oh well, gee, we've got nothing for you, so pay for it yourself." Ms. Hutchins said in a previous committee, there was testimony from somebody who was really worried that the legislation would decrease competition in that it would make it so that nobody would want to sign up with an insurance company with a PPO arrangement. She said she keeps hearing that this bill would decrease competition in that it would make it so that nobody would want to sign up with an insurance company in a PPO arrangement. She stated she doesn't think price is the only thing drives why people go to a doctor, a hospital, or a dentist. There is a question of quality and not just a question of price. Number 0333 DR. MICHAEL SAGE was next to come before the committee. He said most of the testimony that he was going to give has already been given. He said the national news has indicated that people feel that HMOs and PPOs are not providing quality care. The legislation provides an opportunity to address that. The bill is a nondiscrimination bill which he feels is appropriate. Most of the health care providers in Alaska are small business people. He said they don't especially feel that they need to have control and decisions made by administrators that affects the health care of the citizens of Alaska. He stated he would be happy to answer questions. Number 0500 CHAIRMAN ROKEBERG pointed out that there has been testimony that a number of dentists may be forced into some type of managed care arrangement. He asked if that is true and how does it happen. DR. SAGE informed the committee there has been talk of that continually from some of the larger companies and corporations that have offices in Anchorage. He stated he has not received any mailings recently, but you hear about it constantly. CHAIRMAN ROKEBERG asked Dr. Sage what type of problems he has experienced. DR. SAGE said patients are being denied. He said he might recommend a particular treatment for a patient and it is denied under a clause called, "least expensive alternative treatment (LEAT)." It said he may recommend a root canal to save a tooth. The least expensive alternative treatment is to remove the tooth. CHAIRMAN ROKEBERG asked if most dental plans are relatively limited in what they pay. DR. SAGE explained virtually all dental insurance plans will have a yearly maximum, which can vary tremendously. Number 0814 REPRESENTATIVE HUDSON asked if Medicare plans cover emergency dental treatment. DR. SAGE informed Representative Hudson that Medicare doesn't cover dental. He noted if you're involved in a car accident and you have facial injuries, things will overlap. Number 0849 REPRESENTATIVE RYAN asked Dr. Sage if he has experienced long periods for reimbursement. DR. SAGE responded in the affirmative. He noted he has found that a dentist is not required to provide the utilization review - someone who has some knowledge of dentistry. REPRESENTATIVE RYAN asked, "Is this horrible prior authorization crept into your business yet?" DR. SAGE responded, "Yes and no. It crept in a few years ago and now it seems that it's not impacting us as much as it has." Number 1044 REPRESENTATIVE JERRY SANDERS referred to the 90-day payment lag and asked if it is addressed in the bill. DR. SAGE responded not to his knowledge. He noted he believes there are statutes that address that. Number 1123 DR. GEORGE M. HANSEN, Retired Dentist, was next to come before the committee. Dr. Hansen said it seems to him that the insuring agent on one side, and practitioners on the other side are arguing about this, but the only patient he has heard is Ms. Hutchins. He referred to Mr. McRae saying that the legislation is an any willing provider bill, but in his mind, an any willing provider means that anybody who wants to work for that price can join that organization. He said he doesn't read anything like that in the bill and he believes it is a smoke screen. Dr. Hansen said he thinks the bill says that the patient gets treated by the person who they choose to treat them. To him, the bill says to the insurance company, "You're going to cover this group of people and you agree to do that." Dr. Hansen referred to the emergency treatment wording in the bill and said, "I can see how that could be read that a person who was hypochondriac could be charging into the emergency room ... be expecting insurance to pay, but I don't think that's it." He stated he would answer any questions the committee may have. Number 1436 REPRESENTATIVE HUDSON referred to testimony where there might be a $2 million additional cost and said, "Now I could see where we would want to try to expand services for patients through an insurance by ... requirements through the insurance providers. How do you view that statement about increased costs?" DR. HANSEN said he would like to see the accounting statistics because he can't see how it would cost any more. He said, "If you have a bock of 100 people and you estimate that it's going to cost $100 a person to treat them through the year, who cares who treats them? I mean who cares?" Mr. Hansen explained several years ago there was a plan where you got 50 cents per patient, per month, which was called a capitation plan. He said some of his class mates made their money with that plan because they would have 5,000 patients and everybody knows you can't treat more than 2,000 a year. So they didn't treat them, but they still got the money for them. He stated, "That is the only place that the insurance company can lose money is if they deny benefits. And I say this bill should be written such, and I believe it is written such, that it will not deny benefits. It will open benefits up so that insurance companies pays no more per procedure no matter who does it, but it is patient's choice about who does it." Number 1733 ROSS BLAKER, AETNA Health Care, testified via teleconference from Anchorage. He referred page 2, line 29, Section 21.07.020, regarding the preapproval of the unitization review and said they want to make sure that when the payment is actually due, that (indisc.) change from what they've been presented with for recertification. He explained that also in Section 21.07.020, they are also opposed to the subsection that mandates that they cannot have a separate copayment. Mr. Blaker said he believes the employers, or policy holders, wants the ability to customize their plan. CHAIRMAN ROKEBERG asked Mr. Blaker to expand on his concern regarding the wording, "(3) copayment requirements shall be uniform between health care providers;". MR. BLAKER explained that currently they have different co- insurance. He noted they don't have copayment requirements in anything but their prescription drugs. They do have differentials under their prescription drug plan. He referred to the difference in copays and said there should be design ability. CHAIRMAN ROKEBERG asked Mr. Blaker how he interprets the wording. MR. BLAKER responded, "You have to pay the same for - like an office call for a M.D. the same as like x-ray and lab - that kind of thing. Is that correct?" REPRESENTATIVE ROKEBERG said he isn't sure and that is why he is asking Mr. Blaker. Number 2032 MR. BLAKER stated his interpretation is that you would have different copayments. There should be the ability to design a different deferential. He referred to the July 1, 1998, effective date and said they would prefer January 1, 1999, or July 1, 1999. CHAIRMAN ROKEBERG referred to Chapter 07, page 2, line 10, and asked Mr. Blaker what type of insurance they are underwriting that relates to the Chapter 07 issue as far as managed care. He also asked if they have any PPO plans that would qualify as managed care in Alaska. MR. BLAKER responded, "We do have PPO plans. I think it's kind of what you determine as managed care. To (indisc.) managed care (indisc.) HMOs don't have any managed care." CHAIRMAN ROKEBERG referred to page 4 and said he believes the bill defines a managed care entity as something that would bring a PPO under that. He asked if AETNA deals with closed panel type of situations where they restrict the members to specific physicians and hospitals. MR. BLAKER explained they provide a financial incentives to use the panel such as Providence Hospital. Their plan designs typically have 80/60 co-insurance. If you use Providence Hospital, you get 80 percent. If you go to another hospital, it's 60 percent. CHAIRMAN ROKEBERG asked if it is 60 percent of what they charge or whatever AETNA's reimbursement schedule is. Number 2419 MR. BLAKER explained that with Providence Hospital they have what is called per diem rates. He said, "So it would be 80 percent of that discounted rate. If they go to another hospital, then it would be 60 percent of what they had charged." CHAIRMAN ROKEBERG said the copayment requirement in subsection 3, page 3, would prohibit that type of differential between the 80 percent and the 20 percent. MR. BLAKER indicated that is how they read it. CHAIRMAN ROKEBERG asked how that would impact AETNA. MR. BLAKER responded, "It'll impact the business, but I think it's going to adversely impact it. Not going to have some of the discounts. I think that you're going to raise the cost of insurance because (indisc.) discount. I think the overall cost of insurance is going to go up." CHAIRMAN ROKEBERG said if he went to Virginia Mason Hospital in Seattle for some tests, AETNA would only pay 60 percent for a hospital stay. MR. BLAKER said he believes Virginia Mason Hospital is in their network. He said if somebody opted to go outside of the network, they would pay 60 percent of the usual and customary charge. CHAIRMAN ROKEBERG questioned who sets the usual and customary charge. MR. BLAKER said, "Though on hospitals, typically we do not have a usual and customary charge. Usually what we do is reimburse what the hospital charges. We do under -- our physicians have usual and customary charges." CHAIRMAN ROKEBERG asked how many people AETNA covers in the state of Alaska. He asked how many are individual policies. MR. BLAKER said he believes AETNA covers about 41,000 people. They do not have any individual insurance policies. Number 2744 CHAIRMAN ROKEBERG called for a brief at-ease at 4:43 p.m. He called the meeting back to order at 4:44 p.m. REPRESENTATIVE RYAN referred to when AETNA decides to reduce the amount they are going to pay if someone chose to go to a provider where AETNA didn't have an agreement and asked if they also reduce the premium they're charging a person. MR. BLAKER responded they do not. Number 2838 QUINN McKENNA, Operations Administrator, Providence Health System, was next to testify via teleconference from Anchorage. He said, "As I've listened to some of this testimony today, I think we've got a little bit of a definitional problem with (indisc.) testimony several times that this is not an any willing provider legislation. As I look at any willing provider legislation, the main purpose of that form of legislation is to limit an insurance company's ability to direct enrollees to a panel of providers, and that form of legislation attempts to ensure enrollees with free access to any provider they choose and that is willing to accept reimbursement from the insurer. The basic (indisc.), under that definition, still exits in this bill and our position, Providence Hospital's position, is to continue to be in opposition of this bill." Mr. McKenna referred to Section 21.07.030, "Choice of health care provider," mandates there should be a point-of-service plan. Also, under the point-of-service option, it allows the insurer to charge a higher deductible or copayment and higher premiums if there is increased cost caused by the use of a out-of-network provider. He stated as he reads the language, the intent is to ensure that the contract holders may have a free choice in selecting their health care provider. This ability already exists in Alaska today as every contract holder, under any plan, can choose to see whatever health care provider they wish. He said, "The price that we pay today for choice is either a higher premium when you select (indisc.) such as a traditional indemnity plan, or higher copayments and benefit reductions for products such as managed care plans when you choose provider that are out of the network. The intent of this legislation already exists." He stated that we don't need to legislate what we already have. Mr. McKenna added that Version J continues to preclude insurance from reimbursing health care providers at a different rate, depending upon the network status. He explained Section 21.42.390(c)(1) states that a health care insurer may not directly or indirectly reimburse a covered person at a different rate because of a person's choice of provider. This prohibition is the core foundation of any willing provider legislation. It takes away the managed care plan's ability to negotiate discounts with providers in exchange for volume. Without this ability, health care costs will increase. Mr. McKenna referred to Section 21.07.030 and said, "It is allowed that an insurer could charge higher copayments (indisc.) number of utilization. However, in Section 21.07.010(3)(C) states that copayment requirements shall be uniform between health care providers. This seems inconsistent to me as it does not address the in and out-of-network utilization." Mr. McKenna urged the committee not to pass the legislation. REPRESENTATIVE BUNDE asked Mr. McKenna if he heard him say that the general tenor of the bill currently exists in Alaska today. MR. McKENNA responded, "With regards to the any willing provider portion, yes. For the other components, I'm sorry, you're right, a lot of detail in this that probably do not exist today." He noted the language that exists today is in Section 21.07.030, which mandates a point-of-service coverage and allows the insurance company the ability to have a higher deductible and copayment or higher premium. He referred to emergency room provisions and said it is a high cost area, and he believes it is best to keep it specifically for emergency and accident cases that really need to have access. Number 3822 TOM HIPSHER, Dentist, Alaska Dental Society, testified via teleconference from Anchorage. He said after hearing all the testimony, especially from the insurance industry and the labor groups, he would like to say that this has got to go down as the most highly misunderstood bill in the history of the state of Alaska. He stated the legislation is not any willing provider legislation. The patient has to pay additional funds out-of-pocket in order to go a non-network provider. He reiterated the legislation is not any willing provider legislation. Mr. Hipsher referred to PPO networks and said there was discussion about a difference in the percentage reimbursement to patients based on whether they go to a PPO provider or a non-PPO provider. He said to him, that is financial discrimination to the patient. They are basically dictating to the patient who they must go to based on monetary difference in the payment of plan. Mr. Hipsher said, "All we're saying here is that if a patient becomes disgruntled with their PPO provider, with the decisions that are handed down by that provider or by the insurance company, then they can select to ... step outside a network and be reimbursed for a procedure at the same level that they had, had they gone to a PPO provider. In addition, it allows a guarantee with that person if they have been harmed either by the physician or by the insurance company, but it (indisc.) to remain that they had legal recourse against the people that harmed them. And the reason it needs to be reviewed by a provider registered in the state of Alaska is so that person can handle their complaint through the attorney general's office. As it stands right now, if a complaint is handled by someone outside -- it's reviewed by a provider outside the state, the attorney general's office, as I understand it, cannot get involved. I, as a provider, I have to rely on my skill ... I have to provide my patients with the highest quality of care that I can. And if I don't, then people don't come to me. There are no guarantees in my practice." Mr. Hipsher urged that the committee move the bill. It is a nondiscrimination bill and it protects the rights of patients. Number 4325 ED BURGAN, Brady and Company, was next to testify via teleconference from Anchorage. He noted Brady and Company are insurance consultants. Mr. Burgan said he has have several discussions about whether the bill will or will not have a cost impact. He suggested that a majority of group insurance plans are paid for, in the majority, by the employers who sponsor to those plans. For example, the state of Alaska pays probably 75 percent to 90 percent of a state of Alaska employee's health insurance and they should be a party to this. A larger employer can self-insure and they can deal with this financially on their own, but small employers cannot. He informed the committee members that most of their plans are self-funded; however, they do have those with insurance contracts. Mr. Burgan stated the employer should be a serious part of the discussions because it will have an impact on them. Lastly, in terms of alternatives, it would be simple enough to merely require that an insurance company, for those who buy insurance, offer two types of plans for that employer every year. One should be with a managed care network and one should be without. The employer should pick. If the cost differential is significant, some employers will say, "We will let our employees have freedom of choice, otherwise this is all I can afford." The employees can make up their mind whether or not they want to pay the difference to go out of the network. Mr. Burgan referred to the differentials on the reimbursement and said he offered an amendment to the bill that relates to what is currently Section 5, and changing Section 5 to Section 6. It is in terms of the Mental Health Parity Act. Number 4604 CHAIRMAN ROKEBERG called for an at-east at 5:02 p.m. in order to change the tape. TAPE 98-53, SIDE A Number 0007 CHAIRMAN ROKEBERG called the meeting back to order at 5:03 p.m. MR. BURGAN said he would like to suggest an amendment to the bill that is related to an increased cost exemption. The suggested amendment reads as follows: "This Act shall not apply with respect to a group health plan or health insurance coverage offered in connection with a group health plan. If the application of this Act is such plan or to such coverage results in an increase in costs under the plan, or for such coverage of at least 1 percent." MR. BURGAN said if everybody is convinced the legislation won't increase costs, insert the amendment. He thanked the committee for listening to him. Number 0100 REPRESENTATIVE BUNDE asked if he could then assume that the only factor in increasing health care costs in the state of Alaska would be the bill. MR. BURGAN said he isn't sure he understands the question. REPRESENTATIVE BUNDE responded, "You wanted us to indemnify you from any potential increased costs. There are a lot of things that would increase cost." MR. BURGAN said he could assure Representative Bunde he is not indemnifying him. The people who are paying the costs of providing health insurance coverage would be indemnified. He noted that for the most part, it would be employers of the state of Alaska and not him. Number 0149 CHAIRMAN ROKEBERG said, "I think what Representative Bunde is referring to, he wanted to take you up on you're challenge but didn't want to have ... any other escalating heath costs impact the 1 percent." MR. BURGAN explained that they are not allowed to differentiate in either copayments or deductibles under the PPO agreements that are in effect as those a measurable and quantified. CHAIRMAN ROKEBERG asked if Mr. Burgan objects if he to the copayment requirements in Section 21.07.020 on page 3 and page 5. MR. BURGAN stated that is correct. CHAIRMAN ROKEBERG said the bill does provide for increased costs for the point-of-service provisions. He asked Mr. Burgan if he objects to that. MR. BURGAN said he isn't sure it would allow for increased costs for point-of-service. CHAIRMAN ROKEBERG referred to page 3, lines 17 and 18, and said the option may require that a subscriber pay a higher deductible or copayment and a higher premium for the plan if the higher deductible or copayment (indisc.) premium results from increased costs caused by the use of out-of-network providers. MR. BURGAN said, "Not being an attorney, I'm not too sure that's not taken away by item (3) above that - item (c)(1) on page 5. CHAIRMAN ROKEBERG stated that is something that needs to be looked at. Number 0340 MANO FREY, President, Alaska AFL-CIO, testified via teleconference from Anchorage. He noted he is also a trustee of the Alaska Laborer's health trust land plan and they are fortunate to be self- insured. He said as he understands, the current version of HB 300 would not affect them. He stated that there are many unions that have trust funds that don't have the financial wherewithal to be self-insured and they are insured plans. He noted the committee has noticed the apparent inconsistencies with several parts of the bill so he won't repeat them. Mr. Frey said one of the things that the legislature has strived for is fair competition. It is beyond his comprehension why the legislature would try to restrict the ability of some of the trust funds and advisors to be creative in trying to set up plans that would give the participants possibly better health care plans that may be a little bit restrictive in their choice. He stated he would give an example. "The laborers belong to a health care coalition primarily here in the Anchorage area. We have been negotiating, for many months, between the two primary hospitals in Anchorage and we're going to get a tremendous package that's going to benefit our participants. Part of that agreement, however, because it's both hospitals, we had to reimburse just based the same amount of money for the covered service without any disincentive to not go to the other hospital that wasn't the preferred provider. It would take any of the financial incentives that our trust fund is going to gain - it would take away benefits from our members, from our participants and their families, because we would not be able to negotiate the same kind of dollar savings that we're going to enjoy. So I'm at a loss to see why this bill is even being considered because it flies in the face of open fair competition." Number 0653 CHAIRMAN ROKEBERG asked Mr. Frey if one of the largest problems and complaints that they receive from the private business sector is that they have to constantly address the high cost of health care insurance. MR. FREY said they take it up every time they have negotiations. He noted he can't imagine that the legislation wouldn't increase the cost of insurance. They won't be able to put the same kind of packages together. He referred to the negotiations between Providence Hospital and the Alaska Regional Hospital and said they are going to benefit the members and their families because of the cost savings. CHAIRMAN ROKEBERG asked, "Aren't the people that aren't members of your union, or other groups, that can take advantage of those discounts, going to be paying a higher rate and subsidizing your contract?" MR. FREY explained that it is the volume that will make the difference. If they are able to direct their members to go to one of the selected providers, the volume will make up for what they would have to charge otherwise. He said it is true that they are getting a benefit because of their size. Mr. Frey noted that they have spoken to other groups regarding joining the coalition so that they could benefit as well. He indicated there is strength in numbers when you're bargaining for health care services. Number 0957 REPRESENTATIVE BUNDE said, "Just a statement, we've had a number of medical professionals say this is not a preferred provider bill and now we have a union professional say it is, a professional from the union that will not be impacted directly by this bill. So beauty, like many things, is in the [eye of the] beholder." Representative Bunde referred to the proposed 1 percent amendment. He said the state health care costs is about $450 a month. If that 1 percent amendment were to pass, all the insurance costs would have to do is go up $4.50 a month and they could skate. He said he doesn't think the legislature should be in the business of providing incentive for insurance companies to try to increase their costs $4.50 a month. MR. FREY stated that he and the Alaska AFL-CIO opposes the bill. He said he didn't want a misunderstanding. Number 1130 REPRESENTATIVE SANDERS said he would point out that all of the professionals who testified that this wasn't an any willing provider bill were testifying in favor of the bill. He noted that is just their opinion. Number 1158 CHAIRMAN ROKEBERG announced he would recess the hearing on HB 300 in order to take up another order of business. He said the hearing on HB 300 would continue after the other order of business. HB 486 - ALASKA SECURITIES ACT Number 1227 CHAIRMAN ROKEBERG announced the committee would hear HB 486, "An Act relating to the Alaska Securities Act; and providing for an effective date." He stated that there is a committee substitute to the bill and an amendment by Representative Ryan. Number 1242 REPRESENTATIVE RYAN stated that the amendment has been further refined by the Administration. He made a motion to adopt CSHB 486, 0-LS1426\E, dated 4/27/98, for discussion purposes. CHAIRMAN ROKEBERG asked if there was an objection. Hearing none, the proposed CS for HB 486, Version E, was before the committee. Number 1325 REPRESENTATIVE RYAN made a motion to adopt Amendment 1, 0- LS1426\A.2, dated 4/27/98. CHAIRMAN ROKEBERG objected for purposes of discussion. He asked Mr. Elder if Amendment 1 is consistent with the recommendations from the department. Number 1401 TERRY ELDER, Senior Securities Examiner, Division of Banking, Securities and Corporations, Department of Commerce and Economic Development, replied yes it is. CHAIRMAN ROKEBERG asked if the amendment was acceptable to Representative Ryan. REPRESENTATIVE RYAN replied that it was. CHAIRMAN ROKEBERG removed his objection. He asked if there was a further objection to Amendment 1. Hearing none, Amendment 1, 0- LS1426\A.2, dated 4/27/98, was adopted. Number 1423 CHAIRMAN ROKEBERG referred to Section 45 and Section 57 and asked Mr. Elder if he could describe what that does and how it fits into the scheme of things. MR. ELDER stated that Section 45.55.170 covers unlawful representations concerning registrations. It states that just because something is filed, it does not mean that the administrator has ruled it correct, true and not misleading. He stated that section codifies current practice, it has always been that way but it has never been in statute. Number 1604 CHAIRMAN ROKEBERG asked if it was true that there is nothing in the bill that makes a substantive change to Alaska Native Claims Settlement Act (ANCSA) Corporations and the disposition of their corporate structure. MR. ELDER replied that is correct. He stated that it simply codifies current practice. REPRESENTATIVE RYAN stated that when you file your exemption letter for registration of corporation limited liability company, a letter is sent to the filer from the director, stating receipt of the letter. He asked if it was correct that the letter does not mean that the exemption is valid, it is just to document receipt of filing. MR. ELDER replied that is correct. Number 1650 MR. ELDER replied that on page 55, Section 57, refers to the right to have a notice of an opportunity for hearing. He stated that they have added "respondents named", if the order deals with something other than securities. He pointed out that this codifies current practice as the department has always afforded the opportunity of hearings for people they issue orders against. CHAIRMAN ROKEBERG stated that he wanted to put that on the record, because it is in some of the summaries and it might alert a red flag. MR. ELDER stated that any of the sections in the bill that refers to ANCSA Corporations simply codifies current practice and does not extend... CHAIRMAN ROKEBERG asked if it was true that there aren't any substantive changes that would effect the stockholder or shareholder rights from the ANCSA Corporations. MR. ELDER replied that is correct. CHAIRMAN ROKEBERG stated that he has complied a list of questions for the department to answer that will be part of the floor package. There being no further questions or comments, he asked what the will of the committee was. Number 1902 REPRESENTATIVE HUDSON moved and asked unanimous consent to pass CSHB 486(L&C), 0-LS1426\E, dated 4/27/98, as amended, out of committee with the attached zero fiscal note. Number 1947 CHAIRMAN ROKEBERG asked if there was an objection. There being none, CSHB 486(L&C), Version 0-LS1426\E, dated 4/27/98, as amended, was moved out of the House Labor and Commerce Standing Committee. HB 300 - ALASKA PATIENTS' BILL OF RIGHTS Number 1951 CHAIRMAN ROKEBERG indicated the committee would continue the hearing on the proposed committee substitute for HB 300, "An Act relating to health insurance; and providing for an effective date." Number 2005 GORDAN EVANS, Lobbyist, Health Insurance Association of America (HIAA), came before the committee. He informed the committee he hasn't had a chance to review the draft bill in detail or ask his client what their opinion is, although he believes he has a good idea of what their opinion is. He said HIAA thought the original bill was bad and he believes the current version is just as bad. He stated there are too many inconsistencies in the bill and it also discourages business relationships. Mr. Evans referred to page 3, line 2, Section 21.07.020, "(2) all emergency room services shall be covered if the person covered reasonably believes these services are required;". He indicated there may the hypochondriac who reasonably believes services are required. They're going to keep going to the emergency room and these services are going to have to be paid for because it says "shall." He stated that is completely unreasonable. Mr. Evans referred to page 3, line 6, "(4) pharmacy and dental services shall be located in the community in which the covered person resides;", and said suppose there is a covered person who lives in Egegik. Egegik may not have a pharmacy or dentist that resides there, but if the person is covered, the services have to be provided in that community according to the wording in the legislation. Suppose somebody lives in Palmer or Wasilla and they usually go to a doctor in Anchorage. The legislation says the service has to be provided in the community in which the covered person resides. He indicated the bill still needs a lot of work. Mr. Evans referred to the wording on page 2, line 25, and said there is the word "and". He questioned "and" what. Mr. Evans urged the committee not to pass the bill. He noted it has been pointed out that some of the provisions go right to the core foundation of PPOs. He said on page 5, (c)(1), would kill any PPOs in Alaska. He said he would like an opportunity to present more testimony in the future. Number 2431 CHAIRMAN ROKEBERG asked Mr. Evans to provide the committee with some written comments regarding the current amended version of the legislation after he speaks to his clients. MR. EVANS responded that he would. REPRESENTATIVE RYAN referred to waiting 90 days for the insurance companies to send out reimbursements and said that has been a practice of insurance companies ever since inception. He said, "This bill, whether it passes or not, I can tell you I think you're going to see a lot more of this coming and somebody is going to have to change their ways or it's going to get jammed at you. I started out and the more I look at the bill and the more I hear people testify, the more I'm inclined to agree that some of this stuff isn't bad stuff." MR. EVANS pointed out that he doesn't have any personal knowledge of the 90-day delays in payments. He said there is a state law that says that payments have to be made within so many days. CHAIRMAN ROKEBERG asked Mr. Evans to provide the committee with a citation on that. MR. EVANS said he believes Ms. Burke can provide that. CHAIRMAN ROKEBERG asked Mr. Evans to provide the committee with his comments and criticisms on the bill. He also asked him to comment on each specific section. Chairman Rokeberg noted he is particularly concerned about how Section 4 relates to the balance of the bill. He asked him to review the utilization review procedures and the clause on page 5 about the fact that they are licensed in the state. Number 2955 MR. EVANS referred to the issue of being licensed in the state and said HIAA has taken the position that being licensed in the United States may be better as there are not, in certain professions, licensed people in Alaska. CHAIRMAN ROKEBERG questioned his position regarding the peer group level or the level of competency to make a judgement. MR. EVANS responded, "I'd have to check with my client. My ... personal feeling is that I think that's what they try to do. They just don't go to any particular person who happens to answer the phone. They try to find somebody who knows the procedure." Number 3222 MARIANNE BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, came before the committee to testify. She stated she has heard a lot of contradictory testimony. Ms. Burke said, "We absolutely support the patient rights issues. On page 2, under Section 3, I do have some suggestions. The (5)(B) and (C) are applicable to HMOs only. And that is not clear because the health care services to be provided by contractors would apply to an HMO. And this is language that I am familiar with in HMO patient right protection, as well as the provider compensation rates. Currently, all contracts from insurance must stipulate all of the covered care services to be provided and the termination procedures. I would suggest under Section 3, again 5(E), that that be clarified. It refers to usual and customary reimbursement schedules. As you, Mr. Chair, have pointed out there are any number of different schedules. Some are in percentages, some are in dollars. If the intent of this wording was to refer to the usual and customary in the sense of 80 percent for the following procedures, or 100 percent for the following procedures - if that's the intent, that needs to be clarified." CHAIRMAN ROKEBERG said he believes the intention is to know that they would be willing to reimburse. He said there is a controversy about the particular schedules. There seems to be an inconsistency of what is usual and customary in a particular jurisdiction or area. He stated he believes one of the objectives is to make sure there is not a huge distinction between the level of reimbursement for a dollar for dollar premium level. Chairman Rokeberg asked Ms. Burke if she has any recommendations. Number 3455 MS. BURKE responded, "I understand and that's absolutely true. In fact in statute right now in regulations it's required that the UCRs, the usual and customary, be updated ... every six months." CHAIRMAN ROKEBERG questioned what UCR stands for. MS. BURKE pointed out that it stands for usual, customary and reasonable charges. She continued, "That currently, in the state of Alaska, is being determined by insurer to insurer to plans. Self-insurance plans are in fact determining and shopping for usual and customary charges. To me, this is a oxymoron. If it usual, reasonable and customary, you can't shop for it. It's either that or it's not. However, that is the case in the state of Alaska. Number 3637 CHAIRMAN ROKEBERG said, "If there is a schedule, I assume that some of the provisions of this bill and some of the testimony today has to do with the copayment or reimbursement level of that. So wouldn't that be a bargaining point then or what?" MS. BURKE said she believes topics are being confused. She said, "This particular section is saying what they must disclose in their arrangement -- and the disclosure here of usual and customary reimbursement schedules. And the reason I'm suggesting that be clarified, from my reading, would be we'll pay 80 percent for inpatient procedures or 100 percent for inpatient procedures. We'll pay 60 percent chiropractic or whatever the contract may call for. My comment here and my point is that this is very nebulous and very misleading." CHAIRMAN ROKEBERG asked Ms. Burke if she would provide the committee with some corrective language. MS. BURKE indicated she would provide the committee with corrective language. Number 3753 REPRESENTATIVE RYAN indicated he has a problem in trying to figure this out. He said, "You and I and business know we have a certain amount of overhead. We have an office, people we hire, electricity and so forth. Then we want to charge a certain amount for our skills depending on our level of education and expertise. And so that's our usual and customary charge, and if you go to a physician or a dentist, it would be the same thing - except an insurance company comes in and drives it down by offering deals, 'We will give you a volume if you take a cut rate.' That's what a PPO is. So if we're going to give you this volume by you cutting your rate, where do we establish what's customary, usual and reasonable? Because you've got people with a skill level and can justify on a spreadsheet what they're worth versus what the ... insurance companies are forcing them to charge and to make it up on the volume. What does that do to the quality of the care when it's in one door and out the other and you got 10 minutes because that's all I'm being paid?" MS. BURKE said, "Usual, customary and reasonable applies to, for instance, you, Mr. Chairman, being a physician and you, Representative Ryan, being a physician. You may charge 'X' number of dollars for a procedure, say $100 for a procedure. And Representative Ryan charges $60 for a procedure. And Marianne Burke charges $200 for a procedure. The usual and customary and reasonable charges are not $200. That's the high end, nor the low end of the $60. What is attempted here is to get enough procedures provided in the state of Alaska to say the high end, the low end, in the middle, the usual and reasonable charges are $95." REPRESENTATIVE RYAN asked Ms. Burke if that is the department's determination. MS. BURKE informed Representative Ryan that is done by a number of different groups across the country. Different people purchase that service from different organizations. Number 4036 CHAIRMAN ROKEBERG questioned whether there are rate setting private sector firms that provide that type of information to the insurers. He also asked if they provide it to the health care providers. MS. BURKE explained they collect the information from the health care providers. Contrary to what is generally believed, they do not manipulate this data, they collect it. She noted she has reviewed what they do. They accumulate all of this raw data and then it is provided to the insurance companies. The insurance companies and the self-insurance plans determines what they consider to be usual and customary. Ms. Burke informed the committee members that the state of Alaska has very few procedures that are statistically valid. For example, there aren't that many people having heart transplants in Alaska. CHAIRMAN ROKEBERG asked Ms. Burke if there is more than one firm that does this. MS. BURKE responded in the affirmative. CHAIRMAN ROKEBERG asked if an insurers can select one over another and use that as a reimbursement benchmark. MS. BURKE said that is correct. She said, "On page 3 there has been quite a few different ... interpretations of what all emergency room services shall be covered if the person covered reasonably believes the services are required. ... I can testify from personal experience on this and I'll try to do it very quickly. This is an opportunity to gain the system. I know from personal experience of having set up insurance plans where we in fact encouraged people to abuse the system. In that, if you went to your doctor during the day, we would reimburse you 80 percent, but if you would wait and go to the emergency room that night, we would reimburse you 100 percent. Now it's clear what happened. Once we changed that to say we would reimburse you if, in the opinion of the emergency room physician, it was necessary. We took it out of our hands and out of the patients hands and just said, 'in the opinion of the physician.'" CHAIRMAN ROKEBERG asked where that standard came from. MS. BURKE responded that they actually had it in their contract with their employees. She noted this was based on statistics they gathered. CHAIRMAN ROKEBERG asked what language they used. MS. BURKE responded, "If in the opinion of the attending physician, the emergency room services were necessary." The belief is that the physician was in a better position to determine whether it was necessary than anyone else. CHAIRMAN ROKEBERG asked Ms. Burke to continue. MS. BURKE referred to earlier testimony regarding nurse practitioners being compensated differently from physicians and said if that is the case, she would like to know as it is clear violation of AS 21.36.090(D). She said she would like to bring appropriate action if that is true. Number 4520 CHAIRMAN ROKEBERG asked Ms. Burke to inform the committee of her interpretation of the wording, "(3) copayment requirements shall be uniform between health care providers." MS. BURKE responded that PPOs, as we know them, and HMOs if they come to the state of Alaska, would not be permitted. She pointed out that it says, "copayment requirements shall be uniform." We would not permit, in the case of a HMO, in-network rate versus an out-of-network rate. With PPOs, it would not provide the differential. Ms. Burke referred to the wording, "(4) pharmacy and dental services shall be provided", and said her reading is that a health care provider or a contract must provide that service in each location. She said she doesn't believe that was the intent. TAPE 98-53, SIDE B Number 0045 MS. BURKE stated, "...it is interpreted, as was testified to earlier, that if there is a pharmacy in that community, that pharmacy must be included. You would have the impact of eliminating volume discounts. For example, the state of Alaska's plan, you can mail off and get a prescription for $2 ... if it's a non-generic drug, or free if it's generic." Number 0128 REPRESENTATIVE RYAN explained that there is evidence that the mail pharmacies are owned by insurance companies. There was testimony on different insurance legislation from a pharmacist in Alaska who said under insurance plans he was losing money. He couldn't buy the drugs at the volume to get the discounts. Representative Ryan said, "All these things seem to be set up to the people who are providing the insurance, through their multiple investments, to enhance their own bottom line. All the cost provisions don't benefit the consumer as much as it does the insurance company. They own the pharmacy places and mail order, that benefits them. Where in the heck does this end? I keep hearing this cost containment and yet, nobody seems to benefit - the physicians, the patients, but the insurance company is not doing too bad if you look at their final reports." MS. BURKE noted she was specifically referring to the state plan, which is not insured. Ms. Burke said she believes utilization review is critical. She referred to the AETNA plan and said the medical necessity was being second guessed by a registered nurse. A market conduct examination of Blue Cross and AETNA was done shortly after she was appointed to her position. They were the first market conduct exams that had ever been performed by the state of Alaska on a health care insurer. It was found that a registered nurse on the AETNA contract was making determinations on medical necessity. Ms. Burke noted the document is a public document. She said, "We have given them the word, if you will, stop it. We will be back in and we will determine whether or not there are any further violations." Number 0403 CHAIRMAN ROKEBERG asked when that occurred. MS. BURKE responded in the later part of 1996. CHAIRMAN ROKEBERG asked Ms. Burke to provide the committee with the document. He asked if there has been any follow-up since that time. MS. BURKE responded that they have followed up on it. Until the report is issued, it is confidential. She said by statute, we have to give them a time period to respond to the report and that time frame has not run as of yet. Number 0458 REPRESENTATIVE RYAN asked Ms. Burke if it would be helpful to the department if the legislature were to give the department the ability to access a civil penalty and/or press criminal charges when things like that happen. MS. BURKE responded that they presently can't do criminal penalties. However, they do have the authority to assess civil penalties. If they are still doing it, the full weight of those penalties will come down on them. CHAIRMAN ROKEBERG asked Ms. Burke if she has any comments on the point-of-service provisions. He also asked if she believes the definitions that would encompass PPOs or any other type of managed care are adequate. MS. BURKE responded that her concern is with any definition that conflicts with another definition within Title 21. To that extent, she is not comfortable as there are some conflicts. She referred to the amendment to section 4 and said the term "covered person" is problematic in that with group insurance policies, you would be requiring every participant to sign that waiver when the policy is with the employer. It might be an administrative nightmare. It certainly would be extremely difficult for the employer. CHAIRMAN ROKEBERG agreed it should be reviewed and asked Ms. Burke to forward a recommendation to the committee. Number 0905 MS. BURKE stated, "For the record, I met with the Alaska Dental Society about the 90-day issue. When ... the dentists and my staff looked into that, those were all federal plans. They were CHAMPUS plans and they were the federal employee plans without exception. And in fact there is statute, currently, on the books that requires a company to pay a claim, now again this is insured claims, within 30 days. And if there is a questioned portion, they must give full disclosure on what is questioned and what ... additional information must be provided. If the consumer feels that this is not reasonable, we are more than happy to step in with them on (indisc.). CHAIRMAN ROKEBERG referred to the way Section 4 is drafted regarding utilization review and said it would affect every health care plan written in the state of Alaska. He asked what the ramifications would be. MS. BURKE responded that she sees nothing wrong with it. CHAIRMAN ROKEBERG asked if there are ramifications. MS. BURKE stated that there could be ramifications in that if a company or an insurer is out there using this sort of arrangement to reduce cost, it would eliminate it. CHAIRMAN ROKEBERG asked Ms. Burke if she has a problem with the level of training. MS. BURKE referred to the requirement of having to be licensed in the state and said it should be peer to peer. We don't have all the specialties in the state to make these determinations. In some areas, there may be one person that may be a specialist in a very esoteric area. She said if it is peer to peer and they are licensed and certified to practice in that speciality, then she feels the patients' rights would be protected and she would wholeheartedly support that. She suggested they be licensed to practice in the United States. Number 1702 CHAIRMAN ROKEBERG said he thinks the effective date does seem to be a little tight. He asked Ms. Burke if she has comments regarding the July 1, 1998, effective date. MS. BURKE suggested that the effective date be for contracts entered into or renewing after that date. CHAIRMAN ROKEBERG questioned whether that is in current statute. MS. BURKE said it is in Title 21, but this body could change that. CHAIRMAN ROKEBERG asked if the current transition provisions in statute already provides for that. MS. BURKE responded, "I would bow to the attorney general on that because I had tried to guess that one before and was totally wrong." CHAIRMAN ROKEBERG asked, "Is the July 1, problematic? Assuming that's the case - that the normal expiration in those contractual obligations would be end of the termination and the pick up of any new provisions." MS. BURKE stated she does not see that would be a problem. CHAIRMAN ROKEBERG thanked Ms. Burke and asked her to get back to the committee regarding previous questions asked. House Bill 300 was held over for further consideration. HB 350 - INSURANCE COVERAGE FOR CONTRACEPTIVES Number 1842 CHAIRMAN ROKEBERG announced the last order of business would be HB 350, "An Act requiring that the cost of contraceptives and related health care services be included in health insurance coverage," sponsored by Representative Croft. TOM ATKINSON, Researcher to Representative Eric Croft, Alaska State Legislature, came before the committee to explain the bill on behalf of Representative Croft. He said the bill is a mandate that would require insurance to cover contraceptives for employees. CHAIRMAN ROKEBERG questioned wether it includes all contraceptives. MR. ATKINSON indicated it covers all types of contraceptives. Number 1958 CHAIRMAN ROKEBERG said when the bill was before the committee previously he had asked the sponsor to obtain evidence that would show that insurance companies would actually save money. He asked Mr. Atkinson whether he was successful in acquiring evidence. MR. ATKINSON responded, "I believe we have." CHAIRMAN ROKEBERG said he looks forward in hearing the bill the following Wednesday. House Bill 350 was held over until the following Wednesday. ADJOURNMENT Number 2018 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Committee meeting at 6:10 p.m.