MINUTES SENATE FINANCE COMMITTEE April 4, 2000 9:13 AM TAPES SFC-00 # 76, Side A and Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:13 AM. PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Lyda Green, Senator Pete Kelly, Senator Loren Leman, Senator Randy Phillips and Senator Gary Wilken Also Attending: SENATOR ROBIN TAYLOR; JEFF JESSE, Executive Director, Alaska Mental Health Trust Authority, Department of Revenue; CHIP WAGONER; GAIL FENUMANI, Division of Elections, Office of the Governor; KATHLEEN STRASBAUGH, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law; MIKE PAULEY staff to Senator Leman; ANN CAPENETTI, Assistant Attorney General, Legal Services Section, Criminal Division, Department of Law; Attending via Teleconference: From Anchorage: BLAIR MCCUNE, Deputy Director, Public Defender Agency, Department of Administration; DAVID HUDSON, Lieutenant, Alaska State Trooper, Department of Public Safety; BOB LOHR, Director, Division of Insurance, Department of Community and Economic Development; JULIA COSTER, Assistant Attorney General, Commercial Section, Civil Division, Department of Law SUMMARY INFORMATION HB 313-APPROPRIATIONS: MENTAL HEALTH The Committee considered and adopted two amendments, heard from the Alaska Mental Health Trust Authority and reported the bill from Committee. SJR 40-CONST AM: ELECTION & TERMS OF GOV & LT GOV The Committee heard from the sponsor, the Division of Elections, the Department of Law and a member of the public. Two amendments were considered, one was amended and both were adopted. The bill was reported from Committee. SB 26-FALSE REPORT TO POLICE/HINDER PROSECUTION The Committee heard from the sponsor, the Public Defender's Agency, an Alaska State Trooper and the Department of Law. The bill was held in Committee. SB 256-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE The Committee heard from the Department of Community and Economic Development and the Department of Law. A committee substitute and an amendment were adopted. The bill was held in Committee. SB 289-TECH & VOC EDUC/ EMPLOYMENT ASSISTANCE This bill was scheduled but not heard. SB 290-PUBLIC SCHOOL FUNDING & EXPENDITURES This bill was scheduled but not heard. A new fiscal note was distributed to members. COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 313(FIN) am "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program; and providing for an effective date." The Senate Finance Committee had previously heard this bill, adopted a committee substitute, 1-LS1305\G, that includes only the operating expenditures and was preparing to add capital projects to the budget. Amendment #1: This amendment replaces Sections 3 and 4 with the following language. Section 3. The following appropriation items are for capital projects and grants from the general fund or other funds as set out in section 4 of this Act by funding source to the agencies named for the purposes expressed and lapse under AS 37.25.020, unless otherwise noted. Appropriation General Other Allocations Items Funds Funds Senior Services Data 308,200 308,200 Integration Project (ED 99) Telepsychiatry Video 150,000 150,000 Communication System Equipment (ED 99) Appropriation General Other Allocations Items Funds Funds Services Fairbanks - Reopen 495,000 495,000 Fahrenkamp Residential Facility (ED 29-34) Alaska Psychiatric 379,500 379,500 Institute Stop-Gap Repairs (ED 10-25) Mental Health Grants - 650,000 100,000 550,000 Facilities Renovation And Deferred Maintenance (ED 99) Mental Health Grants - 300,000 50,000 250,000 Essential Program Equipment (ED 99) Housing Modifications 250,000 250,000 for Mental Health Trust Beneficiaries (ED 99) Spirit Camp Facility 100,000 100,000 Development (ED 36) Fairbanks Community 150,000 150,000 Mental Health Center Relocation (ED 29-34) Coordination and 100,000 100,000 Resource Sharing Among Mental Health Services Providers (ED 99) Appropriation General Other Allocations Items Funds Funds Transitional Housing 300,000 300,000 for Recovering Substance Abusers (ED 99) Alaska Psychiatric 1,000,000 1,000,000 Institute 2000: Replacement of Existing Facility (ED 10-25) Mental Health Trust 870,000 870,000 Land Development and Value Enhancement (ED 99) AHFC Homeless 450,000 450,000 Assistance Program (ED 99) AHFC Beneficiary and 1,500,000 1,500,000 Special Needs Housing (ED 99) Public Facilities Coordinated 500,000 500,000 Transportation and Vehicles (ED 99) Sec. 4. The following sets out the funding by agency for the appropriations made in Sec. 3 of this Act. Department of Administration Mental Health Trust Authority 308,200 Authorized Receipts Department of Corrections Mental Health Trust Authority 150,000 Authorized Receipts Department of Health and Social Services General Fund / Mental Health 150,000 Mental Health Trust Authority 2,925,000 Authorized Receipts AHFC Dividends 649,500 Department of Natural Resources Mental Health Trust Authority 870,000 Authorized Receipts Department of Revenue Mental Health Trust Authority 200,000 Authorized Receipts AHFC Dividends 1,750,000 Department of Transportation/Public Facilities Mental Health Trust Authority 500,000 Authorized Receipts The following summarizes the funding sources for the appropriations made in section 3 of this act. General Fund / Mental Health 150,000 Mental Health Trust Authority 4,953,200 Authorized Receipts AHFC Dividends 2,399,500 Co-Chair Torgerson explained this amendment adds the capital projects that were included in the version of the bill passed from the House of Representatives. Senator Green moved for adoption. Without objection or discussion, the amendment was ADOPTED. Amendment #2: This amendment adds $100,000 Mental Health Trust Authority receipts funds to the Department of Administration for Home and Community Based Care. Senator Wilken moved for adoption and explained the purpose of the funding is for designing a Catholic Community Services/Southeast Senior Services, adult day care facility to primarily serve Alzheimer patients. He stated that this facility would promote the maximum level of independence, allowing elders to "age in place" and prevent premature institutionalization. He noted that the Catholic Community Services organization is looking for alternative funding for the actual construction of this facility. He also stressed this item has no affect on the general fund. Senator Phillips asked why the Alaska Mental Health Trust Authority (AMHTA) recommended this item. JEFF JESSE, Executive Director, Alaska Mental Health Trust Authority, Department of Revenue, testified via teleconference from Anchorage that when the original proposal was made to the governor for this project, the funding mechanism included a general fund match. Mr. Jesse stated that once the governor decided the general funds were unavailable, he also decided that the planning phase of the project would not be beneficial. However, Mr. Jesse told the Committee, the Trust decided that the design and planning of this facility could help secure other funding. Senator Phillips asked if this item was a capital item or an operating expense. Mr. Jesse answered the funding was for a capital project the same as most other facility designing and planning are considered capital expenditures. There was no objection and the amendment was ADOPTED. Co-Chair Parnell moved to allow the Division of Legislative Finance and the Division of Legal and Research Services to incorporate any necessary technical adjustments. There was no objection and the motion was ADOPTED. Mr. Jesse announced that the Trust was working to gather the information on the homeless assistance program that Senator Phillips had requested. Co-Chair Parnell offered a motion to report from Committee, CS SB 313 (FIN), 1-LS1305\G as amended with individual recommendations. Without objection, the bill was MOVED FROM COMMITTEE. SENATE JOINT RESOLUTION NO. 40 Proposing amendments to the Constitution of the State of Alaska providing that the governor, United States senators, United States representative, and electors of the President and Vice-President of the United States be elected by a majority vote. This was the second hearing for this bill in the Senate Finance Committee. Co-Chair Torgerson drew the Committee's attention to a legal opinion prepared by the Division of Legal and Research Services as requested by Senator Adams regarding whether this resolution was considered a constitutional amendment or a revision. [Copy on File.] Co-Chair Torgerson noted that the opinion stated in part, ".the three resolutions considered by the court under this test in the Bess vs. Ulmer case, SJR 40 appears closer in terms of the quantity and quality of change proposed to the two resolutions held to be amendments (marriage and reapportionment) than the resolution held to be a revision (rights of prisoners)." Co-Chair Torgerson qualified that the opinion also stated that the division was unsure how the court would actually rule if the matter were litigated. SENATOR ROBIN TAYLOR responded to three questions posed in the previous hearing from a representative from the Department of Law. The first question related to the definition of "majority" where the recommendation was made to include a definition in the constitution itself. Senator Taylor stated that he had no objection to Senator Adams's proposed amendment that would add that definition. Senator Taylor responded to the Department of Law's second inquiry about the Electoral College and its membership. He stated that so long as the Electoral College was still in existence, he felt that the provisions providing for this system should be left in the legislation. His reason was that there could be as many as nine presidential candidates running for US President within the State Of Alaska and without a majority requirement, the subsequent delegates to the Electoral College would represent only a small minority of voters. Senator Taylor then addressed the question of run-off elections saying he did not wish to make a decision on the procedures of such elections at this time. Senator Taylor spoke to another proposed amendment that changes "procedures" to the singular "procedure". He did not think this change was necessary, saying that the corresponding statute is sufficient and that the Division of Elections would establish procedure. Amendment #1: This amendment inserts the following language on page 1, line 16, of the resolution, following, "elected." "The winning candidate must be the first choice of at least 50 percent plus one of the votes cast for the office." Senator Adams moved for adoption and explained that the amendment places the specific definition of majority into the constitution. AT EASE 9:23 AM / 9:25 Co-Chair Parnell moved to amend the amendment to delete "first" from the inserted language. The sentence then reads, "The winning candidate must be the choice of at least 50 percent plus one of the votes cast for the office." There was no objection and the amendment was AMENDED. Without objection, the amended amendment was ADOPTED. Amendment #2: This amendment deletes, "and elector of President and Vice-President of the United States," from page 1, lines 14 and 15 of the resolution. The title then reads, "Proposing amendments to the Constitution of the State Of Alaska providing that the governor, United States senators, and United States representative, be elected by a majority vote." This amendment also deletes, "Procedures [THE PROCEDURE] for arriving at a majority vote, and for" and inserts, "The procedure for" on page 1 line 16 through page 2 line 1 of the resolution. The sentence then reads, "The procedure for determining election contests, with right of appeal to the courts, shall be prescribed by law." Co-Chair Parnell moved for adoption on behalf of Co-Chair Torgerson, the sponsor. Co-Chair Torgerson explained this is a two-part amendment that deletes the elections of the president and the vice- president from the majority requirement and also removes the procedures for arriving at the majority vote from the constitution. He asked the resolution sponsor's opinion on this amendment. Senator Taylor repeated his statement about the multiple candidates for president and vice-president on Alaska's recent ballots. Until the country changes and removes the Electoral College system of choosing presidents and vice- presidents, he still wanted the majority represented. Co-Chair Torgerson said he was unsure the voters would understand the relationship between the votes cast for these candidates and the representation on the Electoral College. Senator Leman asked how other states chose electors for president and vice-president. He commented that there have been some strong third-party candidates and the electorates resulting from these races don't represent a majority of the votes cast. Senator Taylor thought that there were several different methods of determining delegates amongst the states. CHIP WAGONER testified that other states were currently debating the same issue of majority votes and that Vermont is one state that is including electorates in the majority requirement. Mr. Wagoner described the electoral process and how the political parties select the delegates. He stated that under the US Constitution the states have the authority to structure the majority requirements as proposed in this resolution. He stated that elections would not be delayed because of the majority requirements because the voters don't select the electorates. Co-Chair Torgerson asked if under current practice, the political parties hold an election to chose its delegates. Mr. Wagoner affirmed told about how the Republican Party chooses the electorates. He listed several Republicans who have served as delegates and were chosen based on their contribution to the party. He noted that in Alaska, the party of the presidential candidate who receives the most votes chooses all the electorates for the next presidential election. Co-Chair Torgerson asked if these elections were public. Mr. Wagoner explained how the elections occur during the Republican Party Convention. He was unsure how the Democratic Party held its elections, noting that the last time the delegates were chosen by the Democrats was in 1960, after John F. Kennedy received the majority of the votes cast in Alaska. Co-Chair Torgerson did not understand the problem that needed to be addressed with an amendment to the state constitution. Mr. Wagoner reiterated that there were multiple presidential candidates in the past several elections and that none of these candidates received a majority of the votes. He asserted that "majority rule is a sacred principal of democracy" as stated by Thomas Jefferson. With the multitude of parties entering the presidential race, Mr. Wagoner stressed, this constitutional amendment ensures that the majority rules. Senator Adams asked the witness for his legal opinion on the revision versus amendment question. He did not want to rule out the possibility that the court would reach the conclusion that this resolution is a revision and therefore not eligible to be placed before the voters. Senator Adams spoke of the short time period between Election Day and the day the governor takes office, questioning whether there would be time to conduct a runoff election. Mr. Wagoner spoke to the legal opinion request, agreeing that the resolution would be an amendment to the constitution. He disagreed with the Supreme Court ruling. Senator Adams commented that he disagreed with the opinions. GAIL FENUMANI, Division of Elections, Office of the Governor asked if the amendment was proposed for both the primary and the general election or just the general election. Ms. Fenumani pointed out that there would be a timing problem with holding a runoff election. She detailed the process of certifying an election and the amount of time required. Ms. Fenumani then addressed the cost of holding a runoff election noting that the cost of a runoff election would be approximately $750,000 based on the expenditures for the September 14, 1999 special election. Ms. Fenumani asked if a presidential candidate did not win in Alaska by a 50 percent plus one vote majority, would a runoff election between the top two candidates be required. Ms. Fenumani commented that the presidential elections are mostly decided by the time the polls close in this state. Senator Phillips remarked that if this constitutional election passes then the legislature could address those questions in the next session. He stressed these details could not be placed in the amendment. He used the 1976 constitutional amendment to establish the Alaska Permanent Fund as an example of how the details of the board of directors, dividends, etc. were not addressed until after the election. Ms. Fenumani responded that she just wanted to state these issues on the record. She stressed that the division had not taken a position in support or in opposition of the resolution. Co-Chair Torgerson asked if the witness interpreted there would be a need for a runoff election for the president and vice-president offices. He thought that was a "far stretch". Senator P. Kelly disagreed, saying that the way the amendment was written, the matter was somewhat confusing. Ms. Fenumani noted that if the language is intended for the method of how electorates are chosen within party, the question of runoff elections for president and vice- president was answered. KATHLEEN STRASBAUGH, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law, added that this constitutional amendment may apply to primary as well as general elections. Ms. Strasbaugh had concerns with mentioning the Electoral College in the state constitution when elsewhere, only the offices of president and vice-president are specifically referred to. She noted that the legislature currently dictates how the electorates are selected in AS 15.30. She saw no reason to change this procedure. She did however, understand the principles that the resolution's sponsor was trying to accomplish would limit the legislature's ability regarding runoff elections. She warned that conducting a runoff election for the office of governor would be difficult because of another state constitutional provision that provides when elected officials takes office. She said the problem continues because US Congress has determined, in federal statutes, that the electorates must be seated by a specific deadline as well. She ascertained that these were fairly serious matters that could not be avoided. Co-Chair Parnell commented on the term of office of the governor citing Article 3 Section 4 of the state constitution, "the term of office of the governor's four years beginning at noon on the first Monday in December following his election, ending at noon on the first Monday of December four years later." He pointed out however, that this provision only addresses the term office but does not specify when the elected governor must be seated. He remarked that under existing procedure, the general election is not certified until December 13, although the term of office still begins on the first Monday of the month, which is an earlier date. Therefore, he surmised that a runoff election would require no term changes even if the elected official were not seated until a later date. Ms. Strasbaugh referred to litigation in other states where a problem has been identified concerning whether the state constitution must be followed precisely. She was concerned that Co-Chair Parnell's scenario may not be that easy. She stressed that any changes to the election process must be pre-cleared by the US Department of Justice. Senator Leman took issue with the previous witness's comment that presidential elections were decided before Alaska's voting was completed. He clarified that while the polls in this state closed later than in other states, all other states still have to count absentee ballots and certify their elections as well. Ms. Fenumani corrected her statement to apply to the projected outcomes only. Senator Taylor thought that with the new computerized systems, elections are conducted much faster. He did not think the time it would take to conduct a runoff election would be a hardship. Senator Leman asked if the sponsor's intent was to include primary elections in the majority vote requirements. Senator Taylor answered he only wanted this to apply to the general election saying he thought the language of the resolution made that clear. He explained that the primary election does not directly elect a candidate to office. Senator Leman agreed with that analysis but noted that sometimes others read ballot initiatives differently and wondered if the question should be cleared up now rather than have difficulties in the future. Senator Taylor did not think specific clarification was necessary referring to page one, line eight of the resolution that specifically states, "general election" with no mention of the primary election. Senator Phillips commented that of all concerns the Division of Elections pointed out, the only legitimate one he felt was the matter of timing. He suggested this issue should be addressed. He spoke of the 14 days needed to receive overseas absentee ballots and of other delays. While he agreed that the automatic voting tabulation system, AccuVote, made in-person ballot counting easier, absentee ballots were a different matter. Senator Taylor responded that in some close elections there could be a recount, a second recount and even litigation. Therefore, he thought runoff elections could be accomplished in a reasonable amount of time. Senator P. Kelly was unsure that the word "general" on page one, line eight addressed the entire issue of whether primary elections would be subject to the majority restrictions. He pointed out that this section, Section 3. Election, only refers to the governor and not to the congressional and presidential candidates. Although he agreed with the sponsor's interpretation that this constitutional amendment should only apply to general elections, he was concerned how others, including the courts, would interpret the language. Senator Leman objected to the adoption of Amendment #2 A roll call was taken on the motion. IN FAVOR: Senator Wilken, Senator P. Kelly, Senator Phillips, Co-Chair Parnell and Co-Chair Torgerson OPPOSED: Senator Green, Senator Leman and Senator Adams ABSENT: Senator Donley The motion PASSED (5-3-1) Senator Phillips asked for legal opinion on the impact a runoff election would have on the timing of swearing-in of the governor. Co-Chair Torgerson said he would request a legal opinion and that it could be prepared in time for the resolution to reach the full Senate. Co-Chair Parnell offered a motion to report SJR 40, 1- LS1579\A, as amended from Committee with a $1,500 fiscal note from the Division of Elections. There was no objection and the resolution MOVED FROM COMMITTEE. COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 26(JUD) "An Act relating to hindering prosecution and to providing false information or reports to a peace officer." This was the first hearing for this bill in the Senate Finance Committee. Senator Leman, sponsor of the bill, stated that this legislation expands two existing statutes that address those people who employ deception to "thwart Alaska's system of justice." He told of how the matter was brought to his attention by the Anchorage Police Department. MIKE PAULEY staff to Senator Leman explained that individuals lie to protect another person or lie to protect themselves. Section 1 of the bill, he said addresses lies told to protect another and Section 2 applies to lies told to protect oneself. Mr. Pauley stated that existing statutes AS 11.56.770 and 780 make it a crime to hinder prosecution by rendering assistance to another person who has committed a crime with the intention of hindering the apprehension, prosecution, conviction or punishment of that person. He gave the definition of "rendering assistance to another" as including use of deception to prevent or obstruct the discovery or apprehension of that person. Therefore, he explained the statute makes it a crime if a person lies to a police officer in order to stop another person who has committed a crime from being apprehended. However, Mr. Pauley continued, this statute only applies if a person lies to prevent apprehension of a person who has committed a crime that is punishable by a prison sentence greater than 90 days. Class B misdemeanors, such as disorderly conduct, harassment, misconduct involving weapons and criminal mischief, are not covered under existing law, he stressed. While these crimes are not the most serious offenses, he qualified; they do consume a significant amount of law enforcement and court resources. Mr. Pauley stated that Section 1 of this bill amends the law to apply to all kinds of crimes, including Class B misdemeanors. Mr. Pauley then detailed how Section 2 of the bill amends current statute on making false reports by adding a new paragraph. The new language, he explained, stipulates that a Class A misdemeanor is committed when a person who has committed another crime, knowingly gives false information to peace officers with the intent of avoiding apprehension, prosecution, conviction and punishment. Mr. Pauley noted a change to the legislation made by the Senate Judiciary Committee in which reports about dams and reservoirs was removed from the applicable offenses. He stressed that the bill's sponsor did not propose this amendment so he could not speak to the intent. He anticipated that a representative from the Department of Law would speak to the Committee on this matter later in the meeting. BLAIR MCCUNE, Deputy Director, Public Defender Agency, Department of Administration, testified via teleconference from Anchorage about a significant change made in the Judiciary version. He understood the original intent of the bill only applied to giving false information concerning a person's identity to a peace officer. He stated that the current version provides that any false information given to police by someone who has committed a crime with the intent of knowingly avoiding apprehension, prosecution, conviction or punishment is an illegal act. He asserted that the practice of providing false information is very common due to fear, guilt, shame, etc. and that many people lie to police when first confronted. Mr. McCune shared that he had talked to the Department of Law about the fiscal impacts and between them, had arrived at the amounts listed on the fiscal notes as the cost to prosecute and defend these cases. Mr. McCune mentioned the difficulty in defending these cases. He did not know of any other states with a similar provision regarding providing false information although there are perjury and unsworn falsification laws. While Mr. McCune understood the police interest, he thought the change to the bill to make the provision apply to any false information given to a peace officer, made the bill too broad. Co-Chair Torgerson asked if the witness had reviewed the proposed committee substitute, 1-LS0119\K. Mr. McCune said he had reviewed the Senate Judiciary committee substitute and was concerned about language on page two, lines 9-11, "having committed a crime, knowingly gives false information to a peace officer with the intent of avoiding apprehension, prosecution, conviction, or punishment" Co-Chair Torgerson referred to the Public Defender's Agency fiscal note and asked what the amount of the note would be if the aforementioned language were deleted. Mr. McCune responded that the omission of that language would mostly zero out the fiscal note, although he said he would have to look at the specific impacts. He stated that there would still be some fiscal impact of the legislation. DAVID HUDSON, Lieutenant, Alaska State Trooper, Department of Public Safety testified via teleconference from Anchorage in strong support for the committee substitute. He stressed that the opportunity to rapidly solve criminal cases could be jeopardized by peace officer's inability to identify suspects or if those suspects provide false information. Lt. Hudson stated that this legislation strengthens the existing crime of making a false report. Tape: SFC - 00 #76, Side B 10:02 AM Lt. Hudson continued by speaking about the harm to the victims when wrong person is arrested. Senator Leman referred to fiscal note that claims that in as many as 40 percent of cases, people lie. He agreed with these figures, but wondered if all who provided false information would actually be prosecuted. Lt. Hudson asserted that based on previous activities, the police would attempt to charge the individuals who provided the false information. However, he said that to follow those charges up with prosecution would be subject to many variables and that he predicted there would be fewer cases prosecuted than charges brought. ANN CAPENETTI, Assistant Attorney General, Legal Services Section, Criminal Division, Department of Law, testified that many cases would be referred to the department. Ms. Carpenetti stated that Section 1 of the bill "is fine." However, she said regarding Section 2, no one wants people to lie to police but that it was a common occurrence and in fact, within human nature. Ms. Carpenetti gave an example of drivers stopped by police, who claim they "only had a couple of drinks," before a blood test indicates the driver consumed much more. Ms. Carpenetti remarked that as the previous witness stated, arrests for false statements would be referred to the department and even if never prosecuted, still would require time and effort to screen. She added that for those cases that were prosecuted, the matter would be difficult to prove. She predicted that these cases would be even more difficult than perjury cases. Ms. Carpenetti then addressed the Department of Natural Resources provision about dams and reservoirs that was omitted in the Senate Judiciary committee substitute. She explained that the amendment excluded giving false information about the safety of a dam or reservoir from this statute. She told of a conversation she had with Charlie Cobb, a dam safety engineer with the State Of Alaska who told her the provision was first put into statute in 1987 as part of an act relating to dam safety. She said Mr. Cobb told her he did not want this provision repealed since he is the only person in the state who performs dam inspections and has to rely on reports of engineers. He explained to her that it is important to encourage these engineers to tell the complete truth with regard to the condition of the dams. Senator Leman stated that he did not agree with the fiscal notes and their interpretation of the number of cases this legislation would create. Co-Chair Torgerson ordered the bill HELD in Committee saying he intended to work on lowering the amounts of the fiscal notes. COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 256(HES) "An Act relating to regulation of managed health care and allowing physicians to collectively negotiate with a health benefit plan that has substantial market power." This was the third hearing for this bill in the Senate Finance Committee. Co-Chair Torgerson noted written testimony dated March 31, 2000, provided by the Department of Community and Economic Development that included a report entitled, "National Cost of Physician Anti-Trust Waivers". [Copy on file]. BOB LOHR, Director, Division of Insurance, Department of Community and Economic Development, testified via teleconference from Anchorage that he had reviewed the available cost studies related to this legislation and found the closest match was the analysis of pending congressional legislation, HR 1304, which was highly studied. Mr. Lohr gave detail on the background of the National Cost of Physician Anti-Trust Waivers report, which he found to be the most comprehensive study on the matter of collective negotiation for health care. He stated that the conclusion of the study was that there would likely be between $29 to $95 billion, or a five to 13 percent increase to private health insurance premiums with the passage of HR 1304. He noted that this increase is beyond the already dramatic increases due to the cost of health care. Mr. Lohr told the Committee that the study analyzed the impact of collective negotiations on the cost of services provided. He stated that this would be the primary factor in the increased premium costs. He said the second effect would be increased health care utilization, or the increased use of health services as a result of negotiated changes in the plan. The third effect, he stated would be the spillover affect on other health plans besides the managed care plans. He explained this was using the assumption that health care providers tend to provide one level of service rather than different levels of service according to the payment ability of each patient's insurance plan. Mr. Lohr pointed out that the study indicated that during the early years of the new federal law, the increases would be at the lower end of the predictions and in subsequent years, at the higher range. Senator P. Kelly asked if the witness had studied the cost analysis done by Penn State University. Mr. Lohr responded that he had not seen that study. Senator P. Kelly explained this study found that the Charles River study was full of unwarranted assumptions and questionable methodology. Senator Green noted the first paragraph of the written testimony stating that the division opposed this bill because it was thought the bill would significantly increase health care costs. She wanted to know if the division would take the same position for all other potential legislation concerning insurance mandates and changes to the insurance industry that would impose similar standards to those proposed in this bill. Mr. Lohr promised the division would endeavor to assess the impact on insurance or health care costs of any proposed legislation. As to predicting a future position on a hypothetical bill, he said he would be difficult. Senator Green challenged that a prediction was made on this bill. She wanted to make sure that the same standard is applied to any other legislation. Senator Adams asked how the federal legislation complemented this bill. Mr. Lohr gave a background of the congressional legislation, also known as the Quality Health Care Coalition Act of 1999 and the Campbell Act after Representative Thomas Campbell, the sponsor. This bill, he explained would exempt health care professional from anti- trust laws when they negotiate with health plans over fees and other terms of any contract under which they provide health care items or services. He said the physicians would therefore be treated as any other group engaged in concerted action under the National Labor Relations Act. The physicians would also be exempted from the Sherman Anti-Trust Act and comparable state statute, he added. JULIA COSTER, Assistant Attorney General, Commercial Section, Civil Division, Department of Law, testified via teleconference from Anchorage referencing Senate Health and Social Services committee substitute. She stated she would limit her comments to the collective bargaining issues proposed in the committee substitute. She said the department has serious legal and policy concerns with the collective bargaining because it may result in substantial harm to consumers in the form of increased health care cost and reduced health care options. Ms. Coster also voiced concerns about the level of state involvement provided in the bill, saying it may not be sufficient for active state supervision to immunize physicians from federal anti-trust enforcement. Ms. Coster stated that the department agrees with previous testimony given to the Committee by a representative of the US Federal Trade Commission (FTC) as well as two letter submitted by the federal agency regarding similar collective negotiating legislation in the State of Texas and in Washington DC. [Copies on file.] She referenced the FTC's prior investigations and enforcement actions that have found an increase in health care costs and a possible decrease in health care services where collective negotiation is allowed as potential harm to consumers. Ms. Coster agreed with Mr. Lohr's conclusion that costs would likely increase in Alaska if this legislation were passed. Ms. Coster pointed out that while there are two primary limits to collective bargaining contained in the bill, these limits are insufficient to protect consumers from substantial mark-ups. The first limitation, she said is the definition of "market share" as 15 percent, with the provision that any health care plan that has over 15 percent of the market share could be subject to physicians forming a group for the purpose of collective negotiations. She explained the second limitation as where a health care plan has less than five percent of the market share, the physician group may not exceed 30 percent of the market in that service area. Ms. Coster said these limitations are not based on accepted concepts of market power. For instance, she stated that a 15 percent of the market is not ordinarily presumed to constitute market power. She also stressed that the limitation of physicians groups to 30 percent of the providers would not affect the group's ability to raise prices. She said these two factors could result in 100 percent of physicians located within a geographic service area negotiating with a health care plan that is only five percent of the market share. She also talked about the impact a physicians group could have on a small health care provider. Ms. Coster next addressed the prohibition on boycotts and concerted actions by physicians saying that when negotiating on price terms, there is no affective prohibition on boycotting. She was unsure if the omitting of such a stipulation was an oversight or a deliberate action. She admitted that the bill does contain a provision for concerted actions, but was unsure if it was sufficient. Ms. Coster stated that another area of concern is the provision in the bill that relates to community issues under the State Action Doctrine. In order to obtain immunity from federal prosecution, she said, state officials must actively supervise the process and ensure competitive conduct. She cautioned that the courts have set high standards for this activity. She explained that the courts have ruled that the state agency must have and exercise ultimate control over the challenge conduct and to exercise sufficient independent judgement and control so that the details of the rates and prices have been established and is the product of deliberate state intervention. An agreement by the parties is not sufficient to prevent anti-trust actions, she stressed. She went into more detail about the requirements of the state to oversee the negotiation process. She added that the legislation fails to place the burden of proof on the parties that propose a contract but instead on the Attorney General's Office. However, she admonished, the time frame allotted for state review was not adequate and the legislation does not provide the Department of Law with any of the information necessary to make an analysis nor any investigative authority to obtain that information. Co-Chair Torgerson stated his intent to adopt a proposed committee substitute as a working draft. Senator P. Kelly suggested taking from the previous testimony, all the warnings of potential problems and instead to focus on the actual detriments to constituents. He compared the statements to the tort reform arguments heard during a previous legislative session when that matter was being considered. Senator P. Kelly returned to his earlier reference to the Penn State University study that questioned the findings of the study cited by the Division of Insurance. He then clarified that the FTC as an agency, did not testify on this bill but rather an individual who works at the commission gave testimony. Therefore, Senator P. Kelly surmised that the FTC has not stated a pro or con position on the legislation. Senator P. Kelly pointed out letter from the Department of Law, which listed concerns with the bill. [Copy on file.] He also noted letter from the Division of Legislative Legal and Research Services that disputes many of the claims of the Department of Law. [Copy on file.] Senator P. Kelly suggested simply placing a sunset clause on this legislation to see what would actually happen. He warned of the results of the mergers of many large insurance companies. He felt that doctors should be allowed to speak out for the benefit of their patients and should not have to chose between salary and their ethics oath. He asserted that every argument made against this bill is refuted in some way. Senator Adams agreed with the suggestion of a sunset clause. He asked if this bill would change the services or goods delivered to consumers in Alaska by federal medical programs. He stressed that it was difficult for him to understand the effect this legislation would have on Alaskans as well as the amount of funds needed from the state. Mr. Lohr responded that the bill would change the price of goods and services delivered in Alaska. If the prices did not increase, he wondered what the point of the bill would be with regards to increased market leverage. Senator Adams asked what impact this bill would have on federal programs. Mr. Lohr said he would have to research before offering an assessment. He said he would provide that information to the Committee. Senator P. Kelly asked for a direct assessment on general cost increases as well. He noted the claim that the costs would rise was based on a study that has been found to be at fault. Mr. Lohr thought the Charles River study did provide a clear statement on its assumptions and methodology, which allows it to be criticized. He said that other testimony presented to the Committee regarding cross-impacts was based on non-germane studies and provided no information about the studies themselves or the methods employed. Therefore, he said those claims were more difficult to assess. Co-Chair Torgerson asked if the witness had the Penn State University study. Mr. Lohr did not, but would obtain a copy. Co-Chair Torgerson asked if the proposed committee substitute, LS-1291\I, incorporated all previously submitted amendments except for Amendment #1. Senator P. Kelly explained that the committee substitute does incorporate the amendments but that it does not provide for a sunset date. He detailed the changes beginning with Section 2, which was removed in the committee substitute. He noted this language was present in a similar House bill that addressed contracts between doctors and insurance providers. Senator P. Kelly stated that throughout the committee substitute, references to the commissioner of the Department of Natural Resources was changed to the Department of Law. Senator P. Kelly continued that a new subsection was added to provide for active state oversight of the contract negotiations as required by the States Action Doctrine. Senator P. Kelly pointed out that a cleanup was made in last page of the bill, which he said was not germane to the legislation. He did not detail what language was removed. Senator P. Kelly next stated the committee substitute added clarification to the description of the substantial market power within the geographic service area. This allows the legislation to more individualize the grouping of physicians into their own service area to the market power of the insurance companies within that area, he explained. He said this was to avoid grouping of all physicians in the state into one large group. Senator P. Kelly relayed that there was some question over the covered lives and the total population in the geographical service area. He said language was inserted in the committee substitute on page three, lines 20 and 24, to give a more defined number. Senator P. Kelly concluded with a comment about the sunset clause. [Indiscernible] Senator P. Kelly commented that the biggest concerns addressed in the committee substitute were switching the contract portion to the Department of Law and the matter of the geographic service areas. Senator P. Kelly moved to adopt the committee substitute, LS-1291\I, as a work draft. Senator Adams would not object to adoption but asked for time to review the committee substitute before reporting from Committee. He said he preferred a sunset clause of two or three years rather than five years to give the legislature a chance to review impacts on consumers and, if necessary, take action at an earlier time. Senator P. Kelly commented that the next legislature has the ability to repeal this law if it were shown to be detrimental. Secondly, he stated the health care market is evolving. He stressed that Health Management Organizations (HMO) could begin doing business in the state in the next few years and if the sunset clause were enacted before the arrival of HMOs the problem of payment to physicians could arise again. Senator Leman asked if the committee substitute adequately addressed the concerns about market share raised by the Department of Law. Senator P. Kelly asserted that he thought the matter of market share was adequately addressed in the committee substitute. He commented that he felt that the entire state could be considered one market share. However, he said the committee substitute narrowed the scope to the area within the market that the physicians actually practicing. He qualified that for some specialties, such as cardiology, the practicing area for a physician could encompass the whole state, but that that issue was addressed in the committee substitute. There was no objection and the committee substitute, Version "I" was adopted as a workdraft. Senator P. Kelly verified that the proposed amendments #1 through #5 were included in the committee substitute. AT EASE 10:43 AM / 10:46 AM Co-Chair Torgerson noted remaining bills scheduled on the day's agenda, SB 289 and SB 290, would not be heard at this meeting. Co-Chair Torgerson noted a new fiscal note for SB 290 was distributed to members to fund pupil transportation at the full amount requested of $5,079,900. Debate resumed on SB 256. Senator P. Kelly told the Committee that Becky Cerney, Director of State Legislation, American Medical Association was available on teleconference from Chicago, Illinois to address any of the questions raised. AT EASE 10:47 AM Amendment #6: This amendment deletes "geographic" everywhere it appears in the committee substitute. The term, "geographic service area" now reads, "service area". Senator P. Kelly moved for adoption and explained the amendment is to address concerns voiced by the Department of Law and the Division of Legal and Research Services. Without objection, the amendment was ADOPTED. Co-Chair Torgerson stated his intent to allow members a couple of days to review the committee substitute before the Committee takes further action. Senator Adams requested information on how the states of Washington and Oregon handle collective negotiating by physicians. He wanted to know what fees could be negotiated under the other's provisions. Senator P. Kelly clarified there is a difference between collective bargaining, which applies to labor unions and collective negotiating. He stated that the physicians under this legislation would not be allowed to engage in the same activities as collective bargaining units. He suggested that members mentally replace "collective negotiating" whenever they hear "collective bargaining" in discussions about this bill. Co-Chair Torgerson ordered the bill HELD in Committee. ADJOURNED Senator Torgerson adjourned the meeting at 10:51 AM. SFC-00 (7) 04/03/00