SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE April 7, 1994 1:01 p.m. MEMBERS PRESENT Senator Steve Rieger, Chairman Senator Bert Sharp, Vice-Chairman Senator Loren Leman Senator Mike Miller Senator Jim Duncan Senator Johnny Ellis MEMBERS ABSENT Senator Judy Salo COMMITTEE CALENDAR SENATE BILL NO. 367 "An Act relating to health care and insurance for health care; to review and approval of health insurance rates and rating factors; relating to certain civil actions against health care providers; to coordination of insurance benefits and to determination and disclosure of fees paid to an insured or health care provider; to the rate of interest on certain judgments and decrees; to excise taxes on cigarettes; amending Alaska Rules of Civil Procedure 26, 27, 68, 79, and 82 and Alaska Rules of Evidence 802, 803, and 804; repealing Alaska Rule of Civil Procedure 72.1; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 367 - See Health, Education & Social Services minutes dated 3/28/94, 3/30/94 and 4/6/94. ACTION NARRATIVE TAPE 94-28, SIDE A Number 004 CHAIRMAN RIEGER called the Senate Health, Education and Social Services (HESS) Committee to order at 1:01 p.m. The only order of business before the committee was SB 367 (HEALTH CARE REFORM COMMITTEES). He reminded the committee that Senator Duncan's amendment, Amendment 17 was before the committee. AMENDMENT 17  ΒΆ Page 1, lines 1 - 9: Delete all material and insert: " "An Act relating to certain civil actions against health care providers; to the rate of interest on certain judgments and decrees; establishing the Alaska Health Insurance Corporation and requiring licensed health care providers to comply with certain statutes and regulations relating to the corporation; relating to disability insurance claims processing and to approval of rates for disability insurance, including health insurance; amending Alaska Rules of Civil Procedure 26, 27, 68, 79, and 82 and Alaska Rules of Evidence 802, 803, and 804; repealing Alaska Rule of Civil Procedure 72.1; and providing for an effective date." BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: * Section 1. FINDINGS AND PURPOSE. (a) The legislature finds that (1) health care services and health insurance in the state are becoming prohibitively costly, and a growing number of our citizens are unable to obtain health insurance or pay for needed care; (2) the reasons that health care expenditures are increasing are complex and are accounted for by general inflation; by inflation specific to the health care industry or changes in the cost of labor, capital, and other industry factors; by population growth; by utilization or the number of times people use health care services; by increasingly complex and costly technology and other resources; by the aging of the population; and the practice of defensive medicine; (3) the primary responsibility for controlling health care expenditures in the state should be borne by Alaska health care providers, particularly physicians, on whose orders and recommendations most health care expenditures are incurred; at present, federal and state antitrust laws effectively preclude health care providers from engaging in voluntary self-regulation regarding fees and volume of services; this Act mandates the participation by health care providers in the peer review process of cost control and volume control to assure that health care expenditures do not increase faster than the general inflation rate; if voluntary self-regulation fails to control health care costs, mandatory cost controls should be imposed; (4) in order to increase access to health care by containing the rate of increase of health care expenditures and by making basic health insurance available to the people in the state, it is essential that the factors contributing to the increasing costs of health care and the unavailability of health insurance be addressed comprehensively and consistently; (5) there is a compelling need for a strong, clear focus on public health issues in the interest of protecting and promoting the public health of the residents of the state; (6) there are inherent problems in our health system infrastructure, including the lack of physical access to services in many areas of the state; (7) the state should immediately begin to create a system that will provide health insurance to all residents of the state, control health care expenditures, preserve the high quality of care that residents demand, preserve the individual's choice of health care provider, and, by doing so, avoid the imposition of a federally mandated health care reform system on the state; (8) because the state constitution's single subject rule precludes the consideration of comprehensive tort reform in the same legislative enactment as health care reform, tort reform should be addressed in a separate legislative enactment; (9) a market based single payer system is preferable to either an employer mandate or a "pay or play" approach because (A) both of the employer mandate approaches are based on the current mix of public, employer, and individual financing that inevitably creates coverage gaps for some people, particularly when their employment status changes; (B) health care financing approaches that require all businesses to provide health care benefits or that levy additional taxes on those businesses threaten the economic viability of many small businesses in the state; (C) multiple payer systems would not necessarily address the problems of cost shifting that exist in our current system; and (D) systems that are built upon the existing public and private financing arrangements can be expected to inherit the inefficiencies in those arrangements. (b) The purpose of this Act is to (1) increase access to health care by containing the rate of increase of health care expenditures and by making health insurance available to the people in the state; (2) create a market based single payer state health insurance system that provides health insurance to all resi of the state, that utilizes market forces to make consumers aware of the actual costs of health services, and that prov consumers with information enabling them to make more infor purchasing decisions; (3) provide a structure for addressing the health care needs of the state including (A) developing a comprehensive long-term care plan that integrates support services and that promotes human dignity; (B) use of preventive and wellness programs to reduce health care costs; and (C) the different health care needs of urban and rural areas of the state. (c) It is not the purpose of this Act to change the existing agreements between employers and employees, includ retirees, in a manner that would diminish health care benef * Sec. 2. AS08.02 is amended by adding a new section read: Sec. 08.02.025. COMPLIANCE WITH REQUIREMENTS OF STATE HEALTH INSURANCE CORPORATION. A health care provider shall comply with the required price list availability provisions of AS21.58.230 and the health care data system provisions of AS21.58.260 that are applicable to health care providers including regulations adopted by the Alaska Health Insurance Corporation under those provisions. Notwithstanding another provision of law, the license of a health care provider is not valid unless the health care provider complies with this section. In this section, "health care provider" has the meaning given in AS21.58.400." Page 1, line 10: Delete " * Section 1. " Insert " * Sec. 3. " Renumber the following bill sections accordingly. Page 8, line 20, through page 22, line 23: Delete all material and insert: " * Sec. 9. AS21.39.020 is amended to read: Sec. 21.39.020. APPLICABILITY. (a) This chapter applies to  disability insurance, to all forms of casual insurance, including fidelity, surety, and guaranty bonds, to all forms of fire, marine, and inland marine insurance, and to a combination of any of them, or risks or operations in this state. Inland marine insurance includes insurance defined by statute, or by interpretation of statute, or if not defined or interpreted, by ruling of the director, or as established by general custom of the business, as inland marine insurance. (b) This chapter does not apply to (1) reinsurance, other than joint reinsurance to the extent stated in AS21.39.110; (2) [DISABILITY INSURANCE; (3)] insurance of vessels or craft, their cargoes, marine builders' risks, marine protection and indemnity, or other risks commonly insured under marine, as distinguished from inland marine insurance policies;  (3) [(4)] insurance against loss of or damage to aircraft or against liability, other than workers' compensation and employer's liability, arising out of the ownership, maintenance, or use of aircraft; or, to insurance of hulls of aircraft, including their accessories and equipment. * Sec. 10. AS21.39.030(a) is amended to read: (a) Rates shall be made in accordance with the following provisions: (1) rates may [SHALL] not be excessive, inadequate, or unfairly discriminatory; (2) consideration shall be given to past and prospective loss experience inside and outside this state, to the conflagration and catastrophe hazards, to a reasonable margin for underwriting profit and contingencies, to dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers, to past and prospective expenses both countrywide and those specially applicable to this state, and to all other relevant factors inside and outside this state; (3) the systems of expense provisions included in the rates for use by an insurer or group of insurers may differ from those of other insurers or group of insurers to reflect the requirements of the operating methods of the insurer or group of insurers with respect to any kind of insurance, or with respect to a subdivision or combination  of them [THEREOF] for which subdivision or combination separate expense provisions are applicable; (4) risks may be grouped by classifications for the establishment of rates and minimum premiums; classification rates may be modified to produce rates for individual risks in accordance with rating plans that establish standards for measuring variations in hazards or expense provisions, or both; the standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expenses; (5) in the case of fire insurance rates, consideration may be given to the experience of the fire insurance business during a period of not more than the most recent five-year period for which experience is available; (6) when there is an established program to inspect new and existing dwellings and the program has been certified by the director as likely to reduce the incidence of fires in inspected dwellings, then in any rate plan used in this state, dwellings that have been found by the inspection to meet the standards established by the program shall have credits applied to the rate in amounts approved by the director ; (7) in the case of disability insurance rates, rates shall be made on a statewide basis; rates may vary depending on age and family status . * Sec. 11. AS21.54 is amended by adding a new section read: Sec. 21.54.025. CLAIMS PROCESSING. (a) An insurer authorized to transact disability insurance in the state shall (1) pay each claim within 15 business days after a claim is received or, within that same time period, give the person that submitted the claim notice that the claim is denied; and (2) adopt a claims grievance procedure and submit the procedure to the division for approval; after the procedure has been approved, the insurer shall follow the procedure. (b) If a claim form is fully completed and an insurer fails to pay a claim or give notice that the claim is denied within the time specified in (a) of this section, the insurer shall pay interest at the rate specified in AS45.45.010, from the 16th business day after the claim was received until paid, on the amount finally determined to be due. (c) If an insurer denies a claim, the notice that the claim is denied must include a statement of the reason for the denial. The statement must be sufficiently clear to allow the provider to understand the reason for the denial and to take corrective action, including resubmission of the claim, if appropriate. * Sec. 12. AS21 is amended by adding a new chapter to CHAPTER 58. ALASKA HEALTH INSURANCE CORPORATION. Sec. 21.58.010. CREATION AND PURPOSE. (a) The Alaska Health Insurance Corporation is established. The corporation is a public corporation and an instrumentality of the state in the Department of Commerce and Economic Development but has a legal existence independent of and separate from the state. The exercise by the corporation of the powers conferred by this chapter is considered an essential function of the state. (b) The purposes of the corporation are to establish and provide uniform health insurance coverage for all residents of the state and to monitor and control all health care expenditures in the state. Sec. 21.58.020. BOARD OF DIRECTORS. The corporation is managed by a board of seven directors. Sec. 21.58.030. APPOINTMENT AND REMOVAL OF DIRECTORS. (a) The directors of the corporation are appointed by the governor, subject to confirmation by the legislature. A director may be removed only for good cause. (b) In appointing directors to the board, the governor shall ensure that (1) a majority of the board are experts in health care issues and fairly represent the interests of the general public in having access to quality and affordable health care; (2) the interests of consumers and health care providers are fairly represented; (3) the director is a resident of the state; and (4) the board has a gender and geographic composition that approximates the population of the state. Sec. 21.58.040. TERM OF SERVICE. The term of a director is four years. Terms of directors shall be staggered. A director may be appointed to successive terms. A director appointed to fill a vacancy serves for the unexpired term of the director. A term shall be measured from January1 of the year in which the term of the vacant position begins, regardless of when the vacancy is filled. Sec. 21.58.050. COMPENSATION AND EXPENSES. A director is entitled to receive compensation at the rate of $400 for each day spent in performing duties as a board member and to travel and per diem expenses authorized by law for boards and commissions under AS39.20.180. Sec. 21.58.060. OFFICERS. At the first meeting of each year, the board of the corporation shall elect a chair and a vice-chair from among its members. The corporation shall prescribe their duties by regulation. Sec. 21.58.070. MEETINGS AND QUORUM. The board of the corporation shall meet at least once every three months. Four members of the board constitute a quorum for the transaction of business and the exercise of the powers and duties of the corporation. Sec. 21.58.080. ADMINISTRATIVE PROCEDURE. Actions of the corporation under this chapter are subject to AS44.62 (Administrative Procedure Act). Sec. 21.58.090. STAFF AND PROFESSIONAL SERVICES CONTRACTS. The corporation shall employ an executive director who serves at the pleasure of the corporation as its chief administrative officer. The executive director may, with the approval of the corporation, select and employ additional staff as necessary. The executive director is in the exempt service under AS39.25.110. Employees of the corporation other than the executive director are in the classified service under AS39.25.100. In addition to its staff of regular employees, the corporation may contract for the services of consultants and professional, technical, and financial advisors the corporation considers necessary for the purpose of developing information, conducting hearings, studies, investigations, or other proceedings, or otherwise exercising its powers. Sec. 21.58.100. GENERAL POWERS. The corporation may (1) exercise the powers granted to insurers under the laws of the state when allowed under AS21.58.130(c); if the corporation acts as an insurer, the corporation shall comply with the requirements applicable to insurers under this title; (2) sue or be sued; (3) make contracts and execute all instruments necessary or convenient for carrying out its business; (4) establish administrative or accounting procedures; (5) acquire, own, hold, dispose of, and encumber personal property and lease real property in the exercise of its powers; (6) establish appropriate levels of reserves to cover expenses of the corporation; (7) perform all other acts necessary and proper to carry out the duties of the corporation. Sec. 21.58.110. DUTIES. The corporation shall (1) adopt regulations to implement this chapter; (2) create and implement the formal public involvement process required under AS21.58.320, for the purpose of gathering broad input on the state health insurance plan, options for financing the cost of coverage, cost-sharing of the health insurance plan, and the cost of plan administration; (3) establish the comprehensive health care data system required under AS21.58.260; (4) create and implement a uniform claims form; (5) develop and update the public health improvement plan for the state required under AS21.58.310; (6) establish the claims clearinghouse required under AS21.58.220; (7) develop a benefits package of health care services that enrollees in the state health insurance plan are entitled to receive and determine the eligibility requirements for enrollment; (8) annually determine the appropriate fee to be paid by an enrollee, after considering the enrollee's income, assets, financial obligations, or other criteria, as determined by the corporation; (9) define acceptable reasons for denial of claims under the state health insurance plan; (10) at least annually, review the health care benefits package and revise it as determined by the corporation, taking into consideration the health needs of the state, available funding, and other relevant factors as determined by the corporation; (11) establish the cost control system required under AS21.58.180, 21.58.230, 21.58.250, 21.58.270, 21.58.290, and 21.58.330, and the voluntary cost control system required under AS21.58.240 and 21.58.280; (12) periodically review options to finance the state health insurance plan and present options to the legislature; (13) with funds from the state health fund, provide or procure coverage required under the state health insurance plan; as provided under AS21.58.130, the corporation may act as an insurer or procure coverage from one or more companies licensed to transact health insurance in the state for all persons who are eligible to be enrollees of the state health insurance plan; (14) pursue necessary federal waivers from applicable federal law or other federal health care payers in order to incorporate both claims data and revenue streams into the corporation's data system and additional revenue into the state health insurance fund; (15) implement the state health insurance plan as a market based single payer system; (16) design a program to give incentives to primary care providers to practice in the state, especially in rural and under served areas of the state; incentives may include added premiums on prices for primary care providers, a student loan forgiveness program, an in-state family practice residency program, training and rotations for midlevel practitioners, and other appropriate incentives; (17) impose a mandatory cost control system in part or overall if the corporation determines that the voluntary cost control system described under AS21.58.280 has failed to substantially achieve the adopted expenditure target; (18) establish committees of experts and others as needed to make recommendations to the corporation regarding how to contain the cost of health care, including incorporating a greater emphasis on healthful lifestyles, prevention of disease and injury, promoting effective medical treatments, identifying the optimal provider mix within the state, or other matters determined by the corporation; (19) develop a plan that comprehensively addresses the needs of residents of the state for long-term care; and (20) hold public meetings and annually report to enrollees, the governor, and the legislature. Sec. 21.58.120. HEALTH INSURANCE FUND. The state health insurance fund is established as a separate account in the general fund. The fund shall be administered by the corporation and used to provide or to purchase insurance under AS21.58.110 or 21.58.130. The fund consists of appropriations by the legislature, individual or employer contributions, and private or government grants. Sec. 21.58.130. PROCUREMENT OR PROVISION OF INSURANCE. (a) The corporation shall (1) solicit proposals from insurance companies that are licensed to transact health insurance in the state under the procurement procedures adopted by the corporation under AS36.30.015(e); and (2) if the corporation does not act as an insurer as provided under (c) of this section, select one or more companies with which it will contract to provide insurance, after considering the cost of the insurance, the availability from the company of program features directed at reducing the cost of providing health care services, and other relevant factors as determined by the corporation. (b) The corporation may contract for insurance coverage for enrollees for a term that it considers to be the most advantageous to the corporation and its enrollees, for a period not exceeding three years. (c) If, after the proposal process under (a) of this section has been completed, the corporation determines that the desired coverage or benefits are not available from insurers licensed in this state or the corporation can provide the desired coverage and benefits at a lower cost per eligible person, the corporation may act as an insurer. Sec. 21.58.140. ENROLLEES. (a) A person is eligible to be an enrollee in the state health insurance plan under this chapter in a given year if the person is a resident of the state and has complied with the procedures established by the corporation under (d) of this section. For purposes of enrollment, the corporation shall by regulation define residency in a manner that is consistent with AS01.10.055 and with this chapter. (b) A person who is eligible to be an enrollee shall be enrolled by the corporation in the state health insurance plan. (c) The corporation shall cancel an enrollee's coverage if, during the fiscal year, the enrollee becomes ineligible to be an enrollee. (d) The corporation shall establish by regulation appropriate procedures for processing applications for enrollment, for determining the eligibility of enrollees, for enrolling enrollees, for determining and collecting the applicable fees, for canceling an enrollee's coverage, and for processing appeals by enrollees of adverse decisions by the corporation regarding eligibility, enrollment, determination or collection of applicable fees, or cancellation of coverage. Sec. 21.58.150. DISCRIMINATION AGAINST ENROLLEES PROHIBITED. A health care provider may not discriminate against an enrollee with respect to the availability, cost, or quality of health care services wholly or in part on the basis of the person's status as an enrollee. Sec. 21.58.160. CONFIDENTIALITY OF ENROLLEE INFORMATION. Medical and financial information regarding applicants or current or former enrollees is confidential and is not subject to public disclosure. The corporation by regulation may establish reasonable standards for the release of limited information in specified circumstances, including the release of reasonably necessary information to insurance companies and the release of information with the written authorization of the applicant or enrollee. Sec. 21.58.170. HEALTH INSURANCE PLAN. (a) The corporation shall adopt regulations specifying the health care services required to be covered by the state health insurance plan, taking into consideration the services requested by the public, the needs and characteristics unique to state residents, the goal of prevention of illness and promotion of wellness, the cost of providing the benefits package, the cost of providing or procuring the insurance coverage, and the funds available in the state health insurance fund. (b) The corporation shall conduct a comprehensive public involvement process designed to solicit information and opinions regarding the services required to be covered under (a) of this section. Sec. 21.58.180. DEDUCTIBLES AND COPAYMENTS. Subject to AS21.58.170, the corporation shall establish the deductible and copayment amounts applicable under the state health insurance plan. Sec. 21.58.190. PREMIUMS. A premium may be charged to an enrollee for coverage as established by the corporation by regulation. In establishing a premium, the corporation shall establish a standard fee and a sliding scale fee and shall consider the cost of coverage, funding available, and other factors the corporation determines are relevant. Sec. 21.58.200. PROHIBITED DISCRIMINATION BETWEEN HEALTH CARE PROVIDERS. The corporation may not discriminate between health care providers who are licensed to perform a covered health care service unless the type of health care service provided is not included under the state health insurance plan. Sec. 21.58.210. SOLICITATION OF ELIGIBLE PERSONS. (a) The corporation, under a plan approved by the director, shall disseminate appropriate information to the residents of the state regarding the existence of the state health insurance plan and the means of enrollment. (b) The corporation shall devise and implement a means of maintaining public awareness of the provisions of this chapter regarding the state health insurance plan and shall administer this chapter in a manner that facilitates public participation in the state health insurance plan. Sec. 21.58.220. CLAIMS CLEARINGHOUSE. (a) The corporation shall establish a claims clearinghouse in the state. A provider of health care services shall submit all claims for payment under the state health insurance plan to the claims clearinghouse. The corporation may, by regulation, require providers to submit specified additional information pertaining to providing health care services in the state to the claims clearinghouse. (b) Subject to appropriation, the claims clearinghouse shall pay claims approved for payment by the corporation under the state health insurance plan. (c) The claims clearinghouse shall comply with the provisions of AS21.54.025, except that the claims grievance procedure required by AS21.54.025(a)(2) shall be submitted to the board of directors of the corporation for approval. (d) The claims clearinghouse may deny a claim only for a reason that has been specified as an acceptable reason by the corporation under AS21.58.110(9). Sec. 21.58.230. REQUIRED AVAILABILITY OF PRICE LIST. (a) A health care provider shall prepare a list of the provider's prices that includes the dates during which the prices will be applicable. The price list shall be made available either by posting the price list in a conspicuous location in the health care provider's office or by similarly posting a notice that the price list is available for review upon request. The corporation shall determine by regulation the contents of the price list required under this section. (b) At least annually, a health care provider shall submit to the corporation copies of the provider's current price list. The corporation shall specify by regulation the date for submitting the price lists. Sec. 21.58.240. INFORMATION ON PRICES FOR HEALTH CARE SERVICES. The corporation shall at least annually publish a description of types of health care providers licensed to provide covered services and a comparative list of provider prices. The corporation shall make the publications available to the public upon request. Sec. 21.58.250. COMPARATIVE LISTS OF PRICES. (a) At least annually, the corporation shall compile comparative lists of prices for commonly provided health care services based on abstracted data provided by the claims clearinghouse under AS21.58.220, on the price lists submitted to the corporation under AS21.58.230, and on other relevant information as determined by the corporation. (b) The lists required under this section shall be prepared to allow identification and comparison of prices made by individual providers for the listed services. Hospital services may be compared on the basis of diagnosis related groups. Sec. 21.58.260. HEALTH CARE DATA SYSTEM. (a) The corporation shall develop and periodically update a health care data system. To the extent practicable, the data system base year shall be calendar year 1993 and the system must include (1) health care expenditures, including capital expenditures associated with receiving health care; (2) demographic data; (3) clinical information, including patient diagnosis, type of provider, type of service, location and length of care, referral patterns, quality of care, and result of care; (4) billing and payment data; and (5) public health data, including vital statistics and health status. (b) The corporation may, by regulation, require health care providers, including providers not being reimbursed by the corporation, to submit claims data and additional information necessary to develop or update the data system required under (a) of this section. Sec. 21.58.270. STATEWIDE HEALTH CARE EXPENDITURE TARGET. (a) The corporation shall prescribe by regulation a statewide health care expenditure target, based on the data obtained under AS21.58.260. To the extent practicable, the base year for the statewide health care expenditure target shall be calendar year 1993. (b) The corporation annually shall adjust the health care expenditure target established under this section to reflect changes in the Consumer Price Index and the following factors: (1) changes in the size and demographic characteristics of the state's population including aging; (2) changes in medical technology; (3) changes that improve access to health care services; (4) changes in the burden of disease resulting from epidemics, disasters, and reduction or elimination of disease; (5) elimination of unnecessary care; (6) changes in costs associated with professional liability insurance; (7) changes in administrative costs; (8) changes in patterns of utilization. Sec. 21.58.280. VOLUNTARY HEALTH CARE PROVIDER COMPLIANCE. The health care expenditure target adopted by the corporation under AS21.58.270 shall constitute a recommended target for expenditures within each specified category or subcategory of health care services or products. Health care providers may voluntarily comply with the expenditure target and may take all appropriate steps not prohibited by law to attempt to ensure that annual expenditures for health care in the state do not exceed the expenditure target adopted by the corporation. Sec. 21.58.290. REVIEW AND REPORT ON HEALTH CARE EXPENDITURES. The corporation shall annually review and report to the legislature and the governor on (1) the total amount of health care expenditures in the state; (2) the amount of increase or decrease in health care and capital medical expenditures in the state; (3) changes in health care provider prices; (4) changes in patterns of utilization or expenditures; and (5) factors that are responsible for changes in patterns of utilization or expenditures. Sec. 21.58.300. MANDATORY HEALTH CARE PROVIDER COMPLIANCE. (a) Based on the data compiled under AS21.58.260, the corporation shall monitor the success of voluntary compliance under AS21.58.280. At any time beginning three years after the voluntary expenditure target has been in effect, if the corporation concludes that voluntary compliance has failed substantially to achieve the adopted expenditure target, the corporation shall impose by regulation a mandatory expenditure limit as provided under (b) of this section. (b) The corporation may, by regulation, (1) impose a mandatory expenditure limit on one or more subcategories or on specific items within the expenditure limit; (2) directly assume all or part of the cost control functions specified under AS21.58.110(11); (3) establish mandatory price and utilization controls or guidelines; (4) annually monitor health care expenditures, patterns of utilization, and factors contributing to changes in expenditures or utilization; (5) establish cost sharing recommendations relevant to the mandatory expenditure limit. (c) A health care provider shall comply with the mandatory cost control provisions that may be established by the corporation under (a) and (b) of this section. An enrollee who receives a charge that does not comply with the mandatory cost control provisions that are imposed under this section is not required to pay the portion of the charge that exceeds the mandatory cost control provisions. A health care provider shall refund an amount received that exceeds the mandatory cost control provisions. (d) The corporation shall establish by regulation procedures for monitoring compliance with the mandatory cost control provisions and for providing notice to a person who is determined to have been overcharged. Sec. 21.58.310. PUBLIC HEALTH IMPROVEMENT PLAN. (a) The corporation shall develop and annually update a public health improvement plan for the state. The plan required under this section must recognize the need for (1) community involvement in health care planning and delivery; (2) attention to local needs that may vary from place to place; (3) accountability for the use of public funds; (4) equity and stability in the distribution of public funds; (5) shared responsibility of all levels of government for administering and financing public health care delivery; and (6) coordination of basic public health services. (b) The plan required under this section must include (1) an analysis of the health status of the residents of the state; (2) an assessment of the most appropriate role for various levels of government to play in addressing the health care needs of the residents of the state; (3) a delineation of the standards that should be used in performing assessment, policy development, and quality assurance in the delivery of public health services; (4) documentation of the extent to which the current public health system implements or achieves the standards identified under (3) of this subsection; (5) identification of interjurisdictional issues involved in health care access and delivery; (6) recommendations, including recommendations for specific legislative action when necessary, pertaining to the following:  (A) strategies, time lines, financial needs, and specific sources of stable revenue for bringing the state public health care system up to standards identified by the corporation;  (B) appropriate sharing of the responsibility of local, regional, state, and federal government entities to deliver public health care services efficiently and effectively, including recommendations for organization within state government;  (C) integration of the public health care system with state and national health care reform efforts;  (D) the corporation's estimate of the optimal share that public health should represent in the total health care delivery system of the state, expressed in terms of a percentage of health care expenditures in the state. Sec. 21.58.320. REQUIRED PUBLIC INVOLVEMENT PROCESS. The corporation shall design, implement, and maintain an extensive community based public involvement process for the purpose of providing residents with an ongoing opportunity to participate in decisions made by the corporation's board of directors regarding (1) health care services residents want included in the benefit package; (2) financing options; (3) revenue sources that should be used to finance the health plan; (4) cost-sharing options; and (5) administration of the health care plan. Sec. 21.58.330. PEER REVIEW OF UTILIZATION AND QUALITY. The corporation shall contract with health care providers in the state to develop utilization and quality controls. The contract must include the use of peer specialty groups that are given the goal of controlling utilization within a specialty. The corporation shall ensure that the contract stresses the development of the use of incentives to control costs. Sec. 21.58.400. DEFINITIONS. In this chapter, (1) "clearinghouse" means the claims clearinghouse designated by the corporation under AS21.58.220; (2) "Consumer Price Index" means the Consumer Price Index for Anchorage, All Items Index, compiled by the Bureau of Labor Statistics, United States Department of Labor; (3) "corporation" means the Alaska Health Insurance Corporation established in AS21.58.010; (4) "enrollee" means a person whose application for coverage under the state health insurance plan has been accepted by the corporation, who has completed applicable enrollment procedures, who is covered by insurance under the program; (5) "health care provider" means an acupuncturist licensed under AS08.06; an audiologist licensed under AS08.11; a chiropractor licensed under AS08.20; a dental hygienist licensed under AS08.32; a dentist licensed under AS08.36; a marital or family therapist licensed under AS08.63; a direct-entry midwife certified under AS08.65; a nurse licensed under AS08.68; a dispensing optician licensed under AS08.71; a naturopath licensed under AS08.45; an optometrist licensed under AS08.72; a pharmacist licensed under AS08.80; a physical therapist or occupational therapist licensed under AS08.84; or a physician's assistant certified under AS08.64; a physician licensed under AS08.64; a podiatrist; a psychologist and a psychological associate licensed under AS08.86; a clinical social worker licensed under AS08.95; an emergency medical technician certified under AS18.08.082; a mobile intensive care paramedic trained as required under AS18.08.082; a hospital as defined in AS18.20.130, including a governmentally owned or operated hospital; and an employee of a health care provider acting within the course and scope of employment; (6) "health care services" means preventive, diagnostic, medical, surgical, reproductive, psychiatric, psychologic, rehabilitative, health maintenance, dental, podiatric, optometric, optical, audiologic, nutritive, and chiropractic care; prescription drugs, laboratory and radiologic services, medical supplies, durable medical equipment and devices; personal assistance services; inpatient and outpatient care; home health care; hospice care; and long-term or institutional care; (7) "health insurance" means an individual or group contract or other plan providing coverage of health care services that is issued by the corporation or by a health insurance company, a hospital service corporation, a medical service corporation, or a health maintenance organization; "health insurance" includes disability insurance under AS21.12.050; (8) "health insurance company" means an insurer that is authorized to transact health insurance; (9) "market based single payer system" means a system in which a single entity provides health insurance to all residents of the state and the insurance is based on market forces, including provider defined fees, defined patient copayments, sliding scale copayments for the indigent, provider fees that are posted or made otherwise available at the point of services, published or disseminated fees in comparative lists that allow fee comparison by consumers, voluntary expenditure targets, provider peer review and control of volume, utilization, and quality of health services, and a regularly published description of the various types of providers licensed to provide services in the benefit package; (10) "state health insurance fund" is the fund established in AS21.58.120. * Sec. 13. AS24.20.206 is amended to read: Sec. 24.20.206. DUTIES. The Legislative Budget and Audit Committee shall (1) report to the legislature its recommendations relating to the confirmation of appointees to the Board of Trustees of the Alaska Permanent Fund Corporation; (2) annually review the long-range operating plans of all agencies of the state which perform lending or investment functions; (3) review periodic reports from all agencies of the state which perform lending or investment functions; (4) present a complete report of investment programs, plans, performance, and policies of all agencies of the state which perform lending or investment functions to the legislature within 30 days after the convening of each regular session; (5) present to the legislature within 30 days after the convening of each regular session a review of the report of the governor under AS37.07.020(d) with recommendations for needed legislation; (6) in conjunction with the finance committee of each house recommend annually to the legislature the investment policy for the general fund surplus and for the income from the permanent fund; (7) provide for an annual post audit and annual operational and performance evaluation of the Alaska Permanent Fund Corporation investments and investment programs; (8) provide for an annual operational and performance evaluation of the Alaska Housing Finance Corporation and the Alaska Industrial Development and Export Authority; the performance evaluation shall include, but is not limited to, a comparison of the effect on various sectors of the economy by public and private lending, the effect on resident and nonresident employment, the effect on real wages, and the effect on state and local operating and capital budgets of the programs of the Alaska Housing Finance Corporation and the Alaska Industrial Development and Export Authority; (9) provide assistance to the trustees of the trust established in AS37.14.400 - 37.14.450 in carrying out their duties under AS37.14.415 ; (10) provide for an annual post audit and annual operational and performance evaluation of the Alaska Health Insurance Corporation . * Sec. 14. AS36.30.015(e) is amended to read: (e) The board of directors of the Alaska Railroad Corporation , [AND] the board of directors of the Alaska Aerospace Development Corporation , and the board of directors of the Alaska Health Insurance Corporation shal adopt procedures to govern the procurement of supplies, services, professional services, and construction. The procedures must be substantially equivalent to the procedures prescribed in this chapter and in regulations adopted under this chapter. * Sec. 15. AS37.07.030 is amended to read: Sec. 37.07.030. RESPONSIBILITIES OF THE LEGISLATURE. The legislature shall (1) provide for a budget review function; (2) analyze the comprehensive operating and capital improvements programs and financial plans recommended by the governor; (3) adopt legislation to authorize implementation of the governor's comprehensive operating and capital improvements programs and financial plans or appropriate alternatives to those plans; (4) provide for a post-audit function to cover financial transactions, program accomplishment, and compliance with legislative intent; (5) adopt or revise the estimate of receipts required to balance the succeeding fiscal year's budget in order that proposed expenditures do not exceed estimated receipts for that fiscal year; (6) adopt, revise, or initiate revenue measures in order to balance the succeeding fiscal year's budget and the capital improvements section of the budget for the succeeding six years ;  (7) appropriate funds for the operation of the Alaska Health Insurance Corporation . * Sec. 16. AS39.25.110 is amended by adding a new p to read: (30) the executive director of the Alaska Health Insurance Corporation. * Sec. 17. AS44.62.330(a) is amended by adding a new paragraph to read: (59) Alaska Health Insurance Corporation." Renumber the following bill sections accordingly. Page 22, line 25: Delete "sec.5" Insert "sec.7" Page 23, line 1: Delete "sec. 6" Insert "sec. 8" Page 23, line 4: Delete "sec. 6" Insert "sec. 8" Page 23, lines 10 - 11: Delete all material and insert: " * Sec. 23. PHASED TRANSITION PERIOD. Notwithstanding the provisions of AS21.58, the Alaska Health Insurance Corporation shall implement the provisions of AS21.58 on an orderly and gradual basis as follows: (1) by December 31, 1994, the corporation shall begin to implement the public involvement process required under AS21.58.320, establish the data system required under AS21.58.260 and begin collecting data, begin the first public health improvement plan required under AS21.58.310, determine the federal waivers necessary to implement AS21.58, and begin to develop incentives to attract health care providers required under AS21.58.110(16); (2) by June31, 1995, the corporation shall complete the uniform claims form required under AS21.58.110(4); (3) by December 31, 1995, the corporation shall establish the claims clearinghouse required under AS21.58.220, determine the health care services required under AS21.58.170, begin monitoring health care expenditures and utilization patterns, and begin collecting fee information required under AS21.58.230; (4) by January 1, 1996, the corporation shall implement the peer review system for utilization and quality required under AS21.58.330 and shall adopt regulations that establish eligibility criteria for enrollment in the state health insurance plan, including a definition of the term "resident" that is consistent with AS01.10.055 and the purposes of this Act; (5) by December 31, 1996, the corporation shall establish the voluntary cost control system required under AS21.58.280; (6) by January 1, 1997, the corporation shall develop a long-term health care plan required under AS21.58.110(19), and establish the deductible and copayment amounts required under AS21.58.180 and present options to the governor and the legislature on how to finance a state health insurance plan under a market based single payer system; in considering options on financing a state health insurance plan the corporation shall strive to structure the options in a manner that provides protection for benefits provided to retired employees through public or private retirement systems; (7) by January 1, 1998, the corporation shall establish the statewide health care expenditure target required under AS21.58.270, and, subject to appropriation, begin to provide health insurance coverage for state residents as required under AS21.58. * Sec. 24. Notwithstanding AS21.58.270(b), enacted in sec. 12 of this Act, the corporation shall increase the health care expenditure target by the following percentages of the target established under AS21.58.270: (1) in 1998, 1.5 percent; (2) in 1999, 1.0 percent; and (3) in 2000, 0.5 percent. * Sec. 25. This Act takes effect July1, 1994." SENATOR DUNCAN stated that Amendment 17 was a comprehensive approach to health care reform which represented the consensus legislation brought together by the CHIPRA group and the task force proposals. Amendment 17 would accomplish the three major principals of health care reform: universal coverage, affordable care, and quality care. He pointed out that Amendment 17 emphasizes preventive health, wellness programs, and under served areas. Amendment 17 puts the mechanisms in place to ensure preparedness for a state plan. He discussed the various responsibilities of the Alaska Health Insurance Corporation created in Amendment 17. In 1997, the proposed plan comes back to the legislature which must approve the financing mechanism and the revenue system at which time a state plan can move forward or decide to stay under a federal plan. Number 100 Senator Duncan stated that other options, including SB 367, would not deliver a health care plan to this point because they do not create a system that ensures affordable health for everyone. He felt that health care reform would happen in the present Congressional session and that universal coverage would be the underlying principal. He explained that at the latest universal coverage would be phased in by 1998; therefore, Alaskans would have coverage. Without Amendment 17, Alaskans may face a very expensive system because the unique needs of Alaska probably would not be met by a federal plan. He concluded that Amendment 17 removes everything from SB 367 except the Tort Reform proposals and replaces it with language decided upon by the interim work group. CHAIRMAN RIEGER acknowledged all the hard work represented in Amendment 17. He pointed out that the differences in opinion seem to focus on the statewide health care expenditure target, the sequence of events leading to the definition of the benefit package and at what point the costs are known. He felt that in other ways SB 367 and Amendment 17 were more parallel than portrayed. SENATOR ELLIS supported Amendment 17. He felt that the CHIPRA 2 proposal is a significant step forward. He opposed an incremental approach. He pointed out that the CHIPRA 2 proposal addresses some of his concerns: the need to have a system that does not perpetuate the job-lock and the shortage of health care providers. Amendment 17 represents a commitment to consumer representation and involvement, more than other proposals. He also noted that Amendment 17 meets federal guidelines and avoids a federal take over of health care in Alaska. He thanked Senator Duncan for offering Amendment 17. Number 195 Senator Ellis explained that a telephone poll had been conducted on public television on Wednesday night. The viewing audience was posed with the following question: "Should every Alaskan be guaranteed a basic level of health care?" Approximately 1700 Alaskans answered "yes" while 777 Alaskans said "no." Senator Ellis concluded that the health care issue was a quiet crisis. He said that small businessmen, loggers, fishermen, etcetera typically do not come to committee hearings to comment on these issues. He felt that on a bipartisan level, they could agree that a federal solution to the unique needs of Alaska would not be adequate. SENATOR LEMAN stated that he had continuously heard from small business people. He noted the polling of NFIB Alaska which were probably on the other side of the issue due to concerns regarding employer mandates. He said that of course people would overwhelming agree that everyone should have a basic level of health care, but much fewer would want to pay the cost. SENATOR ELLIS stated that more business people, who are often more conservative, react to the national reform plan which relies on an employer based approach to health care. In Alaska, there are so many people who are not tied directly to jobs which would pose problems with the federal approach. He noted that Amendment 17 resists employer mandates. He pointed out that the single payer system is an alternative to the employer based tax. He explained that the single payer approach would spread the burden beyond small businesses. Most of the federal plans do not spread the burden. He agreed that most businesses want to provide health insurance, but they do not want to pay for it or have it mandated. He felt that a federal plan would quickly tax small businesses and mandate to the employers. SENATOR LEMAN did not see the difference in Senator Duncan's "avoiding cost shifting" and Senator Ellis' "spreading the cost." Both ask that someone else shares the burden which is cost shifting. He felt that Amendment 17 was a massive cost shift. Number 310 SENATOR ELLIS noted that there is cost shifting now, but without a mechanism to control the cost. Under the CHIPRA proposal doctors have agreed to voluntarily control costs in return for everyone being able to pay their bill. He did agree that Senator Leman's point was intellectually valid. Cost shifting with controls would seem to be an improvement. He addressed Senator Leman's concern with the figures regarding the uninsured and hoped that Senator Leman realized that they had tried to be as accurate as possible with the number of uninsured. He suggested that they discuss the calculation of their figures. SENATOR LEMAN stated that whatever the numbers, their proposal would probably remain the same. He felt that through the analysis, the numbers miss individuals covered part of the year or those who chose not to be covered. CHAIRMAN RIEGER took a hand vote. Senators Duncan and Ellis voted "Yea" and Senators Rieger, Sharp, Leman and Miller voted "Nay." The motion failed. SENATOR ELLIS moved Amendment 18. AMENDMENT 18  Page 19, after line 13: Insert a new subsection to read: "(c) Notwithstanding any other provision of law, a committee member is subject to the provisions of AS 39.50 as if the committee member were a member of a state commission or board described under AS 39.50.200(b)." Reletter the following subsections accordingly. Page 20, line 20: Delete "(d)(1)-(5)" Insert "(e)(1)-(5)" Page 20, line 26: Delete "(d)" Insert "(e)" Page 21, after line 31: Insert a new subsection to read: "(b) Notwithstanding any other provision of law, a committee member is subject to the provisions of AS 39.50 as if the committee member were a member of a state commission or board described under AS 39.50.200(b)" Reletter the following subsections accordingly. SENATOR MILLER objected. SENATOR ELLIS explained that Amendment 18 would place the members involved in the health care reform project under SB 367 to fall under the conflict of interest and disclosure statutes of the state. SENATOR MILLER removed his objection. Hearing no objection, Amendment 18 was adopted. SENATOR DUNCAN moved Amendment 19. SENATOR RIEGER objected. SENATOR DUNCAN explained that Amendment 19 gives the two advisory committees a better balance of consumers. AMENDMENT 19  Page 21, line 26 - page 22, line 4: Delete all material. Insert "provided in this subsection. In appointing members to the committee, the governor shall ensure that a majority of the members represent the interests of health care consumers. The governor shall appoint (1) two persons with experience in providing health care services; (2) one person who is an accountant with experience in health care insurance; (3) four persons who represent the public." Page 24, line 19: Delete "four" Insert "five" Page 24, lines 20-24: Delete all material and insert: "(1) one person who is licensed under AS 08.64; (2) one person who is a health care provider licensed under AS 08 but who is not licensed under AS 08.64; and (3) three persons who represent the interests of health care consumers." SENATOR SHARP asked for clarification of AS 08 and AS 08.64. SENATOR DUNCAN said that it was the same references as in SB 367. Number 390 CHAIRMAN RIEGER did not have a strong feeling regarding the amount of consumer versus provider representation; however, Amendment 19 may go too far. He opposed Amendment 19, but offered to work on the concept. He did want public representation, but was unsure of the design. He was not convinced that a consumer dominated board would produce the best plan. SENATOR DUNCAN asked for a roll call vote. SENATOR SHARP reviewed AS 08 and AS 08.64. CHAIRMAN RIEGER believed that the statutes referred to anyone other than a physician or osteopath. Upon a roll call, Senators Duncan and Ellis voted "Yea" and Senators Rieger, Sharp, Leman, and Miller voted "Nay." The motion failed. CHAIRMAN RIEGER pointed out that there was an error in the draft CS on page 22. The drafter failed to make the changes as specified in Amendment 1; it would change "prematernal" to "prenatal." That would be changed in the final CS. He also noted that on page 23, line 3 should read "whichever is lower" not "whichever is higher." Chairman Rieger moved to adopt that amendment. SENATOR DUNCAN asked if the premium could not exceed $100. CHAIRMAN RIEGER said yes. There was no objection to the change already incorporated in the CS. Number 444 SENATOR DUNCAN moved a conceptual amendment, Amendment 20, in response to the single subject violation. He moved that the provisions relating to the cigarette tax, the changing of the interest rate, and provisions relating to .08 all be removed. Those provisions should be forwarded out of the committee in separate legislation. SENATOR MILLER objected. CHAIRMAN RIEGER informed the committee that he had received an opinion from legal services similar to that of Senator Duncan and he had also spoken with the Judiciary Chairman. He explained that he had asked the Judiciary Chairman to review the single subject rule regarding SB 367. Perhaps, it would be necessary to separate the subjects as Senator Duncan's amendment suggests. Chairman Rieger also noted that the Judiciary Chairman has other .08 language, Tort Reform measures, and judgement on interest language. SENATOR DUNCAN reiterated that SB 367 was unconstitutional. CHAIRMAN RIEGER stated that he was not convinced that SB 367 was unconstitutional. SENATOR DUNCAN said that if SB 367 passes out as it is then the Courts would rule against it. CHAIRMAN RIEGER pointed out that the Alaskan courts have never ruled a bill unconstitutional for violation of the single subject rule. SENATOR DUNCAN noted that when there has been a clear opinion of a violation, the legislature has always corrected that. SENATOR ELLIS noted his support of the pieces of the legislation, but the bill seems to be doomed. He supported Amendment 20. CHAIRMAN RIEGER reiterated that he would forward Mr. Ford's memo and the question to the Judiciary Chairman to decide whether or not the bill should be divided. He opposed the motion. Upon a hand vote, Senators Sharp, Duncan, and Ellis voted "Yea" and Senators Rieger, Leman and Miller voted "Nay." The motion failed. SENATOR MILLER moved SB 367 HES as amended out of committee with individual recommendations and accompanying fiscal notes. Hearing no objection, it was so ordered. There being no further business before the committee, the meeting was adjourned at 1:40 p.m.