SENATE LABOR AND COMMERCE COMMITTEE March 23, 1995 1:35 P.M. MEMBERS PRESENT Senator Tim Kelly, Chairman Senator John Torgerson, Vice Chairman Senator Mike Miller Senator Jim Duncan Senator Judy Salo MEMBERS ABSENT All members present COMMITTEE CALENDAR SENATE BILL NO. 104 "An Act relating to joint insurance arrangements; and providing for an effective date." SENATE BILL NO. 100 "An Act relating to unfair discrimination against a physician assistant or acupuncturist under a group health insurance policy." PREVIOUS ACTION SB 104 - No previous action to consider. SB 100 - See Health, Education & Social Services minutes dated 3/6/95 and 3/16/95. WITNESS REGISTER Mary Jackson, Legislative Aide Senator John Torgerson State Capitol] Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 104. Don Koch, Chief Market Surveillance Section Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, AK 99811-0805 POSITION STATEMENT: Opposed SB 104. Jonathan Schaeffer, L.Ac. 174 S. Franklin, #200 Juneau, AK 99801 POSITION STATEMENT: Supported SB 100. Rachel Yates Alaska Marriage and Family Therapy 1301 1st St. Douglas, AK 99824 POSITION STATEMENT: Supported adding marriage and family therapy to SB 100. Jerry Reinwand Blue Cross of Washington and Alaska P.O. Box 327, MS 301 Seattle, WA 98111-0327 POSITION STATEMENT: Commented on SB 100. Linda Rexwinkel Juneau, AK POSITION STATEMENT: Supported SB 100. Bob Stalnaker, Director Division of Retirement and Benefits Department of Administration P.O. Box 110203 Juneau, AK 99811-0203 POSITION STATEMENT: Stated neutral position on SB 100. Suzanne Cortright, Acupuncturist 174 S. Franklin, #200 Juneau, AK 99801 POSITION STATEMENT: Supported SB 100. Judith Frost Juneau, AK 99801 POSITION STATEMENT: Supported SB 100. ACTION NARRATIVE TAPE 95-14, SIDE A Number 001 SL&C 3/23/95 SB 104 JOINT INSURANCE ARRANGEMENTS  CHAIRMAN KELLY called the Senate Labor and Commerce Committee meeting to order at 1:35 p.m. and announced SB 104 to be up for consideration. MARY JACKSON, Aide to Senator Torgerson, said this legislation, passed in 1986, authorized municipalities, school districts, and REA's to form joint insurance arrangements and extends that authorization to entities that perform a quasi-governmental service defined as being non-profit corporations, native associations, and native village councils. The test of "quasi-government" is that they must exercise at least two of the general municipal powers. Number 43 DON KOCH, Chief, Market Surveillance Section, Division of Insurance, said he did not support the extension proposed in SB 104. The reason is because the entities involved under this legislation could form a joint arrangement; they don't necessarily have to join an existing arrangement. He was concerned primarily with the financial wherewithal of those entities to bear each others liabilities. A joint insurance arrangement is not necessarily the purchase of an insurance product; it's an agreement to share the liabilities of others who are a part of that agreement, he explained. MR. KOCH said that mechanisms already exist allowing purchase of insurance jointly and he has no problem with that. He explained there is an existing federal statute that enables risk purchasing groups and risk retention groups. The risk purchasing group allows a group of entities to come together, pool their resources, and jointly purchase insurance, but not jointly share each others risks. He referenced AS 21.36.190 in this regard. SENATOR KELLY asked why he hadn't received a position paper from the Division of Insurance regarding this legislation. MR. KOCH replied that it had been completed yesterday and needed to be reviewed by "the chain of command." He said the division was also dealing with a number of other controversial issues. SENATOR TORGERSON asked if the department opposed the joint insurance arrangement when it was established seven years ago. MR. KOCH replied that initially they had some of the same concerns. At that time, however, it was pointed out that under the powers of a municipality, extending to the school districts, had taxing power and the ability to draft ordinances and enforce them. The financial concerns "tended to go away" since a tax base would be a backup. SENATOR TORGERSON pointed out that there is presently a successful program operating in the state including municipalities and public corporations, so the liability would be spread out even farther. MR. KOCH replied that basically their view has been that whenever unregulated entities share risk, as soon as there are two, you basically have an insurance plan. There are already a number of mechanisms in the insurance code that provide opportunities for people to form insurers of various kinds. One kind that comes to his mind is the reciprocal exchange which is a form of insurance company that is totally owned by the people who are insured. The management of a reciprocal exchange is performed by an attorney in fact so there isn't the normal "superstructure" an insurance company has. The expenses are, therefore, reduced. Two of these are already in the state - Alaska Timber Insurance Exchange and ARECA Insurance Exchange. There are a series of financial requirements in place and performance issues. The lack of regulatory oversite was deliberate in this type of arrangement, because there were conflicts between state statue and municipal regulations. He explained that municipalities are generally more sophisticated when they go into the market place. They have attorneys on staff and can make and receive the kinds of judgements they need to make decisions. His concern is with non profit corporations, in particular, they may not have that degree of sophistication, so when they make an agreement to share someone else's liabilities, they might not know what they are doing. SENATOR KELLY noted there was a letter of support from Egegik Improvement Corporation saying the reason they want this legislation is so they can join the pools and pay lower premiums. Yet, he mused, there are higher risks for taking large losses by joining one of the pools. MR. KOCH said that was definitely a concern. SENATOR KELLY asked if they would regulate the new units. MR. KOCH replied that they wouldn't. Furthermore, none of the provisions in the Insurance Code apply to them, including things such as reserves for losses, including such things as capital and surplus requirements so there is some floor for finances or trade practices. Number 271 SENATOR KELLY asked who regulated them. MR. KOCH said he thought they made an annual report to the legislature. Number 283 MS. JACKSON informed the committee that the regulatory practices that the JI's have to conform to are state statute. The Division of Insurance does not have oversite. SENATOR KELLY asked Mr. Koch if the regulations were in state statute or state regulation. He replied that if there were regulations at all, they were not in the Insurance Code and he didn't know of them existing anywhere else. SENATOR KELLY asked how he defined a trade practice. MR. KOCH replied unfair claims settlement practices, discrimination, boycott, coercion, intimidation, misrepresentation are all things that are dealt with in the Insurance Code in Chapter 36, the Unfair Trade Practices Act. SENATOR KELLY asked if he was saying that none of those things would be enforceable with the new organization. MR. KOCH replied that was correct; they do not apply. Statute 76 is structured as an exclusive statute, and nothing else in Title 21 applies to it. KEVIN SMITH, Alaska Municipal League Joint Insurance Association, said the reason they support this legislation is because they have received a number of phone calls from non profits and village councils that are taking over traditional municipal services who are finding that liability insurance is becoming expensive for them. Some of them are very small with very few assets and not necessarily the sophistication Mr. Koch attributes to them. SENATOR KELLY asked how many municipalities he had in his group right now. MR. SMITH answered 95. SENATOR KELLY asked if there were a $1 million liability loss, would that be divided by 95. MR. SMITH replied there was another mechanism in the form of financial requirements of a JIA that would make the structure such that you shouldn't ever have to go to the membership to seek additional funds. AS 21.76.020 says: "By October 1 of each year, the administrator of a joint insurance arrangement shall prepare and deliver to the LBA Committee a report showing the true, correct financial condition of the arrangement." The report must: have a certified analysis by a member of the American Academy of Actuaries of the sufficiency of the loss reserves, be certified by a public accountant and must include a provision in the cooperative agreement requiring an annual determination by a casualty actuary who is, again, a member of the American Academy of Actuaries. The annual determination would show that the procedures for establishing reserves for losses are actuarialy sound. Number 350 SENATOR KELLY asked if there were two reports on file now at LBNA. MR. SMITH answered presumably. SENATOR KELLY asked staff to get the reports. MR. SMITH continued saying a JIA would have to do an annual independent audit including a review of the actuarial assumptions used for establishing the reserves, including a certification that the actuarial assumptions continue to be sound and that the level of reserves are adequate. SENATOR KELLY asked, again, about a $1 million liability claim and if all 95 members pay equally and do they all pay equally into the reserves. MR. SMITH replied no, if they were to go back to the membership and assess them, it would be based on payroll. In the case of $1 million claim, the excess insurance would pick that up. SENATOR TORGERSON asked how successful this JIA program has been since its inception. MR. SMITH replied that the program started in 1988 with 37 members over the objections of the Division of Insurance. There are now 95 members; they get approximately $5 million in premiums each year. The goal of the organization was to stabilize the commercial market so that rates weren't fluctuating up and down. He said he had seen a number of commercial carriers cut their quotes in order to compete with a joint insurance association. He said they have 60% of the market share in municipalities alone. SENATOR KELLY asked what their reserves were. MR. SMITH replied that they have approximately $16 million. SENATOR KELLY asked if they had any outstanding lawsuits going. MR. SMITH said he didn't know that and it wouldn't be in the report. He said it would probably be a line item where the accountant said these are the outstanding liabilities at the time. SENATOR KELLY said he would hold SB 104 until receiving copies of the reports and the letter from the Division of Insurance. Number 412 SL&C 3/23/95 SB 100 DISCRIMINATION UNDER GROUP HEALTH INS.  SENATOR KELLY announced SB 100 to be up for consideration. He said they are working on work draft 9SLS0788/F4 3/22/95 which changes the title and deals with including physician assistant and acupuncturist into the bill. SENATOR MILLER said he understood there were three groups who were interested and all three have merits. He thought it was possible there should be a separate bill for each group. After discussion with committee members SENATOR KELLY said they would begin taking testimony and asked Jack Heesch to address the committee. MR. HEESCH said he would answer questions. JONATHAN SCHAEFFER, Licensed Acupuncturist, said that SB 100 would allow freedom of choice for folks with insurance. This is basically a fundamental right and a principal that this country was based on. Acupuncture is a very safe and effective form of health care for many conditions. In the long run, its use reduces health costs for consumers and insurers. He supported adding physician assistants and acupuncturists to the ranks of the reimbursable health care providers of the state. RACHEL YATES, Alaska Association of Marriage and Family Therapists, said she would like to answer any questions they have about marriage and family therapy. SENATOR KELLY said that he didn't think that what she did, while being very important, was medicine. Personally, he thought the list should just include medical providers. JERRY REINWAND, Blue Cross, said he thought the committee really needed to look at the public policy issues involved in light of the memo from Mr. Koch, Division of Insurance, specifically where he says 090 (d) isn't a mandate, but then says later that it is a mandate. He said he was still unclear about that section. MR. KOCH said perhaps one way to address that question is that if a policy provides coverage for treatment of a headache, then it should extend to anyone on the list who can provide treatment for a headache. If, however, the policy structures itself in a way that says you're addressing a diagnosis as to what's causing the headache, then only those people who can make a diagnosis as to what is causing that headache can be the service providers. He didn't view this as a mandate of coverage. It is intended to be an antidiscrimination provision. It says basically, if a provider can provide a coverage that is covered on a policy and do so within the scope of his license, then you can't discriminate against him. He didn't view this as a mandate. He added this would cause some serious concern for those who don't want to deal with particular professions. MR. REINWAND said that answered his question. SENATOR DUNCAN said he was not sure that was a solution he could support. MR. KOCH explained if the cause of a backache was beyond the scope of an acupuncturists' practice, he would be excluded. The insurer is the one who makes that determination. SENATOR DUNCAN asked if there was nothing to stop insurers from just making a policy call on a corporate level denying acupuncture all together. MR. KOCH replied that if they did that, they would have to be very careful about how they worded the coverages in their policy, because as soon as they provided a coverage that was clearly within the scope of their practice, and allowed another practitioner to perform it, they would be up against discrimination. It's not requiring them to provide the coverage, but it does say that if you provide it, you can't discriminate against those who can provide that service. SENATOR DUNCAN asked if adding acupuncturists to this list would prohibit an insurance contract from specifically excluding acupuncturists. MR. KOCH replied that it would. SENATOR DUNCAN asked who decided what is a valid treatment. MR. KOCH explained that decision goes to the insurer first, and then a complaint could be filed with the Division of Insurance. The Division would review what was within the scope of their practice and, if it's within the scope of their practice, they would go to the insurer and see why they declined to cover it. The courts can also determine what's within the scope of the practice of the acupuncturist. Number 550 SENATOR DUNCAN said he knew of a case where a physician assistant provided some services which were within the scope of a P.A. and provided that service in a physician's office. The physician submitted a claim to the insurance industry and was denied, because it was a physician assistant who did it. He asked if physician assistant were added to the list, could that happen. MR. KOCH said that that could not occur. TAPE 95-14, SIDE B SENATOR SALO asked for his response to Senator Kelly's contention that these should just be medical providers. MR. KOCH said if a group health policy structures itself in a way to provide coverages for things that are not typically within the practice of a physician or extend to other things, then it may be appropriate. The policy states what it's intending to provide. If it says marital counseling and the current list says the only ones who can provide marital counseling are the psychologist or physician, then it is limited to just those. SENATOR DUNCAN said his concern with stating in statute that this is not mandated coverage, that it would give insurers a loophole to say they don't recognize that an acupuncturist provides services. MR. KOCH said he would prefer that language not appear in this section of law and typically the place where mandates of coverage are placed are in chapter 42, the section of law that deals with contract content. Number 552 SENATOR KELLY announced a break from 2:25 - 2:32. MR REINWAND said he still thought the effect of 090 (d) was to mandate coverage. He thought that was a much different policy question than adding people to the list. He thought it would be helpful for the committee to clarify the statute does not mandate coverage. Number 535 LINDA REXWINKEL said her concern was with acupuncture. She said she suffered from a chronic pain syndrome called reflex sympathetic dystrophy which she contracted in 1991. Basically, the sympathetic system in her leg has gone crazy and produces pain on its own initiative in the form of swelling which cut off her circulation, and if left untreated, her leg would gangrene and require amputation. She had no alternative, but to secure medical treatment which has amounted to about $65,000 since 1991. The normal course of treatment for this disorder by the medical profession is an injection of anesthetic which did not work for her at all. Since 1993, she has seen Suzanne Cortright, an acupuncturist here in Juneau. The average cost for the medical treatment that didn't work was about $1,000. Ms. Cortright's treatments are just a fraction of that and the amount of pain relief is substantial. For many people with chronic pain, alternative medicine is about the only course of treatment they have available to them, because the regular medical profession does not fully understand what is happening and can't provide relief. As an employee under the state's plan, her acupuncture was not covered by Aetna Health Plans. She thought she faced unfair discrimination, because she knows people who had acupuncture treatments by physicians who were covered by Aetna. It, therefore, seems to her that we have occupational licensing for various professions, but do not accord them the same kind of treatment as we would an M.D. It seems we allow for coverage of services by a doctor merely because he has an M.D. behind his name, even though he made not have had any specific kind of acupuncture training and merely has someone else administer the needles for him. She said the cost of the treatments between the two would be much less for the acupuncturist. The issue is not only of fair coverage and discrimination, but to provide people with an alternative to traditional medicine when it doesn't work, and to be able to receive reimbursement for it, and also cost containment. SENATOR KELLY said he was in favor of the lower cost, but it seems that they are adding to the list, but no one is saying you only get one of these, so he wondered if there really was any savings in the final analysis. MS. REXWINKEL said she thought there was a cost savings, because people go to whomever their insurance covers. If the alternative is provided, people can go to whomever they want. She did not believe putting acupuncturist in there makes it a mandated service. From when she sold insurance, she recollects that insurance companies have the ability to make discretionary changes in the policies in the coverage they provide. She asked why they wouldn't want it covered, if they are already paying for it under an M.D. and providing alternatives to people is one way to control cost. SENATOR DUNCAN asked why Aetna turned her down. MS. REXWINKEL said "service not covered." She said she didn't realize they were covering acupuncture by a physician in Anchorage until just recently. She has drafted a letter to Aetna and Division of Retirement and Benefits detailing the fact that they are paying for services under a physician in Anchorage, even though they are not paying for her acupuncturist down here. MS. REXWINKEL said her experience with Aetna is that many times it is the initial claims representative, then the claims supervisor, and then it would be a nurse who reviews the file and makes the determination on what is covered. An appeal goes to the Division of Retirement and Benefits who review Aetna's denial and then the courts are beyond that. Number 427 BOB STALNAKER, Director, Division of Retirement and Benefits, said he had a neutral position on SB 100. He said in the case of an M.D. using acupuncture for treatment modalities, they would have to check that out. SENATOR SALO said she didn't think it was unusual to go to a medical doctor, a chiropractor, acupuncturist, or a massage therapist, or whoever to find a solution to your condition. She asked how that was handled under the Aetna system. MR. STALNAKER said he thought that situation would be very rare, and people normally switch providers within the same professional service. SENATOR SALO said she disagreed, that she personally knows people who seek many different kinds of health care, especially when you think of chiropractic services in addition to a medical doctor. MR. STALNAKER noted that the insurer would eventually deny coverage after a point in time, because of improper treatment. SENATOR DUNCAN asked him if he agreed with Mr. Koch's position, that if there is a service specifically covered by Aetna, as in Ms. Rexwinkel's case, and she goes to a physician, they pay the claim. If she goes to an acupuncturist for that condition, Aetna would have to pay the claim also. MR. STALNAKER said that would be correct if acupuncture services were an accepted form of treatment for that ailment. Number 375 SENATOR DUNCAN asked who makes the determination of what's an accepted form of treatment for that condition. MR. STALNAKER said the decision is made by the insurance carrier through generally accepted treatment modalities, the "treatment book." SENATOR DUNCAN asked if the state had any ability to have impact on that. He said he really didn't have too much faith in getting non traditional services covered, because Aetna corporate headquarters could just say they don't accept that as a form of treatment for that particular condition. He didn't see what good it did to have anyone listed, if the state is leaving it up to the insurance industry to make the decision about what are accepted forms of treatment. MR. STALNAKER said there will always be treatments that are not yet medically accepted forms of treatment that over time might become accepted. SENATOR DUNCAN said, in reference to Ms. Rexwinkel's condition, that it was a "fringe condition" and he wanted to see the book that Aetna uses for these determinations. MR. STALNAKER responded that "the book" defines what's an acceptable treatment rather than who is acceptable to do it. If an acupuncturist is licensed to perform that form of treatment, they would be reimbursed. SENATOR DUNCAN said he didn't understand what an acupuncturist's license says. Number 300 SUZANNE CORTRIGHT, Acupuncturist, read the statute definition of an acupuncturist: "A form of healing, developed from traditional Chinese medical concepts, that uses the stimulation of certain points on or near the surface of the body by the insertion of needles to prevent or modify the perception of pain or normalize physiological functions. The practice of acupuncture means the insertion of sterile acupuncture needles and the application of moxibustion to special areas of the human body based upon acupuncture diagnosis. The practice of acupuncture includes adjunctive therapies involving mechanical, thermal, electrical, and electro-magnetic treatment and the recommendation of dietary guidelines and therapeutic exercises." MR. STALNAKER said we pay to have medical experts make those kinds of calls. He felt they would do it without discrimination and with a completely open mind in what is generally accepted in the medical profession. He said acupuncture is allowed as a form of anesthesiology. SENATOR DUNCAN commented that the insurance industry can hire doctors to give opinions like he can hire an attorney to give him an opinion. Number 290 MS. CORTRIGHT presented a list from the World Health Organization of things that are acceptable for treatment by acupuncture. She said insurance coverage for acupuncture increases the efficiency of our health care system. By beginning treatment with the least invasive and least expensive modalities there will be less money spent overall. She said that often her patients have been through months or years of medical treatment that was quite costly and ineffective. Acupuncture often provides relief for them at a small fraction of the cost. If it were covered by insurance, it would provide encouragement for people to seek these less expensive modalities earlier. She said that acupuncture is very effective for addictions. SENATOR TORGERSON asked if her treatment just made people feel better or if it really cured them too. MS. CORTRIGHT said absolutely; the goal is to get people better so that they don't come back. She noted that some insurance companies cover acupuncture (in pilot programs), like Blue Cross and Blue Shield of Washington and Oregon, and they are saving money. Number 211 MS. YATES wanted to point out that marriage and family therapists are licensed providers of a clinical service in this state. They are mental health providers and however you describe that, it is more or less medical. Marriage and family therapy is regularly mandated to clients in the state via the judicial system and the Division of Family and Youth Services. They seek to repair relational difficulties within the family system. JUDITH FROST said she took time off from work to testify, because she feels strongly about this issue. She said acupuncture has been much more effective than any other alternative she has tried for her sleep disorder and depression from the death of her daughter. She tried traditional medical treatments and became addicted to valium. She then started going to Suzanne Cortright for acupuncture treatments and found that it was most effective for dealing with her condition. She works for a company that does cover acupuncture. She feels strongly that everyone should be able to have their insurance coverage pay for acupuncture treatment. SENATOR DUNCAN asked what insurance company she used. She replied it was Northwestern. SENATOR KELLY said the committee would take into consideration the testimony heard and bring the bill up at a later date. SENATOR KELLY adjourned the meeting at 3:10 p.m.