SENATE LABOR AND COMMERCE COMMITTEE March 2, 2000 1:40 p.m. MEMBERS PRESENT Senator Jerry Mackie, Chairman Senator Tim Kelly, Vice Chairman Senator Loren Leman Senator Lyman Hoffman MEMBERS ABSENT Senator Dave Donley COMMITTEE CALENDAR SENATE BILL NO. 279 "An Act relating to the redemption of shares of certain Alaska corporations." -MOVED SB 279 OUT OF COMMITTEE SENATE BILL NO. 230 "An Act relating to the relationship between employees and labor organizations; and prohibiting collective bargaining contracts that require employees to join a labor or employee organization; and providing for an effective date." -HEARD AND HELD SENATE BILL NO. 276 "An Act requiring that health care insurers provide coverage for treatment of diabetes." -MOVED SB 276 OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 279 - See Labor and Commerce Committee minutes dated 2/29/00. SB 276 - No previous action to report. SB 230 - No previous action to report. WITNESS REGISTER Mr. David Grey, Aide Senator Jerry Mackie State Capitol Bldg. Juneau, AK 99811 POSITION STATEMENT: Commented on SB 279 for sponsor. Mr. Franklin Terry Elder, Director Division of Banking and Securities Department of Commerce and Economic Development P.O. Box 110807 Juneau, AK 99811 POSITION STATEMENT: Commented on SB 279. Mr. Julius Brecht 900 W 5th Ave #600 Anchorage, AK 99501 POSITION STATEMENT: Supported SB 279. Mr. Jimmy Jackson GCI Representative 2550 Denali St. Anchorage, AK 99503 POSITION STATEMENT: Supported SB 279. Mr. Stephen Goodrick, Vice President National Right to Work Committee 8001 Bradock Rd. Springfield, Virginia 22160 POSITION STATEMENT: Supported SB 230. Senator Mike Miller Senate District Q Alaska State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Sponsor of SB 276 Ms. Betsy Turner Bogren Fairbanks District Manager American Diabetes Association PO Box 343 Ester, AK 99725 POSITION STATEMENT: Supported SB 276. Max Bogren PO Box 343 Ester, AK 99725 POSITION STATEMENT: Supported SB 276. Ms. Michelle Cassano Executive Director American Diabetes Association 801 W Fireweed Anchorage, AK 99503 POSITION STATEMENT: Supported SB 276. Ms. Janel Wright 3330 Arctic Blvd. #1303 Anchorage, AK 99503 POSITION STATEMENT: Supported SB 276. Mr. Howard Hedges 4032 Beluga Circle Homer, AK 99603 POSITION STATEMENT: Supported SB 276. Ms. Daisy Lee Bitter 62479 E Skyline Dr. Homer, AK 99603 POSITION STATEMENT: Supported SB 276. Gordon Evans Health Insurance Association of America 211 4th Street, Suite 305 Juneau, AK 99801 POSITION STATEMENT: Supported SB 276 if amended. ACTION NARRATIVE TAPE 00-7, SIDE A Number 001 CHAIRMAN MACKIE called the Senate Labor and Commerce Committee meeting to order at 1:40 p.m. Present were Senators Leman, Tim Kelly, Hoffman, and Chairman Mackie. SB 279-REDEMPTION OF CORPORATE SHARES CHAIRMAN MACKIE announced SB 279 to be up for consideration. MR. DAVID GREY, Aide to Senate Labor and Commerce, said SB 279 is an act related to redemption of shares of certain Alaskan corporations. It allows the redemption of preferred stock at the discretion of the stock holder. By providing this option, Alaska corporations are given an alternative method to raise funds and Alaskan investors are given an expanded investment opportunity. As the Alaskan Corporate Code stands now, redemption of preferred shares is only at the option of the issuer. The right to have stock redeemed under specific conditions can be an important aspect for a stock sale or transaction. This share redemption right gives the shareholder an avenue to get the holder's cash back under terms negotiated with the issuing corporation. Under this bill, preferred stock share redemption must also comply with other restrictive provisions of the Corporate Code. For example, a redemption is prohibited if the amount of the corporation's retained earnings immediately before the proposed distribution does not equal or exceed the amount of the proposed distribution. "You've got to have enough money to pay everybody off." The Alaska Corporate Code is modeled in large part after the California Corporation Code. This body of law has since been amended and expanded to allow for this kind of stock redemption. A number of other states have also allowed the issuance of preferred stocks similar to what is being proposed by this bill. MR. TERRY ELDER, Director, Division of Banking, Securities, and Corporations testified that a number of other states already allow this option to corporations. It wouldn't have any fiscal impact on his department in terms of filing requirements. They agree that there are other sections of the Corporation Code that provide adequate security for shareholders so that they wouldn't be financially harmed by redemptions. Consequently, it just becomes a public policy issue for the legislature to decide. CHAIRMAN MACKIE asked what other states do. MR. ELDER answered that California, in particular, which our Code was based on, and a number of other states have already amended their acts to allow for this option. CHAIRMAN MACKIE asked if he saw any public policy reasons or downside why they should continue to deny that option. MR. ELDER said he didn't. Number 411 SENATOR LEMAN asked if he would recommend to the Governor that he sign this. MR. ELDER responded that he was not taking a position on the bill, but, if the bill passes the legislature, and the Governor asks the Commissioner, and the Commissioner asks him, he couldn't see any reason why he wouldn't recommend it. SENATOR KELLY asked who requested it. CHAIRMAN MACKIE answered that the Labor and Commerce Committee introduced it at the request of some companies. He thought GCI was one. Number 477 MR. JULIUS BRECHT, Attorney and Managing Shareholder of the Law firm Wolforth, Bachelor, Johnson, and Brecht, said he was a past Director of the Alaska Division of Banking, Securities, and Corporations. He said he had submitted a written statement in support of this bill which they should already have. He summarized his statement saying that he participated in the development and review of proposals for a new Alaska Corporate Code. As comprehensive as that effort was, time marches on and corporate law needs change. Redemption of shares is an example. The proposed changes to section .325 do not lessen the provisions in the Code for protection of shareholders of a corporation. They will allow greater flexibility to a corporation's board of directors in addressing capital needs in the present day financial markets. MR. JIMMY JACKSON, GCI, said their chief financial officer, John Lowe, has submitted testimony in support of SB 279. Since he is traveling today, Mr. Jackson said he was here to reiterate his testimony and answer questions. Several other states, including those who are leaders in corporate law like Delaware, already allow preferred stock which is redeemable in this way at the option of the shareholder. GCI is an Alaskan corporation, founded by Alaskans, and is one of the few publicly traded corporations. Unfortunately, they are at a disadvantage because they cannot issue preferred stock which is redeemable at the option of the shareholder. This is a disadvantage to them in trying to raise capital to conduct their business. Without this law, businesses will be less inclined to incorporate in Alaska and more inclined to incorporate in another state. MR. DAVID TAYLOR, Chief Financial Officer, Grady and Company, a privately held insurance brokerage, supported SB 279 for many of the same reasons that have already been stated. By enabling Alaskan corporations to remain competitive with other states in the raising of capital, this is a revenue positive bill for the State and will result in additional taxable income. CHAIRMAN MACKIE asked if there was anyone else to testify and getting no response he closed the pubic testimony. SENATOR LEMAN thanked him for introducing this legislation. It was good and timely. SENATOR KELLY commented that he wasn't sure of that since they had the bill only ten days and had heard from only one corporation. He would like to believe that. He wanted to hear if there is another side of the story. He wanted to hear that, too. CHAIRMAN MACKIE responded that the bill was scheduled twice and the same people had testified. He asked Mr. Grey if there was any opposition to the bill. He indicated there was none. He asked Senator Kelly if he wanted to hold the bill and he indicated no. SENATOR KELLY said this appears to be a major change in the Corporate Code and he's not sure if the corporate world is aware of that, yet. SENATOR LEMAN moved to pass SB 279 from committee. There were no objections and it was so ordered. SB 230-RIGHT TO WORK CHAIRMAN MACKIE announced SB 230 to be up for consideration. SENATOR LYDA GREEN, sponsor, introduced Stephen Goodrick, National Right to Work Committee, the premier spokesman on the subject. MR. STEPHEN GOODRICK, Vice President, National Right to Work Committee, said they are an organization made up of 2 million members and supporters across the country who are united in the belief that it is wrong to compel any worker to pay union dues or to join a union as a condition of employment. It's the only thing they are about, but they feel very strongly about it. Number 1070 MR. GOODRICK said his job is to monitor legislation across the country. They became aware of Alaska through their membership here and members of the legislature that there was an effort to seek enactment or introduction of the State Right to Work bill. He addressed the question brought up by the Commissioner of the Department of Labor as to whether they have 5,000 - 10,000 members in Alaska; the exact count is 5,920. He said that 80% of the American public think it is wrong to require a worker to pay union dues or fees as a condition of employment. He would be surprised if a majority of Alaskans don't agree with the national opinion on that question. He commended Representative Kohring and Senator Green for taking the very first step towards freeing Alaskan workers from the tyranny of compulsory unionism. SB 230 is simple even though a lot of union officials wanted to make it seem very complicated. It makes it illegal to force workers to pay union dues as a condition of employment. It does nothing to diminish the right of an individual worker to join and participate in a labor union. Those rights are protected under federal law and they wouldn't support anything contrary to that. He asked what could be more basic or more fair than letting individual workers decide for themselves what groups are worthy of their support and patronage. Unfortunately, in Alaska today, thousands of working men and women have no such choice. The message to these independent minded workers is unmistakable. Join the union and pay the union dues or don't work here. There is no natural right in a free society for any private association to compel representation or financial tribute. The true role of government in a free society is to protect the individual's ability to exercise his or her rights without harassment or interfering. Passing "right to work" would let Alaska's workers say to their union officials "Persuade me; convince me; don't force me." Unions operate the same in right to work states as they do in enforced unionism states like Alaska. Under the right to work law, the only thing that changes is that union officials can no longer negotiate with an employer for a union security clause, a contract that forces all the workers to pay union dues whether they wish to or not. "Despite misinformation from union officials, right to work has no real affect on nominal wages." According to the Union Membership and Earnings Data published by the Bureau of National Affairs, the average weekly earnings of private sector union members in a right to work state is $600 while union members earn $594 in nonright to work states. In fact, right to work is a little tiny bit ahead. Alaska's failure to pass a right to work clause costs far above the injustice to individual workers. Every Alaskan pays the price in lost jobs, higher taxes, and a lower standard of living. It hurt consumers, it hurts taxpayers, and hurts workers. The AFL/CIO's own numbers show that right to work states have higher real income. Their information comes from the U.S. Department of Labor data and does not adjust for anything. Number 1395 But if you adjust for the cost of living, the benefits of right to work becomes clear. The average of hourly earnings in manufacturing industries in right to work states are 8% higher than they are in nonright to work states. Average earnings in manufacturing are 7.6% higher in right to work states than in nonright to work states. Average per capita personal income is $1,100 higher in right to work states than in compulsory union states. The average annual pay overall is $900 higher in right to work states than it is in compulsory union states. These numbers confirm the right to work advantage reported by Nobel Prize winning economist, James Bennet, at George Mason University. The gap is even wider as a result of adjusting for state differences in taxation. A quote from Dr. Bennet's report, A Higher Standard of Living in Right to Work States, says that a typical urban family in a right to work state has $2,852 more after-tax purchasing power than the very same family would have in a nonright to work state. He shows that much of the reason families are so much better off in right to work states is that they pay 25 percent more for food, housing, health care, utilities, property taxes, and college tuition than families in enforced union states. What matters to workers is not how much they earn, but how much of it they get to keep and spend. Right to work does better in every category when you look at it that way. Since 1980, per capita income in right to work states by 11% more than in nonright to work states. Total economic growth in right to work states has out paced nonright to work states by 25% since 1991 and is projected to continue at the same pace to 9% by 2001 according the Financial World Magazine. The importance which business attributes to a state's policy encouraging cooperative and voluntary relations between labor and management has been very clear for many years. According to Ann Elizabeth Morris, President and Chief Economist of the Insight Research Corporation, one of the leading dominant competitors in corporate relocation research, says "Ninety percent of companies use forced collective bargaining as a first kick-out criteria and choose to locate in only right to work states when their overall operating requirements give them any latitude on this issue." He said that Alaska is cutting itself off at the knees at the beginning by continuing to allow the forced union policy to remain in place, because it keeps out nine out of 10 companies that might come to Alaska and hire people and pay taxes. The results of this thinking can be very clearly seen. According to the U.S. Department of Labor, between 1960 and 1993, right to work states created nearly 2.7 million new high paying manufacturing jobs while during the very same period, forced union states lost about 1.4 million jobs. The fact is that the prosperity the nation has encountered and enjoyed over the last 20 years has been produced by the workers and employers in the right to work states. If you cut the country in half and made half of it compulsory unionism and the other half right to work, you would see the nonright to work half in a severe economic recession and severe decrease in job creation; and you would have seen a tremendous growth rate in right to work America. The evidence is clear that employee freedom and prosperity go hand in hand. This is where right to work differs with organized labor's officials. They have a higher belief and trust in the intelligence of American workers to make these decisions on their own behalf. They will not be hurt by being allowed to choose for themselves what to do with their own money. The case in Alaska is compelling from any legitimate perspective. Is it right to ask a person who voted against union representation in the first place to pay or be fired. Political; is it the right thing to allow forced union dues to be spent by organized labor in direct contravention of the beliefs and view of their own members in supporting political candidates who are out of touch with the working man in America. Or is it smart economically? No it's not; but union officials want to keep coercing union dues from unwilling workers and they will do or say anything to keep their money rolling into their coffers and right into their wallets out of Alaska workers' paychecks. By fighting against right to work, union officials are telling you that this is union busting legislation. That the only way they can stay in business is by forcing their members to pay dues. This is a damming admission. If their power is based on the ability to force or coerce workers to pay, that's an illegitimate power and it should be removed. Right to work supporters know that when workers see a union truly representing them, they won't need to be compelled by government guidance to pay tribute. They will gladly join on their own if they see it's in their self interest. A good labor union has no need for compulsory systems of membership recruitment to attract their members. A bad union doesn't deserve to continue to have that power. In the interests in the rights of working men and women of Alaska, he urged them to support HB 309 and SB 230. Number 1700 CHAIRMAN MACKIE recapped that he said 80% of Americans oppose mandatory dues and union membership and asked him to expand on that. MR. GOODRICK responded that the numbers had gone up over the last 20 years. It's always been a solid majority. This idea of requiring workers to pay union dues has been a foreign concept to American workers. It has gone up a couple of points in the fall of every decade. The latest poll they have is 78%. The question is asked: "Do you think that a worker should be required to pay union dues or fees in order to get or keep a job." CHAIRMAN MACKIE said how many states right now have right to work laws such as proposed in this legislation. MR. GOODRICK answered 21. CHAIRMAN MACKIE asked if it was correct that 21 states have no requirement to pay union dues or join a union for employment. MR. GOODRICK said that was correct. CHAIRMAN MACKIE asked what some of them were. MR. GOODRICK answered geographically it was almost all of the south and most of the west. CHAIRMAN MACKIE asked him to name some of the western states. MR. GOODRICK replied Kansas, Wyoming, Kansas, Florida, Georgia, South Carolina, North Carolina, Arkansas, Alabama... CHAIRMAN MACKIE said he asked for the west. MR. GOODRICK replied Kansas, Nebraska, Texas, Utah, Wyoming, one or two of the Dakotas. CHAIRMAN MACKIE asked if any federal laws were in conflict with this legislation. MR. GOODRICK responded that the history is very interesting. It all goes back to 1936 when FDR paid off organized labor for their support in his presidential campaign by enacting the National Labor Relations Act (Wagner Act). It made a blanket national policy that workers should be required to pay union dues as a condition of employment in a union shop. That was very unpopular. It caused a tremendous backlash which is one of the things that lead to the brief Republican take-over of Congress under President Truman. Instead of just repealing it like they should have, they simply said this is so unpopular we are going to make an exception. If a state legislature will jump through the hoop of passing a state right to work law, they would allow them to be shielded against that federal policy. Unless the legislature is able to overcome the $14 billion empire of organized labor and pass a law like this, it's the federal law. This is the only area in the private sector a state legislature will be able to do much about union or labor policy. Everything else would be superseded by federal law. The other solution to this problem of the burden of representation used by organized labor officials to justify compulsory payment of these dues is to either let the workers decide whether or not to pay themselves or remove from organized labor any compulsion to represent them. Either one of them would be fair solutions, but of course they are opposed to any restrictions on their power and authority. They demanded the right to be the only exclusive representative of the workers to their employers and they turn around and use that privilege and one wrong plus another wrong to make another wrong doesn't give them the right to force people to pay for representation that they demanded in the first place. CHAIRMAN MACKIE pointed out that there was an opposing view and that would be presented at the next meeting. Number 1908 SENATOR HOFFMAN asked if in the statistics in the right to work states with agricultural jobs, it shows that Nevada has a markedly larger percentage increase than other states (72%) and he asked why that is. MR. GOODRICK answered that Nevada is a right to work state and he didn't know if they could attribute the entire jump to passage of that law. SENATOR LEMAN asked again what states are right to work states. MR. GOODRICK replied mostly the south and the west. CHAIRMAN MACKIE said the west is California, Oregon... MR. GOODRICK said he thought the west was everything west of the Mississippi - Idaho, Nevada, Utah, Arizona, Wyoming, North and South Dakota, Nebraska, Texas, Kansas. CHAIRMAN MACKIE noted that those were all way south and way Midwest and east of us. SENATOR KELLY asked what was the last state to go right to work. MR. GOODRICK answered in 1982 Idaho enacted their right to work law by a three quarters majority over the governor's veto. In 1986 organized labor challenged that law through a referendum; even though his organization started out 25 points ahead in the poll at the beginning, they won narrowly with 53% after organized labor spent an estimated $6 per registered voter on that referendum. SENATOR KELLY asked when was the last big state wide fight over this issue throughout the nation. MR. GOODRICK said they have lost a lot of fights since then. It is very close to passage in New Hampshire, Oklahoma, Colorado, Montana, and New Mexico. SENATOR KELLY asked if he was talking about within the legislature or in the public arena through an initiative or referendum. MR. GOODRICK said he was strictly speaking of the legislative process. There hadn't been a referendum since 1986 which is the one they won in Idaho. There are other labor related proposals that look and smell like right to work, but are not, that have been on the ballot, such as the California initiative to restrict the use of forced dues for politics. SENATOR KELLY asked if that passed. MR. GOODRICK said that did not. It was a flawed proposal in the first place. Number 2022 SENATOR LEMAN said it was hard to argue against someone having the right to work without being forced t join anything. Yet he gets messages saying this is more than what it purports to be - a hidden agenda. MR. GOODRICK said that's how it comes off in every state. The lies range from the outrageous to the absurd. There was a rumor that they started "clan" activity in Idaho. SENATOR LEMAN said he was going to ask the same question of the people on the other side of the issue. SENATOR HOFFMAN asked what other states were considering this legislation actively today. MR. GOODRICK answered depending on various levels of active (he would say the Alaska legislature is not actively considering it), states like Colorado, New Mexico, New Hampshire, and Montana. CHAIRMAN MACKIE asked if the issue was being placed before the voters in those states. MR. GOODRICK responded that it was in the legislature. On the east coast in a lot of states there is no referendum or initiative process. CHAIRMAN MACKIE thanked Mr. Goodrick for his testimony and said they would hear the other side of the issue on Tuesday. SB 276-REQUIRE HEALTH INS COVERAGE FOR DIABETES CHAIRMAN MACKIE announced SB 276 to be up for consideration. SENATOR MIKE MILLER, sponsor of SB 276, stated that he was asked by members of the American Diabetes Association (ADA), in his role as Chairman of the Senate HESS Committee, to introduce SB 276. The bill requires health care insurers to provide coverage for treatment of diabetes. He noted it is rare for a Republican legislator to offer legislation that requires insurers to provide coverage, but he believes the lack of coverage for diabetes treatment affects over 30,000 Alaskans and that people with diabetes must take many actions to control their disease. He admitted that he was taken aback to learn that diabetes treatment coverage is not required. He noted his sponsor statement was in members' packets and that he and others were available to answer questions. SENATOR LEMAN commented that the issue of mandatory coverage versus mandatory offering may not be as obvious on this issue as it has been on others, but he believes people should be allowed the flexibility to choose their own health plans and the amount of coverage they want. He asked Senator Miller why he chose the approach of mandatory coverage. SENATOR MILLER replied that the legislature has mandated coverage for other things, some which he did not agree with, but he feels the legislature should go in that direction on coverage for diabetes. He personally feels that mandatory coverage is the right thing to do in this case. SENATOR LEMAN asked if early detection and education will result in decreased expenditures and save lives. TAPE 00-07, SIDE B Number 2300 SENATOR MILLER indicated that an ADA study shows an annual savings of $917 per person with diabetes when they have insurance coverage. He asked that further questions on the ADA study be directed to representatives from the ADA members. He said, as with all diseases, an early diagnosis and treatment can save more money later on. SENATOR LEMAN remarked that he saw a proposal yesterday for an upper cap on outpatient education costs and that he was told that education could take as many as six hours per year. He said he can understand why insurance companies might want to make sure that the outpatient education coverage is limited. He asked Senator Miller whether he believes that a time or dollar limit on outpatient education is a reasonable approach. SENATOR MILLER said he hopes the health care providers would be self-limiting and that he does not favor a cap because each individual is different; one may need 15 hours of education while another may need 30 hours. SENATOR LEMAN asked whether it would be reasonable for the insurers to require a person who exceeds the 90th percentile amount for education to provide documentation as to why the additional education is necessary. SENATOR MILLER replied, that on the face, that request sounds reasonable because it would only apply to the top ten percent and because requiring documentation is different than requiring a cap. He asked that those questions be addressed to the medical professionals who work with diabetics on a daily basis because they are better able to provide answers. SENATOR LEMAN noted that these issues are important to work through and that others who want to testify may want to give them some thought. CHAIRMAN MACKIE asked participants who wish to testify to limit their testimony to a few minutes so that everyone can be heard. Number 2167 CHAIRMAN MACKIE declared, for the record, that he supports this legislation but that he has a conflict of interest because his father is diabetic. MS. BETSY TURNER BOGREN, the Fairbanks District Manager for the ADA, urged committee members to support SB 276 for the following reasons. SB 276 will ensure that Alaskans have access to the medicines, supplies, and patient education that is necessary to properly manage diabetes by requiring reimbursement from insurance companies for these expenses. Regarding the concern expressed about the effect of a mandate, she is confident, after listening to testimony and reviewing the material and data provided to committee members, that legislators will be persuaded and conclude that diabetes management is different from other diseases and that this type of insurance does require a special look. MS. BOGREN said diabetes is a very serious disease that affects over 30,000 Alaskans. It is the leading cause of kidney disease, blindness, nerve damage, and lower limb amputations. It is a major risk in heart disease and stroke. The management of diabetes is substantially different from that of other diseases. Proper management is done by the patients themselves. Patients, therefore, must have access to supplies and medicines, but more importantly, to good patient education when they are going through a steeper learning curve. MS. BOGREN addressed three concerns that have been expressed about SB 276. The first relates to why the state should mandate private industry to provide coverage. She believes the answer to that concern is that the insurance industry does not behave like other industries. The patient is not the consumer. In most cases, when a patient has diabetes insurance coverage, that coverage is purchased by the employer. A patient does not have direct buying power when purchasing insurance. Also, not every employer is able or interested in learning what the needs of employees with diabetes are. Diabetes mandates have been passed in 37 states, by both Democratic and Republican legislatures, and signed by Democratic and Republican governors. No effort to repeal the law has been made in any state, suggesting that in all cases, the law has had the anticipated effect. The State of Wisconsin determined that premiums did increase by about one-tenth of one percent as the result of passing similar legislation. Another concern is that mandated coverage would raise costs and be a special burden to the small business owner in Alaska and therefore cause a disenrollment from insurance. Studies in other larger states have concluded that there has been no evidence that would result. MS. BOGREN noted committee members' packets contain copies of studies showing the cost savings associated with preventive medicine. In a study done in Maine, diabetes control resulted in 32 percent fewer hospitalizations and shorter hospital stays. In Maryland, hospitalizations and stays declined 50 percent after coverage was mandated. She correlated that when patients are able to make the daily decisions, they can respond to the ups and downs of diabetes control. They do not have to wait until they are in crisis to see a doctor and they do not visit doctors as often. Acute care is expensive and can be minimized. A Maryland study suggests that about $917 per patient per year will be saved if patients are able to manage their disease. She asked committee members to consider that if the private sector decides not to cover these costs, it may not see the benefits of long term savings from long term health care. When people with Type 2 diabetes, which accounts for about 95 percent of the patients, have health complications, they are generally in their 60's, so they qualify for Medicare and Medicaid. If the private sector will not provide coverage, the patient pays the price in the human toll, and the state pays the price in the form of Medicaid or Medicare. MS. BOGREN said the ADA is strongly opposed to capping the amount allowed for diabetes education. First, education is the foundation of this bill. Patients can receive unlimited supplies and medicine, but it will be useless unless they know how to use it. Second, the American Diabetes Association is not aware of any other legislation that caps the amount of outpatient health care that can be provided. She suggested that the insurance companies share statistics with legislators showing that there is widespread overuse of outpatient education services, if that is what they are saying. The ADA is not aware of any demonstrated overuse of the patient education system. Finally, the amount of $250 has been suggested for patient education. That amount is minimal, especially in light of the fact that the national standards for diabetes education recommend 12 hours of outpatient care. When her son was diagnosed with diabetes, it took her family about 20 hours per week for two months to learn what carbohydrate management was about. Her family needed support from occupational educators, and the people she sees in support groups need more than that. If the legislature is considering setting a cap, she hopes the cap will be no lower than the amount established by the state as the minimum standard of care. The ADA set a minimum standard at 16 hours. Number 1741 MAX BOGREN, the 11-year old son of Ms. Turner Bogren, read the following testimony. Mr. Chairman and committee members: My name is Max Bogren and I am 12 years old and I have had diabetes five and one-half years. I have to work hard to keep my blood sugar in control and manage my diabetes. Every day I test my blood sugar at least five times and I give myself three shots of insulin. I can't vary the amount of food I eat from day to day and I have to eat at the same time every day. Exercise has to be a big part of my life. Luckily for me, I was already an active kid so it's easy to just keep [indisc.] with exercise. MAX then gave a demonstration of how he tests his blood sugar and injects himself with insulin. MAX continued with his testimony as follows. On sick days, everything gets more complicated. My blood sugar is high and I need to test my urine for keytones. A couple of days ago, I saw my doctor and she thought I might want to use an insulin pump. That will take a lot of new learning. My entire life will change around and it will probably improve my blood sugar. Without all of this, I'd probably spend a lot of time in the hospital. With this expensive equipment, I'm probably going to need good insurance for the rest of my life. Please support SB 276. Thank you. CHAIRMAN MACKIE thanked Ms. Turner Bogren and Max for their testimony. He then took teleconference testimony. MS. MICHELLE CASSANO, Executive Director of the American Diabetes Association, thanked the Chairman for scheduling this vital bill. She commented that the cost of diabetes education varies with each patient. The American Diabetes Association feels there is no need for a cap on the annual education costs as there is no evidence that any abuse has been reported in that area. She pointed out that what Max Bogren demonstrated to the committee, is something that he must do many times per day. Diabetes has no cure - it is a lifelong disease and nobody gets a day off. She offered to answer questions. MS. JANEL WRIGHT told the committee she has had diabetes for 25 years. She asked each member to support SB 276. This bill will ensure that Alaskans have access to the medication, equipment, supplies and education necessary to treat and control diabetes. When people with diabetes have access to those things, they are able to self-manage their disease. Then, the complication of diabetes can be minimized and consequently health care costs for those people are greatly reduced. MS. WRIGHT illustrated the importance of access to effective treatment for diabetes with her own story. Many years ago, she entered college, eager to get her education and make something of herself. Several weeks after school started and after several trips to the emergency room, the health clinic doctor contacted her parents and recommended that she go home because her diabetes was not under control. She begged her parents to let her stay while she worked with her biology professor to control her diabetes. At that time, diabetes education was not available. She had a headache throughout her college years and did not know why. She graduated from college and went on to law school. The headaches and her vision got worse. Law school was stressful and she still did not know how to control her diabetes. The insurance plan she had did not cover the cost of syringes, a blood test machine, test strips, or education. It covered only the cost of insulin. Being a poor student, she scraped together funds to buy syringes. In 1988 she moved to Alaska. At that time, she obtained insurance that covered the cost of controlling her diabetes. She was able to get the supplies and medicine she needed. MS. WRIGHT explained to committee members that a test, named Hemoglobin A1C, shows a person's blood sugar levels for the previous three months. Right before she was able to get her blood test machine and other supplies, her hemoglobin A1C was 8.5, which means her blood sugars were about 250 or higher. Ideally, her blood sugars should be between 90 and 120. The doctor explained that is why she could not see and needed glasses. Studies show that when blood sugars are as high as hers were, the costly complications of diabetes, such as impaired vision and blindness, kidney disease, nerve damage, amputations, heart disease and stroke are much more likely to occur. She has been using a pump for twelve years and has had access to supplies and education for 12 years. The results of her latest Hemoglobin test was 5.4. This means that her blood sugar average over the past three months was 94. She attributes that level to the insurance coverage she has that allows access to those supplies necessary to control her diabetes. She no longer has to wear glasses. As a staff attorney for the Disability Law Center of Alaska, she advocates and protects the rights of Alaskans with disabilities. Many individuals with diabetes come to her office seeking assistance in obtaining social security. Due to uncontrolled diabetes, these individuals are unable to work. Many worked at one time but had no health insurance or had insurance that did not cover diabetes treatment. She believes if her insurance company did not cover the cost of diabetes treatment, she would be unable to work and would be seeking social security benefits herself. MS. WRIGHT said that 37 states have passed legislation similar to SB 276. Wisconsin was the first state to enact diabetes insurance coverage and did so in 1987. Studies in Wisconsin have shown there was no rise in insurance premiums after the law was passed. New Mexico passed its legislation in 1997, and Maine in 1996. Each of those states has reported no expected premium increases. She urged legislators to help Alaskans with diabetes to lead healthier and more productive lives by supporting SB 276. Number 1196 SENATOR LEMAN asked Ms. Wright how much it costs per year to manage her diabetes. MS. WRIGHT estimated that last year her expenses were close to $5,000 but that she also got a new pump which cost $5,595. She does not need a new pump every year. The national average is $3,500 and a lot of people cannot afford that amount. MS. BOGREN told Senator Leman that Max's expenses vary each year, but they are running about $3,000 right now. She noted that syringes are not as expensive as the pumps, but that the test strips cost about 75 cents a piece and he uses five per day. SENATOR LEMAN asked how people will pay the $600 per month for a health insurance premium if they cannot afford $3,000 per year for supplies and medicine. MS. WRIGHT said that her employer pays for her health insurance. MS. BOGREN said that is a great answer to the question Senator Leman asked earlier about the difference between offerings and mandated coverage. She noted in the states who have a mandated offering, all of the costs are reduced to the pool of people who have diabetes. For that pool, folks save by paying out-of-pocket rather than paying the high premiums. That is why the American Diabetes Association is advocating for mandated coverage rather than a mandated offering. CHAIRMAN MACKIE mentioned that Max has insurance coverage through his father's employer, but that part of Ms. Turner Bogren's mission is to look out for the people who do not have coverage. MS. BOGREN said that part of her mission is to watch out for children like Max who, when they are no longer covered by their families, will be looking for good health insurance. Her son does not want to have to move to another state that has mandated coverage when he turns 23 or 24. She pointed out that her husband asks to review his employer's coverage plans when they are up for renegotiation which occurs about every five years. Number 995 MR. HOWARD HEDGES, a resident of Homer, recounted his experience with the diagnosis and management of his diabetes. He was diagnosed as diabetic in 1991. Without knowing the symptoms, he went through the previous ten years with diabetes without being diagnosed. When he finally got to a doctor, his blood sugar was totally out of control. He was able to work with a COBRA plan for six months, but once that expired, he could not afford insurance coverage as a self employed person. While covered, he got a test machine, syringes, test strips, and insulin. After he lost the coverage, he tried to control his diabetes for two years with diet, by cutting test strips in half and by getting outdated bottles of insulin from friends. In 1993, the progression continued and he had a heart attack. Two weeks later he had a stroke that paralyzed his left side. His blood sugars were over 900 at the time of the stroke. With no health insurance, he went to Providence for five weeks of rehabilitation at a cost of $160,000. He and his health care providers are convinced that had he been able to continue to tighten down on his blood sugars, he could have avoided the stroke. Now, at the age of 44, he is on Medicaid, Medicare and Social Security. He feels fortunate to have that coverage and reminded committee members that many people do not have the desire to have a stroke so that they can have insurance coverage. He asked committee members to support SB 276 so that the advances in diabetes treatment can be taught to people. SENATOR HOFFMAN told Mr. Hedges that he was researching diabetes on the Internet and learned that only one out of three people know they have diabetes. He asked Mr. Hedges if he thought that number sounded accurate. MR. HEDGES said it does. He noted he had all of the symptoms but thought he was not feeling right because he was working hard and "burning the midnight oil." MS. DAISY LEE BITTER, a resident of Homer, related her personal experience. For 25 years, she was a teacher and principal in the Anchorage School District. She has lived with diabetes for 53 years and had insulin not been discovered, she would have died over 50 years ago. Alaska is only one of 13 states without diabetes coverage legislation. She does not like to use the word "mandatory" because she sees the legislation as a cost saving measure, as studies in other states have shown. She knows that some insurance companies are smart enough to know that if they cover supplies and medicines, they are unlikely to have to pay the high cost of emergencies, hospitalizations, and the many complications associated with diabetes. Number 658 CHAIRMAN MACKIE noted his intention to move this bill today. GORDON EVANS, Health Insurance Association of America (HIAA), stated the HIAA has opposed mandatory insurance because it does and will raise costs. Cost increases are affected by a series of mandates. Alaska has seven mandates for coverage and two mandated offerings at this time, while Wisconsin has over 40. HIAA will support the bill if it is amended to include a cap on patient education. HIAA came up with the cap amount of $250 because three states have caps: one at $100, one at $250, and one at $500. He pointed out the cap only applies to outpatient management education and training, and not to the cost of supplies and medicine. He asked how many of the estimated 36,000 Alaskans with diabetes will be affected by passage of SB 276, since many of those people may already be covered. He repeated that HIAA is opposed to government mandates but HIAA will support SB 276 if it is amended. SENATOR HOFFMAN asked when HIAA last recommended that it provide coverage. MR. EVANS replied in the 15 years that he has represented HIAA in Alaska, he has been pro-active on one major piece of legislation that passed: small employer health insurance coverage for 2 to 50 employees. He has worked with the acupuncturists to get a mandated offering, and he has worked with the chiropractors, and on the dental/vision/auditory portion of state insurance. In general, the health insurance industry supports bills when they do not mandate coverage, and that he has appeared before the legislature when such bills were being considered. TAPE 00-08, SIDE A Number 001 CHAIRMAN MACKIE said he has also opposed mandates that go up against people like Max. He personally is willing to pay more on his insurance premium if it means that other folks would have the opportunity for coverage. MR. EVANS added that the mammogram bill that passed in recent years, the prostate cancer screening bill, the 48-hour birth control - all have passed in the last five years. He had testified that the only opposition they had to the bills was because it was mandated; then they backed off and supported them. When major problems (diabetes is probably one of those) come up, it's good that they are insured so that everyone shares the cost of it, not just those who have to bear the expense. CHAIRMAN MACKIE noted that Ms. Bogren said the insurance premiums would go up around a tenth of a percent and asked if the industry had analyzed what it would do to Alaskans. MR. EVANS replied no they had not. Anytime a coverage is mandated, the insurers figure that into their underwriting. They don't use the same figures. He didn't think there was any study that would show how much a premium increases because of it. CHAIRMAN MACKIE asked the committee to review the amendment from Mr. Evans in their packets. It's on page 1, line 14, after diabetes insert, "and the insurer shall pay up to $250 for such covered out patient expenses per person per year." MR. EVANS said if there is a cap, that is only applied to the education and/or training and not to the coverage of the materials which are the most expensive. Number 250 SENATOR KELLY said he was nervous about the breadth of the language in this bill, because every time they add or mandate additional coverages, premiums do go up. It's inevitable. He is nervous about their being no caps at all and about the concept of "nutrition therapy." He didn't really know what that meant. SENATOR MILLER responded that those were valid concerns, but he had a lot of confidence in the health providers in the state and believed they would not overcharge on these issues. A couple might push the envelope, but unfortunately that happens in any profession. He thought the $250 was entirely too low. He had heard testimony of roughly around 15 hours at $100 per hour which is $1,500. This is an average and he is uncomfortable trying to stick everyone into the same box. SENATOR KELLY said he agreed that the $250 was too low, but he thought they should study the issue. Every week you read about some provider who is pulling some shenanigans like Medicaid. He thought they had some responsibility to define what is unnecessary medication and not put them in the position of billing and billing and billing. SENATOR LEMAN concurred with what Senators Kelly and Miller are saying. They ought to be concerned about costs and one of the things he's concerned about is why does an insulin pump have to cost $5,600? Why does a wheel chair have to cost $20,000? These are questions we ought to be asking. Consumers ought to be asking that rather than saying that's the price; someone should pay for it. There ought to be cost and utilization review. CHAIRMAN MACKIE called an at ease for one minute. CHAIRMAN MACKIE said there was some feelings about looking at the number more and asked Mr. Evans to continue to work with the sponsor as the bill moves through the legislature. MR. EVANS said that the language about what constitutes education and training needs to be clarified. CHAIRMAN MACKIE said that the members concurred and they would try to work and tighten it up without defeating the purpose. He asked if there was anyone with objections to the bill. SENATOR LEMAN moved to pass SB 276 from committee with individual recommendations. There were no objections and it was so ordered. CHAIRMAN MACKIE adjourned the meeting at 3:35 p.m.