House bills target rising medical costs

JUNEAU — State legislators are dealing with a number of bills affecting business as the 2014 session enters its final month. Lawmakers must adjourn April 20, although there are procedures for extending the session.

One closely watched bill is an effort to reform the rate at which medical services under the state’s workers’ compensation programs are paid for. House Bill 316, which is in the House Labor and Commerce Committee, could bring down the outlay for medical services and the cost of workers’ comp premiums paid by employers. Alaska’s premiums are now the highest in the nation.

The bill would shift the payment standard for services to what is paid by Medicaid and Medicare for the same procedures but with an adjustment allowed, which would be made yearly by the state workers’ compensation board.

Current state regulations require payments to medical providers at the 80th percentile level for a procedure in a geographic area, which creates a situation where the highest-cost provider essentially sets the rate in an area where there are very few specialists, which is the case in much of Alaska.

The payment procedure tied to Medicaid and Mediacre is used in several other states. The workers’ compensation board requested the bill, which was introduced in February.

The Labor and Commerce Committee has been working on HB 316 and a committee substitute is expected to be voted out soon.

Another bill in the committee, which is aimed at lowering all heath care costs in the state, is House Bill 203, introduced by Rep. Wes Keller, R-Wasilla, and backed by Premera Blue Cross/Blue Shield.

The bill would repeal a requirement in state law that insurers like Premera make direct payment to health care providers who are not part of preferred provider networks where discounts in fees are required. Hospitals are excluded from the bill.

“Our intent is to encourage a swift expansion of preferred provider networks in Alaska as a way of moderating the rising costs of health care,” Leonard Sorrin, of Premera’s government relations staff, told the Labor and Commerce Committee March 14.

Currently, there are many Alaska health care providers, mainly physicians offering specialized services, who are not members of provider networks. The ability to avoid negotiated discounts in the networks, when combined with a state rule that health insurers must pay at the 80 percentile of what providers for services charge in a geographic area, has created a situation where Alaska health care costs continue to rise rapidly with few options to slow the increase. 

“Current Alaska law requires health plans to pay non-contracted providers directly for care. This requirement removes a significant incentive for providers to enter into negotiated contracts with health plans at lower rates, the direct payment from the health plan,” Sorrin said.

“HB 203 would ‘rebalance’ that contracting dynamic in Alaska by allowing health plans to issue a joint check made out to both the member (the patient) and the provider,” Sorrin said.

If the provider is a member of a network, Premera would pay directly. If not, the bill would provide that a paper check would be issued that would have to be signed over to the provider by the patient.

Avoiding the delays and extra handling that would impose would be a significant incentive to join networks, Sorrin said.

The proposal has sparked sharp criticism from medical providers in specialties that are typically not in preferred provider plans, such as orthopedic surgeons.

James Brooks, speaking for the Alaska Medical Association, opposes the proposal, and told the Labor and Commerce Committee the requirement to issue paper checks would interrupt the transition to electronic information and payment systems that is now underway in the medical community.

“It will delay reimbursements and ultimately raise costs,” for providers, he told the committee. “This is a step back to the way business was done 20 years ago.”

Rick Watson, CEO of an Anchorage-based orthopedic surgery group, objected to hospitals being excluded from the bill but not physicians or surgery clinics. He said he bill would “strip the patients’ ability to assign their benefits directly to providers,” which allows medical providers to handle administration of health claims as a service to patients.

There were other supporters for the idea, however. Mike Humphrey, of The Wilson Agency, an insurance broker, said his 20 years of experience as human resources director in the University of Alaska system showed employers have limited tools to reduce outlays for employee medical costs.

“One is plan redesign, or shifting some of the costs to employees; a second is to work through a provider network, which discounts can be offered. These two can offer immediate results in lowering costs, but shifting costs to employees is unpopular and can sap morale, he said.

Humphrey endorsed the network approach as a better way for employers to get an immediate return, and endorsed HB 203.

“The providers get something in return for joining networks: faster payment,” he said.

Another supporter is Dr. Ward Hurlburt, the state’s chief medical officer, who also chairs the Alaska Health Care Commission, an advisory body to the governor and Legislature on health care issues.