The 3rd meeting of the Interim Joint Committee on Banking and Insurance was held on Tuesday, September 25, 2001, at 10:00 AM, in Room 149 of the Capitol Annex. Senator Tom Buford, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative James Bruce, Co-Chair; Senators Lindy Casebier, Julie Denton, Bob Jackson, Ray Jones II, David K. Karem, Marshall Long, Richard Sanders Jr, and Dan Seum; Representatives John Adams, Paul Bather, James Comer, Brian Crall, Ron Crimm, Robert Damron, Mike Denham, Joseph Fischer, Danny Ford, James Gooch, Dennis Horlander, Steve Riggs, Dottie Sims, Roger Thomas, Ken Upchurch, and Susan Westrom.
Guests: Chris Wood, Mike Jackson, Ephraim McDowell Regional Medical Center, Karen Bornhauser, Shannon Turner, BlueGrass Family Health, Mark Birdwhistell, CEO, CHA, Sharon Crouch, Todd Siroky, CHA, Carol Palmore, Secretary, Personnel Cabinet, Carl Felix, Personnel Cabinet, Jim Horrar, Chief Operating Officer, Humana Barb Hillier, Humana, Nancy Galvagni, Kentucky Hospital Association, Bill Doll, Kentucky Medical Association, Melodye Doom-Schrader, Kentucky Association of Health Plans, John McCarthy, Gail Louis.
LRC Staff: Greg Freedman, Emily Bottoms, Jamie Griffin.
Senator Tom Buford congratulated Representative R.J. Palmer on his recent election to the Kentucky Senate.
Senator Buford asked that everyone observe a moment of silence in honor of those who died in the terrorist attacks of September 11, 2001.
Senator Buford recognized Representative Mike Denham for the presentation of a resolution. Representative Denham stated that the resolution condemns the September 11, 2001, terrorist attack on America, supports the President of the Untied States, and the United States Congress, and the military forces of the United States of America, and commends the Federal Reserve and the United States banking system on its efforts to keep markets functioning and to stabilize, and ensure public confidence in, the nation’s financial system. Representative Denham made a motion to adopt the resolution. Second by Representative Roger Thomas. The resolution was adopted.
Senator Buford asked Secretary Carol Palmore to update the committee regarding the contract issues discussed at the August meeting. Secretary Palmore stated that since the August meeting a contract has been signed between Bluegrass Family Health and Ephraim McDowell Regional Medical Center, addressing the concern of not having an HMO in Boyle County that offered access to the local hospital. She stated that CHA has made the decision not to contract in Boyle County.
Senator Buford asked Mark Birdwhistell, CEO, CHA Health, what factors went into their decision not to contract in Boyle County. Mr. Birdwhistell stated that they regret that they will not be included in the offering for 2002. He stated that the decision not to bid on these counties was the result of a business decision made as a response to the Commonwealth’s Request for Proposal (RFP) pricing requirements. He stated that the RFP process required each plan to bid the same rate for the same level of coverage on all chosen counties. He stated that the price bid accounts for a weight of 30 percent in the evaluation process, making the bid price a critical factor. Rates submitted in the Commonwealth Group RFP process are based on medical experience for residents living in counties for which CHA bids. CHA’s experience shows that the medical cost for the state population is 30 percent higher for the Boyle county area versus the remainder of the CHA service area. He stated that it is important to note that medical costs are driven by many factors including provider reimbursement levels, the availability of providers and utilization patterns of members in that area. He stated that these factors are the primary drivers behind medical costs and are the reasons that some counties were not included in CHA’s proposal to the Commonwealth. He stated that CHA did not choose to bid in the Boyle county area because doing so would have jeopardized its chances of being selected to be offered in a number of other counties in its core service area.
Mr. Birdwhistell stated that by including counties in which medical costs are significantly higher than other counties, the composite rate for all counties included in a bid become higher. He stated had CHA included counties in the Boyle county area in its 2002 bid, the overall rate of increase would have been approximately 22 percent versus the overall 14 percent that was submitted when these counties were excluded from the bid. This rate of increase is more in line with the budgeted state contribution level. Excluding the counties with high medical costs allows each plan to reduce its composite bid and remain competitive. Had CHA been approved for a rate increase of 22 percent, this could have been a disadvantage to the state, its employees, and CHA. He stated that this response is specific to the issue addressed at the August meeting related to Boyle County, and it is generally applicable to the decision not to bid on the Commonwealth Group for other counties in the Danville and Ashland Areas. He stated that regional rating factors would help in contracting with providers.
Representative Jim Bruce stated he feels that regional rating needs to be considered for legislation in the 2002 Regular Session. Mr. Birdwhistell stated that he feels it would help.
Secretary Palmore stated that the Personnel Cabinet is looking at regional rating. She stated that regional rating will not effect single coverage, but rural areas will have to pay more. She stated that regional rating will be more expensive and wants everyone to be aware of that fact.
Senator Dan Seum stated that he had attended a seminar about insurance recently and he feels if everyone was in a large pool there would be more bargaining power. Secretary Palmore stated that she agrees there would be more bargaining power in a large pool, but it creates a problem when people opt out of the pool.
Representative Brian Crall stated that if a company offered the same product all over the state it would create greater parity and should stabilize rates. Secretary Palmore stated that if projected over a four to five year period, it might happen.
Senator Bob Jackson stated that he feels that a self insured pool would be a possibility for the state. He asked if it is a problem finding someone to administer a large pool. Secretary Palmore stated “yes”, and that in the past they have not had sufficient data, but now the data is available.
Senator Jackson stated that in Western Kentucky (Trigg & Christian Counties) the state contribution is not covering the single plan and many people are having to pay additional money to obtain single coverage because providers are not included in the area. Secretary Palmore stated that she believes the problem in that area is that some of the providers were left out of the insurance booklets and the open enrollment will probably be extended in that area. Senator Jackson stated that he does not feel that this is being communicated well enough to the people in Western Kentucky. Representative Jim Bruce stated that he had inquired about this months ago with Humana.
Gail Louis stated that she feels that residents of Boyle county are being penalized because they are in a regional area.
Representative Susan Westrom asked if county governments and municipalities were required to participate in a large pool, would coverage be expanded. Mr. Birdwhistell stated that it would probably give more negotiating power.
Representative Ron Crimm stated that there would be many problems with a self insurance fund and it would not resolve all the problems.
Senator Bob Jackson stated that there are no major hospitals in Paducah listed as providers. Barb Hillier, Humana, stated that there are hospitals in the area that can provide the services. Senator Jackson stated that many people cannot and do not want to drive many, many miles to other hospitals, and this is unacceptable.
Representative Bruce stated that legislation should be worked on for the next session that would help areas like Western Kentucky with the access problem.
Representative Bob Damron asked if providers in Eastern and Western Kentucky are excluded. Mr. Birdwhistell stated that they try to include both areas.
Representative Bruce stated he feels open enrollment should be extended at the committee’s request. Secretary Palmore asked if it could only be done in the counties with problems.
Senator Dan Seum stated that he had recently attended a seminar and talked to representatives from other states that are experiencing the same problems as Kentucky. He stated that this is a national problem. He stated that he is worried this will lead to socialized medicine. Jim Horrar, Humana, stated that contracting with providers is difficult and he feels the price reflects access and he does not think it will lead to socialized medicine.
Senator Tom Buford recognized Nancy Galvangi, Kentucky Hospital Association, John McCarthy, Melody Doom-Schrader, Kentucky Association of Health Plans, Janie Miller, Commissioner, and Charlotte Hummel, General Counsel, Department of Insurance to discuss 806 KAR 17:310.
Melodye Doom-Schrader asked if the committee would defer the regulation so that she can work with the Kentucky Hospital Association to make sure all data is correct for the information requested in the regulation. Representative Crimm made the motion for a 90 day extension. Second by Representative Jim Gooch.
Representative Jim Bruce stated that he serves on the Administrative Regulation committee and it is his understanding that the Department of Insurance has to be in agreement to defer the regulation. Commissioner Miller stated that she understands there is considerable concern on both parties regarding this regulation. Senator Buford suggested deferring only until the next meeting.
Commissioner Miller said she was concerned about deferring the regulation because the emergency action will expire and she wants to make sure the data will be reported. Ms. Doom-Schrader stated that the information will be reported.
Greg Freedman explained to the members that the regulation can be amended, approved as is, held as deficient, or deferred only until the next meeting. Representative Ron Crimm stated that he would be willing to change his motion to defer the regulation until the next meeting.
Nancy Galvangi stated that this has been discussed for some time and has not just become a concern. She stated that the change made to the regulation only requires the disclosure of how many “clean” claims were received and how many of those “clean” claims were paid in 30 days.
Bill Doll, Kentucky Medical Association, stated that his association agrees with this action and has the same concern as the Kentucky Hospital Association, wanting to know if claims are paid on time.
Representative Bruce asked if the Department of Insurance was in favor of deferring or changing this regulation. Commissioner Miller stated, “no”.
Representative Bruce made the motion to adjourn. Senator Tom Buford seconded the motion. Meeting adjourned at 12:20 p.m.