Greetings from the Gold Dome! Summer may be here but Legislators are hard at work gathering information and holding hearings on various issues. On June 6, 2001, Sen. Tom Price held a hearing on ‘access to healthcare’ in the Legislative Office Building. Members of his Committee who were present were Sens. Connie Stokes, Nadine Thomas, and Susan Cable. Other members of this Committee are Sens. Michael Meyer von Bremen, Jack Hill, and Don Balfour.

This hearing initially began as a result of a bill introduced by Sen. Price in the 2001 Session, SB 148, concerning managed care contracting with hospitals. The issue now appears to have broadened to also include not only exclusionary contracting but also the uninsured (including the underinsured) and Certificate of Need ("CON") issues. SB 148 was introduced as a result of the exclusive managed care arrangements that Northside Hospital has with many employee groups in northern Fulton Counties and those surrounding areas. Such arrangements have prohibited North Fulton Hospital from participating in some managed care contracting arrangements. Claims have been made that many residents have to travel many miles for care as a result of such contracts – essentially driving right by North Fulton Hospital to get that care.

At the hearing on Wednesday, Sen. Price stated that the issue of SB 148, a more narrowly drawn bill than the issue of access to healthcare, would be dealt with in a separate Committee under the direction of Sen. Ed Harbison. Sen. Price’s Committee will look at the higher costs of healthcare, achieving higher quality of healthcare, efficient and cost effective care, and appropriate costs associated with care. He also distributed to his Committee articles on CON and numbers of uninsured and what other states have done to address issues surrounding these two topics. He and his Committee will hold four or five hearings on these issues before the General Assembly reconvenes, with the last meeting being a wrap up with proposals on how to address the issues.

At this hearing, there were several presentations, primarily by State departments.

Commissioner Russ Toal appeared at this hearing and gave an overview of what his Department has been doing on various issues. Toal explained that when the Department of Community Health ("DCH" or "Department") was formed, it was charged by the General Assembly to address the problem of the uninsured. Thus, as a result of that charge, DCH undertook various meetings and hearings trying to gather resources, information, and possible solutions from the private sector, providers, insurers, and consumers. Last year, DCH reported out its "Business Plan for Health" which gained support from the General Assembly. Toal estimates that Georgia has approximately 1.3 to 1.5 million uninsured although there are no hard statistics on these numbers. Many Georgians actually have access to health insurance but decline to purchase such. Many of Georgia’s uninsured are males in their 20s or females in their late 50s who are otherwise not eligible for Medicare. Also, many of these persons work full time for small businesses. Toal also explained that many small businesses, if they offer coverage to employees, do not provide the same level of insurance coverage to the employee’s dependents. DCH gets calls and inquiries concerning how persons may obtain insurance. Insurance product lines have also been at issue as there are not as many carriers as there were five years ago. He also noted that if Blue Cross Blue Shield had not made the "good" decision to stay in the small group insurance market, Georgia would really be suffering.

The provider community, according to Toal, also suffers. Many of Georgia’s uninsured come to local emergency rooms for care. This is the most expensive setting for care, but hospitals cannot turn away patients. There are many factors in play – underwriting the costs for such persons is one. The Commissioner also noted that the Indigent Care Trust Fund allows facilities to reap some benefits from their treatment of the uninsured. Presently, there are 96 facilities which participate in this Fund. A misconception is that hospitals are made whole by monies from this Fund. This is not true; smaller rural hospitals are treated differently and thus fare better.

Commissioner Toal also discussed CON and how the uninsured fit within that concept. He claimed that it was fit as it related to financial accessibility and sufficient volume of services which produced good quality healthcare. In the last year and a half, DCH has used CON to promote community health initiatives. DCH has looked at financial accessibility of the CON applicants. DCH is now looking at quality and safety of hospitals – hospitals around Georgia have heard this message and are essential to the community delivery system of care. The question of sustainability, according to Toal, is tied to CON. The Commissioner also stated that DCH must look at community health on a regional basis. He did note, however, that there were certain services in which there was not a need for CON – but rather, the State utilized a letter of non-reviewability (such as for limited purpose physician-owned ambulatory surgery centers).

Commissioner Toal gave good reviews for the newly published cardiovascular services rules which are now out for public comment. He claimed too that these made a strong statement concerning the need for sufficient volume of services to get specific outcomes. Toal also mentioned that CON is needed and such has been documented as there is a direct relationship between volume and quality care (especially as it relates to cardiovascular services). Anomalies are seen. Also, there is always the inevitability that someone will be inconvenienced.

The Commissioner also mentioned the State Health Benefit Plan ("SHBP"). When DCH was created, it was charged with the responsibility of overseeing SHBP. He told the Committee it was shocking to see the amount of money needed in order to ‘shore up' the ailing plan which covers State employees and retirees. The Legislature provided DCH with the necessary dollars and time within which it could address some of the SHBP’s problems. In an effort to make the plan more sustainable, it was necessary to reorganize it. He reminded the Committee that the SHBP had a fiduciary responsibility in this regard. A request for proposal ("RFP") was placed out for bid for a PPO network. Five bidders responded with two being disqualified. In the end, the bidder, MRN/Georgia 1^st, won the State’s business. According to Toal, one of the reasons that MRN/Georgia 1^st won was that it had better access to more providers (including essential rural hospitals). Problems continue to besiege the SHBP with respect to the hospital-based physicians (he noted that more than 30,000 physicians had been added to the SHBP’s network). There are also two situations which may never be totally resolved with respect to the hospital-based physicians. One such situation is in Albany concerning a group of radiologists. In looking at who is in and who is out of the State’s PPO network, this is a decision made by this joint venture between MRN/Georgia 1^st. It looks at the credentialing standards to get the necessary specialists included. Toal claimed that the DCH is enjoying the savings (at the necessary level) generated by the PPO.

Toal noted that the issue surrounding contracts impacting Northside Hospital, North Fulton Hospital, St. Joseph’s Hospital, and Baptist North Hospital is not an issue for the SHBP as all of these facilities are in its PPO network.

Commissioner Toal was asked some questions by Sen. Stokes and Sen. Cable. Sen. Stokes explained that she was on her way to a meeting at NIH and access was the number one topic which included insuring the uninsured. She also asked what was available to the uninsured. Toal noted that at the most recently held DCH Board meeting an RFP was issued with responses due back to DCH on June 27, 2001. This RFP asked for private initiatives on dealing with the uninsured. He also noted that the General Assembly had undertaken a number of eligibility expansions in its State-funded programs (Medicaid and PeachCare) by allowing pregnant women with incomes up to 235% of the Federal Poverty Level to participate in Medicaid and for children with family incomes of up to 235% of the Federal Poverty Level to participate in PeachCare.

Sen. Cable claimed that her constituents in Macon had asked a number of questions concerning having a level playing field when it came to the SHBP. They asked about steerage, volume and CON. She asked if the State looked at persons responding to the RFP for the PPO network to determine if those respondents had a CON for services and whether that gave an applicant an advantage. Toal stated that it might, depending on services, but it did not in this instance involving the PPO procurement. Sen. Cable reminded Toal that the State controlled CON and perhaps the Legislature should look at the entire CON law. Toal also noted that there was no bias at DCH; there also was no pattern in the Department’s behavior – he pointed to the decisions involving Emory Johns Creek, Joan Glancy, and Baptist North Hospital.

Professor William Custer spoke to this Committee on insurance and CON issues. He and others have done studies involving the census data – the most recent one was in March 2000 using 1999 data. Most of America’s uninsured are under age 65. He noted that 49 million persons have insurance with 64% of those being insured through private sources. Custer explained that the uninsured, when they appeared at hospitals, were generally sicker, stayed in hospitals longer, and many tended to die there. This is due in part to not getting regular care. Another reason that there are uninsured is that in America there is a voluntary system to purchase – such is based on an individual’s income, cost of care, and the need for care. In addition, there are also many employers who do not offer insurance. Small employers often cannot pool their risks and often do not have the human resources departments to negotiate contracts as the larger employers are able to do. One half of the uninsured in Georgia have family members who work in firms with fewer than 100 employees. Children are also less likely to be uninsured due to CHIPS (Child Health Insurance Programs) and in Georgia specifically due to PeachCare. He also noted that women over the age of 50 were more vulnerable. Custer made some comments about the healthcare cost inflation and the fact that this has been lower but now is on the rise due to the economic slowdown. National projections show that there could be as many as 60 million uninsured with a growth in Georgia’s uninsured from its present level to approximately 1.65 million persons. Custer explained to the Committee that in order to reduce the uninsured numbers, one had to induce people to purchase coverage (low incomes are thus a problem as many spend their wages on other items). He also explained that there was a need to reduce the risk.

As for CON, laws were passed nationally in the 1960s and 1970s to address healthcare costs. It was specifically used to address hospital costs. CON had instead changed hospital markets by eliminating competition and limiting the amounts of investments. Increasing the access to coverage and dealing with CON’s passive regulation would not impact everyone equally.

Sen. Cable asked about costs of insurance mandates and what studies show in that regard. Professor Custer stated that research shows that mandates do decrease insurance coverage and that they are costly. Increases in cost mean that people opt out of purchasing coverage. Large employers who are self-insured are not impacted by the mandates. The small employers bear the brunt of the mandates. Sen. Cable stated that if small business was the backbone of business in Georgia, then the Legislature should be doing what it could to help them get health insurance coverage as many were experiencing large increases in premiums. Sen. Price asked if the data about a rise in 1% of premium costs really caused 11,000 persons to decline coverage. Custer agreed that was generally the rate. The small employers usually do not offer as generous a package of benefits to dependents as to the actual employees. Custer believes that small group market plans and purchasing pools could be successful. There has been moderate success of pooling of the risks in California and Florida.

Attorney Jim Coots spoke to the Committee on behalf of the Attorney General’s Office. Basically, he explained where one could find the statutes and regulations regulating Certificate of Need. The statutes begin at O.C.G.A. § 31-6-1 et seq.; the State’s regulations involving CON may be found at 272-2-.01 et seq. and 274-1-.01. After July 1, 1999, CON laws began to apply to new institutional health services. Further, the Division of Health Planning, within DCH, must find need for such a new service. There are, however, exemptions, which are outlined at O.C.G.A. § 31-6-47. The Division of Health Planning must also follow certain review criteria for CON applicants, and those are outlined in O.C.G.A. § 31-6-42. When a CON application is denied, an applicant may appeal to a hearing officer. This hearing officer is appointed by the State Health Planning Review Board. This Board is appointed by the Governor. Sen. Cable asked questions on the Legislature’s ability to change laws governing CON.

As to the issue of exclusive contracts, Mr. Coots explained that the Attorney General would have to have a specific question. It could however give some general legal thoughts on the subject. As for the question of whether CON could somehow be used in the granting of exclusionary contracts, that issue could be potential litigation and thus, he could not comment.

Commissioner Toal did interject that only an aggrieved party could take a case to the Superior Court in a CON dispute. However, the State could not be such an aggrieved party.

Commissioner John Oxendine from the Department of Insurance also made a presentation at this meeting. He agreed that the issue of exclusive contracting was an important issue and one which should be addressed. During the 2000 Session, he thought that the General Assembly might give some indication on its thoughts behind such exclusive contracting between managed care organizations and hospitals. He did agree that it would be appropriately dealt with by the Governor and/or DCH.

Commissioner Oxendine did provide some relief in the North Fulton County situation by calling a meeting between various health plans and hospitals. As the Department of Insurance does not regulate hospitals, his powers are limited. He did get the parties to the table and Northside Hospital did make some concessions.

In dealing with exclusive contracts, the Commissioner stated that one must weigh the competing interests. Keeping healthcare costs "controlled" is nearly impossible. If an insurance company promises a hospital a certain level of volume or promises a physician certain discounts for volume, then it is likely that such agreements will occur.

He also agreed that the General Assembly should take a serious look at the State’s CON laws. Hospitals fought one another for services. He likened it to children playing in a sandbox with fights over the toys in the bucket. CON was also a long, drawn out process.

The issues relating to the uninsured are serious – the population is growing and the problem is a national one. Commissioner Oxendine suggested to the Committee, which he stated he had suggested previously, that using the Tobacco Settlement Fund dollars for funding the high risk pool would help. The Legislature should look at this as the settlement with the tobacco companies was due to the health problems due to the usage of tobacco. However, those dollars were spent elsewhere in Georgia. If the State is not going to use the Tobacco Settlement Fund dollars to fund this pool, then there is a need for a tax increase (which he stated he was not promoting) to get the substantial dollars to fund such a high risk pool (which is currently established under Georgia statute).

Sen. Cable asked if a free market might help regarding CON or whether CON narrowed things? She was inquiring as to whether competition actually lowers the cost of insurance. She also asked whether Georgia had laws which restricted competition or if it made it easier for insurance companies to offer new products.

Commissioner Oxendine told the Committee that competition could keep costs down generally but if there are only three hospitals in a market then perhaps there is not enough competition. Northside Hospital is a unique situation – Northside Hospital has been good at promoting its name. As a result, consumers demand access to that facility. Thus, Northside Hospital uses its valuable name and negotiates favorable contracts (especially relating to its obstetrical care reputation).

Sen. Cable also asked if the Commissioner was managing insurance rates. Oxendine claimed that he had the least regulatory ability and authority over health insurance (not so with property and casualty insurance). He also claimed that health insurance provided him with the most headaches. There are no rules for non-HMO type healthcare policies on those products’ rates. Therefore, the Department of Insurance has no control. He also explained that there were a number of other reasons why there was limited control over health plans: 1) many large employers are self-funded and therefore ERISA laws apply; 2) many persons are covered by Medicare and PeachCare; and 3) another group is covered by Medicare which also allows for no control at the State level. He cited that 75% of the population was in self-funded plans, Medicare, Medicaid, or PeachCare programs. The other 25% of the population covered might be in HMOs or other non-HMO-type products. He did explain that HMOs may adjust rates and are given 5% to 6% increases typically. Also, HMOs are allowed to use rating bands which, when applied, may also provide large rate increases (as much as 60% to 100%, per the Commissioner). The experience factor allows his Department some flexibility. The Department of Insurance is currently proposing some rules in this regard which would change such experience from a plus/minus 35% to a plus/minus 25%. He has been working with the National Federation of Independent Businesses and Georgia Association of Health Underwriters on this issue.

The Commissioner also explained that many insurers were pulling out of the small group market.

Kelly McCutchen spoke on this entity’s behalf. He explained that high risk pools could be done. In fact, it could be part of the solution to the problem. One of five Georgians, who are not elderly, are uninsured. Other states have used solutions involving rating bands and community rating of insurance products. This has actually shown increases between 5& and 28% of the uninsured. High risk pools mostly offer benefits in comparable policies. There are exclusion periods. He also cited some information on caps to such. He suggested that this pool could be funded through general revenues from the State or it could be funded like Indiana funded its pool. There, insurers were charged a percentage based on their market allocation. He also noted, that with guaranteed issue, an insurer may not turn down anyone seeking insurance. However, the rates could be adjusted according to that person’s risk.

This Committee will next meet in July at a date to be announced.