North Dakota Legislative Business Industry Committee

NORTH DAKOTA LEGISLATIVE MANAGEMENT
Minutes of the
INDUSTRY, BUSINESS, AND LABOR COMMITTEE
Thursday, August 6, 2009
Roughrider Room, State Capitol
Bismarck, North Dakota
Representative George J. Keiser, Chairman, called
the meeting to order at 9:00 a.m.
Members present: Representatives George J.
Keiser, Bill Amerman, Tracy Boe, Donald L. Clark,
Mark A. Dosch, Jim Kasper, Scot Kelsh, Dan Ruby,
Mike Schatz, Jasper J. Schneider, Elwood Thorpe,
Don Vigesaa; Senators Arthur H. Behm, David Hogue,
Dave Oehlke, Tracy Potter, Terry M. Wanzek
Members absent: Representatives Rick Berg,
Steven L. Zaiser
Others present: See Appendix A
Committee counsel reviewed the Supplementary
Rules of Operation and Procedure of the North
Dakota Legislative Management.
COMMENTS BY COMMITTEE CHAIRMAN
Chairman Keiser said the committee has a
significant study relating to the cost of health care and
health insurance. He said a number of related issues
were discussed frequently during the last legislative
session. He said his goal is to have the committee
examine what has been done; what the state is doing;
and what the state can do to create the best health
care delivery, insurance, and funding system in the
country. Although some people suggest that the state
should wait to see what happens with federal
proposals to address health insurance issues, he said,
the state should be aggressive and take advantage of
the opportunity to set policy for the state. He said
proposals under consideration by Congress will result
in rising health care costs, and states will be asked to
play a larger role in funding health care. He said
accessibility issues must be addressed and costs
must be lowered. He said the work of the committee
will be a long journey and he does not support
partisan politics in committee. Although committee
members can have legitimate disagreements on
policy and philosophy, he said, legitimate solutions will
not be developed without cooperation.
WHISTLEBLOWER PROTECTION STUDY
At the request of Chairman Keiser, committee
counsel presented a memorandum entitled
Whistleblower Protection Laws - Background
Memorandum.
Chairman Keiser called on Mr. Tag Anderson, Risk
Management Division, Office of Management and
Budget, for comments regarding the study of the
state's whistleblower protection laws. He said in
addition to his experience as director of the Risk
Management Division, he handled a number of
personnel matters when he worked in the Attorney
General's office. He said he is not intending to
advocate policy in a broad sense but would like to
address an overriding concern, which is the cost of
litigation. He said whatever approach the Legislative
Assembly takes to address whistleblower protection,
he would like to see complaints channeled through the
administrative process as Senate Bill No. 2267 (2009)
did. He said the administrative process gives an
employee a quick and inexpensive means to address
complaints. In addition, he said, the administrative
process is cheaper for the employer.
In response to a question from Senator Potter,
Mr. Anderson said under current law, the Attorney
General cannot order the reinstatement of an
employee. However, he said, the Attorney General
may provide advice to an agency, which agency
heads generally follow. He said an administrative law
judge has the authority to order reinstatement of an
employee. He said employees may hire an attorney
or have other representation during the administrative
proceedings.
In response to a question from Representative
Keiser, Mr. Anderson said the whistleblower
protection law does not include a provision for the
payment of legal expenses for an employee who
prevails in an action under that law. He said if it is
found that an employee brought forward charges in
bad faith, the agency employing the individual may
discipline the employee. In his experience, he said,
he has seen a number of administrative cases in
which the employee has lost but has not been
terminated from employment.
Mr. Stuart Savelkoul, North Dakota Public
Employee Association, said the whistleblower
protection law is lacking in strength and is ambiguous.
He said the committee has an opportunity to develop
an improved approach to whistleblower protection.
He said the law needs to be clear as to who assumes
costs for good-faith complaints and should not be
ambiguous. He said individuals who filed complaints
against Workforce Safety and Insurance during the
last couple of years illustrate that the whistleblower
protection law clearly failed the employees, the
agency, and the state. He said strengthening the law
should not be a partisan issue. Because there is no
upside to reporting a problem, he said, complaints are
rare. He said the state must provide protection to
Industry, Business, and Labor 2 August 6, 2009
employees to allow employees to live by their
conscience and to encourage employees to stand up
for what is right.
In response to a question from Representative
Kasper, Mr. Savelkoul said he receives several calls a
week from employees inquiring if something in the
workplace is inappropriate or whether an employee
should perform a certain act that has been requested.
He said he generally advises an employee to
document conversations with a supervisor and
provide a copy to the supervisor. Because it is likely
that an employee will be targeted or put under a
microscope if the employee files a formal complaint,
he said, he often advises the employee not to take the
next step.
Representative Kasper said it is easy to say that
things happen, but he would like to see proof that
those things are really occurring.
Mr. Savelkoul said in the nine months he has been
in his position, five or six employees have indicated to
him that they believed they were being punished for
doing their job more ethically or for not doing things
the way they were told to do. He said it appears that
most problems arise when employees are working
under complex guidelines related to federal programs.
Senator Hogue requested Mr. Savelkoul to provide
the committee with a summary of complaints so that
the committee can see the seriousness of the claims.
He said the information should be provided without
containing information that would identify the
employee or the agency.
Mr. Savelkoul said the request is reasonable and
he will attempt to provide additional information.
However, he said, because there is a level of trust
between an employee and the North Dakota Public
Employee Association when employees submit
complaints, he is concerned that providing the
committee with too much information may violate that
trust. In addition, he said, there are a great number of
employees who do not belong to the North Dakota
Public Employee Association and the complaints
submitted to him may represent only 10 percent of the
total number of complaints that may exist.
In response to a question from Representative
Schneider, Mr. Savelkoul said he has not received
any complaints regarding the inappropriate use of
public funds. He said most of the complaints are
along the lines of a supervisor not coming to work on
time or other similar issues that may cost the state
money.
In response to a question from Senator Potter,
Mr. Savelkoul said employee morale was low when
the individuals filing complaints relating to Workforce
Safety and Insurance were in the news. Before that
time, he said, most state employees likely had not
been familiar with the whistleblower protection law.
He said that situation created a degree of fear for
public employees.
Senator Potter said his constituents who are state
employees indicated that employee morale
plummeted when complaints against Workforce
Safety and Insurance were in the news.
In response to a question from Senator Potter,
Mr. Savelkoul said the North Dakota Public Employee
Association did not support Senate Bill No. 2267. He
said the legislation does not provide the Labor
Commissioner with any authority to do anything if a
problem is substantiated.
In response to a question from Representative
Ruby, Mr. Savelkoul said whistleblower protection is
about the employee not about punishing lawbreakers.
In response to a question from Representative
Keiser, Mr. Savelkoul said he would like to see the
whistleblower protection law include a reinstatement
process that would allow the Attorney General or the
Labor Commissioner to return an individual to the
individual's job or another job in state government.
Senator Wanzek said issues such as this are not
unique to state government and everyone faces
decisions that may involve personal risk. He said if an
employee is found to be correct and a complaint is
substantiated, the employee should be reimbursed for
the costs.
Senator Potter said public employees are simply
looking for protection when filing a complaint. He said
there is a compelling public interest in protecting
public resources. He said additional protections such
as those included within Senate Bill No. 2258 (2009)
would address those interests.
Representative Ruby said employees should be
protected. However, he said, the whistleblower law
should address true violations of law not
disagreements with management styles or policies.
He said the decision to terminate an employee is often
the result of a long process and he does not want to
see every termination result in a whistleblower
complaint.
Representative Keiser said the committee should
seek additional information regarding exempt
employees and the provision of compensatory time.
He said there may be good management reasons for
an employee not working regular hours. Therefore,
he said, a review of state employee management
approaches to exempt and nonexempt employees
and compensatory time may be helpful to the
committee.
HEALTH INSURANCE STUDY
At the request of Chairman Keiser, committee
counsel distributed a memorandum entitled Factors
Impacting the Cost of Health Insurance - Background
Memorandum.
Chairman Keiser called on Mr. Adam W. Hamm,
Insurance Commissioner, for a presentation regarding
the regulation of health insurers in this state. He
submitted written information summarizing the
regulation of health insurance and an overview of the
health insurance market (Appendix B).
In response to a question from Representative
Keiser, Commissioner Hamm said the Insurance
Commissioner does not have regulatory authority over
Industry, Business, and Labor 3 August 6, 2009
long-term care policies. However, he said, the
commissioner has authority to regulate rates and
forms.
In response to a question from Representative
Kasper, Commissioner Hamm said the Insurance
Department works with the National Association of
Insurance Commissioners to see that all insurance
companies have gone through financial audits.
In response to a question from Representative
Keiser, Commissioner Hamm said the majority of
states are prior approval states, which means
insurance company rates and forms must be
approved by the Insurance Commissioner before
being implemented. He said he will provide the
committee with additional information regarding prior
approval.
In response to a question from Representative
Vigesaa, Commissioner Hamm said the targeted
financial examination of Blue Cross Blue Shield of
North Dakota will be completed soon.
In response to a question from Representative
Keiser, Commissioner Hamm said there has been an
evolution toward principles-based reserving as a
solvency measurement. He said he is not certain if
there will be any substantial change nationally in this
area. He said there has been ongoing discussion for
three years. He said he will provide the committee
with additional information summarizing solvency
measurements.
Chairman Keiser said the current financial
conditions have presented a unique opportunity to
apply a model to large insurers to see what would
happen and what would have happened under
different solvency models.
In response to a question from Representative
Keiser, Commissioner Hamm said risk-based capital
is based upon many factors and may fluctuate widely
for different companies. He said the current riskbased
capital amount for Blue Cross Blue Shield of
North Dakota is approximately 500 percent, which is
down from previous years.
In response to a question from Senator Potter,
Commissioner Hamm said New York operates with a
prefunded guarantee fund, but he is not sure of the
benefits of a prefunded fund. He said the North
Dakota Life and Health Insurance Guarantee
Association provides an annual report, and he does
not recall having seen any reports of insolvencies of
North Dakota companies in the reports that he has
reviewed. He said he will provide the committee with
additional information regarding the North Dakota Life
and Health Insurance Guarantee Association.
In response to a question from Representative
Keiser, Commissioner Hamm said the committee
could complete the choosing health plans altogether
(CHAT) study as a group. He said the group session
would take approximately two hours.
In response to a question from Representative
Kasper, Commissioner Hamm said Medicare
reimbursement levels are responsible for a significant
shifting of costs in this state. He said the
reimbursement levels lag behind the rest of the
country by 30 percent and the cost shift affects health
insurance premiums paid in this state.
In response to a question from Senator Hogue,
Commissioner Hamm said the Insurance Department
reviews premium rates of Blue Cross Blue Shield of
North Dakota in the same manner as it reviews other
companies despite the fact that Blue Cross Blue
Shield of North Dakota has the vast majority of the
market share in this state. However, he said, the
department acts as a careful watchdog over Blue
Cross Blue Shield of North Dakota due to the
dominant market share of the company.
In response to a question from Representative
Keiser, Commissioner Hamm said he can provide the
committee with additional information regarding
minimum loss ratios.
In response to a question from Representative
Kasper, Commissioner Hamm said studies indicate
that there are approximately 51,000 to 52,000
individuals uninsured in North Dakota.
In response to a question from Senator Potter,
Commissioner Hamm said the amount of money paid
to medical providers is a significant factor used in
reviewing requests for increases in premium rates.
At the request of Chairman Keiser, Commissioner
Hamm presented information regarding major health
care legislation under consideration in the United
States Congress. He submitted a written summary
(Appendix C).
Chairman Keiser called on Mr. Rod St. Aubyn,
Blue Cross Blue Shield of North Dakota, for
comments regarding the committee's study of health
insurance. He submitted PowerPoint slides
(Appendix D).
In response to a question from Representative
Kasper, Mr. St. Aubyn said Blue Cross Blue Shield of
North Dakota reimbursement rates are approximately
150 percent to 165 percent of Medicare
reimbursement rates. He said a complex formula is
used to determine the rates and the company meets
with providers regularly to discuss the rate schedule.
The cost shift due to low Medicare reimbursement
rates and the uninsured requires someone to pick up
the additional costs. He said it is very difficult to
balance the need to keep providers in business in this
state while making premiums affordable.
In response to a question from Senator Potter,
Mr. St. Aubyn said the fee schedule is negotiated with
individual facilities. He said all hospitals in the state
are participating providers and the majority of other
medical providers elect to participate with Blue Cross
Blue Shield of North Dakota.
In response to a question from Representative
Keiser, Mr. St. Aubyn said medical facilities have been
good at coding procedures and services. He said the
providers generally provide high-quality care and do
not cheat through the use of coding.
In response to a question from Senator Hogue,
Mr. St. Aubyn said although Blue Cross Blue Shield of
North Dakota is the dominant health insurance carrier
Industry, Business, and Labor 4 August 6, 2009
in the state and has some ability to dictate what will be
paid to providers, the company has limited premium
income to pay providers. He said the company works
hard to keep administrative costs down. He said the
company is willing to make changes in schedules and
recently has made changes in midyear for certain
hospitals to help keep a facility operating.
In response to a question from Representative
Boe, Mr. St. Aubyn said if Medicare reimbursement
were equal to the cost of providing the services, there
would be a significant increase in the operating
margins of North Dakota providers. He said Medicare
is the dominant payer in the state.
In response to a question from Representative
Kasper, Mr. St. Aubyn said any profits generated by
for-profit subsidiaries of Blue Cross Blue Shield of
North Dakota help reduce overall costs. He said
approximately 7.1 percent of premium income is used
for administrative costs for Blue Cross Blue Shield of
North Dakota. He said that percentage is close to
one-half of the amount of many national companies.
Nonetheless, he said, improvements can be made in
administrative costs.
Chairman Keiser called on Mr. Mike Thielen,
PreferredOne, for a presentation regarding the
committee's study of health insurance. He distributed
written information (Appendix E).
Mr. Thielen said four major insurance plans
compete in Minnesota because of equitable contracts
with providers. He said the competition benefits
employers and keeps costs down. He said the
companies compete on service, quality products, and
innovation. He said true transparency provides for
disclosure of administrative costs, provider fees,
provider discounts, and claims data. He said
transparency helps educate consumers.
In response to a question from Senator Hogue,
Mr. Thielen said representatives of the contracting
department of PreferredOne have visited with many
providers in North Dakota, but have frequently been
stonewalled in those visits. He said it appears that
providers are looking at PreferredOne as a subsidizer
and contract proposals appear to come back at a
much higher reimbursement rate than those provided
by Blue Cross Blue Shield of North Dakota. He said
the company has offered to pay more than Blue Cross
Blue Shield of North Dakota but still has not been able
to secure provider relationships.
In response to a question from Senator Oehlke,
Mr. Thielen said PreferredOne has been successful in
Minnesota due to administrative efficiencies.
Although it takes time to build relationships, he said,
the company is willing to do that in this state.
However, he said, the reimbursement gap is so
substantial that the company may not be able to
compete in the state.
In response to a question from Senator Potter,
Mr. Thielen said he would not object to seeing Blue
Cross Blue Shield of North Dakota pay providers
more. He said he would just like to have a fair chance
to compete in this state.
In response to a question from Representative
Kasper, Mr. Thielen said claims administration
charges for PreferredOne are approximately 4 percent
to 5 percent. He said the company negotiates with
providers in Minnesota on an individual basis. He
said the company shows its actual fees or contracted
rates on a website that is available to customers.
Through the use of the website, he said, members
can compare facility costs and make determinations
as to where to go for services.
In response to a question from Representative
Clark, Mr. Thielen said the company likely will open
the website to the public in the future, but the site is
currently targeted at its members.
In response to a question from Senator Hogue,
Mr. Thielen said the fact that there are few
independent physician practices has an impact on
negotiations with providers.
In response to a question from Representative
Kasper, Mr. Thielen said PreferredOne welcomes new
entrants in the market because of the benefit to
employers and members. However, he said, if a
merger such as the MeritCare and Sanford Health
Systems merger results in an unwillingness to offer
contracts to competitors, the merger would be a
detriment to providing services in the state.
Chairman Keiser called on Mr. Bruce Levi,
Executive Director, North Dakota Medical Association,
for comments regarding the committee's study of
health insurance. He submitted written testimony
(Appendix F). He also submitted information
(Appendix G) on behalf of the North Dakota
Healthcare Association.
In response to a question from Senator Oehlke,
Mr. Levi said he could attempt to find information
regarding bad debts and charity care if Indian Health
Service funds were removed from the calculations.
Representative Keiser said a significant amount of
hospital bad debt is attributable to individuals using
emergency care for routine treatments. Under federal
law, he said, treatment to a patient has to be done in
the emergency room if the patient enters the
emergency room regardless of the existence of a
nearby walk-in clinic. He said if the federal law would
allow the use of the walk-in clinic, the amount of bad
debt could be reduced significantly.
In response to a question from Senator Potter,
Mr. Levi said Medicare payment reform is necessary.
He said North Dakota physicians rank second to last
in payment rates for Medicare.
In response to a question from Representative
Kasper, Mr. Levi said the North Dakota Medical
Association is involved in addressing insurance issues
on an ongoing basis. He said great strides have been
made in Medicaid reimbursement rates and significant
improvement has been made with respect to
Workforce Safety and Insurance reimbursements.
In response to a question from Representative
Keiser, Mr. Levi said there is not much negotiation
available to physicians with respect to reimbursement
for services in this state. He said the vast majority of
Industry, Business, and Labor 5 August 6, 2009
reimbursement is from Medicare, Medicaid, and Blue
Cross Blue Shield of North Dakota.
In response to a question from Senator Potter,
Mr. Levi said he will attempt to provide the committee
with information regarding physicians' salaries.
Chairman Keiser said the next meeting of the
committee will be September 10, 2009, in Fargo.
There being no further business, Chairman Keiser
adjourned the meeting at 4:05 p.m.
___________________________________________
John Bjornson
Committee Counsel
ATTACH:7