Providers, physicians tell committee repeal of 80th-percentile rule left insurers setting low reimbursement floors

Senator Kathy Giesel, sponsor of Senate Bill 121, told the Senate Labor and Commerce Committee that the measure "will set some health care services reimbursement minimums" after the repeal of the so-called "eightieth percentile" rule. Giesel said the bill directs the director of insurance to adopt standards using a market-based methodology and to ensure reimbursements are uniform and not less than a statewide percentile of charges or a multiple of Medicare fee schedules.

Jeffrey Davis, principal and owner of Weston Group Consulting LLC testifying on behalf of the Alaska State Medical Association, said the intent behind restoring a state-defined minimum is twofold: to protect patients from large balance bills and to restore balance in contract negotiations between providers and insurers. "So what does senate bill 121 do? It restores a state defined minimum that senator talked about that is based on charges in Alaska," Davis told the committee. He added that, in his review, insurers moved from a floor near "approximately 450% of Medicare" under the prior rule to "85% of Medicare" after the rule’s repeal.

Physicians warned of flat or falling reimbursements over many years. Family physician Noah Laufer said his practice’s reimbursement has been "flat for 10 years" and added that the repeal reduced negotiating leverage. Dr. Wade Erickson, founder of Capstone Clinics and Medical Network of Alaska, said he began to see alarm after one insurer published a floor of "185% of Medicare" within weeks of repeal. Cardiologist Gene Quinn, who leads Envoy Integrated Health, said the debate over percentile rules distracts from broader coordination and payment-reform efforts: "this is a huge distraction... focusing on these things that create an adversarial and a false dichotomy," Quinn said.

Witnesses provided written letters and excerpts describing declining revenue, recruitment difficulties for specialist positions in secondary cities, and concerns that independent practices may close or stop accepting certain payers if reimbursement pressures continue. Senator Giesel said the bill would use a "statistically credible market based methodology based on the most current 12 months of data of provider charges in Alaska" and require insurers to update charges every 3 to 5 years. The committee set SB 121 aside for future consideration; no final vote was recorded in this hearing.