BILL ANALYSIS AB 952 Page 1 Date of Hearing: May 5, 2009 ASSEMBLY COMMITTEE ON HEALTH Dave Jones, Chair AB 952 (Krekorian) - As Introduced: February 26, 2009 SUBJECT : Health information: health plans. SUMMARY : Revises the Confidentiality of Medical Information Act (CMIA) to authorize, notwithstanding any other provision of law, a health plan, as defined in federal law, to disclose summary health information (SHI) and protected health information (PHI) to the health plan's third party administrator, or to another health plan, to the extent authorized by, and in a manner consistent with the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) and HIPAA regulations. For purposes of this bill, and the disclosures authorized, makes applicable in CMIA the federal HIPAA definitions of health plan, PHI and SHI. Specifically, this bill : 1)Authorizes a health plan, as that term is defined in federal HIPAA, notwithstanding any other provision of law, to disclose SHI and PHI to the health plan's third party administrator, or to another health plan, to the extent authorized by, and in a manner consistent with federal HIPAA and HIPAA regulations. 2)Defines the following, for purposes of this bill, by reference to federal HIPAA regulations: a) "Health plan" as an individual or group plan that provides, or pays the cost of, medical care, and which includes the following, singly or in combination, among other specified entities: an employer welfare benefit plan; specified state and federal coverage plans; a group health plan, organized pursuant to the Employer Income Retirement Security Act (ERISA); a health insurance issuer or an HMO; or any other individual or group plans that provide or pay for medical care; b) "PHI" as individually identifiable health information, which identifies an individual or can be used to identify an individual; and, c) "SHI" as information that may be individually identifiable health information and that summarizes claims history, claims expenses, or types of claims experienced by AB 952 Page 2 individuals for whom a plan sponsor has provided health benefits under a group health plan, and from which individual identifying information has been removed (such as name, social security numbers, health plan membership number, e-mail addresses or any number, characteristic or code that can be used to identify an individual) and which need only be aggregated to the geographic zip code level. EXISTING LAW : 1)Provides for regulation of health plans by the Department of Managed Health Care (DMHC) under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene) and for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code. 2)Prohibits health plans and health insurers, under Knox-Keene and the Insurance Code, respectively, from releasing any information to an employer that would directly or indirectly indicate that an employee is receiving or has received services from a health care provider covered by the health plan or insurer unless authorized to do so by the employee. 3)Prohibits, under the CMIA, a provider of health care, health care service plan, or health care contractor from disclosing a person's medical information without first obtaining that person's authorization, except as specified. 4)Requires under the CMIA, notwithstanding 3) above, a health care provider, health care service plan, or health care contractor to disclose medical information if required by a subpoena, search warrant, or other court order. 5)Permits under the CMIA, a provider, plan, or contractor to disclose information in other specified circumstances, including for purposes of diagnosis or treatment or as necessary to provide billing or other administrative services to the provider or plan. Prohibits a provider, plan, or contractor from disclosing a person's medical information for marketing purposes, or any other purpose not necessary to provide health care services to the patient, without express authorization from that person. 6)Prohibits, under the California Insurance Information and Privacy Protection Act, insurers, including health insurers, AB 952 Page 3 from disclosing any personal or privileged individual information collected or received in an insurance transaction, except as specified, including that the information may be disclosed to insurers, agents, or self-insurers if related to an insurance transaction involving the individual, as specified, and to a group policyholder for the purpose of reporting claims experience or conducting an audit of an insurer or agent, as specified. 7)Under HIPAA, prohibits, with exceptions, covered entities from using or disclosing PHI, except pursuant to a written authorization signed by the patient or for treatment, payment or health care operations, and generally requires a covered entity to make reasonable efforts to limit the use or disclosure of PHI to the minimum necessary to accomplish the intended purpose of the disclosure. 8)Defines in federal HIPAA regulations: a) "Group health plan" as an employee welfare benefit plan, as defined in ERISA, including insured and self-insured plans; b) "Health insurance issuer" as an insurance company, insurance service or insurance organization, including an HMO, licensed to engage in the business of insurance in a state and subject to state laws that regulate insurance; c) "PHI" as individually identifiable health information, which identifies an individual or can be used to identify an individual; and, d) "SHI" as information that may be individually identifiable health information and that summarizes claims history, claims expenses, or types of claims experienced by individuals for whom a plan sponsor has provided health benefits under a group health plan, and from which individual identifying information has been removed (such as name, social security numbers, health plan membership number, e-mail addresses or any number, characteristic or code that can be used to identify an individual) and which need only be aggregated to the geographic zip code level. 9)Under federal ERISA, authorizes one or more employers, or employee organizations, to voluntarily establish an employee welfare benefit plan for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, specified benefits, including health AB 952 Page 4 care benefits, and sets minimum standards related to the rights and protection of individuals in these plans, subject to oversight by the federal Department of Labor (DOL). 10)Defines in federal ERISA regulations: a) "Employer" as any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; b) "Plan" as an employee welfare benefit plan, which means any plan, fund, or program established or maintained by an employer or employee organization, or by both, for the purposes of providing employee benefits, including but not limited to, health benefits; c) "Plan administrator" as the person specifically designated by the terms of the plan; and, d) "Plan sponsor" as an employer or employee organization, or joint employer-employee plan or trust. FISCAL EFFECT : This bill has not yet been analyzed by a fiscal committee. COMMENTS : 1)PURPOSE OF THIS BILL . According to the author, California has some of the most strict and effective patient privacy regulations for health plans governed by DMHC and CDI. The author acknowledges that these regulations, codified in the CMIA, contain intentionally greater protections than are provided under federal HIPAA. However, according to the author, in recently adopted federal regulations around HIPAA, a problem has emerged with provisions that give deference in the implementation of HIPAA to more strict state law. As a result, a uniquely structured class of health plans present in California (ERISA Taft-Hartley Trusts regulated by the federal DOL) is unduly burdened by a quirk in state law. The author contends that both HIPAA and the CMIA allow appropriate PHI to be shared with appropriate health plan administrators in order to facilitate efficient and proper administration of health benefits for patients and consumers. The author argues that if PHI is not allowed to be shared with the Taft-Hartley plan, consistent with HIPAA and CMIA, the Taft-Hartley plan will not know whether it is paying health care providers for the appropriate benefits, for the right patients and consumers, and at the appropriate level of compensation. The author AB 952 Page 5 indicates that the unfortunate quirk in CMIA is that it does not recognize an ERISA DOL Taft-Hartley Health plan as a "health plan, " and therefore health care providers, in the absence of state law regarding Taft-Hartley plans, are imposing requirements for sharing PHI that are even more stringent than state law. According to the author, this bill allows for Taft-Hartley Trusts to share PHI and SHI in a manner consistent with and as authorized by HIPAA. 2)BACKGROUND . According to the Privacy Rights Clearinghouse (PRC) in San Diego, California, many people consider information about their health to be highly sensitive, deserving of the strongest protection under the law. Long-standing laws in many states and the age-old tradition of doctor-patient privilege have been the mainstay of privacy protection for decades. The federal HIPAA sets a national standard for privacy of health information, under the Privacy Rule, but HIPAA only applies to medical records maintained by health care providers, health plans, and health clearinghouses - and only if the facility maintains and transmits records in electronic form. PRC points out that a great deal of health-related information exists outside of health care facilities and the files of health plans, and thus beyond the reach of HIPAA. The extent of privacy protection given to medical information often depends on where the records are located and the purpose for which the information was compiled. The laws that cover privacy of medical information vary by situation. PRC indicates that confidentiality is likely to be lost in return for insurance coverage, an employment opportunity, application for a government benefit, or an investigation of health and safety at a work site. Medical records are created when a patient receives treatment from a health professional such as a physician, nurse, dentist, chiropractor, or psychiatrist. Records may include a person's medical history, details about lifestyle (such as smoking or involvement in high-risk sports), and family medical history. In addition, medical records contain laboratory test results, medications prescribed, and reports that indicate the results of operations and other medical procedures. Medical records could also include the results of genetic testing used to predict future health. 3)HIPAA . The privacy regulations enacted pursuant to HIPAA became effective April 14, 2003. HIPAA Privacy Rules only apply to covered entities, including health care providers, AB 952 Page 6 health plans and health care clearinghouses, such as medical billing services. HIPAA applies to covered entities when they use electronic means to perform HIPAA covered transactions, including transmission of health claims, remittance and payment advice, and even simply accessing a health plan's web site to check the eligibility of a patient. If a provider or health plan is covered by HIPAA, then all PHI held by the provider, whether in paper, oral, or electronic form, is subject to HIPAA Privacy Rules. HIPAA covers any information about a person's past, present or future mental or physical health, including information about payment for health care services. A person's health information, combined with some fact that identifies the person, (name, address, telephone number, social security number, etc.) is referred to as PHI. PHI can be oral, handwritten or entered into a computer. HIPAA generally requires patient authorization to disclose information for non-treatment purposes, such as to employers, life insurers, underwriters, or researchers. Under federal law, patient authorization is not required when medical information is used for treatment, payment or health care operations disclosed as part of specified "business associate" relationships established through contract. Disclosure for non-treatment purposes must generally be limited to the minimum necessary to accomplish the purpose of the disclosure. Under federal law, if a HIPAA provision conflicts with a provision of state law, the provision that is most protective of patient privacy prevails. 4)CMIA . As a general rule, under CMIA, health care providers and Knox-Keene health care service plans are prohibited from disclosing a patient's confidential medical information without the consent of the patient. (Note: Health insurers subject to the jurisdiction of the Insurance Commissioner are covered by Insurance Code privacy protections related to personal or privileged information collected or transmitted in an insurance transaction, but are not subject to CMIA.) However, there are many exceptions to this rule, where disclosure by the plan or provider is either required or permitted by law. Under CMIA, a provider or health plan is required to release medical record information, even without a patient's written authorization, to the following, among others: a) A court pursuant to a court order; b) A board, commission, or administrative agency for AB 952 Page 7 purposes of resolving a dispute pursuant to its lawful authority; c) A party to a proceeding before a court or administrative agency pursuant to an investigative subpoena; d) An arbitrator or arbitration panel, when arbitration is lawfully requested by either party pursuant to a subpoena; and, e) A government law enforcement agency pursuant to a search warrant. Under CMIA, a health plan or health care provider ma y, in their discretion, release medical information without the patient's written authorization to the following entities in the following limited circumstances: f) Billing, claims management, medical data processing or other administrative services for the health care provider or health plan; g) Organizations or professional societies that review the competence or qualifications of health care professionals; h) Any private or public body responsible for licensing or accrediting health care providers or health plans for review at the premises of the health care provider or health plan; i) County coroner in the course of an investigation by the coroner's office; j) Agencies, investigators, and educational and research organizations engaged in bona fide research projects provided that the recipient does not further disclose a person's identity; aa) An employer who has paid for employment-related health care services in connection with a lawsuit or arbitration dispute where the medical condition is an issue, provided that the information is disclosed only in connection to the proceeding, or when used to determine entitlement to leave from work for medical reasons or physical limitations that prevent a person from performing his or her job; bb) The sponsor, insurer, or administrator of a group or individual health plan for the purpose of evaluating the application for coverage of benefits; cc) A health care service plan for the purpose of transferring a patient to other health care providers in the plan; dd) Probate officers or domestic relations investigators for the purposes of determining the need for a conservatorship AB 952 Page 8 or guardianship; ee) Organ procurement organizations or tissue banks for purpose of aiding a transplant; ff) Federal Food and Drug Administration when medical information relates to problems with drug products or medical devices; gg) Disaster relief organizations for the purpose of responding to disaster welfare inquiries, but only basic information such as name, city of residence, age, sex and general condition may be disclosed; hh) Third parties for purposes of encoding, encrypting, or otherwise making information anonymous; and, ii) Disease management organizations that provide services to patients in order to improve their overall health in accordance with certain practice guidelines to which a physician refers a patient. 5)ERISA . ERISA is a federal law that sets minimum standards for most pension and group health plans (group benefit plans) voluntarily established by employers and employee organizations, including Taft-Hartley group benefit plans, or trusts (Taft-Hartley Trusts). ERISA requires group benefit plans to provide participants with plan information including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty. ERISA's treatment of group benefit plans is both complicated and confusing. ERISA has been interpreted as dividing group benefit plans into two groups regulated differently under the law: a) individuals who are covered by self-insured group benefit plans for which the employer, rather than an insurer, assumes the risk for paying for covered services; and b) individuals who are covered by insurance purchased by the group benefit plan. ERISA also distinguishes between the regulation of group benefit plans and the business of insurance, for purposes of determining federal and state regulatory authority. As these distinctions are not clear cut, ERISA has been the subject of many court cases. Generally speaking, ERISA permits states to regulate the business of insurance, including instances where an ERISA plan contracts with a state licensed insurer to provide health care to the employees, in which case the contracted insurer is subject to state insurance regulation. AB 952 Page 9 ERISA generally preempts states from regulating health benefits provided by a self-insured ERISA plan. Some ERISA group benefit plans offer choice of coverage to employees, which might include a self-insured coverage option, generally a Preferred Provider Organization, and a fully insured coverage option, such as an HMO. In short, only ERISA applies to self-insured health plans, while both ERISA and state insurance regulatory authority apply to insured health plans covering employees in an ERISA group benefit plan. The distinction is important because federal and state laws governing health plans are different in areas such as consumer rights, provider compensation, claims payment, access to care and mandated coverage. 6)TAFT-HARTLEY TRUSTS . Under ERISA, Taft-Hartley Trusts can be established as group benefit plans to provide employee benefits for private sector unionized employees. Taft-Hartley Trusts have five basic characteristics: a) one or more employers contribute to the plan; b) the plan is collectively bargained with each participating employer; c) the plan and its assets are managed by a joint board of trustees equally representative of labor and management; d) assets are placed in a trust fund; and, e) mobile employees can change employers without losing health or pension coverage provided the new job is with an employer who participates in the same Taft-Hartley trust fund. Unions negotiate for employer contributions to a Taft-Hartley plan, rather than for specific benefits and cost sharing provisions. Typically, employer contributions are a flat rate based on covered employment, such as $1.75 per hour of covered service. Some unions negotiate for monthly contributions to provide for more financial stability. The number of hours employees must work during a given time period to be eligible for coverage is negotiated with the employer. A new Taft-Hartley Trust cannot provide benefits to its members until sufficient reserves have been accumulated. Taft-Hartley Trusts may provide more than just health benefits and, for example, can also include pension benefits, life and disability insurance, vacation, severance and holiday benefits, child care centers, legal services, and financial assistance for employee housing. According to an article in the newsletter of the American Federation of State, County and Municipal Employees, approximately 93% of Taft-Hartley plans are wholly or partially self-funded for health care. As AB 952 Page 10 discussed above, as ERISA group benefit plans, Taft-Hartley Trusts are exempt from state insurance regulation, including mandated benefit requirements. According to the California HealthCare Foundation nearly three million Californians receive their health care coverage through a Taft-Hartley Trust. 7)SUPPORT . Pacific Federal (Pac-Fed), sponsor of this bill, writes in support that this bill will benefit health care coverage provided to the three million Californians who are covered in DOL health plans. According to Pac-Fed, federal HIPAA law permits the sharing of information between state and federal regulated plans. Pac-Fed identifies areas when this exchange of information is necessary including: verifying accuracy of claims; coordinating courses of treatment; establishing and conducting wellness programs; funding appropriate reserves for future claims; advocating for claims payment; establishing pricing for contracted health plan services; monitoring large claims; and transferring risk and reinsurance to a new contracted health plan. Valley Industry and Commerce Association (VICA) writes that California law places restrictions on the flow of SHI and PHI between health plans, which makes it difficult for Taft-Hartley Trusts to rapidly deliver services to those who rely on them. According to VICA, this bill will allow for the flow of information between health plans that otherwise would not be able to occur. Western Alliance Trust (WAT) Fund supports this bill and argues that the exchange of PHI is a necessary component of health plan treatment, risk-sharing or reinsurance relationships. WAT complains that one provider would not share medical information, claiming that California law is applicable not federal law. Neighborhood Legal Services (NLS) of California supports this bill because NLS believes that it strikes the right balance between protecting individual rights and ensuring the health insurance delivery system is able to meet the needs of working Californians. According to NLS, the primary impact of this bill is to conform California law to federal HIPAA by permitting the sharing of administrative and PHI between health plans and health plan business associates. 8)OPPOSE UNLESS AMENDED . Kaiser Permanente opposes this bill unless it is amended to limit disclosures of individually identifiable medical information to those currently permitted for payment purposes under the CMIA, and to expressly provide AB 952 Page 11 that no further use or disclosure of the information may be made. According to Kaiser, as written, this bill puts health plans like Kaiser Permanente between competing statutory directions--on the one hand to disclose PHI with third party administrators and on the other to comply with the strict dictates of CMIA, which permits only very limited disclosures of medical information without the express written authorization of the individuals affected. Kaiser writes that it understands the need of certain third party administrators, including Taft-Hartley trusts to secure limited medical information for paying claims and other payment-related purposes. Kaiser would therefore remove its opposition if this bill is amended: a) to incorporate changes to the existing CMIA payment exception that expressly incorporate the HIPAA definition of "health plan" that includes Taft-Hartley trusts and other entities involved in payment of health care claims; and b) to expressly provide that no further use or disclosure of the medical information received for payment purposes may be permitted. 9)OPPOSITION . World Privacy Forum (the Forum) is opposed to this bill and objects to the inclusion of the clause "notwithstanding any other provision of law" because it is unclear what it means. The Forum expresses the concern that the inclusion of that phrase may be interpreted to exempt the disclosures permitted in this bill from the possibility of any civil or criminal liability. According to the Forum, if there is some specific provision of California law that would prohibit the disclosure which is being sought it should be clearly identified on the record so that the reasons for changing it can be evaluated. The Forum is also concerned about the placement of the new section added in this bill outside of the existing CMIA. The Forum contends that since this bill places a new section outside of CMIA it would appear to completely exempt all disclosures authorized from the limitations and restrictions of CMIA, including the prohibition on a provider or health plan using a person's medical information, without their authorization, for purposes not necessary to provide health care service to the patient. The Forum recommends that, presuming the specific statutory barrier and the need for a new disclosure authorization can be justified on the public record, any new disclosures authorized be included within the existing provisions of CMIA. Finally, the Forum suggests that any new authorizations for disclosure of medical information include restrictions on the entities AB 952 Page 12 receiving the information and their subsequent use of the information to ensure that information disclosed for health plan purposes cannot be used against an employee in any way. Privacy Rights Clearinghouse (PRC) writes in opposition to this bill that while HIPAA may allow the disclosures in this bill, it appears that no provision of the CMIA authorizes the disclosures. PRC writes further that just because a particular disclosure is allowed by the HIPAA health privacy rule does not mean that it should be allowed under California law. PRC writes with the particular concern that this bill may result in the disclosure of summary health information to a plan sponsor - for example, an employer -- which might be identifiable, notwithstanding the required removal of some identifiers to meet HIPAA standards. PRC writes that it is strongly opposed to provisions of law that have the potential to sweep away privacy and patient protections. 10)RELATED LEGISLATION . AB 562 (Cook) would require a health insurance issuer to, upon request, provide specified aggregate and individual health care claims information, for employers with more than 50 employees, to an employee welfare benefit plan (maintained by an employer(s) or employee organization(s)), joint employer-employee plan, a governmental entity, or plan administrator, as specified. AB 562 failed passage in the Assembly Health Committee on April 21, 2009. 11)DOUBLE REFERRAL . This bill is double referred, should it pass out of this committee, it will be referred to the Committee on Judiciary. 12)POLICY ISSUES . a) Confusion of terminology in state and federal law . This bill would incorporate federal definitions into a new section in the CMIA, including the federal HIPAA definition of a health plan. The federal definition, intended to apply HIPAA protections broadly to any and all entities engaged in providing health care services across the 50 states, is necessarily broad and all-inclusive. For example, the federal definition takes in all employer welfare benefit plans and group benefit plans, even those that are self-insured for health care. However, at the state level, a health plan or insurer is an entity subject to state insurance regulation and would not include AB 952 Page 13 self-insured ERISA plans, such as Taft-Hartley Trusts. Federal ERISA prohibits states from including ERISA plans as health plans for state law purposes and precludes their regulation as health plans under state law. To be a health plan under California law, an entity would have to be either licensed by DMHC or certificated as an insurer by CDI. This bill authorizes "health plans" to provide specified information to other health plans, incorporating the federal definition in California's CMIA, which generally applies to health care providers and DMHC-regulated health plans. It is unclear what the effect of this bill would be, specifically what the impact would be of including all types of health plans anticipated in federal law within the state privacy law. It is also unclear which entities subject to state oversight would be authorized to disclose the medical information of patients and to whom they would be authorized to disclose it under this bill. b) Self-insured v. fully insured . Proponents of this bill state that they are seeking an information exchange between Taft-Hartley Trusts and the fully-insured health plans that are contracted to provide health care services to workers eligible to receive health care through the Trust. They seek the information exchange on the basis that they are a health plan. CMIA already allows for disclosure by a health care provider or health plan of medical information, to various entities, including employee benefit plans, to the extent necessary to allow responsibility for payment to be determined and payment to be made. However, once a Trust or other group benefit plan contracts with a fully insured health plan, such as an HMO licensed under Knox-Keene, the Knox-Keene plan is obligated to assume all administrative functions, pay all claims, set provider fees, respond to consumer complaints, bear all financial risk and coordinate and provide for treatment. In this instance, the Taft-Hartley is a purchaser of insurance, which pays premiums, but no longer has responsibility for day-to-day claims payment or the administrative functions typically performed by a health plan. It is unclear why a Taft-Hartley trust contracted with a state licensed health plan needs PHI, as if it is acting as a health plan, without the enrollee's authorization, on a day-to-day basis, when it is functioning primarily as a purchaser of health coverage. AB 952 Page 14 c) Patient authorization . Both HIPAA and CMIA contemplate disclosure and exchange of SHI and PHI among health care providers and health plans providing authorization is first obtained from the patient or enrollee. Given the suggested uses of this information by proponents, many of which appear likely to be helpful or in the interest of the patient and enrollee, why is there a need to provide for such disclosure without any of the protections of CMIA as proposed in this bill and without patient permission? Would the Taft-Hartley trusts be able to obtain patient authorization for disclosure of medical information when the trust is acting in the interests of the patient? What are the specific statutory barriers in this regard? d) Scope of this bill . According to the author and sponsors of this bill, the goal is to enable disclosure of information to Taft-Hartley Trusts, and their administrators, to allow the Trusts to assist members and advocate for claims payment among other administrative functions. However, this bill is drafted much more broadly and could permit disclosures to employers as well as trust administrators. Should this bill be narrowed to permit specified disclosures specifically to Taft-Hartley trusts and their administrators? e) Use of the information . Once information is provided under this bill to any entity that meets the definition of a health plan under federal law, PHI may be in the possession of entities not subject to HIPAA protections and there is at least the potential for PHI disclosed to be used against an employee. The Committee may wish to consider imposing restrictions on the subsequent and secondary use of the information. Specifically, the committee may wish to prohibit any further use or disclosure by the recipient of information provided under this bill, in a manner that would directly or indirectly violate CMIA or HIPAA, including the manipulation of the information in any way that might reveal individually identifiable medical information. REGISTERED SUPPORT / OPPOSITION : Support Pacific Federal (sponsor) AB 952 Page 15 California Association of Joint Powers Authorities International Union of Security, Police and Fire Professionals of America and Participating Employers Health and Welfare Fund Liberty Dental Fund Professional Musicians, Local 47, and Employers' Health and Welfare Fund Public Employees Benefit Trust Fund South Bay Teamster and Employers Health and Welfare Related Benefits Trust Teamsters Local Union 572 Western Alliance Trust Fund Oppose unless amended Kaiser Permanente Opposition Privacy Rights Clearinghouse World Privacy Forum Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097