BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1825
                                                                  Page  1

          Date of Hearing:   April 20, 2010

                            ASSEMBLY COMMITTEE ON HEALTH
                              William W. Monning, Chair
              AB 1825 (De La Torre) - As Introduced:  February 11, 2010
           
          SUBJECT  :  Maternity services.

           SUMMARY  :  Requires every individual or group health insurance  
          policy, as specified, to cover maternity services, as defined.   
          Specifically,  this bill  :   

          1)Requires a health insurer with respect to a pending or  
            approved individual or group health insurance policy form on  
            file with the California Department of Insurance (CDI) as of  
            January 1, 2011 to submit to CDI, on or before March 1, 2011,  
            a revised policy form that provides coverage for maternity  
            services.

          2)Requires that the corresponding policy issued, amended, or  
            renewed on or after 30 days following CDI's approval of the  
            revised form to include coverage for maternity services.

          3)Defines maternity services to include prenatal care,  
            ambulatory care maternity services, involuntary complications  
            of pregnancy, neonatal care, and inpatient hospital maternity  
            care, including labor and delivery and postpartum care. 

          4)Exempts from the provisions of this bill specialized health  
            insurance, Medicare supplement insurance, short-term limited  
            duration health insurance, Civilian Health and Medical Program  
            of the Uniformed Services (CHAMPUS)-supplement insurance, or  
            TRI-CARE supplemental insurance, or hospital indemnity,  
            accident-only, or specified disease insurance. 

          5)Makes the following findings and declarations:

             a)   Health care service plans (health plans) are required by  
               the Knox-Keene Health Care Service Plan Act of 1975  
               (Knox-Keene) to provide maternity services as a basic  
               health care benefit;  
             b)   Existing law does not require health insurers to provide  
               designated basic health care services and, therefore, they  
               are not required to provide coverage for maternity  
               services; and,








                                                                  AB 1825
                                                                  Page  2

             c)   It is essential to clarify that all health coverage made  
               available to California consumers, whether issued by health  
               plans regulated by the Department of Managed Health Care  
               (DMHC) or disability insurers who sell health insurance  
               (health insurers) regulated by CDI, must include maternity  
               services. 

           EXISTING LAW  :

          1)Provides for the regulation of health plans by DMHC under  
            Knox-Keene and for the regulation of health insurers by CDI  
            under the Insurance Code. 

          2)Requires health plans under Knox-Keene to cover a number of  
            basic health care services and permits DMHC to define the  
            scope of the services and to exempt plans from the requirement  
            for good cause. 
          3)Provides, under Knox-Keene, that "basic health care services"  
            include:  a) physician services, including consultation and  
            referral; b) hospital inpatient services and ambulatory care  
            services; c) diagnostic laboratory and diagnostic and  
            therapeutic radiological services; d) home health services; e)  
            preventive health services; f) emergency health care services,  
            including ambulance and ambulance transport services and  
            out-of-area coverage; and, g) hospice care. 

          4)Provides, under Knox-Keene, that health plans must provide all  
            medically necessary basic health care services, including  
            maternity services necessary to prevent serious deterioration  
            of the health of the enrollee or the enrollee's fetus, and  
            preventive health care services, specifically including  
            prenatal care. 

          5)Prohibits health plans and health insurers from issuing  
            contracts and policies that contain a copayment or deductible  
            for inpatient hospital or ambulatory care maternity services  
            that exceed the most common amount charged for the same type  
            of care and services provided for other covered medical  
            conditions. 

          6)Prohibits health plans and health insurers providing maternity  
            benefits for a person covered continuously from conception  
            from attaching any exclusions, reductions, or limitations to  
            coverage for involuntary complications of pregnancy unless  
            those provisions apply to all of the benefits paid by the plan  








                                                                  AB 1825
                                                                  Page  3

            or insurer. 

           FISCAL EFFECT  :    This bill has not yet been analyzed by a  
          fiscal committee. 

           COMMENTS  :    

           1)PURPOSE OF THIS BILL  .  The author asserts that one of the  
            latest trends in the individual market is for insurers to  
            exclude maternity care from their basic plan benefits to sell  
            cheaper products to target populations.  As more employers are  
            dropping employee health coverage, the author contends that  
            insurance companies are increasingly targeting the young,  
            uninsured population of the market with non-maternity  
            products, even though 25% of these individuals are women of  
            childbearing age.  The author argues that these types of  
            non-maternity products delay and restrict access to prenatal  
            care, which can lead to serious health complications for both  
            the mother and the baby, and force more women into  
            state-funded programs, such as Medi-Cal or Access for Infants  
            and Mothers (AIM).  As evidence of the need to level the  
            playing field between health plans regulated by DMHC that are  
            required to cover maternity services and health insurers  
            regulated by CDI that currently are not, the author points to  
            a 2008 report from the National Women's Law Center entitled,  
            "Nowhere to Turn: How the Individual Health Insurance Market  
            Fails Women," which found that it is difficult and costly for  
            women to find health insurance that covers pregnancy-related  
            care.

           2)BACKGROUND  .  Numerous studies have shown that prenatal care  
            pays for itself by helping to minimize the prevalence and  
            severity of low- and very low-birth weight babies.  A 2004  
            study in the Journal of Perinatal and Neonatal Nursing  
            evaluated the effects of augmented prenatal care on women at  
            high risk for having a low-birth weight baby who were enrolled  
            in a special program that provided basic prenatal care,  
            prenatal education, and case management.  The program saved  
            about $13,962 per single low-birth weight birth prevented,  
            and, after program costs were considered, the return on  
            investment equaled 37%; for every dollar invested in the  
            program $1.37 was saved.  In addition, a March of Dimes report  
            indicated that hospital charges for premature, low-birth  
            weight infants totaled $37.7 billion in 2003.  The report  
            stated that premature birth was among the most common,  








                                                                  AB 1825
                                                                  Page  4

            serious, and costly problems facing infants in the United  
            States and is responsible for about half of all infant  
            hospitalizations.

           3)CALIFORNIA HEALTH BENEFITS REVIEW PROGRAM  .  AB 1996 (Thomson),  
            Chapter 795, Statutes of 2002, requests the University of  
            California to assess legislation proposing a mandated benefit  
            or service, and prepare a written analysis with relevant data  
            on the medical, economic, and public health impacts of the  
            proposed health plan and health insurance benefit mandate  
            legislation.  The California Health Benefits Review Program  
            (CHBRP) was created in response to AB 1996 and extended for  
            four additional years in SB 1704 (Kuehl), Chapter 684,  
            Statutes of 2006.  

          On March 30, 2010, President Obama signed into law the federal  
            Patient Protection and Affordable Care Act (P.L. 111-148),  
            which was amended by the Health Care and Education  
            Reconciliation Act (P.L. 111-152).  These laws came into  
            effect after CHBRP received a request for analysis for AB  
            1825.  There are provisions in P.L. 111-148 that have  
            effective dates of 2014 and beyond that would dramatically  
            affect the California health insurance market and its  
            regulatory environment.  Given the uncertainty surrounding  
            implementation of these provisions and given P.L. 111-148 was  
            only recently enacted, it is important to note that the  
            potential effects of these short-term provisions are not taken  
            into account in the baseline estimates presented in CHBRP's  
            analysis of AB 1825.  Following are some of the findings of  
            CHBRP's analysis of AB 1825:

              a)   Medical Effectiveness  .  Studies of the impact of the  
               number of prenatal care visits that pregnant women receive  
               have consistently found no correlation between the number  
               of prenatal visits and birth outcomes for either infants or  
               mothers.  However, there is clear and convincing evidence  
               that specific services provided during, or in conjunction  
               with, prenatal care visits are effective.  These services  
               include smoking cessation counseling, blood pressure  
               monitoring, screening for various genetic and  
               sexually-transmitted diseases, and diagnostic ultrasounds.

              b)   Utilization, Cost, and Coverage Impacts  .  This bill  
               requires the entire CDI-regulated market to cover maternity  
               services.  Since all group policies are required to, and in  








                                                                  AB 1825
                                                                  Page  5

               practice, currently cover maternity services, this bill  
               would impact only those enrollees in individual  
               CDI-regulated policies.  According to CHBRP, most  
               Californians enrolled in CDI-regulated policies (61%) have  
               coverage for prenatal care and maternity services.  In the  
               individual insurance market, about 963,000 enrollees  
               currently lack maternity benefits, including 240,700 women  
               between the childbearing ages of 19 and 44.  CHBRP  
               estimates that approximately 8,298 pregnancies would be  
               newly-covered under CDI insurance policies as a result of  
               this bill.  Overall, the mandate in this bill is estimated  
               to have no impact on the number of deliveries since the  
               birth rate is not expected to change as a result of this  
               bill.  CHBRP concludes that most women are likely to  
               continue to face large out-of-pocket costs for maternity  
               services regardless of whether or not their insurance  
               policy includes maternity benefits and attributes this to  
               almost 70% of the women in CDI-regulated policies currently  
               being in high deductible health plans (HDHPs).  According  
               to CHBRP, prenatal care is usually subject to an HDHP  
               minimum annual deductible of $1,200 for individual plans  
               and $2,400 for family plans as reported by the federal  
               Internal Revenue Service.  According to CHBRP, HDHPs  
               generally do not exempt maternity/prenatal services from  
               the high deductibles, so a high level of cost sharing is  
               required for maternity services.  CHBRP further states that  
               even women currently enrolled in non-HDHPs frequently face  
               high cost-sharing requirements in the CDI-regulated  
               individual market, and some might also choose to switch to  
               HDHPs as a result of this bill in order to save on  
               premiums.

             CHBRP estimates that total statewide health expenditures by  
               or for all enrollees in both DMHC and CDI-regulated  
               policies will increase by .1%, or about $40 million, as a  
               result of this bill.  All of the cost impacts of AB 1825  
               would be concentrated in the individual CDI-regulated  
               insurance market, where total premium expenditures are  
               estimated to increase by 1% and premiums by 5%.  Per member  
               per month premium expenditures are estimated to increase by  
               an average of $8.48.  Most of the increase would be  
               concentrated among those aged 19-29.  For the majority of  
               individuals in the CDI-regulated individual market who do  
               not currently have maternity benefits, CHBRP estimates that  
               AB 1825 would increase average premiums from 2% to 28%  








                                                                  AB 1825
                                                                  Page  6

               depending on the age of the enrollee.  CHBRP also notes  
               that in 2009, California passed AB 119 (Jones), Chapter  
               365, Statutes of 2009, which prohibits insurers from gender  
               rating, or charging differential premiums based on gender  
               for contracts issued, amended, or renewed on or before  
               January 1, 2011.  Therefore, CHBRP maintains that the  
               premium and cost calculations in their analysis assumes all  
               gender-rated policies would be converted to gender-neutral  
               pricing prior to the implementation of AB 1825.   
               Additionally, among those in the CDI-regulated individual  
               market who currently have maternity benefits, AB 1825 is  
               expected to decrease average premiums by .5% to 20%.   
               Lastly, CHBRP states that the estimated premium increases  
               could result in adding 9,335 individuals to the ranks of  
               the newly uninsured; these individuals are likely to be  
               younger individuals and women, if they experience the  
               greatest premium increases.

              c)   Public Health Impact  .  CHBRP reports that it is unable  
               to estimate what the impact of AB 1825 would be on the  
               utilization of prenatal care and concludes that the overall  
               public health impact most likely lies somewhere between a  
               lower bound estimate that would assume no increase in the  
               utilization of effective prenatal care services because  
               these pregnant women would probably still face high levels  
               of cost sharing found in the cheapest insurance plans and  
               an upper bound estimate that would assume an increase in  
               utilization and a corresponding improvement in health  
               outcomes if all 8,298 newly covered pregnancies would have  
               financial barriers to prenatal care removed.

             According to CHBRP, women enrolled in plans in the individual  
               health insurance market without coverage for maternity  
               benefits are currently paying $108.8 million out of pocket  
               for non-covered maternity services.  AB 1825 would shift  
               these costs from women enrollees to increase premiums  
               across both men and women enrollees.  Therefore, this bill,  
               CHBRP maintains would differentially reduce the out-of  
               pocket-costs for women enrollees.

             Lastly, CHBRP reports that 10.9% of babies are born preterm  
               in California and there are 3,000 infant deaths each year.   
               According to CHBRP, it is estimated that each premature  
               birth costs society approximately an average of $51,600.   
               To the extent that AB 1825 increases the utilization of  








                                                                  AB 1825
                                                                  Page  7

               effective prenatal care that can reduce outcomes such as  
               preterm births and related infant mortality, CHBRP asserts,  
               there is a potential to reduce morbidity and mortality and  
               the associated societal costs.
           4)SUPPORT  .  The California Commission on the Status of Women,  
            writes that women should not have to pay more for what amounts  
            to essential medical care and this bill will ensure fair,  
            affordable access to maternity coverage in all health  
            insurance policies.  The American Congress of Obstetricians  
            and Gynecologists, District IX, asserts that women should not  
            be required to pay significantly more for coverage for their  
            basic medical needs that are part of their biology and such  
            gender discrimination is exacerbated by a lesser ability to  
            pay for these policies when women still earn less than  
            80-cents on the dollar of that of men.  The California Medical  
            Association points out that reproductive health coverage is  
            preventive medicine that, in its absence, can pose significant  
            health problems for both the mother and baby.  Health Access  
            California states that this bill closes a gap in existing law;  
            and if an insurer fails to provide maternity coverage, the  
            state picks up the cost, whether for prenatal care provided  
            through a public program or the costs associated with lack of  
            prenatal care.  The California Academy of Family Physicians  
            (CAFP) asserts that the point of insurance is to pool  
            resources and risk, share the cost of medical care and protect  
            individuals from financial harm due to a medical condition.   
            CAFP further maintains that women will never need treatment  
            for prostate cancer as men will never need treatment for  
            cervical cancer and childless couples will never need  
            pediatric care.  CAFP argues that it is to all of our  
            advantage to be included in a collective risk pool.  

           5)OPPOSITION  .  The Association of California Life and Health  
            Insurance Companies (ACLHIC) contends in opposition that since  
            federal law already requires group insurance policies to  
            include maternity benefits, the mandate in this bill is an  
            individual market competition issue, rather than a health  
            insurance access or equity issue.  ACLHIC notes that  
            approximately 93% of births in California are covered by some  
            form of insurance and current law also ensures maternity  
            benefits are offered on the same terms and conditions as other  
            health benefits so there is no consumer equity issue that  
            needs to be addressed.  Anthem Blue Cross writes that, by  
            eliminating choice, this bill negatively impacts women and men  
            who have made a conscious decision not to buy maternity  








                                                                  AB 1825
                                                                  Page  8

            services, or women who are unable to have children, by forcing  
            them to purchase coverage for services they do not want or  
            need.  The California Chamber of Commerce (Cal Chamber) states  
            that this bill is premature and could further exacerbate  
            California's budget crisis if the benefits mandated in this  
            bill exceed the benefits mandated in federal health care  
            reform.  Cal Chamber further maintains that this bill will  
            increase costs to the private sector at a time that this state  
            is still struggling through an economic crisis, evidenced by  
            one of the highest unemployment rates in the nation.

           6)PREVIOUS LEGISLATION  .  

             a)   AB 119 (Jones), Chapter 365, Statutes of 2009, prohibits  
               gender discrimination in individual health insurance and  
               health plan rates.  

             b)   AB 98 (De La Torre) of 2009, AB 1962 (De La Torre) of  
               2008, and SB 1555 (Speier) of 2004 were all nearly  
               identical to this bill.  These three bills were vetoed by  
               the Governor.  In his veto messages, Governor  
               Schwarzenegger acknowledged that the bills present a  
               difficult choice between protecting access to affordable  
               health insurance when costs continue to rise for employers  
               and individuals, or mandating that every person who pays  
               for their own health insurance must buy maternity services.  
                The Governor stated that he must continue to veto  
               one-sided mandates that only increase costs to the overall  
               health care system.

             c)   SB 897 (Speier) of 2003 contained similar provisions to  
               SB 1555 and was reviewed by CHBRP, but was not heard in any  
               committee.  

             d)   SB 1411 (Speier), Chapter 880, Statutes of 2002,  
               prohibits health plans and health insurers from charging a  
               higher copayment for maternity services than for other  
               medical services.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          American Congress of Obstetricians and Gynecologists, District  
          IX/California (sponsor)








                                                                 AB 1825
                                                                  Page  9

          California Commission on the Status of Women (sponsor)
          Blue Shield of California
          California Academy of Family Physicians
          California Medical Association
          California School Employees Association
          California Teachers Association
          Health Access California
          March of Dimes
          Planned Parenthood Affiliates of California

           Opposition 
           
          Association of California Life & Health Insurance Coverage
          Anthem Blue Cross
          California Chamber of Commerce


           Analysis Prepared by  :    Tanya Robinson-Taylor / HEALTH / (916)  
          319-2097