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