BILL ANALYSIS SB 220 Page 1 Date of Hearing: June 22, 2010 ASSEMBLY COMMITTEE ON HEALTH William W. Monning, Chair SB 220 (Yee) - As Amended: May 26, 2010 SENATE VOTE : Not relevant SUBJECT : Health care coverage: tobacco cessation services. SUMMARY : Requires certain health care service plan (health plan) contracts and health insurance policies that provide outpatient prescription drug benefits to also provide coverage for specified tobacco cessation services and would prohibit copayments, coinsurance, or deductibles for those benefits. Specifically, this bill : 1)Makes specified legislative findings and declarations regarding the statewide economic and personal costs of tobacco addiction and the effectiveness of tobacco cessation counseling and medication. 2)Requires a health plan contract, except a specialized health plan contract, and every individual or group health insurance policy that is issued, amended, delivered, or renewed on or after July 1, 2011, that provides outpatient prescription drug benefits, to include coverage for tobacco cessation services that include specified counseling services, and all medications approved by the federal Food and Drug Administration (FDA) for the purpose of tobacco cessation, including all prescription and over-the-counter medications.3)Requires covered treatment to follow recommendations in the Public Health Service sponsored 2008 clinical practice guideline, "Treating Tobacco Use and Dependence: 2008 Update," or its successors and prohibits copayments, coinsurances, or deductibles for benefits in this bill. 4)Authorizes a health plan or health insurer to contract with qualified local, statewide, or national providers, whether for profit or nonprofit, for the provision of cessation services. 5)Requires a health plan or health insurer to disclose the benefits under this section in its evidence of coverage and disclosure forms and communicate the availability of coverage SB 220 Page 2 to all enrollees at least once per year. 6)Requires coverage provided in this bill to be available upon the order of an authorized provider and states that nothing in this bill shall preclude a health plan from allowing enrollees to access tobacco cessation services on a self-referral basis. 7)Defines "course of treatment" as at least four sessions of counseling, each session lasting at least 10 minutes, in regards to counseling, or the duration of treatment approved by the FDA for over-the-counter or prescription medications. 8)Prohibits enrollees from being required to enter counseling in order to receive tobacco cessation medications and that a health plan shall not impose prior authorization or stepped-care requirements on tobacco cessation treatment. 9)States that this bill shall not apply to Medicare supplement, short-term limited duration health insurance, vision-only, dental-only, or CHAMPUS-supplement insurance, or to hospital indemnity, hospital-only, accident-only, or specified disease insurance that does not pay benefits on a fixed benefit, cash payment only basis. EXISTING LAW : 1)Provides for regulation of health care service plans by the Department of Managed Health Care (DMHC) and health insurers by the Department of Insurance (CDI). 2)Allows health insurers (but not health plans) to subject treatment for nicotine use to separate deductibles, copays, and overall cost limitations. 3)Requires, by regulation, health plans (but not health insurers) to cover all medically necessary services, applicable to basic health care services and also to prescription drug benefits, if prescription drugs are covered. 4)Allows, by regulation, health plans covering prescription drug benefits to require prior authorization and to establish co-payments or deductibles that are found to be non-objectionable. FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. SB 220 Page 3 COMMENTS : 1)PURPOSE OF THIS BILL . According to the author, smoking remains one of the most difficult public health issues facing California, with nearly four million smokers in our state and 32,000 youth becoming smokers each year. Smoking costs California's economy an estimated $18 billion in a year in the form of medical care, lost productivity, and worker absenteeism. Studies show that people who use tobacco cessation treatment such as counseling, over-the-counter and prescription medications are more likely to quit and stay tobacco free for a longer period of time. Additionally, people with full coverage for medications and counseling services for tobacco cessation are more likely to use tobacco cessation medication than those who do not have coverage. This bill will address these negative impacts by requiring health plans and health insurance policies that provide outpatient prescription drug benefits to include coverage for comprehensive tobacco cessation services. 2)BACKGROUND . Despite significant efforts to reduce smoking in California, nicotine use remains prevalent, particularly among ethnic communities. While, overall, 15% of Californians smoke, Native Americans smoke at twice this rate and one in five African Americans smoke. Nicotine is highly addictive and difficult to quit. According to U.S. Department of Health and Human Services, 70% of smokers attempt to quit each year, but only 7% remain smoke free for one year after attempting. Comprehensive tobacco cessation services include telephone, group, or individual counseling, and all prescription and over-the-counter medication approved by the FDA. Numerous studies show that behavioral and pharmacological treatments and combinations of the two significantly improve quit rates and increase the likelihood of sustained abstinence from smoking. 3)MASSACHUSETTS TOBACCO CESSATION COVERAGE . In July 2006, Massachusetts passed a comprehensive health reform law that mandated tobacco cessation coverage for its Medicaid population. The coverage, which included behavioral counseling and all FDA approved medications was utilized by over 70,000 Medicaid users, or 37% of all Medicaid smokers. In a recent report entitled, "Medicaid Coverage for Tobacco Dependence Treatments in Massachusetts and Associated SB 220 Page 4 Decreases in Smoking Prevalence" researchers sought to determine if smoking prevalence decreased as a result of coverage by measuring smoking prevalence pre- and post-benefit. The study found that smoking rates decreased from 38% in the pre-benefit period to 28% in the post-benefit period, representing a decline of 26%. The authors concluded that providing access to tobacco cessation coverage, combined with broad promotion, can significantly reduce smoking prevalence. In 2004, U.S. Medicaid expenditures for smoking-related conditions totaled $22 billion. Tobacco cessation treatment is cost-effective and should be made available to all smokers via health insurance benefits. 4)FEDERAL HEALTH REFORM . On March 23, 2010, the federal government enacted the Patient Protection and Affordable Care Act (PPACA) (Public Law 111-148), which was further amended by the Health Care Education Reconciliation Act (H.R.4872). Under PPACA, Medicaid would now cover tobacco cessation counseling and pharmacotherapy for pregnant women, including the removal of cost-sharing between Medicaid and beneficiaries. While the provisions of PPACA that go into effect on 2014 will change California's health insurance market and regulatory framework, PPACA would also require tobacco cessation treatments to be provided by qualified health plans providing coverage in small-group and individual markets through the state-based insurance exchanges. Tobacco cessation will also be considered part of the "essential health benefits package" to be provided, effective in 2014. 5)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 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. In its analysis of this bill, CHBRP notes that, any effects of this bill might be diminished by the PPACA requirements following 2014 as tobacco cessation will be considered an essential benefit for all health plans. While the analysis acknowledged several short-term provisions of PPACA that would go into effect in six months, such as the temporary high-risk pool, the temporary effects of these SB 220 Page 5 short-term changes are not taken into account in the report. a) Analytic Approach . CHBRP considered two factors for this analysis: level of benefit coverage and type of tobacco cessation use. The estimated impact of the bill is based on data and literature that demonstrates the total number of people attempting to quit will not increase post-mandate. Instead, this population will be more likely to use cessation services rather than attempting to quite "cold turkey," and as a result, a higher percentage will quit successfully. Additionally, CHBRP excluded adolescents aged 12 to 17 from the analysis because this group is typically in the initiation phase rather than the cessation phase. b) Medical Effectiveness . According to CHBRP, the literature on the effectiveness of tobacco cessation treatments is clear and convincing that it improves quit rates and increases the likelihood of sustained abstinence from smoking. These conclusions about the efficacy of smoking cessation interventions are unlikely to change because of the large quantity of literature available on this topic. c) Coverage Impacts . Nearly 19.5 million Californians are currently enrolled in health plan insurance policies. The report anticipated the coverage increase in 2011 would immediately affect the 97% of enrollees that have coverage for prescription drugs, or 18.89 million individuals. The report focuses on the impact of increasing premium costs of all 19.5 million enrollees with plans or policies subject to the mandate, and on the estimated increase of utilization of smoking cessation treatment among 1.83 million adult smokers with current prescription drug coverage because this population will be likely to use cessation services covered by this new mandate. The report estimated that 81.7% of enrollees already have full or partial coverage for smoking cessation-related counseling; 57.4% have full or partial coverage for over-the-counter smoking cessation treatment; and, 77.8% have full or partial coverage for prescription smoking cessation treatment. This bill would require smoking cessation services for 100% of insured adults. Medi-Cal already provides comprehensive smoking cessation benefits and would not be subject to the mandate. SB 220 Page 6 d) Utilization Impacts . Pre-mandate, CHBRP found that 268,344 of the 1.83 million adult smokers used one or more tobacco cessation treatments, with 203,845 using treatments covered through insurance and 64,500 using treatments for which they were uninsured. CHBRP estimated that this bill would increase utilization by 34.3% for counseling; 54.2% for over-the-counter treatments; and, 37.2% for prescription treatments for an overall increase 44.2% or 118,482 additional smokers receiving treatment. e) Cost Impacts . CHBRP found that increases in premiums per member per month (PMPM) varied by type of plan with DMHC regulated Medi-Cal HMO plans experiencing no increases and CDI regulated individual insurance policies experiencing an increase of .37%. Total increases range from $0.00 to $0.67 PMPM. The total net annual health expenditures are projected to increase by $52.7 million or 0.07%, which is due to an $83.7 million increase in health insurance premiums partially offset by reductions in both enrollee copayments ($10 million) and out-of-pocket expenditures ($20.6 million). However, the analysis projects potential savings of $1.04 million in health savings as a result of less than ten fewer low-birth weight deliveries and hospitalizations. The analysis also anticipates measurable long-term improvements in health, which are not accounted for because the cost estimates are for one year only. Numerous studies suggest that smoking cessation is cost-effective as quitters gain an average 7.1 years of life at a net cost of $3,417 per year of life saved, or $24,261 per quitter. f) Public Health Impacts . CHBRP found that the bill would likely have a positive impact on public health in California, based on scientific evidence of the medical effectiveness of smoking cessation treatments. In California, 14.2% of the insured adult population smokes, which results in 34,492 deaths annually. Evidence suggests that this bill would increase utilization of smoking cessation treatments, with approximately 118,482 insured adult smokers shifting from self-help to obtaining some form of tobacco cessation services. CHBRP estimates an increase in utilization, at an additional 8,081 smokers successfully quitting smoking annually. There is significant evidence that this bill would contribute to the SB 220 Page 7 reduction in premature death from long-term smoking-related diseases such as cancer and cardiovascular and respiratory diseases. When the estimates of increased longevity for quitters are applied to the projected 8,081 additional smokers who successfully quit each year attributable to the mandate in this bill, approximately 56,567 to 100,204 years of potential life may be gained in the state each year. Smoking-related productivity loss in California in 2004 was about $8.5 billion. Both direct costs and indirect costs are reduced by smoking cessation. There is sufficient evidence to conclude that this bill would reduce smoking and its concomitant economic loss. Overall, smoking cessation treatment is cost-effective, which is supported by over two decades of health economics literature and is supported by America's Health Insurance Plans, a trade group representing health insurers, which recommends coverage of clinical treatments for smoking cessation as a cost-effective business investment. 6)SUPPORT . This bill is jointly sponsored by the American Lung Association, the American Cancer Society, and the American Heart Association who state that health plans have an obligation to fully over smoking cessation services for their members. The sponsors state that a person's chances of successfully quitting more than doubles when an evidence-based tobacco cessation service or treatment is used. Additionally, the vast majority of smokers want to quit and 75% try to quit each year. Providing comprehensive tobacco cessation services and treatments not only will improve the health of smokers and save lives, it will provide economic benefits to insurers, employers, government, taxpayers, and smokers themselves. 7)OPPOSITION . Health Net opposes this bill, which create an expensive new mandate to cover over-the-counter drugs and counseling for tobacco cessation. The opponents believe that the benefit mandates in this bill are too broad as they include coverage for over-the-counter medications. The opponents state that while this bill is well intentioned, mandating a new benefit into all health insurance policies is counterproductive to the efforts of making health insurance more affordable. 8)PREVIOUS LEGISLATION . SB 576 (Ortiz) of 2005 would have required health plans and health insurers to provide coverage SB 220 Page 8 for two courses of tobacco cessation treatments per year, including counseling and prescription and over-the-counter medications, and would have prohibited plans and insurers from applying deductibles but allow specified co-payments for those benefits. SB 576 was vetoed by Governor Schwarzenegger, who stated that the bill would impose costs on employers, plans, and individuals and not increase utilization of the benefit. REGISTERED SUPPORT / OPPOSITION : Support American Heart Association (cosponsor) American Cancer Society (cosponsor) American Lung Association (cosponsor) American Bone Health American Cancer Society, California Division American Stroke Association Association of Northern California Oncologists Breathe California California Academy of Family Physicians California Association of Physician Groups California Medical Association California State Firefighters' Association California Tobacco Control Alliance Foundation for Osteoporosis Research and Education Medical Oncology Association of Southern California, Inc. National Kidney Foundation State Building and Construction Trades Council of California Opposition Association of California Life & Health Insurance Companies California Association of Health Plans Health Net Molina Healthcare of California Analysis Prepared by : Martin Radosevich / HEALTH / (916) 319-2097