BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 369 (Huffman) - Health care coverage: prescription drugs.
Amended: July 3, 2012 Policy Vote: Health 5-2
Urgency: No Mandate: Yes
Hearing Date: August 6, 2012
Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 369 would prohibit health plans and health
insurers from requiring a patient to try and fail on two pain
medications before allowing the patient to access the pain
medication (or generic equivalent) originally prescribed by the
patient's medical provider.
Fiscal Impact:
One-time costs of about $40,000 (Managed Care Fund) to the
Department of Managed Health Care to review compliance by
health plans.
Minor costs to the Department of Insurance to review
compliance by health insurers.
Negligible costs to CalPERS to provide pharmacy benefits to
its subscribers.
Unknown potential costs increases to Medi-Cal managed care
plans (50 percent General Fund, 50 percent federal funds).
The Department of Health Care Services indicates that it
expects there to be some fiscal impact of the bill, but it
is not able to quantify any potential cost increases at this
time. The Department is concerned that limiting the use of
step therapy will lead to greater use of more expensive pain
medication, when, in some cases, less expensive medications
may provide relief.
Background: Under current law, health plans are regulated by the
Department of Managed Health Care and health insurers are
regulated by the Department of Insurance. Health plans and
health insurers in the state are not currently required to cover
pharmacy benefits, but they are subject to certain regulatory
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requirements if they do offer coverage.
Health plans and insurers (or subcontracted pharmacy benefit
managers) sometimes required patients to use a process known as
"fail first protocol" or "step therapy" for certain types of
drugs, particularly for drugs used to treat pain. Under a fail
first protocol, before a patient can access a specific
medication prescribed by the provider, the patient must first
attempt to use one or more alternative medications. As those
medications fail to give relief from pain (or have any other
intended impact) the patient progresses to the next medication.
The use of fail first protocols varies between health plans and
insurers, with different drugs covered by such protocols and
different numbers of steps required.
Proposed Law: AB 369 would limit the ability of health plans and
health insurers to use fail first protocols or step therapy,
when the health plan or insurer provides pharmacy benefits.
Specifically:
The bill would prohibit health plans and insurers from
requiring a patient to try and fail on more than two pain
medications before the patient can access the medication (or
its generic equivalent) that was initially prescribed by the
patient's medical provider.
The bill would require the provider to determine the length
of time required to judge whether a pain medication has
failed to give relief.
The bill specifically would not prohibit a health plan or
insurer from charging copayments or deductibles or limiting
maximum coverage for pharmacy benefits. The bill would not
require coverage of drugs not on a health plan or insurer's
formulary or prohibit generic drug substitution for brand
name drugs.
Staff Comments: Under the federal Patient Protection and
Affordable Care Act, health coverage provided in the small group
or individual market (including through health exchanges) must
provide essential health benefits. The Affordable Care Act
specifies the general categories of benefits that must be
provided, which includes prescription drugs. Under federal
guidance, the states will be able to select an essential health
benefits benchmark plan. After 2014, all coverage provided in
the small group and individual markets must provide coverage
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equal to or greater than the coverage provided by the benchmark
plan.
Under federal law, individuals purchasing coverage through
health benefit exchanges will be eligible for subsidies, based
on income, paid by the federal government.
Under federal law, if a state imposes a benefit mandate after
January 1, 2012 that exceeds the benefits provided by the
essential health benefits benchmark plan, the state is
responsible for providing the subsidies for coverage of that
mandated benefit.
While the bill places some constraints on the ability of health
plans and health insurers to use fail first protocols to manage
usage, the bill does not mandate health plans or health insurers
to provide any additional benefits to patients. Therefore, it is
unlikely that this bill would be construed as imposing a benefit
mandate under the Affordable Care Act.