BILL ANALYSIS Ó
AB 1453
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Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1453 (Monning) - As Amended: April 17, 2012
Policy Committee: HealthVote:13-4
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires, effective January 1, 2014, all health plans
and policies in the individual and small group markets to cover
minimum "essential health benefits" (EHBs), defines the Kaiser
Small Group Health Maintenance Organization (HMO) plan contract
as California's Essential Health Benefits (EHB) benchmark plan,
and clarifies several standards that plans and policies must
meet with respect to EHBs.
This bill also specifies it shall be implemented only to the
extent that federal law or policy does not require the state to
defray the costs of benefits included within the definition of
EHBs.
FISCAL EFFECT
1)This bill responds to pre-regulatory federal guidance. We
assume it is likely that forthcoming federal regulations will
reflect the guidance issued thus far. If the federal
regulations take a different approach, potential costs of
requiring all individual and small group plans to meet the EHB
standards are unknown but could be significant, to the extent
a different approach requires the state to defray the costs of
state-mandated benefits (as explained further below).
However, given this bill includes protective language that
requires the bill to be implemented only to the extent that
federal law or policy does not require the state to defray the
costs of benefits included within the definition of EHBs, it
should not result in increased state costs. There could be
minor legal costs to CDI and DMHC to make this determination.
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2)Regulatory and enforcement costs as a result of this bill are
minor and absorbable. Costs will be incurred to ensure
compliance with EHB standards under federal law; additional
workload as a result of this bill will be minor.
COMMENTS
1)Rationale . This bill sets minimum standards for EHBs in
California in response to guidance from the federal Health and
Human Services Agency guidance issued pursuant to the federal
Patient Protection and Affordable Care Act (ACA). The author
indicates that with this guidance in mind, the choice of the
benchmark plan is based on the following principles:
a) Recognition of the importance of existing state mandated
benefits and incorporation of as many state mandates as
possible.
b) Protection of California's commitment to reproductive
services.
c) Embracing the consumer oriented regulatory framework in
place at the DMHC.
d) Maintaining affordability for consumers.
Through a process of comparison to these principles, other
available plan choices were eliminated and the Kaiser Small
Group HMO was chosen.
The author believes, based on the information available, the
Kaiser Small Group HMO represents the best benchmark plan
choice for Californians. The Kaiser Small Group HMO covers
all of California's mandates and includes vision exams. The
contract covers reproductive services, is licensed at DMHC as
a Knox-Keene plan with corresponding consumer protections, and
while the cost differentials among all of the options are not
significant, this plan falls in the middle.
1)Health Care Coverage in the ACA . Broadly speaking, the ACA
attempts to craft a system whereby individuals are guaranteed
access to affordable health care coverage either through
existing public programs, through their employers, or by
purchasing coverage in the individual market. The ACA also
sets up state-based exchanges, health care coverage
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marketplaces where individuals and small businesses will be
offered a variety of comprehensive plan options for purchase,
beginning in 2014. For individuals in families with incomes
below 400% of the federal poverty level who don't qualify for
Medicaid, federal subsidies will be available for purchase of
health care coverage through exchanges.
2)EHBs . After 2013, the ACA requires health plans offered in
the individual and small group markets, both inside and
outside of the exchanges, to offer a comprehensive package of
items and services. These EHBs must include items and services
within at least the following 10 categories: ambulatory
patient services; emergency services; hospitalization;
maternity and newborn care; mental health and substance use
disorder services, including behavioral health treatment;
prescription drugs; rehabilitative and habilitative services
and devices; laboratory services; preventive and wellness
services and chronic disease management; and pediatric
services, including oral and vision care.
Each plan will have to cover EHBs and comply with
out-of-pocket maximums, but depending on the cost-sharing
structure, plans could still vary dramatically in their
premiums and out-of-pocket costs for copayments, deductibles,
or coinsurance. Cost-sharing is not included or defined in the
EHB definition. The ACA also requires all individuals to
maintain "minimum essential coverage" which generally includes
EHBs.
3)State Flexibility to Define EHBs . The ACA gives the federal
Secretary of Health and Human Services the authority to define
EHBs. Despite this authority to define a nationwide standard,
a pre-regulatory bulletin released in mid-December 2011
suggests that HHS intends to allow states flexibility to
define a state-specific EHB package. According to this
bulletin and a related Frequently Asked Questions document,
states will be allowed to define EHBs by reference to a
package of benefits available in a "benchmark plan." The
benchmark plan would have to be chosen from a list of the most
popular plans by enrollment, and would serve as that state's
initial EHB definition through 2015.
This bill defines the Kaiser Small Group HMO as the benchmark
plan.
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It should be noted that the HHS bulletin is federal guidance
on HHS's intended approach, but is not, at this time, a formal
notice of proposed rulemaking.
4)Analysis of Benchmark Plans . The California Health Benefit
Exchange (the Exchange) contracted with Milliman, an actuarial
firm, to perform a comparative study of the various benchmark
plan choices, including the costs of each plan relative to the
others. The study concluded all potential benchmark plans
were fairly comprehensive, and that total cost differences
based on the package of benefits were fairly minor.
5)State Mandates . The ACA requires states to bear costs related
to state-mandated benefits that exceed the EHBs.
Specifically, if California law mandates health plans subject
to EHB standards to offer additional benefits that go beyond
the EHBs, then the state must pay to defray the cost of those
additional benefits on behalf of each individual subject to
the mandate. This bill includes two provisions related to
required "habilitative services" and medical necessity
standards that could potentially go beyond federal
requirements, but it also specifies these provisions shall be
implemented only to the extent that federal law or policy does
not require the state to defray the costs of benefits included
within the definition of essential health benefits.
HHS's proposed benchmark approach allows the states to avoid
paying for mandated benefits that exceed the EHB, at least for
2014 and 2015. The state will essentially be able to define
EHBs as those benefits included in the benchmark plan. Since
this bill defines the benchmark plan as a small-group plan
that is subject to state mandates, the state will not need to
pay for the extra benefits. If another benchmark plan were
chosen-one that was exempt from state mandates, such as the
federal employee health plan-plans offered through the
Exchange would still be mandated to provide benefits, and the
state would have to pay to defer the cost of those benefits
The HHS guidance gives notice that it may cease to cover some
state-mandated benefits beginning in 2016.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081
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