BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 1453 AUTHOR: Monning AMENDED: April 17, 2012 HEARING DATE: June 27, 2012 CONSULTANT: Trueworthy SUBJECT : Essential health benefits. SUMMARY : Designates the Kaiser Small Group HMO as California's benchmark plan to serve as the essential health benefit (EHB) standard. Existing federal law: 1.Establishes the Patient Protection Affordable Care Act (ACA), which among other provisions, imposes new requirements on individuals, employers, and health plans; restructures the private health insurance market; sets minimum standards for health coverage; establishes health benefit exchanges; and provides financial assistance to certain individuals and small employers. 2.Requires, under the ACA, each state, by January 1, 2014, to establish an American Health Benefit Exchange that facilitates the purchase of qualified health plans by qualified individuals and qualified small employers. 3.Requires, under the ACA, health plans and health insurers that offer coverage in the small group or individual market, both inside and outside of the Exchange, to ensure coverage includes the EHB package. Existing state law: 1.Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of health plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975. 2.Requires health plan contracts and health insurance policies to cover various benefits. 3.Establishes the California Health Benefit Exchange (Exchange) to facilitate the purchase of qualified health plans by Continued--- AB 1453 | Page 2 qualified individuals and qualified small employers by January 1, 2014. This bill: 1.Requires individual and small group health plans and health insurance policy contracts, both inside and outside of the Exchange, to cover EHBs, as defined. 2.Defines EHBs as the benefits and services covered by Kaiser Small Group HMO, including the categories identified in the ACA. 3.Requires the services and benefits to be covered to the extent they are medically necessary. Prohibits scope and duration limits from exceeding the scope and duration limits imposed on those services by the Kaiser Small Group HMO plan contract. 4.Requires habilitative services to be provided for the same services as, and under the same terms and conditions of, the plan contract for rehabilitative services. 5.Requires the same services and benefits for pediatric oral care as provided by a specified federal plan to be provided as an EHB. 6.Prohibits plans from indicating or implying a contract or policy meets the EHB standard unless it covers EHBs, as defined. 7.Exempts self-insured group health plans, large group market health plans, or grandfathered health plans. FISCAL EFFECT : According to the Assembly Appropriations Committee, this bill responds to pre-regulatory federal guidance. The committee analysis assumes 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. However, given this bill includes protective language that requires this 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 AB 1453 | Page 3 costs to CDI and DMHC to make this determination. 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. PRIOR VOTES : Assembly Health: 13- 4 Assembly Appropriations:12- 5 Assembly Floor: 50- 25 COMMENTS : 1.Author's statement. This bill establishes minimum benefits that all health plans and insurers in the individual and small group markets must cover. The benefits are based upon the product with the largest enrollment in the small group market, a Kaiser plan. The benefits are comprehensive and affordable. With the ACA's minimum essential health benefit requirement Californians will no longer have to worry if the insurance they are paying for is junk insurance. They can be assured coverage for minimum services will be there when they need it. A bulletin issued by the Center for Consumer Information and Insurance Oversight (CCIIO) suggests that states are permitted to select a single benchmark to serve as the EHB standard for qualified health plans operating inside the state exchange and plans offered in the individual and small group markets, with an exception for grandfathered plans. For 2014 and 2015, states have been given the choice among 10 options. If a state does not choose a benchmark plan, CCIIO will use the largest product in the state's small group market as the default. CCIIO believes this approach will give states time to provide a transition period to coordinate their benefit mandates while minimizing the likelihood that the state would be required to defray the costs of mandates in excess of the EHB. The federal HHS Agency intends to assess the benchmark process for the year 2016 and beyond. 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; and d) Maintaining AB 1453 | Page 4 affordability for consumers. Through a process of comparison to these principles other plans were eliminated and the Kaiser Small Group HMO was chosen. 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 and complies with all of the consumer rights and protections that go along with that, and while the cost differentials among all of the options are not significant, this plan falls in the middle. 2.Background. Effective January 1, 2014, federal law requires Medicaid benchmark and benchmark-equivalent plans, plans sold through the Exchange and the Basic Health Program (if enacted), and health plans and health insurers providing coverage to individuals and small employers to ensure coverage of EHBs, as defined by the Secretary of the Department of Health and Human Services (HHS). HHS is required to ensure that the scope of EHBs is equal to the scope of benefits provided under a typical employer plan, as determined by the Secretary. Under federal law, EHBs must include 10 general categories and the items and services covered within the following 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. 1.EHB Bulletin. On December 16, 2011, the HHS CCIIO released an EHB Bulletin proposing that EHBs be defined using a benchmark approach. This gives states the flexibility to select a benchmark plan that reflects the scope of services offered by a "typical employer plan." If a state does not choose a AB 1453 | Page 5 benchmark health plan, the default benchmark plan for the state would be the largest plan by enrollment in the largest product in the small group market. EHBs must include coverage of services and items in all 10 statutory categories listed above, but states would choose one of the following benchmark health insurance plans: § One of the three largest small group plans in the state by enrollment-in California, these options are Anthem PPO licensed by CDI, Kaiser HMO licensed by DMHC, or Anthem PPO licensed by DMHC; § One of the three largest state employee health plans by enrollment-in California, these options are CalPERS Blue Shield Basic HMO, CalPERS Choice, or CalPERS Kaiser HMO; § One of the three largest federal employee health plan options by enrollment, which are Government Employee Health Association, Blue Cross and Blue Shield (BCBS) Basic, or BCBS Standard; or § The largest HMO plan offered in the state's commercial market by enrollment, which is the Kaiser Large Group Commercial HMO. 1.Frequently Asked Questions for EHB bulletin. HHS issued a Frequently Asked Questions for EHB bulletin to provide additional guidance on HHS's intended approach in defining EHB. The bulletin outlines three categories of benefits not included in many of the health insurance plans - 1) pediatric oral services, 2) pediatric vision services, and 3) habilitative services. The bulletin describes rules to ensure coverage of these categories, and this bill implements these rules related to pediatric oral services and habilitative services. Specifically, this bill requires a plan to cover pediatric oral services at par with the largest federal plan by enrollment, the federal BCBS Standard Option Service Benefit Plan. The bill also requires habilitative services to be covered at parity with rehabilitative services provided by the Kaiser Small Group HMO. 2.Milliman analysis. In January 2012, the Exchange retained consulting firm, Milliman, to analyze and compare the health services covered by the 10 EHB California benchmark plan options. Milliman found all the plans to be comprehensive and found there to be only a very small cost difference between the optional plans. 3.Selection of EHB benchmark plan. Federal guidance states that AB 1453 | Page 6 if a state selects a benchmark plan that does not include all state-mandated benefits, the state must pay the costs of those mandated benefits. Given the impact this could have on the state's budget, it is appropriate for the Legislature to select the benchmark plan. Further, given that the EHB benchmark plan impacts plans outside of the Exchange, it is reasonable for the Legislature to select to the benchmark plan. The Kaiser Small Group HMO includes all state mandates which will protect the state budget and many of the items and services are covered within the 10 required categories requiring very few supplements from different plans. Further, according to a recent data analysis complied by Milliman, "the range in estimated plan costs due to the chosen EHB benchmark is about 2.36% (101.87% to 104.23%)." Given this very small difference, cost does not appear to be an influential factor. 4.Related legislation. SB 961 (Hernandez) and AB 1461 (Monning) would establish reforms in the individual health insurance market to update California laws and implement the ACA. SB 961 is pending in the Assembly Health Committee, and AB 1461 is pending in the Senate Health Committee. 5.Prior legislation. SB 51 (Alquist), Chapter 644, Statutes of 2011, establishes enforcement authority in California law to implement provisions of the ACA related to medical loss ratio requirements on health plans and health insurers and enacts prohibitions on annual and lifetime benefits. SB 900 (Alquist), Chapter 659, Statutes of 2010, and AB 1602 (Perez), Chapter 655, Statutes of 2010, established the Exchange. 6.Support. The California Children's Health Coverage Coalition writes, in support of this bill, that the selection of a robust EHB benchmark is the first step towards providing children in the Exchange with the most comprehensive coverage possible. The California Pan-Ethnic Health Network supports this bill writing the bill will ensure that California's EHB package covers a comprehensive package of health care services both inside and outside of the Exchange. Consumers Union writes that the marketplace today is flooded with plans offering skimpy coverage and argues this bill will ensure AB 1453 | Page 7 California's EHB will cover a comprehensive package of health services. 7.Support with amendments. Western Center on Law & Poverty (WCLP) requests that the bill specify that it is not adopting the cost-sharing components of the Kaiser Small Group HMO plan as part of the EHB standard. Additionally, this bill does not explicitly address benefit substitution and insurer flexibility, and WCLP requests adding language stating that plans cannot substitute coverage of services even if such substitutions are actuarially equivalent. National Health Law Program (NHeLP) supports this bill but requests amending the bill to include broader coverage of children for mental health services. NHeLP also requests amending habilitative services to mirror the Medicaid definition, and they request adding language to prevent benefit substitutions. California Speech-Language Hearing Association raises several issues concerning habilitative services including that it should be defined and that the definition should contrast with rehabilitation. Health Access California (Health Access) writes that while this bill select a benchmark plan that is a Knox-Keene plan, the bill does not include the necessary statutory underpinning to assure that consumers with coverage regulated under the Insurance Code have the same benefits as those with coverage regulated under the Knox-Keene Act. Health Access seeks further amendments to assure such basic consumer protections. Without this statutory foundation, insurers may find ways to sidestep the apparent requirements of the law, imposing dollar or visit limits on outpatient care or hospital stays, denying access to prescription drugs for which there is no therapeutic equivalent, or substituting one benefit for another. Health Access writes this legislation is needed not only to select the specific EHB product but to assure that both regulators can enforce that standard in the individual and small group markets outside the Exchange. 8.Oppose unless amended. The California Chiropractic Association (CCA) writes that in California seven of the benchmark plan options include a chiropractic benefit. CCA is opposed to this bill and asks that the legislature re-examine the possible choices for an EHB plan to select one that includes chiropractic benefits. Any health care reform program should rely on access to chiropractic treatment to achieve the most positive health and financial results. AB 1453 | Page 8 The California Association of Alcohol and Drug Program Executives writes in opposition that this bill selects a benchmark plan that does not meet the mental health and substance abuse mandates in both the ACA and federal Mental Health parity law. The California Association of Dental Plans (CADP) writes that the bill designates the Federal Employees Dental and Vision Insurance Program (FEDVIP) as the benchmark plan for pediatric oral care. CADP argues this designation should be changed to reflect a benchmark that is more appropriate for children's oral health and that alternative is California's Healthy Families Program 9.Policy comments. a. Medically necessary language. Several organizations, including health plans, providers and consumer groups, have proposed alternative language clarifying the intent of medically necessary. The author may wish to amend the definition of medically necessary. b. Habilitative services definition. Several organizations, including health plans, providers and consumer groups, have proposed alternative definitions for habilitative services. The federal government has not to date issued guidance on this benefit. The author may wish to amend the definition of habilitative services. c. Benefit substitutions. The current federal guidelines issued to date appear to allow plans to offer benefits that are "substantially equal" to the benefits of the benchmark plan. The author may wish to include language preventing benefit substitutions to give clarity on the issue. d. Cost sharing. The federal government has issued guidance on cost-sharing rules and current federal guidelines issued to date appear to keep the EHB benchmark plan separate from cost-sharing rules. The author may wish to add intent language clarifying the Kaiser Small Group cost-sharing rules do not mandate a certain level of cost sharing. e. Mental health and substance abuse treatment. Opponents have questioned if the Kaiser Small Group health plan meets the requirements outlined in the ACA and in state and federal mental health parity law. The author is currently working on an analysis of this issue. f. Dental benchmark plan. Opponents have questioned using the Federal Employees Dental and Vision Insurance Program AB 1453 | Page 9 as the benchmark plan for children's dental. The author is currently working on an analysis of this issue. SUPPORT AND OPPOSITION : Support: Association of Regional Center Agencies Autism Speaks California Association for Behavior Analysis California Black Health Network California Commission on Aging California Communities United Institute California Council of Community Mental Health Agencies California Coverage & Health Initiatives California Pan-Ethnic Health Network California Physical Therapy Association California Podiatric Medical Association California Primary Care Association California Psychiatric Association California Speech-Language Hearing Association Children Now Children's Defense Fund-California The Children's Partnership Congress of California Seniors Consumers Union The Greenlining Institute Health Access California Jericho Mental Health America of California National Alliance on Mental Illness, California National Health Law Program (if amended) Planned Parenthood Affiliates of California SEIU California United Ways of California Western Center on Law and Poverty Oppose: California Association of Alcohol and Drug Program Executives (unless amended) California Chiropractic Association (unless amended) -- END --