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---
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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
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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
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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
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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
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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
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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.
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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
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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)
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