BILL ANALYSIS �
SB 866
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Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 866 (Ed Hern�ndez) - As Amended: May 31, 2011
SENATE VOTE : 27-10
SUBJECT : Health care coverage: prescription drugs.
SUMMARY : Requires the Department of Managed Health Care (DMHC)
and the California Department of Insurance (CDI) to jointly
develop an electronic uniform prior authorization form (PA form)
for use on or after January 1, 2013 that health care service
plans (health plans) and health insurers must accept when
prescribing providers seek authorization for prescription drug
benefits. Specifically, this bill :
1)Requires, on and after January 1, 2013, a health plan or
health insurer that provides prescription drug benefits to
accept only the PA form when requiring prior authorization for
prescription drug benefits, unless financial risk for
prescription drugs has been delegated to a physician or
physician group that does not use a prior authorization
process.
2)Deems authorization granted if a health plan or health insurer
fails to utilize or accept the PA form, or fails to respond
within two business days upon receipt of a request from a
prescribing provider. Exempts health plan contracts and
insurance policies for enrolled Medi-Cal beneficiaries.
3)Requires, on or before July 1, 2012, the DMHC and the CDI to
jointly develop the PA form. Requires, on or after January 1,
2013, notwithstanding any other provision of law, every
prescribing provider to use the PA form to request prior
authorization for coverage of prescription drug benefits and
every health plan or health insurer to accept the PA form as
sufficient to request prior authorization for prescription
drug benefits.
4)Establishes the following criteria for the PA form:
a) The PA form may not exceed two pages;
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b) The PA form must be available electronically;
c) The completed PA form may also be electronically
submitted from the prescribing provider to the plan or
insurer;
d) The PA form must be developed with input from interested
parties from at least one public meeting; and,
e) Take into consideration existing prior authorization
forms established by the federal Centers for Medicare and
Medicaid Services and the Department of Health Care
Services, and national standards pertaining to electronic
prior authorization.
5)Defines "prescribing provider" to include a provider
authorized to write prescriptions pursuant to the Business and
Professions Code to treat a medical condition of an enrollee.
EXISTING LAW :
1)Regulates health plans under the Knox-Keene Health Care
Service Plan Act of 1975 through the DMHC and regulates health
insurers under the Insurance Code through the CDI.
2)Requires health plans and insurers to respond to requests for
authorization within five business days for non-urgent
medically necessary health care services, as specified, or
within 72 hours for situations when the enrollee or insured's
condition is such that he or she faces an imminent and serious
threat to his or her health, as specified.
3)Requires health plans and insurers to communicate decisions to
approve, modify, or deny requests within 24 hours of the
decision to the provider, with certain exceptions.
Additionally requires health plans and insurers to communicate
decisions resulting in the denial, delay, or modification of
all or part of the request to the enrollee or insured within
two business days.
4)Requires every health plan that provides prescription drug
benefits to maintain an expeditious process by which
prescribing providers may obtain authorization for a medically
necessary non-formulary prescription drug.
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5)Requires every health plan that provides prescription drug
benefits to file with the DMHC a description of its process,
including timelines, for responding to authorization requests
for non-formulary drugs. Requires any changes to this process
to be filed with the DMHC, as specified. Requires each plan
to provide a written description of its most current process,
including timelines, to its prescribing providers.
FISCAL EFFECT : According to the Senate Appropriations
Committee, any cost to CDI and DMHC to develop the PA form would
be minor and absorbable. DMHC would likely need to promulgate
regulations at a cost of up to $75,000 in fiscal year (FY)
2011-12 and up to $150,000 in FY 2012-13 for a staff attorney.
To the extent this change generates additional complaints to
DMHC, there could be help center costs in the low hundreds of
thousands of dollars. Since this bill would require the PA form
to be developed and used prior to the completion of DMHC's
regulatory process, there could be more than $150,000 special
fund expenditures in FY 2012-13.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, prior
authorization is a common cost containment method used by
health plans and insurers that significantly delays medication
accessibility for patients and imposes high costs that
negatively impact operating margins for health care providers.
Health plans and insurers require physicians to fill out a
prior authorization form when the provider prescribes a
medicine or treatment not covered by the plan or insurer's
formulary. Each health plan and insurer has their own forms
for prior authorization. A recent survey by the American
Medical Association found nearly two-thirds of physicians wait
several days to receive prior authorization from an insurer.
More than half of physicians experience difficulty obtaining
approval from health plans and insurers. A survey of
pharmacists found that 61% of pharmacists knew of an incident
when the requirement for prior authorization adversely
affected patient care. Physicians spend, on average, 20 hours
per week handling prior authorizations. Studies show that
navigating the managed care maze cost physicians $23.2-31
billion a year. Pharmacists also find prior authorization
time consuming, spending an average of 4.6 hours a week on
requests.
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2)PRIOR AUTHORIZATION . Prior authorization is a mechanism
health plans and insurance companies use to manage health care
costs. According to the Consumer Health Information
Corporation, health plans and insurers typically require
prescribing health care providers to obtain prior
authorization for brand name medicines that have a generic
alternative, expensive medications, medicines with age limits
(like acne medication which is considered to be a condition of
children and young adults), drugs for cosmetic reasons, drugs
prescribed to treat a non-life threatening medical condition,
drugs not usually covered but said to be medically necessary
by the prescribing physician, and drugs that are usually
covered but are being used at a dose higher than normal.
3)SUPPORT . This bill enjoys support from many physicians,
provider organizations, and representatives of the life
science industry (biotechnology, pharmaceutical, medical
device, and diagnostics companies) who report that the current
prior authorization process is complex, lacks transparency,
and varies significantly among health plans. Proponents argue
that this bill will streamline, simplify and make uniform the
process of prescribing medications. One group, the
Association of Northern California Oncologists (ANCO) is
pleased to see that a standardized prior authorization form
must be electronically available and transmittable. ANCO
writes that widespread adoption and effective implementation
of health information technology such as electronic prior
authorizations carries with it the promise of optimal patient
care, increased cooperation and coordination among health care
professionals and reduced health care costs by making patient
care more efficient.
4)OPPOSE UNLESS AMENDED . The California Association of Health
Plans (CAHP) requests amendments to make the form developed by
the providers a model or template that is optional in order
for the plan to preserve the ability to ask drug specific
information. CAHP also wants more flexibility in the
turn-around time in case a plan needs more information from
the provider and the provider doesn't respond in a timely
fashion, doesn't use the PA form, or doesn't fully complete
the PA form. Finally, CAHP asks that the implementation date
be delayed six months to a year after the regulators complete
their work on the PA form in order to give plans and providers
time to begin using the PA form.
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5)OPPOSITION . Express Scripts, Inc., a pharmacy benefit
management company, indicates that their clients look to them
to manage increasing drug costs while providing value and
quality care to patients. According to Express Scripts, Inc.,
this bill will require the use of a California-specific form
that will likely vary from other states and federal agencies,
will increase costs, and is contrary to development of
national standards, which is a far preferable approach.
6)RELATED AND PREVIOUS LEGISLATION .
a) AB 369 (Huffman), among other things, specifies that
once a patient has tried and failed on two pain
medications, prior authorization is no longer required and
the physician may write the prescription for the
appropriate pain medication. It further specifies that a
note in the patient's chart that a patient has tried and
failed on the health insurer's step therapy or fail first
protocol shall suffice as prior authorization from the
insurer. AB 369 was held in Assembly Appropriations
Committee.
b) SB 625 (Rosenthal), Chapter 69, Statutes of 1998,
requires health plans that include prescription drug
benefits to maintain an expedited process by which
prescribing providers may obtain authorization for a
medically necessary non-formulary prescription drug and
requires various disclosures and recordkeeping related to
plan formularies.
7)POLICY QUESTIONS .
a) Should prescribing providers be required to submit a
completed request, on the required form, prior to the clock
starting on the two business day turn-around? If it is not
the author's intent to authorize two-business day deeming
when a provider submits an incomplete request, or on a form
other than the form developed pursuant to this bill, the
author may wish to clarify that the prescribing provider
must use the required form and it must be complete in order
to trigger the two business day deeming requirement.
b) Should health plans and health insurers be provided some
time to phase in use of the form in the event the
regulators have not developed the form by July 1, 2012.
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Should this bill be enacted, the effective date will be
January 1, 2012, giving the departments six months to
complete their work in order for the health plans, insurers
and providers to have six months to prepare for
implementation. The author may wish to amend this bill to
allow health plans, insurers and providers six months from
the time the form is developed should the regulators
complete their work after July 1, 2012.
8)TECHNICAL AMENDMENTS .
a) In the last sentence in subdivision (b) of Health and
Safety Code 1367.241 and Insurance Code 10123.191 the term
"provision" should be replaced with "subdivision."
b) On page 3, lines 10-15 the references should be replaced
with the following:
The requirements of this subdivision shall not apply to
contracts entered into pursuant to Article 2.7 (commencing
with Section 14087.3), Article 2.8 (commencing with Section
14087.5), Article 2.81 (commencing with Section 14089), or
Chapter 8 (commencing with Section 14200).
REGISTERED SUPPORT / OPPOSITION :
Support
American Academy of Private Physicians
American Society for Pain Management Nursing
Association of Northern California Oncologists
BayBio
California Academy of Family Physicians
California Arthritis Foundation Council
California Association of Joint Powers Authorities
California Association of Physician Groups
California Black Health Network
California Chronic Care Coalition
California Healthcare Institute
California NeuroAlliance
California Psychiatric Association
California Society of Industrial Medicine and Surgery
California Society of Physical Medicine and Rehabilitation
Los Angeles County Medical Association
National Multiple Sclerosis Society
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Osteopathic Physicians & Surgeons of California
US Pain Foundation
Several Individual Physicians
Opposition
Express Scripts, Inc.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097