BILL ANALYSIS Ó
SB 866
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SENATE THIRD READING
SB 866 (Ed Hernandez)
As Amended August 26, 2011
Majority vote
SENATE VOTE :27-10
HEALTH 15-0 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield, |
| |Bonilla, Eng, Gordon, | |Bradford, Charles |
| |Hayashi, | |Calderon, Campos, Davis, |
| |Roger Hernández, Bonnie | |Gatto, Hall, Hill, Lara, |
| |Lowenthal, Mitchell, | |Mitchell, Solorio |
| |Nestande, Pan, | | |
| |V. Manuel Pérez, Smyth, | | |
| |Williams | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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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 and after January 1, 2013, or six months after the
form is developed, that health plans and insurers must accept
when prescribing providers seek authorization for prescription
drug benefits. Specifically, this bill :
1)Deems authorization granted if a health plan or health insurer
fails to utilize or accept the completed 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.
2)Requires, on or before July 1, 2012, the DMHC and the CDI to
jointly develop the PA form and establishes criteria for the
PA form.
3)Defines "prescribing provider" to include a provider
authorized to write prescriptions to treat a medical condition
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of an enrollee.
FISCAL EFFECT : According to the Assembly Appropriations
Committee,
1)One-time costs to DMHC and CDI, combined, of approximately
$90,000 for staff time to develop the form, issue regulations,
and to review compliance with the new standard form.
2)Depending upon plan, provider, and consumer response to the
standardized form, the use of a such a form may have indirect
fiscal impacts on the state, including the following:
a) Potential for increased costs to DMHC associated with
increased complaints to the Help Center and Provider
Complaint Unit related to shorter required response times
for prior authorization of prescription drugs.
Alternatively, the standardized form may reduce complaints
and associated workload costs; and,
b) Potential for cost impacts in CalPERS-funded plans
associated with plans' response to the standardized form
and shorter required response times. If the standardized
form results in fewer prescriptions approved, there could
be lower cost pressure on rates compared to the status quo.
Alternatively, if the use of a standardized form leads to
a larger number of prescriptions approved, there could be
increased cost pressure.
The likelihood, magnitude, and direction of these potential
indirect costs are unknown.
COMMENTS : 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.
Prior authorization is a mechanism health plans and insurance
companies use to manage health care costs. According to the
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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, 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.
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.
The California Association of Health Plans indicates that using
one standardized form could result in insufficient information
to obtain approval for the drug, and that this would lead to
follow-up calls and faxes, creating additional administrative
burdens.
Express Scripts, Inc., a pharmacy benefit management company,
indicates, 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.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0002224
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