BILL ANALYSIS Ó SB 951 Page 1 Date of Hearing: July 3, 2012 ASSEMBLY COMMITTEE ON HEALTH William W. Monning, Chair SB 951 (Ed Hernandez) - As Amended: April 16, 2012 SENATE VOTE : 25-13 SUBJECT : Health care coverage: essential health benefits. SUMMARY : Establishes the Kaiser Small Group Health Maintenance Organization (HMO) plan contract as California's Essential Health Benefits (EHB) benchmark plan. Specifically, this bill : 1)Requires an individual or small group health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2014 to, at a minimum, include coverage for EHBs, which means all of the following: a) The benefits and services covered by the Kaiser Foundation Health Plan Group HMO $30 deductible plan contract as this contract was offered during the first quarter of 2012, including, but not limited to, all of the following: i) The items and services covered by the plan contract within the categories identified in the Patient Protection and Affordable Care Act (ACA), including but not limited to, 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, chronic disease management, and pediatric services, including oral and vision care. ii) Mandated benefits pursuant to statutes enacted before December 31, 2011. b) The service and benefits to be covered to the extent they are medically necessary. Scope and duration limits imposed on the services and benefits shall be no greater than the scope and duration limits imposed on those services and benefits by the plan contract identified in 1) a) above. SB 951 Page 2 c) Habilitative services to be covered under the same terms and conditions applied to rehabilitative services identified in the plan contract identified in 1) above. Defines "habilitative services" as health care services that help a person keep, learn, or improve skills and functioning for daily living. d) The same services and benefits for pediatric oral care and pediatric vision care covered under the Federal Employees Dental and Vision Insurance Program (FEDVIP) dental plan and vision plan with the largest national enrollment as the first quarter of 2012. Makes scope and duration limits imposed on the services and benefits no greater than the scope and duration limitations imposed on those benefits by the FEDVIP dental plan and vision plan with the largest national enrollment as of the first quarter of 2012. Requires the pediatric oral and vision care benefits to be in addition to, and not replace, any dental, orthodontic, or vision services covered under the plan contract in 1)a) above. e) Any other benefits required to be covered by health plans and disability insurers. 2)Prohibits a health plan or health insurer from indicating or implying that the health plan contract or health insurance policy covers EHBs when offering, issuing, selling, or marketing a health plan contract or health insurance policy unless the plan contract or policy covers EHBs. 3)Applies the provisions of this bill regardless of whether the plan contract or policy is offered inside or outside the California Health Benefit Exchange (Exchange). 4)States that a plan contract or health insurance policy subject to this bill shall also comply with state and federal requirements with regard to annual and lifetime limits on the dollar value of benefits. 5)States that this bill shall not be construed to prohibit a plan contract or policy from covering additional benefits, including, but not limited to, spiritual care services that are tax deductible under the Internal Revenue Service Code, as specified. SB 951 Page 3 6)Exempts a plan contract or health insurance policy that provides excepted benefits under the Public Health Service Act, and a plan contract or health insurance policy that qualifies as a grandfathered plan from some provisions of this bill. 7)States that this bill 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. EXISTING LAW : 1)Regulates health plans pursuant to the Knox-Keene Health Services Act of 1975 (Knox-Keene) at the Department of Managed Health Care (DMHC) and health insurers pursuant to the insurance code at the California Department of Insurance (CDI). 2)Defines "basic health care services" under Knox-Keene as: a) Physician services, including consultation and referral; b) Hospital inpatient services and ambulatory care services; c) Diagnostic laboratory and diagnostic and therapeutic radiologic services; d) Home health services; e) Preventive health services; f) Emergency health care services, including ambulance and ambulance transport services and out-of-area coverage, including services through the 911 emergency response system; and, g) Hospice care, as specified. 3)Establishes a variety of covered mandated benefits applicable to health plans and health insurers including benefits relating to breast cancer testing and treatment, cancer screening tests, cervical cancer screening, mammography, mastectomy and lymph node dissection length of stay, cancer clinical trials, prostate cancer screening, diabetes management and treatment, HIV/AIDS, Osteoporosis, Phenylketonuria, health parity for severe mental illness, and behavioral health treatment for autism and related disorders. 4)Establishes the Exchange to compare and make available through selective contracting health coverage to individuals and small SB 951 Page 4 businesses as authorized under the ACA. 5)Requires, under the ACA, a health insurance issuer that offers health insurance coverage in the individual or small group market to ensure that such coverage includes the EHB package, as specified. 6)Requires the federal Secretary of Health and Human Services (HHS) to define EHBs, except that such benefits are required to include at least the following general categories and the items and services covered within the categories: a) Ambulatory patient services; b) Emergency services; c) Hospitalization; d) Maternity and newborn care; e) Mental health and substance use disorder services, including behavioral health treatment; f) Prescription drugs; g) Rehabilitative and habilitative services and devices; h) Laboratory services; i) Preventive and wellness services and chronic disease management; and, j) Pediatric services, including oral and vision care. FISCAL EFFECT : According to the Senate Appropriations Committee, no additional costs to subsidize the costs of state benefit mandates for health plans sold in the Exchange. One-time costs to CDI of $120,000 in 2012-13 and $110,000 in 2013-14 for the review of health insurance policy filings (Insurance Fund). COMMENTS : 1)PURPOSE OF THIS BILL . According to the author, keeping in mind federal guidance issued to date and federal health care reform, this bill uses the following principles to guide the selection of California's benchmark EHB: recognize the importance of existing state-mandated benefits and incorporate as many state mandates as possible; protect California's commitment to reproductive services; embrace the consumer-oriented regulatory framework in place at the DMHC; and, maintain affordability for consumers. Using these principles and through a process of comparison, this bill selected the Kaiser Small Group HMO to serve as the state's benchmark plan. Beginning January 1, 2014, this bill would SB 951 Page 5 require individual and small group health care service plans and health insurance policy contracts, both inside and outside of the Exchange, to cover EHB. All services and benefits covered by the Kaiser Small Group HMO, as of the first quarter of 2012, will define EHB. These include the 10 categories identified above, as well as all state mandates enacted before December 31, 2011. HHS's Frequently Asked Questions for EHBs bulletin outlines three categories of benefits not included in many of the health insurance plans: a) pediatric oral services; b) pediatric vision services; and, c) 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. The Kaiser Small Group HMO covers pediatric vision services. The bill also requires habilitative services to be covered at parity with rehabilitative services provided by the Kaiser Small Group HMO. This bill further protects consumers by prohibiting plans from indicating or implying a contract or policy meets EHB unless it covers EHBs, as defined by the services and benefits covered by the Kaiser Small Group HMO, as of the first quarter of 2012. As required by federal law, this bill applies to both the individual and small group market, both inside and outside of the Exchange. This bill does not apply to self-insured group health plans, large group market health plans, or grandfathered health plans. 2)BACKGROUND . On December 16, 2011, the HHS Center for Consumer Information and Insurance Oversight 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 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, which is also the Kaiser HMO. EHBs must include coverage of services and items in all 10 statutory categories, but states can choose among the following benchmark health insurance plans: a) One of the three largest small group plans in the state by enrollment, in California these options are Anthem Preferred Provider Organization (PPO) licensed by CDI, SB 951 Page 6 Kaiser HMO licensed by DMHC, or Anthem PPO licensed by DMHC; b) One of the three largest state employee health plans by enrollment, in California these options are California Public Employees' Retirement System (CalPERS) Blue Shield Basic HMO, CalPERS Choice, or CalPERS Kaiser HMO; c) One of the three largest federal employee health plan options by enrollment, which are Government Employee Health Association, Blue Cross Blue Shield (BCBS) Basic, or BCBS Standard; or, d) The largest HMO plan offered in the state's commercial market by enrollment, which is the Kaiser Large Group Commercial HMO. 3)MILLIMAN ANALYSIS . In January 2012, the Exchange retained Milliman Inc., to analyze and compare the health services covered by the 10 EHB California benchmark plans. Milliman found all the plans to be comprehensive and found there to be only a very small cost difference between the plan choices. Milliman set as the baseline the minimum coverage for all services available in the 10 plans. This was set at 100%. Each plan was compared to the baseline and given a differential percentage. According to the analysis, the range in estimated plan costs associated with the EHB benchmark plan options is about 2.36% (101.87% to 104.23%). Given this very small range, cost differences between the options do not appear to be an influential factor. 4)SUPPORT . Many organizations have expressed support for this bill. The California Speech-Language Hearing Association supports the speech therapy and other habilitative services provisions of this bill. The California Psychiatric Association supports this bill because it includes severe and non-severe mental illness as well as substance abuse as EHBs. SEIU California believes the Kaiser Small Group HMO is a solid choice for California. The California Pan-Ethnic Health Network is pleased that the plan is governed by Knox-Keene because it ensures a comprehensive package of medically necessary basic health services. The California Association for Behavior Analysis believes this bill provides much needed clarity on the minimum coverage which must be offered beginning 2014, particularly with regard to behavioral health treatment, which includes applied behavior analysis for autism or pervasive developmental disorder. The Congress of California Seniors supports efforts to create a benchmark SB 951 Page 7 listing of EHBs for California health plans as required by ACA. Planned Parenthood Affiliates of California indicates that their preliminary analysis of the Kaiser Small Group HMO is positive, including that preventive services such as family planning counseling, well woman exams, cancer screenings, and prenatal care are specifically identified as covered services with no cost sharing. Consumers Union supports the codification of EHB standard based on upon the most popular small group plan in California. The California Optometric Association applauds recent amendments to supplement pediatric vision with the FEDVIP which will allow coverage for corrective lenses for children. While in support of this bill, Children Now expresses concerns with possibilities to select California's Healthy Families Program dental plan standard as the pediatric dental benchmark, and suggests clarifying coverage for medically necessary orthodontic treatment should such amendment be adopted. Children Now also requests clarifications on mental health coverage for children, definition of habilitative, and coverage of hearing aids. The National Alliance on Mental Illness supports this bill because it provides an adequate floor for benefits and it is a good starting point. 5)SUPPORT WITH CONCERNS . While acknowledging that guidance is still not out on cost-sharing, the Western Center on Law and Poverty (Western Center) wants to ensure that the cost-sharing components of the Kaiser Small Group HMO plan are not adopted in the EHB standard because $400 per day hospital inpatient co-pays shouldn't be the basis for structuring cost-sharing. Western Center is also concerned that this bill does not explicitly address benefit substitution and insurer flexibility. Western Center requests an amendment to say that plans cannot substitute coverage of services even if such substitutions are actuarially equivalent. Planned Parenthood is also concerned about cost sharing and substitution of benefits. The Council of Acupuncture and Oriental Medicine Associations is pleased that this bill recognizes acupuncture as an EHB and requires acupuncture for treatment of pain and nausea in the individual and small group market but feels this is limiting and prevents acupuncture for neuromusculoskeletal and smoking abstinence. Health Access California (HAC) supports establishing EHBs and believes that the decision that is made will remain in place for several decades. HAC supports the Kaiser Small Group HMO SB 951 Page 8 selection at this time. However, HAC remains concerned that the Insurance Code framework in existing law allows insurers to impose dollar and visit limits on outpatient care or hospital stays, deny access to prescription drugs for which there is no therapeutic equivalent or substituting one benefit for another. HAC seeks an amendment to require the following provision to be included in the Health and Safety Code 1367.005 and Insurance Code 10112.27:The services and benefits described in this paragraph shall be covered to the extent they are medical necessary.Medically necessary or appropriate services and benefits described in this section shall be covered, subject to cost sharing approved by the director and any limitation consistent with this paragraph. HAC also requests an enhancement of the definition of habilitative to include services for degenerative conditions such as multiple sclerosis, Amyotrophic Lateral Sclerosis, Alzheimer's, and other conditions for which current medical science can slow the rate of decline or minimize but does not allow individuals to "keep, learn or improve skills and functioning." HAC suggests the following amendment: Habilitative services: means health care services that help a person keep, learn, or improve skills and functioning for daily living and that help a person to slow, minimize or reduce the loss of skills and functioning for daily living. HAC also requests amendments in legislation this year to add consumer protections to the Insurance Code related to network adequacy, access to specialists, out of network emergency room care, balance billing for out of network emergency service, timely access to care, prior approval of changes to cost sharing and covered benefits, and standards for prescription drug coverage. 6)SUPPORT IF AMENDED. The National Health Law Program (NHeLP) requests several amendments such as broader coverage for children in order to access mental health services than are permitted in the Kaiser plan so that children do not have to wait until conditions worsen to the "severe emotionally disturbed" threshold required by Kaiser. NHeLP would like an amendment to address a 24-month waiting period for orthodontic SB 951 Page 9 services which exists in the Met Life (FEDVIP) plan, and requests a restriction on benefit substitutions. NHeLP is concerned that there is not much information about Kaiser's rehabilitative services and requests that habilitative service not be covered in the same way as rehabilitative as the bill requires, and NHeLP requests using the Medicaid definition of "habilitative services" which is: Habilitiative services: means services designed to assist individuals in acquiring, retaining, and improving the self-help, socialization, and adaptive skills necessary to reside successfully in home and community-based settings, including prevocational, educational, and supported employment services. 7)OPPOSE UNLESS AMENDED . The California Chiropractic Association asks that the Legislature reexamine the possible choices for an EHB plan to select one that includes chiropractic benefits. The California Association of Alcohol and Drug Program Executives respectfully requests that this bill be amended to assure that California's EHB package is in compliance with ACA and the federal parity requirements specified in the Paul Wellstone-Pete Domenici Mental Health Parity and Addiction Equity Act of 2008. 8)RELATED LEGISLATION . a) SB 615 (Calderon) prohibits multiple employer welfare arrangements (MEWAs) from offering, issuing, selling or renewing health coverage benefits unless the MEWA discloses whether the benefits constitute minimum essential coverage as defined by the ACA. SB 615 is pending in the Assembly Health Committee. b) SB 1321 (Harman) requires the Exchange to select the plan with the lowest EHB cost to be the set benchmark for the definition of EHBs. SB 1321 failed passage in the Senate Health Committee. c) AB 1453 (Monning) selects the Kaiser Small Group HMO as California's benchmark plan to serve as the EHB standard, as required by federal law. AB 1453 is pending before the Senate Appropriations Committee. d) AB 1738 (Huffman) requires health plan contracts and SB 951 Page 10 health insurance policies issued, amended, renewed, or delivered on or after January 1, 2013, to provide coverage for two courses of treatment in a 12-month period for tobacco cessation preventive services rated "A" or "B" by the United States Preventive Services Task Force, and would prohibit plans and insurers from charging a copayment, coinsurance, or deductible for those services. AB 1738 was held by the author in the Assembly Health Committee. e) AB 1800 (Ma) requires, commencing January 1, 2013, a health plan contract, and a health insurance policy, to provide for a limit on annual out-of-pocket expenses for all covered benefits, and specifies that this limit shall not exceed federal limits. AB 1800 is pending in the Senate Appropriations Committee. f) AB 1000 (Perea) requires a health plan contract or health insurance policy that provides coverage for cancer chemotherapy treatment to establish limits on enrollee out-of-pocket costs for prescribed, orally administered, nongeneric cancer medication. AB 1000 is pending in the Senate Appropriations Committee. g) AB 154 (Beall) requires health plans and health insurers to cover the diagnosis and medically necessary treatment of a mental illness, as defined, of a person of any age, with specified exceptions, and not limited to coverage for severe mental illness as in existing law. AB 154 was held by the author in the Senate Health Committee. h) AB 171 (Beall) requires health plans and health insurers to cover the screening, diagnosis, and treatment of pervasive developmental disorder or autism. AB 171 was held by the author in the Senate Health Committee. i) AB 137 (Portantino) requires health plan contracts and health insurance policies that are issued, amended, delivered, or renewed, on or after July 1, 2013, to provide coverage for mammography for screening or diagnostic purposes upon referral by a health care professional, based on medical need, regardless of age. AB 137 is pending in the Senate Appropriations Committee. j) AB 369 (Huffman) prohibits health plans and health insurers that restrict medications for the treatment of SB 951 Page 11 pain from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or its generic equivalent, prescribed by his or her physician. AB 369 is pending in the Senate Appropriations Committee. 9)POLICY COMMENT . As indicated, federal regulations have not yet been issued on EHBs. Absent federal guidance, policy staff and stakeholders are working to craft an EHB benchmark that is workable in California. Stakeholders have commented on provisions of this bill including the definition of habilitative, implication of medical necessity, mental health and substance abuse parity, benefit substitutions, pediatric oral coverage, and other issues. The author and the Assembly Health Chair, through committee staff, have been working with stakeholders to work through these issues. Amendments are being developed but are not ready at this time. REGISTERED SUPPORT / OPPOSITION : Support 100% Campaign Association of Regional Center Agencies Autism Speaks California Academy of Child and Adolescent Psychiatry California Association for Behavioral Analysis California Council of Community Mental Health Agencies California Coverage & Health Initiatives California Optometric Association California Pan-Ethnic Health Network California Primary Care Association California Psychiatric Association California Speech-Language Hearing Association Children NOW Children's Defense Fund - California Consumers Union Greenlining Institute Health Access Jacob's Institute of Women's Health Mental Health America of California NAMI California SB 951 Page 12 Planned Parenthood Affiliates of California SEIU California The Children's Partnership United Ways of California Opposition None on file. Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097