BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 951
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          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 
               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.


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             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 


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          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 

          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 
           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 

          2)Defines "basic health care services" under Knox-Keene as:
             a)   Physician services, including consultation and referral;
             b)   Hospital inpatient services and ambulatory care 
             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 


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            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 


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            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, 


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               Kaiser HMO licensed by DMHC, or Anthem PPO licensed by 
             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 


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            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 


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            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 


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            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 


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               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 


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               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.  



          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


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          Planned Parenthood Affiliates of California
          SEIU California
          The Children's Partnership
          United Ways of California


          None on file.

           Analysis Prepared by  :    Teri Boughton / HEALTH / (916) 319-2097