BILL ANALYSIS Ó
SB 951
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 951 (Hernández) - As Amended: April 16, 2012
Policy Committee: HealthVote:11-5
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires, effective January 1, 2014, all health plans
and policies in the individual and small group markets to cover
minimum "essential health benefits" (EHBs), defines the Kaiser
Small Group Health Maintenance Organization (HMO) plan contract
as California's Essential Health Benefits (EHB) benchmark plan,
and clarifies several standards that plans and policies must
meet with respect to EHBs.
This bill also specifies it shall be implemented only to the
extent that federal law or policy does not require the state to
cover the costs of benefits included within the definition of
EHBs.
FISCAL EFFECT
1)Significant costs will be incurred by the Department of
Managed Health Care (DMHC) and the California Department of
Insurance (CDI) to ensure compliance with EHB standards and
respond to a changing health care marketplace under federal
law. The costs listed below reflect the costs that will be
incurred based on the imposition of minimum EHB standards. It
is difficult to separate the regulatory and compliance costs
related specifically to this bill from those the state would
incur in absence of this bill.
2)Costs to the DMHC (Managed Care Fund) of $600,000 over the
next three years to review compliance with this bill, to issue
regulations, and to handle increased phone calls and consumer
complaints.
3)Costs to the CDI (Insurance Fund) of $400,000 over the next
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three years to review compliance with this bill and review
rate filings for premium changes resulting from this
alteration in benefits.
4)CDI will incur additional one-time costs estimated at $1.5
million (Insurance Fund) to conduct review premium rates for
reasonableness in an highly dynamic market environment.
5)This bill responds to pre-regulatory federal guidance. We
assume 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 (as explained further below).
However, given this bill includes protective language that
requires the 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 related to benefits
that exceed EHBs. There could be minor legal costs to CDI and
DMHC to make this determination.
COMMENTS
1)Rationale . This bill sets minimum standards for EHBs in
California in response to guidance from the federal Health and
Human Services Agency guidance issued pursuant to the federal
Patient Protection and Affordable Care Act (ACA). The author
indicates that 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.
d) Maintaining affordability for consumers.
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Through a process of comparison to these principles, other
available plan choices were eliminated and the Kaiser Small
Group HMO was chosen.
The author believes, 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 with corresponding consumer protections, and
while the cost differentials among all of the options are not
significant, this plan falls in the middle.
1)Health Care Coverage in the ACA . Broadly speaking, the ACA
attempts to craft a system whereby individuals are guaranteed
access to affordable health care coverage either through
existing public programs, through their employers, or by
purchasing coverage in the individual market. The ACA also
sets up state-based exchanges, health care coverage
marketplaces where individuals and small businesses will be
offered a variety of comprehensive plan options for purchase,
beginning in 2014. For individuals in families with incomes
below 400% of the federal poverty level who don't qualify for
Medicaid, federal subsidies will be available for purchase of
health care coverage through exchanges.
2)EHBs . After 2013, the ACA requires health plans offered in
the individual and small group markets, both inside and
outside of the exchanges, to offer a comprehensive package of
items and services. These EHBs must include items and services
within 10 defined categories of benefits.
Each plan will have to cover EHBs and comply with
out-of-pocket maximums, but depending on the cost-sharing
structure, plans could still vary dramatically in their
premiums and out-of-pocket costs for copayments, deductibles,
or coinsurance. Cost-sharing is not included or defined in the
EHB definition. The ACA also requires all individuals to
maintain "minimum essential coverage" which generally includes
EHBs.
3)State Flexibility to Define EHBs . The ACA gives the federal
Secretary of Health and Human Services the authority to define
EHBs. Despite this authority to define a nationwide standard,
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a pre-regulatory bulletin released in mid-December 2011
suggests that HHS intends to allow states flexibility to
define a state-specific EHB package. According to this
bulletin and a related Frequently Asked Questions document,
states will be allowed to define EHBs by reference to a
package of benefits available in a benchmark plan. The
benchmark plan would have to be chosen from a list of the most
popular plans by enrollment, and would serve as that state's
initial EHB definition through 2015. This bill defines the
Kaiser Small Group HMO as the benchmark plan. It should be
noted that the HHS bulletin is federal guidance on HHS's
intended approach, but is not, at this time, a formal notice
of proposed rulemaking.
4)Analysis of Benchmark Plans . The California Health Benefit
Exchange (the Exchange) contracted with Milliman, an actuarial
firm, to perform a comparative study of the various benchmark
plan choices, including the costs of each plan relative to the
others. The study concluded all potential benchmark plans
were fairly comprehensive, and that total cost differences
based on the package of benefits were fairly minor.
5)State Mandates . The ACA requires states to bear costs related
to state-mandated benefits that exceed the EHBs.
Specifically, if California law mandates health plans subject
to EHB standards to offer additional benefits that go beyond
the EHBs, then the state must pay to defray the cost of those
additional benefits on behalf of each individual subject to
the mandate. This bill includes two provisions related to
required habilitative services and medical necessity standards
that could potentially go beyond federal requirements, but it
also specifies these provisions shall be implemented only to
the extent that federal law or policy does not require the
state to cover, or defray, the costs of benefits included
within the definition of essential health benefits.
HHS's proposed benchmark approach allows the states to avoid
paying for mandated benefits that exceed the EHB, at least for
2014 and 2015. The state will essentially be able to define
EHBs as those benefits included in the benchmark plan. Since
this bill defines the benchmark plan as a small-group plan
that is subject to state mandates, the state will not need to
pay for the extra benefits. If another benchmark plan were
chosen-one that was exempt from state mandates, such as the
federal employee health plan-plans offered through the
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Exchange would still be mandated to provide benefits, and the
state would have to pay to defer the cost of those benefits
The HHS guidance gives notice that it may cease to cover some
state-mandated benefits beginning in 2016.
6)Concerns . The California Association of Health Plans (CAHP)
has concerns related to the definition of the term
"habilitative." CAHP believes that the term must be defined
carefully in order to exclude services that are not medical
services. The California Association of Alcohol and Drug
Program Administrators believes the benchmark plan chosen in
this bill does not ensure full mental health parity. The
author indicates he is considering further amendments to
refine definitions and address stakeholder concerns.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081