BILL ANALYSIS Ó
SB 746
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Date of Hearing: August 14, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 746 (Leno) - As Amended: August 6, 2013
Policy Committee: HealthVote:12-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires health care service plans to disclose
specified data on their large-group products. Specifically,
this bill:
1)Requires health care service plans to annually disclose to the
Department of Managed Health Care (DMHC) several categories of
aggregate data for products sold in the large group market,
including rate increases broken down by benefit category and
trends attributable to cost and utilization.
2)Allows a health care service plan that is unable to provide
certain data pursuant to (1) above, to instead provide
alternative categories of data, including data that is
comparable to that provided in (1), plus data on capital
investment, community benefit, and use of services by service
and disease category.
3)Requires a health care service plan that exclusively contracts
with no more than two medical groups in the state (Kaiser
Permanente (KP)) to provide claims data at no charge to a
large group purchaser upon request of the purchaser.
4)Requires, if claims data is not available pursuant to (3), the
plan to provide several alternative categories of
de-identified patient-level data.
FISCAL EFFECT
1)Costs to DMHC as follows (Managed Care Fund):
a) Minor costs to specify reporting templates, receive in
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the range of 15-20 new reports on aggregate data relevant
to the large-group market, and make reports publicly
available .
b) Costs to DMHC of approximately $165,000 over two years
to issue guidance and adopt regulations of a controversial
and complex nature.
c) Potential minor enforcement costs for violations of this
bill or arbitration between parties, or costs of
approximately $70,000 if a trial is required. Any trial
costs would likely be one-time or sporadic.
1)Cost pressure to the state of up to $300,000 annually for
CalPERS health plans associated with the provision specific to
KP requiring patient-level data to be provided to large-group
purchasers. This estimate assumes costs of compliance are
passed on to large-group customers in the form of a general
increase in administrative costs.
This bill will require significant administrative work for KP
to provide patient-level data sufficient to comply with its
provisions, given requirements to comply with privacy
standards. The bill also expressly prohibits KP from charging
large-group purchasers for this data. A CalPERS analysis
indicates to the extent KP is unable to pass on increased
costs to its other large group customers, this bill could
translate into increased costs for CalPERS in the form of
increased premiums and cost-sharing for CalPERS KP members.
KP estimates the cost of complying with this section at $7
million annually. CalPERS's proportionate share of this
administrative cost increase is approximately $500,000. Based
on the proportion of CalPERS health plan enrollees that are
state employees and dependents, $300,000 of this cost is
estimated to be a state cost, split between GF, federal, and
special funds. Cost pressure could be lower if fewer groups
request data or if compliance is simpler than KP estimates.
COMMENTS
1)Rationale . According to the author, certain large-group
purchasers feel they have little bargaining power when
negotiating health care rates with KP because KP does not
provide sufficient data to allow purchasers to understand and
manage rising health care costs. This bill refers to health
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plans that contract exclusively with no more than two medical
groups; at this time, only KP fits this criteria. This bill
mandates KP provide certain data to large-group purchasers
upon request.
Other sections of the bill require all health plans to submit
aggregate data about their rates for large-group plans to
DMHC, including utilization and cost trends. The author
believes this information will allow the public to assess if
costs are shifting from the individual/small group market to
the large group market, in light of increased regulatory
scrutiny of rates in the former. This bill is sponsored by
UniteHERE, a union representing workers in the hotel and food
service industry, and the United Food and Commercial Workers
Union, Western States Council, and the Teamsters Union.
2)Data Generated by Integrated Health Plans . Network-based
health care plans provide for health care services through
contracts with a network of hospitals and providers. In
contrast, integrated health plans provide a coordinated system
for the delivery of health care services. For example, KP
Health Plan contracts with a single KP hospital group and two
KP medical groups in a coordinated network to serve nearly 7
million Californians. Care at KP takes place in KP
facilities, which include hospitals as well as outpatient care
settings, pharmacies, laboratories, and other facility types.
These facilities are linked through sophisticated electronic
communication systems.
The model of care delivery has implications for the type of
health care data generated, as well as a plan's rate
development methodology. Network-based health care systems
generally pay claims to various categories of contracted
providers and thus can easily provide data on projected costs
and utilization trends by benefit category. A paid claim
generally has data on a specific patient, service, and the
amount paid. KP, however, does not pay claims, but instead
directly funds facilities and personnel adequate to meet the
demand for health services for their enrollees. KP indicates
it calculates rates and any year-over-year cost increase based
on the projected revenue needed to operate the delivery
system, provide services, and fund infrastructure and health
plan administration-then calculates an increase for the large
group segment as a whole. The rate for large groups is
further refined by underwriting based on experience and other
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factors specific to the group.
KP has provided data to DMHC on rate increases in the small
group and individual market, pursuant to SB 1163 (Leno),
Chapter 661, Statutes of 2010, similar to what is being
requested here for large group products. SB 1163 contains
special provisions that provide KP with some flexibility with
respect to data reporting. DMHC has indicated that although
they provide slightly different data than that of other health
plans, KP's reports pursuant to SB 1163 are at this point
adequate, from an actuarial standpoint, to justify rate
increases.
3)Data Provided to Large Employers . Approximately 520,000
CalPERS members are enrolled in the KP health plan, making it
KP's largest purchaser. Like this bill's sponsors, CalPERS has
had ongoing discussions with KP about data transparency,
comparability with other health plans, and justification for
rate increases. CalPERS indicates the information they
receive from KP as part of the rate negotiation and review
process is analogous to the employer data disclosure
requirements of this bill. CalPERS further states the cost of
providing this information in a usable format is included in
its plan rates. In addition to "encounter" data, which is
patient-level data on services (but not cost), the arrangement
CalPERS has with KP includes technical refinements that allow
CalPERS to funnel KP data into a sophisticated "data
warehouse" that also includes data from other health plans.
Such a system allows management-level comparisons and summary
reports, but comes at a significant cost to CalPERS.
KP has provided examples of detailed cost and health status
information given to all large group purchasers as part of
rate discussions. However, without the patient-level data
analogous to what CalPERS is provided, the data is not easily
comparable to what purchasers state they receive from other
plans, due to fundamental differences in rate development
methodology and internal record-keeping. The bill's sponsors
indicate that smaller groups of several hundred or thousand
lack bargaining leverage to require this level of data from KP
absent a statutory requirement.
4)Prior Legislation . SB 1163 requires health plans and health
insurers to file with the DMHC and the California Department
of Insurance specified rate information for individual and
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small group plans and policies at least 60 days prior to
implementing any rate changes. SB 1163 also requires filings
for large group plan contracts and policies for unreasonable
rate increases, as defined by federal guidance, prior to
implementing any such rate change. However, SB 1163
provisions related to large group plans are essentially
inoperative, given a lack of federal definition for
"unreasonable rate increase" for the large group market.
5)Opposition . Opponents, generally health insurance companies
and associations and business organizations, argue that this
bill sets a disturbing precedent as it would interfere and
essentially control private contracts between customers and
business. The Service Employees International Union - United
Healthcare Workers West (SEIU-UHW) is concerned this bill
unwittingly places KP at a market disadvantage when compared
to its competitors. KP writes in opposition that this bill is
over reaching and is an attack on the integrated model of care
delivery. KP asserts this bill attempts to insert legislative
process into a private, voluntary contract discussion between
Kaiser and one of their large group purchasers. KP indicates
this bill would reveal patient level data and even
deidentified data can be misused. KP believes this bill is
divisive and will erect unnecessary administrative barriers.
6)Policy Comments . The section of this bill that requires
certain health plans (i.e., KP) to provide data to large group
purchasers does not specify how it is to be enforced. In the
case of a dispute between KP and a purchaser over the adequacy
of data provided or other issues, DMHC would likely arbitrate
this dispute, given its broad enforcement authority for
violations of the Knox-Keene Act, the body of law governing
health care service plans. However, there is no established
mechanism for dispute resolution. The format of the data
required to be disclosed, and a process for resolving
disputes, would likely be addressed through DMHC regulation
and guidance.
In addition, it is unclear how the department could enforce
the requirement that disclosure of data be made no charge to
the large-group purchaser. KP has indicated that developing
patient-level data that comply with privacy requirements will
be costly for their system. It appears reasonable that any
increased administrative costs will be charged to their
large-group customers in some manner.
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Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081