BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                  SB 1182
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          Date of Hearing:  August 26, 2014

                            ASSEMBLY COMMITTEE ON HEALTH
                                 Richard Pan, Chair
                    SB 1182 (Leno) - As Amended:  August 22, 2014

           SENATE VOTE  :  21-12
          SUBJECT  :  Health care coverage: rate review.

           SUMMARY  :  Requires health plans and insurers to share specified  
          data with large group purchasers that have 1,000 or more  
          enrollees or that are multiemployer trusts.  Specifically, this  

          1)Requires a health plan or insurer annually to provide  
            de-identified claims data at no charge to a large group  
            purchaser upon request, if the purchaser is able to  
            demonstrate its ability to comply with state and federal  
            privacy laws and is either an employer with enrollment of  
            greater than 1,000 covered lives or a multiemployer trust.  

          2)Requires health plans and insurers to obtain a determination  
            by a qualified statistician that the claims data do not  
            provide a reasonable basis from which to identify an  
            individual.  Prohibits data that a statistician is unable to  
            determine has been de-identified to be shared under this bill.  
             Allows a health plan to provide the claims data in an  
            aggregated form as necessary to comply with state and federal  
            privacy laws.

          3)Requires a health plan or insurer, as an alternative to  
            providing claims data under 1) above, to provide:   
            de-identified aggregated data sufficient for the purchaser to  
            compare costs of similar services from other health plans or  
            insurers; and de-identified aggregated patient level data that  
            include demographics and encounter data, including data used  
            to experience rate the group, as specified.  Requires the  
            health plan or insurer, for purposes of this requirement, to  
            obtain a formal determination, in writing, from a qualified  
            statistician that the shared data do not provide a reasonable  
            basis from which to identify an individual.


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          4)Prohibits health plans and insurers from disclosing their  
            contracted rates with providers to purchasers under this bill.

          5)Makes the information shared not subject to public  
            availability, as specified.  Deems data shared under this bill  
            confidential information that shall not be shared by state  
            regulators and is exempt from disclosure under the California  
            Public Records Act.

          6)Requires all disclosures of data under this bill to comply  
            with the federal Health Insurance Portability and  
            Accountability Act of 1996 (HIPAA), the federal Health  
            Information Technology for Economic and Clinical Health Act,  
            and the California Confidentiality of Medical Information Act  

           EXISTING LAW  : 

          1)Establishes regulation of health plans by the Department of  
            Managed Health Care and health insurers by the California  
            Department of Insurance.  

          2)Prohibits a health plan from releasing any information to an  
            employer that would directly or indirectly indicate to the  
            employer that an employee is receiving or has received  
            services from a health care provider covered by the plan  
            unless authorized to do so by the employee.  Prohibits an  
            insurer that has, pursuant to an agreement, assumed the  
            responsibility to pay compensation, as specified, from being  
            considered an employer.  States that nothing in this provision  
            prohibits a health plan from releasing relevant information  
            for the purposes of fraud prevention, as specified.

          3)Establishes HIPAA under federal law, which among various  
            provisions, mandates industry-wide standards for health care  
            information on electronic billing and other processes; and  
            requires the protection and confidential handling of protected  
            health information.

          4)Establishes CMIA under state law, which governs the disclosure  


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            of medical information by health care providers, regulated  
            plans, health care clearinghouses, and employers.

           FISCAL EFFECT  : This bill, as amended, has not been analyzed by a  
          fiscal committee.

           COMMENTS  :

           1)PURPOSE OF THIS BILL  .  The author writes the rising cost of  
            health care is a major concern for employers in California,  
            and the lack of transparency in pricing for the large group  
            market has contributed to uncontrolled cost increases for  
            large employers and union trusts.  According to the 2014  
            California Employer Health Benefits Survey, health premiums in  
            California rose by 185% since 2002, more than five times the  
            state's overall inflation rate.  In addition, one in four  
            California employers reported that they reduced benefits or  
            increased employee cost sharing in the last year because of  
            the rising cost of health care.  This bill is intended to  
            further transparency efforts and protect large employers and  
            their employees and dependents from unjustifiable rate  
            increases through transparency.

           2)BACKGROUND  .  

             a)   Health care premiums in the group market.  The Medical  
               Expenditure Panel Survey (MEPS) insurance component is a  
               survey of business establishments and governments that  
               collects information on employer-sponsored health  
               insurance, such as whether insurance is offered,  
               enrollments, types of plans, and premiums.  The survey is  
               conducted annually by the U.S.  Census Bureau under the  
               sponsorship of the Agency for Healthcare Research and  
               Quality (AHRQ).  MEPS data tables from 2012 show average  
               annual premiums for private sector employer coverage in  
               California of $5,422, compared with premiums of $2,936 in  
               2002, an 85% increase, or an average 6.3% yearly increase.   
               For family coverage, premiums increased from $8,380 in 2002  
               to $15,898 in 2012, a 90% increase, or an average 6.6%  
               yearly increase.  For comparison, prices for goods and  
               services increased 27.6%, an average yearly rate of about  
               2.5%, between 2002 and 2012, according to the Bureau of  
               Labor Statistics' Consumer Price Index.


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             b)   Market segments and employer-based coverage.  According  
               to estimates by the California Health Benefits Review  
               Program (CHBRP), the large group health insurance market in  
               California includes 11.8 million enrollees, compared to the  
               small and individual groups, which, combined, include 6.6  
               million.  However, there are indications that the group  
               market is eroding.  A recent survey by the California  
               HealthCare Foundation indicates the proportion of  
               California employers offering coverage has declined  
               significantly over the last decade, from 69% in 2000 to 61%  
               in 2013.  Coverage is offered to employees at a higher rate  
               at larger firms, firms with higher wages, and firms with  
               some union workers.  California workers paid an average of  
               22% of the total premium for single coverage and 33% for  
               family coverage in 2013, significantly higher shares than  
               in the previous year.  California's HMO premiums have been  
               higher than the national average since 2010, a shift from  
               the previous decade.  Nearly one-third of covered workers  
               in small firms had a deductible of $1,000 or more for  
               single coverage in 2013, up from just 7% in 2006.  In large  
               firms, only 9% had a deductible of $1,000 or more.  One in  
               four California firms reported that they reduced benefits  
               or increased cost sharing in the last year.  California  
               employers viewed consumer directed health plans, disease  
               management, and changes in care delivery and payment as the  
               most effective at controlling health care costs.

             c)   De-identification of health information under HIPAA.   
               Federal HIPAA regulations lay out standards for the  
               de-identification of protected health information, which  
               involves removing identifiers from health information to  
               protect individual privacy and allow for the use of health  
               information for other purposes.  The federal standards  
               provide two ways for health information to be  
               de-identified, known as the "expert determination" method  
               and the "safe harbor" method.  Under the expert  
               determination method, information may be considered  
               de-identified if an expert with knowledge of statistical  
               and scientific methods of de-identification determines and  
               documents that the risk is very small that information  
               about an individual could be used to identify the  
               individual.  Under the safe harbor method, information may  


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               be considered de-identified if a specified set of  
               identifiers is removed, including:  names, geographic  
               locations (except state, and, in certain cases, the initial  
               three digits of a zip code), dates (except year), telephone  
               numbers, social security numbers, medical record numbers,  
               and numerous other identifiers.  

             This bill creates a stronger requirement for  
               de-identification by requiring a qualified statistician to  
               certify that data has been de-identified.  This requirement  
               is in addition to the requirement that sharing of  
               information comply with HIPAA.  This creates a higher  
               standard of de-identification to ensure that individuals  
               are protected from any potential adverse actions by an  
               employer based on their health status.

           3)SUPPORT  .  The California Labor Federation (Labor Fed), a  
            cosponsor of this bill, writes that rising health care costs  
            are taking a toll on employers, workers, and union trust  
            funds.  The Labor Fed contends that premiums for employer  
            health insurance plans have risen 185% since 2002, more than  
            five times the increase in the state's overall inflation.  The  
            Labor Fed argues every dollar that large purchasers have to  
            put toward health coverage is a dollar that comes out of  
            workers' pockets.  The Labor Fed argues that this bill's  
            requirement for health plans to disclose claims data to large  
            purchasers will help those purchasers understand health care  
            cost drivers, institute cost savings programs, and bargain  
            effectively with health plans.  

          UNITE HERE, AFL-CIO, also a cosponsor, describes programs in Las  
            Vegas, Atlantic City, and New York City that have met the  
            triple aim of slowing cost increases, improving care quality,  
            and improving the health of members.  UNITE HERE states this  
            goal was achieved by intense management of the care of members  
            and careful design of benefits to meet low wage workers'  
            needs.  In Las Vegas, health care costs were reduced by $67  
            million over 18 months while outcomes were improved by  
            eliminating copays for diabetes care, working with casinos to  
            provide healthy meals, and intense diabetes care management.   
            The result, according to UNITE HERE, was a wage increase for  
            its members, a strike avoided, and better health for workers.   
            UNITE HERE argues that its attempts to implement similar  


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            strategies in California have been stymied by Kaiser  
            Permanente and other HMOs, which would not provide robust and  
            timely patient-level data needed to design care management  
            programs.  UNITE HERE further states it has worked with the  
            American Civil Liberties Union to assure the data sharing  
            requirements in this bill protect the privacy of workers,  
            creating patient privacy protections that are stronger than  
            federal requirements.

          Numerous unions, in support, attest that some of their trust  
            funds spend more per hour on health benefits than the San  
            Francisco minimum wage, a situation that is outrageous and  
            unsustainable.  These supporters write this bill will help  
            them determine whether health plans are shifting costs from  
            the individual and small employer markets to large purchasers.  
             These supporters further state that, contrary to Governor  
            Brown's exhortation in his veto of SB 746 (Leno) of 2013, they  
            have not yet received the data necessary to analyze health  
            care costs.  

           4)OPPOSITION (PRIOR VERSION)  .  Kaiser Permanente, in opposition  
            to a prior version of this bill, argues that it currently  
            provides very robust information to its large group  
            purchasers, and suggests this bill inappropriately inserts the  
            Legislature into private and voluntary contractual discussions  
            between plans and purchasers.  The California Association of  
            Health Underwriters (CAHU), also in opposition to a prior  
            version, argues that health plans currently go to great  
            lengths to provide as much information as possible to all size  
            group purchasers to help them evaluate coverage options for  
            their workers in the highly competitive group market.  CAHU  
            argues this bill's data sharing requirements are not necessary  
            and that, by creating new administrative costs, this bill has  
            the potential to raise premium costs.

           5)RELATED LEGISLATION  .  

             a)   AB 1558 (Roger HernŠndez) creates the California Health  
               Data Organization within the University of California to  
               organize data provided by health plans and insurers on a  
               website to allow consumers to compare the prices paid for  
               procedures, as specified.  AB 1558 was held on the Senate  
               Appropriations Committee suspense file.  


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             b)   SB 746 (Leno) would have established new data reporting  
               requirements on all health plans applicable to products  
               sold in the large group market and established new specific  
               data reporting requirements, as well as claims data or  
               de-identified patient-level data, as specified, for a  
               health plan that exclusively contracts with no more than  
               two medical groups in the state to provide or arrange for  
               professional medical services for the enrollees of the plan  
               (referring to Kaiser Permanente).  SB 746 was vetoed by the  
               Governor.  In his veto message, the Governor stated:

                    This bill would require all health plans and  
                    insurers to disclose every year broad data  
                    relating to services used by large employer  
                    groups, including aggregate rate increases by  
                    benefit category.  The bill also requires that  
                    one health plan additionally provide anonymous  
                    claims data or patient level data upon request  
                    and without charge to large purchasers.  I  
                    support efforts to make health care costs more  
                    transparent, and my administration is moving  
                    forward to establish transparency programs that  
                    will cover all health plans and systems.  I urge  
                    all parties to work together in this effort.  If  
                    these voluntary efforts fail, I will seriously  
                    consider stronger actions.

             c)   SB 1322 (Ed Hernandez) creates the California Health  
               Care Cost and Quality Database to receive and report  
               information from all types of health care entities.  SB  
               1322 was held on the Assembly Appropriations Committee  
               suspense file.

             d)   SB 1340 (Ed Hernandez), Chapter 83, Statutes of 2014,  
               expands provisions related to gag clauses in contracts  
               between health plans or insurers and providers.  

           6)AUTHOR'S AMENDMENTS  .  The author has offered amendments to  
            address concerns raised by this bill's opponents.  
              a)   This bill currently provides that, if claims data cannot  
               be de-identified by a qualified statistician, the data  


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               shall not be shared.  However, there is no similar  
               requirement for aggregated data that may be shared as an  
               alternative to the sharing of claims data.  The author has  
               proposed to amend this bill to clarify that, if aggregated  
               data cannot be de-identified by a qualified statistician,  
               that data shall not be shared.
              b)   This bill currently includes a minimum threshold of  
               1,000 covered lives for employers that may receive data  
               under this bill and no minimum threshold for multiemployer  
               trusts that may receive data.  The author has proposed to  
               amend this bill to provide that data must be disclosed to  
               employers with at least 1,000 covered lives (at least 500  
               of which are covered under the disclosing health plan or  
               insurer) and multiemployer trusts with at least 500 covered  
               lives (at least 250 of which are covered under the  
               disclosing plan or insurer).

          California Labor Federation (cosponsor)
          California Teamsters Public Affairs Council (cosponsor)
          UNITE HERE (cosponsor)
          Alameda Labor Council
          Allen Temple Baptist Church
          American Federation of Musicians, Local 6
          American Federation of State, County, and Municipal Employees,  
          American Federation of State, County, and Municipal Employees,  
          Council 57
          American Federation of Teachers, Local 2121
          B.A.C., Local 3
          Berkeley Federation of Teachers
          California Alliance of Retired Americans
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Federation of Teachers, AFT, AFL-CIO
          California National Organization for Women
          California Nurses Association
          California Physical Therapy Association
          California Professional Firefighters


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          California Retired Teachers Association
          California School Employees Association
          California Teachers Association
          California Teamsters Public Affairs Council
          Campaign for a Health California
          Communications Workers of America, AFL-CIO, District 9
          Communications Workers of America, Retired Member Club, Local  
          Congress of California Seniors
          Consumer Federation of California
          Courage Campaign
          Democracy for America
          Engineers and Scientists of California, IFPTE Local 20, AFL-CIO
          Gray Panthers, San Francisco Chapter
          Health Access California
          Health Care for All California
          Health Care for All, Nevada Chapter
          Health Care for All, Santa Clara Chapter
          International Brotherhood of Electrical Workers, Local 332
          International Longshore and Warehouse Union
          International Longshore Workers and Warehouse Union Pensioners,  
          San Francisco/Bay Area
          Ironworkers Local 377
          Job with Justice, San Francisco
          Labor United for Universal Healthcare
          Laborers Local 261
          Los Rios College of Federation of Teachers
          Napa/Solano CLC
          National Nurses United
          National Union of Healthcare Workers
          Office and Professional Employees International Union Local 3
          Olallieberry Inn Bed and Breakfast, Cambria, California
          Older Women's League
          Portrero Hill Democratic Club
          Professional and Technical Engineers, IFPTE Local 21, AFL-CIO
          Progressive Democrats of America
          Progressive Voices
          Public Citizen
          Sacramento Central Labor Council
          San Diego Electrical Health and Welfare Trust
          San Francisco Building and Construction Trades
          San Francisco Central Labor Council


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          San Francisco Labor Council
          San Mateo Building and Construction Trades
          San Mateo Community College Federation of Teachers, AFT Local  
          San Mateo County Central Labor Council
          Service Employees International Union 1021
          Service Employees International Union 521 Retirees
          Services Employees International Union California
          Sheet Metal Workers' International Association, Local 104
          South Bay Labor Council
          State Building and Construction Trades Council of California
          UA Local 393
          UAW Local 5810
          UNITE/HERE, Local 2
          United Educators, San Francisco
          Utility Workers Union of America, Local 132

          America's Health Insurance Plans (prior version)
          Anthem Blue Cross (prior version)
          Association of California Life & Health Insurance Companies  
          (prior version)
          California Association of Health Plans (prior version)
          California Association of Health Underwriters (prior version)
          California Chamber of Commerce (prior version)
          Kaiser Permanente (prior version)

           Analysis Prepared by  : Ben Russell / HEALTH / (916) 319-2097