BILL ANALYSIS Ó AB 1764 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 1764 (Waldron) - As Amended May 3, 2016 ----------------------------------------------------------------- |Policy |Health |Vote:|13 - 1 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: Effective July 1, 2017, this bill requires the California Health Benefit Review Program (CHBRP) to examine the impact of coverage, or repeal of coverage, on projected medium-term costs or savings for either two years or, if applicable, five years. AB 1764 Page 2 Implementation is contingent upon reauthorization of the chapter establishing CHBRP, which will sunset under current law sunset July 1, 2017. FISCAL EFFECT: Assuming CHBRP and its revenue source are extended and the provisions of this bill take effect, this bill could result in an increase in modeling, analytic efforts, actuarial, staff and faculty time, resulting in the following: 1)One-time costs to CHBRP of $200,000 to develop and test a customized Cost Simulation Model (CSM). 2)An estimated $340,000 per year for staff and contract costs to add the additional projections for each bill CHBRP analyzes. The fund source for additional funding is uncertain, as the current funding only provides up to $2 million from an assessment on health plans and insurers (Health Care Benefits Fund). The increased costs would result in cost pressure to increase the assessment. Otherwise, this bill would result in less funding available for CHBRP's other duties in order to stay within the $2 million annual appropriation. COMMENTS: 1)Purpose. According to the author, limiting savings and cost estimates to a 12-month period does not accurately reflect the benefits or impacts of the covered therapy. For example, the AB 1764 Page 3 author notes treatment with high-cost drugs may show substantial savings-from reduced hospitalization, for example- that manifest after 12 months. This bill is author-sponsored. 2)CHBRP. Housed in the University of California Office of the President, CHBRP responds to legislative requests to provide independent analysis of the medical, financial, and public health impacts of bills proposing to mandate - or repeal a mandate for-coverage of health insurance benefits. A small analytic staff works with a task force of faculty from several UC campuses, as well as actuarial consultants, to analyze bills, usually before the Legislature begins formal consideration of such bills. With respect to costs, CHBRP generally projects the cost for the 12-month period in which the mandate is implemented. CHBRP comments on potential long-term impacts when there is significant evidence supporting such impacts. 3)CHBRP Comments. CHBRP notes the dynamism of health insurance design, and states holding factors such as technology, regulation, population covered constant for a near-term projection is reasonable. With respect to long-term projections, CHBRP notes numerous factors-take-up rates, advances in practice patterns, technology adoption, policy or regulatory changes- can have massive and unpredictable impacts. They also note they would need to create and implement a simulation model for fiscal impacts (or savings) that can reliably project up to 5 years. 4)Prior legislation. AB 1764 Page 4 a) SB 125 (Hernández), Chapter 9, Statutes of 2015, extends the sunset of the California Health Benefits Review Program (CHBRP) for two years to June 30, 2017, and extends the existing assessment on health plans and health insurers to support the program. b) AB 1996 (Thomson), Chapter 795, Statutes of 2002, requested the UC to create CHBRP. Two prior bills have extended CHBRP's sunset, one in 2002 and one in 2009. 1)Staff Comment. UC is required to submit a report to the Legislature and the Governor by January 1, 2017 on implementation of CHBRP's mandate. The CHRBP provisions are also set to expire on July 1, 2017. Furthermore, this bill is contingent on a sunset extension. Thus, it seems logical to consider an expansion of duties in context of a CHBRP sunset extension. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081