BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 2004 --------------------------------------------------------------- |AUTHOR: |Bloom | |---------------+-----------------------------------------------| |VERSION: |May 31, 2016 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |June 29, 2016 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Teri Boughton | --------------------------------------------------------------- SUBJECT : Hearing aids: minors SUMMARY : Requires health insurers and health plans to cover hearing aids for enrollees under 18 years of age, including an initial assessment, new hearing aids every five years, and more frequently under specified circumstances. Existing law: 1)Provides for the regulation of health plans by the Department of Managed Health Care (DMHC) and regulation of health insurers by the California Department of Insurance (CDI). 2)Establishes as California's essential health benefits (EHBs) the Kaiser Small Group HMO plan along with the following 10 federally mandated benefits under the Patient Protection and Affordable Care Act (ACA) as well as other state mandated benefits: 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. 3)Defines "Habilitiative Services" as health care services and AB 2004 (Bloom) Page 2 of ? devices that help a person keep, learn, or improve skills and functioning for daily living. Examples include therapy for a child who is not walking or talking at the expected age. These services may include physical and occupational therapy, speech-language pathology, and other services for people with disabilities in a variety of inpatient or outpatient settings, or both. 4)Extends emergency regulation authority for DMHC and CDI and makes this authority inoperative on July 1, 2018. 5)Establishes federal and state-based market places or health benefit exchanges, under the ACA, such as Covered California, which makes individual and small group health insurance products available for purchase. Covered California also administers federal premium subsidies and cost-sharing reductions to help qualified purchasers afford health insurance purchased through Covered California. 6)Requires, under section 1311 of the ACA, a state to make payments to or on behalf of an individual eligible for the premium subsidies and any cost-sharing reduction to defray the cost to the individual of any additional benefits which are not eligible for such credit or reduction under the ACA. 7)Prohibits, under section 1557 of the ACA, discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. This bill: 1)Requires a health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2017, to include coverage for hearing aids for all enrollees under 18 years of age, when medically necessary. 2)Requires coverage for hearing aids to include an initial assessment, new hearing aids at least every five years, new ear molds, new hearing aids if alterations to existing hearing aids cannot meet the needs of the child, a new hearing aid if the existing one is no longer working, fittings, adjustments, auditory training, and maintenance of the hearing aids. 3)Defines "hearing aid" as an electronic device usually worn in or behind the ear of a deaf and hard of hearing person for the purpose of amplifying sound. AB 2004 (Bloom) Page 3 of ? 4)Exempts Medicare supplement, dental-only, vision-only health plan contracts and health insurance policies. 5)Requires this bill to become inoperative if DMHC or CDI receives a notification from the federal Centers for Medicare and Medicaid Service (CMS) or any other applicable federal agency that this bill constitutes a discriminatory age limitation under federal law and the state is required to defray the costs of requiring a plan contract to include coverage for hearing aids on behalf of enrollees who are 18 years of age or older pursuant to Section 1311 of the ACA. 6)Requires this bill to become inoperative 30 days after DMHC executes a declaration, retained by the director or insurance commissioner, stating that DMHC or CDI received the notification described in 5) above. Requires the director or insurance commissioner to post the declaration on the DMHC or CDI website, and send the declaration to the appropriate committees of the Legislature and Legislative Counsel. 7)Sunsets this bill on January 1, 2019. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)According to the California Health Benefits Review Program (CHBRP): a) No cost to Medi-Cal (General Fund (GF)/federal) nor California Public Employees' Retirement System (CalPERS), as hearing aids are already covered; and, b) Increased employer-funded premium costs in the private insurance market of approximately $13 million. lxxxxx) Increased premium expenditures by employees and individuals purchasing insurance of $7.1 million, and reduced total out-of-pocket expenses of $16.5 million (based on $19.5 million in newly covered benefits, offset by cost-sharing of $3 million). cccclxxxxx) These costs would only be incurred for the operative date of the mandate, until January 1, 2019, assuming coverage was no longer provided. AB 2004 (Bloom) Page 4 of ? 1)Minor costs to CDI (Insurance Fund) and DMHC (Managed Care Fund) to verify plans and insurers comply with this requirement. 2)This bill is likely to exceed the EHB and result in a cost to the state to defray expenditures on behalf of enrollees in Covered California plans to which this mandate would apply. This essentially means the state would pay for hearing aids on behalf of anyone enrolled in Covered California. These costs could be as high as $1.8 million GF for 2017 and 2018, assuming costs must be defrayed for small-group and individual enrollees in Covered California plans. The mandate expires in 2019 and the state would not incur costs to defray the costs of exceeding EHBs beyond this date. 3)Recent state regulatory action in other states indicated a broad federal ban on age discrimination in insurance coverage invalidates age limits for coverage of hearing aids. If similar logic applied in California, the state would be required to pay for hearing aids for adults as well. Federal regulations issued on May 16, 2016 clarifying antidiscrimination provisions do not apply to state mandates may resolve this concern. PRIOR VOTES : ----------------------------------------------------------------- |Assembly Floor: |69 - 6 | |------------------------------------+----------------------------| |Assembly Appropriations Committee: |16 - 2 | |------------------------------------+----------------------------| |Assembly Health Committee: |16 - 0 | | | | ----------------------------------------------------------------- COMMENTS : 1)Author's statement. According to the author, a child's ability to hear should not be determined by their family income. It should be viewed as a fundamental right of choice to the citizens of our state. Yet here in California, the overwhelming majority of private insurance companies do not AB 2004 (Bloom) Page 5 of ? cover the cost of hearing aids, forcing families to either forgo these medically-necessary devices for their children or pay the full cost of hearing aids and hearing aid services out of their own pockets. Hearing aids have been shown to mitigate the effects of hearing loss and improve speech and language outcomes in children; these outcomes are better the earlier a child begins using a hearing aid. Hearing aids, however, also come with a steep financial cost. Pediatric hearing aids cost thousands of dollars and must be accompanied by a number of "hearing aid services" including hearing aid assessments, replacement hearing aids and ear molds, fittings, and maintenance. Cumulatively, hearing aids and hearing aid services cost an average of $3,500 and cost is the most significant barrier to parents obtaining pediatric hearing aids. AB 2004 will ensure that all California children, regardless of income or background, have health insurance coverage for hearing aids. 2)CHBRP analysis. AB 1996 (Thomson, Chapter 795, Statutes of 2002), requests the University of California assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed health plan and health insurance benefit mandate legislation. CHBRP was created in response to AB 1996, and analyzed this bill. Key findings include: a) Coverage impacts and enrollees covered. Approximately 53.2% of enrollees aged 10 to 17 years in California already heave health insurance compliant with this bill. This is because 100% of children in publicly funded health insurance products have coverage for hearing aids and services. Only 9% of enrollees aged 0 to 17 in privately funded health insurance have coverage for hearing aids and services; b) Essential health benefits. CHBRP indicates that this bill would exceed the EHB benchmark and would appear to trigger the ACA requirement for enrollees in Covered California; c) Medical effectiveness. There is a preponderance of evidence from studies with moderately strong research designs that hearing aids are effective in improving speech and language development outcomes in children. Evidence suggests that earlier age of fitting with hearing aid is associated with greater gains in speech outcomes. There is insufficient evidence that hearing AB 2004 (Bloom) Page 6 of ? aids are effective in improving nonverbal outcomes in children. There is ambiguous/conflicting evidence that hearing aids are effective in improving personal and social development outcomes in children; d) Utilization. CHBRP indicates that some evidence suggests that hearing aids are price inelastic thus a modest increase in utilization is anticipated of 2.4% among enrollees who did not have coverage for hearing aids and services premandate; e) Impact on expenditures. CHBRP estimates that this bill would increase total net annual expenditures by $3,599,000 in the first year postmandate. While a major increase in utilization is not anticipated, there would be a shift in costs from enrollee out-of-pocket expenditures to costs paid by health plans and insurance policies. CHBRP believes this bill would reduce the net financial burden of out-of-pocket expenses by approximately $17 million for the families of 21,100 children who use hearing aids and services in the first year, postmandate. The annual out-of-pocket costs for families of the newly covered children would decrease from about $1,850 to $300; and, f) Public health. CHBRP projects that AB 2004 would increase the first-time use of hearing aids and services by 200 children (all in the privately funded insurance market) in the first-year postmandate; thus, assuming new coverage is similar to premandate cost sharing, hearing and speech and language skills would be expected to improve for this subset of newly covered children with hearing loss who were unable to afford hearing aids premandate. 3)EHB plan selection. Under the ACA, qualified health plans (QHPs) are sold through Covered California and provide coverage to individuals and small employers not through Covered California. QHPs are required to ensure coverage of EHBs, as defined by the federal Secretary of the Department of Health and Human Services (HHS). In 2011, the federal Center for Consumer Information and Insurance Oversight (CCIIO) released an EHB Bulletin proposing that EHBs be defined using a benchmark approach, which gave states the flexibility to select a benchmark plan that reflected the scope of services offered by a "typical employer plan." If a state did 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. EHBs must include AB 2004 (Bloom) Page 7 of ? coverage of services and items in all 10 statutory categories required in the ACA. A report by the consulting firm, Milliman, analyzed and compared the health services covered by the 10 EHB California benchmark plan options and found all the plans to be comprehensive and a very small cost difference between the optional plans. The Legislature, with stakeholder input, chose the Kaiser Small Group HMO, which was also the default plan had California not made an affirmative choice. Last year a similar analysis and process was used to update the EHB benchmark plan. Additionally, federal regulations required if the benchmark does not include coverage of habilitative services, the state may determine which services are included in that category. The federal guidance indicates states should consider the new definition of habilitative services and devices to determine if coverage exists, and indicates there is no need to defray QHP subsidy costs if a mandate is passed to supplement the habilitative coverage category. A second Milliman analysis found relatively small differences in average healthcare costs among the 2014, ten benchmark plan options. Milliman also found differing coverage for acupuncture, infertility treatment, chiropractic care, and hearing aids. The three California small group plans were essentially the same average cost as the California EHB plan and the California large group and CalPERS plans were approximately 0.2-1.0% higher. The estimated average costs for the three federal plan options were approximately 0.8-1.2% higher than the previous California EHB plan. With this information, the Legislature passed SB 43 (Hernandez, Chapter 648, Statutes of 2015) which adopted the federal definition of habilitative services and maintained the Kaiser Small Group HMO Plan as California's EHB benchmark. The Kaiser Small Group HMO Plan does not cover hearing aids. 4)Antidiscrimination. Section 1557 of the ACA provides that an individual shall not, on the grounds prohibited under multiple provisions of federal law including the Civil Rights Act, Title IX of the Education Act, the Age Discrimination Act, the Rehabilitation Act and others be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any health program or activity, any part of which is receiving federal financial assistance, or under any program or activity that is administered by a federal or other agency, as specified. Some states, such as Connecticut's Department of Insurance, have issued bulletins specific to hearing aids for children, indicating that the benefit is AB 2004 (Bloom) Page 8 of ? potentially discriminatory under Section 1557 of the ACA, directing carriers to remove the age limits. A federal final rule issued on May 18, 2016 includes a discussion about state mandates with age limits. Specifically, the commenters asked that the federal Office of Civil Rights (OCR) clarify that state mandates that have age limits are exempt and that states are allowed to create new mandates that have age distinctions if clinically appropriate. The response from the OCR indicates that the final rule states that age distinctions contained in federal, state, or local statutes or ordinances adopted by an elected, general purpose legislative body are not covered by the final rule. States may adopt new laws that contain age distinctions: those distinctions would not violate the final rule. The regulations specifically reference the following exemption: An age distinction contained in that part of federal, state, or local statute or ordinance adopted by an elected, general purpose legislative body which provides any benefits or assistance to persons based on age; establishes criteria for participation in age-related terms; or describes intended beneficiaries or target groups in age-related terms. However, a footnote says that age limits may violate CMS regulations under the ACA and covered entities are responsible for ensuring compliance with all applicable CMS regulations and other federal laws. Furthermore, elsewhere OCR states that arbitrary age, visit, or coverage limitations could constitute discrimination based on age, in certain cases, for example where consideration of age is not necessary to the normal operation of a health program. AB 2004 states that this bill would become inoperative upon a notification by a federal agency that California is in violation of age discrimination provisions and if the state would be required to defray costs. 5)Habilitative services. While the current EHB benchmark plan does not cover hearing aids, it is not clear why hearing aids are not covered under the current definition of habilitative services. The federal and state definition for habilitative services is the following: Health care services and devices that help a person keep, learn, or improve skills and functioning for daily living. Examples include therapy for a child who is not walking or talking at the expected age. These services may include physical and occupational therapy, speech-language pathology, and other services for people with AB 2004 (Bloom) Page 9 of ? disabilities in a variety of inpatient or outpatient settings, or both. Furthermore, the federal regulations clearly gave states the authority to determine which services are included in habilitative services if the EHB benchmark did not have coverage for habilitative services and the state would not have to defray costs. Initially, the benchmark plan did not cover habilitative which is why California adopted its own definition and later adjusted it to conform to the federal minimum definition which is the current definition. Federal guidance indicates that if the benchmark includes habilitative services and the state adds a new definition that includes additional benefits, this would need to be defrayed as a new mandate. But if a state with a "habilitative services" definition chooses to modify or clarify it, this would not need to be defrayed. 6)Prior legislation. SB 43 (Hernandez, Chapter 648, Statutes of 2015), updates California's EHB law to make it consistent with new federal requirements promulgated under the ACA, which includes adoption of the federally required definition of habilitative services and devices. SB 951 (Hernandez, Chapter 866, Statutes of 2012) and AB 1453 (Monning, Chapter 854, Statutes of 2012) select the Kaiser Small Group HMO as California's benchmark plan to serve as the EHB standard, as required by federal law. SB 1321 (Harman of 2012), would have required Covered California 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. 7)Support. The Children's Partnership writes in support that pediatric services has yet to be federally defined and is often not fully covered, and California's current EHB benchmark does not cover all essential pediatric services, such as hearing aids or audiology services. The National Association of Social Workers - California Chapter writes that purchasing hearing aids for children can be a financial challenge for parents and as children grow so do their ears. A child's ability to hear should not be determined by family income and should be viewed as a fundamental right of choice to all Californians. This bill is not simply covering hearing aids but allowing children to continue to maintain the same if not better quality of life as they grow. The Center for Early Intervention on Deafness writes that timely access to hearing AB 2004 (Bloom) Page 10 of ? aids is a critical component of achieving optimal outcomes for these children. Hearing Healthcare Providers California writes that in spite of the fact that California offers a program to screen the hearing of infants delivered in hospitals via the Newborn Hearing Screening Program, families that do not qualify for publicly-subsidized coverage are left with almost no assistance in covering the cost of a child's hearing aid. These devices are out of reach for most families' finances and require ongoing modifications and fittings as the child grows. This bill would provide a huge financial relief for families with job-based coverage and will put California on par with 16 other states that require this benefit. 8)Opposition. The California Association of Health Plans writes that the bill exceeds EHBs and it is the wrong time to pass more mandates. Maintaining affordable premiums is a delicate balancing act. Federal law clearly states that the cost of any benefits that exceed EHBs must be borne by the state. Key protections that were built into the ACA to stabilize the market such as reinsurance and risk corridors are scheduled to expire. Multiple surveys confirm the cost of the monthly premium is the number one concern for consumers when selecting a health plan. Americas Health Insurance Plans writes that this bill will increase annual expenditures by $3.6 million. The state should be looking for ways to bring down health care costs for consumers, not drive them up. 9)Policy Comment. Just last year, California legislators made a choice for the EHB benchmark plan knowing that it was not the plan that offered coverage of hearing aids and other services. If the Kaiser large group CalPERS plan had been chosen, hearing aids for children and adults would have clearly been included in the EHBs. The age discrimination issue remains a concern. Should legislators choose to support this measure in its current form it is quite possible that it will never be implemented. SUPPORT AND OPPOSITION : Support: California Association of the Deaf California Children's Hospital Association California Coalition of Agencies Serving the Deaf & Hard of Hearing California Coalition of Option Schools California State PTA California Teachers Association AB 2004 (Bloom) Page 11 of ? Center for Early Intervention on Deafness Deaf and Hard of Hearing Service Center, Inc Disability Rights California Greater Los Angeles Agency on Deafness Hearing Healthcare Providers National Association of Social Workers National Health Law Program The Children's Partnership Fifty Individuals Oppose: Association of California Life and Health Insurance Companies America's Health Insurance Plans California Association of Health Plans California Chamber of Commerce -- END --