BILL ANALYSIS                                                                                                                                                                                                    



          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 --