BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 2004 (Bloom) - Hearing aids:  minors
          
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          |Version: May 31, 2016           |Policy Vote: HEALTH 5 - 0       |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: August 1, 2016    |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.

          Bill  
          Summary:  SB 2004 would require health insurers and health plans  
          to provide coverage for hearing aids for enrollees under 18  
          years of age.


          Fiscal  
          Impact:  
           No cost impact is anticipated is anticipated for the Medi-Cal  
            program or for CalPERS health care coverage. Both programs  
            already provide coverage for hearing aids for enrollees under  
            18 years of age.

           Ongoing costs of $1.5 to $2.0 million per year to subsidize  
            the cost to provide the hearing aid benefit for individuals  
            enrolled in health care coverage through Covered California.  
            Under federal law, states are required to cover the cost of  
            any new benefit mandate that exceeds essential health benefits  
            for those individuals that are receiving subsidized coverage  
            through a health benefit exchange. The state's current  
            essential health benefit benchmark plan does not include  
            coverage for hearing aids. Therefore, under this bill the  







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            state would be imposing a new benefit mandate that exceeds  
            essential health benefits and the state would be responsible  
            for covering the cost to subsidize that benefit for  
            individuals purchasing subsidized coverage through Covered  
            California.

           Minor ongoing costs for review of insurance plan filings by  
            the Department of Insurance (Insurance Fund).

           Minor ongoing costs for review of health plan filings by the  
            Department of Managed Health Care (Managed Care Fund).


          Background:  Under federal law, health insurance policies and health plans  
          are generally required to provide coverage for ten essential  
          health benefits (such as emergency services, prescription drugs,  
          etc.). Under federal regulation, the states are authorized to  
          select an essential health benefits benchmark plan, which sets  
          the standards for providing essential health benefits. Once a  
          state has selected an essential health benefits benchmark plan,  
          any new benefit mandate imposed by the state that is not already  
          covered by the benchmark plan is considered to exceed the  
          essential health benefits. For individuals purchasing subsidized  
          health care coverage through a health benefits exchange, such as  
          Covered California, the state would be responsible for paying  
          for the cost to subsidize the new benefit.
          The state's current essential health benefits benchmark plan,  
          the Kaiser Small Group HMO plan, does not provide coverage for  
          hearing aids.


          One of the essential health benefits required under federal law  
          is "habilitative services" which are health care services and  
          devices that help a person keep, learn, or improve skills and  
          functioning for daily living.




          Proposed Law:  
            SB 2004 would require health insurers and health plans to  
          provide coverage for hearing aids for enrollees under 18 years  
          of age.
          Specific provisions of the bill would:








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           Require health insurance policies and health plans to provide  
            coverage for hearing aids for all enrollees under 18 years of  
            age when medically necessary;
           Specify the services and devices included in the coverage  
            mandate;
           Exempt certain specialty insurance policies and health plans;
           Make the provisions of the bill inoperative if any federal  
            agency determines that the benefit mandate constitutes a  
            discriminatory age limitation and the state is required to  
            defray the costs to provide subsidized coverage for hearing  
            aids to individuals over 18 years of age;
           Impose a January 1, 2019 sunset on the bill's requirements.




          Staff  
          Comments:  The requirement to provide coverage for hearing aids  
          for enrollees under age 18 exceeds the benefits in the state's  
          essential health benefits benchmark plan. To date, the state has  
          not enacted a benefit mandate that clearly exceeded essential  
          health benefit requirements.
          Federal law and regulation prohibit discrimination on the basis  
          of race, color, national origin, sex, age, or disability in a  
          variety of health care programs. Some states have interpreted  
          federal requirements to prohibit health coverage benefit  
          mandates with limitations based on age. A federal regulation  
          issued in May 2016 indicates that states may impose new laws  
          that impose age distinctions without violating federal law.  
          However, the regulation also stated that arbitrary age  
          limitations could constitute age discrimination.


          Based on the clear requirement that hearing aids must only be  
          covered for enrollees under 18 years of age, it is likely that  
          the federal government would rule that this bill discriminates  
          based on age.


          The federal essential health benefits requirement includes  
          coverage of habilitative services. Under federal guidance, if a  
          state's essential health benefits benchmark plan provides  
          coverage for habilitative services, then the habilitative  
          services benefit is set by the coverage provided by the  








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          benchmark plan. If the benchmark plan does not cover  
          habilitative services, they would still be a required essential  
          health benefit, but the parameters of the benefit could be  
          defined by the state. The Kaiser Small Group HMO plan does  
          provide coverage for habilitative services, but it excludes  
          coverage for hearing aids. Therefore, in California habilitative  
          services do not include coverage for hearing aids.


          According to the California Health Benefits Review Program,  
          there is a preponderance of evidence that hearing aids are  
          effective in improving speech outcomes in children and that  
          hearing aids are effective in improving language development  
          outcomes in children. 


          The California Health Benefits Review Program found that the  
          bill would result in a minor increase in utilization of hearing  
          aids. This is because the Program found that when hearing aids  
          are not covered by health insurance, families pay the necessary  
          out-of-pocket costs themselves. According to the Program, about  
          21,000 families would experience cost savings, because the costs  
          of coverage would shift from consumers to health insurers and  
          health plans. On the other hand, the Program projects that only  
          about 200 additional children would receive hearing aids who  
          would not receive them under current law (e.g. because the  
          out-of-pocket costs are unaffordable).


          The only costs that may be incurred by a local agency relate to  
          crimes and infractions. Under the California Constitution, such  
          costs are not reimbursable by the state.




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