BILL ANALYSIS Ó
AB 2400
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Date of Hearing: March 29, 2016
ASSEMBLY COMMITTEE ON HEALTH
Jim Wood, Chair
AB 2400
(Nazarian) - As Amended March 17, 2016
SUBJECT: Prescription drug coverage: prior authorization and
external review.
SUMMARY: Requires health care service plans (health plans) and
health insurers to comply with a shortened internal grievance
review process for formulary drugs. Specifically, this bill:
1)Requires a health plan or health insurer to resolve grievances
within 72 hours for non-urgent request and within 24 hours if
exigent circumstances exist, if the health plan or health
insurer disapproves a request for prior authorization of a
formulary drug.
2)Provides that an enrollee is not required to file a 30 day
grievance with the health plan if a health plan disapproves a
request for prior authorization of a non-formulary drug.
Requires the health plan to treat the enrollee's appeal as a
request to obtain an external request review.
3)Clarifies existing law to provide for the external exception
request for non-formulary drugs in the Department of Managed
Health Care's (DMHC) grievance and appeal process.
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4)Requires an external exception review process for
non-formulary drugs and grievance process for formulary drugs
before an appeal can be brought to the DMHC's or Department of
Insurance's (CDI) Independent Medical Review (IMR).
5)Makes other technical and conforming changes.
EXISTING LAW:
1)Regulates health plans under the Knox-Keene Health Care
Service Plan Act of 1975 through the DMHC and regulates health
insurers under the Insurance Code through the CDI.
2)Mandates the 10 federally required essential health benefits
(EHBs) in the individual and small group market and
establishes the Kaiser Small Group health plan as California's
EHB benchmark plan, including prescription drug benefits, as
specified, and incorporates by reference state law and
regulations related to outpatient prescription drug coverage.
3)Requires health plans that provide prescription drug benefits
to provide coverage for all medically necessary outpatient
drugs, except as specified.
4)Requires health plans to maintain an expeditious process by
which prescribing providers may obtain authorization for a
medically necessary non-formulary prescription drug.
5)Requires health plans and health insurers that provide
prescription drug benefits and maintain drug formularies to
post the formulary or formularies for each product offered by
the health plan or health insurer on the health plan's or
insurer's website in a manner that is accessible and
searchable by potential enrollees and insureds, enrollees,
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insureds and providers.
6)Requires DMHC and CDI to develop a standard formulary template
that contains specified information by January 1, 2017.
Requires health plans and health insurers to use the standard
formulary template within six months of the date the template
is developed by DMHC and CDI.
7)Requires health plans and health insurers to update their
posted formularies with any change to those formularies on a
monthly basis.
8)Requires health plans to maintain the following:
a) Complete drug formulary or formularies, including a list
of prescription drugs on the formulary of the plan by major
therapeutic category with an indication of whether any
drugs are preferred over other drugs;
b) Records developed by the pharmacy and therapeutic
committee of the health plan that fully describe the
reasoning behind formulary decisions; and,
c) Health plan arrangements with entities that are
associated with activities of the health plan to encourage
formulary compliance or otherwise manage prescription drug
benefits.
9)Requires DMHC and CDI to jointly develop a uniform prior
authorization form that health plans and health insurers must
accept when prescribing providers seek authorization for
prescription drug benefits. Requires prescribers to use the
standardized prior authorization form. Provides that if a
health plan or health insurer fails to utilize or accept the
prior authorization form, or fails to respond within 72 hours
for non-urgent requests and within 24 hours when exigent
circumstances exist, the prior authorization request is deemed
granted.
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10)Requires health plans and health insurers offering outpatient
prescription drugs in the individual, small group, or large
group markets to comply with the request for exception appeal
process for non-formulary drugs as described in the Federal
Regulations.
11)Establishes the IMR process as part of the DMHC or CDI appeal
process. Makes IMR available to the enrollee or insured after
participation in a health plan or health insurer's grievance
process.
FISCAL EFFECT: This bill has not yet been analyzed by a fiscal
committee.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, federal law
leaves consumers at a disadvantage because consumers that
select a particular plan because their medication is on the
formulary face a longer appeal process compared to a plan that
did not have their medication on the formulary. The author
states that this bill ensures consistency in the appeal
process for all prescription drugs, whether the drugs are on
the formulary or not, specifically with respect to the
timeframe for appeal. The author contends that delays in
access to drugs can exacerbate a patient's condition and cause
irreversible deterioration or damage to patients, which can
limit their daily functions and ability to remain a productive
member of the workforce and society.
2)BACKGROUND.
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a) Federal Law and Regulations. Federal regulations
provide for a request for exception process for
non-formulary drugs as follows:
i) Request for exception. A health plan
providing EHBs must have a process in place to allow
an enrollee, the enrollee's designee, or the
enrollee's prescribing physician to request and gain
access to clinically appropriate drugs not covered by
the health plan, i.e., non-formulary drugs;
ii) Standard exception request. A health plan
must have a process for an enrollee to request a
standard review of a decision that a drug is not
covered by the health plan. A health plan must make
its determination on a standard exception no later
than 72 hours following receipt of the request. A
health plan or health insurer will also have a process
for expedited review, no less than 24 hours, based on
exigent circumstances. Exigent circumstances exist
when an enrollee is suffering from a health condition
that may seriously jeopardize the enrollee's life,
health, or ability to regain maximum function or when
an enrollee is undergoing a current course of
treatment using non-formulary drugs; and,
iii) External exception request review. A health
plan must also make available an external exception
request process when a plan denies coverage during its
standard review process. The original standard
request and subsequent denial must be reviewed by an
independent medical organization. A health plan must
make a determination no later than 72 hours or 24
hours if exigent circumstances exist.
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b) Non-formulary drugs. The enactment of SB 282
(Hernandez), Chapter 654, Statutes of 2015, adopted federal
regulations for requesting for an exception process for
non-formulary drugs (subdivision (c) of Section 156.122 of
Title 45 of the Code of Federal Regulations), as summarized
above, but applicable to only non-formulary drugs.
c) Grievance and Appeal process. Generally, a health plan
or health insurer must make a determination regarding a
denial of health care services within 30 days (if
expedited, then 72 hours or less). An enrollee or insured
may file a complaint with the DMHC or CDI to appeal a
denial. Generally, if the denial is based upon medical
necessity, then the complaint may be eligible for an IMR in
which independent medical professionals will review the
medical decision made by a health plan or health insurer.
Absent expedited review, IMR review and determination can
take up to 30 days.
3)SUPPORT. The Arthritis Foundation, the sponsor of this bill,
states that this bill will align the grievance timelines for
formulary drugs with what is already required for
non-formulary drugs. The sponsor also states that this bill
clarifies that an enrollee seeking access to a non-formulary
drug is not required to exhaust the health plan's internal
grievance process before request their external exception
process. The sponsor contends that this bill ensures
consistency in the grievance process for all prescription
drugs, regardless of the formulary design. The sponsor
asserts that lengthy delays in appealing a health plan's
denial through their internal grievance process, which can
take up to 30 days, can lead to irreversible damage and joint
destruction as well as increased utilization of health care
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services. Other supporters note that federal guidance has
created additional review processes and quicker timeframes for
non-formulary drugs, and therefore support the application of
72 or 24 hours to formulary drugs as well as non-formulary
drugs.
4)OPPOSITION. The Association of California Life & Health
Insurance Companies (ACLHIC) states that this bill would
diminish an insurer's ability to effectively and thoughtfully
review formulary drug exception requests since it can take
several days to collect all the information necessary to
complete a request. Furthermore, ACLHIC argues that it is
unclear why prescription drug exception requests should be
given preferential treatment over all other medical service
reviews. ACLHIC raises concerns regarding prescription drug
abuse and this bill limiting the plans' ability to thoroughly
review whether or not it is appropriate to prescribe a
particular drug. ACLHIC contends that it is critical that
health insurers continue to be diligent in their efforts to
ensure that providers are adhering to evidence-based practices
and delivering quality healthcare to their members. The
California Chamber of Commerce (Chamber) also opposes this
bill because it will drive up health care premiums without
providing a substantial benefit for enrollees. The Chamber
notes that the federal Department of Health and Human Services
indicated that its decision not to apply the shortened
timeline to formulary drugs was one reason it did not believe
that the new requirements for non-formulary drugs would
significantly increase the administrative cost burden on
health care issuers, and therefore suggesting that shortening
the timeline for all prescription drugs, as proposed in this
bill, is unnecessary and likely to increase administrative
costs for plans. The Chamber argues that health care costs
can increase if health plans hire more staff and/or if staff
makes more cursory decision about each request received.
Finally, the Chamber notes that many prior authorization
requirements related to formulary drugs are designed to
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protect enrollees, for example, opioid pain killers and drugs
with potentially dangerous side effects. The Chamber contends
that if health plans or health insurers are rushed to approve
these requests, it could undermine quality of care.
The California Association of Health Plans (CAHP) and Blue
Shield of California raises concerns on the existing appeal
process indicating that the IMR process should be reserved for
more significant disagreements over the medical necessity of a
covered service and contends that this bill could clog the
process with prescription drug cases that could have been
resolved internally at the plan level if the appropriate
review time is given. CAHP also notes that health plans and
regulators are currently interpreting how the new external
review process fits into existing exception processes and a
new law may complicate efforts to determine whether efficient
processes are still available.
5)RECENT LEGISLATION.
a) SB 866 (Hernandez), Chapter 648, Statutes of 2011,
requires DMHC and CDI to jointly develop a uniform prior
authorization form that health plans and insurers must
accept when prescribing providers seek authorization for
prescription drug benefits.
b) SB 282 (Hernandez), Chapter 654, Statutes of 2015,
authorizes a prescribing provider to use an electronic
prior authorization system that utilizes the standardized
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form or an electronic process developed specifically for
transmuting prior authorization information that is
consistent with the standardized form and that meets the
National Council for Prescription Drug Programs' SCRIPT
standard for electronic prior authorization transactions.
SB 282 also deemed a prior authorization request granted if
the health plan or insurer filed to respond within 72 hours
for a nonurgent request and within 24 hours for exigent
circumstances.
6)POLICY COMMENTS. This bill addresses the internal appeal
process at the health plan or health insurer level by
identifying a 72 or 24 hour appeal timeframe for review,
however, does not address the external exception request
review process (i.e., denial reviewed by an independent review
organization) for formulary drugs. While an external
exception request process may be costly, as this bill moves
forward, the author may wish to explore adding this
requirement.
7)TECHNICAL AMENDMENT. Legislative Counsel inadvertently
deleted the "or" in Health and Safety Code Section 1374.30(j)
but this language must be included so as to not change
existing law requirements, as follows:
(j) An enrollee may apply to the department for an independent
medical review when all of the following conditions are met:
(1) (A) The enrollee's provider has recommended a health care
service as medically necessary, or necessary , or
(B) The enrollee has received urgent care or emergency
services that a provider determined was medically necessary,
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or necessary, or
(C) The enrollee, in the absence of a provider recommendation
under subparagraph (A) or the receipt of urgent care or
emergency services by a provider under subparagraph (B), has
been seen by an in-plan provider for the diagnosis or
treatment of the medical condition for which the enrollee
seeks independent review. The plan shall expedite access to an
in-plan provider upon request of an enrollee. The in-plan
provider need not recommend the disputed health care service
as a condition for the enrollee to be eligible for an
independent review.
REGISTERED SUPPORT / OPPOSITION:
Support
Arthritis Foundation (sponsor)
California Life Sciences Association
Western Center on Law and Poverty
Opposition
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Association of California Life & Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
Analysis Prepared by:Kristene Mapile / HEALTH / (916) 319-2097