BILL ANALYSIS                                                                                                                                                                                                    Ó



          ENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 43     
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          |AUTHOR:        |Hernandez                                      |
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          |VERSION:       |April 20, 2015                                 |
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          |HEARING DATE:  |April 29, 2015 |               |               |
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          |CONSULTANT:    |Teri Boughton                                  |
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           SUBJECT  :  Health care coverage:  essential health benefits

           SUMMARY  :1)  Updates California law related to the definition of  
            essential health benefits to make it consistent with recent  
            federal regulations under the Patient Protection and  
            Affordable Care Act. Health plans and health insurers are  
            required to cover essential health benefits for products sold  
            in the individual and small group health insurance market,  
            which includes plans offered through Covered California.
          
          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,







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                  j.        Pediatric services, including oral and vision  
                    care.

          3)Defines "habilitative services" as medically necessary health  
            care services and health care devices that assist an  
            individual in partially or fully acquiring or improving skills  
            and functioning and that are necessary to address a health  
            condition, to the maximum extent practical. These services  
            address the skills and abilities needed for functioning in  
            interaction with an individual's environment. Examples of  
            health care services that are not habilitative services  
            include, but are not limited to, respite care, day care,  
            recreational care, residential treatment, social services,  
            custodial care, or education services of any kind, including,  
            but not limited to, vocational training. 

          4)Requires habilitative services to be covered under the same  
            terms and conditions applied to rehabilitative services under  
            the plan contract. 

          5)Requires, with respect to habilitative services, coverage to  
            also be provided as required by federal rules, regulations,  
            and guidance issued pursuant to ACA. 

          6)Requires, with respect to pediatric vision care, the same  
            health benefits for pediatric vision care covered under the  
            Federal Employees Dental and Vision Insurance Program (FEDVIP)  
            vision plan with the largest national enrollment as of the  
            first quarter of 2012.

          7)Requires, with respect to pediatric oral care, the same health  
            benefits for pediatric oral care covered under the dental plan  
            available to subscribers of the Healthy Families Program in  
            2011-2012, including the provision of medically necessary  
            orthodontic care provided pursuant to the federal Children's  
            Health Insurance Program (CHIP) Reauthorization Act of 2009.
          
          This bill:
          1)Updates existing law to reflect that the Kaiser Foundation  
            Health Plan Small Group HMO 30 plan as offered during the  
            first quarter of 2014 (rather than 2012) is California's EHB  
            benchmark and makes a similar update with respect to the  
            pediatric vision care benchmark plan offered during the first  
            quarter of 2014. 









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          2)Prohibits, for plan years commencing on or after January 1,  
            2017, limits on habilitative and rehabilitative services from  
            being combined.

          3)Replaces the existing definition of habilitative services with  
            the following:

               "Habilitiative Services" means 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 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.  

           FISCAL  
          EFFECT  :  This bill has not been analyzed by a fiscal committee.
           
          COMMENTS  :
          1.Author's statement.  According to the author, in 2012 the  
            California Legislature established California's benchmark  
            EHB plan through a process that recognized the importance of  
            existing state-mandated benefits and incorporated as many  
            state mandates as possible; protected California's  
            commitment to reproductive services; embraced the  
            consumer-oriented regulatory framework in place at DMHC; and  
            maintained affordability for consumers.  Using these  
            principles and through a process of comparison, SB 951  
            (Hernandez), Chapter 866, Statutes of 2012, paired with AB  
            1453 (Monning), Chapter 854, Statutes of 2012, designated  
            the Kaiser Small Group HMO to serve as the state's benchmark  
            plan.  Additionally, the legislation established a  
            definition for habilitative services.  Habilitative services  
            are federally mandated EHBs but, at the time, were not  
            federally defined.  The federal government has since  
            established a definition of habilitative services, which is  
            contained in this bill.  California's Secretary of Health  
            and Human Services sent a letter recently notifying the  
            federal government of California's proposed 2017 EHB  
            benchmark which remains the Kaiser Small Group HMO plan.   
            California must update our law to keep California EHBs in  








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            compliance with federal requirements. 

          2.2012 EHB Selection.  Under the ACA, plans sold through Covered  
            California and those providing coverage to individuals and  
            small employers not through Covered California are required to  
            ensure coverage of EHBs, as defined by the federal Secretary  
            of the Department of Health and Human Services (HHS).  HHS is  
            required to ensure that the scope of EHBs is equal to the  
            scope of benefits provided under a typical employer plan, as  
            determined by the Secretary.  

            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 as of the first quarter of 2012. EHBs  
            must include coverage of services and items in all 10  
            statutory categories required in the ACA.  States were  
            permitted to choose among the following benchmark health  
            insurance plan options:

             a.   One of the three largest small group plans in the state  
               by enrollment;
             b.   One of the three largest state employee health plans by  
               enrollment; 
             c.   One of the three largest federal employee health plan  
               options by enrollment; or
             d.   The largest HMO plan offered in the state's commercial  
               market by enrollment.   
             
            In January 2012, Covered California retained a consulting  
            firm, Milliman, to analyze and compare the health services  
            covered by the 10 EHB California benchmark plan options.   
            Milliman found all the plans to be comprehensive and found  
            there to be only 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.
            
          1.2014 EHB Selection.  A recent federal regulation issued by  
            CCIIO, requires states to use 2014 plans to define EHB,  








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            starting with the 2017 plan year.  The process will largely  
            mirror the prior benchmark selection process conducted in  
            2012.  The benchmark options and default plan are the same  
            10 types as in 2012. If a benchmark plan does not include  
            items or services within one or more of the 10 federally  
            required EHB categories, the EHB must be supplemented by the  
            addition of the entire category of such benefits offered  
            under any other benchmark plan option.   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 qualified health plan (QHP) subsidy  
            costs if a mandate is passed to supplement the habilitative  
            coverage category.  States that plan to select an EHB  
            benchmark must identify their proposed benchmark plan  
            (including supplementation if necessary) and send supporting  
            documents by June 1, 2015.  As was the case in 2012, states  
            that do not make a plan selection will default to the  
            largest product by enrollment in the state's small group  
            market.  Final benchmark plans will be published in the  
            Federal Register in fall of 2015.  
            
            On April 17, 2015, the Secretary of California's Health and  
            Human Services Agency sent a letter to CCIIO selecting the  
            Kaiser Small Group HMO as the state's proposed benchmark  
            plan.  Additionally, the state has selected the state's CHIP  
            program for pediatric oral services and the FEDVIP with the  
            largest national enrollment as of the first quarter of 2014  
            as the pediatric vision services benchmark.

          2.Milliman, 2015.  The California Health Benefits Review  
            Program asked Milliman to analyze and compare the health  
            services covered by the ten plans available to California as  
            options for California's EHB benchmark effective January 1,  
            2017, similar to the analysis completed for Covered  
            California in 2012.  Milliman found relatively small  
            differences in average healthcare costs among the ten  
            benchmark options.  Milliman did find differing coverage of  
            acupuncture, infertility treatment, chiropractic care, and  
            hearing aids.  The three California small group plans are  
            essentially the same average cost as the current California  
            EHB plan and the California large group and CalPERS plans  
            are approximately 0.2-1.0 percent higher.  The estimated  








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            average costs for the three FEHBP options are approximately  
            0.8-1.2 percent higher than the current California EHB plan.
          
          3.Prior legislation.  
            
            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.

            SB 51 (Alquist), Chapter 644, Statutes of 2011, established  
            enforcement authority in California law to implement  
            provisions of the ACA related to medical loss ratio  
            requirements on health plans and health insurers and enacts  
            prohibitions on annual and lifetime benefits.
            
            SB 900 (Alquist), Chapter 659, Statutes of 2010, and AB 1602  
            (Perez), Chapter 655, Statutes of 2010, established the  
            California Health Benefit Exchange.

          4.Support.  Health Access California supports this bill  
            because it has a more comprehensive definition of  
            habilitative consistent with federal guidance adopted in  
            February 2015.  The Western Center on Law and Poverty writes  
            that they support the provisions in SB 43 to conform the  
            definition of habilitative services to the federal  
            definition and keeping the parity language with  
            rehabilitative services and adding language indicating that  
            for plan years on or after 2017, limits on habilitative and  
            rehabilitative services shall not be combined. Additionally,  
            while the bill selects the 2014 Kaiser Small Group HMO plan  
            as the benchmark plan Western Center understands that an  
            analysis of the ten California benchmark plans is being  
            conducted and looks forward to reviewing that analysis and  
            having stakeholders assess at that point if a different plan  
            should be chosen as the benchmark. There may be other needed  
            changes to the bill including regarding prescription drug  
            coverage based on federal regulatory requirements in that  
            arena as well.









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          5.Support if amended.  California Chiropractic Association  
            requests this bill be amended to include language specific to  
            EHB plan that would require the Covered California governing  
            board to offer additional benefits.  The California  
            Chiropractic Association believes amending this bill as such  
            would make the EHB the minimum of covered services and allow  
            plans to offer any other services or benefits they would like  
            provide their insured patient.
          
          
           SUPPORT AND OPPOSITION  :
          Support:  Health Access California
                    California Primary Care Association
                    Western Center on Law and Poverty
          
          Oppose:   None received
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