BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 43| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 43 Author: Hernandez (D), et al. Amended: 4/20/15 Vote: 21 SENATE HEALTH COMMITTEE: 9-0, 4/29/15 AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen, Pan, Roth, Wolk SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen SUBJECT: Health care coverage: essential health benefits SOURCE: Author DIGEST: This bill updates California's essential health benefits (EHB) law to make it consistent with new federal requirements promulgated under the Affordable Care Act. EHBs are required to be covered by health plans and health insurers for products sold in the individual and small group health insurance market, which includes products offered through Covered California. ANALYSIS: 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 EHBs the Kaiser Small Group HMO plan, other state mandated benefits, and the following 10 SB 43 Page 2 federally mandated benefits required under the Affordable Care Act (ACA): 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 "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. SB 43 Page 3 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. 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: "Habilitative 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. SB 43 Page 4 4)Extends emergency regulation authority for DMHC and CDI and makes this authority inoperative on July 1, 2018. 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 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 SB 43 Page 5 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, 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 SB 43 Page 6 devices to determine if coverage exists, and indicates there is no need to defray qualified health plan 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 10 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. The analysis was presented to stakeholders on May 15, 2015. Milliman found relatively small differences in average healthcare costs among the 10 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% higher. The estimated average costs for the three federal Employees Health Benefits Program options are approximately 0.8-1.2% higher than the current California EHB plan. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes SB 43 Page 7 According to the Senate Appropriations Committee: One-time costs over $150,000 to revise regulations by CDI (Insurance Fund). One-time costs over $150,000 to revise regulations by DMHC (Managed Care Fund). No anticipated impact to state health care program such as Medi-Cal or CalPERS. This bill's provisions make minor changes to statute governing the individual and small group health care markets, which do not include those programs. No cost to the state to provide subsidies for additional costs to Covered California plans, due to the change to the definition of habilitative services. Recent federal guidance indicates that states are not obligated to defray any additional subsidy costs in health benefit exchanges due to a change to the definition of habilitative services. SUPPORT: (Verified5/28/15) American Federation of State, County and Municipal Employees, AFL-CIO California Primary Care Association California Teachers Association Health Access California Western Center on Law and Poverty OPPOSITION: (Verified5/28/15) None received ARGUMENTS IN SUPPORT: Health Access California supports this bill because it has a more comprehensive definition of habilitative consistent with federal guidance adopted in SB 43 Page 8 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 this bill selects the 2014 Kaiser Small Group HMO plan as the benchmark plan Western Center understands that an analysis of the 10 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 this bill including regarding prescription drug coverage based on federal regulatory requirements in that arena as well. Prepared by:Teri Boughton / HEALTH / 5/31/15 11:38:57 **** END ****