BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                         SB 43|
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                                   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  








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            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. 









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          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.  









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          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  








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            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  








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            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










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          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  








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          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


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