BILL ANALYSIS
AB 1296
Page 1
Date of Hearing: April 24, 2007
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
AB 1296 (Torrico) - As Amended: April 19, 2007
SUBJECT : Public Employee Health Benefits: Disclosures
KEY ISSUE : Should a health benefit plan offering services to
public employees be required to submit specified information to
the board of the public employees retirement system, so that the
board may make more informed decisions when contracting on
behalf of public employees?
SYNOPSIS
This bill is a response to a recent report issued by the
California Bureau of State Audits. That audit was requested by
the Joint Legislative Audit Committee in the wake of a CalPERS
decision that greatly reduced the size of the hospital network
available to CalPERS members enrolled in the Blue Shield of
California HMO. The audit recommended that the State
Legislature consider legislation that would permit CalPERS,
during its contract negotiation process, to demand from health
plans documentation pertaining the health care costs,
utilization, and payment rates. The Audit reasoned that this
information would assist CaPERS in negotiating the best possible
contracts for its members and for the state. This bill
specifies the kinds of information that CaPERS may demand and
enacts other provisions relating to protecting the security of
that information. There is no registered opposition to this
bill, although the California Hospital Association (CHA) has
submitted a "letter of concern" relating to the possible impact
that the availability of such information may have on the
"competitive aspects of the health care marketplace." However,
the author and the CHA have committed to resolving these
concerns as the bill moves forward.
SUMMARY : Requires a health benefit plan to disclose to the
Board of the California Public Employees' Retirement System
(CalPERS) specified information relating to health care services
rendered by hospitals to CalPERS members and annuitants.
Specifically, this bill :
1)Requires a health benefit plan or contract, or entities
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offering services related to the administration of health
benefit plans, to disclose to the CalPERS Board the cost,
utilization, and actual claim payments on behalf of each
member and annuitant for all health care services rendered by
hospitals, including the allowance amounts for services billed
for each individual hospital.
2)Provides that all information disclosed shall be deemed
confidential and protected in accordance with federal HIPAA
standards and regulations promulgated pursuant to HIPAA.
Specifies, as such, that information provided to the CalPERS
Board shall not include the individual member or annuitant
identifying information.
3)Specifies that hospital contract allowance amounts and
payments shall be deemed to be confidential trade secret
information and subject to evidentiary trade secret
protections.
4)Prohibits the CalPERS Board from disclosing member and
annuitant information or otherwise making it available to the
public. Specifies that information shall be exempt from
disclosure under the California Public Records Act.
EXISTING LAW:
1)Requires the CalPERS Board, under the Public Employees'
Medical and Hospital Care Act, to establish the scope and
content to health benefit plans for public employees and
annuitants and to ensure that these health plans meet minimum
standards. (Government Code Section 22796.)
2)Authorizes the CalPERS Board to enter into contracts with
carriers of health benefit plans and sets out considerations
relative to contract approval. Provides further that the
CalPERS Board may require a carrier to furnish certain
information or documents for the purposes of entering into and
approving contracts. (Government Code Sections 22850 through
22854.)
FISCAL EFFECT : As currently in print this bill is keyed
fiscal.
COMMENTS : In 2004, the California Bureau of State Audits (BSA)
conducted a review of a May 2004 decision by the CalPERS Board
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to approve an exclusive provider network for the 427,000 CalPERS
members in the Blue Shield of California HMO. Although this
decision was part of an overall strategy to reduce costs, it
also reduced the size of the hospital provider network available
to CalPERS members. In response to this decision, the Joint
Legislative Audit Committee requested the BSA to conduct an
audit of the CalPERS decision.
The BSA audit concluded that in making that decision, the
CalPERS board relied upon Blue Shield's summary analyses and
presentation of its cost-saving model. Although the audit
concluded that Blue Shield's estimates and analyses were
reasonable, it nonetheless questioned some elements of Blue
Shield's cost-savings model. More to the point, whatever the
merits of the Blue Shield model, the audit observed that CalPERS
made its decision without having access to any information that
would have permitted it to verify the summary presented by Blue
Shield. In its final report, therefore, the audit recommended
that
[t]he Legislature should consider enacting legislation that
would allow CalPERS, during its contract negotiation
process, to obtain relevant documentation supporting any
analyses it will use to make decisions that materially
affect the members of the health benefits program
established by the Public Employees' Medical and Hospital
Care Act.
Simply put, this bill adopts this recommendation. Existing
law gives to the CalPERS board the serious duty of approving
health benefit plans for public employees and annuitants and
contracting with carriers of those health benefit plans.
According to the author, this bill would allow CalPERS, during
its contract negotiation process, to obtain relevant
documentation so that it can make fully informed decisions
when contracting health benefits for public employees and
their families.
In order to provide the CalPERS board with necessary
information, this bill would require a health plan, or any
entity offering services related to the administration of
health benefit plans, to disclose to the board the cost,
utilization, and actual claims payments for hospital services
rendered to any CalPERS member or annuitant. This information
would include contract allowance amounts for services billed
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for each individual hospital.
In order to ensure the security of any information provided,
this bill also provides that any information relating to an
individual member or annuitant shall be deemed confidential
and protected in accordance with the federal Health Insurance
Portability and Accountability Act, or HIPAA. (45 CFR Parts
160 and 164.) This means that any information provided to the
board could not include any personal identifiers that would
link the information to a particular covered employee or
annuitant. Finally, this bill would also provide that
hospital contract allowance amounts and payments shall be
deemed confidential trade secret information and subject to
evidentiary trade secret protections.
ARGUMENTS IN SUPPORT : According to the author, this bill will
require health benefit plans that contract with CalPERS to
provide critical data that
will enable [CalPERS] staff to more effectively analyze
benefit plan designs, validate the true cost of health care,
and reliably determine health program effectiveness during
the health plan annual rate negotiation process . . .
[C]urrent law does not allow CalPERS to obtain claims
payment information between health plans and the hospitals
and physicians that provide care to CalPERS members. As the
third largest purchaser of employee health benefits in the
nation, CalPERS health program will spend $4.9 billion in
2007 to purchase health benefits to cover 1.2 million active
and retired state and local government public employees and
their families. Over the last 5 years premiums for the
Basic HMO plans have increased by 101 percent and Basic PPO
plans have increased by 78 percent. As such, the CalPERS
Board has a responsibility to its members and the California
taxpayers to make fully informed decisions during rate
negotiations.
Finally, the author argues that this bill is consistent with the
BSA's recommendations. The author estimates that by providing
the CalPERS board with access to essential information, this
bill "equates to a savings of $24.5 million to members and
employers."
Blue Shield of California supports this bill for the same
reasons articulated by the author, but it adds that currently
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CalPERS is generally prohibited from obtaining claims payment
information between health plans and hospitals due to
confidentiality provisions in contracts between health plans and
hospitals. This bill, Blue Shield argues, "would specify that
this type of information shall be disclosed to CalPERS and
ensures that confidential information will not be disclosed to
any party other than CalPERS." Finally, Blue Shield observes
that "with the cost of health care continuing to rise, there is
no better time to provide CalPERS with the information it needs
to offer the best benefits to its members at the most affordable
price."
Concerns of the California Hospital Association : Although
there is no registered opposition to this bill, the California
Hospital Association (CHA) has expressed some concern about
certain "ambiguities" in the existing bill, though CHA also
expresses confidence that it will be able to work with the
author to address its concerns.
CHA contends that CalPERS already has access to much of the
information that this bill requires health plans to provide.
CHA claims, however, that some of the information "impacts the
competitive aspects of the healthcare marketplace."
Accordingly, CHA wants to ensure that CalPERS receives the
information that it needs while at the same time "preserving
the ability of health plans, hospitals and physicians to
compete with each other and negotiate competitive contracts."
CHA notes that while the bill includes important protections
for employees, annuitants, and parties to the contract, such
as requiring compliance with HIPAA, the bill does not state
precisely how the information will be used. For example, CHA
points out that while proposed subdivision (d) of the amended
bill provides that information of particular members or
annuitants shall not be disclosed to the public, "the language
could be strengthened to ensure that any summaries,
compilations, or rankings derived from the data are also not
publicly available." Finally, CHA suggests that CalPERS
"should be required to allow hospitals and physicians to
validate the data health plans provide about them before
relying on that data," since "CalPERS cannot achieve its
stated purposes if it is not receiving accurate and reliable
data."
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Notwithstanding these concerns, both the CHA and the author
have indicated their mutual willingness to resolve these
concerns as the bill moves forward.
REGISTERED SUPPORT / OPPOSITION :
Support
CalPERS (sponsor)
Blue Shield of California
Opposition
None on file
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334