BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2007-2008 Regular Session
AB 1296 A
Assemblymember Torrico B
As Amended July 3, 2007
Hearing Date: July 10, 2007 1
Government Code 2
ADM:jd 9
6
SUBJECT
Public Employee Health Benefits: Disclosures
DESCRIPTION
This bill would require that a health benefit plan or
contract, or an entity offering services relating to the
administration of health benefit plans to California Public
Employees' Retirement System (CalPERS) members and
annuitants, disclose to the CalPERS board and staff the
cost, utilization, actual claim payments, and contract
allowance amounts for health care services rendered by
participating hospitals to each member and annuitant.
This bill would provide that the above information would be
deemed confidential information and protected in accordance
with federal law. The bill would also provide that
information provided to the board and staff shall not
include individual member or annuitant identifying
information.
This bill would provide that the board shall not disclose
the above-specified information in either individual or
aggregated form to any other health care service plan or
insurer or any entity offering services relating to the
administration of health benefit plans, and shall not make
this information available to the public. This bill would
further provide that the information would be used only to
make decisions that materially affect the members and
annuitants of the health benefits plan established by the
board.
(more)
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This bill would provide that the information specified
above, in either individual or aggregate form, shall be
exempt from the California Public Records Act.
This bill would define "actual claim payment," "contract
allowance amounts," and "cost" for purposes of the bill's
provisions.
BACKGROUND
In 2004, as part of CalPERS overall strategy to alleviate
the rising cost of health care, CalPERS reduced the size of
its hospital provider network, instructing Blue Shield to
contract with hospitals that achieve a certain threshold of
cost and quality. The Joint Legislative Audit Committee
requested the Bureau of State Audits (BSA) to conduct an
audit of CalPERS' decision. The State Auditor concluded
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."
The author and sponsor, CalPERS, assert that, consistent
with the BSA's recommendation, AB 1296 would allow CalPERS
to obtain the necessary information to enable staff to more
effectively analyze benefit plan designs, validate the true
cost of health care, and reliably determine health
programs' effectiveness during the health plan annual rate
negotiation process.
CHANGES TO EXISTING LAW
Existing law requires the CalPERS Board, pursuant to the
Public Employees' Medical and Hospital Care Act, to adopt
all necessary rules and regulations to establish the scope
and content of health benefit plans for public employees
and annuitants, and reasonable minimum standards for health
benefit plans. (Government Code (GC) Section 22796.)
Existing law authorizes the CalPERS Board to enter into
contracts with carriers offering health benefit plans,
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specifies certain criteria the board may take into account
with respect to a plan, and allows the board to require
specified documents from the plan. (GC Sections
22850-22854.)
Existing federal law , the Health Insurance Portability and
Accountability Act of 1996 (HIPPA) specifies, among other
things, minimum privacy protections for patients' personal
medical information, including "Standards for Privacy of
Individually Identifiable Health Information" ("Privacy
Rule"). The Privacy Rule provides, among other things,
that protected health information, as defined, may not be
used or disclosed, except as specified. (42 U.S.C. Section
1320d et seq.; 45 C.F.R. 164.520 et seq.)
This bill would require that a health benefit plan or
contract, or an entity offering services relating to the
administration of health benefit plans to members and
annuitants, disclose to the board and staff the cost,
utilization, actual claim payments, and contract allowance
amounts for health care services rendered by participating
hospitals to each member and annuitant.
This bill would provide that the above information would be
deemed confidential information and protected in accordance
with the federal HIPPA (42 U.S.C. Section 300gg) and the
final regulations issued pursuant to the act by the United
States Department of Health and Human Services (45 C.F.R.
Parts 160 and 164). The bill would provide that
information provided to the board and staff shall not
include individual member or annuitant identifying
information.
This bill would provide that the board shall not disclose
the above-specified information in either individual or
aggregated form to any other health care service plan or
insurer or any entity offering services relating to the
administration of health benefit plans, and shall not make
this information available to the public, including, but
not limited to, any summaries, compilations, or rankings
derived from this information. This bill would provide
that the information would be used only to make decisions
that materially affect the members and annuitants of the
health benefits plan established by the board.
AB 1296 (Torrico)
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This bill would provide that the information specified
above, in either individual or aggregate form, shall be
exempt from the California Public Records Act.
This bill would provide that, upon request from a hospital,
the board shall provide, on an annual basis, the hospital a
reasonable opportunity to validate the data that has been
provided to the board by a health insurer, health care
service plan, or other entity pursuant to the bill's
provisions.
This bill would define "actual claim payment" to mean the
actual amount paid by the health care plan or administrator
to the participating hospital for a health care service
rendered to a member or annuitant, exclusive of member or
annuitant cost sharing and any other payment adjustments.
This bill would define "contract allowance amounts" to mean
the negotiated rate that the participating hospital agrees
to accept as payment for a health care service rendered to
a member or annuitant under the provider agreement between
the health plan or administrator and the participating
hospital.
This bill would define "cost" to mean the full amount
billed by the participating hospital for a health care
service rendered to a member or annuitant.
COMMENT
1. Stated need for the bill
The sponsor, CalPERS, writes:
Current 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 five 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
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has a responsibility to its members and California
taxpayers to make fully informed decisions during rate
negotiations.
However, many hospitals prohibit contracting health plans
from disclosing to CalPERS the actual rate hospitals are
paid, thereby preventing CalPERS from validating relevant
information needed to negotiate the best rate for its
members.
This bill would allow CalPERS to obtain the necessary
information that would enable 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. As a result, the Board will be in a
better position to negotiate the best rates possible for
its employees and members. Additionally, the information
will be aggregated in compliance with the Health
Insurance Portability and Accountability Act of 1996
(HIPPA) and held proprietary by CalPERS.
2. Privacy protections in the bill
This bill would provide that any medical information
disclosed to CalPERS pursuant to the bill's provisions
would be deemed confidential information and protected by
HIPPA. In addition, the bill would provide that CalPERS
shall not disclose any medical information, as specified,
to any other health care service plan or insurer or any
entity offering services relating to the administration
of health benefit plans (other than the provider of the
information), and shall not make the information
available to the public, including, but not limited to,
any summaries, compilations, or rankings derived from the
information.
While the bill provides some protection for individual
member or annuitant identifying information, should it be
amended to provide that any individual member or
annuitant information be security protected by a coding
system or otherwise?
3. Opposition
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Opponent California Hospital Association (CHA) objects to
one subdivision of the bill as amended, (f), which would
provide that upon request from a hospital, the board
shall provide the hospital, on an annual basis, a
reasonable opportunity to validate the data that has been
provided to the board by a health insurer, health care
service plan, or other defined entity.
CHA argues that the better approach would be to have each
participating hospital and the health plan to agree on a
standard reporting format prior to submission of the data
to the board, and, if there is not agreement on the
format or the information to be submitted, the
participating hospital can register its objections to the
board and have them considered.
Support: CA State Employees Assoc.; Professional
Engineers in CA
Government; CA School Employees Assoc.; CA
Professional Firefighters; Blue Shield of CA;
Service Employees International Union; Riverside
Sheriffs' Assoc.; American Federation of State,
County, and Municipal Employees, AFL-CIO;
Independent Employees of Merced County;
Organization of SMUD Employees; San Bernardino
Public Employees Assoc.; San Diego County Employees
Assoc.; San Luis Obispo County Employees Assoc.;
Santa Rosa City Employees Assoc.; CA Labor
Federation, AFL-CIO; CA State Treasurer
Opposition: CA Hospital Assoc.
HISTORY
Source: CA Public Employees' Retirement System
Related Pending Legislation: None Known
Prior Legislation: None Known
Prior Vote: Assembly Public Employees, Retirement &
Social Security
Committee (Ayes 5, Noes 0)
Assembly Judiciary Committee (Ayes 10, Noes 0)
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Assembly Appropriations Committee (Ayes 16, Noes
0)
Assembly Floor (Ayes 70, Noes 1)
Senate Public Employment & Retirement Committee
(Ayes 3, Noes 2)
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