BILL ANALYSIS
AB 214
Page 1
Date of Hearing: April 14, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 214 (Chesbro) - As Introduced: February 3, 2009
SUBJECT : Health care coverage: durable medical equipment.
SUMMARY : Requires health care service plans (health plans) and
disability insurers selling health insurance (health insurers)
to provide coverage for durable medical equipment (DME) and
services at the same levels of coverage as other basic health
care benefits. Specifically, this bill :
1)Requires every health plan, except a specialized health plan,
that covers hospital, medical, or surgical expenses on a group
or individual basis that is issued, amended, received, or
delivered on or after January 1, 2010, and every group or
individual health insurance policy, on and after January 1,
2010, to provide coverage for DME and services under the terms
and conditions that may be agreed upon between the subscriber
or policyholder and the plan or insurer.
2)Requires the amount of the DME benefit to be no less than the
annual and lifetime benefit maximums applicable to a basic
health care service required to be provided in the plan
contract and no less than the annual and lifetime benefit
maximums applicable to all benefits in the insurance policy.
3)Requires any copayment, coinsurance, deductible, and maximum
out-of-pocket amount applied to the DME benefit to be no more
than the most common amounts applied to a basic health care
service required to be provided in the plan contract and no
more than the most common amounts contained in the insurance
policy.
4)Prohibits the amount of the DME benefit from being subject to
an annual or lifetime benefit maximum level if the contract or
policy does not include any annual or lifetime benefit
maximums applicable to basic health care services.
5)Requires every health plan and health insurer to communicate
the availability of the DME coverage to all current and
prospective group or individual contractholders or
policyholders.
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6)Requires coverage for DME to occur when it is prescribed by a
physician or podiatrist or ordered by a licensed health care
provider acting within the scope of his or her license.
7)Requires every health plan and health insurer to have the
right to conduct utilization review to determine medical
necessity prior to authorizing these services.
8)Defines DME for purposes of this bill as equipment that is
used for the treatment of a medical condition or injury, or to
preserve the patient's functioning, and that is designed for
repeated use.
9)Exempts from the provisions of this bill Medicare supplement,
short-term limited duration health insurance, vision-only, or
Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS)-supplement insurance, or hospital indemnity,
hospital-only, accident-only, or specified disease insurance
that does not pay benefits on a fixed benefit, cash payment
only basis.
EXISTING LAW :
1)Provides for the regulation of health plans by the Department
of Managed Health Care (DMHC) and health insurers by the
California Department of Insurance (CDI).
2)Requires full-service health plans licensed under the
Knox-Keene Health Care Service Plan Act of 1975 to cover all
medically necessary basic health care services, including
physician services; hospital inpatient and outpatient
services; diagnostic services; preventive and routine care;
emergency and urgent care services; medically appropriate home
health services; and, rehabilitation therapy.
3)Defines health plans that cover only certain kinds of care,
such as dental and vision care plans, behavioral or mental
health plans, and chiropractic plans, as specialized plans.
4)Defines "specialized health insurance policy" as a policy of
health insurance for covered benefits in a single specialized
area of health care, including dental-only, vision-only, and
behavioral health-only policies. There is no requirement for
health insurers subject to regulation by CDI to cover
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medically necessary basic services or any specific minimum
basic benefits.
5)Requires every health plan and every health insurer, to cover
or offer coverage for specified mandated benefits or types of
coverage. Mandated benefits and mandated offerings may apply
to individual coverage, group coverage, or both, depending on
the statutory requirements related to that benefit, and in
most instances, apply equally to health plans and health
insurers. There are some specific mandates or mandated
offerings that apply only to health plans or only to health
insurers.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, unlike public
programs in California that provide full coverage of DME, up
to 90% of private plans in California impose an annual benefit
cap of $2,000 and explicitly exclude certain medically
necessary equipment. The author notes that while some DME is
inexpensive, most breathing devices and scooters cost more
than $2,000 each and a motorized wheelchair can cost between
$5,000 and $25,000. The author maintains that Californians
who have private health insurance and whose physicians have
determined that DME is necessary for their functioning at
home, work, and in the community are often unable to get that
equipment, may go without it entirely, or use broken or
ill-fitting devices. The author points out that, nationwide,
46% of adults with disabilities aged 18-64 report that they
have gone without medically necessary DME because of the high
cost. This bill is intended to ensure that fewer people would
be forced to make these difficult choices.
2)DME . DME items are usually external, reusable equipment used
in conjunction with medical care to treat a medical condition
or injury or to preserve a patient's functioning and quality
of life. DME can be used on a long-term basis to treat a
chronic illness or to cope with a physical disability or the
consequences of treatment for a disease. DME can also be used
temporarily by patients being treated for or recovering from
an illness or injury, such as a strain, sprain, or broken
bone. Types of DME include manual and motorized wheelchairs,
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scooters, oxygen equipment, crutches, walkers, electric beds,
shower and bath seats, and mechanical patient lifts.
Currently, DME is fully covered through Medicare and Medi-Cal
without annual or lifetime benefit caps. Medicare
beneficiaries must pay 20% of the cost of the DME, while
Medi-Cal patients do not have any copayment. In the private
market, health plans and health insurers usually do not offer
DME benefits as part of their standard set of benefits, but
offer it as a "rider," meaning an additional set of benefits
available for purchase, or under an arrangement in which DME
is partially covered under the standard set of benefits, but
augmented in a rider.
3)CALIFORNIA HEALTH BENEFITS REVIEW PROGRAM (CHBRP) . AB 1996
(Thomson), Chapter 795, Statutes of 2002, requests the
University of California to assess legislation proposing a
mandated benefit or service, and prepare a written analysis
with relevant data on the public health, medical, and economic
impact of proposed health plan and health insurance benefit
mandate legislation. CHBRP was created in response to AB
1996. SB 1704 (Kuehl), Chapter 684, Statutes of 2006, extends
the sunset on the CHBRP process. In its analysis of AB 214,
CHBRP reported:
a) Medical Effectiveness . For people who use DME on a
temporary or long-term basis, DME can improve health,
functioning, and quality of life. Few studies have
examined the effect of having private health insurance
coverage for DME on use of DME, and the findings are
inconsistent. CHBRP was not able to find any studies that
specifically address the effects of increasing annual or
lifetime limits for DME coverage on DME usage or the impact
of reducing deductibles, coinsurance, or copayments for DME
on such usage. CHBRP states that there is some evidence
from a small number of studies that utilization management
reduces use of some types of DME.
b) Utilization, Cost, and Coverage Impacts . According to
CHBRP, 99.73% of enrollees with coverage subject to the
mandate in this bill already have some coverage for DME.
CHBRP found that an estimated 57,000 enrollees would gain
coverage for DME as a result of this bill and all of these
individuals are enrolled in individual policies regulated
by CDI. Currently, according to CHBRP, over 21 million
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enrollees in the private group or individual health
coverage market have DME coverage, but almost 62% have a
plan or policy that would not be in compliance with this
bill because they face higher coinsurance for DME than for
other medical benefits, or they face annual DME benefit
limits, or both. CHBRP estimates that an average coverage
claim made by a DME user is about $711 per year and,
overall, about 53% of DME users have annual claims below
$100, 41% have annual claims between $101 and $2,000, and
only 6% have claims that exceed $2,000, which is the
current common annual benefit cap.
With regard to utilization, CHBRP indicates that the number
of DME users is not likely to increase but there would be a
slight increase in the units of DME or utilization of more
expensive DME among current users. The estimated increase
in utilization and related expenses are about $29 per DME
user per year, or 4%, in response to reduced cost-sharing
and lifting of annual and lifetime expenditure caps. CHBRP
also notes that the potential change in benefit structure
from one with an annual benefit limit to a benefit with no
limit but a coinsurance rate (such as 20%) or deductible
might maintain a disincentive for an enrollee to upgrade a
DME device.
CHBRP estimates that total net annual expenditures (including
total premiums and out-of-pocket costs) for DME and
services are estimated to increase by about $73 million, or
0.09%, as a result of this bill. CHBRP reports that this
bill would increase premiums for private employers by 0.29%
and increase enrollee contributions toward group insurance
premiums by 0.28%. According to CHBRP, per member per
month premium increases are the following: $0.40 in the
large group CDI-regulated market; $0.77 in the large group
DMHC-regulated market; $0.70 in the small-group
CDI-regulated market; $2.12 in the small group
DMHC-regulated market; $2.09 in the individual
DMHC-regulated market; and, finally, $0.85 in the
individual CDI-regulated market. While CHBRP notes that
the greatest impact on premiums, as a result of this bill,
will be in the small-group and individual DMHC-regulated
markets, these premium increases will be largely offset by
reductions in out-of-pocket expenditures. Lastly, CHBRP
indicates that the California Public Employees Retirement
System (CalPERS), Medi-Cal, and Healthy Families programs
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would not be expected to face any expenditure or premium
increases because they currently provide DME benefits at
parity.
c) Public Health Impact . CHBRP reports that some health
outcomes associated with the use of DME include increased
independence, mobility, functionality, survival, and
decreased morbidity. CHBRP notes that while this bill is
not expected to increase the number of DME users, it is
expected to increase the scope of insurance coverage for
about 720,000 insured DME users. A majority of these users
will financially benefit from this bill due to decreased
copayments associated with DME expenses. Among current
users, this bill is expected to result in an increased
utilization because increased annual limits and coinsurance
are expected to lead to some individuals receiving more
DME, more expensive DME items, and more frequent
replacement of existing DME items, but the health benefits
associated with such an increase are unknown. Lastly,
CHBRP indicates that this bill is not expected to
substantially impact gender, racial or ethnic disparities
and the impact of this bill on the economic loss associated
with DME-related diseases and conditions is unknown.
4)SUPPORT . The sponsors of this bill, Disability Rights
Education and Defense Fund, Disability Rights California, and
National Multiple Sclerosis Society - California Action
Network, point out that current DME benefit limits can pose an
insurmountable financial hardship for many people with
disabilities who are covered by private health insurance and
who require equipment such as motorized wheelchairs, scooters,
or any type of customized device that supports an individual's
health and capacity to work, live, and function independently.
Supporters, representing several disability rights, consumer
advocacy, and labor groups, among others, point out that this
bill will significantly lower the risk that people with
disabilities and chronic conditions, whose ongoing health care
costs can already be very high, will also be required to pay
thousands of dollars out-of-pocket when they such expensive
and life-sustaining items as ventilators, motorized
wheelchairs, or some combination of DME devices. In addition,
supporters state that, as a result of this bill, people with
disabilities, particularly those with long term chronic and
complex conditions, will no longer be forced to choose among a
group of necessary devices because of current benefit
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limitations. Supporters argue this bill will help prevent the
extra costs of health problems, accidents, and surgeries that
can result when people with disabilities try to make do with
incorrectly sized or overly used equipment or delay needed
repairs. Lastly, supporters add that lifting benefit limits
on DME will help people with disabilities live full lives,
avoid debt, reduce hospital stays, and avoid
institutionalization.
5)OPPOSITION . Health plans, health insurers, and business
groups object to this bill. The California Association of
Health Plans argues that requiring DME coverage to mirror the
benefit maximums and cost-sharing arrangements of other
medical benefits reduces a health plan's ability to craft
products that deliver affordable coverage and increases costs
by forcing health plans to redesign coverage and alter
pricing. Health Net contends that the one-siz0e fits-all
approach in this bill removes the ability of employers to make
choices that reflect the value they place on different
benefits compared to the affordability of the premiums. The
California Association of Health Underwriters believes that
the requirement for plans to provide DME coverage under the
terms and conditions that may be agreed upon between the
subscriber and the plan subjects the plan to unending
negotiating and lawsuits from individuals who want
experimental prosthetic devices. The Association of
California Life and Health Insurance Companies and National
Federation of Independent Business, among others, generally
oppose all benefit mandates because, while they sympathize
with the intent to meet a need, they assert that mandates
increase the already high cost of care for everyone and
eliminate the flexibility that employers would otherwise have
to pick benefits that best address the needs of their
employees in the future. The California Chamber of Commerce
adds that benefit mandates make insurance less affordable,
resulting in an increased number of uninsured.
6)PRIOR LEGISLATION . SB 1198 (Kuehl) of 2008, vetoed by
Governor Schwarzenegger, would have required health plans and
health insurers to offer group coverage for DME and services
at the same levels of coverage as other basic health care
benefits.
7)POLICY QUESTION . According to the CHBRP report, most
enrollees (99.7%) already have some form of DME coverage.
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Should this bill be amended to require, instead of an
unlimited benefit, the current common DME benefit cap of
$2,000 to be increased?
8)SUGGESTED TECHNICAL AMENDMENT . This bill does not exclude
from the mandate all types of specialized health insurance,
such as behavioral health plans. Consistent with this intent,
this bill should be amended to delete lines 33-38 and clarify
that it does not apply to "specialized health insurance,
Medicare supplement, short-term limited duration health
insurance, CHAMPUS-supplement insurance, TRI-CARE supplement,
or to hospital indemnity, accident-only, and specified disease
insurance."
REGISTERED SUPPORT / OPPOSITION :
Support
Disability Rights California (sponsor)
Disability Rights Education and Defense Fund (sponsor)
National Multiple Sclerosis Society - California Action Network
(sponsor)
American Federation of State, County and Municipal Employees,
AFL-CIO
Association of Regional Center Agencies
California ALS Advocacy Committee
California Association of Area Agencies on Aging
California Association of Medical Product Suppliers
California Foundation for Independent Living Centers
California NeuroAlliance
California Physical Therapy Association
California Teamsters Public Affairs Council
Center for Independent Living
Computer Technologies Program
Congress of California Seniors
Health Access California
Parkinson Association of Northern California
State Independent Living Council
The Arc of California
Through the Looking Glass
United Domestic Workers of America
Several individuals
Opposition
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Anthem Blue Cross
Association of California Life and Health Insurance Companies
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
Health Net
National Federation of Independent Business
Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097