BILL ANALYSIS
AB 1201
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 1201 (V. Manuel Perez) - As Introduced: February 27, 2009
SUBJECT : Immunizations for children: reimbursement of
physicians.
SUMMARY : Requires a health care service plan (health plan) or
health insurer that provides coverage for childhood and
adolescent immunizations to reimburse a physician or physician
group the entire cost of acquiring and administering the
vaccine, and prohibits a health plan or insurer from requiring
cost-sharing for immunizations. Specifically, this bill :
1)Requires a health plan or insurer that covers childhood and
adolescent immunizations, including a health plan
participating in the Healthy Families Program (HFP), to
reimburse a physician or physician group no less than the
actual costs of acquiring and administering the vaccine,
regardless of whether the child is part of a current contract
between the physician or physician group and the health plan.
Specifies the following:
a) The cost of acquiring the vaccine includes, but is not
limited to, the invoiced purchase price plus reasonable
shipping, handling, insurance, and storage costs; and,
b) The cost of administration of the vaccine must be no
less than the amount the current Medicare physician fee
schedule allows.
2)Prohibits a health plan from including the costs of acquiring
or administering required immunizations for children in the
capitation rate of a physician who is individually capitated.
3)Prohibits a health plan contract or health insurance policy
from imposing a deductible, copayment, coinsurance, or other
cost-sharing mechanism for the administration, or procedures
related to the administration, of a childhood or adolescent
immunization.
4)Prohibits a health plan contract or health insurance policy
from containing a dollar limit that includes the
administration of childhood and adolescent immunizations.
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5)Makes legislative findings and declarations regarding
immunizations as a successful and cost-effective public health
intervention; rising pediatric vaccine acquisition costs;
physician costs for vaccines; the effects of inadequate
provider reimbursement for vaccines; insured families'
financial barriers to immunizations; and, the importance of
ensuring continued access to vaccines.
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 health plans licensed under the Knox-Keene Health
Care Service Plan Act of 1975 to cover all medically necessary
basic health care services, as defined. Defines basic health
care services to include: physician services; hospital
inpatient and outpatient services; including outpatient
physical, occupational, and speech therapy; diagnostic
laboratory and X-ray services; preventive and routine care,
such as vaccinations and routine checkups; emergency and
urgent care services, including ambulance and out-of-area
emergency services; and, medically appropriate home health
services. There is no requirement for health insurers subject
to regulation by CDI to cover medically necessary basic
services or any specific minimum basic benefits.
3)Prohibits a risk-based contract between a physician or
physician group and a health plan from requiring a physician
or physician group to assume financial risk for the cost of
acquiring required immunizations for children as a condition
of accepting the contract. Prohibits a health plan from
requiring a physician to assume financial risk for
immunizations that are not part of the contract.
4)Requires a health plan to reimburse a physician for
immunizations within 45 days of receiving from the physician
documentation that the immunizations were administered.
5)Establishes HFP, administered by the Managed Risk Medical
Insurance Board, to provide low-cost, subsidized health,
vision, and dental insurance to uninsured children with family
incomes up to 250% of the federal poverty level (FPL), who are
not eligible for no-cost Medi-Cal, and the infants of mothers
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in families with incomes between 250-300% FPL.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, existing law
prohibits health plans and insurers from requiring physicians
or physician groups to assume financial risk for the costs of
acquiring required immunizations for children, but the cost of
administering a vaccine is not included in the prohibition.
Administration costs associated with giving immunizations
include refrigeration and storage, clinical staff time, and
medical supplies such as gloves and syringes. The author
contends that health plans and insurers often do not reimburse
for the entire cost of providing vaccines, which forces
physicians to absorb these costs. The author states that as
small businesses, physicians face severe financial strain when
they absorb the costs associated with vaccine administration.
According to the author, some physicians may be forced to
discontinue or delay offering the most costly vaccinations, or
require parents to pay up front, which could shift the burden
of vaccine financing to parents' out-of-pocket expenses or to
public programs. The author further argues that as costlier
new vaccines are approved and recommended, the problem will
only get worse. The author states this bill is intended to
ensure that physicians are fully reimbursed for the costs to
acquire and administer recommended vaccines and that
out-of-pocket expenses do not deter patients from immunizing
their children.
2)Immunization-RELATED EXPENSES . In 2007, the American Academy
of Pediatrics (AAP) published a paper on pricing vaccines and
immunization administration. The paper lists the following as
vaccine-related expenses:
a) Purchase price or acquisition cost of vaccine;
b) Personnel costs for ordering and inventory, including
staff time to monitor vaccine stock, place orders,
negotiate prices, delivery and payment term, and monitor
storage procedures;
c) Storage costs, including refrigerators and freezes,
locks, alarm systems, temperature monitoring devices, and
generators for continued electrical supply;
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d) Insurance against loss of vaccine;
e) Wastage and non-payment; and,
f) Lost opportunity costs for the money invested in
vaccines and for which a reasonable return on investment
might otherwise be expected.
The AAP paper lists the following as immunization
administration expenses:
a) Physician work;
b) Practice expenses, including staff time, medical
supplies (non-sterile gloves, exam table paper, syringe
with needle, the federal Centers for Disease Control and
Prevention (CDC) information sheet, alcohol swabs, bandage)
and medical equipment (exam table); and,
c) Professional liability insurance.
AAP used a methodology developed by the federal Center for
Medicare and Medicaid Services and the administration expenses
shown above to calculate the value of immunization
administration. AAP estimates that the value of administering
an immunization to a child under age 8 is $21.33 for the first
injection and $10.66 for each additional injection. AAP
estimates the value of administering an immunization orally or
intranasally to a child under age 8 is $13.33, and each
additional administration is $10.28. AAP concludes that the
total costs of providing a vaccine is approximately 17-28%
above the vaccine purchase price.
3)PHYSICIAN UNDERPAYMENT . In California, some pediatricians
report that despite the existing law requiring full
reimbursement for acquisition of vaccines, they are not
receiving reimbursements that cover the full direct costs. A
2008 article in Pediatrics on a national survey of
pediatricians and family practice physicians found that about
half had delayed the purchase of specific vaccines for
financial reasons and experienced a decreased profit margin
from immunizations in the past three years. The article
reports 5% of pediatricians and 21% of family physicians said
their practice had seriously considered whether to stop
providing all vaccines to privately insured children. The
article and other reports state that because of high vaccine
costs, many physicians do not keep enough vaccines on hand to
meet demand, or simply do not stock a vaccine, such as the
human Papilloma virus (HPV) vaccine, which costs $360 for the
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full three dose vaccination. The development and
recommendation of new vaccines increases the cost of fully
vaccinating a child. According to a 2008 news article, in
1995, the federal government's cost to purchase all
recommended vaccines for a child up to age 12 was $155; by
2007, the cost had risen to $927 for a boy and $1,214 for a
girl (including the HPV vaccine). The 2009 CDC Vaccine Price
List shows that private sector purchasers are charged
substantially more for vaccines than the prices CDC
negotiates. CDC prices for vaccines are often one-third less,
and in some cases less than half what manufacturers charge
private sector purchasers.
In California, physicians anecdotally report that various health
plans and insurers do not reimburse the full costs of
vaccines, and are unresponsive to complaints. In some cases,
physicians state they are not being reimbursed for certain
vaccines at all. As a consequence, some physicians state they
are requiring payment directly from patients or sending
patients to the local health department.
4)SUPPORT . The California Medical Association (CMA), cosponsor
of this bill, writes that purchase of vaccines is the single
most expensive part of a pediatric or family practice. CMA
writes physicians typically face higher vaccine prices than
large public purchasers and usually lose money when they
provide immunizations, which could discourage them from
purchasing adequate doses to meet demand and shift the burden
of vaccine financing to parents or to public programs. CMA
argues health insurers should be incentivizing preventive
care, not creating obstacles. The California District of AAP
(AAP-CA), another cosponsor of this bill, writes that as
costlier new vaccines are approved and recommended, some
physicians may be forced to discontinue or delay offering the
most costly vaccinations or require parents to pay up front.
The California Academy of Family Physicians (CAFP), one more
cosponsor of this bill, writes many primary care practices are
operating on very thin financial margins, and often receive
payments that do not equal the cost of care they provide.
CAFP writes it is imperative that we ensure continued access
to disease-preventing vaccines. Children Now writes in
support that 10% of our state's children are not fully safe
from preventable infectious diseases and it is critical that
remaining barriers to childhood immunizations, such as out of
pocket costs and under-reimbursement of physicians, are
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removed. The Association of Northern California Oncologists
(ANCO) writes that pediatricians and oncologists share a key
characteristic: they acquire medicines in advance on behalf
of their patients and administer them when needed. ANCO
states it is imperative that health plans and insurers pay for
the dispensing of drugs; otherwise, the physician is
subsidizing the care and providing an economically unviable
service, which in turn threatens access to care for future
patients.
5)OPPOSITION . The California Association of Health Plans (CAHP)
writes in opposition that acquisition costs of vaccines are
already protected under existing law as not allowable in a
risk-based contract. CAHP and Health Net write that
physicians' indirect costs associated with a health service
are considered part of the overall negotiated rate for
providing medical services. Health Net writes that
historically, administration costs are factored in the vaccine
reimbursement and only the physician would know what
negotiated rate he or she would require to be made whole.
Further, CAHP and Health Net object to the prohibition on
cost-sharing mechanisms, stating that a full range of services
may be provided at the same visit that a child receives
immunizations, so this bill would effectively prohibit
co-payment or coinsurance for the entire visit. CAHP and
Health Net also argue substantial administrative costs would
result from revising all the products this bill would affect.
The Association of California Life and Health Insurance
Companies (ACLHIC), Health Net, and Anthem Blue Cross write in
opposition that this bill will disrupt health plans and
insurers' automated payment systems. ACLHIC argues that in
order to bill for acquisition costs of vaccines, physicians
may have to manually submit invoices, which would exacerbate
the already high administrative costs insurers face. Finally,
CAHP questions whether removing reimbursement for
administering vaccines from provider capitation rates is an
appropriate incentive for cost-effectiveness.
6)RELATED LEGISLATION .
a) AB 354 (Arambula) and AB 1021 (Emmerson), both pending
in the Assembly, remove age and grade restrictions from
vaccination requirements for children entering schools and
child care facilities, and adds the American Academy of
Family Physicians to the list of entities whose
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recommendations DPH must consider when updating the list of
required vaccinations.
b) AB 977 (Skinner), pending in the Assembly, allows
pharmacists to administer influenza and pneumonia vaccines
to persons over seven years of age, as specified.
7)PREVIOUS LEGISLATION .
a) AB 142 (Richman) of 2001 would have prohibited health
plan contracts from requiring health care providers to
assume any financial risk for any specified medications and
adult vaccines. AB 142 was vetoed by the Governor. Former
Governor Davis' veto message stated:
This bill interferes with the private contractual
relationships between plans and providers on many
levels. Not only does it limit a plan and
provider's ability to contract for the provider
to assume the risk for certain medications, it
sets the reimbursement rates for those services.
Moreover, this bill effectively eliminates a
plan's ability to use its strong purchasing power
to buy medications in bulk at discounted rates.
Not only is it bad public policy for the
government to dictate the contractual
relationships of private parties, this bill will
lead to higher costs for consumers and employers.
Two years ago I signed SB 260, which created the
Financial Solvency Standards Board within the
Department of Managed Health Care. The FSSB has
been working diligently with the Department to
implement the provisions of SB 260 and meets
monthly to continue its goal of providing
comprehensive recommendations that address the
complex issue of provider solvency of the State's
managed health care system. The Department and
the FSSB should be allowed to continue its
important work before new legislation in this
area is considered.
b) SB 168 (Speier) Chapter 845, Statutes of 2000 requires
health plans to reimburse physicians for immunizations at
not less than the actual acquisition costs of the vaccine.
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c) SB 1291 (Polanco) of 2000 would have required California
to utilize a federal option that permits states to purchase
federal discounted bulk childhood vaccines for HFP
enrollees. SB 1291 was held under submission on the
Assembly Appropriations Committee suspense file.
d) AB 1053 (Thomson) of 1997 would have required plans to
cover all medically necessary vaccines and prohibited plans
from including vaccine costs within capitation rates, as
specified, and required health plans to augment provider
reimbursements for additions made to the recommended
childhood immunization schedule. AB 1053 was vetoed by
then Governor Wilson, who stated:
This bill is not about providing children with
vaccines. Existing law already requires health
care service plans to provide pediatric vaccines
pursuant to the most current version of the
Recommended Childhood Immunization
Schedule/United States, jointly adopted by the
American Academy of Pediatrics, the Advisory
Committee on Immunization Practices, and the
American Academy of Family Physicians.
This bill is really about how physicians are
paid. These matters are best left to the
contracting parties. This bill would also
establish a precedent for excluding services and
procedures from the capitation rate, resulting in
increased health care costs.
8)POLICY QUESTIONS AND COMMENTS .
a) Determining Administrative Costs . How will
administrative costs be calculated? The author may wish to
provide guidelines as to how to define administrative costs
in order to achieve consistent application among
physicians, health plans, and health insurers.
b) Cost sharing . Given that a single health care visit may
include multiple services, including immunizations, the
author may wish to address the application of the
cost-sharing prohibition to visits involving immunizations
and other health services.
9)AMENDMENTS . The author intends to amend the bill to include a
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finding that lack of participation in the California
Immunization Registry is a problem, and to include a
legislative declaration requesting all medical specialty
associations to encourage their physicians to participate in
the registry.
10)CHAPTERING CONCERNS .
a) This bill, AB 542 (Feuer), and SB 1 (Steinberg and
Alquist) each add Section 12693.56 to the Insurance Code.
As the bills move through the process, they will need to be
amended to avoid a chaptering problem.
b) This bill and AB 92 (Aanestad) both add Section 10123.56
to the Insurance code. Each should be amended to avoid
chaptering out the other, should both bills be enacted.
REGISTERED SUPPORT / OPPOSITION :
Support
American Academy of Pediatrics - California District (cosponsor)
California Medical Association (cosponsor)
California Academy of Family Physicians (cosponsor)
Association of Northern California Oncologists
California Communities United Institute
Children Now
Opposition
Anthem Blue Cross
Association of California Life and Health Insurance Companies
California Association of Health Plans
Health Net
Analysis Prepared by : Allegra Kim / HEALTH / (916) 319-2097