BILL ANALYSIS
AB 2587
Page 1
Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 2587 (Tom Berryhill) - As Introduced: February 19, 2010
SUBJECT : Health care coverage: benefit mandates.
SUMMARY : Prohibits health plans and health insurers from
complying with existing law mandating coverage of certain health
care benefits until their respective regulatory agencies declare
that the state unemployment rate has been no more than 5.5% for
four consecutive quarters. Specifically, this bill :
1)Exempts health plans and health insurers from complying with
existing law requiring them to provide certain health care
benefits until the Department of Managed Health Care (DMHC) or
the California Department of Insurance (CDI), respectively,
issue a declaration finding that the state unemployment rate,
as determined by the official statistics of the Labor Market
Information Division of the Employment Development Department
(EDD-LMI), has been no more than 5.5% for four consecutive
quarters.
2)Defines, for purposes of this bill, "benefit mandate" to mean
a requirement to do any of the following:
a) Permit a subscriber or enrollee to obtain health care
treatment or services from a particular type of health care
provider;
b) Offer or provide coverage for the screening, diagnosis,
or treatment of a particular disease or condition; and,
c) Offer or provide coverage of a particular type of health
care treatment or service, or of medical equipment, medical
supplies, or drugs used in connection with a health care
treatment or service.
3)Clarifies, with respect to health plans, that the definition
of benefit mandate in 2) above does not include the
requirement to provide basic health care services.
EXISTING LAW :
AB 2587
Page 2
1)Provides for regulation of health plans by DMHC under the
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene)
and regulation of health insurers by the CDI under the
Insurance Code.
2)Requires health plans under Knox-Keene to cover a number of
basic health care services and permits DMHC to define the
scope of the services and exempt plans from the requirement
for good cause.
3)Defines, under Knox-Keene, 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.
4)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. Some specific mandates or mandated offerings 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, paying for
health care coverage is the fastest rising cost facing
businesses and families. At the same time, the author argues
health insurance is one of the highest regulated sectors of
our economy and state-imposed mandates play a large role in
determining the cost of health care insurance today. The
author asserts that the state must take seriously its critical
role in determining whether or not the state's consumers have
access to affordable healthcare options. Currently, the
AB 2587
Page 3
author contends Californians are limited to purchasing
California-based health plans at top prices due to state
mandates that they may not need, or simply cannot afford.
This bill would allow carriers to develop "mandate-lite" plans
in response to market needs and when the unemployment rate
exceeds 5.5 %. A carrier would be authorized to offer, sell,
and renew a health care service plan contract or health
insurance policy after January 1, 2011, that excludes
specified benefits otherwise mandated by law. The author
maintains that this bill is intended to put health care
affordability in the hands of tens of thousand of Californians
currently without medical coverage while lowering the burden
facing California's small businesses.
2)CALIFORNIA HEALTH BENEFITS REVIEW PROGRAM . 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.
The California Health Benefits Review Program (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 issue analysis of this bill, CHBRP reported:
a) Unemployment Trends . AB 2587 would allow health plans
and insurers to forego compliance with current or future
benefit mandates until the EDD-LMI declares that the
unemployment rate has been no more than 5.5% for four
consecutive quarters. The unemployment rate reported by
the EDD-LMI is determined by dividing the number of
unemployed by the civilian labor force, defined as
individuals, aged 16 years and older, who are not members
of the Armed Services, and are not in institutions such as
prisons, mental hospitals, or nursing homes. The
"unemployed" are defined as individuals, aged 16 years or
older, who are not working but are able to work, available
for work, and seeking either full-time or part-time work.
As of February 2010, the unemployment rate in California is
12.5%. CHBRP reports that, from 1999-2010, the state's
unemployment rate fell below the 5.5% threshold specified
in this bill only during two periods, 1999-2001 and
2005-2007. From 2001-2007, about 55%-57% of California
adults under 65 had continuous health insurance coverage
AB 2587
Page 4
for the entire year provided through an employer but that
number fell to an estimated 51.3% in 2009. From 2001-2007,
about 25% of California adults were uninsured all or part
of the year, but in 2009, that percentage rose to almost
30%. CHBRP reports that the rates of employment and health
insurance coverage are linked because the majority of the
non-elderly adult population attains coverage through an
employer. According to statistics cited by CHBRP, an
increase in the unemployment rate of 1% causes 1.1 million
more non-elderly adults to become uninsured.
b) Medical Effectiveness . Findings regarding the medical
effectiveness of specific health care services addressed by
the mandates and mandated offerings for which coverage
could be excluded under this bill are as follows:
CHBRP finds that many of the mandates and mandated offerings
addressed by this bill require health insurance products to
provide coverage for health care services for which there
is strong evidence of effectiveness. CHBRP notes that
there is clear and convincing evidence for medical
effectiveness from multiple, well-designed, randomized
controlled trials of the following currently mandated
services: screening for breast, cervical, and colorectal
cancers; diagnostic procedures and treatment for breast
cancers; screening tests for the human immunodeficiency
virus (HIV); diabetes management medications, services, and
supplies; diagnosis and treatment of osteoporosis; medical
and psychosocial treatment for severe mental illness and
alcoholism; some preventive services for children and
adolescents; prescription contraceptive devices; diagnosis
and treatment of infertility; and, home care services for
elderly and disabled adults.
CHBRP finds that there is also a preponderance of evidence
for the medical effectiveness of the following tests and
treatments: liver and kidney transplants for persons with
HIV; medical formulas and foods for persons with
phenylketonuria (PKU); prosthetic devices; orthotic devices
for some conditions; special footwear for persons with
rheumatoid arthritis; acupuncture; pain management
medication for persons with terminal illnesses; pediatric
asthma management; prenatal diagnosis of genetic disorders;
expanded alpha-fetoprotein screening; and, surgery for the
jawbone and associated bone joints.
AB 2587
Page 5
According to CHBRP, there is insufficient evidence to
determine whether the following are effective: tests for
screening and diagnosis of lung cancer, oral cancer, and
skin cancer; orthotic devices for some conditions; general
anesthesia for dental procedures; screening the blood lead
levels of children at increased risk for lead poisoning;
orthodontic services for persons with oral clefts;
reconstructive surgery for clubfoot and craniofacial
abnormalities; and, home care for children. CHBRP
clarifies that insufficient evidence indicates that
available evidence is not sufficient to determine whether
or not a health care service is effective. It is not the
same as evidence of no effect. A health care service for
which there is insufficient evidence might or might not be
found to be effective if more evidence were available.
CHBRP further reports a preponderance of evidence indicating
that screening for bladder cancer, ovarian cancer,
pancreatic cancer, and testicular cancer, and screening
blood lead levels of children at average risk for lead
poisoning are not medically effective.
c) Utilization, Cost, and Coverage Impacts . According to
CHBRP, individual benefit mandates typically raise premiums
by less than 1%; the cumulative annual cost of the state's
mandated benefits is between 5% and 19% of the total
premium for the health insurance product. Studies of the
marginal cost of benefit mandates (i.e., the cost of the
benefit minus the cost of the benefit that would be covered
in the absence of the legal requirement imposed by the
mandate) indicate that the marginal costs are lower than
the total cumulative annual costs, ranging from 2% to 5% of
premiums. CHBRP estimates that allowing the sales of
limited benefit plans in California by out-of-state
carriers could potentially reduce premiums by about 4.8
percent to five percent. Approximately 266,000 to 298,000
individuals could switch from plans and policies with
mandated benefits to limited-benefit plans. For this
population, out-of-pocket expenditures for benefits
previously covered could potentially increase by an
estimated $19.4 million. In addition, these insured persons
would have an increased risk of foregoing treatment for
services no longer covered under limited-benefit plans. In
particular, the absence of coverage for effective
AB 2587
Page 6
preventive services could result in diagnosis at more
advanced stages of disease, more costly illness, and
premature death. Furthermore, CHBRP states that it is
important to note that coverage under limited-benefit plans
would likely attract low-risk enrollees rather than those
uninsured with chronic or high-risk conditions.
d) Public Health Impacts . To access the public health
impact if coverage for a particular benefit is excluded
from a limited mandate plan, CHBRP used three criteria: the
medical effectiveness findings, the scope of the public
health problem (broad, moderate, or limited), and the type
of public health problem (mortality or morbidity). CHBRP
estimates that excluding coverage of the following benefits
would have mortality impacts of broad scope, meaning that
they could affect more than 1 in 20 persons: cancer
screening tests for breast, cervical, and colorectal
cancers; diagnostic tests and treatments for breast cancer;
diabetes management medications, services, and supplies;
medication and psychosocial treatments for severe mental
illness and alcoholism; preventive services for children
and adolescents; and, pediatric asthma management. CHBRP
reports that excluding benefits for prescription
contraceptive devices would have a morbidity impact of
broad scope.
CHBRP indicates that excluding coverage for services for HIV
testing, the diagnosis and treatment of osteoporosis and
prenatal diagnosis of genetic disorders could have
mortality impacts of moderate public health scope; meaning
more than 1 in 2,000 persons could be affected. CHBRP also
finds that excluding coverage of the following benefits
could have a morbidity impact of moderate scope: prosthetic
devices; orthotic devices for some conditions; special
footwear for persons with rheumatoid arthritis; pain
management medication for persons with terminal illnesses;
acupuncture; diagnosis and treatment of infertility; and,
surgery for the jawbone and associated bone joints.
The exclusion of coverage for the following benefits would
cause public health impacts of limited scope, meaning fewer
than 1 in 2,000 persons would be affected: medical formulas
and foods for persons with PKU, and expanded
alpha-fetoprotein screening. Excluding coverage of
benefits for home care services for elderly and disabled
AB 2587
Page 7
adults, and hospice care would have morbidity impacts of
limited public health scope.
CHBRP concludes that the medically effective mandated
benefits that are most likely to be dropped as a result of
this bill include: alcoholism treatments and parity in
coverage for severe mental illness/coverage for mental and
nervous disorders, PKU treatment with medical formula and
foods, expanded alpha-fetoprotein screening, prescription
contraceptive devices, acupuncture, infertility treatments,
jawbone or associated bone joint surgery, orthotics and
prosthetics, special footwear for persons with rheumatoid
arthritis, and home care services for elderly and disabled
adults.
e) Other Policy Considerations . CHBRP notes that this bill
raises a number of questions regarding potential
implementation and compliance. CHBRP indicates that these
questions relate specifically to administrative and
regulatory factors, consumer disclosures, risk
segmentation, in which healthier consumers select the least
extensive and least expensive product while those needing
more health care services tend to select more extensive and
more expensive products, and complications arising from
requirements under recently enacted federal health care
reform.
3)RELATED LEGISLATION . AB 1904 (Villines) allows carriers
domiciled in another state to offer, sell, or renew a health
plan or insurance policy in California without holding a
license issued by DMHC or a certificate of authority issued by
CDI and exempts the carrier's plan contract or policy from
requirements otherwise applicable to plans and insurers
providing health care coverage in this state if the plan
contract or policy complies with the domiciliary state's
requirements, and the carrier is lawfully authorized to issue
the plan contract or policy in that state and to transact
business there. AB 1904 is set to be heard in this committee
on April 20, 2010.
4)PRIOR LEGISLATION .
a) AB 1214 (Emmerson) of 2007 would have established the
Freedom to Choose Health Benefits Act to authorize health
plans and health insurers to offer, sell, and renew health
AB 2587
Page 8
plan contracts or health insurance policies, respectively,
that excluded coverage for specified benefits otherwise
mandated in law, provided the applicant or policyholder
waived those benefits by signing a disclosure form. AB
1214 was set for a hearing in the Assembly Health Committee
but the hearing was cancelled at the request of the author.
a) AB 1644 (Niello) of 2007 would have allowed a carrier
domiciled outside California to offer, sell, or renew an
essential health benefit plan in California without holding
a license issued by DMHC or a certificate of authority
issued by CDI, and would have exempted the essential health
benefit plan from requirements otherwise applicable to
plans and insurance policies providing health care coverage
in this state. AB 1644 was set for a hearing in the
Assembly Health Committee but the hearing was cancelled at
the request of the author.
a) SB 365 (McClintock) of 2007, identical to AB 1904
(Villines), failed passage in the Senate Health Committee.
5)SUPPORT . The Howard Jarvis Taxpayers Association writes in
support that current mandates and mandated offerings are an
infringement by government that drive up premiums, make
coverage more expensive for those that already have insurance,
and help to explain why millions of Californians do not have
coverage.
6)OPPOSITION . Opponents, representing labor, provider, teacher,
and consumer groups, contend that this bill goes in the wrong
direction by removing critical health care consumer
protections that ensure Californians will have the coverage
they need. They assert that, without mandates, health
insurance companies would not be required to provide certain
specified health care services, leaving people unable to
access needed care. Opponents argue that tying important
health care mandates to an arbitrary and unrelated issue, such
as the state unemployment rate, will detrimentally impact the
health and well-being of Californians who rely on their health
plan or health insurance policy for coverage of needed medical
services. The California Medical Association adds in
opposition that this bill would decimate important protections
for patients and physicians, create chaos in the health
insurance marketplace, impose new costs and burdens on public
AB 2587
Page 9
health care programs, and be an enforcement and implementation
nightmare.
REGISTERED SUPPORT / OPPOSITION :
Support
Howard Jarvis Taxpayers Association
Opposition
American Federation of State, County and Municipal Employees,
AFL-CIO
California Medical Association
California Physical Therapy Association
California Teachers Association
Disability Rights California
Health Access California
Planned Parenthood Affiliates of California
Western Center on Law and Poverty
Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097