BILL ANALYSIS �
AB 310
Page 1
Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 310 (Ma) - As Amended: April 25, 2011
Policy Committee: HealthVote:12-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill prohibits health plan contracts and health insurance
policies that cover outpatient prescription drugs from requiring
coinsurance for outpatient prescription drug benefits, and
imposes specified limitations on co-payments and out-of-pocket
expenses for outpatient prescription drugs. Specifically, this
bill:
1)Prohibits health plan contracts and health insurance policies
that cover outpatient prescription drugs from requiring
coinsurance for outpatient prescription drug benefits.
2)Limits co-payments for an individual prescription drug to $150
for a one-month supply of a prescription.
3)Requires, if a health plan contract or health insurance policy
provides for a limit on the annual out-of-pocket expenses for
an enrollee or insured, the enrollee's or insured's
out-of-pocket costs of covered prescription drugs to be
included in that limit.
4)Makes this bill inoperative upon a determination by the
Department of Managed Health Care (DMHC) or California
Department of Insurance (CDI) that its requirements exceed the
essential health benefits (EHBs) set forth in the federal
Patient Protection and Affordable Care Act (ACA).
FISCAL EFFECT
1)According to the California Health Benefits Review Program
(CHBRP), estimated state costs of $11 million ($6.5 million
GF) to provide coverage to public employees through CalPERS
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HMOs. This bill would not apply to plans offered through
Medi-Cal or Healthy Families.
2)Increased employer-funded premium costs in the private
insurance market of approximately $153 million.
3)Increased premium expenditures by employees and individuals
purchasing insurance $56 million. Increased costs are
estimated to be offset by a reduction in out-of-pocket costs
for policyholders of $189 million.
4)Federal regulations implementing the federal health reform
law, the ACA, may impact the costs of this bill in future
years. If it is determined that the requirements in this
mandate exceed the federally defined essential health benefits
(EHBs), this bill will become inoperative and thus will not
result in state costs.
COMMENTS
1)Rationale . According to the author, the intent of this bill is
to reduce exorbitant coinsurance charges for expensive
"specialty tier" drugs that are used to treat rare conditions,
genetic disorders, and chronic conditions that without
treatment will lead to disability and death. The author notes
that, in 2006, federal Medicare Part D plans instituted a
fourth tier of prescription drugs known as "specialty tiers"
to provide plans with the ability to use coinsurance to share
the costs of the most expensive medications with the patient.
The author asserts that many private health plans and health
insurers have copied this model for the most expensive
medications, and require enrollees/insured to pay a percentage
of the cost through coinsurance.
2)Specialty tiers . In a three-tiered prescription drug plan,
individuals pay the lowest co-pay for Tier 1 (generic drugs),
the next highest co-pay for Tier 2 (preferred drugs), and the
highest co-pay for Tier 3 (non-preferred or non-formulary
drugs). For example, a plan might charge $10 for Tier 1, $25
for Tier 2, and $60 for Tier 3. According to a recent report
by the American Association of Retired Persons (AARP),
specialty drugs commonly placed in a fourth "specialty tier"
have prices that range from $5,000 to $300,000 annually, with
an average cost of over $20,000. Out-of-pocket spending on
medications generally does not count towards deductibles,
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leaving pharmacy spending potentially uncapped in many cases.
Specialty drugs are primarily used to treat complex chronic
conditions, such as anemia, cancer, growth hormone deficiency,
hemophilia, hepatitis, multiple sclerosis, and rheumatoid
arthritis. They are more expensive to produce and no generic
or "biosimilar" (biologics with properties similar to existing
biologics) versions of them are available.
3)Mandates and the Affordable Care Act (ACA) . The ACA creates
new state-run health insurance exchanges that will likely
provide coverage to millions of Californians beginning in
2014, and requires that health plans offered through an
exchange cover certain categories of benefits, called
Essential Health Benefits (EHBs). The federal Secretary of
Health and Human Services (HSS) is expected to publish
guidance later in 2011 and 2012 that will further define these
categories. These definitions will have important fiscal
implications for the state.
The ACA specifies that if states require plans in the exchange
to offer additional benefits that go beyond the defined EHBs,
then states must pay the additional cost related to those
mandates. At this time, there are a number of outstanding
questions related to how federally defined EHBs will interact
with state-level benefit mandates.
Federal law requires the EHB package to include coverage for
prescription drugs. However, since the prescription drug
coverage has not yet been specified, it is unclear whether the
cost-sharing requirements in this bill will comply with or
exceed the federally defined benefits. If the bill was found
to exceed the federally defined benefits, its provisions would
become inoperative.
4)Related Legislation . AB 369 (Huffman) prohibits health plans
and health insurers that restrict medications for the
treatment of pain from requiring a patient to try and fail on
more than two pain medications before allowing the patient
access to the pain medication, or its generic equivalent,
prescribed by his or her physician. AB 369 is pending on the
Suspense File of this Committee
5)Other Mandates in the Current Session . There are 14 health
mandates proposed this year, including AB 72. Other mandates
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in the current session include:
a) AB 137 (Portantino): Mammography
b) AB 154 (Beall): Mental Health Services
c) AB 171 (Beall): Autism
d) AB 185 (Hernandez): Maternity Services
e) AB 310 (Ma): Prescription Drugs
f) AB 369 (Huffman): Pain Prescriptions
g) AB 428 (Portantino): Fertility Preservation
h) AB 652 (Mitchell): Child Health Assessments
i) AB 1000 (Perea): Cancer Treatment
j) SB 136 (Yee): Tobacco Cessation
aa) SB 155 (Evans): Maternity Services
bb) SB 173 (Simitian): Mammograms
cc) SB 255 (Pavley): Breast Cancer
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081