BILL ANALYSIS �
AB 1800
Page 1
Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1800 (Ma) - As Amended: May 1, 2012
Policy Committee: HealthVote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill limits cost-sharing for prescription drugs and
modifies provisions related to exclusions of medically necessary
drugs in health plans. Specifically, this bill:
1)Establishes, beginning in 2014, limits on total out-of-pocket
costs for health plans and health insurance policies by
referring to out-of-pocket maximums in federal law that apply
to the individual and small group market. Specifies this
limit shall apply to copayments, coinsurance, deductibles, and
payments for prescription drugs.
2)Prohibits, beginning in 2014, separate deductibles for
prescription drugs and other covered benefits.
3)Prohibits the Department of Managed Health Care (DMHC) from
approving an exclusion to medically necessary prescription
drugs for which there is no therapeutic equivalent
4)Specifies factors DMHC must consider when determining whether
to allow an exclusion to a plan's prescription drug benefits,
including whether there is a therapeutic equivalent, and
whether peer-reviewed scientific literature indicates that the
prescription drug is likely to provide a benefit to the
consumer.
FISCAL EFFECT
1)Minor costs, potentially in the range of $50,000 special fund
to DMHC to modify regulations related to drug exclusions.
2)Workload costs to DMHC and CDI of $150,000 special fund,
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combined, to ensure plan filings reflect these changes.
3)Unknown, potentially significant state health care costs to
CalPERS plans, and potentially significant costs in the
private market, related to the provision requiring DMHC to
consider whether the drug provides a benefit to the consumer.
It is possible this could be construed to limit DMHC's ability
to exclude categories of drugs they are allowed to exclude
under current law, such as drugs prescribed for cosmetic
purposes.
4)Unknown, potentially significant short-term increases state
health care costs related to CalPERS plans, and potentially
significant costs in the private market, related to the
provision requiring combined deductibles. Since this appears
to be a significant departure from standard practice, plans
may tend to increase costs across the board to ensure they are
adequately protected from the risk inherent in broadly
offering new products with limited data of the impacts of
these changes on utilization. Plans also indicate they would
experience significant administrative costs that would be
passed on to consumers.
5)CalPERS, Medi-Cal, Healthy Families, and other
state-administered health plans already comply with the
requirements of this bill related to out-of-pocket maximums,
so no fiscal impact is expected from this provision.
COMMENTS
1)Rationale . This bill intends to protect individuals from
catastrophic financial pressure caused by high-cost
prescription drugs, by imposing maximum out-of-pocket limits
on patient cost-sharing that will apply to all health plans.
The author contends patients, even those with fairly
comprehensive coverage, are sometimes faced with cost sharing
of 25% or more for certain high-cost drugs. This bill is
supported by many consumer advocates and advocates for
patients with diseases that require high-cost drugs for
treatment, including the Multiple Sclerosis Society and the
Arthritis Foundation.
2)Specialty tiers . 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
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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, leaving pharmacy
spending potentially uncapped.
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. 25% of these costs
can run into the tens of thousands of dollars or more.
3)Interaction with Reforms in 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 in the
individual and small group market cover certain categories of
benefits, called essential health benefits (EHBs). The federal
Secretary of Health and Human Services (HSS) is expected to
propose regulations that will further define EHBs.
Pre-regulatory guidance from HHS suggests the federal
government intends to allow the state to designate EHBs
through selection of a benchmark plan. AB 1453 (Monning),
pending on the Assembly Floor, and SB 951 (Ed Hern�ndez),
pending referral in the Assembly, have been introduced this
year to select the EHB benchmark plan.
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 to defray the additional cost of those
mandates. This bill does not exceed requirements under the ACA
and thus is not expected to result in any state costs to
defray benefits.
Federal law requires the EHB package, which applies to the
small group and individual markets, to include prescription
drug coverage. Most large-group plans already include
prescription drug coverage. Federal law also appears to
require all health plans, including large group plans, to meet
the out-of-pocket maximums in this bill, although there are
some outstanding technical questions about how the limits will
be applied in large-group plans.
4)Pharmacy Benefits . While most insured individuals have access
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to provide pharmacy benefits, the marketplace is complex and
there are many models for how benefits are delivered.
Employers that provide coverage have the choice to fully
insure or to self-insure for pharmacy, and can choose to
include drug benefits in a plan or carve them out. Even many
health plans subcontract with pharmacy benefit managers such
as ExpressScripts or CVS/Caremark to administer their pharmacy
benefit and, although it can appear seamless to the consumer,
the pharmacy benefit is managed as a completely separate
benefit. Health plans indicate huge systems changes would be
necessary to comply with the provision of the bill that
requires a single deductible that combines pharmacy and
medical services, although it appears some level of such
systems change will be necessary to comply with the maximum
out-of-pocket limits specified in ACA.
5)Opposition . Health plans and insurers oppose the various
provisions of this bill. They indicate imposing an
out-of-pocket maximum will raise premium costs and that the
maximums should not apply to large employers, who are
sophisticated.
Kaiser Permanente indicates they would expect significant
costs to reengineer their systems to implement the combined
deductible provision of this bill, and actually see consumer
pitfalls, not benefit. They indicate combining the
deductibles means that it may take individuals longer to meet
their deductibles, and that this requirement appears to
prohibit them from offering a popular benefit design where
preventative care only requires co-pays and would not count
toward the deductible.
6)Related Legislation . AB 310 (Ma), 2011, prohibited health plan
contracts and health insurance policies that cover outpatient
prescription drugs from requiring coinsurance as a basis for
cost sharing for outpatient prescription drug benefits, and
imposed limitations on copayments and out-of-pocket expenses
for outpatient prescription drugs. AB 310 was held on the
Suspense File of this committee.
AB 2170 (Bonnie Lowenthal), 2010, prohibited health plans and
insurer contracts that include prescription drug benefits from
increasing copayments or deductibles for the length of the
contract. AB 2170 was held on the Suspense File of this
committee.
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Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081