BILL ANALYSIS �
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THIRD READING
Bill No: SB 866
Author: Hernandez (D)
Amended: 5/31/11
Vote: 21
SENATE HEALTH COMMITTEE : 7-0, 4/13/11
AYES: Hernandez, Strickland, Alquist, Anderson, De Le�n,
DeSaulnier, Rubio
NO VOTE RECORDED: Blakeslee, Wolk
SENATE APPROPRIATIONS COMMITTEE : 6-2, 5/26/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Runner
NO VOTE RECORDED: Emmerson
SUBJECT : Health care coverage: prescription drugs
SOURCE : Author
DIGEST : This bill directs the Department of Managed
Health Care and the Department of Insurance, on or before
January 1, 2013, to develop a standardized prior
authorization form for prescription drug benefits, as
specified, and requires "prescribing providers," as
defined, to use, and health care service plans and health
insurers to accept, the standardized form when requiring
prior authorization for prescription drug benefits.
ANALYSIS :
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Existing law:
1. Provides for the regulation of health care services
plans (health plans) by
the Department of Managed Health Care (DMHC), and for
the regulation of health insurers by the Department of
Insurance (CDI).
2. Imposes various requirements and restrictions on certain
procedures, commonly referred to as utilization review,
that apply to every health plan and insurer that
prospectively, retrospectively, or concurrently reviews
and approves, modifies, delays, or denies, based on
medical necessity, requests by providers prior to,
retrospectively, or concurrent with, the provision of
health care services to enrollees or insureds, as
specified.
3. Imposes various requirements and restrictions on health
plans and insurers, including, among other things, a
prohibition on health plans and insurers that provide
prescription drug benefits from excluding or limiting
coverage for a drug on the basis that the drug is
prescribed for a use that is different from the use for
which the drug has been approved for marketing by the
federal Food and Drug Administration.
4. Requires health plans and insurers to respond to
requests for authorization within five business days for
non-urgent medically necessary health care services, as
specified, or within 72 hours for situations when the
enrollee or insured's condition is such that he or she
faces an imminent and serious threat to his or her
health, as specified.
5. Requires health plans and insurers to communicate
decisions to approve, modify or deny requests within 24
hours of the decision to the provider, with certain
exceptions.
6. Requires health plans and insurers to communicate
decisions resulting in the denial, delay or modification
of all or part of the request to the enrollee or insured
within two business days.
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7. Requires health plans that provide prescription drug
benefits to maintain an expeditious process by which
prescribing providers, as described, may obtain
authorization for a medically necessary nonformulary
prescription drug, according to certain procedures.
This bill:
1. Directs DMHC and CDI to jointly develop a standardized
prior authorization form for prescription drug benefits
on or before January 1, 2013, which every prescribing
provider is required to use to request prior
authorization for coverage of prescription drug
benefits.
2. Defines "prescribing provider" as a provider authorized
to write a prescription to treat a medical condition of
an enrollee, as currently defined in existing law.
3. Requires health plans and insurers that provide
prescription drug benefits to accept the standardized
form when requiring prior authorization for prescription
drug benefits.
4. Specifies that the form shall not exceed two pages, be
made electronically available by the departments and
health plans and insurers, and may be electronically
submitted from the prescribing provider to the health
plan or insurer.
5. Requires DMHC and CDI to develop the form with input
from interested parties, as specified.
6. Requires DMHC and CDI, in developing the form, to
consider existing prior authorization forms established
by the federal Centers for Medicare and Medicaid and the
state Department of Health Care Services, and national
standards for electronic prior authorization. If the
health plan or insurer fails to use or accept the prior
authorization form, or fails to respond within two
business days upon receipt of a request from a
prescribing provider who has submitted a prior
authorization form, the prior authorization request
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shall be deemed granted.
7. Exempts Medi-Cal managed care plans from the
two-business day requirement.
8. Provides an exemption for a physician or physician group
that has been delegated the financial risk for
prescription drugs by a health plan and does not use a
prior authorization process within the group.
Background
Prior authorization is a common cost-containment and
utilization review method used by health plans, insurers,
and some public coverage programs. The practice of prior
authorization, also called prior approval or
preauthorization, requires a prescriber to obtain
permission from the health plan or insurer to prescribe a
medication before prescribing it.
Health plans and insurers routinely require physicians to
fill out prior authorization forms when the provider
prescribes a medicine or treatment not covered by the plan
or insurer's formulary. Each plan or insurer has their own
prior authorization form, and some plans and insurers may
have multiple forms depending on the type of drug
requested.
Prior authorization is intended to curb abuse and diversion
of controlled substances, and has been shown to be
effective in controlling prescription drug costs.
Medications that commonly require prior authorization
include:
1. Brand name medications that have a generic available;
2. Expensive medications;
3. Drugs not usually covered by the insurance company, but
said to be medically necessary by the doctor;
4. Drugs usually covered but prescribed at a higher dosage;
5. Drugs used for cosmetic reasons; and
6. Drugs prescribed to treat a non-life threatening medical
condition.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
DMHC regulations up to $75 up to $150
$0Special*
Increased complaints potentially in the hundreds of
thousands Special*
to DMHC of dollars in first year; unknown
ongoing
Increased prescriptions potentially in the hundreds of
thousands General/**
approved to millions of dollars annually
commen-Federal/
cing FY 2012-13
Special/Other
* Managed Care Fund
**Healthy Families costs shared 35 percent General Fund, 65
percent federal funds; CalPERS costs shared 55 percent
General Fund, 45 percent special and other funds
SUPPORT : (Verified 5/27/11)
Alliance for Patient Access
American Academy of Private Physicians
American Cancer Society
Association of Northern California Oncologists
BayBio
BIOCOM
California Academy of Family Physicians
California Association of Health Plans
California Association of Physician Groups
California Healthcare Institute
California Medical Association
California NeuroAlliance
Los Angeles County Medical Association
Medical Oncology Association of Southern California, Inc.
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National Council of Asian Pacific Islander Physicians
Neuropathy Action Foundation
Orange County Medical Association
Osteopathic Physicians and Surgeons of California
Pharmaceutical Research and Manufacturers of America
Power of Pain Foundation
US Pain Foundation
OPPOSITION : (Verified 5/27/11)
California Association of Health Plans (unless amended)
ARGUMENTS IN SUPPORT : The California Medical Association
writes in support, stating that preauthorization policies
lead to costly bureaucratic hassles that take time from
patient care. The Medical Oncology Association of Southern
California, Inc. asserts that the prior authorization
process is currently highly complex, lacks transparency,
and the criteria and processes vary significantly among
health plans. Furthermore, these different requirements
create logistical complexity for providers, as well as
adding duplicative overhead and staff time. The American
Academy of Private Physicians concurs, stating that
providers need to be able to get back to the work of
patient care and should not be spending needless time
trying to figure out which health plan has what protocol
and what form.
The Alliance for Patient Access supports this bill, citing
that health plans and insurers have great incentive to
limit a physician's treatment options by using prior
authorization as a way to cut costs. Writing in
concurrence, the Power of Pain Foundation states that they
receive calls regularly from Californians stating that, in
the course of the prior authorization process, they are
forced to go days and/or weeks before they obtain/continue
to get treatments deemed necessary by their provider, and
that they are forced to go through the prior authorization
process multiple times a year for the same medication for
the same condition.
ARGUMENTS IN OPPOSITION : The Californian Association of
Health Plans (CAHP) opposes the bill unless amended, citing
that health plans use drug specific prior authorization
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forms because each drug is unique in its requirements for
diagnosis, limitations, existing diseases, treatment
failures and other clinically relevant information, and
that applying a standardized prior authorization form could
create even more administrative burdens if the form does
not ask the appropriate questions which will subsequently
lead to follow-up calls and faxes. CAHP further objects to
the provision in the bill that deems approval of a prior
authorization request if a plan or insurer does not respond
to a prior authorization request within 48 hours or if the
plan or insurer fails to use the standard form, and raises
concerns that the bill does not address situations where
the provider fails to respond to a request for additional
information or fails to use the standardized form. In
addition, CAHP notes that the implementation date for
plans, insurers and providers is unclear.
CTW:mw 5/31/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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