BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 866 (Hernandez)
Hearing Date: 5/26/2011 Amended: 4/11/2011
Consultant: Katie Johnson Policy Vote: Health 7-0
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BILL SUMMARY: SB 866 would require the Departments of Insurance
and Managed Health Care, on or before July 1, 2012, to develop a
standardized form for the prior authorization of prescription
drug benefits. On and after July 1, 2012, the bill would require
providers to use and insurers and health care service plans to
accept the standardized form. Additionally, this bill would deem
a prior authorization request approved if the insurer or health
plan failed to use or accept the form or to respond within 48
hours.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
DMHC regulations up to $75 up to $150 $0 Special*
Increased complaints topotentially in the hundreds of
Special*
DMHC thousands of dollars in first year;
unknown ongoing
Increased prescriptionspotentially in the hundreds of
thousandsGeneral/**
approved to millions of dollars annually
Federal/
commencing 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.
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
This bill would require the California Department of Insurance
(CDI) and the Department of Managed Health Care (DMHC) to
jointly develop a uniform prior authorization form that every
provider would be required to use when requesting permission
from an insurer or health care service plan (collectively
referred to as "carriers") to prescribe prescription drugs for a
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patient. The form would be required to be developed on or before
July 1, 2012. On and after July 1, 2012, providers would be
required to use, and carriers would be required to accept, only
that form when requesting prior authorization for prescription
drug benefits.
Standardized Form Fiscal Impact
Any cost to CDI and DMHC to develop the form would be minor and
absorbable. DMHC would likely need to promulgate regulations at
a cost of up to $75,000 in FY 2011-2012 and up to $150,000 in FY
2012-2013 for a staff attorney. To the extent this change
generates additional complaints to DMHC, there could be help
center costs in the low hundreds of thousands of dollars. Since
this bill would require the form to be developed and used prior
to the completion of DMHC's regulatory process, discussed below,
there could be more than $150,000 special fund expenditures in
FY 2012-2013.
Currently, each health plan, including Medi-Cal managed care
plans, develops and utilizes its own prior authorization forms.
The Centers for Medicare and Medicaid and California's
Department of Health Care Services use standardized, two-page
forms for Medicare and Medi-Cal fee-for-service treatment
authorization requests.
Requiring a standardized form from carriers would streamline
paperwork for providers, thus giving them more time with which
to see patients. This could potentially lead to an increased
number of visits in a day and therefore increased reimbursement
claims for services rendered, which would result in more costs
to private and publicly-funded health care coverage programs
such as Medi-Cal, the Healthy Families Program (Healthy
Families), and the California Public Employees Retirement System
(CalPERS). This bill would affect about half of Medi-Cal's 7.5
million beneficiaries who are enrolled in Medi-Cal managed care
plans; costs would be shared 50 percent General Fund, 50 percent
federal funds. Healthy Families covers approximately 900,000
children and costs are shared 35 percent General Fund, 65
percent federal funds. CalPERS covers approximately 1.3 million
individuals of which 700,000 are state employees. Their costs
are shared 55 percent General Fund, 45 percent special and other
funds.
48 Hours Requirement Fiscal Impact
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This bill would require that in the event that a carrier fails
to use the standardized form or fails to respond to a prior
authorization request from a provider within 48 hours, the
request would be deemed to have been granted. Currently, private
carriers have 5 business days to respond to a routine prior
authorization request and 72 hours in which to respond to an
urgent request. Medi-Cal managed care plans are contractually
required to respond a pharmaceutical prior authorization request
within 24 hours; however, if a plan required more time to obtain
additional clinical information from the provider or to
otherwise modify a request, the plan could give the request a
"pending" status and thereby have additional time in which to
approve or deny the request.
The 48 hour time limit would reduce the flexibility that plans
currently have when responding to these requests. The reduction
in flexibility could lead to more expensive drugs being approved
than are currently.
For publicly-funded programs, the increased costs would be
reflected in cost reports made by plans to Medi-Cal and Healthy
Families; this would put cost pressure in likely in the hundreds
of thousands to millions of dollars on the Department of Health
Care Services and the Managed Risk Medical Insurance Board to
increase the rates paid to programs. The costs would be shared
50 percent General Fund and 50 percent federal funds for
Medi-Cal and 35 percent General Fund and 65 percent federal
funds for Healthy Families.
Staff notes that the author may want to consider amending the
bill in a way that minimizes confusion surrounding the existing
Medi-Cal requirements and this bill's 48 hour requirement.
In contrast, if this bill would result in the denial of some
requests that would have been granted if the carrier had a
longer time to review the request, there would be increased
paperwork for the provider and the carrier and a potentially
worse health outcome for the patient if he/she went without
treatment, which could drive up health care costs.
The author's proposed amendments would:
1) Change the 48 hour requirement to a two-business days
requirement that would begin upon the receipt of a prior
authorization request;
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2) Delay implementation until January 1, 2013, instead of
until July 1, 2012;
3) Exempt Medi-Cal managed care plans from the two-business
day requirement.
Exempting Medi-Cal managed care plans would decrease the
potential impact on the state due to increased prescription drug
approvals. A potential impact on state funds would continue to
exist because plans that contract with CalPERS and Healthy
Families would continue to be subject to these provisions.