BILL ANALYSIS �
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THIRD READING
Bill No: AB 1917
Author: Gordon (D)
Amended: 6/24/14 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 6-2, 6/18/14
AYES: Hernandez, Beall, DeSaulnier, Evans, Monning, Wolk
NOES: Morrell, Nielsen
NO VOTE RECORDED: De Le�n
SENATE APPROPRIATIONS COMMITTEE : 5-2, 8/4/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
ASSEMBLY FLOOR : 48-25, 5/28/14 - See last page for vote
SUBJECT : Outpatient prescription drugs: cost sharing
SOURCE : Health Access California
DIGEST : This bill establishes limits on the copayment,
coinsurance, or any other form of cost sharing for a covered
outpatient prescription drug for an individual prescription of
1/12 (equivalent to $529 for 2014) or 1/2 ($3,175 for 2014)
applicable to self-coverage only, of the annual out-of-pocket
limit (which is $6,350 for 2014), as specified under the federal
Patient Protection and Affordable Care Act (ACA) with respect to
a non-grandfathered individual or group health plan contract or
insurance policy.
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ANALYSIS : Existing law:
1.Regulates health plans through the Department of Managed
Health Care (DMHC) and health insurance policies through the
Department of Insurance (CDI).
2.Mandates the 10 federally required Essential Health Benefits
(EHBs) and establishes Kaiser Small Group health plan as
California's EHB benchmark plan.
3.Requires, on or after January 1, 2015, for non-grandfathered
health plan contracts or health insurance policies in the
individual and small group markets, to provide for a limit on
annual out-of-pocket expenses for all covered benefits that
meet the definition of EHB, including out-of-network emergency
care, as specified. For large group, requires a
non-grandfathered health plan or health insurer to provide for
a limit on annual out-of-pocket expenses for covered benefits,
including out-of-network emergency care, as specified.
Requires this limit to only apply to EHBs that are covered
under the plan or policy to the extent that this provision
does not conflict with federal law or guidance on
out-of-pocket maximums.
4.Requires the maximum out-of-pocket limit to apply to any
copayment, coinsurance, deductible and any other form of cost
sharing for all covered benefits that meet the definition of
EHB.
5.Limits the total maximum out-of-pocket limit for all EHBs to
the dollar amounts in effect under the Internal Revenue
Service, as specified, as adjusted by the ACA, as specified.
6.Excludes specialized health plans or insurance policies from
#3 through #5 unless the plan contract or policy offers or
provides an EHB.
7.Limits, for an individual or group health care service plan
contract or health insurance policy issued, amended, or
renewed on or after January 1, 2015, that provides coverage
for prescribed, orally administered anticancer medications
used to kill or slow the growth of cancerous cells, the total
amount of copayments and coinsurance an enrollee or insured is
required to pay for orally administered anticancer medications
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to $200 for an individual prescription of up to a 30-day
supply.
8.Establishes Covered California as California's health benefit
exchange where individuals and small employers can purchase
standardized health insurance from selectively contracted
qualified health plans (QHPs) based on bronze, silver, gold
and platinum actuarial level categories.
This bill:
1.Limits, with respect to a non-grandfathered individual or
group health plan contract or insurance policy, the copayment,
coinsurance, or any other form of cost sharing for a covered
outpatient prescription drug for an individual prescription to
the following:
A. For a non-time-limited course of treatment or a
time-limited course of treatment of more than three months,
1/12 of the annual out-of-pocket limit applicable to
self-only coverage, for a supply of up to 30 days; and
B. For a prescription drug that has a time-limited course
of treatment of three months or less, of the annual
out-of-pocket limit applicable to self-only coverage, for
the time-limited course of treatment.
1.Requires for a high deductible health plan or insurance
policy, in #1 above, to only apply once an enrollee's
deductible has been satisfied for the plan year.
2.Exempts health plan contracts or insurance policies for
Medicare from the provisions of this bill.
3.Applies the cost-sharing limits to outpatient prescription
drugs covered by the contract or policy that constitute EHBs.
4.Prohibits this bill from being construed to affect the
reduction in cost sharing for enrollees or insureds eligible
for cost-sharing reductions under the ACA.
5.Applies this bill to a specialized health plan contract or
insurance policy that offers or provides an EHB. Exempts from
this bill specialized health plan contracts or insurance
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policies that do not offer or provide an EHB.
6.Applies this bill to an individual health plan contract or
insurance policy issued, amended, or renewed on or after
January 1, 2016, and to a group health plan contract or
insurance policy that is issued, amended, or renewed on or
after July 1, 2015.
7.Defines "outpatient prescription drug" as a drug approved by
the federal Food and Drug Administration, and prescribed by a
licensed health care professional acting within his or her
scope of practice, that is self-administered by a patient,
administered by a licensed health care professional in an
outpatient setting, or administered in a clinical setting that
is not an inpatient setting.
8.Defines plan year for the group market as defined in federal
regulations, as specified, and for the individual market as
the calendar year.
Comments
According to the author, the annual out-of-pocket limit
established last year is intended to protect Californians from
financial ruin by placing hard caps on how much money patients
will have to spend out of their own pocket for health care
services. This bill takes that goal a step further but limits
it to prescription drugs. Patients with cancer, HIV/AIDS,
hepatitis, multiple sclerosis, and other serious and chronic
conditions need high cost specialty drugs, which can cost
thousands of dollars. These Californians can often reach their
out-of-pocket limit in the first month of the plan year with
only one prescription drug. Many Californians would find it
difficult to spend $6,350, let alone in one month. Too many
patients are forced to choose between paying for their
life-saving drugs and paying for housing, child care, or food.
In turn, many are suffering, and even face death, from illnesses
that are treatable. AB 1917 reduces the prescription drug cost
sharing for patients by capping the amount an individual pays
based on a percentage of the out-of-pocket limit. This protects
Californians and makes it easier for them to realistically
afford and pay for their health care thereby increasing
patients' access and medication adherence to life-saving drugs.
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California Health Benefits Review Program (CHBRP) analysis . 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 medical, economic, and public health
impacts of proposed health plan and health insurance benefit
mandate legislation. CHBRP was created in response to AB 1996.
Below are major findings of CHBRP's analysis.
Enrollees Covered: CHBRP estimates that in 2015, 11.7
million of 23.4 million Californians with state regulated
health insurance would have coverage subject to this bill.
Enrollees eligible for cost-sharing reductions under the
ACA have incomes between 100% and 250% of the federal
poverty level and are enrolled in a silver metal-level QHP
in Covered California. Approximately, 730,000 in 2015 are
estimated by CHBRP to have reduced cost sharing, including
lower annual out-of- pocket maximums through Covered
California
Impact on Expenditures: In a revised analysis based
only on the 1/12 cap, CHBRP indicates expenditures would
increase in California by an estimated $43.3 million in the
non-grandfathered group and individual market. Premium
increases are estimated to range from an average of .02%
for group plans to an average of .17% for individual market
policies. Enrollee out-of-pocket expenses would be reduced
by an estimated $7 million. As for the amendment regarding
time-limited prescriptions and not time-limited
prescriptions, CHBRP is not able to quantitatively say by
how much or what the magnitude, but the limitation would
likely result in additional reduction in expenditures.
Medical Effectiveness: CHBRP states that overall there
is strong evidence that persons who face higher cost
sharing reduce use of both essential and non-essential
services, and for prescription drugs, there is evidence
that as cost sharing increases for prescription drugs,
including specialty prescription drugs, usage decreases.
Benefit Coverage: The mandate is expected to have the
greatest impact on high cost and/or specialty drugs.
According to CHBRP, the average cost sharing per outpatient
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prescription drug claim pre-mandate is $408.94, and
post-mandate is $302.24. This is lower than the cap of
$529 because some people will hit their out-of-pocket
maximum due to other additional expenses. CHBRP points out
that there is no standard industry definition of specialty
prescription drugs, but specialty drugs are generally
recognized by many payers as prescription drugs with an
average minimum monthly cost of $1,150. Other criteria may
include prescription drugs that treat a rare disease,
require special handling, or have a limited distribution
network. Examples of conditions that require treatment
using specialty drugs include growth hormone disorders,
rheumatoid arthritis, asthma, multiple sclerosis, hepatitis
C, hemophilia, cancer and lupus.
Utilization: According to CHBRP approximately 25,582
enrollees have high cost/specialty prescription drug claims
greater than the AB 1917 limit on cost sharing (1/12th).
The limit on cost sharing would increase utilization of
high cost and/or specialty drugs by 1.35% and there would
be an estimated 345 new users.
Public Health: CHBRP projects no measurable public
health impact due to the small percentage of enrollees
(.24%) utilizing high cost and/or specialty prescription
drugs with cost sharing that would be lowered. However, on
a case by case basis this bill may yield important health
and quality of life improvements and could significantly
impact disease progression and outcomes.
Essential Health Benefits. This bill would not exceed
EHBs and would not require the state to defray the costs of
this mandate for enrollees in QHPs.
Prior Legislation
AB 219 (Perea, Chapter 661, Statutes of 2013) limits the total
amount of copayments and coinsurance an enrollee or insured is
required to pay for orally administered anticancer medications
to $200 for an individual prescription of up to a 30-day supply.
Governor Brown wrote in a message approving AB 219 that this
policy is not without the potential for unintended consequences
and that placing a price cap on a specific class of drugs for a
specific class of diseases might not be a policy for the ages.
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A sunset on the bill allows for examination of intended and
unintended consequences before embracing the policy long term.
SB 639 (Hernandez, Chapter 316, Statutes of 2013) places in
California law provisions of the ACA relating to out-of-pocket
limits on health plan enrollee and insured cost-sharing, health
plan and insurer actuarial value coverage levels and
catastrophic coverage requirements, and requirements on health
insurers with regard to coverage for out-of-network emergency
services. Applies health plan enrollee and insured out-of-pocket
limits to specialized products that offer EHBs. Allows carriers
in the small group market to establish an index rate no more
frequently than each calendar quarter.
AB 1000 (Perea, 2011) would have required a health plan contract
or health insurance policy that provides coverage for
prescription drugs and cancer chemotherapy treatment to limit
enrollee out-of-pocket costs for prescribed, orally administered
anti-cancer medications. AB 1000 was vetoed by Governor Brown,
stating that the bill doesn't distinguish between health plans
and insurers who make these drugs available at a reasonable cost
and those who do not.
SB 961 (Wright, 2010) which was virtually identical to AB 1000,
was vetoed by Governor Schwarzenegger, who stated in his veto
message that the bill would have added costs to increasingly
expensive health insurance premiums and it was unnecessary in
light of federal health reform.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Costs of $35,000 in 2014-15, $78,000 in 2015-16, and $70,000
per year thereafter for review of plan filings and enforcement
by CDI (Insurance Fund.)
One-time costs of $80,000 for adoption of regulations and
review of plan filings and ongoing costs of $25,000 per year
for enforcement by DMHC (Managed Care Fund).
No significant impact to CalPERS for health care costs is
anticipated. CHBRP analyzed a previous version of this bill
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and concluded that health care costs to CalPERS would increase
by $5.6 million per year. However, the increase in costs to
CalPERS in that analysis related to reduced cost sharing for
infertility drugs. The current version of this bill will not
reduce cost sharing for infertility drugs. For prescription
drug coverage that would be impacted by this bill, CalPERS
health plans use a co-payment system that complies with the
requirements of this bill.
SUPPORT : (Verified 8/6/14)
Health Access California (source)
American Cancer Society Cancer Action Network
American Federation of State, County and Municipal Employees,
AFL-CIO
California Alliance for Retired Americans
California Healthcare Institute
California Teachers Association
CALPIRG
Congress of California Seniors
Epilepsy California
Epilepsy Foundation
Greater Sacramento Urban League
Hemophilia Council of California
Los Angeles Gay & Lesbian Center
National Alliance on Mental Illness California
National Multiple Sclerosis Society
Project Inform
Western Center on Law and Poverty
OPPOSITION : (Verified 8/6/14)
Aetna
America's Health Insurance Plans
Anthem Blue Cross
Association of California Life and Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Association of Health Underwriters
California Association of Joint Powers Authorities
California Chamber of Commerce
California Manufacturers and Technology Association
CVS Caremark
Department of Finance
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Department of Managed Health Care
Kaiser Permanente
Molina Healthcare of California
National Federation of Independent Business
Pharmaceutical Care Management Association
ARGUMENTS IN SUPPORT : Health Access California, the bill's
sponsor, writes that the emergence of very high cost specialty
drugs as well as drugs administered on an outpatient basis, such
as chemotherapy, has led health plans and insurers to impose
high copays and coinsurance on these drugs. Such high cost
drugs are often on a fourth tier of a drug formulary with
coinsurance of 10% or 20% so a patient may exhaust their annual
out-of-pocket limit with a single prescription in the first
month. Asking someone to spend $6,000 for a single prescription
upfront is unrealistic. This bill directly benefits
Californians by spreading the cost of prescription drugs so that
patient with expensive medications will not be forced to pay
high upfront costs. Western Center on Law and Poverty states
that consumers may be able to work out payment plans if they do
not have money to pay for a medication, but all too often the
answer is that they simply cannot purchase the medication. The
intent of this bill is to protect insured Californians from
financial ruin.
ARGUMENTS IN OPPOSITION : America's Health Insurance Plans
writes that this bill further confuses the benefit design for
consumers and makes it more difficult to provide affordable
health plans that consumers want to purchase. In order to keep
the actuarial value in balance, health plans would need to make
an adjustment to some other type of cost sharing in the benefit
design to off-set the reduction if a separate cost-sharing limit
is established for prescription drugs. Imposing separate
cost-sharing limits for prescriptions does nothing to address
the problem of increasing health care costs. Opponents, such as
the California Chamber of Commerce, indicate this bill will
increase the usage of the most costly specialty medications,
which already account for 25% of all spending for prescription
drugs. The ACA and SB 639 help shield individuals and families
from the ever rising cost of health care, setting additional
limits that encourage use of costly prescription drugs at the
expense of other health care products and services, will
dramatically increase health care spending and will force
individuals and employers to pay higher premiums.
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ASSEMBLY FLOOR : 48-25, 05/28/14
AYES: Ammiano, Bloom, Bocanegra, Bonilla, Bonta, Bradford,
Brown, Ian Calderon, Campos, Chau, Chesbro, Cooley, Dababneh,
Daly, Dickinson, Eggman, Fong, Garcia, Gatto, Gomez, Gonzalez,
Gordon, Hall, Roger Hern�ndez, Holden, Jones-Sawyer, Levine,
Lowenthal, Mullin, Muratsuchi, Nazarian, Pan, John A. P�rez,
V. Manuel P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Salas, Skinner, Stone, Ting, Waldron, Weber, Wieckowski,
Williams, Yamada, Atkins
NOES: Achadjian, Allen, Bigelow, Ch�vez, Conway, Dahle,
Donnelly, Fox, Beth Gaines, Gorell, Gray, Grove, Hagman,
Harkey, Jones, Linder, Logue, Maienschein, Mansoor, Melendez,
Nestande, Olsen, Patterson, Wagner, Wilk
NO VOTE RECORDED: Alejo, Buchanan, Frazier, Medina, Perea,
Rodriguez, Vacancy
JL:nl 8/6/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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