BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1052
AUTHOR: Torres
AMENDED: March 28, 2014
HEARING DATE: April 23, 2014
CONSULTANT: Boughton
SUBJECT : California Health Benefit Exchange: annual report.
SUMMARY : Prohibits a plan from being selected as a Qualified
Health Plan (QHP) participating on California's Health Benefit
Exchange (Covered California) if it does not post searchable
formularies on its Internet websites that are standardized and
meet certain specifications. Requires Covered California to
link to QHP formularies and create a search function for
potential enrollees to search by drug and therapeutic category.
Requires Covered California to evaluate and report on the
effectiveness of the activities undertaken to market and
publicize the availability of health care coverage and federal
subsidies, as well as outreach and enrollment activities,
including populations that may experience barriers to
enrollment, such as the disabled and those with limited English
language proficiency.
Existing federal law:
1.Requires under the federal Affordable Care Act (ACA)
non-grandfathered individual and small group health insurance
plans and policies to cover ten essential health benefits
(EHBs), including prescription drugs and under regulatory
guidance, authorizes states to establish a benchmark plan.
2.Establishes under the federal ACA, market places for
individuals and small groups to purchase QHPs, which must
cover EHBs, and meet other federal requirements. Authorizes
states to establish state level health benefit exchanges.
3.Requires under federal regulations regarding prescription drug
benefits, that a health plan, with regard to EHB, cover at
least the greater of one drug in every United States
Pharmacopeia (USP) category and class; or the same number of
prescription drugs in each category and class as the EHB
benchmark plan; and, submit its drug list to the federal
Exchange, the State, or U.S. Office of Personnel Management.
Requires a health plan providing EHBs to have procedures in
Continued---
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place that allow an enrollee to request and gain access to
clinically appropriate drugs not covered by the health plan.
4.Requires under federal regulations under the Summary of
Benefits and Coverage (SBC) specified content including among
other items: a description of the coverage, including cost
sharing, for each category of benefits identified by the
Secretary of the Department of Health and Human Services (HHS)
in guidance; the cost-sharing provisions of the coverage,
including deductible, coinsurance, and copayment obligations;
and for plans and issuers that use a formulary in providing
prescription drug coverage, an Internet address (or similar
contact information) for obtaining information on prescription
drug coverage.
Existing state law:
5.Establishes Covered California as an independent government
entity governed by a five member board of directors to
selectively contract with QHPs and administer premium
assistance and cost sharing subsidies.
6.Authorizes Covered California to adopt standardized QHP
benefit designs.
7.Requires Covered California to maintain an Internet Web site
through which enrollees and prospective enrollees of QHPs may
obtain standardized comparative information on QHPs.
8.Establishes Kaiser Small Group Health Plan as California's EHB
benchmark plan.
9.Establishes the California Department of Insurance (CDI) to
regulate health insurance pursuant to the Insurance Code and
the Department of Managed Health Care (DMHC) to regulate
health plans under the Knox-Keene Act.
10.Prohibits a disability policy (another name for health
insurance policy) from being issued or delivered until
specified information is filed with the Commissioner and
either 30 days expires without notice from the Commissioner,
or, the Commissioner gives his written approval prior to that
time.
11.Requires according to CDI regulations on EHBs, an individual
or small group health insurance policy to provide coverage for
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3
prescription drugs that complies with specified state law and
federal regulations. Requires a health insurer to submit all
of the following to the Commissioner together with a health
insurance policy form, as specified, and annually on July 1
thereafter:
a. A list reporting the number of chemically
distinct prescription drugs covered in each USP
category and class and an attestation to the truth and
accuracy of the list;
b. Any prescription drug list and/or formulary
associated with the policy form;
c. Consumer documents describing prescription
drug benefits and limitations on coverage, including
any prescription drug list and/or formulary associated
with policy form that is provided to consumers; and,
d. An attestation of compliance with DMHC
regulations, as specified.
12.Requires, under state regulations, a health plan to file an
EHB worksheet to demonstrate compliance with EHB requirements,
including prescription drug benefits, as required by state law
and federal regulations, including the plan's prescription
drug list and/or formulary. Requires the EHB Filing Worksheet
to include a certification that the plan's drug list meets or
exceeds the prescription drug formulary requirements specified
in federal regulations.
13.Requires, under state regulations, every health plan that
provides coverage for outpatient prescription drug benefits to
provide coverage for all medically necessary outpatient
prescription drugs except as specified.
14.Establishes, under state regulations, standards for
outpatient prescription drug benefit plans.
This bill:
1.Includes along with the information required in the annual
report of Covered California the total number of uninsured
Californians as a percentage of the state population and an
evaluation of the effectiveness of the activities undertaken
to market and publicize the availability of health care
coverage and federal subsidies, as well as outreach and
enrollment activities, including populations that may
SB 1052 | Page 4
experience barriers to enrollment, such as the disabled and
those with limited English language proficiency. Requires the
evaluation to be conducted by an independent entity selected
by Covered California.
2.Prohibits a QHP from being offered through Covered California
unless the carrier offering the plan does all of the
following:
a. Posts the formulary for the QHP on the
Internet Web site of the carrier in a manner that is
accessible and searchable by potential enrollees,
enrollees, and providers. Updates the formulary posted
within 24 hours of any changes;
b. Uses a standard template to display the
formulary for all QHPs offered by the carrier.
Requires the template to use the USP classification
system, and organize drugs by therapeutic class,
listing drugs alphabetically; and,
c. Includes both of the following on any
published formulary for the QHP, including, but not
limited to, the formulary posted in 2a):
i. Any prior authorization or step
edit requirements for each specific drug included
on the formulary; and,
ii. The range of coinsurance cost to a
potential enrollee of each specific drug included
on the formulary, as follows:
1. Under $100 - $
2. $100-$250 -$$
3. $251-$500 - $$$
4. Over $500 - $$$$
3.Requires Covered California to ensure that its Internet Web
site provides a direct link to the formulary posted before the
plan is offered through Covered California.
4.Requires Covered California to create a search tool on its
Internet Website that allows potential enrollees to search for
QHPs by a particular drug and by a particular therapeutic
condition.
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5
5.Defines "formulary for the QHP" as the complete list of drugs
preferred for use and eligible for coverage under the QHP and
includes the drugs covered under the pharmacy benefit of the
plan and the medical benefit of the plan.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1. Author's statement. According to the author, the ACA, in
addition to increasing insurance market competition, sought to
improve transparency in health benefits through
consumer-friendly tools such as the standardized summary of
benefits and coverage. However, the lack of access to clear
and comparable information on prescription drug coverage and
cost-sharing significantly undermines these goals. The
absence of a window-shopping feature for health plan
formularies on Covered California's website remains a
significant problem for patients. We should make it easy for
consumers, especially patients with chronic conditions, to
make an apples-to-apples comparison of prescription drug
coverage.
Currently, eight states offer the ability to view plan
formularies. Nevada has gone so far as to allow consumers to
search for any drug on any of the plan formularies offered
through their state marketplace simply by entering the drug
name. In February the Centers for Medicare and Medicaid
Services (CMS) published the "Draft 2015 Letter to Issuers in
the Federally-facilitated Marketplace" which proposes to
collect direct formulary links from all issuers in the
Federally-facilitated Marketplace for the 2015 plan year. With
almost 10,000 Federal Drug Administration-approved
prescription drug products, consumers may have difficulty
identifying a plan that includes the prescription drugs they
need and out-of-pocket costs they can afford.
2. Cancer Drug Coverage In Health Insurance Marketplace Plans,
March 2014. A study published by the sponsors of this bill,
entitled Cancer Drug Coverage in Health Insurance Marketplace
Plans, studied QHPs of 62 health insurance issuers across five
states and the District of Columbia. The study indicates that
California and New York do not have a window-shopping
function, and the District of Columbia's window-shopping
function does not include web links to formularies, so data
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for the study had to be gathered directly from issuer
websites. Issuers do not use a common organizational
structure for formularies, making comparisons difficult. The
lack of information on medical benefit drugs may make it
impossible for cancer patients to find out if their
intravenous chemotherapy is covered, as cancer drugs typically
administered by a physician, such as intravenous chemotherapy,
are often not listed on formularies. The report indicates
that in California the study authors were unable to find
sufficient formulary information to complete the analysis for
one issuer. Additionally, in every state at least one plan
appears to cover fewer drugs than the benchmark in at least
one class. With regard to cost-sharing, in California,
individual silver plans are required to have a $250 drug
deductible, a $2,000 medical deductible, and standard 20
percent coinsurance on specialty drugs. Most cancer drugs
are covered on the highest cost-sharing tiers. Cost sharing
reduction plans are available to enrollees with income between
100 and 250 percent of the federal poverty level.
3. Study on compliance with EHB Requirements. In February
2014, the American Journal of Managed Care released a study,
entitled Complying with State and Federal Regulations on
Essential Drug Benefits: Implementing the Affordable Care
Act, which indicated that all plans consistently covered at
least one drug per pharmacologic class, with the exception of
nonsedating antihistamines, which are mostly over the counter.
In California, all oral contraceptives, with the exception of
emergency contraceptives, all smoking cessation products, and
all osteoporosis products are covered by all three QHPs. In
California, three percent of antidepressents were not covered
and three percent of antipsychotics were not covered. Across
California, six percent of antidiabetic medications were not
covered. The study concludes among other things that health
plans are not fully compliant with state and federal
regulations. Additionally, there are significant differences
among plans related more to cost sharing and conditions of
reimbursement, such as prior authorization, step edits, and
quantity limits than to drug coverage, and that plans will
have to adjust their formularies to meet minimum requirements.
4. Federal EHB Requirements. According to the federal EHB
review guide, in conjunction with the policy that plans must
offer the one drug in every USP category and class or the
number of drugs in each USP category and class offered by the
EHB-benchmark, whichever is greater, HHS is considering
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7
developing a drug counting service to assist states and
issuers with implementation of the proposed prescription drug
policy. The federal government clarified in the Standards
Related to Essential Health Benefits, Actuarial Value, and
Accreditation Final Rule ("EHB Rule") that drugs must be
chemically distinct to be counted as more than one drug.
Issuers will need to know the extent of drug coverage in the
state's EHB-benchmark plan in order to comply. The following
summarizes the process CMS uses and will continue to use to
classify and categorize drug products covered by state
EHB-benchmark plans. The process produces a count of distinct
drug entities by state. CMS collected a list of trade-standard
11-digit National Drug Codes (NDCs) to identify the individual
drug products covered by the EHB-benchmark plan's drug list.
The NDCs identify the drug product, its package size and type,
and its manufacturer, distributor, reseller, or labeler. While
NDCs are an industry-standard identification code, they do not
provide the information needed to count, group and classify
chemically distinct drugs for the purposes of EHB.
5. DMHC EHB Worksheet. To demonstrate compliance with the
prescription drug EHBs required under the ACA, DMHC requires
health plans to complete a form indicating the number of
prescription drugs offered by the health plan in each class
and category of prescription drugs, as specified. Health plans
must make whatever modifications are necessary to their
current formularies so that the number of prescription drugs
they cover equal or exceed the number listed in the "EHB
Submission Count" column. They are also required to attach the
health plan's prescription drug list and/or formulary to the
worksheet.
6. QHP Requirements. QHP standard benefit designs, as it
relates to prescription drugs, has more to do with cost
sharing requirements than formulary requirements. For 2014,
for a silver plan the standard prescription drug benefit is as
follows:
----------------------------------------------------------------
|Annual |$15,856-$17,|$17,235-$22,|$22,980-$28,|$28,725-$45,|
|Income |235 |980 |725 |960 |
|------------+------------+------------+------------+------------|
|Monthly |$19-$57 |$57-$121 |$121-$193 |$193-$364 |
|Premium | | | | |
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|consumer | | | | |
|Portion(Bala| | | | |
|nce paid by | | | | |
|federal | | | | |
|subsidy) | | | | |
|------------+------------+------------+------------+------------|
|Generic |$3 |$5 |$20 |$25 |
|------------+------------+------------+------------+------------|
|Brand |No |$50 plus |$250 plus |$250 plus |
|medications |Deductible |copay |copay |copay |
|may be | | | | |
|subject to | | | | |
|Annual Drug | | | | |
|Deductible | | | | |
|before you | | | | |
|pay the | | | | |
|Copay | | | | |
|------------+------------+------------+------------+------------|
|Preferred |$5 |$15 |$30 |$50 |
|Brand copay | | | | |
|after Drug | | | | |
|Deductible | | | | |
----------------------------------------------------------------
7. Draft 2015 Letter to Issuers in the Federally-facilitated
Marketplace In 2015, CMS is proposing for the federal Exchange
the ability for issuers to indicate whether a drug (identified
through its RxNorm Concept Unique Identifier or RxCUI12) is
considered a "medical drug" covered under a plan's medical
benefit. CMS believes that this revision will provide greater
clarity with respect to how drugs are covered and paid for
while ensuring that medical benefit drugs are taken into
account when evaluating potential QHPs for compliance with
federal regulations. Issuers will continue to be required to
submit their entire drug lists, including drugs covered either
under the prescription drug or the medical benefit, to the
count service in order to test for compliance with the
benchmark drug counts. Under a similar proposal, issuers will
have the option of identifying a drug as a "preventive drug"
covered at zero cost. As part of the QHP Application, issuers
must provide a URL to their formularies and must also provide
information regarding formularies to consumers, pursuant to
federal Summary of Benefits and Coverage regulations. CMS
expects the URL link to direct consumers to an up-to-date
formulary where they can view the covered drugs, including
tiering and cost sharing, that are specific to a given QHP.
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9
The URL provided to the federal Exchange as part of the QHP
Application should link directly to the formulary, such that
consumers do not have to log on, enter a policy number or
otherwise navigate the issuer's website before locating it. If
an issuer has multiple formularies, it should be clear to
consumers which directory applies to which QHP(s).
CMS also intends to propose through rulemaking that state
Exchanges may require issuers to temporarily cover
non-formulary drugs, including drugs that are on the issuer's
formulary but require prior authorization or step therapy, as
if they were on the issuer's formulary during the first 30
days of coverage, for coverage beginning on January 1 of each
year, starting with the 2015 plan year. This proposed policy
would also allow those newly enrolled in a QHP to receive
coverage for a non-formulary drug during this time period
without using the exceptions process. This would prevent
disruptions in treatment for new enrollees while the issuer
and/or the enrollee pursues prior authorization, step therapy,
and/or drug exception processes and would only apply to
enrollees who change QHPs or who become newly enrolled in a
QHP after having other non-QHP coverage. As stated in the
interim final rule published on December 17, 2013, issuers are
encouraged to accommodate the needs of new enrollees by
covering a transitional fill of non-formulary drugs to new
enrollees. Also being contemplated are policies to help with
transitions for other types of care (e.g., continuity of
access to specialists for individuals in the midst of a course
of cancer treatment).
8. Related legislation. AB 1917 (Gordon) limits, for a health
care service plan contract or health insurance policy that is
subject to specified annual out-of-pocket limits, the
copayment, coinsurance, or any other form of cost sharing for
a covered outpatient prescription drug for an individual
prescription for a supply of up to 30 days to 1/24 of the
annual out-of-pocket limit. Requires an enrollee who is
eligible for a reduction in cost sharing through a QHP offered
through the Exchange not be required to pay in any single
month more than 1/24 of the annual limit on out-of-pocket
expenses for that product. AB 1917 is currently pending in the
Assembly Committee on Health.
9. Prior legislation. SB 639 (Hernandez), Chapter 316,
Statutes of 2013, codifies provisions of the ACA relating to
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out-of-pocket maximums on cost-sharing, health plan and
insurer actuarial value coverage levels and catastrophic
coverage requirements, and requirements on health insurers for
coverage of out-of-network emergency services. Applies
out-of-pocket limits to specialized products that offer EHBs
and permits carriers in the small group market to establish an
index rate no more frequently than each calendar quarter.
AB 1453 (Monning), Chapter 854, Statutes of 2012, and SB
951 (Hernandez), Chapter 866, Statutes of 2012, establish
California's EHBs.
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.
10. Support. According to the National Multiple Sclerosis
Society - CA Action Network, people living with MS have very
high medical expenses. They make frequent health care visits
and rely on expensive prescription medications to help manage
their disease. There are ten injectibles and three oral
medications used to help manage MS. These medications have no
generic equivalents and are typically placed on specialty drug
tiers, which make them subject to more costly co-insurance,
rather than a standard co-payment. Therefore, when selecting
a health insurance plan, many patients living with MS find
that their top priority is determining whether their drugs are
contained on a plan drug formulary, as well as comparing the
cost sharing requirements for these medications across plans.
Currently, there is no easy way to find and navigate this
information. This bill will provide a simple way for an
individual to determine which of their drugs are covered by an
Exchange plan, as well as compare plans based on coverage of
their particular prescription drugs. The California
Healthcare Institute strongly supports legislation that
provides patients and their families with access to treatments
and a higher quality of life.
11. Opposition. According to the California Association of
Health Plans, this bill inappropriately micromanages Covered
California's contracting process by prohibiting plan
participation in the Exchange if the plan does not meet the
bureaucratic specifications of this bill. Under this bill not
only would a plan have to post its drug formulary on its
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11
website (something many plans already do) but the plan would
also be required to update the formulary under unrealistic
time frames and to post drug management and share-of-cost
related information. Nothing in the bill helps control the
underlying cost pressures of prescription drugs. This is
unfortunate considering the alarmingly high price-tag of many
new specialty drugs. Policymakers and consumers could benefit
from knowing how the underlying cost of new drugs is driving
share of-cost. The Association of California Life and Health
Insurance Companies (ACLHIC) believe this measure is not
necessary and thinks the 24-hour adherence requirement is not
administratively feasible.
12. Applicability Across the Market. California took early
steps to establish Covered California, pass rate review
requirements, establish EHB, expand Medi-Cal and adopt
insurance market reforms to implement aspects of the ACA. An
overarching objective in the development of the California
implementing legislation has been to ensure, to the extent
possible, that laws applicable to plans and insurers
participating in Covered California are also applied to plans
and insurers not participating in Covered California to keep a
level regulatory playing field and to minimize
disproportionate health risk (which impacts premium rates) in
Covered California. Consistent with this effort this bill
should be amended to apply formulary disclosure and search
functionality to all health plans and insurance policies.
13. Time Frame and Stakeholder Process. This bill does not
establish a time frame for implementation of the technology
requirements related to formulary disclosure and
standardization. Covered California is still a new start up
organization. Health plans and insurers are undergoing major
regulatory and market transition along with an influx of new
enrollments because of the ACA. In addition, federal
requirements, which are contemplating some similar
requirements, are not completely final. At the same time,
consumers have been prompted by virtue of federal tax penalty
to shop for and enroll in health insurance. This bill should
be amended to stage implementation so that requirements, which
may be more difficult to implement can be done so in a
reasonable time frame. Furthermore, this bill should be
amended to establish a stakeholder process and an independent
study to inform the development of formulary format
standardization.
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SUPPORT AND OPPOSITION :
Support: American Cancer Society Cancer Action Network
(sponsor)
Association of Northern California Oncologists
California Arthritis Foundation Council
California Healthcare Institute
California Primary Care Association
Huntington's Disease Society of America
Lupus Foundation of Southern California
Medical Oncology Association of Southern California
National Multiple Sclerosis Society - CA Action
Network
Pharmaceutical Research and Manufacturers of America
Project Inform
Oppose: Association of California Life and Health Insurance
Companies
Anthem Blue Cross
California Association of Health Plans
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