BILL ANALYSIS �
SB 1052
Page 1
Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 1052 (Torres) - As Amended: May 27, 2014
SENATE VOTE : 30-6
SUBJECT : Health care coverage.
SUMMARY : Requires health plans and insurers to use a standard
template to display their drug formularies, post their
formularies on their websites, and update posted formularies
within 24 hours after making a change. Requires the California
Health Benefit Exchange (Exchange, also known as Covered
California) to provide links to the formularies and, by January
1, 2016, create a search tool that allows potential enrollees to
search for health plans by a particular drug and a particular
therapeutic condition. Specifically, this bill :
1)Requires the Exchange Board to ensure that its website
provides a direct link to the formularies for each qualified
health plan (QHP) offered through the Exchange.
2)Requires the Exchange ABoard to create a search tool on its
website that allows potential enrollees to search for QHPs by
a particular drug and by a particular therapeutic condition.
3)Requires a health plan or insurer that provides prescription
drug benefits and maintains one or more drug formularies to:
a) Post the formulary for each of the plan's products on
the plan's website in an accessible and searchable manner;
b) Update the formularies posted on the website with any
change to those formularies within 24 hours after making
the change;
c) Display the formulary for each product using a standard
template that uses the U.S. Pharmacopeia classification
system and that organizes drugs by therapeutic class,
listing drugs alphabetically;
d) Include all of the following on any published formulary:
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i) Any prior authorization or step edit requirements
for each specific drug included on the formulary.
ii) The range of cost sharing for a potential enrollee
of each specific drug included on the formulary, as
follows:
(1) Under $100 - '$';
(2) $100-$250 - '$$';
(3) $251-$500 - '$$$'; and,
(4) Over $500 - '$$$$';
iii) Identification of any drugs on the formulary that
are preferred over other drugs on the formulary.
e) A notification, required to be provided to requesters of
formulary information under current law, that the presence
of a drug on the plan's formulary does not guarantee that
an enrollee will be prescribed that drug by his or her
prescribing provider for a particular medical condition.
4)Allows the California Department of Insurance (CDI) and the
Department of Managed Health Care (DMHC) to develop a standard
formulary template, provided that each department consults
with the other on the template design. Requires health plans
and insurers, if their regulator (DMHC or CDI, respectively)
develops a template, to use the template to comply with the
requirements of this bill.
EXISTING LAW :
1)Establishes in state government the Exchange as an independent
public entity not affiliated with an agency or department.
2)Establishes the CDI to regulate health insurers and DMHC to
regulate health plans.
3)Requires, under the federal Patient Protection and Affordable
Care Act (ACA), non-grandfathered individual and small group
health insurance plans and policies to cover 10 essential
health benefits (EHBs), including prescription drugs and
authorizes states to establish a benchmark plan. Under state
law, defines California's EHBs as the benefits covered under
the Kaiser Small Group HMO plan.
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4)Requires, under federal regulations, that a health plan, for
purposes of covering EHBs, must cover at least one drug in
every U.S. Pharmacopeia category and class, or the same
number of prescription drugs in each category and class as the
EHB benchmark plan, whichever is greater. Requires a health
plan providing EHBs to have procedures in place that allow an
enrollee to request and gain access to clinically appropriate
drugs not covered by the health plan.
5)Requires, under the ACA and federal regulations, that plans
provide a Summary of Benefits and Coverage that includes: a
description of the coverage; 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. Under state law, requires this
Summary of Benefits and Coverage to serve as the disclosure
form that health plans are currently required to provide.
6)Requires the Exchange to maintain a website through which
enrollees and prospective enrollees of QHPs may obtain
standardized comparative information on QHPs.
7)Requires, under state regulations on EHBs, an individual or
small group health plan or insurer to submit specified
information, including any prescription drug list or
formulary, to demonstrate compliance with state and federal
EHB requirements.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Potential one-time costs up to $150,000 to adopt regulations
by the CDI (Insurance Fund). Ongoing enforcement costs are
not expected to be significant.
2)One-time costs of $140,000 in 2014-15 and $110,000 in 2015-16
to develop standards and adopt regulations by DMHC. Ongoing
enforcement costs are not expected to be significant.
3)One-time costs between $1 million and $5 million for Covered
California to add a search function to its website and make
the underlying improvements to its information technology
systems (federal funds and special funds).
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COMMENTS :
1)PURPOSE OF THIS BILL . The author writes that, for people with
serious and chronic conditions, making sure that the health
insurance plan they choose covers the prescription drugs they
need is particularly important. The author states that all of
the QHPs available through Covered California must include
prescription drug coverage, but the drugs that are covered
vary by plan. The author argues that, since many specialty
drugs can be extremely expensive, making sure that the plan
covers the specific drugs an individual takes can have an
impact on a consumer's finances. The author states, with the
increasing complexity of drug formularies, many individuals
living with chronic conditions cannot obtain the information
they need to confirm that their drugs are covered. The author
states the purpose of this bill is to create a window-shopping
feature on Covered California's website to allow patients to
search for coverage by prescription drug.
2)BACKGROUND .
a) Exchange Plan Drug Coverage Study. A study published by
American Cancer Society Cancer Action Network (ACS-CAN) the
sponsors of this bill entitled "Cancer Drug Coverage in
Health Insurance Marketplace Plans" examined prescription
drug formularies for QHPs of 62 health insurance issuers
across five states-California, Florida, New York, Ohio, and
Texas-and the District of Columbia. None of the exchange
websites in these states include formulary information
directly on the website (Nevada is reported to be the only
state to include a filter-by-drug function). The study
finds that formularies located on issuers' websites do not
use a common organizational structure for formularies,
making comparisons difficult. In general, the study found
that patients would find it difficult or impossible to make
apples-to-apples comparisons of prescription drug coverage
across marketplace plans. The study notes that no issuer
provides a drug-by-drug list of copays or coinsurance rates
for each plan, so patients would have to match up formulary
information to cost-sharing information to calculate their
potential costs.
Finally, the study notes that it would be nearly impossible
for patients to determine which plans cover their
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intravenous chemotherapy regimens, as these drugs are often
covered under a plan's medical benefit, not its
prescription drug benefit, and are therefore not listed
consistently on the formulary. The study's authors were
unable to find a list of covered medical-benefit drugs from
any issuer.
b) Currently posted formularies. Most health plans and
insurers currently post a drug formulary in some form on
their websites. For example, Anthem Blue Cross's Select
Drug List is presented as a list for individuals who
purchased coverage through the Exchange. The Select Drug
List says it includes most commonly used drugs that are
covered and directs consumers to call customer service for
more information if the drug they are looking for is not
listed. The Select Drug List groups covered drugs into
four tiers, based a plan enrollee's share of cost, and for
each drug indicates whether prior authorization is
required, whether there are quantity limits per
prescription per month, whether step therapy (where the
plan requires the enrollee to try at least one other drug
before the given drug is covered) is required, and whether
dose optimization (where the amount of a dose may be
increased so that a patient only has to take it once a day)
is required.
Kaiser Permanente's formulary, in contrast, is presented as
an online search tool that allows a user to type the name
of a drug, either the generic name (for example, ibuprofen)
or the trade name (for example Motrin). The search site
indicates that, if the drug name is not listed in the
search results, it is not on the formulary. On the other
hand, if the drug name is listed in the search results, it
is on the formulary, but not all forms of the drug may be
covered. The search tool does not include any information
on cost sharing or utilization controls.
Plans also include separate formularies for Medicare Part D
products. These formularies generally provide somewhat
different and more comprehensive information than the
standard formularies: they are categorized by therapeutic
condition and include information on drug tier, prior
authorization, home infusion drugs that may be covered
under the medical benefit, whether the prescription is
available only at certain pharmacies, whether it is
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injectable, and whether it is available through mail order.
c) Federal Exchange formulary instructions. In its
instructions for the 2015 QHP application, the federal
Centers for Medicare and Medicaid Services (CMS) provides
detailed formulary submission guidelines for plans seeking
to offer products in the federal marketplace (these
guidelines do not affect states that run their own
exchanges, like California). For each drug on a given
formulary, plans are required to enter a unique identifier,
the tier level of the drug, whether prior authorization is
required, and whether step therapy is required. For each
formulary submitted, plans must include a web address that
directs consumers to an up-to-date formulary where they can
view the covered drugs, including tiering, specific to a
given QHP. Each formulary must also indicate the number of
tiers (with a maximum of seven) and the makeup of each tier
in terms of branded drugs vs. generics, and preferred vs.
non-preferred drugs. All drugs within the same tier are
required to have the same cost sharing. For each tier, the
plan must indicate the cost sharing structure, including
cost sharing type (copayment, coinsurance, or the minimum
or maximum of the two), cost sharing amount (copayment
dollar amount or coinsurance percentage) for one month for
an in-network retail pharmacy. Plans must also complete
this information for three other pharmacy types, if they
apply to the given drug tier: out-of-network retail
pharmacy, in-network mail order pharmacy, and
out-of-network mail order pharmacy.
In 2015, CMS is proposing for the federal Exchange the
ability for issuers to indicate whether a drug 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 EHB 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, in order to test for compliance
with benchmark drug counts.
As part of the QHP Application, issuers must provide a link
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to their formularies and must also provide information
regarding formularies to consumers, as specified. CMS
expects the Uniform Resource Locator (URL) link to direct
consumers to an up-to-date formulary where they can view
the covered drugs, including tiering, that are specific to
a given QHP. The URL provided to the Marketplace 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. CMS will make formulary links provided
by issuers available to consumers on HealthCare.gov
d) Medicare Part D Plan Finder. Since the beginning of the
Medicare Part D program, which subsidizes prescription
drugs for Medicare beneficiaries, CMS has administered a
Plan Finder website to assist beneficiaries and their
advisers in assessing Part D plan options by providing them
with information on plan coverage and quality, and by
estimating their annual drug costs. Beneficiaries can use
Plan Finder to evaluate their plan options when they first
become eligible for Part D or to reevaluate their options
during the open enrollment period each year, and they can
enroll in a plan through the website. To compare plans in
Plan Finder, beneficiaries work their way through the
website by entering information on where they live, the
drugs they take, and the pharmacies they use. Plan Finder
then identifies Part D plan options available to them and
estimates their annual drug costs for each plan at their
selected retail and mail order pharmacies. It also
provides information on how beneficiaries' monthly drug
costs change as they move through the Part D benefit over
the course of the year.
A January 2014 report by the U.S. Government Accountability
Office entitled "Medicare Part D: CMS Has Implemented
Processes to Oversee Plan Finder Pricing Accuracy and
Improve Website Usability" provides an overview of accuracy
issues in the Plan Finder. CMS uses data checks and
quality measures to oversee the accuracy of Part D plan
pricing information on the Plan Finder interactive website.
CMS requires Part D plan sponsors to submit drug pricing
information for their plans, which Plan Finder uses to
estimate beneficiaries' cost-sharing amounts and expected
annual drug costs. To ensure the accuracy of this
information, CMS performs computerized data checks on the
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pricing information for each plan to identify incomplete
and potentially inaccurate data before information is
displayed on Plan Finder. If CMS's data checks identify
potentially inaccurate plan pricing information, CMS gives
the plan's sponsor an opportunity to attest to the accuracy
of the data, or correct it. If the plan's sponsor does not
verify or correct potential inaccuracies identified by
these checks, CMS will "suppress" the plan from Plan
Finder, which means that the plan's pricing information is
removed and that beneficiaries cannot enroll in the plan
through the website. In the first seven months of 2013,
25% of Part D contracts had one or more plans suppressed
from Plan Finder at least once. The report notes that CMS
has taken compliance actions against plan sponsors for
repeated suppressions-between January 1, 2009, and July 31,
2013, CMS issued 89 notices of noncompliance and 67 warning
letters.
CMS uses quality measures to evaluate the accuracy of
pricing information on Plan Finder. As part of its Part D
Star Ratings, which provide beneficiaries with information
on plan quality, CMS collects performance data on Part D
plans covered under each individual contract. CMS assigns
scores to each contract based on the extent to which
beneficiaries' point-of-sale costs were higher than prices
posted on Plan Finder. For the 2013 Star Ratings, 6% of
contracts had point-of-sale prices that were greater than
Plan Finder prices by an average of 4% or more.
3)SUPPORT . The American Cancer Society Cancer Action Network,
the sponsor of this bill, writes that currently, obtaining
information to confirm whether a person's drugs are covered by
a QHP is impossible or incredibly time consuming. The sponsor
writes that there have been instances where consumers have
unknowingly selected plans that did not appropriately cover
their needed medications, forcing Covered California staff,
issuers, and consumers to devote resources to correcting the
problem.
The Arthritis Foundation writes with the story of an individual
with systemic arthritis who confirmed her prescription
biologic was covered prior to enrolling in a Covered
California plan, but later found her share of cost increased
from $5 to $2,000 per month. The Western Center on Law and
Poverty asserts it is particularly concerned about individuals
with chronic conditions who lose access to affordable
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prescription drugs when they move between health coverage
programs due to an income change.
The Huntington's Disease Society of America, Pacific Southwest
Region argues that technology should be able to easily
translate drug coverage information into a format that
consumers can use to make informed choices about their
insurance.
BayBio and Biocom assert this bill is especially important for
patients who may have gone through a number of therapeutics
before finding a specific product that best manages their
condition. For these people, these supporters argue, having
coverage for the right drug becomes a basic quality of life
issue.
4)OPPOSITION . The California Association of Health Plans (CAHP)
writes this bill requires plans to update their formularies
under unrealistic timeframes and to post drug management and
share-of-cost related information in a manner that would be
difficult and costly to accomplish. CAHP suggests that
policymakers should instead focus on controlling the
underlying cost pressures of prescription drugs, considering
the alarmingly high price tag of many new specialty drugs.
America's Health Insurance Plans (AHIP) argues that this bill
would create an overwhelmingly complex formulary list that
could confuse consumers and would require a burdensome
administrative overhaul. AHIP writes that the bill's standard
template for formulary reporting is very different from how
drug formularies are reported today, as required by federal
and state regulators. In addition, AHIP recommends that
effective date for the drug search tool on the Exchange
website be delayed until the Exchange can ensure that the
provider directory is fully functional and can reflect
accurate updates. The Association of California Life and
Health Insurance Companies argues that contractual
negotiations, patent exclusivity, physician prescription
trends, and a number of other factors go into the pricing and
cost sharing ratios of most drugs on the market; by requiring
insurers to pin down, publicize, and maintain an exact number
for each and every drug with little room for market volatility
could upset this balance.
Anthem Blue Cross writes that health plans are not allowed to
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make changes in the negative to their drug lists at any given
time; they cannot remove a drug from their covered drug list
without re-filing their formulary with their regulators, and
they contend they only do that on an annual basis.
CVS Caremark objects to this bill's standard formulary template
requirement, which differs from the standard format that CVS
Caremark uses nationwide. The Pharmaceutical Care Management
Association (PCMA), also in opposition, argues that this bill
is infeasible from a computer programming and resource
standpoint and impractical for consumers. PCMA argues that
formulary design is a consistently fluid program based on
entrance of generic drugs in the market as low-cost options
for expensive branded medicines, approval of new therapies by
the U.S. Food and Drug Administration, and ever increasing
drug prices, which already make drug cost-sharing requirements
difficult to balance.
5)RELATED LEGISLATION .
a) AB 1917 (Gordon) limits, for health plans and insurance
policies which cover EHBs, enrollee cost sharing, such as
copayments and coinsurance, for outpatient prescription
drugs. AB 1917 is pending in the Senate Health Committee.
b) SB 639 (Ed Hernandez), Chapter 316, Statutes of 2013,
codifies provisions of the ACA relating to 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.
c) SB 1176 (Steinberg) requires health plans and insurers
to track the accumulation of out-of-pocket costs, as
specified, and notify and reimburse enrollees or insureds
when cost sharing reaches the maximum annual out-of-pocket
limit. SB 1176 is currently in the Assembly Appropriations
Committee.
6)PREVIOUS LEGISLATION .
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a) AB 1453 (Monning), Chapter 854, Statutes of 2012, and SB
951 (Ed Hernandez), Chapter 866, Statutes of 2012,
establishes California's EHBs.
b) 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.
7)POLICY COMMENTS .
a) Implementation timeline. This bill's requirements, with
the exception of the Exchange's search tool requirement,
are all effective January 1, 2015. It is unrealistic to
expect such rapid implementation. First, plans and
insurers cannot satisfy this bill's requirement to utilize
a standard formulary until after a standard formulary is
created. Therefore, the bill should delay the requirement
that plans use a standard formulary until after a standard
formulary is established through regulations. DMHC and CDI
indicate that creating a standard formulary through the
regulatory process, with stakeholder input, is likely to
take two years. After that, depending on how radical a
shift the standard formulary required under this bill is
from the formularies plans and insurers currently use, it
could take plans a year or more to build the IT systems to
implement the necessary changes. Finally, Covered
California indicates that the prescription search tool
would require a minimum nine month lead time assuming
Covered California receives formularies in a standard
format across all plans (and indicates there are serious
operational challenges to building the search tool if
formulary information is not received in a standard format,
which would create apples to oranges comparisons). This
bill should be amended to provide a reasonable timeline for
these activities.
b) Administrative costs. Covered California indicates it
would cost roughly $5 million to build the search tool
required by this bill. Because Covered California must be
financially self-supporting by 2015, any expenses Covered
California incurs must be paid for by increasing fees on
QHPs offered through the Exchange. Given this bill's
additional requirement that all plans and insurers provide
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comprehensive information about their formularies on their
websites, it is not clear that the additional convenience
created by the search tool (as compared with a link to the
plan's comprehensive formulary) justifies its
administrative costs.
c) Classification system. This bill requires formularies
to indicate, using a dollar-sign-based classification
scheme, the cost sharing for each drug on the formulary in
terms of a range of dollar values. However, the dollar
value of an enrollee's cost sharing for a particular plan
depends on numerous factors: whether the enrollee has
reached any annual deductible, whether the enrollee uses a
mail-order pharmacy, which pharmacy the enrollee uses for
the drug, the setting in which the drug is delivered, the
quantity and dose of the drug, and other factors. It is
not clear whether the intent of the bill is for formularies
to include separate dollar-sign indicators for each
possible combination. In addition, it is not clear that
the proposed scale will be optimally useful for consumers:
in particular, a single dollar sign ($) indicates a drug
with cost sharing up to $100, failing to distinguish
between a plan with a $5 copay for a given drug and another
with $90 coinsurance, and four dollar signs ($$$$), the
highest category, includes all drugs with $500 or more of
cost sharing.
REGISTERED SUPPORT / OPPOSITION :
Support
American Cancer Society Cancer Action Network (sponsor)
Association of Northern California Oncologists
BayBio
Biocom
California Arthritis Foundation Council
California Chronic Care Foundation
California Healthcare Institute
California Pharmacists Association
California Primary Care Association
California Urological Association
Hemophilia Council of California
Huntington's Disease Society of America
Leukemia and Lymphoma Society
Lupus Foundation of Southern California
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Medical Oncology Association of Southern California
National Multiple Sclerosis Society, California Action Network
Novartis Pharmaceutical Corporation
Pharmaceutical Research and Manufacturers of America
Project Inform
Western Center on Law and Poverty
Opposition
America's Health Insurance Plans
Anthem Blue Cross
Association of California Life and Health Insurance Companies
California Association of Health Plans
CVS Caremark
Pharmaceutical Care Management Association
Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097