BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1340
AUTHOR: Hernandez
AMENDED: March 24, 2014
HEARING DATE: April 9, 2014
CONSULTANT: Moreno
SUBJECT : Health care coverage: provider contracts.
SUMMARY : Makes a number of technical and clarifying changes to
existing law prohibiting contracts between health plans or
insurers and hospitals restricting the ability of the health
plan/insurer from furnishing information concerning the cost
range of procedures at the hospital or facility or the quality
of services performed by the hospital or facility to subscribers
or enrollees. Includes self-funded health coverage arrangement
administered by the health plan or other persons entitled to
access services through a network established by the health care
service plan in the prohibition of a contract gag clause.
Requires health plans and insurers to give a provider or
supplier an advance opportunity of 30 days (rather than at least
20 days) to review the methodology and data developed and
compiled by the health plan or insurer.
Existing law:
1.Prohibits contracts between health plans or insurers and
hospitals from containing any provision that restricts the
ability of the health plan or insurer to furnish information
to subscribers or enrollees of the plan concerning the cost
range of procedures at the hospital or facility or the quality
of services performed by the hospital or facility. Makes a
contractual provision inconsistent with this to be void and
unenforceable.
2.Requires health plans and insurers to provide the hospital at
least 20 days to review the methodology and data developed and
compiled by the health plan or insurer before cost or quality
information is provided to subscribers or enrollees, as
specified.
3.Requires health plans and insurers, if the information
proposed to be furnished is data that the plan/insurer has
developed and compiled, to utilize appropriate risk adjustment
factors to account for different characteristics of the
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population, such as case mix, severity of patient's condition,
comorbidities, outlier episodes, and other factors to account
for differences in the use of health care resources among
hospitals and facilities.
4.Defines "provider" to mean a hospital, a skilled nursing
facility, a comprehensive outpatient rehabilitation facility,
a home health agency, a hospice, a clinic, or a rehabilitation
agency.
5.Defines "supplier" to mean a physician and surgeon or other
health care practitioner, or an entity that furnishes health
care services other than a provider.
This bill:
1.Deletes references to "hospital" and "facility" and instead
references "provider" and "supplier," as defined in current
law.
2.Deletes references to "enrollee" and "subscriber" and instead
refers to "consumer" and "purchaser." Defines "consumer" as
enrollees or subscribers of the health plan, or policy holder
or insured of a health insurance policy, or beneficiaries of a
self-funded health coverage arrangement administered by the
health care service plan or other persons entitled to access
services through a network established by the health care
service plan. Defines "purchaser" as the sponsors of a
self-funded health coverage arrangement administered by the
health plan or insurer.
3.Deletes a prohibition on gag clauses for information to
subscribers or enrollees, policy holders, or insureds
concerning the cost range of procedures at the hospital or
facility or the quality of services performed by the hospital
or facility and instead prohibits gag clauses that would
prohibit consumers or purchasers from accessing information
concerning:
a. The cost range of a procedure or a full course of
treatment, including, but not limited to, facility,
professional, and diagnostic services, prescription drugs,
durable medical equipment, and other items and services
related to the treatment; and,
b. The quality of services performed by the provider or
supplier.
4.Requires health plans and insurers to give a provider or
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3
supplier an advance opportunity of 30 days (rather than at
least 20 days) to review the methodology and data developed
and compiled by the health plan or insurer.
5.Makes other technical, clarifying changes.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, health care
costs continue to outpace inflation and more costs are being
shifted to consumers. According to the California Employer
Health Benefits Survey, nearly one-third of covered workers in
small firms had a deductible of $1,000 or more in 2013. A
"Silver" plan purchased through Covered California (a
mid-level product with the greatest enrollment of the plan
tiers in Covered California) has a deductible of $2,000 and
out-of-pocket maximum of $6,350. Consumers often face
disparities in prices charged by different providers for the
same service and need to understand their financial liability
and find the best quality and value. Despite this, they often
do not have the tools to make informed decisions because some
providers have prevented price and quality information from
being disclosed. Recent legislation has made attempts to
bring transparency to contracts between hospitals and health
plans/insurers; however, there has been some difficulty in
implementation due to a lack of clarity in the law. This bill
improves transparency by making a number of clarifying changes
to the prohibition on gag clauses in hospital contracts. It
also builds on existing law by allowing enrollees in
self-funded health plans to obtain cost and quality
information.
2.Background. While reports indicate that health care costs are
increasing at a slower pace in recent years, health care still
accounts for over 17 percent of the U.S. Gross Domestic
Product and health care costs continue to consume
significantly large percentages of federal, state and personal
budgets. Whereas most sectors keep pace with the overall
economy, health care continues to grow at higher rates than
inflation. According to a 2013 Health Care Almanac report on
health care costs published by the California HealthCare
Foundation (CHCF), the average annual growth rate has declined
since 1981 and has remained flat over the last three years at
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a historic low of 3.9 percent. Health spending in 2011 was
only slightly higher than inflation. Annual average health
care spending has been in the single digits (as compared to
double digits) for the last two decades, influenced recently
by the recession. However, some provisions of the federal
Affordable Care Act (ACA) are expected to cause a one-time
spike in growth.
According to a May 2012 Primer published by the Kaiser Family
Foundation, the U.S. spends substantially more on health care
than other developed countries. In 2009, U.S. spending was 90
percent higher than many other industrialized countries. Some
researchers believe the U.S. pays more for health care because
prices are higher, technology is more readily available, and
Americans have greater rates of chronic disease. The CHCF
report indicates that hospital and physician services,
combined, account for just over half of U.S. health care
expenditures. Prescription drugs account for another 10
percent.
3.Managing costs. According to a February 2008 CHCF fact sheet,
consumers are paying more attention to the cost of their
health care because they have greater responsibility for
paying for it. People with insurance are coping with higher
deductibles and copayments and some are being offered
consumer-driven health savings accounts as an alternative to
traditional insurance. Those who lack health insurance have an
even more daunting task of anticipating and managing their
health care costs. Whether insured or uninsured, consumers
need to understand their financial liability and find the best
value. Additionally, employers have an increased interest in
price transparency in order to improve health care outcomes
for their employees and to slow the growth rate of health care
expenditures. Despite this, consumers often do not have the
tools to make informed decisions based on cost and quality of
care because some providers have prevented disclosure of price
and quality data.
4.Usefulness of data. A March 2006 report by The Commonwealth
Fund argues knowing prices of health care services is of
little value without information on the total cost of caring
for a given condition and the quality or outcomes of that
care. Transparency and better public information on cost and
quality are essential for three reasons: a) to help providers
improve by benchmarking their performance against others; b)
to encourage private insurers and public programs to reward
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quality and efficiency; and c) to help patients make informed
decisions about their care. Transparency can also play an
important role in leveling the playing field, as it can shed
light on the practice of charging patients different prices
for the same care. A March 31, 2012 Los Angeles Times article
entitled, "The bizarre calculus of emergency room charges,"
highlighted a number of discrepancies in charges for health
care services that, at times, did not seem to make sense. For
example, a man with health insurance was billed $13,000 for an
MRI scan of his shoulder that required him to pay $2,500 out
of pocket while his brother-in-law, who lacks health care
coverage, was billed $350 for the same procedure.
5.Transparency initiatives. Transparency in health care has
been a focus over the last decade with the rise of more
consumer-driven health coverage. Government and private
sector initiatives have been developed with the goals of
advancing higher quality health care and controlling the rapid
growth of health care costs. The health care market is unique
with a variety of intermediaries involved in decision making,
which make it challenging to determine the effect transparency
and reporting can have on the market. It is believed that
despite these complications price transparency may lead to
more efficient outcomes and lower prices. Over 30 states,
including California, have passed legislation affecting
disclosure, transparency, reporting, and/or publication of
health care, provider, and hospital charges and fees. Several
states have established databases that collect health
insurance claims information from all health care payers into
statewide information repositories, known as "all payer claims
databases." Some states have created programs publicly
posting prescription drug prices and hospital charges. At the
same time, some insurance companies have developed patient
portals that make available cost and quality information on a
range of services such as prescription drugs, outpatient and
inpatient medical procedures and services, and dental
treatment. The federal government has also pursued public
reporting and transparency initiatives in the Medicare
program. In March 2014, Catalyst for Payment Reform and the
Health Care Incentives Improvement Institute released a report
card that graded states based on their laws requiring doctors
and hospitals to share prices and make that data publicly
available. No states received an "A" grade, two states (Maine
and Massachusetts) were given a "B," and three states
(Colorado, Vermont, and Virginia received a "C." The
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remaining 45 states, including California, received a "F."
6.California Healthcare Performance Information System (CHPI).
According to CHPI, its mission is to measure the quality and
cost of care, report performance ratings, educate the public
about healthcare value, and help drive improvements in
healthcare in California.
CHPI administers the state's only Multi-Payer Claims Database,
which consists of claims from the state's three largest health
plans (Anthem Blue Cross, Blue Shield of California, and
UnitedHealthcare) and the Medicare fee-for-service program,
representing approximately 60 percent of commercial non-Kaiser
enrollment. These data provide information on services
provided by hospitals, emergency departments, ambulatory
surgery centers, ancillary providers, pharmacies, and
physicians. It combines data on the healthcare experiences of
more than 12 million people to evaluate the quality and
efficiency of medical services. In February 2013, CHPI was
designated as a Qualified Entity (QE) through the Medicare
Data Sharing Program and received Medicare fee-for-service
claims representing over five million California
beneficiaries. CHPI will aggregate administrative claims and
eligibility data for approximately 12 million lives across
California to create physician performance ratings.
7.Related legislation. SB 1182 (Leno) would require health
plans and insurers to submit to regulators for rate review any
large group plan contract or policy rate increases that exceed
five percent of the prior year's rate. Establishes new data
reporting requirements on all health plans and insurers
applicable to products sold in the large group market and
establishes new specific data reporting requirements related
to annual medical trend factors by service category, as well
as claims data or de-identified patient-level data, as
specified, for a purchaser, at no cost, when requested, and if
the purchaser can demonstrate its ability to comply with state
and federal privacy laws, and is either an employer-sponsored
plan with an enrollment of greater than 1,000 covered lives or
multi-employer trust. SB 1182(Leno) is set for hearing on
April 23, 2014 in this Committee.
SB 1322 (Hernandez) would require the Governor to convene the
California Health Care Quality Improvement and Cost
Containment Commission to research and recommend appropriate
and timely strategies for promoting high-quality care and
containing health care costs. Requires the commission to, on
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or before July 1, 2015, or within six months of the convening
of the commission, whichever occurs later, issue a report to
the Legislature and the Governor making recommendations for
health care quality improvement and cost containment. SB 1322
(Hernandez) is set for hearing on April, 23, 2014 in this
Committee
8.Prior legislation. SB 1196 (Hernandez), Chapter 869, Statutes
of 2012, prohibits a contract in existence or issued,
amended, or renewed on or after January 1, 2013, between a
health plans or insurers, and a provider or supplier, from
prohibiting, conditioning, or in any way restricting the
disclosure of claims data related to health care services
provided to an enrollee or subscriber of the health plan or
carrier, or beneficiaries of any self-funded health coverage
arrangement administered by the carrier to a QE, as defined.
SB 746 (Leno) of 2013 would have established new data
reporting requirements on all health plans applicable to
products sold in the large group market and establishes new
specific data reporting requirements related to annual medical
trend factors by service category, as well as claims data or
de-identified patient-level data, as specified, for a health
plan that exclusively contracts with no more than two medical
groups in the state to provide or arrange for professional
medical services for the enrollees of the plan (referring to
Kaiser Permanente). SB 746 was vetoed by the Governor.
SB 751 (Gaines and Hernandez), Chapter 244, Statutes of 2011,
prohibits contracts between health plans and insurers and a
licensed hospital or health care facility, owned by a licensed
hospital, from containing any provision that restricts the
ability of the carrier from furnishing information to
subscribers, enrollees, policyholders, or insureds concerning
cost range of procedures or the quality of services. Provides
hospitals at least 20 days in advance to review the
methodology and data developed and compiled by the carriers,
requires risk adjustment factors for quality data, requires a
disclosure on the carrier's Web site about the data developed
and compiled by the carriers and an opportunity for a hospital
to provide a link where the hospital's response to the data
can be accessed.
AB 2389 (Gaines) of 2009 would have prohibited a contract
between a health facility and a carrier from containing a
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provision that restricts the ability of the carrier to furnish
information on the cost of procedures or health care quality
information to carrier enrollees. AB 2389 died in the
Assembly on Concurrence.
SB 1300 (Corbett) of 2008 would have prohibited a contract
between a health care provider and a health plan from
containing a provision that restricts the ability of the
health plan to furnish information on the cost of procedures
or health care quality information to plan enrollees. SB 1300
died on the Senate Floor.
AB 2967 (Lieber) of 2007 would have established a Health Care
Cost and Quality Transparency Committee to develop and
recommend to the Secretary of the Health and Human Services
Agency a health care cost and quality transparency plan, and
would have made the Secretary responsible for the timely
implementation of the transparency plan. AB 2967 died in the
Senate Appropriations Committee on the inactive file.
AB 1296 (Torrico), Chapter 698, Statutes of 2007, requires a
health plan or contractor offering health benefits to
California Public Employees' Retirement System (CalPERS)
members and annuitants to disclose to CalPERS the cost,
utilization, actual claim payments, and contract allowance
amounts for health care services rendered by participating
hospitals to each member and annuitant. AB 1296 requires this
information to be deemed confidential.
9.Support. The California Labor Federation writes that this
bill improves on existing laws by expanding transparency
requirements to members of self-funded and Taft-Hartley plans
and to also cover all providers of health care, not just
hospitals. The bill also clarifies that cost includes the full
course of treatment, including prescription drugs, durable
medical equipment, and diagnostic services and ensures that
the quality of the provider or supplier is transparent, as
well. This bill brings much-needed transparency to health care
at a time when consumers are paying more out-of pocket for
their own care and need information to make decisions. The
San Diego Electrical Health & Welfare Trust states that this
bill is a great next step in the author's quest to deliver
transparency as purchasers and consumers desperately need
access to comprehensive costa and quality data to make
informed decisions about their health care. Health Access
California writes that transparency of cost and quality is
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essential to helping control health care costs while improving
health care quality and allowing plans and insurers to provide
comparative information to enrollees gives consumers who have
the opportunity to shop for care the opportunity to compare.
The California Professional Firefighters states that measuring
and publicly reporting information about the performance of
physicians, hospitals and other health care providers is
critical to improving health care quality and controlling
costs. California School Employees Association writes that
their members are particularly vulnerable to increases in
health care costs because school employers usually have a cap
on how much they will pay for the health care of classified
employees. Anything above that cap, the classified employee
will have to pay and their members want to be able to make
informed decisions about the cost and quality' of their health
care and strongly support improved health care transparency.
Blue Shield of California states that the only way to truly
control healthcare costs is to focus on the key cost drivers
and empower consumers to make educated decisions, and
providing consumers with this basic information is a modest,
but important, first step that will lead to healthier patient
outcomes and ultimately help drive down the cost of care.
10.Concerns. The California Association of Physician Groups
(CAPG) writes that they have not developed a formal position
on this bill, but they express a few significant concerns and
comments about the transparency process in the 2014
legislative session. Those are: a) Some health plans do not
play fair with provider transparency data and before pans are
allowed to public provider quality data, the accuracy of their
own provider directories should be established within an
acceptable confidence interval; b) Provider quality and cost
transparency disclosures should be accurate to within a 95
percent confidence interval or else the information contained
therein is useless and misleading to the public; and, c)
Mandating the compliance of provides absent the corresponding
requirement for health plans to produce such information in an
accurate manner is unfair, unwise, and imprudent.
SUPPORT AND OPPOSITION :
Support: Blue Shield of California
California Labor Federation
California Professional Firefighters
California School Employees Association
Health Access California
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Pacific Business Group on Health
San Diego Electrical Health and Welfare Trust
SEIU California
Silicon Valley Employers Forum's
Oppose: None received
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