BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1340|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 1340
Author: Hernandez (D)
Amended: 3/24/14
Vote: 21
SENATE HEALTH COMMITTEE : 8-0, 4/9/14
AYES: Hernandez, Anderson, Beall, DeSaulnier, Evans, Monning,
Nielsen, Wolk
NO VOTE RECORDED: De Le�n
SUBJECT : Health care coverage: provider contracts
SOURCE : Author
DIGEST : This bill 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. 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.
ANALYSIS : 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
CONTINUED
SB 1340
Page
2
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
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
CONTINUED
SB 1340
Page
3
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.
1.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.
2.Makes other technical, clarifying changes.
Background
While reports indicate that health care costs are increasing at
a slower pace in recent years, health care still accounts for
over 17% 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 a historic low of 3.9%. 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
CONTINUED
SB 1340
Page
4
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%
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%.
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
Qualified Entity, as defined.
SB 746 (Leno, 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 Governor Brown.
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
CONTINUED
SB 1340
Page
5
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, 2009) would have prohibited a contract between
a health facility and a carrier from containing a 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, 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, 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 4/23/14)
Blue Shield of California
California Labor Federation
CONTINUED
SB 1340
Page
6
California Professional Firefighters
California School Employees Association
CALPIRG
Health Access California
Local Health Plans of California
Pacific Business Group on Health
San Diego Electrical Health and Welfare Trust
SEIU California
Silicon Valley Employers Forum
UNITE HERE!
ARGUMENTS IN SUPPORT : According to the author's office,
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. 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.
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.
CALPIRG writes in support that, "The more open and transparent
the health care market, the better it will serve the needs of
the public. The more pricing information that consumers have
access to when choosing a provider, the more that providers who
prioritize quality and cost control will be rewarded."
JL:nl 4/23/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED
SB 1340
Page
7
CONTINUED