California Health Legislation: End of Session Update

Special to the J&R Report –

The Legislature has finished the 2013 legislative session. Because of the Democratic supermajority in the Senate and the near super-majority in the Assembly, few Democratic bills were defeated and many of those that were seriously threatened were either shelved by the authors or amended to move through the process.

There were few big issues left during the last two weeks of session. The prison deal with the Governor was concluded and quickly dispensed with on the floors. There were some budget trailer bills done to clean up some earlier issues, but they required a majority vote only. Senator Darrell Steinberg, the Senate President Pro Tem, had a CEQA reform bill that was contentious, amended twice in September and then shelved due to its controversial nature and stiff opposition from the business community and local governments. It was not, the opponents said, real reform. Steinberg instead pursued his bill to pave the way for the Sacramento Kings’ new downtown arena, inserting a few statewide CEQA changes into that measure.

The Assembly concluded its work on a replacement water bond, and Senator Lois Wolk introduced her counter version—both around $5 billion to $6 billion in water monies for storage, conservation and water quality. Both will compete—or collaborate—next January to become the replacement for the $11 billion water bond that would otherwise appear on the November 2014 ballot.

The number of health care bills affecting health plans dropped slowing all year long, first in the initial house Appropriations Committee, and by three during August’s Appropriations actions. AB 889, the annual step-therapy bill, was one of those, along with SB 22 (Beall), which would have required each health plan to submit a report on its compliance with the federal mental health parity law to its regulator, and for the Department of Insurance and the Department of Managed Health Care to collaborate on a report to the Legislature on the results.

Other measures were dropped by their others. AB 18 (Pan), regarding pediatric stand-alone coverage, was put on hold for the year, but likely to come back after the Exchange Board/Covered California receives the Wakely report, which us underway. Assemblyman Roger Dickinson shelved his AB 578, which would require that the regulators—Department of Managed Health Care and Department of Insurance—publish a notice regarding applications from first-time health plans or insurers, allow public comments to be submitted through the departments’ websites on those applications, consider those comments (similar to a regulatory process) and hold at least one public hearing if comments are received—all prior to approving an application.

Among the hottest topics in health care were the scope of practice bills. Senator Ed Hernandez’s chair of the Senate Health Committee, began the year with a three-bill package, supplemented by bill by Senator Fran Pavley bill on medical assistants and by Senator William Monning on expanding primary care access through the use of non-physician practitioners. But the Hernandez bill expanding the scope for nurse practitioners failed to get out of the Assembly Appropriations Committee, despite squeaking out of Assembly Business and Professions Committee, and the optometry bill had been put on hold earlier. In the end, the three bills that are heading to the Governor’s desk are SB 493 (Hernandez) on pharmacy practice, SB 352 (Pavley) and SB 494 (Monning).

The other big issue was over PPACA conformity. SB 639 (Hernandez), a Health Access-sponsored bill, initially started out as a bill to attempt to standardize the entire marketplace, prohibiting health plans other than the precious metal plans authorized under the federal law. It would up a bill dealing with the out-of-pocket maximum for all benefits and creating complexity for the multiple medical, dental and vision plans that large employers purchase. After AB 18, the bill on pediatric stand-alone coverage, had been dropped, SB 639 became the vehicle for dealing with some of the issues the consumers had with the Exchange Board’s decision to create a separate out-of-pocket maximum for pediatric stand-alone dental plans in the Exchange. SB 639 ultimately contained myriad provisions relating to the codification of the precious metal tiers, the total out-of-pocket maximums for 2014 and 2015, and language fixing an earlier statute so that health plans could do quarterly rate indexing. As a result, SB 639 became an important bill for health plans while leaving serious, unanswered questions regarding the coordination of out-of-pocket maximums among medical, dental and vision plans in the large group market, and whether and how the bill applies in the large group market.

Included with this memo is an updated status report on this session’s health care legislation. Below is a quick update on the key health care bills this session. I’ve boldfaced the portions that are recent developments.

Special Session Bills

ABX1 2 (Pan) and SB X1 2 (Hernandez): Health market reform: SIGNED.
These two bills conform state law to market provisions of the federal Affordable Care Act. The changes are tied back to the specific provisions of the federal law so that guarantee issues and community rating are no longer applicable if Congress and the President modify certain aspects of the ACA. The bills also officially establish the 19 geographic rating regions for the individual market, consistent with the 19 established for the small group market last year. These bills have been signed, and take 90 days after the close of the special session.

SBX1 3 (Hernandez) Health care coverage: bridge plan. This bill was signed by the Governor on July 11 to create a bridge plan for California that is intended to provide Medi-Cal enrollees with continuity of care with their health plan as well as more low-income options. Some fear that it will reduce the purchasing power of those eligible, but the bill is limited only to those leaving Medi-Cal, regardless of income level. The Exchange has not yet received approval from CMS, and will not put out a solicitation until they do. You can view the bill at www.leginfo.ca.gov/pub/13-14/bill/sen/sb_0001-0050/sbx1_3_bill_20130711_chaptered.htm

PPACA and Exchange-Related Bills

AB 18 (Pan) Stand-Alone Dental Coverage: This bill, initially a spot bill for individual market reform and then a vehicle to permit stand-alone dental coverage in the Exchange, became a bill backed by the CA Dental Association to impose a 75 percent medical loss ratio on dental plans as well as other consumer protection provisions of PPACA and the Knox-Keene Act that dental plans were previously exempted from. (Amendments setting the pediatric age at 22 and requiring coordination of the out-of-pocket maximum were deleted.) The CA Association of Dental Plans, CAHP, ACLHIC, CAHU, the California Chamber of Commerce and most of the health plans and dental plans opposed the bill. Despite the CA Association of Dental Plans hiring of Milliman to explain administrative cost trends for dental plans and factors that make a 75 percent MLR difficult for the dental plan product offered by the Exchange, the author at the CDA were unwilling to drop the bill. At one point, the rumor circulated that the CDA was seeking another vehicle that does not contain an urgency clause so that it did not need a two-thirds vote. But after the August 8 meeting of the Exchange Board on pediatric dental, and the commissioning of the Wakely report, AB 18 was shelved for the year. Dental plans, however, were put on notice that the bill would be back next year.

AB 1180 (Pan) HIPPA Coverage: This bill makes inoperative, because of the federal Patient Protection and Affordable Care Act, several provisions in existing law that implement the health insurance laws of the federal Health Insurance Portability and Accountability Act of 1996 and additional provisions that provide former employees rights to convert their group health insurance coverage to individual market coverage without medical underwriting. The bill is on its way to the Governor’s desk. CAHP supports it.

SB 509 (DeSaulnier) and AB 1428 (Conway): Background Checks: SB 509 would require the board to submit to the Department of Justice fingerprint images and related information of employees, prospective employees, contractors, subcontractors, volunteers, or vendors whose duties include or would include access to specified information for the purposes of obtaining prescribed criminal history information. The bill would require the board to require any services contract, interagency agreement, or public entity agreement, that includes or would include access to those types of information to include a provision requiring the contractor to agree to criminal background checks on its employees, contractors, agents, and subcontractors who will have access to that information as part of their services contract, interagency agreement, or public entity agreement. The bill would require the department to forward to the Federal Bureau of Investigation (FBI) requests for federal summary criminal history information, and would require the department to review the information returned from the FBI and compile and disseminate a response to the board. Because it could have been interpreted to require the fingerprinting of any physician or health plan contractor with access to patient medical information, AB 1428 was amended to become a companion bill that would revise these provisions to require that the fingerprint images and related information be submitted to the Department of Justice consistent with the federal Centers for Medicare and Medicaid Services (CMS), Catalog of Minimum Acceptable Risk Standards for Exchanges (MARS-E), Exchange Reference Architecture Supplement version 1.0, issued on August 12, 2012, or further updates, guidance, or regulations. The bill would provide that the fingerprint images and related information submitted to the Department of Justice include those of the specified individuals whose duties include or would include access to any information contained in the information systems and devices of the Exchange. SB 509 was signed in June and AB 1428 is one its way to the Governor’s desk.

SB 639 (Hernandez): Benefit Plan Standardization. This bill implements provisions of the federal Patient Protection and Affordable Care Act by requiring health plans and carriers to provide for maximum out-of-pocket limits, establishes small group deductibles, and defines the precious metal tiers level of coverage required. The bill previously would have prohibited any product from being offered other than those with a standardized product design in the individual market and would preclude large group products from offering alternative benefits, outside the EHB, that are not included under the out-of-pocket maximum. But the bill was amended August 6 and then two more times, and now—in additional to conforming with PPACA regarding the precious metal plans—the bill codifies the Exchange policy regarding the out-of-pocket maximum for 2014, but requires the Exchange to adhere to a single $6350 out-of-pocket maximum in 2015—as opposed to $6350 for medical and $1000 for dental, though they can allocate the number any way they want. For a while, the bill required a “benefit design review” process that would have mandated plans to submit all sorts of information to DMHC in order to get a non-standard design approved, but this language was deleted at the request of the Administration. Clean-up language regarding quarterly rate indexing was also added to the bill, which lead to the withdrawal of opposition by CAHP, ACLHIC, CAHU and the California Chamber. The bill remains a concern to specialized plans, including vision plans, but is on its way to the Governor and is highly likely to be signed.

Health Plan Mandates

SB 353 (Lieu) Health care coverage: language assistance: This bill requires a health plan that advertises or markets to in a language other than English –to individual and small group only, according to the latest amendments—even if the language group does not meet certain enrollment thresholds, to translate into that language specified documents using trained and qualified translators. The bill also extends the approval requirements and exemptions on advertisements on health plans. CAHP, ACHIC and the Chamber oppose this bill, which is on its way to the Governor.

AB 912 (Quirk-Silva) Health care coverage: fertility preservation- Requires health plans to cover medically necessary expenses for standard fertility preservation services when a necessary medical treatment may directly or indirectly cause iatrogenic infertility to an enrollee. CAHP and the California Chamber of Commerce oppose this measure. It passed the Assembly 52-26 and the Senate Health Committee 7-2, demonstrating the emotional nature of the bill as well as the partisan split over health care issues. Because it is a new mandated benefit, the governor may veto it. But it passed both houses on a partisan vote and is headed to the Governor’s desk.

AB 578 (Dickinson) Health care- Requires the director of the DMHC to publish a notice, upon receiving an application for licensure as a health plan or specialized health plan, that would include information regarding the applicant and nature of the application. Requires the director to require the plan to publish a written notice concerning the application pursuant to conditions imposed by rule or order. CAHP opposes this bill, which is sponsored by the California Nurses Association to go after Sutter, which is filing for licensure as a Knox-Keene Plan. Ironically, the bill would probably not apply to Sutter’s filing. The bill was parked in Senate Health Committee and dropped for the year.

SB 22 (Beall) Health care coverage: mental health parity. This bill would, on or October 1, 2014, require health health plans, including managed behavioral health plans, to submit an annual report to the Department of Managed Health Care or the Department of Insurance, as appropriate, certifying compliance with specified state laws and the MHPAEA, except as provided. The bill would require the departments to collaborate with each other and consult with experts and stakeholders to create the standards for the form and content of those reports. The bill would require those departments to report to the Legislature on or before January 1, 2020, on the information obtained through those annual reports and make the reports a public record available upon request and published on the departments’ websites. The bill had been sailing along with little resistance—though the Republicans have opposed it in committee—but was held in the Assembly Appropriations Committee.

SB 126 (Steinberg) Health care coverage: pervasive developmental disorder or autism- This bill would have extended the requirement for plans to provide coverage for behavioral health treatment for pervasive developmental disorder or autism until July 1, 2019, but was amended to limit it to 2017. The bill passed the Senate 37-0, the Assembly Health Committee 18-0, the full Assembly 78-0 and on Senate concurrence 37-0, and is now headed to the Governor’s desk.

Pharmacy Issues

AB 219 (Perea) Health care coverage: cancer treatment- This bill would prohibit a health plan that provides coverage for prescribed, orally administered anticancer medications from requiring an enrollee to pay a total cost-sharing amount of more than $200 per 30-day prescription. The bill was amended to increase the cap to $200 from $100 in response to Administration requests, though the amendments apparently do not reflect a “deal” with the Governor. CAHP, the California Chamber and others oppose this bill, but there is a long list of supporters because of its emotional nature and the disparity in treatment between patients who receive intravenous chemotherapy and oral chemotherapy drugs. The bill passed off the Assembly floor 64-9—meaning bipartisan support—though it got a partisan 7-2 vote in Senate Health Committee. It passed the full Senate 29-9 and the Assembly 65-11 on concurrence, and is headed to the Governor’s desk.

AB 889 (Frazier) Health care coverage: This bill is another step-therapy prohibition bill, but broader than bills from prior years in that it goes beyond step-therapy for pain medications and includes ALL medications. CAHP and the California Chamber of Commerce opposed the bill. The bill was held in the Senate Appropriations Committee.

SB 598 (Hill) Biosimilars: This bill amends existing state law to include biosimilars, but adds to the requirements in existing law a requirement that the physician by notified, within 5 days, that the patient has received a biosimilar instead of the brand-name biologic–or that the the patient has received the brand product if the physician does not check the “Do Not Substitute” box. So physicians in certain specialties would receive numerous faxes. Amgen and Genentech, the main sponsors of the bill, say physicians should receive this information so that they are aware in case any side effects arise, since there is no way a biosimilar can be manufactured to be exactly identical to the brand name biologic. But health plans, pharmacists, PBMs and others say this is just one way to discourage the use of biosimilars and oppose it. They provided FDA comments on this type of legislation and secured editorials against the bill. The bill passed the Senate 29-4, and passed the Assembly 60-4. The Senate Concurrence vote was 30-2 despite vigorous lobbying by the opposition and an oppose position by the state Board of Pharmacy. The lobbying against this bill continues in earnest while it is on the Governor’s desk.

Workforce Issues

SB 491, SB 492 and SB 493 (Hernandez) Scope of Practice. These three bills deal with the scope of practice for nurse practitioners, optometrists and pharmacists. As indicated above, SB 491 on nurse practitioners was held in the Assembly Appropriations Committee on suspense. SB 492 on optometrists was shelved for the year in Assembly Business and Professions Committee and SB 493 on pharmacists passed both houses handily and is on its way to the Governor’s desk.

Miscellaneous

SB 161 (Hernandez): Stop-Loss Coverage: This bill initially set fairly high attachment points–$95,000 per individual case—for stop-loss coverage for small businesses, but was amended down to $65,000. The Chamber of Commerce, brokers and others opposed the bill. The bill was amended down to $35,000 for an individual attachment point, and an aggregate attachment point that is the greater of $5000 times the total number of covered employees and dependents; 120 percent of expected claims; or $35,000. As a result of these amendments, the opposition went neutral. Subsequent amendments grandfathered in existing policies. The Assembly passed the bill on a partisan 51-21vote and the Senate by 25-11.

SB 239 (Hernandez): Hospital Fee Bill: During the last weekend before the end of session, leadership from the California Hospital Association negotiated a three-year extension of the hospital quality assurance fee that has brought billions of dollars into the state for hospitals and children’s health care. The Medi-Cal Hospital Reimbursement Improvement Act of 2013, would the hospital quality assurance fee on certain general acute care through December 30, 2016, and also require supplemental payments to be made to private hospitals for certain services, require direct grants to public hospitals and non-designated public hospitals, increase capitation payments to Medi-Cal managed care plans for hospital services, and direct 24 percent of the net benefit to children’s health coverage and Department of Health Care Services administration. The bill also eliminates the 10 percent Medi-Cal rate cut under AB 97 that would be imposed on distinct-part nursing facilities for dates of services on and after October 1, 2013.

CHA estimates that over the three year period (January 1, 2014 through December 31, 2016), $13.1 billion would be raised from the fee, which would provide $9.9 billion (net, meaning payments to hospitals minus fees paid) to hospitals after federal matching funds are drawn down. The state would receive nearly $2.4 billion for children’s coverage and administration. Public and district hospitals are exempt from paying the QAF. The bill was amended with the final deal on Sept 11, heard in the Assembly Health Committee that same day and passed by the Assembly 77-0. On the final day of the legislative session, the bill was heard in Senate Health, then passed by the full Senate 38-0. It is fully expected to be signed by the Governor.

SB 746 (Leno) Health care coverage: premium rates. This union-sponsored bill used to require health plans to file all specified rate information for rate increases that exceed the Consumer Price Index as published by the US Bureau of Labor Statistics even for large groups. The portion on rates was removed, but the bill continues to require the filing of a significant amount of cost data, claims data and trend information by plans regarding their large group business. The bill requires a health plan that exclusively contracts with no more than two medical groups—clearly targeting Kaiser—to provide claims data if requested by a large purchaser, and if the plan can’t do that, to disclose a significant amount of other data. Amendments added in the Assembly included identical Insurance Code provisions, so that all plans are affected. The bill was strongly opposed by CAHP, Kaiser, Kaiser’s unions, and the California Chamber of Commerce. It passed the Senate Floor 24-15. After strong lobbying in the Assembly, it passed the Assembly 43-33 and then the full Senate by a vote of 22-14.

SB 615 (Galgiani): Prevailing Wage: This bill expands the definition of “public works,” for purposes of prevailing wage payment requirements, to also include any construction, alteration, demolition, installation, or repair work done under private contract on a hospital or health care facility project when the project is paid for in whole or in part with the proceeds of conduit revenue bonds, as defined, that were issued on or after January 1, 2015. The bill will not take effect until on or after January 1, 2015. The California Hospital Association strongly opposed the bill, arguing that it would halt some projects and make many others more costly. But it passed the Assembly Floor 52-22 and the Senate Floor 23-11. Expect another union versus business fight in the Governor’s office.

AB 880 (Gomez): Employer penalties. This bill would create the Employer Responsibility for Medi-Cal Cost of Employees Act of 2013 (Act). It would require large employers, employing 500 or more employees, to pay a penalty if their employees, who work more than eight hours per week, are enrolled in Medi-Cal based on the Modified Adjusted Gross Income eligibility standard. The bill previously prohibited employers from terminating or adjusting hours of employees to avoid providing health care, but that provision was deleted. The bill specifies a formula for calculating the penalty based on the average cost of health care coverage provided to employees of large employers. The bill also requires the Department of Health Care Services to determine the penalty, based on the calculation, and requires the Employment Development Department to provide notice of the amount and to collect the penalty. The bill creates the Employer Responsibility for Medi-Cal Trust Fund (Fund) and requires monies collected from the penalties to be deposited in the Fund and used in the Medi-Cal program. New language has some money going to fund medical residencies, which placated the California Medical Association. This bill is intensely opposed by a broad coalition of employer groups who are working together to kill the bill. The bill is an urgency measure, meaning it requires a two-thirds vote and is also not subject to the usual deadlines. It was not taken up on the Assembly Floor during deadline week because the author did not have the necessary 54 votes to pass it, and then was amended to exempt regional centers and place more focus on rural areas to try to get rural-area Democrats. It was finally taken up before the Assembly lost its supermajority, but failed to get the required 54 votes, getting only 46 aye votes to 27 no votes. There has been talk of resurrecting it, but no one thinks they will do it this year.

Maureen O’Haren, O’Haren Government Relations

Source: John & Rusty Report via Choice Admin