Increasing access to health care and prescription drugs was the main priority for state policymakers in 2015. While a number of measures that would have increased health care premiums or put additional strain on the General Fund were stopped due to concerns about their cost, several proposals that threaten the long-term affordability of health care premiums were either signed into law or remain viable threats going into the 2016 legislative session.
Despite the fact that health insurers are already subject to considerable regulation and are required to spend a prescribed amount of every premium dollar on direct care, lawmakers continue to introduce measures targeting the industry as a cost driver.
This year, Senator Mark Leno (D-San Francisco) introduced SB 546 requiring health insurers to annually report aggregated information about how their large group premium rates are calculated, as well as specific information about employers’ rates that will increase in the coming plan year.
The measure was originally tagged a job killer because it also would have allowed state regulators to unilaterally veto or modify large group rates, but it was scaled back substantially as it moved through the Legislature, and only the aggregate reporting requirement remained in the final version signed by the Governor.
Despite the changes, the CalChamber remained opposed because the measure still imposes new administrative costs on health plans and insurers that will ultimately be passed on to employers, and fails to provide new information that would help large employers negotiate lower premiums.
Concern over rising prescription drug prices has been increasing in the last two years, but so far legislative proposals have focused only on increasing consumer access instead of addressing the underlying cost of the drugs.
CalChamber opposed AB 339 (Gordon; D-Menlo Park), which imposes numerous restrictions on how prescription drug benefits can be designed, thereby limiting the ability of health insurers to negotiate lower prices with manufacturers and the ability of employers to control costs by encouraging efficient utilization of prescription drugs by their employees.
Unfortunately, AB 339 was signed into law and will cap enrollee cost-sharing requirements for a 30-day supply of a prescription drug at $250 under most health care plans; require all health insurers to cover expensive single-tablet formulations of antiretroviral treatments for enrollees with HIV/AIDS; mandate specific definitions for each tier of a plan’s covered drug list in the individual and small group markets; and codify new federal regulatory requirements governing how prescription drug benefits are designed and administered, even though those regulations are subject to change.
A few of these provisions will sunset automatically at the end of 2019 unless the Legislature affirmatively acts to extend them after having a chance to evaluate their impact.
In the meantime, though, the biggest concern is that, by increasing utilization of expensive medications, limiting the negotiating strength of insurers, and shifting a larger share of prescription drug costs into premiums, this new law will quickly eliminate the most affordable plans on the market, harming middle class Californians and small employers that are unable to afford higher premiums.
Two other bills also dealing with prescription drugs did not fare as well:
• AB 623 (Wood; D-Healdsburg) would have required health insurers to cover abuse-deterrent formulations of opioid pain medications, even though these formulations have not been proven to prevent opioid abuse or addiction, and are considerably more expensive that other formulations on the market. This bill was held in the Assembly due to fiscal concerns.
• AB 374 (Nazarian; D-Sherman Oaks) sought to restrict the ability of health insurers to require an enrollee to first try proven, safer and/or less costly prescription drugs before covering one prescribed by their doctors. The CalChamber removed its opposition after the measure was significantly amended to instead simplify the process by which a doctor can ask a patient’s health insurer to bypass this protocol when medically appropriate.
Two CalChamber-opposed bills introduced this year sought to expand existing coverage requirements already imposed on health insurers, driving up premiums for employers and their employees. Due to the costs associated with both measures, and the lack of evidence that either expansion would have improved patient outcomes significantly or improved health care access, both were defeated in the first house:
• SB 190 (Beall; D-San Jose) would have increased employer premiums by $145 million by requiring health insurers to cover care by post-acute residential transitional rehabilitation providers for patients with acquired brain injuries.
• SB 289 (Mitchell; D-Los Angeles) would have increased employer premiums by as much as $207 million by mandating physicians be reimbursed for email and telephone communications with patients as though they were office visits.
The CalChamber supported SB 125 (E. Hernandez; D-West Covina), which was signed into law mid-year, extending authorization and funding for the California Health Benefits Review Program administered by the University of California to provide the Legislature with valuable independent analyses of the medical, financial and public health impacts of proposed health insurance benefit mandates like those in SB 190 and SB 289. These analyses have proved incredibly valuable in helping legislators weigh the potential costs and benefits associated with measures like these, and have helped prevent adoption of many other costly proposals.
MCO Tax and Special Session
One issue that is still pending and could have an even larger impact on employer premiums in the long run is the administration’s proposal to tax commercial health insurance to cover part of the cost of the state’s Medicaid program (Medi-Cal in California) that would otherwise be paid for out of the General Fund.
Last year the federal government called a halt to the state’s current practice of drawing down federal matching funds by taxing Medi-Cal managed care plans that are ultimately reimbursed through higher payments from the state. Starting in July 2016, in order for California to continue receiving federal matching funds for what it spends on Medi-Cal, the tax must be broadened to apply to health insurers that cover few, if any, Medi-Cal enrollees, and therefore will not be fully reimbursed by the state.
Prior iterations of the so-called MCO tax easily received enough votes to meet the two-thirds vote requirement for new taxes even though they did not, in fact, impose a net tax on the entities subject to them.
The four proposals considered by the Legislature this year, however, proved to be much more controversial, and were opposed by CalChamber and other business groups because they would have unfairly penalized responsible employers and individuals who purchase commercial health insurance, reduced the affordability of that coverage, and set a dangerous precedent that could lead to long-term pressure to increase the tax to fund a growing share of this general government program.
Most of these proposals were introduced as part of a special session called by the Governor to identify new revenue streams to support Medi-Cal and other growing public health and developmental services programs. While none of the measures had enough support to pass when the regular session adjourned in September, it is very likely that they will be considered again later this year or early on in 2016 when the Legislature formally reconvenes.
CalChamber also supported AB 533 (Bonta; D-Oakland) to resolve a long-standing problem caused by out-of-network providers unexpectedly treating patients at in-network hospitals and clinics.
Typically, insurers will not pay out-of-network providers more than they would pay an in-network one for the same service, and as a result, out-of-network providers often bill patients for the portion of their charges that insurers do not pay, a practice known as balance billing.
In a hospital setting, it is virtually impossible for patients to verify that every provider they could encounter in the course of their treatment is an in-network provider. Operators of health care facilities are prohibited by law from directly employing providers or from requiring providers that work there to contract with the same health insurers with which those facilities contract.
As a result, a patient can verify that a facility and his/her primary provider is in the patient’s network and still end up having an ancillary service performed by an out-of-network provider.
In fact, balance billing by anesthesiologists, radiologists, pathologists and other ancillary providers is common and can result in insured patients receiving large bills they cannot afford and made every effort to avoid.
AB 533 prohibits out-of-network providers from balance billing patients treated at an in-network facility unless the providers receive the patient’s informed, written consent before providing the health care service.
The bill also allows patients to apply payments made to out-of-network providers toward the patients’ annual out-of-pocket spending cap, thus helping to preserve the value of employer-sponsored coverage and protect employees from unreasonable, unanticipated health care costs.
Unfortunately, AB 533 was narrowly defeated on the last night of session, but there still is a chance it will be approved through a reconsideration vote during the second year of this two-year session.