Date of Hearing: May 16, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1268

Author:(Rodriguez) – As Amended Ver:April 30, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires entities that perform utilization review or utilization management functions pursuant to a contract with a health care plan to report the number of services denied or approved, for each of the 30 health care services for which prospective review was most frequently requested.

It also requires plans to report the information to the Department of Managed Health Care (DMHC) and DMHC to review the information for compliance with existing law and authorizes DMHC to assess an administrative penalty by order, to be deposited into a newly created Managed Care Penalty Account. It puts similar requirements in place for insurers and the California Department of Insurance (CDI).

FISCAL EFFECT:

1. Costs to the Department of Managed Health Care (DMHC) of $590,000 in fiscal year 2019-20, $1.5 million in 2020-21 and $1.7 million annually ongoing. Costs will be incurred to review compliance and to enforce the requirements (Managed Care Fund).
2. One-time costs for legal analysis and information technology (IT) changes to improve the existing electronic document system to handle new reports (Managed Care Fund).
3. Costs to the California Department of Insurance (CDI) of about $165,000 in fiscal year 2019-20 and $290,000 in 2020-21 to issue regulations and enforce compliance with the new requirements, and $125,000 in ongoing annual costs thereafter for review and enforcement (Insurance Fund).
4. Unknown potential penalty revenues.

COMMENTS:

1. Purpose. According to the author, necessary medical care is often delayed or even abandoned by patients due to issues with the prior authorization process. According to the author, this bill is needed to provide all stakeholders with the necessary information to begin tackling the problem and find workable solutions that allow for the highest quality of care for patients, while also providing relief to providers for this overly-burdensome process.
2. Prior Authorization. Prior authorization is a decision by a health plan or insurer that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. The health plan or insurer may require preauthorization for certain services before an individual receives them, except in an emergency.
   
   Health plans and insurers are subject to various requirements in California, as stated in existing law above, including an obligation to file policies and procedures that describe UR or UM functions used to authorize, modify or deny health care services under the benefits provided by the health plan. Additionally, existing law requires these policies and procedures to ensure decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines supported by clinical principles and processes.
3. Industry efforts. In January 2018, America’s Health Insurance Plans (AHIP) issued a Consensus Statement identifying that health insurers and provider groups are working together to improve prior authorization processes for patients’ medical treatments, also known as pre-approval. These groups acknowledge this will help patients have access to safe, timely and affordable care, while reducing administrative burdens for both health care professionals, hospitals and health insurance providers. The statement number of areas of recommended improvement including aligning standards, regular review of protocols and improved communications.
4. Support. The California Medical Association (CMA) and other medical provider groups support this bill. The California Chapter of the American College of Cardiology notes that very little information is known about the rates at which health plans and insurers approve or deny physician requests for services.
5. Opposition. Plans and insurers oppose this bill. The Association of California Life and Health Insurance Companies (ACLHIC) states prior approval optimizes patient outcomes by ensuring patients receive the most appropriate treatment available while also reducing waste, error and unnecessary cost to the system. ACLHIC states it appreciates the time it takes for physicians to process prior approval requests, but is concerned this bill will add extensive cost for little benefit. According to ACLHIC, each authorization request has a unique set of circumstances specific to each patient. To submit these individual requests without truly understanding the underlying reason for the request and the rationale for the approval, denial or modification ignores the complexity of the healthcare system and individual medical needs.

America’s Physician Groups is opposed unless amended and is concerned this bill might require the approximately 200 risk-bearing organizations in California to separately report their statistics to DMHC.

1. Prior Legislation. SB 866 (Hernandez), Chapter 648, Statutes of 2011, requires DMHC and CDI to, on or before July 1, 2012, develop a prior authorization form for use by every health care service plan and health insurer that provides prescription drug benefits, except as specified.
2. Staff Comments. This bill places penalties issued by DMHC into a newly created account. Penalties are otherwise placed in the Managed Care Administrative Fines and Penalties Fund. Creation of a new account does not appear necessary.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: April 23, 2019

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 1268

Author:(Rodriguez) – As Introduced Ver:February 21, 2019

SUBJECT: Health care coverage: prospective review.

SUMMARY: Requires a health care service plan (health plan) or disability insurer (insurer) that prospectively reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers for the provision of health care services to enrollees or insureds, as specified, for each health care service subject to prospective review, to report to the Department of Managed Health Care (DMHC) or the California Department of Insurance (CDI), the number of times in the preceding calendar year the service was approved, modified, delayed, or denied. Specifically, this bill:

1. Revises the criteria or guidelines used by health plans or insurers, or an entity with which the health plan or insurer contracts for services that include utilization review (UR) or utilization management (UM) functions, as specified, to include the information reported pursuant to 2) below, as specified.
2. Requires a health plan or insurer that prospectively reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers before the provision of health care services to enrollees or insureds, or that delegates these functions to medical groups or independent practice associations (IPAs) or to other contracting providers, on or before July 1, 2020, and annually on July 1 thereafter, for each health care service subject to prospective review, to report to the DMHC or CDI, the number of times in the preceding calendar year the service was approved, modified, delayed, or denied.
3. Specifies that the form and manner of the reporting required pursuant to 2) above to be determined by the DMHC or CDI.
4. Makes other technical and conforming changes.

EXISTING LAW:

1. Establishes the DMHC to regulate health plans and the CDI to regulate health insurers.
2. Requires health plans to demonstrate that medical decisions are rendered by qualified medical providers, unhindered by fiscal and administrative management.
3. Requires health plans to disclose or provide for disclosure of the process the health plan, its contracting provider groups, or any entity with which the plan contracts for services that include UR or UM functions, uses to authorize, modify, or deny health care services under the benefits provided by the health plan, including coverage for sub-acute care, transitional inpatient care, or care provided in skilled nursing facilities. Requires health plans to disclose those processes to enrollees or persons designated by an enrollee, or to any other person or organization, upon request. Requires the criteria or guidelines used by health plans, or any entities with which plans contract for services, that include UR or UM functions, to determine whether to authorize, modify, or deny health care services to comply with all the following:
   1. Be developed with involvement from actively practicing health care providers;
   2. Be consistent with sound clinical principles and processes; and,
   3. Be evaluated, and updated if necessary, at least annually.
4. Requires a health plan or insurer to have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees or insureds. Requires these policies and procedures to ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. Requires these policies and procedures, as specified, to be filed with the DMHC Director or Insurance Commissioner for review and approval, and to be disclosed by the plan to providers and enrollees, and by the plan to the public upon request.
5. Requires a health plan or insurer to employ or designate a medical director who holds an unrestricted license to practice medicine in this state, as specified, or if the plan is a specialized health plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. Requires the medical director or clinical director to ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees.
6. Requires a health plan or insurer to maintain telephone access for providers to request authorization for health care services.
7. Specifies that the obligation of the plan to comply with existing law is not waived when the plan delegates any services that it is required to perform to its medical groups, IPAs, or other contracting entities.
8. Establishes the Independent Medical Review (IMR) process as part of the DMHC or CDI appeal process when a health plan or insurer denies, changes or delays a request for medical services, denies payment for emergency treatment, or refuses to cover experimental or investigational treatment for a serious medical condition.
9. Requires health plans that provide prescription drug benefits to provide coverage for all medically necessary outpatient drugs, except as specified.
10. Requires the DMHC and CDI to jointly develop a uniform prior authorization form that health plans and health insurers must accept when prescribing providers seek authorization for prescription drug benefits. Requires prescribers to use the standardized prior authorization form.
11. Requires the DMHC to conduct periodically an onsite medical survey of the health delivery system of each plan.

FISCAL EFFECT: This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, necessary medical care is often delayed or even abandoned by patients due to issues with the prior authorization process. The solution is a more streamlined, less onerous prior authorization system that provides patients with a high-value, timely, and personalized level of care.
   
   According to the author, this bill is needed to begin addressing the burdens due to prior authorizations. It will provide all stakeholders with the necessary information to begin tackling the problem and find workable solutions that allow for the highest quality of care for patients, while also providing relief to providers for this overly-burdensome process. The author concludes that we cannot begin to address the problem without information and facts, and this bill will ensure that the detailed data is collected and made available to stakeholders who wish to address this problem.
2. BACKGROUND.
   1. Prior Authorization. Prior authorization is a decision by a health plan or insurer that a health care service, treatment plan, prescription drug, or durable medical equipment is medically necessary. The health plan or insurer may require preauthorization for certain services before an individual receives them, except in an emergency.
      
      Health plans and insurers are subject to various requirements in California, as stated in existing law above, including an obligation to file policies and procedures that describe UR or UM functions, used to authorize, modify, or deny health care services under the benefits provided by the health plan. Additionally, existing law requires these policies and procedures to ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes.
      
      Furthermore, California law requires, DMHC to conduct a routine medical survey of each licensed full service and specialty health plan at least once every three years. , DMHC may also perform an investigative medical survey as often as deemed necessary by DMHC's Director. The medical survey is a comprehensive evaluation of the plan's compliance with the law in the following health plan program areas:
      1. Quality Assurance;
      2. Grievances and Appeals (enrollee complaints);
      3. Access and Availability;
      4. UM (referrals and authorizations); and,
      5. Overall plan performance in meeting enrollees' health care needs.
   2. Existing consumer protections. In California, consumers have many health care rights, including the right to know why a plan denies a service or treatment, and the right to file a grievance if the consumer disagrees. Health plans are required to have grievance and appeals systems to assist consumers in resolving these issues. A health plan’s grievance program informs consumers of their full grievance and appeal rights and the protections afforded to them under the law, including the right to pursue an IMR or file a complaint with the DMHC if they are dissatisfied with their health plan’s decision. A robust grievance program also allows health plans to track and trend grievances for the purpose of uncovering systemic problems, thereby providing the opportunity for quality improvement.
      
   3. Industry efforts. In January 2018, America’s Health Insurance Plans (AHIP) issued a Consensus Statement identifying that physicians, pharmacists, medical groups, hospitals, and health insurance providers are working together to improve prior authorization processes for patients’ medical treatments, also known as pre-approval. These groups acknowledge that this will help patients have access to safe, timely, and affordable care, while reducing administrative burdens for both health care professionals, hospitals and health insurance providers. According to the Consensus Statement, these health care leaders will work together to:
      1. Reduce the number of health care professionals subject to prior authorization requirements based on their performance, adherence to evidence-based medical practices, or participation in a value-based agreement with the health insurance provider;
      2. Regularly review the services and medications that require prior authorization and eliminate requirements for therapies that no longer warrant them;
      3. Improve channels of communications between health insurance providers, health care professionals, and patients to minimize care delays and ensure clarity on prior authorization requirements, rationale, and changes;
      4. Protect continuity of care for patients who are on an ongoing, active treatment or a stable treatment regimen when there are changes in coverage, health insurance providers or prior authorization requirements; and,
      5. Accelerate industry adoption of national electronic standards for prior authorization and improve transparency of formulary information and coverage restrictions at the point-of-care.

AHIP is also working on other prior authorization solutions (both alone and with provider partners) and is working specifically to offer solutions to insurers to help manage chronic pain and tackle the opioid crisis. AHIP is also launching a demonstration project to study the best ways to automate, streamline, and improve the prior authorization process and will be contracting with vendors who have extensive experience working with payers and providers to offer solutions to automate prior authorization. Finally, AHIP is working with physician groups on a model for risk sharing to promote improved population health adopted from the Health Care Payment Learning and Action Network, which is the the federal Department of Health and Human Services working in concert with partners in the private, public, and non-profit sectors to transform the nation’s health system to emphasize value over volume. This model allows for delegation of certain functions, including UM, to provider groups. AHIP is also planning collaborative education programs to build awareness on the model, what it takes to be successful, and how it can be spread.

1. SUPPORT. The California Medical Association (CMA), the sponsor of this bill, states that this bill is the first step in helping to address the ever-growing problem of physician burnout and patient continuity of care. CMA contends that burdensome prior authorization processes also contribute to more adverse events during care for patients and delays in treatment and states that the solution is a more streamlined, less burdensome prior authorization system that provides patients with a high value, timely, and personalized level of care. The California Chapter of the American College of Cardiology notes that very little information is known about the rates at which health plans and insurers approve or deny physician requests for services, nor is it easy to find which services even require a prior authorization. The Arthritis Foundation states that patients increasingly face challenges in accessing health care and dealing with administrative burdens due to the lack of transparency in the health care system. According to the Arthritis Foundation, the transparency related to prior authorization protocols which would result from the passage of this bill would be critical to laying the groundwork for policies and best practices to be implemented that will make health care work better for patients.
2. OPPOSE UNLESS AMENDED. America’s Physician Groups is oppose unless amended, and is concerned that this bill might require the approximately 200 risk-bearing organizations in California to separately report their statistics to DMHC, when they are already surveyed by the contracted health plans. Since these organizations are acting in the capacity as a delegated agent of those health plans, the reporting should be done once, and by the plan, if at all.
3. OPPOSITION. The California Association of Health Plans contends that this bill will result in new and ongoing administrative burdens on health plans for the collection of data that will be difficult to assemble. These new administrative costs translate into higher premiums for consumers for an ill-defined objective. The Association of California Life and Health Insurance Companies (ACLHIC) states that the ultimate purpose of prior approval is to optimize patient outcomes by ensuring that patients receive the most appropriate treatment available while also reducing waste, error and unnecessary cost to the system. ACLHIC states that it appreciates the time it takes for physicians to process prior approval requests, but is concerned that this bill will add extensive administrative cost to the system while providing very little benefit to regulators. According to ACLHIC, each authorization request has a unique set of circumstances specific to each patient. To submit these individual requests without truly understanding the underlying reason for the request and the rationale for the approval, denial, or modification ignores the complexity of the healthcare system and the individual medical needs of every patient.
4. PREVIOUS LEGISLATION. SB 866 (Hernandez), Chapter 648, Statutes of 2011, requires DMHC and CDI to, on or before July 1, 2012, develop a prior authorization form for use by every health care service plan and health insurer that provides prescription drug benefits, except as specified. Requires, on and after January 1, 2013, or 6 months after the form is developed, whichever is later, every prescribing provider, as defined, when requesting prior authorization for prescription drug benefits, to submit the prior authorization form to the health care service plan or health insurer, and requires those plans and insurers to utilize and accept those prior authorization forms for prescription drug benefits.
5. COMMITTEE AMENDMENTS. The author wishes to amend this bill as follows to address concerns regarding the volume of information filed with the DMHC:
   1. Limit the number of information filed to the DMHC, to the top 30 health care services approved or denied; and,
   2. Require the DMHC to review the filed information as it relates to consumer complaints of the same or similar health care services.

REGISTERED SUPPORT / OPPOSITION:

Support

California Medical Association (sponsor)

Arthritis Foundation
Association of Northern California Oncologists
California Academy of Eye Physicians & Surgeons
California Academy of PAs
California Chapter American College of Cardiology
California Orthopedic Association
California Psychiatric Association
California Rheumatology Alliance
California Society of Dermatology & Dermatologic Surgery
California Society of Plastic Surgeons
California Urological Association
Independent Physical Therapists of California
Infectious Disease Association of California
Medical Oncology Association of Southern California
San Diego County Medical Society

Oppose

Association of California Life and Health Insurance Companies

California Association of Health Plans

Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097