Existing law, the Knox-Keene Health Care Service Plan Act of 1975, requires the Department of Managed Health Care to license and regulate health care service plans and makes a willful violation of the act a crime. Other existing law requires the Department of Insurance to regulate health insurers. Existing law requires an individual or small group health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2017, to include, at a minimum, coverage for essential health benefits pursuant to the federal Patient Protection and Affordable Care Act. Under existing law, essential health benefits includes, among other things, rehabilitative and habilitative services. Existing law requires habilitative services and devices to be covered under the same terms and conditions applied to rehabilitative services and devices under the plan contract or policy, and defines habilitative services to mean health care services and devices that help a person keep, learn, or improve skills and functioning for daily living.

This bill would specify that coverage of rehabilitative and habilitative services and devices under a health care service plan or health insurance policy includes durable medical equipment, services, and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician, surgeon, or other health professional acting within the scope of their license. The bill would define durable medical equipment to mean devices, including replacement devices, that are designed for repeated use, and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living. The bill would prohibit coverage of durable medical equipment and services from being subject to financial or treatment limitations, as specified. Because

Because a violation of the bills provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, requires the Department of Managed Health Care to license and regulate health care service plans and makes a willful violation of the act a crime. Other existing law requires the Department of Insurance to regulate health insurers. Existing law requires an individual or small group health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2017, to include, at a minimum, coverage for essential health benefits pursuant to the federal Patient Protection and Affordable Care Act. Under existing law, essential health benefits includes, among other things, rehabilitative and habilitative services. Existing law requires habilitative services and devices to be covered under the same terms and conditions applied to rehabilitative services and devices under the plan contract or policy, and defines habilitative services to mean health care services and devices that help a person keep, learn, or improve skills and functioning for daily living.

This bill would specify that coverage of rehabilitative and habilitative services and devices under a health care service plan or health insurance policy includes durable medical equipment, services, and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician, surgeon, or other health professional acting within the scope of their license. The bill would define durable medical equipment to mean devices, including replacement devices, that are designed for repeated use, and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living. The bill would prohibit coverage of durable medical equipment and services from being subject to financial or treatment limitations, as specified. Because a violation of the bills provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 1157 (Ortega) - Rehabilitative and habilitative services: durable medical equipment and services

Bill Summary:

AB 1157 would include, as a mandated California essential health benefit (EHB) under the rehabilitative and habilitative services and devices benefit, coverage of durable medical equipment (DME), as specified.

Fiscal Impact:

• The Department of Managed Health Care (DMHC) estimates costs of approximately $2,056,000 in 2023-24, $3,219,000 in 2024-25, $3,222,000 in 2025-26, $3,223,000 in 2026-27, and $3,224,000 in 2027-28 and annually thereafter for state administration (Managed Care Fund).
• The California Department of Insurance estimates costs of $7,000 in 2023-24 for state administration (Insurance Fund).
• Unknown one-time General Fund costs, over several years, for the California Health and Human Services Agency to implement the provisions of the bill.
• Unknown potential General Fund cost pressures to the extent the benefit mandate would exceed California’s EHB benchmark plan.

Background:

The DMHC regulates health plans under the Knox-Keene Act and the CDI regulates health insurance. The federal Affordable Care Act (ACA) requires non-grandfathered individual and small group plan contracts and insurance policies to cover EHBs. These EHBs include rehabilitative and habilitative services and devices. Current law defines “habilitative services” as health care services and devices that help a person keep, learn, or improve skills and functioning for daily living. These services may include physical and occupational therapy, speech-language pathology, and other services for people with disabilities in a variety of inpatient or outpatient settings, or both.

Current law does not explicitly specify that California’s EHBs include DME. However, California’s current “benchmark EHB plan,” which is used as the basis for specifying mandated EHB services in the state, does specify required coverage for some DME for home use. The following items are mandated to be covered as DME:

• Blood glucose monitors for diabetes blood testing and their supplies;
• Bone stimulator;
• Canes and replacement supplies;
• Cervical traction (over door);
• Crutches and replacement supplies;
• Dry pressure pad for a mattress;
• Enteral pump and supplies;
• Infusion pumps and supplies;
• IV pole;
• Nebulizer and supplies;
• Peak flow meters;
• Phototherapy blankets for treatment of jaundice in newborns; and,
• Tracheostomy tube and supplies.

Under the ACA, if California adopts a state benefit mandate for coverage that exceeds the benefits contained in its EHB benchmark plan, the state would have to defray the cost of those mandates for plans offered through Covered California. However, if the state were to revise its EHB benchmark plan and choose a benchmark plan that contains the mandated benefit, those costs for Covered California plans would be subsidized primarily through federal funds.

Proposed Law:

Specific provisions of the bill would:

• Include as coverage of rehabilitative and habilitative services and devices under California’s EHBs, DME services and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician or other health professional acting within the scope of their license.
• Prohibit, with respect to rehabilitative and habilitative services and devices, coverage of DME and services from being subject to financial or treatment limitations, including annual caps or requirements limiting coverage of the devices to those for home use.
• Define “DME” as devices, including replacement devices, that are designed for repeated use and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living; and require the prescription or order for DME to include fittings, design, adjustment, programming, and other necessary services for the provision or maintenance of the devices.
• Require the Secretary of California Health and Human Services to communicate to the federal Center for Consumer Information and Insurance Oversight that the coverage of DME is necessary for purposes of being considered EHBs not subject to defrayal payments; require that if the federal Center overrules the state’s determination that the addition of coverage for DME does not subject the state to the defrayal requirement, the Secretary must commence and complete the process of reevaluating California’s EHB benchmark plan to incorporate these DME services and repairs without triggering the defrayal requirement; and require the Secretary to submit a report to the Legislature recommending the corresponding changes to the EHB benchmarking process in order for the Legislature to approve submission of a new benchmark plan.

Staff Comments: The California Health Benefits Review Program (CHBRP) analysis of AB 1157, as introduced, estimates an increase in total net annual expenditures by $26,410,000 for enrollees with DMHC-regulated plans and CDI-regulated policies. This is due to a $57,162,000 increase in total health insurance premiums paid by employers and enrollees for newly covered benefits, adjusted by an increase of $11,432,000 in enrollee expenses for covered benefits and a decrease of $42,184,000 in enrollee expenses for noncovered benefits.

The CHBRP analysis indicates that AB 1157 would require coverage for a new state benefit mandate that may exceed the definition of EHBs in California by requiring benefit coverage for DME beyond what is present in the California EHB benchmark plan. CHBRP provided two scenarios to project the potential cost to the state. One potential scenario projected a cost of $211,715,000 and another potential scenario projected a cost of $57,162,000.

While the provisions of the bill would require the state to pursue a process to include the DME benefit in a new EHB benchmark plan if necessary to avoid triggering the defrayal requirement, the mandate would become effective January 1, 2024, thus leaving a gap period during which time the state could be responsible for defrayal payments.

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SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 1157 (Ortega) - Rehabilitative and habilitative services: durable medical equipment and services

Bill Summary:

AB 1157 would include, as a mandated California essential health benefit (EHB) under the rehabilitative and habilitative services and devices benefit, coverage of durable medical equipment (DME), as specified.

Fiscal Impact:

• The Department of Managed Health Care (DMHC) estimates costs of approximately $2,056,000 in 2023-24, $3,219,000 in 2024-25, $3,222,000 in 2025-26, $3,223,000 in 2026-27, and $3,224,000 in 2027-28 and annually thereafter for state administration (Managed Care Fund).
• The California Department of Insurance estimates costs of $7,000 in 2023-24 for state administration (Insurance Fund).
• Unknown one-time General Fund costs, over several years, for the California Health and Human Services Agency to implement the provisions of the bill.
• Unknown potential General Fund cost pressures to the extent the benefit mandate would exceed California’s EHB benchmark plan.

Background:

The DMHC regulates health plans under the Knox-Keene Act and the CDI regulates health insurance. The federal Affordable Care Act (ACA) requires non-grandfathered individual and small group plan contracts and insurance policies to cover EHBs. These EHBs include rehabilitative and habilitative services and devices. Current law defines “habilitative services” as health care services and devices that help a person keep, learn, or improve skills and functioning for daily living. These services may include physical and occupational therapy, speech-language pathology, and other services for people with disabilities in a variety of inpatient or outpatient settings, or both.

Current law does not explicitly specify that California’s EHBs include DME. However, California’s current “benchmark EHB plan,” which is used as the basis for specifying mandated EHB services in the state, does specify required coverage for some DME for home use. The following items are mandated to be covered as DME:

• Blood glucose monitors for diabetes blood testing and their supplies;
• Bone stimulator;
• Canes and replacement supplies;
• Cervical traction (over door);
• Crutches and replacement supplies;
• Dry pressure pad for a mattress;
• Enteral pump and supplies;
• Infusion pumps and supplies;
• IV pole;
• Nebulizer and supplies;
• Peak flow meters;
• Phototherapy blankets for treatment of jaundice in newborns; and,
• Tracheostomy tube and supplies.

Under the ACA, if California adopts a state benefit mandate for coverage that exceeds the benefits contained in its EHB benchmark plan, the state would have to defray the cost of those mandates for plans offered through Covered California. However, if the state were to revise its EHB benchmark plan and choose a benchmark plan that contains the mandated benefit, those costs for Covered California plans would be subsidized primarily through federal funds.

Proposed Law:

Specific provisions of the bill would:

• Include as coverage of rehabilitative and habilitative services and devices under California’s EHBs, DME services and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician or other health professional acting within the scope of their license.
• Prohibit, with respect to rehabilitative and habilitative services and devices, coverage of DME and services from being subject to financial or treatment limitations, including annual caps or requirements limiting coverage of the devices to those for home use.
• Define “DME” as devices, including replacement devices, that are designed for repeated use and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living; and require the prescription or order for DME to include fittings, design, adjustment, programming, and other necessary services for the provision or maintenance of the devices.
• Require the Secretary of California Health and Human Services to communicate to the federal Center for Consumer Information and Insurance Oversight that the coverage of DME is necessary for purposes of being considered EHBs not subject to defrayal payments; require that if the federal Center overrules the state’s determination that the addition of coverage for DME does not subject the state to the defrayal requirement, the Secretary must commence and complete the process of reevaluating California’s EHB benchmark plan to incorporate these DME services and repairs without triggering the defrayal requirement; and require the Secretary to submit a report to the Legislature recommending the corresponding changes to the EHB benchmarking process in order for the Legislature to approve submission of a new benchmark plan.

Staff Comments: The California Health Benefits Review Program (CHBRP) analysis of AB 1157, as introduced, estimates an increase in total net annual expenditures by $26,410,000 for enrollees with DMHC-regulated plans and CDI-regulated policies. This is due to a $57,162,000 increase in total health insurance premiums paid by employers and enrollees for newly covered benefits, adjusted by an increase of $11,432,000 in enrollee expenses for covered benefits and a decrease of $42,184,000 in enrollee expenses for noncovered benefits.

The CHBRP analysis indicates that AB 1157 would require coverage for a new state benefit mandate that may exceed the definition of EHBs in California by requiring benefit coverage for DME beyond what is present in the California EHB benchmark plan. CHBRP provided two scenarios to project the potential cost to the state. One potential scenario projected a cost of $211,715,000 and another potential scenario projected a cost of $57,162,000.

While the provisions of the bill would require the state to pursue a process to include the DME benefit in a new EHB benchmark plan if necessary to avoid triggering the defrayal requirement, the mandate would become effective January 1, 2024, thus leaving a gap period during which time the state could be responsible for defrayal payments.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Dr. Susan Talamantes Eggman, Chair

BILL NO: AB 1157

SUBJECT: Rehabilitative and habilitative services: durable medical equipment and services

SUMMARY:

Includes as a mandated California essential health benefit under the rehabilitative and habilitative services and devices benefit, coverage of durable medical equipment (DME), services, and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician, surgeon, or other health professional acting within the scope of their license.

Existing law:

1. Establishes: the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Services Plan Act of 1975; the California Department of Insurance (CDI) to regulate health and other insurers; Covered California as California’s health benefit exchange for individual and small business purchasers as authorized under the federal Patient Protection and Affordable Care Act (ACA); and, the Department of Health Care Services (DHCS) to administer the Medi-Cal program. [HSC §1340, et seq., INS §106, et seq., GOV §100500 -100522, and WIC §14000, et seq.]
   
2. Establishes, as California's essential health benefits (EHBs) benchmark, the Kaiser Small Group Health Maintenance Organization, existing California mandates (including medically necessary basic health care services), and ten ACA mandated benefits as described below. Requires non-grandfathered individual and small group plan contracts and insurance policies to cover EHBs:
   1. Ambulatory patient services;
   2. Emergency services;
   3. Hospitalization;
   4. Maternity and newborn care;
   5. Mental health and substance use disorder services, including behavioral health treatment;
   6. Prescription drugs;
   7. Rehabilitative and habilitative services and devices;
   8. Laboratory services;
   9. Preventive and wellness services and chronic disease management; and,
   10. Pediatric services, including oral and vision care. [HSC §1367.005 and INS §10112.27]
3. Requires, with respect to habilitative services, in addition to any habilitative services and devices identified in 2g) above, coverage to also be provided as required by federal rules, regulations, and guidance issued pursuant to the ACA. Requires habilitative services and devices to be covered under the same terms and conditions applied to rehabilitative services and devices under the plan contract. Prohibits limits on habilitative and rehabilitative services and devices from being combined. [HSC §1367.005 and INS §10112.27]
4. Defines “habilitative services” as health care services and devices that help a person keep, learn, or improve skills and functioning for daily living. These services may include physical and occupational therapy, speech-language pathology, and other services for people with disabilities in a variety of inpatient or outpatient settings, or both. Requires habilitative services to be covered under the same terms and conditions applied to rehabilitative services under the plan contract. [HSC §1367.005 and INS §10112.27]
5. Prohibits, under federal law, an individual, on the ground prohibited under Title VI of the Civil Rights Act of 1964 and other federal laws, as specified, from being excluded from participation in, be denied the benefits of, or be subjected to discrimination under any health program or activity, any part of which is receiving federal financial participation in, including credits, subsidies, or contracts of insurance, or under any program or activity that is administered by an executive agency or any entity established under this title, as specified. [42 U.S.C. §18116]
   
6. Establishes federal EHB requirements including that the Secretary of the federal Department of Health and Human Services (HHS) not make coverage decisions, determine reimbursement rates, establish incentive program, or design benefits in a ways that discriminate against individuals because of their age, disability, or expected length of life. [42 U.S.C. §§ 18022]

This bill:

1. Includes, as coverage of rehabilitative and habilitative services and devices under California’s EHBs, DME, services, and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician or other health professional acting within the scope of their license.
   
2. Prohibits, with respect to rehabilitative and habilitative services and devices, coverage of DME and services from being subject to financial or treatment limitations, including annual caps or requirements limiting coverage of the devices to those for home use.
   
3. Defines “DME” as devices, including replacement devices, that are designed for repeated use and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living. Requires the prescription or order for DME to include fittings, design, adjustment, programming, and other necessary services for the provision or maintenance of the devices.
   
4. Finds and declares that:
   1. Lack of access to DME disproportionately affects individuals with disabilities or chronically ill individuals;
   2. Because of their effect on protected population classes, categorical exclusions of DME by health insurers, and burdensome financial limitations imposed by insurers on DME, result in insurance policy designs that discriminate against people with disabilities in violation of federal and state nondiscrimination provisions, including specified provisions of the ACA; and,
   3. In order to comply with federal and state requirements regarding nondiscrimination in benefit design, it is important that coverage of rehabilitative and habilitative services and devices include DME and services.

FISCAL EFFECT:

According to the Assembly Appropriations Committee:

1. CDI estimates costs of $7,000 in fiscal year (FY) 2023-24 (Insurance Fund).
2. DMHC estimates the total costs of this bill to be approximately $305,000 in FY 2023-24 and $1.1 million in FY 2024-25 and annually thereafter (Managed Care Fund). DMHC states several offices within DMHC will implement this bill. The Office of Plan Monitoring will develop surveys requiring a focused review of DME files and conduct clinical reviews during routine and follow-up medical survey assessments. DMHC anticipates the Office of Help Center will incur the majority of costs for additional workload to address an increase in consumer complaints and independent medical reviews. DMHC notes that, generally and depending on enrollment, a $1 million increase to the Managed Care Fund could result in a $0.02 increase per enrollee on assessments to full-service health plans and a $0.01 increase per enrollee to specialized health plans. To the extent this and other bills result in an additional assessment on health plans, consumers could face increased premiums.
3. The California Health Benefit Review Program (CHBRP) expects this bill will not affect Medi-Cal coverage or health plans or policies offered to members of the California Public Employees' Retirement System.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, private health plans regularly exclude or severely limit coverage for DME such as wheelchairs, hearing aids, or ventilators, causing people to go without medically necessary devices or obtaining inferior ones that put their health and safety at risk. This gap in private coverage occurs despite the ACA clear mandate to cover all EHB, including rehabilitative and habilitative devices, in a nondiscriminatory way. Without adequate coverage, the lives of adults and children with disabilities are severely impacted – many are unable to attend school, work, or participate in community life. Others face institutionalization because they cannot function in their own homes without needed equipment. To ensure that Californians with disabilities and chronic conditions have access to necessary DME, this bill would clarify that DME is a covered EHB in California-regulated health plans, when prescribed by a doctor for rehabilitative or rehabilitative purposes. This bill would also prohibit targeted limitations, such as annual dollar caps and “home use only” restrictions on DME coverage.
2. DME. DME is not currently defined under California law. There are five major categories of DME, including personal mobility devices, bathroom safety devices, medical furniture, monitoring and therapeutic devices, and patient lifts. DME can be used for either chronic or temporary conditions.
   
3. Benchmark Plan Benefit. CHBRP indicates that California’s benchmark EHB plans covers the following:
   1. Rehabilitative and habilitative services are covered if they meet the following requirements:
      1. Services address a health condition;
      2. Services are to help enrollees partially or fully acquire or improve skills and functioning to perform activities of daily living, to the maximum extent practical; and,
      3. Rehabilitative and habilitative services include physical and occupational therapy provided in various settings, including those for individual and group outpatient care, skilled nursing facilities, organized, multidisciplinary rehabilitation day-treatment program, and inpatient hospitals.
         
   2. DME covered is for home use. EHB-specific DME for home use is defined as “an item that is intended for repeated use, primarily and customarily used to serve a medical purpose, generally not useful to a person who is not ill or injured, and appropriate for use in the home. Specifically, the following items are covered as DME:
      1. Blood glucose monitors for diabetes blood testing and their supplies;
      2. Bone stimulator;
      3. Canes and replacement supplies;
      4. Cervical traction (over door);
      5. Crutches and replacement supplies;
      6. Dry pressure pad for a mattress;
      7. Enteral pump and supplies;
      8. Infusion pumps and supplies;
      9. IV pole;
      10. Nebulizer and supplies;
      11. Peak flow meters;
      12. Phototherapy blankets for treatment of jaundice in newborns; and,
      13. Tracheostomy tube and supplies.
          
4. CHBRP report. AB 1996 (Thomson, Chapter 795, Statutes of 2002) requests the University of California to assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed health plan and health insurance benefit mandate legislation. CHBRP was created in response to AB 1996, and reviewed this bill. Key findings include:
   1. Assumptions. This bill does not define or delineate specific devices or equipment that would be covered under the mandate, thus CHBRP assumes these definitions are subject to interpretation by regulators, plans, and policies. Estimates of utilization and cost are likely to be higher if DMHC and CDI interpret this bill to require coverage for more DME than the plans and policies with the fewest restrictions cover and without caps on coverage, prior authorization, or other techniques that plans and policies with the most restrictions use to manage utilization and cost of DME.
   2. Coverage impacts, enrollees covered and utilization. According to CHBRP, about 55% of enrollees (2,599,294) already have coverage compliant with this bill. About 285,082 enrollees use DME with coverage and 77,811 enrollees use DME without coverage. With this bill, an additional 469,800 units of DME, services, and repairs would be covered that were not previously covered. New users of DME are estimated to be 81,907
   3. Impact on expenditures. Premiums are estimated to increase by $57,162,000 for employers, employees, and individuals and families. Cost-sharing for covered benefits will increase by $11,432,000 and enrollee expenses for noncovered benefits are estimated to decrease by $42,184,000. The average per unit cost is estimated to be $121.67.
   4. Essential health benefits. CHBRP indicates that this bill would require coverage for a new state benefit mandate that may exceed the definition of EHBs because it requires benefit coverage for DME beyond what is present in the California benchmark plan.
5. California’s benchmark plan. California’s current benchmark plan is the Kaiser Foundation Health Plan Small Group HMO 30 plan. California last reviewed its benchmark plan in 2015. CHBRP asked Milliman to analyze and compare the health services covered by the ten plans available to California as options for California’s EHB benchmark effective January 1, 2017, similar to an analysis completed for Covered California in 2012. Milliman found relatively small differences in average healthcare costs among the ten benchmark options. Among the plan options, Milliman found differing coverage of acupuncture, infertility treatment, chiropractic care, and hearing aids. The three California small group plans were essentially the same average cost as the California EHB plan and the California large group and CalPERS plans were approximately 0.2-1.0% higher in cost. The estimated average costs for the three federal employee plan options was approximately 0.8% to 1.2% higher than the California EHB plan. On April 17, 2015, the Secretary of California’s Health and Human Services Agency sent a letter to the federal Center for Consumer Information and Insurance Oversight selecting the same Kaiser Small Group Plan to remain as California’s benchmark plan.
   
6. Updating EHBs. According to a 2022 CHBRP brief on EHBs, federal HHS issued final rules in 2018 and 2019, which provided new flexibility for states by allowing three new options for the EHB benchmark plan, in addition to the option of retaining the current EHB benchmark plan. Beginning with the 2020 plan year, states could: (1) select an EHB benchmark plan used by another state for the 2017 plan year; (2) replace one or more of the ten EHB categories in the state’s EHB benchmark plan with the same category or categories of EHBs from another state’s 2017 EHB benchmark plan; or, (3) otherwise select a set of benefits that would become the state’s EHB benchmark plan. At a minimum, the EHB benchmark plan must provide a scope of benefits equal to or greater than a typical employer plan. Furthermore, a new “generosity test” requires that EHBs cannot exceed the generosity of the most generous among the set of ten previous 2017 benchmark comparison plan options.
7. Related legislation. SB 635 (Menjivar) requires a health plan contract or health insurance policy to include coverage for hearing aids for all insureds under 21 years of age, if medically necessary, as specified. SB 635 is set to be heard in the Assembly Health Committee on July 11, 2023.
   

SB 729 (Menjivar) requires a health plan contract or policy of disability insurance sold in the large group market (employers with more than 100 covered individuals) to provide coverage for the diagnosis and treatment of infertility and fertility services, including services of completed oocyte retrievals with unlimited embryo transfers in accordance with the guidelines of the American Society for Reproductive Medicine using single embryo transfer when recommended and medically appropriate. SB 729 is set for hearing in the Assembly Health Committee on July 11, 2023.

1. Prior legislation. SB 43 (Hernandez, Chapter 648, Statutes of 2015) updates California’s EHB law to make it consistent with new federal requirements promulgated under the ACA, which includes adoption of the federally required definition of habilitative services and devices.
   
   SB 951 (Hernandez, Chapter 866, Statutes of 2012) and AB 1453 (Monning, Chapter 854, Statutes of 2012) select the Kaiser Small Group HMO as California’s benchmark plan to serve as the EHB standard, as required by federal law.
2. Support. The National Health Law Program and Western Center on Law and Poverty are cosponsors of this bill. The cosponsors write that many Californians do not have access to the wheelchairs, hearing aids, oxygen equipment, and other DME that they need. Without adequate coverage, many people go without medically necessary devices, obtain inferior ones that put their health and safety at risk, or turn to publicly-funded health care programs for help. People with disabilities and chronic conditions are disproportionately impacted by these policies. This gap in private health insurance coverage occurs despite the ACA’s clear mandate otherwise. The ACA requires all individual and small group plans to cover EHBs, including “rehabilitative and habilitative services and devices.” States can select an existing health plan as a “benchmark” for EHB coverage, however, individual plans must ensure that their own benefit designs do not discriminate on the basis of disability or health status and states have the responsibility of enabling compliance with this federal requirement. The EHB provisions complement existing state and federal nondiscrimination law, as well another key provision of the ACA. When California chose its EHB benchmark plan, it selected a Kaiser plan that excluded coverage of most DME. Following this benchmark, many plans have failed to cover essential DME items or placed strict dollar limitations and “home use only” rules on the equipment they will cover. These practices undermine the EHB guarantee, as well as federal and state nondiscrimination laws protecting people with disabilities. California, as regulator of these health plans, has the responsibility to remedy this coverage gap that leads to discriminatory benefit design in violation of federal and state requirements. When DME is excluded or severely limited from health plan coverage, it creates an access barrier for the adults and children who rely on this equipment but who cannot afford the out-of-pocket cost, which can range from $500 to $50,000. Further, “home use” rules, which limit coverage to only the devices an individual needs inside their home, to the exclusion of devices they may need to travel even ten feet outside their home, serve to further segregate and isolate people with disabilities from their communities. This bill will help address this inequity.
3. Opposition. The California Chamber of Commerce writes employer-based health care coverage is usually one of the largest expenses a business experiences and, while the bill is well-intentioned, it will unintentionally exacerbate health care affordability issues. CHBRP analyzed the cost impact of this bill and concluded that if the mandate went into effect, it would increase employer and enrollee health care premiums by $57,162,000 prior to adjustments for noncovered benefits. When looking at health care cost increases in isolation they seem tolerable, however, this bill must be considered in context. Premiums for employers and enrollees consistently increase year after year due to a number of issues including benefit mandates. The 2022 Kaiser Family Foundation Employer Health Benefits Survey indicated that the average premium for family coverage has increased 20% over the last five years and 43% over the last ten years. Additionally, annual premiums for employer-sponsored family health coverage reached $22,463 in 2022, with workers on average paying $6,106 toward the cost of their coverage. The California Association of Health Plans, the Association of California Life and Health Insurance Companies, and America’s Health Insurance Plans write in opposition to this along with 20 other health insurance mandate bills. These bills include mandates for health plans and insurers to cover specific services, as well as bills that eliminate cost-sharing and limit utilization management, which have similar cost impacts as coverage mandates. Taken together, these bills will increase premiums by at least $742,533,000 in 2024 alone, with projected additional increases in out years. Ultimately, these bills will harm affordability and access for small businesses and individual market consumers. Moreover, they will increase costs, reduce choice and competition, and further incent some employers and individuals to avoid state regulation by seeking alternative coverage options. State mandates increase costs of coverage – especially for families who buy coverage without subsidies, small business owners who cannot or do not wish to self-insure, and California taxpayers who foot the bill for the state’s share of those mandates. Benefit mandates that do not promote evidence-based medicine can lead to lower quality care, over- or misutilization of services, and higher costs for treatments that may be ineffective, less safe, or higher cost than other, new or trusted services. California is rightly focused on achieving both universal coverage and cost containment at a time when the national conversation has shifted toward lower costs through less comprehensive options.
   
4. Defraying costs. This is one of at least three bills (this bill, SB 635, and SB 729) pending this session that propose mandates that exceed EHBs. If a mandate exceeds the state’s EHB, the state will have to defray the cost of the federal credits and subsidies under the ACA that are associated with those added costs. Should California revise its EHB benchmark and choose a plan or benefits that contain these new mandates there would not be a need for the state to defray those federal costs.
   
5. Amendments. The committee may wish to direct DMHC and/or CDI to submit an analysis to HHS similar to that which has been done by other states demonstrating that the policy in this bill is necessary to comply with antidiscrimination requirements of federal and state law and thus should not be considered to exceed EHBs or require the state to defray federal costs. Additionally, the committee may wish to amend this bill to include a contingency directing the Secretary of the California Health and Human Services Agency to start the process of updating California’s EHB benchmark to include the items described in this bill should HHS reject CA’s analysis. The benchmark update process takes up to two years as noted the last time California reviewed our benchmark plan in 2015 for the 2017 plan year.

SUPPORT AND OPPOSITION:

Support: National Health Law Program (cosponsor)
Western Center on Law and Poverty (cosponsor)

Access Reproductive Justice

ALS Association

Association of Regional Center Agencies
Bay Area Legal Aid
California Advocates for Nursing Home Reform

California Association for Health Services at Home
California Association of Medical Product Suppliers

California Association of Public Authorities for In-Home Supportive Services
California Foundation for Independent Living Centers
California Life Sciences
California Pan - Ethnic Health Network
California Physicians Alliance
California Rural Legal Assistance Foundation, INC.
California State Council of Service Employees International Union
Children Now

Community Health Initiative of Orange County
Community Legal Aid SoCal
Disability Rights California
Disability Rights Education and Defense Fund
Hand in Hand: the Domestic Employers Network
Health Access California
National Multiple Sclerosis Society, MS-CAN
The Leukemia & Lymphoma Society

Oppose: America's Health Insurance Plans

Association of California Life and Health Insurance Companies

California Association of Health Plans
California Chamber of Commerce

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1157

Author:(Ortega and Wilson)

As Introduced Ver:February 16, 2023

Majority vote

SUMMARY

Specifies that coverage of rehabilitative and habilitative services and devices under a health plan contract or health insurance policy includes durable medical equipment (DME), services, and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician, surgeon, or other health professional acting within the scope of their license. Defines DME to mean devices, including replacement devices, that are designed for repeated use, and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living. Prohibits coverage of DME and services from being subject to financial or treatment limitations, as specified.

Major Provisions

COMMENTS

According to the California Health Benefits Review Program (CHBRP), DME is not currently defined under California law. However, the Patient Protection and Affordable Care Act (ACA) requires that all state-regulated nongrandfathered health plans and policies in the individual and small-group markets — plans regulated by the Department of Managed Health Care (DMHC) and policies regulated by the California Department of Insurance (CDI) — cover all tests, treatments, and services included within the California essential health benefits (EHB) benchmark plan, which includes coverage for a limited number of DME. It should be noted that state-regulated health plans and policies may cover more than what is required within the EHB benchmark plan. There are five major categories of DME, including personal mobility devices, bathroom safety devices, medical furniture, monitoring and therapeutic devices, and patient lifts. DME can be used for either chronic or temporary conditions. Although some DME equipment comes in a standard size, others require special modifications or customization to meet the medical needs of the user. The process of obtaining authorization for coverage of DME varies by health plan or policy. Health plans and policies may impose terms and conditions on authorization of coverage for DME, such as limiting coverage to only a single item that meets the minimum specifications for the enrollee's needs, limiting coverage based on the proposed location of use of the device, or authorizing only one type of DME device to be covered within a certain timeframe. Health plans and policies also typically require a prescription, medical chart notes, and a letter of medical necessity written by a physician, occupational therapist, or physical therapist as part of the prior authorization process. CHBRP states the process for authorization of coverage may take several months, depending on the request. Barriers to access to DME include challenges such as differences in commercial insurers' coverage and a lack of transparency in guidelines; lack of understanding by health care professionals on device coverage; varying health plan and policy guidelines on patient testing, clinical policies and standards, and documentation requirements; and, communication difficulties with commercial insurers. Studies have demonstrated disparities in populations with disabilities, use of DME, and authorization of DME requests.

1. DME Coverage. Health plans are required to cover DME for use in the enrollee's home (or another location used as the enrollee's home). DME for home use is an item that is intended for repeated use, primarily and customarily used to serve a medical purpose, generally not useful to a person who is not ill or injured, and appropriate for use in the home. Under regulations, a health plan may limit coverage to the standard equipment or supplies that adequately meet the enrollee's medical needs. Coverage includes repair or replacement of covered equipment. The health plan may decide whether to rent or purchase the equipment, and may select the vendor. The enrollee may be required to return the equipment to the plan or pay the fair market price of the equipment or any unused supplies when they are no longer medically necessary.
2. CHBRP analysis. CHBRP reviewed this bill and states the following in its analysis:
   1. Enrollees covered. This bill impacts small-group and individual plans regulated by DMHC and policies regulated by CDI, which includes the health insurance of approximately 4.7 million enrollees (12% of all Californians). This represents approximately 21% of the 22.8 million Californians who will have state-regulated health insurance that may be subject to any state mandate law. Since this bill specifies “group and individual” plans and policies, the health insurance of Medi-Cal beneficiaries enrolled in DMHC-regulated plans would not be subject to this bill's requirements. This bill does not define or delineate specific devices or equipment that would be covered under the mandate, thus CHBRP assumes these definitions are subject to interpretation by regulators, plans, and insurers. CHBRP assumed that at baseline, some DMHC-regulated health plans and CDI-regulated policies cover only the minimum requirements for DME – per the state's EHB benchmark plan – and that postmandate, coverage would shift to be similar to those health plans and policies that include coverage for a more expansive list of DME (i.e., plans and policies with the fewest coverage restrictions). CHBRP calculated those cost estimates based on those shifts in coverage. Thus, the estimates in this report are based on a modeling scenario where, while DME coverage would be expanded by the mandate, it would be principally bounded by the DME covered by health plans and policies with the fewest restrictions on coverage.
   2. Impact on expenditures. Estimates of utilization and cost are likely to be higher if DMHC and CDI interpret this bill to require coverage for more DME than the plans and policies with the fewest restrictions cover and without caps on coverage, prior authorization, or other techniques that plans and policies with the most restrictions use to manage utilization and cost of DME. This bill would increase total net annual expenditures by $26,410,000 or 0.02% for enrollees with DMHC-regulated plans and CDI-regulated policies. This is due to a $57,162,000 increase in total health insurance premiums paid by employers and enrollees for newly covered benefits, adjusted by an increase in enrollee expenses for covered benefits ($11,432,000) and decrease in enrollee expenses for noncovered benefits (−$42,184,000). Postmandate percent changes in premiums are in the range of $0.001 to $0.002 per member per month (PMPM), with the greatest value in the DMHC-regulated small-group and individual plans ($0.002 PMPM for both). This bill's changes in cost sharing for covered benefits (deductibles, copays, etc.) and out-of-pocket expenses for noncovered benefits would vary by market segment. CHBRP projects no change to copayments or coinsurance rates but does project an increase in utilization of DME and related services and repairs and therefore an increase in enrollee cost sharing for covered DME. It is possible that some enrollees incurred expenses related to DME and related services and repairs for which coverage was denied, but CHBRP cannot estimate the frequency with which such situations occur and so cannot offer a calculation of impact. For enrollees with coverage for DME at baseline, 6.0% of enrollees in small-group and 5.8% of enrollees in individual plans and policies have out-of-pocket expenses due to DME. For enrollees for whom postmandate DME coverage would be new, 1.6% of enrollees in small-group and 1.6% in individual plans and policies would experience an average decrease in out-of-pocket expenses for noncovered DME benefits of −$395.21.
   3. EHBs. This bill requires coverage for a new state benefit mandate that may exceed the definition of EHBs in California by requiring benefit coverage for DME beyond what is present in the California EHB benchmark plan.
   4. Long-term impacts. Qualitatively, CHBRP expects the key long-term impact of this bill would be increased utilization of DME should a greater number of items be classified as DME by DMHC and CDI or interpreted by plans/policies over time; however, CHBRP is unable to assess the likelihood of this occurring.

According to the Author

Private health plans regularly exclude or severely limit coverage for DME such as wheelchairs, hearing aids, or ventilators, causing people to go without medically necessary devices or obtaining inferior, more affordable ones that put their health and safety at risk. This gap in private coverage occurs despite the ACA's clear mandate to cover all EHBs, including rehabilitative and habilitative devices, in a nondiscriminatory way. The author states without adequate coverage, the lives of adults and children with disabilities are severely impacted, many are unable to attend school, work, or participate in community life. Others face institutionalization because they cannot function in their own homes without needed equipment. To ensure that Californians with disabilities and chronic conditions have access to necessary DME, this bill would clarify that DME is a covered EHB in California-regulated health plans when prescribed by a doctor under specified conditions. The author concludes that this bill would also prohibit coverage of this equipment and services from being subject to financial or treatment limitations.

Arguments in Support

Western Center on Law and Poverty and National Health Law Program, cosponsors, write that DME devices – essential for basic functions such as mobility, breathing, and communication – are primarily used by people with disabilities. When DME is excluded or severely limited from health plan coverage, it creates an access barrier for the adults and children who rely on this equipment but who cannot afford the out-of-pocket cost, which can range from $500 to $50,000. Further, “home use” rules, which limit coverage to only the devices an individual needs inside their home, to the exclusion of devices they may need to travel even 10 feet outside their home, serve to further segregate and isolate people with disabilities from their communities.

Arguments in Opposition

The California Chamber of Commerce writes when health plans and insurers are required to cover new services or to waive/limit cost-sharing requirements for certain services, premiums for all enrollees and purchasers go up. This is true even though only some enrollees will utilize the mandated product or services, or benefit from the reduction in cost-sharing. When looking at health care cost increases in isolation they seem tolerable, however, this bill must be considered in context. Premiums for employers and enrollees consistently increase year after year due to a number of issues including benefit mandates. The 2022 Kaiser Family Foundation Employer Health Benefits Survey indicated that the average premium for family coverage has increased 20% over the last five years and 43% over the last 10 years. Additionally, annual premiums for employer-sponsored family health coverage reached $22,463 in 2022, with workers on average paying $6,106 toward the cost of their coverage.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. CDI estimates costs of $7,000 in fiscal year (FY) 2023-24 (Insurance Fund).
2. DMHC estimates the total costs of this bill to be approximately $305,000 in FY 2023-24 and $1.1 million in FY 2024-25 and annually thereafter (Managed Care Fund). DMHC states several offices within DMHC will implement this bill. The Office of Plan Monitoring will develop surveys requiring a focused review of DME files and conduct clinical reviews during routine and follow-up medical survey assessments. DMHC anticipates the Office of Help Center will incur the majority of costs for additional workload to address an increase in consumer complaints and independent medical reviews. DMHC notes that, generally and depending on enrollment, a $1 million increase to the Managed Care Fund could result in a $0.02 increase per enrollee on assessments to full-service health plans and a $0.01 increase per enrollee to specialized health plans. To the extent this and other bills result in an additional assessment on health plans, consumers could face increased premiums.
3. CHBRP expects this bill will not affect Medi-Cal coverage or health plans or policies offered to members of the California Public Employees' Retirement System.

VOTES

ASM HEALTH: 12-0-3

YES: Wood, Waldron, Aguiar-Curry, Arambula, Boerner, Wendy Carrillo, Maienschein, McCarty, Rodriguez, Santiago, Villapudua, Weber

ABS, ABST OR NV: Flora, Vince Fong, Joe Patterson

ASM APPROPRIATIONS: 12-1-3

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle

ABS, ABST OR NV: Dixon, Robert Rivas, Sanchez

UPDATED

VERSION: February 16, 2023

CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0000784

Date of Hearing: May 17, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 1157

Author:(Ortega) – As Introduced Ver:February 16, 2023

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

SUMMARY:

This bill specifies that coverage of rehabilitative and habilitative services and devices under a health care service plan (health plan) or health insurance policy includes durable medical equipment (DME), services, and repairs, if prescribed or ordered by a physician or other health professional acting within the scope of their license. The bill prohibits health plans or insurance policies from subjecting coverage of DME and services to financial or treatment limitations, as specified.

This bill defines DME to mean devices that are designed for repeated use, and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living.

FISCAL EFFECT:

1. The California Department of Insurance estimates costs of $7,000 in fiscal year (FY) 2023-24 (Insurance Fund).
   
2. The Department of Managed Health Care (DMHC) estimates the total costs of this bill to be approximately $305,000 in FY 2023-24 and $1.1 million in FY 2024-25 and annually thereafter (Managed Care Fund). DMHC states several offices within DMHC will implement this bill. The Office of Plan Monitoring will develop surveys requiring a focused review of DME files and conduct clinical reviews during routine and follow-up medical survey assessments. DMHC anticipates the Office of Help Center will incur the majority of costs for additional workload to address an increase in consumer complaints and independent medical reviews.
   DMHC notes that, generally and depending on enrollment, a $1 million increase to the Managed Care Fund could result in a $0.02 increase per enrollee on assessments to full-service health plans and a $0.01 increase per enrollee to specialized health plans. To the extent this and other bills result in an additional assessment on health plans, consumers could face increased premiums.
3. The California Health Benefits Review Program (CHBRP) expects this bill will not affect Medi-Cal coverage or health plans or policies offered to members of the California Public Employees’ Retirement System.

COMMENTS:

1. Purpose. According to the author:

Private health plans regularly exclude or severely limit coverage for durable medical equipment such as wheelchairs, hearing aids, or ventilators, causing people to go without medically necessary devices or obtaining inferior, more affordable ones that put their health and safety at risk. This gap in private coverage occurs despite the Affordable Care Act’s clear mandate to cover all essential health benefits, including rehabilitative and habilitative devices, in a nondiscriminatory way.

Without adequate coverage, the lives of adults and children with disabilities are severely impacted – many are unable to attend school, work, or participate in community life. Others face institutionalization because they cannot function in their own homes without needed equipment.

To ensure that Californians with disabilities and chronic conditions have access to necessary DME, AB 1157 would clarify that durable medical equipment is a covered essential health benefit in California-regulated health plans when prescribed by a doctor under specified conditions. This bill would also prohibit coverage of this equipment and services from being subject to financial or treatment limitations.

1. CHBRP Report. CHBRP estimates this bill will increase total net annual expenditures by $26.4 million, or 0.02% for enrollees with DMHC-regulated plans and CDI-regulated policies. The increase is due to a $57.2 million increase in total health insurance premiums paid by employers and enrollees for newly covered benefits, an increase in enrollee expenses for covered benefits ($11.4 million) and a decrease in enrollee expenses of $42.2 million. CHBRP projects changes in premiums in the range of $0.001 to $0.002 per member per month, with the greatest increase in the DMHC-regulated small-group and individual plans ($0.002 PMPM for both). CHBRP projects no change to copayments or coinsurance rates but does project an increase in utilization of DME and related services and repairs and therefore an increase in enrollee cost sharing for covered DME. For enrollees gaining coverage of DME because of this bill, 1.6% of those in small-group or individual plans and policies would experience an average decrease in out-of-pocket expenses of $395.21 for DME benefits.
2. SUPPORT. Western Center on Law and Poverty and National Health Law Program, cosponsors, write DME devices—essential for basic functions such as mobility, breathing, and communication—are primarily used by people with disabilities. When DME is excluded or severely limited from health plan coverage, it creates an access barrier for the adults and children who rely on this equipment but who cannot afford the out-of-pocket cost, which can range from $500 to $50,000. Further, “home use” rules, which limit coverage to only the devices an individual needs inside their home, to the exclusion of devices they may need to travel even 10 feet outside their home, serve to further segregate and isolate people with disabilities from their communities.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: April 25, 2023

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 1157

Author:(Ortega) – As Introduced Ver:February 16, 2023

SUBJECT: Rehabilitative and habilitative services: durable medical equipment and services.

SUMMARY: Specifies that coverage of rehabilitative and habilitative services and devices under a health plan contract or health insurance policy includes durable medical equipment (DME), services, and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician, surgeon, or other health professional acting within the scope of their license. Defines DME to mean devices, including replacement devices, that are designed for repeated use, and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living. Prohibits coverage of DME and services from being subject to financial or treatment limitations, as specified. Specifically, this bill:

1. Specifies that coverage of rehabilitative and habilitative services and devices includes DME, services, and repairs, if the equipment, services, or repairs are prescribed or ordered by a physician, surgeon, or other health professional acting within the scope of their license.
2. Prohibits coverage of DME and services from being subject to financial or treatment limitations, including annual caps or requirements limiting coverage of the devices to those for home use.
3. Defines DME to mean devices, including replacement devices, that are designed for repeated use and that are used for the treatment or monitoring of a medical condition or injury in order to help a person to partially or fully acquire, improve, keep, or learn, or minimize the loss of, skills and functioning of daily living. Requires the prescription or order for DME to include fittings, design, adjustment, programming, and other necessary services for the provision or maintenance of the devices.
4. Makes Legislative findings and declarations including:
   1. Lack of access to DME disproportionately affects individuals with disabilities or chronically ill individuals; and
   2. Because of their effect on protected population classes, categorical exclusions of DME by health plans, and burdensome financial limitations imposed by plans on DME, result in plan designs that discriminate against people with disabilities in violation of federal and state nondiscrimination provisions, including the federal Patient Protection and Affordable Care Act (ACA).

EXISTING LAW:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the California Department of Insurance (CDI) to regulate health insurers. [Health and Safety Code (HSC) §1340, et seq., and Insurance Code (INS) §106, et seq.]
2. Establishes as California's essential health benefits (EHBs) benchmark under the ACA, the Kaiser Small Group Health Maintenance Organization, existing California health insurance mandates, and the 10 ACA mandated benefits, including DME coverage. Specifies EHBs in the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and, pediatric services, including oral and vision care. [HSC §1367.005 and INS §10112.27]
3. Includes, in regulations, DMEs as other health benefits that EHBs must cover. [Title 28 Code of Regulations §1300.67.005]
4. Defines “basic health care services” as all of the following:
   1. Physician services, including consultation and referral;
   2. Hospital inpatient services and ambulatory care services;
   3. Diagnostic laboratory and therapeutic radiologic services;
   4. Home health services;
   5. Preventive health services;
   6. Emergency health care services, including ambulance and ambulance transport services and out-of-area coverage. Basic health care services includes ambulance and ambulance transport services provided through the 911 emergency response system; and,
   7. Hospice care, as specified. [HSC §1345]

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

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, private health plans regularly exclude or severely limit coverage for DME such as wheelchairs, hearing aids, or ventilators, causing people to go without medically necessary devices or obtaining inferior, more affordable ones that put their health and safety at risk. This gap in private coverage occurs despite the ACA’s clear mandate to cover all EHBs, including rehabilitative and habilitative devices, in a nondiscriminatory way. The author states without adequate coverage, the lives of adults and children with disabilities are severely impacted, many are unable to attend school, work, or participate in community life. Others face institutionalization because they cannot function in their own homes without needed equipment. To ensure that Californians with disabilities and chronic conditions have access to necessary DME, this bill would clarify that DME is a covered EHB in California-regulated health plans when prescribed by a doctor under specified conditions. The author concludes that this bill would also prohibit coverage of this equipment and services from being subject to financial or treatment limitations.
2. BACKGROUND. According to the California Health Benefits Review Program (CHBRP), DME is not currently defined under California law. However, the ACA requires that all state-regulated nongrandfathered health plans and policies in the individual and small-group markets — plans regulated by the DMHC and policies regulated by the CDI — cover all tests, treatments, and services included within the California EHB benchmark plan, which includes coverage for a limited number of DME. It should be noted that state-regulated health plans and policies may cover more than what is required within the EHB benchmark plan. There are five major categories of DME, including personal mobility devices, bathroom safety devices, medical furniture, monitoring and therapeutic devices, and patient lifts. DME can be used for either chronic or temporary conditions. Although some DME equipment comes in a standard size, others require special modifications or customization to meet the medical needs of the user. The process of obtaining authorization for coverage of DME varies by health plan or policy. Health plans and policies may impose terms and conditions on authorization of coverage for DME, such as limiting coverage to only a single item that meets the minimum specifications for the enrollee’s needs, limiting coverage based on the proposed location of use of the device, or authorizing only one type of DME device to be covered within a certain timeframe. Health plans and policies also typically require a prescription, medical chart notes, and a letter of medical necessity written by a physician, occupational therapist, or physical therapist as part of the prior authorization process. CHBRP states the process for authorization of coverage may take several months, depending on the request. Barriers to access to DME include challenges such as differences in commercial insurers’ coverage and a lack of transparency in guidelines; lack of understanding by health care professionals on device coverage; varying health plan and policy guidelines on patient testing, clinical policies and standards, and documentation requirements; and, communication difficulties with commercial insurers. Studies have demonstrated disparities in populations with disabilities, use of DME, and authorization of DME requests.
   1. DME Coverage. Health plans are required to cover DME for use in the enrollee’s home (or another location used as the enrollee’s home). DME for home use is an item that is intended for repeated use, primarily and customarily used to serve a medical purpose, generally not useful to a person who is not ill or injured, and appropriate for use in the home. Under regulations, a health plan may limit coverage to the standard equipment or supplies that adequately meet the enrollee’s medical needs. Coverage includes repair or replacement of covered equipment. The health plan may decide whether to rent or purchase the equipment, and may select the vendor. The enrollee may be required to return the equipment to the plan or pay the fair market price of the equipment or any unused supplies when they are no longer medically necessary.
      
      Medicare Part B (Medical Insurance). If a beneficiary’s supplier accepts Medicare, the beneficiary pays 20% of the Medicare-approved amount, and the Part B deductible applies. Medicare DME coverage includes, but is not limited to:
      
      1. Blood sugar meters;
      2. Blood sugar test strips;
      3. Canes;
      4. Commode chairs;
      5. Continuous passive motion devices;
      6. Continuous Positive Airway Pressure devices;
      7. Crutches;
      8. Hospital beds;
      9. Home infusion services;
      10. Infusion pumps and supplies;
      11. Lancet devices and lancets;
      12. Nebulizers and nebulizer medications;
      13. Oxygen equipment and accessories;
      14. Patient lifts;
      15. Pressure-reducing support surfaces;
      16. Suction pumps;
      17. Traction equipment;
      18. Walkers; and,
      19. Wheelchairs and scooters.
          
   2. CHBRP analysis. AB 1996 (Thomson), Chapter 795, Statutes of 2002, requests the University of California to assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed health plan and health insurance benefit mandate legislation. CHBRP was created in response to AB 1996. SB 125 (Hernandez), Chapter 9, Statutes of 2015, added an impact assessment on EHBs, and legislation that impacts health insurance benefit designs, cost sharing, premiums, and other health insurance topics. CHBRP reviewed this bill and states the following in its analysis:
      1. Enrollees covered. This bill impacts small-group and individual plans regulated by DMHC and policies regulated by CDI, which includes the health insurance of approximately 4.7 million enrollees (12% of all Californians). This represents approximately 21% of the 22.8 million Californians who will have state-regulated health insurance that may be subject to any state mandate law. Since this bill specifies “group and individual” plans and policies, the health insurance of Medi-Cal beneficiaries enrolled in DMHC-regulated plans would not be subject to this bill’s requirements. This bill does not define or delineate specific devices or equipment that would be covered under the mandate, thus CHBRP assumes these definitions are subject to interpretation by regulators, plans, and insurers. CHBRP assumed that at baseline, some DMHC-regulated health plans and CDI-regulated policies cover only the minimum requirements for DME — per the state’s EHB benchmark plan — and that postmandate, coverage would shift to be similar to those health plans and policies that include coverage for a more expansive list of DME (i.e., plans and policies with the fewest coverage restrictions). CHBRP calculated those cost estimates based on those shifts in coverage. Thus, the estimates in this report are based on a modeling scenario where, while DME coverage would be expanded by the mandate, it would be principally bounded by the DME covered by health plans and policies with the fewest restrictions on coverage.
      2. Impact on expenditures. Estimates of utilization and cost are likely to be higher if DMHC and CDI interpret this bill to require coverage for more DME than the plans and policies with the fewest restrictions cover and without caps on coverage, prior authorization, or other techniques that plans and policies with the most restrictions use to manage utilization and cost of DME. This bill would increase total net annual expenditures by $26,410,000 or 0.02% for enrollees with DMHC-regulated plans and CDI-regulated policies. This is due to a $57,162,000 increase in total health insurance premiums paid by employers and enrollees for newly covered benefits, adjusted by an increase in enrollee expenses for covered benefits ($11,432,000) and decrease in enrollee expenses for noncovered benefits (−$42,184,000). Postmandate percent changes in premiums are in the range of $0.001 to $0.002 per member per month (PMPM), with the greatest value in the DMHC-regulated small-group and individual plans ($0.002 PMPM for both). This bill’s changes in cost sharing for covered benefits (deductibles, copays, etc.) and out-of-pocket expenses for noncovered benefits would vary by market segment. CHBRP projects no change to copayments or coinsurance rates but does project an increase in utilization of DME and related services and repairs and therefore an increase in enrollee cost sharing for covered DME. It is possible that some enrollees incurred expenses related to DME and related services and repairs for which coverage was denied, but CHBRP cannot estimate the frequency with which such situations occur and so cannot offer a calculation of impact. For enrollees with coverage for DME at baseline, 6.0% of enrollees in small-group and 5.8% of enrollees in individual plans and policies have out-of-pocket expenses due to DME. For enrollees for whom postmandate DME coverage would be new, 1.6% of enrollees in small-group and 1.6% in individual plans and policies would experience an average decrease in out-of-pocket expenses for noncovered DME benefits of −$395.21.
      3. EHBs. This bill requires coverage for a new state benefit mandate that may exceed the definition of EHBs in California by requiring benefit coverage for DME beyond what is present in the California EHB benchmark plan.
      4. Long-term impacts. Qualitatively, CHBRP expects the key long-term impact of this bill would be increased utilization of DME should a greater number of items be classified as DME by DMHC and CDI or interpreted by plans/policies over time; however, CHBRP is unable to assess the likelihood of this occurring.
3. SUPPORT. Western Center on Law and Poverty and National Health Law Program, cosponsors, write that DME devices—essential for basic functions such as mobility, breathing, and communication—are primarily used by people with disabilities. When DME is excluded or severely limited from health plan coverage, it creates an access barrier for the adults and children who rely on this equipment but who cannot afford the out-of-pocket cost, which can range from $500 to $50,000. Further, “home use” rules, which limit coverage to only the devices an individual needs inside their home, to the exclusion of devices they may need to travel even 10 feet outside their home, serve to further segregate and isolate people with disabilities from their communities.
4. OPPOSITION. The California Chamber of Commerce writes when health plans and insurers are required to cover new services or to waive/limit cost-sharing requirements for certain services, premiums for all enrollees and purchasers go up. This is true even though only some enrollees will utilize the mandated product or services, or benefit from the reduction in cost-sharing. When looking at health care cost increases in isolation they seem tolerable, however, this bill must be considered in context. Premiums for employers and enrollees consistently increase year after year due to a number of issues including benefit mandates. The 2022 Kaiser Family Foundation Employer Health Benefits Survey indicated that the average premium for family coverage has increased 20% over the last five years and 43% over the last 10 years. Additionally, annual premiums for employer-sponsored family health coverage reached $22,463 in 2022, with workers on average paying $6,106 toward the cost of their coverage.
5. PREVIOUS LEGISLATION.
   1. SB 842 (Dodd) of 2021 would have required the Department of Rehabilitation (DOR), upon appropriation by the Legislature, to establish a device reutilization pilot program in Contra Costa, Napa, Solano, and Yolo Counties to facilitate the reuse and redistribution of assistive technology, including DME. The Governor Newsom’s veto stated:

“This bill would require DOR to contract with one or more nonprofit entities to establish a three-year device reutilization pilot program in the Counties of Contra Costa, Napa, Solano, and Yolo to facilitate the reuse and redistribution of assistive technology, including durable medical equipment. The bill would also require the contracting nonprofit agency to use a computerized system to track the available inventory of equipment and supplies and organize pickup and delivery of those items.

I agree with the author's goal of increasing access to assistive technology for people with disabilities and older adults, while also reducing waste in landfills. Although the bill is subject to appropriation, the proposed pilot is duplicative of existing assistive technology reuse programs and would cost an estimated $5.1 million General Fund over a three-year period that was not included in the state budget.

With our state facing lower-than-expected revenues over the first few months of this fiscal year, it is important to remain disciplined when it comes to spending, particularly spending that is ongoing. We must prioritize existing obligations and priorities, including education, health care, public safety and safety-net programs.

The Legislature sent measures with potential costs of well over $20 billion in one-time spending commitments and more than $10 billion in ongoing commitments not accounted for in the state budget. Bills with significant fiscal impact, such as this measure, should be considered and accounted for as part of the annual budget process.”

• 1. AB 598 (Bloom) of 2019 would have required health plans and insurers to cover hearing aids. AB 598 was held on the Assembly Floor.

1. POLICY COMMENTS.
   1. As this bill moves forward, the author may wish to consider a delayed implementation for health plan coverage to address changes to Covered California’s standard benefit design, if any.
   2. EHBs. The ACA requires states to defray the costs of state-mandated benefits in qualified health plans that are in excess of the EHB. If a state were to choose a benchmark plan that does not include all State-mandated benefits, the ACA requires the state to defray the cost of those mandated benefits in excess of EHB as defined by the selected benchmark. CHBRP’s analysis notes that DME for use outside of the home and DME that are not currently specifically listed in the EHB benchmark plan are not included in California’s EHB package. If this bill were enacted, this bill could trigger this requirement, and would require the state to defray related costs. It should be noted that the state has not yet triggered this ACA requirement.

REGISTERED SUPPORT / OPPOSITION:

Support

Western Center on Law and Poverty (cosponsors)

National Health Law Program (cosponsors)

Access Reproductive Justice
Bay Area Legal Aid
California Association for Health Services At Home
California Association of Medical Product Suppliers
California Foundation for Independent Living Centers
California Life Sciences
California Pan - Ethnic Health Network
California Physicians Alliance
California Rural Legal Assistance Foundation, INC.
California State Council of Service Employees International Union (SEIU California)
CANHR
Children Now
Community Legal Aid Socal
Disability Rights California
Disability Rights Education and Defense Fund
Hand in Hand: the Domestic Employers Network
Health Access California
Independence Through Enhancement of Medicare and Medicaid (ITEM) Coalition
Legal Aid Society of San Mateo County
National Health Law Program
National Multiple Sclerosis Society, MS-CAN
The Leukemia & Lymphoma Society

Opposition

America's Health Insurance Plans (AHIP)
California Chamber of Commerce

Other

Neighborhood Legal Services of Los Angeles County

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