We use cookies to better understand how you use our site and to improve your experience by personalizing content. Please review our updated Privacy Policy and Terms of Use. If you accept the use of cookies, please click the "I accept" button.I acceptI declineX
Skip navigational links

California Healthcare Reform and Access


Email Alert

By Paul A. Gomez*

September 18, 2009

After a summer of often spirited and sometimes contentious healthcare reform debates, town hall meetings, and Congressional committee meetings and conferences, California legislators remain focused on discussing ways to expand health insurance coverage on a state level, including restoring funding for the Healthy Families program, expanding coverage for those suffering from mental illness and limitations on healthcare policy or contract rescissions, and healthcare-related out-of-pocket expenses. Certain of these endeavors and other healthcare reform and access-related measures are highlighted below.

Healthy Families Program Funding May Be Restored (AB 1422)

Recently, California's Assembly approved by substantial margins a bill (AB 1422) that aims to prevent the disenrollment of approximately 660,000 children from the Healthy Families program. Healthy Families is California's Children's Health Insurance Program. The Senate already approved the measure and, reportedly, Governor Arnold Schwarzenegger (R) stated he will sign it.

In order to offset reductions in funding, the bill would levy certain new taxes, including a 2.35% tax on health plans that administer benefits for Medi-Cal, and impose higher premiums and copayments for Healthy Families participants. Passage of the bill would reportedly help California generate $157 million in additional revenue and access approximately $97 million in federal matching funds.

Notwithstanding the above, the remedy the measure sets forth is only temporary, as many of the taxes and fees imposed sunset on January 1, 2011. As a result, it will be up to the legislature to address this issue again at some point next year if they want to continue to work to prevent substantial disenrollment from the Healthy Families program.

Limits on Out-of-Pocket Costs for Certain Covered Benefits (AB 786)

A report on this bill was included in the last healthcare reform update from California but is included again here because of recent revisions. As stated previously, this bill would require the Department of Managed Health Care and the Department of Insurance to jointly prepare regulations that develop a system to categorize all healthcare service plan contracts and health insurance policies that are offered and sold to individuals into various coverage choice categories that meet certain specified requirements.1 Healthcare service plans and health insurers would be authorized to offer plan contracts in any coverage choice category subject to certain restrictions, including a maximum dollar limit on out-of-pocket costs for covered benefits provided by in-network providers and for certain covered emergency services. The bill would also require the California Office of Patient Advocate2 to develop and maintain on its website a uniform benefits matrix of those contracts and policies arranged according to coverage choice category and other information. Moreover, the bill would require healthcare service plans, health insurers, solicitors, solicitor firms, brokers, and agents to make prospective enrollees or insureds aware of the availability and contents of the benefits matrix when marketing or selling a contract or policy in the individual market.

The bill was last amended and revised in the Senate on September 4, 2009.

Limitations on Insurance Policy Rescissions (AB 2)

This bill seeks to limit the circumstances in which health insurance companies can rescind a patient's insurance policy. Among other things, the bill would: (1) require agency-imposed, standardized information and health history questions that carriers must use in healthcare coverage application forms, and prohibit applications from containing questions other than approved questions; (2) require carriers to complete medical underwriting prior to issuance of a health plan contract or health insurance policy, and would establish reasonable parameters for an investigation of an applicant's health history; (3) prohibit the cancellation or rescission of an individual contract or policy that has been issued except in specified exceptions, such as a material misrepresentation or material omission in the application prior to issuance of the contract or policy that would have prevented the contract from being entered into, or an intentional misrepresentation or omission prior to issuance of the contract or policy in order to obtain healthcare coverage; and (4) establish, beginning January 1, 2011, an independent review process for review of decisions to cancel or rescind individual health plan contracts or individual health plan insurance policies, and require that all carrier decisions to cancel or rescind be reviewed in accordance with this process, except in limited circumstances. The bill would also authorize the California Department of Managed Care and the Department of Insurance to levy administrative penalties on insurance companies in certain circumstances.

The bill was passed largely based on party affiliation, with most Democrats reportedly supporting the bill and most Republicans opposed to it. Although Governor Schwarzenegger has not yet taken a formal position on the bill, it was reported that he vetoed a similar measure last year.

Expanded Coverage for Persons Suffering From Mental Illness (AB 244)

Existing law provides that healthcare service plan contracts and health insurance policies are required to provide coverage for the diagnosis and treatment of severe mental illness for persons of all ages. Currently the law does not specifically define "severe mental illness" but describes it as including several listed conditions.

This measure would require certain healthcare service plan contracts and health insurance policies that are issued, amended, or renewed on or after January 1, 2010, to include the diagnosis and treatment of a mental illness of a person of any age. Moreover, the measure defines "mental illness" for these purposes as a mental disorder defined in the Diagnostic and Statistical Manual IV, or subsequent editions published by the American Psychiatric Association, including substance abuse. For purposes of compliance with the measure, a healthcare service plan may provide coverage for all or part of the mental health services required by this measure through a separate specialized healthcare services plan or mental health plan, and shall not be required to obtain an additional or specialized license for such purposes.

Expanded Coverage for Cancer Treatment (SB 161)

Current law requires healthcare service plan contracts and health insurance policies to provide coverage for all generally medically accepted cancer screening tests and requires those plans and policies to provide coverage for the treatment of breast cancer, among other things. Current law also imposes certain requirements on contacts and policies that cover prescription drug benefits.

This bill would require healthcare service plans and health insurers that provide coverage for cancer chemotherapy treatment to provide coverage for a prescribed, orally administered cancer medication on a basis no less favorable than intravenously administered or injected cancer medications that are covered. According to the bill, its requirements do not apply to any healthcare benefit plan, contract, or health insurance policy with the California Board of Administration or the California Public Employees' Retirement System.

The bill was last amended in the Assembly on September 3, 2009.

*We wish to thank Paul A. Gomez, Esquire (Paul Hastings Janofsky & Walker LLP, Los Angeles, CA), for providing this email alert.

1 This bears some similarity to provisions in the healthcare reform legislation outline circulated publicly by Senator Max Baucus (D-MT) on September 8, 2009.
2 According to the Office of Patient Advocate's website, the Office of Patient Advocate is an independent state office created to represent the interests of health plan members to get proper care and promote transparency and quality healthcare.
© 2018 American Health Lawyers Association. All rights reserved. 1620 Eye Street NW, 6th Floor, Washington, DC 20006-4010 P. 202-833-1100 F. 202-833-1105