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SB-516 Health care coverage: prior authorization.(2023-2024)

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Date Published: 08/22/2024 11:50 AM
SB516:v91#DOCUMENT

Amended  IN  Assembly  August 22, 2024
Amended  IN  Assembly  August 19, 2024
Amended  IN  Assembly  September 13, 2023
Amended  IN  Assembly  September 01, 2023
Amended  IN  Assembly  June 30, 2023
Amended  IN  Senate  May 18, 2023
Amended  IN  Senate  April 27, 2023
Amended  IN  Senate  April 10, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 516

Introduced by Senator Skinner
(Coauthor: Senator Wiener)
(Coauthors: Assembly Members Bains, Jackson, and Weber)

February 14, 2023

An act to add and repeal Section 1367.025 of the Health and Safety Code, and to add and repeal Section 10133.52 of the Insurance Code, relating to health care coverage.


LEGISLATIVE COUNSEL'S DIGEST


SB 516, as amended, Skinner. Health care coverage: prior authorization.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or health insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or health insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law requires the criteria or guidelines used to determine whether or not to authorize, modify, or deny health care services to be developed with involvement from actively practicing health care providers.
This bill would require the Department of Managed Health Care, beginning Care and the Department of Insurance, by July 1, 2025, to issue instructions to health care service plans and health insurers to report specified information relating to prior authorization, as defined, including all covered designated health care services (services), items, and supplies subject to prior authorization and the percentage rate at which health care service plans approved plans, health insurers, or their delegated entities, approve or modify those services, items, and supplies. The bill would require health care service plans and health insurers to report that information to the department by December 31, 2025, and relevant department by December 31, 2025, or as otherwise specified. The bill would require the relevant department to evaluate the reports received from the health care service plans and health insurers, and identify the services, items, and supplies most frequently approved by health care service plans the plans or insurers or their delegated entities, as specified. The bill would require the each department, after evaluating the reports received from health care service plans, plans and health insurers, to identify, and by December 31, 2026, to publish a list of, the most frequently approved or modified services, items, and supplies. supplies, based on a prescribed threshold percentage rate. The bill would authorize the department to consider certain factors when determining the appropriateness of removing prior authorization for a specific health care service, item, or supply, regardless of its approval percentage rate. The bill would require the department to issue instructions to health care service plans and health insurers regarding, among other matters, the date by which the listed services, items, and supplies would no longer be subject to prior authorization, and how a health care service plan plan or insurer could reinstate prior authorization upon a showing of good cause, as prescribed. Within 4 years from the cessation date of the prior authorization requirements, the bill would require the each department to publish a report regarding the impact of the cessation of those requirements. The bill would authorize the department departments to contract with a consultant with expertise in prior authorization procedures to assist with implementation of the bill, as specified. These provisions The bill would provide that it would not apply with respect to specified types of health care service plans or to fully integrated delivery systems, as defined. plans including, but not limited to, specialized health care service plans, or to specialized health insurers, except as specified. The provisions would be repealed on January 1, 2032. Because a willful violation of the bill’s requirements relative to health care service plans would be a crime, the bill would impose a state-mandated local program.

The bill, until January 1, 2032, would authorize the Insurance Commissioner to issue instructions to health insurers prohibiting them from requiring prior authorization, in accordance with the above-described instructions issued by the Department of Managed Health Care. The bill would require these instructions to direct a health insurer desiring to petition for reinstatement of prior authorization for a particular health care service to submit that petition to the Department of Managed Health Care.

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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1367.025 is added to the Health and Safety Code, to read:

1367.025.
 (a) For (1) This section applies only to health care services, items, and supplies ordered or prescribed by:
(A) A network provider.
(B) An out-of-network provider when the plan has authorized health care services, items, or supplies consistent with this chapter.
(C) An out-of-network provider, consistent with the terms and conditions of a health care service plan contract that includes out-of-network benefits.
(2) For purposes of this section, “prior authorization” means the process by which utilization review determines the medical necessity or medical appropriateness of otherwise covered health care services prior to, or concurrent with, the rendering of those health care services. “Prior authorization” also includes a requirement by a health care service plan or its delegated entity that an enrollee or health professional notify the health care service plan before a health care service is provided, including preauthorization, precertification, and prior approval.
(b) Beginning By July 1, 2025, the department shall issue instructions to health care service plans plans, which shall include a standard reporting template, to report all of the following:
(1) All covered health care services, items, and supplies subject to prior authorization.
(2) The percentage rate at which the services, items, and supplies are approved or modified by the health care service plan or its delegated entity.
(3) Data regarding requested and authorized duration, frequency, or level of care of the health care services, items, and supplies.

(3)

(4) Any other relevant information or data regarding prior authorization determinations and processes, as determined by the department.
(c) (1) By December 31, 2025, or at least six months after the date the department issues instructions pursuant to subdivision (b), a health care service plan shall report to the department the information described in paragraphs (1) to (3), (4), inclusive, of subdivision (b).
(2) If a health care service plan delegates responsibility for decisions regarding prior authorization requests to another entity, the health care service plan shall obtain information required by this section from each delegated entity and include that information in the health care service plan plan’s report to the department. Health care service plans shall require delegated entities to comply with a request under this paragraph.
(d) (1) The department shall evaluate the reports received pursuant to this section and identify the health care services, items, and supplies most frequently approved by health care service plans or their delegated entities. For purposes of this section, “most frequently approved” means approved or modified at a threshold rate determined by the department pursuant to this section. The A threshold rate shall not exceed 90 percent.
(2) The department may consider the following factors when determining the appropriateness of removing prior authorization for a specific health care service, item, or supply, regardless of its approval percentage rate:
(A) Utilization of a health care service, item, or supply in a manner inconsistent with current clinical practice guidelines published in peer-reviewed medical literature.
(B) The potential for fraud, waste, and abuse.
(C) The potential for cost savings from eliminating prior authorization, including, but not limited to, out-of-pocket cost savings to the enrollee.
(D) The potential for improvements in quality of care, health care outcomes, and timely access to care for enrollees from eliminating prior authorization.
(E) Other factors deemed appropriate by the department.
(3) Prior to finalizing the list of services, items, and supplies pursuant to this section, the department shall consult interested stakeholders.

(2)

(4) By December 31, 2026, the department shall publish the list of health care services, items, and supplies identified under paragraph (1).

(3)

(5) The department shall issue instructions to health care service plans regarding all of the following:

(A)The date by which the health care service plan and its delegated entities shall cease requiring prior authorization for the health care services, items, and supplies identified pursuant to this subdivision.

(A) The date by which the health care service plan and its delegated entities shall cease requiring prior authorization for the health care services, items, and supplies identified pursuant to this subdivision. When issuing the date by which a health care service plan and its delegated entities shall cease requiring prior authorization pursuant to this section, the department shall take into consideration the time necessary for plans to update their policies.
(B) Requirements for notifying enrollees and providers of the change in prior authorization requirements.
(C) The process by which a health care service plan may petition the department to reinstate the ability of health care service plans to use prior authorization for a particular health care service, item, or supply upon a showing of good cause that a lack of prior authorization for the health care service, item, or supply has resulted in a demonstrable increase in the cost or decrease in the quality of care for the health care service plan’s enrollees, including, but not limited to, fraud, waste, or abuse. The department determination on a petition pursuant to this paragraph shall be made within 60 days of receipt of all information necessary for the department to issue a decision on the petition. A health care service plan shall not reinstate prior authorization for a health care service, item, or supply subject to this section until authorized by the department.

(4)

(6) The director may issue other instructions deemed necessary and appropriate by the director to implement this section.
(e) A health care service plan or its delegated entity shall not deny or reduce payment the contracted or agreed upon payment, or the applicable rate or reimbursement methodology specified in a plan contract, for a covered health care service, item, or supply exempted from a prior authorization requirement pursuant to this section unless the provider failed to substantially perform or provide the health care service, item, or supply.
(f) No later than four years after the date determined by the department under subparagraph (A) of paragraph (3) (5) of subdivision (d), the department shall publish a report regarding the impact of the cessation of prior authorization requirements. Health care service plans shall report information and data to be included in this report, as required by the department.
(g) (1) The department may contract with a consultant or consultants with expertise in prior authorization procedures to assist the department in implementing this section, including, but not limited to, developing instructions described in subdivision (b), evaluating the reports received by the department pursuant to subdivisions (c) and (d), subdivision (c), developing and publishing a list pursuant to subdivision (d), developing other implementation instructions, and drafting the report required pursuant to this section.
(2) The department’s contract with a consultant shall include conflict-of-interest provisions to prohibit a person from participating in any report in which the person knows, or has reason to know, they have a material financial interest, including, but not limited to, a person who has a consulting or other agreement with a person or organization that would be affected by the results of the report.
(3) Contracts entered into pursuant to the authority in this subdivision are exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(h) (1) This section does not apply to specialized health care service plans, except to the extent the plans provide or administer essential health benefits pursuant to health care service plan contracts subject to Section 1367.005.
(2) This section does not apply to health care service plans contracting with the State Department of Health Care Services pursuant to Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code.
(3) This section does not apply to a fully integrated delivery system, as defined in subdivision (h) of Section 127500.2. nonprofit health care service plan with at least 3,500,000 enrollees that owns or operates its own pharmacies and that provides health care services to enrollees in a specific geographic area through a mutually exclusive contract with a single medical group.
(i) (1) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific this section by means of all-plan letters, methodologies, rules, definitions, policies, forms, information or data requests, or similar instructions, without taking regulatory action, until this section is repealed.
(2) The department shall consult with the Department of Insurance before issuing instructions pursuant to this section.
(j) A health care service plan shall not delegate the requirements in this article to a delegated provider, pharmacy benefit manager, or other entity, unless the parties have negotiated and agreed upon a new provision to the parties’ contract, as provided in Section 1375.7. A change to the parties’ contract pursuant to this subdivision shall be considered a material change. Notwithstanding delegation pursuant to this subdivision, a health care service plan shall comply with this section, including, but not limited to, paragraph (2) of subdivision (c).
(k) This section shall remain in effect only until January 1, 2032, and as of that date is repealed.

SEC. 2.Section 10133.52 is added to the Insurance Code, to read:
10133.52.

(a)The commissioner may issue instructions to health insurers prohibiting them from requiring prior authorization, in accordance with instructions issued by the Department of Managed Health Care pursuant to paragraph (3) of subdivision (d) of Section 1367.025 of the Health and Safety Code. The commissioner’s instructions shall direct a health insurer desiring to petition for reinstatement of prior authorization for a particular health care service as permitted in subparagraph (C) of paragraph (3) of subdivision (d) of Section 1367.025 of the Health and Safety Code to submit the petition to the Department of Managed Health Care.

(b)The commissioner may specify an effective date for a requirement pursuant to subdivision (a) that is the effective date of the requirement as applicable to health care service plans subject to Section 1367.025 of the Health and Safety Code, but shall provide health insurers with reasonable notice to comply.

(c)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the commissioner may issue instructions to health insurers pursuant to subdivision (a) without taking regulatory action, until this section is repealed pursuant to subdivision (e).

(d)For purposes of this section, “prior authorization” has the same meaning as defined in Section 1367.025 of the Health and Safety Code.

(e)This section, including any requirements on health insurers issued by the commissioner pursuant to subdivision (a), shall remain in effect only until January 1, 2032, and as of that date is repealed.

SEC. 2.

 Section 10133.52 is added to the Insurance Code, to read:

10133.52.
 (a) (1) This section applies only to health care services, items, and supplies ordered or prescribed by:
(A) A network provider.
(B) An out-of-network provider when the health insurer has authorized health care services, items, or supplies consistent with this chapter.
(C) An out-of-network provider, consistent with the terms and conditions of a health insurance policy or certificate that includes out-of-network benefits.
(2) For purposes of this section, “prior authorization” means the process by which utilization review determines the medical necessity or medical appropriateness of otherwise covered health care services prior to, or concurrent with, the rendering of those health care services. “Prior authorization” also includes a requirement by a health insurer or its delegated entity that an insured or health professional notify the health insurer before a health care service is provided, including preauthorization, precertification, and prior approval.
(b) By July 1, 2025, the department shall issue instructions to health insurers, which shall include a standard reporting template, to report all of the following:
(1) All covered health care services, items, and supplies subject to prior authorization.
(2) The percentage rate at which the services, items, and supplies are approved or modified by the health insurer or its delegated entity.
(3) Data regarding requested and authorized duration, frequency, or level of care of the health care services, items, and supplies.
(4) Any other relevant information or data regarding prior authorization determinations and processes, as determined by the department.
(c) (1) By December 31, 2025, or at least six months after the date the department issues instructions pursuant to subdivision (b), a health insurer shall report to the department the information described in paragraphs (1) to (4), inclusive, of subdivision (b).
(2) If a health insurer delegates responsibility for decisions regarding prior authorization requests to another entity, the health insurer shall obtain information required by this section from each delegated entity and include that information in the health insurer’s report to the department. Health insurers shall require delegated entities to comply with a request under this paragraph.
(d) (1) The department shall evaluate the reports received pursuant to this section and identify the health care services, items, and supplies most frequently approved by health insurers or their delegated entities. For purposes of this section, “most frequently approved” means approved or modified at a threshold rate determined by the department pursuant to this section. A threshold rate shall not exceed 90 percent.
(2) The department may consider the following factors when determining the appropriateness of removing prior authorization for a specific health care service, item, or supply, regardless of its approval percentage rate:
(A) Utilization of a health care service, item, or supply in a manner inconsistent with current clinical practice guidelines published in peer-reviewed medical literature.
(B) The potential for fraud, waste, and abuse.
(C) The potential for cost savings from eliminating prior authorization, including, but not limited to, out-of-pocket cost savings to the insured.
(D) The potential for improvements in quality of care, health care outcomes, and timely access to care for insureds from eliminating prior authorization.
(E) Other factors deemed appropriate by the department.
(3) Prior to finalizing the list of services, items, and supplies pursuant to this section, the department shall consult interested stakeholders.
(4) By December 31, 2026, the department shall publish the list of health care services, items, and supplies identified under paragraph (1).
(5) The department shall issue instructions to health insurers regarding all of the following:
(A) The date by which the health insurer and its delegated entities shall cease requiring prior authorization for the health care services, items, and supplies identified pursuant to this subdivision. When issuing the date by which a health insurer and its delegated entities shall cease requiring prior authorization pursuant to this section, the department shall take into consideration the time necessary for insurers to update their policies.
(B) Requirements for notifying providers of the change in prior authorization requirements.
(C) The process by which a health insurer may petition the department to reinstate the ability of health insurers to use prior authorization for a particular health care service, item, or supply upon a showing of good cause that a lack of prior authorization for the health care service, item, or supply has resulted in a demonstrable increase in the cost or decrease in the quality of care for the health insurer’s insureds, including, but not limited to, fraud, waste, or abuse. The department determination on a petition pursuant to this paragraph shall be made within 60 days of receipt of all information necessary for the department to issue a decision on the petition. A health insurer shall not reinstate prior authorization for a health care service, item, or supply subject to this section until authorized by the department.
(6) The commissioner may issue other instructions deemed necessary and appropriate by the commissioner to implement this section.
(e) A health insurer or its delegated entity shall not deny or reduce the contracted or agreed upon payment, or the applicable rate or reimbursement methodology specified in a health insurance policy or certificate, for a covered health care service, item, or supply exempted from a prior authorization requirement pursuant to this section unless the provider failed to substantially perform or provide the health care service, item, or supply.
(f) No later than four years after the date determined by the department under subparagraph (A) of paragraph (5) of subdivision (d), the department shall publish a report regarding the impact of the cessation of prior authorization requirements. Health insurers shall report information and data to be included in this report, as required by the department.
(g) (1) The department may contract with a consultant or consultants with expertise in prior authorization procedures to assist the department in implementing this section, including, but not limited to, developing instructions described in subdivision (b), evaluating the reports received by the department pursuant to subdivision (c), developing and publishing a list pursuant to subdivision (d), developing other implementation instructions, and drafting the report required pursuant to this section.
(2) The department’s contract with a consultant shall include conflict-of-interest provisions to prohibit a person from participating in any report in which the person knows, or has reason to know, they have a material financial interest, including, but not limited to, a person who has a consulting or other agreement with a person or organization that would be affected by the results of the report.
(3) Contracts entered into pursuant to the authority in this subdivision are exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(h) This section does not apply to specialized health insurers, except to the extent the insurers provide or administer essential health benefits pursuant to health insurance policies or certificates subject to Section 10112.27.
(i) (1) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific this section by means of guidance, methodologies, rules, definitions, policies, forms, information or data requests, or similar instructions, without taking regulatory action, until this section is repealed.
(2) The department shall consult with the Department of Managed Health Care before issuing instructions pursuant to this section.
(j) This section shall remain in effect only until January 1, 2032, and as of that date is repealed.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.