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SB-598 Health care coverage: prior authorization. (2023-2024)

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Date Published: 08/14/2023 02:00 PM
SB598:v96#DOCUMENT

Amended  IN  Assembly  August 14, 2023
Amended  IN  Senate  April 17, 2023
Amended  IN  Senate  March 22, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 598

Introduced by Senator Skinner
(Coauthor: Senator Wiener)
(Coauthor: Assembly Member Weber)

February 15, 2023

An act to add Article 4.7 (commencing with Section 1366.70) to Chapter 2.2 of Division 2 of, and to repeal Section 1366.81 of, the Health and Safety Code, and to add Article 1.3 (commencing with Section 10127.40) to Chapter 1 of Part 2 of Division 2 of, and to repeal Section 10127.51 of, the Insurance Code, relating to health care coverage.


LEGISLATIVE COUNSEL'S DIGEST


SB 598, 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.
On or after January 1, 2025, 2026, this bill would prohibit a health care service plan or health insurer from requiring a contracted health professional to complete or obtain a prior authorization for any covered health care services if the plan or insurer approved or would have approved not less than 90% of the prior authorization requests they submitted in the most recent completed one-year contracted period. The bill would set standards for this exemption and its denial, rescission, and appeal. The bill would authorize a plan or insurer to evaluate the continuation of an exemption not more than once every 12 months, and would authorize a plan or insurer to rescind an exemption only at the end of the 12-month period and only if specified criteria are met. The bill would require a plan or insurer to provide an electronic prior authorization process. The bill would also require a plan or insurer to have a process for annually monitoring prior authorization approval, modification, appeal, and denial rates to identify services, items, and supplies that are regularly approved, and to discontinue prior authorization on those services, items, and supplies that are approved 95% of the time. 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 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.

 Article 4.7 (commencing with Section 1366.70) is added to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:
Article  4.7. Prior Authorization Exemptions

1366.70.
 For purposes of this article:
(a) “Health professional” means a physician and surgeon or other professional who is licensed in California to deliver or furnish health care services.
(b) (1) “Health care service” means a health care procedure, treatment, or service that is either of the following:
(A) Provided at a health facility licensed in California.
(B) Provided or ordered by a physician and surgeon or within the scope of practice for which a health care professional is licensed in California.
(2) “Health care service” also includes the provision of pharmaceutical products or services services, or durable medical equipment.
(3) “Health care service” includes brand name prescription drugs until January 1, 2028. 2029.
(4) “Health care service” does not include any of the following:
(A) Tier four prescription drugs, as defined in Section 1342.73, under the applicable enrollee’s coverage.
(B) Experimental, investigational, or unproven drugs or products under the applicable enrollee’s coverage.
(C) Prescription drugs not approved by the federal Food and Drug Administration.
(c) (1) “Prior authorization” means the process by which utilization review determines the medical necessity or medical appropriateness of otherwise covered health care services before or concurrent with the rendering of those health care services. “Prior
(2) “Prior authorization” also includes a health care service plan requirement that an enrollee or health professional notify the health care service plan before providing a health care service, including preauthorization, precertification, and prior approval.
(3) “Prior authorization” does not include utilization review used and submitted by health facilities, such as hospitals, skilled nursing facilities, long-term care facilities, and acute rehabilitation facilities, to track the ongoing appropriateness of care and confirm payment to the facilities from health care service plans.

1366.71.
 (a) (1) On or after January 1, 2025, 2026, a health care service plan shall not require a contracted health professional to complete or obtain a prior authorization for any covered health care services if, in the most recent completed one-year contracted period, the health care service plan approved or would have approved not less than 90 percent of the prior authorization requests submitted by the health professional for the class of health care services or treatments subject to prior authorization for enrollees of the health care service plan.
(2) A health professional shall have a total contracting history of at least 36 months with the health care service plan to be considered eligible for an exemption pursuant to paragraph (1). The 36 months do not need to be continuous.
(3) For purposes of this section, a modification by a plan of a prior authorization request that is ultimately approved shall count as an approval.
(4) A health professional’s exemption pursuant to paragraph (1) shall apply to all health care services, items, and supplies, including drugs, that are covered by the plan contract and are within the contracted health professional’s medical licensure, board certification, specialty, or scope of practice.
(5) This article applies to any and all product types offered by the health care service plan that are regulated by the department, but includes Medi-Cal managed care plans only to the extent permissible under federal law.
(6) (A) A health care service plan shall provide an electronic prior authorization process.
(B) A health professional shall agree to use the plan’s electronic prior authorization process to be considered eligible for an exemption pursuant to paragraph (1). A health care service plan may waive this requirement based on the health professional’s access to requisite technologies and infrastructure, including broadband internet.
(b) A health care service plan shall evaluate if a contracted health professional without an exemption qualifies for an exemption from prior authorization requirements under subdivision (a) once every 12 months or upon the request of the health professional, but no more often than once every 12 months. A health care service plan may evaluate if a contracted health care professional continues to qualify for an exemption from prior authorization requirements under subdivision (a) not more than once every 12 months. This section does not require a health care service plan to evaluate an existing exemption or prevent the establishment of a longer exemption period. A contracted health professional is not required to request an exemption to qualify for the exemption.
(c) A health care service plan shall provide a health professional who receives an exemption with a notice that includes a statement that the health professional qualifies for an exemption from preauthorization requirements and a statement of the duration of the exemption.

1366.72.
 (a) Upon a health professional’s request, the health care service plan shall provide a health professional who is denied a prior authorization exemption with the facts and information that supports its denial, including statistics and data for the relevant prior authorization request evaluation period and detailed information sufficient to demonstrate that the health professional does not meet the criteria for an exemption pursuant to Section 1366.71.
(b) A health professional’s exemption from prior authorization shall remain in effect until the 30th calendar day after the date the health care service plan notifies the health professional of the health care service plan’s determination to rescind the exemption, or, if the health professional appeals the rescission determination, the fifth business day after the date the independent review affirms the health care service plan’s determination to rescind the exemption.

1366.73.
 (a) A health care service plan shall only rescind a prior authorization exemption at the end of the 12-month period and if the health care service plan meets all of the following requirements:
(1) For exemptions pursuant to paragraph (1) of subdivision (a) of Section 1366.71, makes a determination that the health professional would not have met the 90-percent approval criteria based on a retrospective review of a sample of a minimum of 15, but no more than 25, claims for covered services for which the exemption applies for the previous 12 months.
(2) Complies with other applicable requirements specified in this section, including both of the following:
(A) Notifies the health professional at least 30 calendar days before the proposed rescission is to take effect.
(B) Provides the notice required under subparagraph (A) with both of the following:
(i) The information and data relied on to make the determination.
(ii) A plain-language explanation of how the health professional may appeal and seek an independent review of the determination pursuant to this section.
(b) A determination to rescind or deny a prior authorization exemption shall be made by a health professional licensed in California California, of the same or similar specialty as the health professional being considered for an exemption and exemption, and who has experience in providing the type of services for which the exemption applies.
(c) If a health care service plan does not finalize a rescission determination as specified in subdivision (a), then the individual health professional is considered to have met the criteria under Section 1366.71 to continue to qualify for the exemption.
(d) (1) A health professional may appeal the decision to deny or rescind a prior authorization exemption and has a right to have the appeal conducted and completed by a health professional licensed in California of the same or similar specialty as the health professional being considered for an exemption who was not directly involved in making the initial denial or rescission of the exemption.
(2) This appeal review may be performed by a health care service plan’s contracted specialist reviewer, provided the reviewer is a licensed health professional of the same or similar specialty as the health professional seeking the appeal.

(2)

(3) A health professional may request that the reviewing health professional consider a random sample of claims submitted to the health care service plan by the health professional during the relevant evaluation period as part of their review.

(3)

(4) Within 30 calendar days of receipt of the appeal, the health care service plan shall reconsider the denial or rescission of the exemption and provide a written response to the health professional with the appeal determination and the basis for the determination, including pertinent facts and information relied upon in reaching the determination.

1366.74.
 A health care service plan shall be bound by the determination made pursuant to Section 1366.73. A health care service plan shall not retroactively deny or modify a covered health care service on the basis of a rescission of an exemption, even if the health care service plan’s determination to rescind the prior authorization exemption is affirmed pursuant to Section 1366.73.

1366.75.
 Following a final determination or review affirming the rescission or denial of an exemption, a health professional is eligible for consideration of an exemption after a 12-month period.

1366.76.
 A health care service plan shall not deny or reduce payment for a covered health care service exempted from a prior authorization requirement pursuant to paragraph (1) of subdivision (a) of Section 1366.71, including a covered health care service performed or supervised by another health care professional when the performing or supervising health care professional or other health care professional who ordered the service received a prior authorization exemption, unless the performing or supervising health care professional or other health care professional did either of the following:
(a) Knowingly and materially misrepresented the health care service in a request for payment submitted to a health care service plan with the specific intent to deceive and obtain an unlawful payment from the health care service plan.
(b) Failed to substantially perform the health care service.

1366.77.
 This article does not prevent a health care service plan from taking action, including rescinding a prior authorization exemption granted under subdivision (a) of Section 1366.71 at any time, against a contracted health professional that has been found, through an investigation by the plan, to have committed fraud or to have a pattern of waste or abuse in violation of the plan’s contract.

1366.78.
 A grievance or appeal submitted by or on behalf of an enrollee regarding a delay, denial, or modification of health care services shall be reviewed by a physician and surgeon of the same or similar specialty as the physician and surgeon requesting authorization for those health care services.

1366.79.
 (a) A health care service plan’s policies and procedures pursuant to Section 1367.01 shall include a process for annually monitoring prior authorization approval, modification, appeal, and denial rates to identify services, items, and supplies, including drugs, that are regularly approved.
(b) A health care service plan shall discontinue requiring prior authorization on services, items, and supplies, including drugs, that are approved 95 percent of the time.

1366.80.

(a)A plan shall not delegate the requirements in this article to a delegated provider unless the parties have negotiated and agreed upon a new provision to the parties’ contract pursuant to Section 1375.7. That change to the parties’ contract shall be considered a material change.

1366.80.
 (a) This article does not apply to prior authorization that is delegated by a health care service plan to a risk-bearing organization, as defined in subdivision (g) of Section 1375.4. This article does not require a health care service plan to perform prior authorization that has otherwise been delegated to a risk-bearing organization.
(b) This article does not apply to fully integrated delivery systems, as defined in subdivision (h) of Section 127500.2.
(c) This article does not apply to vision-only and dental-only health care service plans and coverage.
(d) This article applies to a pharmacy benefit manager under contract with a health care service plan to administer prior authorization for prescription drugs.

1366.81.
 (a) The department shall conduct an analysis of the inclusion of brand name prescription drugs as a health care service for purposes of this article, including an analysis of the costs and savings, prospects for continuing or expanding the gold card program for brand name prescription drugs, feedback received from the provider community, and an assessment of the administrative costs to the plan of administering or implementing the gold card program for brand name prescription drugs.
(b) The department shall submit a report on its findings to the Legislature on or before July 1, 2027. 2029. The report shall be submitted in compliance with Section 9795 of the Government Code.
(c) This section shall remain in effect only until January 1, 2029, 2030, and as of that date is repealed.

SEC. 2.

 Article 1.3 (commencing with Section 10127.40) is added to Chapter 1 of Part 2 of Division 2 of the Insurance Code, to read:
Article  1.3. Prior Authorization Exemptions

10127.40.
 For purposes of this article:
(a) “Health professional” means a physician and surgeon or other professional who is licensed in California to deliver or furnish health care services.
(b) (1) “Health care service” means a health care procedure, treatment, or service that is either of the following:
(A) Provided at a health facility licensed in California.
(B) Provided or ordered by a physician and surgeon or within the scope of practice for which a health care professional is licensed in California.
(2) “Health care service” also includes the provision of pharmaceutical products or services services, or durable medical equipment.
(3) “Health care service” includes brand name prescription drugs until January 1, 2028. 2029.
(4) “Health care service” does not include any of the following:
(A) Tier four prescription drugs, as defined in Section 10123.1932, under the applicable insured’s coverage.
(B) Experimental, investigational, or unproven drugs or products under the applicable insured’s coverage.
(C) Prescription drugs not approved by the federal Food and Drug Administration.
(c) (1) “Prior authorization” means the process by which utilization review determines the medical necessity or medical appropriateness of otherwise covered health care services before or concurrent with the rendering of those health care services. “Prior
(2) “Prior authorization” also includes a health insurer requirement that an insured or health professional notify the health insurer before providing a health care service, including preauthorization, precertification, and prior approval.
(3) “Prior authorization” does not include utilization review used and submitted by health facilities, such as hospitals, skilled nursing facilities, long-term care facilities, and acute rehabilitation facilities, used to track the ongoing appropriateness of care and confirm payment to the facilities from health insurers.

10127.41.
 (a) (1) On or after January 1, 2025, 2026, a health insurer shall not require a contracted health professional to complete or obtain a prior authorization for any covered health care services if, in the most recent completed one-year contracted period, the health insurer approved or would have approved not less than 90 percent of the prior authorization requests submitted by the health professional for the class of health care services or treatments subject to prior authorization for insureds of the health insurer.
(2) A health professional shall have a total contracting history of at least 36 months with the health insurer to be considered eligible for an exemption pursuant to paragraph (1). The 36 months do not need to be continuous.
(3) For purposes of this section, a modification by an insurer of a prior authorization request that is ultimately approved shall count as an approval.
(4) A health professional’s exemption pursuant to paragraph (1) shall apply to all health care services, items, and supplies, including drugs, that are covered by the insurance policy and are within the contracted health professional’s medical licensure, board certification, specialty, or scope of practice.
(5) This article applies to any and all product types offered by the health insurer that are regulated by the department.
(6) (A) A health insurer shall provide an electronic prior authorization process.
(B) A health professional shall agree to use the insurer’s electronic prior authorization process to be considered eligible for an exemption pursuant to paragraph (1). A health insurer may waive this requirement based on the health professional’s access to requisite technologies and infrastructure, including broadband internet.
(b) A health insurer shall evaluate if a contracted health professional without an exemption qualifies for an exemption from prior authorization requirements under subdivision (a) once every 12 months or upon the request of the health professional, but no more often than once every 12 months. A health insurer may evaluate if a contracted health care professional continues to qualify for an exemption from prior authorization requirements under subdivision (a) not more than once every 12 months. This section does not require a health insurer to evaluate an existing exemption or prevent the establishment of a longer exemption period. A contracted health professional is not required to request an exemption to qualify for the exemption.
(c) A health insurer shall provide a health professional who receives an exemption with a notice that includes a statement that the health professional qualifies for an exemption from preauthorization requirements and a statement of the duration of the exemption.

10127.42.
 (a) Upon a health professional’s request, the health insurer shall provide a health professional who is denied a prior authorization exemption with the facts and information that supports its denial, including statistics and data for the relevant prior authorization request evaluation period and detailed information sufficient to demonstrate that the health professional does not meet the criteria for an exemption pursuant to Section 10127.41.
(b) A health professional’s exemption from prior authorization shall remain in effect until the 30th calendar day after the date the health insurer notifies the health professional of the health insurer’s determination to rescind the exemption, or, if the health professional appeals the rescission determination, the fifth business day after the date the independent review affirms the health insurer’s determination to rescind the exemption.

10127.43.
 (a) A health insurer shall only rescind a prior authorization exemption at the end of the 12-month period and if the health insurer meets all of the following requirements:
(1) For exemptions pursuant to paragraph (1) of subdivision (a) of Section 10127.41, makes a determination that the health professional would not have met the 90-percent approval criteria based on a retrospective review of a sample of a minimum of 15, but no more than 25, claims for covered services for which the exemption applies for the previous 12 months.
(2) Complies with other applicable requirements specified in this section, including both of the following:
(A) Notifies the health professional at least 30 calendar days before the proposed rescission is to take effect.
(B) Provides the notice required under subparagraph (A) with both of the following:
(i) The information and data relied on to make the determination.
(ii) A plain-language explanation of how the health professional may appeal and seek an independent review of the determination pursuant to this section.
(b) A determination to rescind or deny a prior authorization exemption shall be made by a health professional licensed in California of the same or similar specialty as the health professional being considered for an exemption and who has experience in providing the type of services for which the exemption applies.
(c) If a health insurer does not finalize a rescission determination as specified in subdivision (a), then the individual health professional is considered to have met the criteria under Section 10127.41 to continue to qualify for the exemption.
(d) (1) A health professional may appeal the decision to deny or rescind a prior authorization exemption and has a right to have the appeal conducted and completed by a health professional licensed in California California, of the same or similar specialty as the health professional being considered for an exemption exemption, and who was not directly involved in making the initial denial or rescission of the exemption.
(2) This appeal review may be performed by a health insurer’s contracted specialist reviewer, provided the reviewer is a licensed health professional of the same or similar specialty as the health professional seeking the appeal.

(2)

(3) A health professional may request that the reviewing health professional consider a random sample of claims submitted to the health insurer by the health professional during the relevant evaluation period as part of their review.

(3)

(4) Within 30 calendar days of receipt of the appeal, the health insurer shall reconsider the denial or rescission of the exemption and provide a written response to the health professional with the appeal determination and the basis for the determination, including pertinent facts and information relied upon in reaching the determination.

10127.44.
 A health insurer shall be bound by the determination made pursuant to Section 10127.43. A health insurer shall not retroactively deny or modify a covered health care service on the basis of a rescission of an exemption, even if the health insurer’s determination to rescind the prior authorization exemption is affirmed pursuant to Section 10127.43.

10127.45.
 Following a final determination or review affirming the rescission or denial of an exemption, a health professional is eligible for consideration of an exemption after a 12-month period.

10127.46.
 A health insurer shall not deny or reduce payment for a covered health care service exempted from a prior authorization requirement pursuant to paragraph (1) of subdivision (a) of Section 10127.41, including a covered health care service performed or supervised by another health care professional when the performing or supervising health care professional or other health care professional who ordered the service received a prior authorization exemption, unless the performing or supervising health care professional or other health care professional did either of the following:
(a) Knowingly and materially misrepresented the health care service in a request for payment submitted to a health insurer with the specific intent to deceive and obtain an unlawful payment from the health insurer.
(b) Failed to substantially perform the health care service.

10127.47.
 This article does not prevent a health insurer from taking action, including rescinding a prior authorization exemption granted under subdivision (a) of Section 10127.41 at any time, against a contracted health professional that has been found, through an investigation by the insurer, to have committed fraud or to have a pattern of waste or abuse in violation of the insurer’s contract.

10127.48.
 A grievance or appeal submitted by or on behalf of an insured regarding a delay, denial, or modification of health care services shall be reviewed by a physician and surgeon of the same or similar specialty as the physician and surgeon requesting authorization for those health care services.

10127.49.
 (a) A health insurer’s policies and procedures pursuant to Section 10123.135 shall include a process for annually monitoring prior authorization approval, modification, appeal, and denial rates to identify services, items, and supplies, including drugs, that are regularly approved.
(b) A health insurer shall discontinue requiring prior authorization on services, items, and supplies, including drugs, that are approved 95 percent of the time.

10127.50.
 (a) An insurer shall not delegate the requirements in this article to a delegated provider unless the parties have negotiated and agreed upon a new provision to the parties’ contract pursuant to Section 10133.65. That change to the parties’ contract shall be considered a material change.
(b) This article does not apply to fully integrated delivery systems, as defined in subdivision (h) of Section 127500.2 of the Health and Safety Code.
(c) This article does not apply to vision-only and dental-only health insurance policies and coverage.
(d) This article applies to a pharmacy benefit manager under contract with a health insurer to administer prior authorization for prescription drugs.

10127.51.
 (a) The department shall conduct an analysis of the inclusion of brand name prescription drugs as a health care service for purposes of this article, including an analysis of the costs and savings, prospects for continuing or expanding the gold card program for brand name prescription drugs, feedback received from the provider community, and an assessment of the administrative costs to the insurer of administering or implementing the gold card program for brand name prescription drugs.
(b) The department shall submit a report on its findings to the Legislature on or before July 1, 2027. 2029. The report shall be submitted in compliance with Section 9795 of the Government Code.
(c) This section shall remain in effect only until January 1, 2029, 2030, 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.