Legislative Update 1
NEW AMBULANCE TRANSPORT SERVICE LAWS IN EFFECT FOR 1999

Other requirements set forth in AB984 are as follows:

1. On or before July 1, 1999, disclosure materials must include a statement
2. encouraging enrollees to use 911 appropriately.
3. Health plans are prohibited from requiring prior authorization for ambulance services provided through 911.
4. Health plans cannot refuse to pay for any ambulance or ambulance transport service if the enrollee reasonably believed that the medical condition was an emergency that required ambulance transport services.
5. The determination as to whether an enrollee reasonably believed that the medical condition required an emergency response may not be based solely upon a retrospective analysis of the level of care eventually provided to, or a final discharge of, the person who received emergency assistance.
6. Health plans are not required to pay for ambulance services if any of the following apply:
   1. the health plan determines that the services were never performed,
   2. an emergency medical condition did not exist,
   3. fraud or an incorrect billing was discovered,
   4. the service was not covered under a member's current benefit plan,
   5. an enrollee's membership was invalid at the time of service.

Legislative update II
DRUG FORMULARY DISCLOSURE LAWS TAKE EFFECT

In 1998 the California state legislature passed two new laws requiring health care organizations to provide drug formulary information when requested.

The laws implemented on July 1, 1999 give consumers the right to review the drug formulary of a health plan and inquire about the availability of specific medications(Inclusion of a drug on the Health Plan formulary does not guarantee that the drug will be prescribed for a specific condition.) The new laws also provide for the coverage of a nonformulary medication if a Plan physician determines that the drug is medically necessary.

Legislative Update III
IRS CHANGES STANCE ON SMOKING CESSATION PROGRAMS & PRESCRIPTION DRUGS IN RELATION TO HEALTHCARE SPENDING ACCOUNTS

The Internal Revenue Service(IRS) recently revoked Revenue Ruling 79-162 which stated that smoking cessation programs are generally not deductible under Internal Revenue Code(IRC) 213, and were not reimbursable under a healthcare spending account. Revenue Ruling 99-28, set out on June 10, 1999, states that costs associated with participation in smoking cessation programs as well as cost associated with smoking related prescription medications are now deductible medical expenses under IRC 213.

Furthermore, smoking cessation program expenses and smoking related prescription medication expenses can now be reimbursed through a healthcare spending account. Note that, like other over the counter medications, over the counter smoking cessation medications are not reimbursable even if prescribed.

Legislative Update IV
HIGHLIGHTS of the NEW HEALTHCARE BILLS SIGNED INTO LAW YESTERDAY

REVIEW: The Department of Corporations must establish an independent medical review system for patients to dispute claims when treatment has been delayed, denied, or modified by their health plan.

GRIEVANCES: Healthcare plans must provide enrollees with written response to grievances and expedite the review and appeals process.

LAWSUITS: Patients have the right to sue a health plan for harm caused by failure to provide quality care.

SECOND OPINIONS: Healthcare plans must provide a second medical opinion upon request by the patient.

PRIVACY: The unauthorized selling, sharing or use of medical information for any purpose not necessary to provide healthcare is prohibited.

REFERRALS: Deadlines are now established for health plans to respond to physician requests when a patient is referred to a specialist.

BREAST CANCER: The screening, diagnosis and treatment of breast cancer are now covered. Also, enrollment cannot be denied because of a personal or family history of breast disease or breast cancer.

MENTAL ILLNESS: Health care plan contracts must cover the diagnosis and medically necessary treatment of severe mental illnesses at any age and serious emotional disturbances of children.

CONTRACEPTION: Disability insurers and healthcare plans must expand outpatient prescription drug benefits to include Federal Drug Administration approved contraception methods.

HOSPICE: This is added as part of the basic healthcare services that must be provided.

NEW AGENCIES: The state department of managed care will be devoted exclusively to the licensing and regulation of healthcare plans. A new office of the patient advocate will assist consumers with their rights and grievances.

Legislative Update V
NEW COBRA REGULATIONS GO INTO EFFECT JANUARY 1, 2000

There is a new term, "non-Cobra beneficiary" which replaces "active employee" in several parts of the regulation. These non-Cobra beneficiaries are persons who receive coverage other than by reason of COBRA, and who are in a situation similar to a Cobra beneficiary (e.g. disabled employees, divorce decreed benefits, etc.).

The new classification "non-Cobra beneficiary" brings up an important new regulation.

If the employer offers two plans to non-Cobras beneficiaries, and decides to eliminate one plan without giving the beneficiary the right to enroll in the remaining plan, then that non-cobra beneficiary must receive a Cobra notice and the right to enroll in the other plan.

If a Cobra beneficiary changes his/her/their place of residence, coverage under Cobra could be lost.

If the employer uses a regional insurance provider, not licensed to do business in the state to which the Cobra beneficiary moves, then the employer has no obligation to continue Cobra. The cobra beneficiary has the responsibility to obtain coverage elsewhere. However, if the employer also offers a self-insured plan not governed by the state to which the beneficiary moves, then that plan must be offered to the cobra continuant. The clarification of the regulations says that even employees who voluntarily leave, reduce hours or terminate have Cobra continuation rights. In the past some employers interpreted the regulations to mean that loss of coverage had to be involuntary.

The IRS has flip flopped (highly unusual) on the Medicare/Cobra eligibility issue.

The 1987 regulation stated that if Cobra beneficiaries were eligible for coverage from another group plan, then Cobra would not have to be offered, and if offered, could be terminated. The new regulations say that if an individual has any coverage, including Medicare, at the time of the qualifying event, then Cobra must be made available. Previously the Cobra beneficiary's coverage ended when he/she first became entitled to Medicare regardless of whether or not enrollment occurred. Now, coverage can only be terminated if the Cobra beneficiary becomes covered after the date of the Cobra election. The regulations states that "entitlement" means actually being enrolled in Medicare Part A or B. In other words, eligibility for Medicare is not a reason to terminate Cobra coverage.

What coverages can the employer require the Cobra beneficiary elect?

Final regulations eliminate the concept of core versus non core benefits. If an employer has one plan document or plan for a multiple of coverages, and the plan document describes the plan as a "single" plan, then the employer's Cobra notice can require participation in "all plans, or none." If each Cobra eligible plan has its own document, and does not defined all plans as being "one plan," then each plan must be offered separately. For example: A Cobra beneficiary must take prescription drugs when it is part of a medical plans contract and summary plan description. However, some large companies separately negotiate the prescription coverage with a specialty provider. If this arrangement is not part of the medical plan and has its own contract and summary plan description, then the Cobra beneficiary could select one plan or the other, or both.

Initial notice of Cobra to active employees is absolutely mandatory. An employer must have documentation that all active employees were notified at home about their rights and beneficiary rights upon loss or reduction in coverage. If there is no proof of this notice, than there is an obligation of the employer to provide coverage to a Cobra eligible beneficiary even if that beneficiary elects coverage after the 60 day grace period.

Legislative Update VI
WHY US HEALTHCARE COSTS ARE RISING?

US Healthcare Trends:
In 1980 the United States spent about $1052 per person on healthcare. By 1993, healthcare costs had soared to $3350 per person. This growth in costs have led to the the widespread growth of managed care and HMO style medical plans and reimbursements. Managed care did slow healthcare spending to less than inflation from 1993 to date and saved employers and employees more than $300 billion per year. The savings boosted paychecks, reduced taxes, and made it possible for employers to hire more people. Today, California premiums are 30% below those on the East Coast, where managed care is less established. Medical costs are on the rise again for the following reasons.

Aging Population:
Americans are living longer. While this is certainly good news it also means increased use of hospitals and other medical care. Health care needs for people over 65 are three times greater than those of younger people. And Baby Boomers will require more medical care as they move into their 50's. Impact - 2%

Advances in Medical Technology:
Diagnostics and therapeutic technologies are improving quickly, and breakthroughs are occurring every day. Patients and doctors demand the latest technology. Hospitals purchase the latest equipment to stay competitive. The cost of keeping up with technological advances is high. Impact 8-10%

Legislative/Regulatory Changes:
Recent legislative and regulatory changes will increase the cost of healthcare in California by at least 2%. However well-intentioned, mandated benefits and increased scrutiny of health plans and care providers make it harder for individuals and their employers to afford healthcare coverage. Impact - 2%

Rising Labor Costs:
More than half of healthcare dollars are used to pay health professionals and support staff. Like the rest of the population these people need pay increases to keep up with the increasing cost of living. Impact - 3%