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Updated Analysis:
Analysis of California Assembly Bill 1860
Prescription Drugs
Summary to the 2017-2018 California State Legislature, June 20, 2018
Current as of June 20, 2018 www.chbrp.org 1
AT A GLANCE
CHBRP analyzed the impacts of the sunset of oral anticancer medication cost sharing provisions, should Assembly
Bill (AB) 1860 not pass. CHBRP estimates that, in 2018, 13.4 million Californians enrolled in state-regulated health
insurance will be impacted by the sunset of cost sharing provisions included in current law.
1. Benefit coverage. Enrollees with health insurance offered through Covered California or an off-exchange mirror
product are subject to Covered California standard plan benefit design rules (which includes cost sharing limits for
prescription drugs), therefore the sunset of cost sharing provisions in current law are unlikely to directly impact
these enrollees.
2. Utilization. CHBRP estimates 9,200 enrollees in plans and policies subject to current cost sharing provisions
have oral anticancer medication outpatient prescription drug claims that hit the current cost sharing limitation of
$200 per prescription for up to a 30-day supply, or about 0.1% of the impacted population. Since the majority of
enrollees with high cost oral anticancer medication will reach their maximum out of pocket (MOOP) limits, CHBRP
predicts no change in utilization.
3. Expenditures. The sunset of oral anticancer medication cost sharing provisions in current law would decrease
annual expenditures by $174,000 or -0.0001% for enrollees with DMHC-regulated plans and CDI-regulated
policies. This decrease is largely due to a decrease of $1,017,000 in total health insurance premiums paid by
employers and enrollees, adjusted by an increase of $844,000 in enrollee expenses. These estimates are an
overestimate of premium reduction since the impact of cost sharing increases on utilization of other medical
services are not incorporated in the cost model.
4. Impacts of Out of Pocket Maximums and Deductibles. Should current law’s cost sharing limits sunset, a
majority of enrollees who use high cost prescription drugs would be protected from increases in cost sharing due
to health insurance plan designs. Limitations in overall enrollee cost sharing are incorporated in virtually all
medical plan designs through out of pocket maximums. Approximately 90.7% of enrollees utilizing high cost oral
anticancer medications would be expected to reach their out of pocket maximums under the assumed plan design
and therefore would continue to be protected from increases in cost sharing due to the sunset of current law. For
the 9.3% of enrollees who do not meet their out of pocket maximums within the plan year, increases in cost
sharing may lead to changes in utilization of prescription drugs due to cost. However, as utilization may not
change for enrollees impacted by the increases in cost sharing due to the availability of cost sharing assistance
programs. Patient assistance programs can help income-qualified patients pay for the more expensive
prescription drugs, which may help shield some enrollees from increases in cost sharing for prescription drugs. If
enrollees are not helped by patient assistance programs and reduce their prescription drug use due to increased
cost sharing/out of pocket costs to the enrollee, it could result in significant clinical consequences; however,
because CHBRP is unable to estimate the magnitude of this problem and cannot estimate the costs of clinical
care when drugs are forgone, the expenditure and premium impacts presented here do not reflect any changes to
medical care utilization or costs.
5. Long-term impacts. Over time, an increasing number of enrollees utilizing high cost prescription drugs may
experience increases in cost sharing due to rising drug costs or the availability of new and more expensive
medications. This may place more enrollees at risk of experiencing high cost sharing early in the plan year and
may potentially result in utilization changes.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 2
CONTEXT
Upon request from the Assembly Health Committee, CHBRP analyzed AB 1860 Cancer Treatment, as
introduced, and submitted the report to the Legislature on April 20, 2018. On May 8, 2018, the Senate
Health Committee requested additional analysis on the impacts on premiums and utilization of oral
anticancer medications should AB 1860 not pass and the cost sharing limitation in current statute sunset.
BILL SUMMARY
AB 1860, introduced by Assembly Member Limón on January 10, 2018, amends provisions of current law
that limit cost sharing for oral anticancer medications. Additional information about oral anticancer
medications is included in CHBRP’s analysis of AB 1860 published April 20, 2018.
1
Current law limits cost sharing for oral anticancer medications to $200 per prescription for up to a 30-day
supply for enrollees in DMHC-regulated plans and CDI-regulated policies, including CalPERS and
exempting Medi-Cal Managed Care plans. Plans and policies are allowed to increase the cost sharing
limit by the Consumer Price Index yearly beginning in 2016, although no insurers had done so as of
March 2018. This provision of current law sunsets January 1, 2019, unless extended through the passage
of AB 1860.
Another current law, enacted through the passage of AB 339, limits cost sharing for covered outpatient
prescription drugs to $250 per prescription for up to a 30-day supply for enrollees in DMHC-regulated
plans and CDI-regulated policies, including CalPERS and exempting Medi-Cal Managed Care plans. For
enrollees in high deductible health plans (HDHPs), cost sharing is limited to $500 per prescription for up
to a 30-day supply. This provision of current law sunsets January 1, 2020, unless extended through the
passage of SB 1021.
Therefore, if AB 1860 were to not pass and current law limiting cost sharing for oral anticancer
medications sunsets on January 1, 2019, cost sharing for oral anticancer medications would increase by
a maximum of $50 per prescription or $300 per prescription for enrollees in HDHPs until January 1, 2020.
If SB 1021 were to also not pass, there would be no cost sharing limits for oral anticancer medications
beginning in 2020. CHBRP discusses the impact should all cost sharing limits in current law sunset,
effective January 1, 2020.
BENEFIT COVERAGE, UTILIZATION, AND COST IMPACTS
This section reports the potential incremental impacts should current cost sharing limits sunset on
estimated baseline benefit coverage, utilization, and overall cost. For further details on the underlying
data sources and methods, please see Appendix A.
Currently, 100% of the 15.9 million enrollees with health insurance subject to current law currently have
coverage with cost sharing limits for oral anticancer medications of $200 per prescription for up to a 30-
day supply. Should AB 1860 and SB 1021 not be enacted and current law sunset, 100% of these
enrollees would have health insurance no longer required to include cost sharing limits for oral anticancer
medications. Due to these interacting laws, CHBRP has analyzed the impacts of the sunset of cost
sharing limitations on premiums and utilization for oral anticancer medications in 2020.
1
CHBRP’s analysis of AB 1860 published on April 20, 2018 is available at:
http://chbrp.org/completed_analyses/index.php
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 3
Cost sharing limits in current law sunset by January 1, 2020. CHBRP has adapted the cost model that
estimates impacts on benefit coverage, utilization, and expenditures in 2019 by continuing to trend
increases in premiums and expenditures, while assuming enrollment and population estimates
remain constant in order to estimate impacts in 2020. Changes at the federal and state level that
impact enrollment, as well as population changes, will alter the results obtained in this analysis.
As described in the previous analysis of SB 1021,
2
enrollees with health insurance offered through
Covered California or an off-exchange mirror product are subject to Covered California plan benefit
design regulations. Covered California included cost sharing limits for prescription drugs in the plan
benefit design beginning in 2016, and therefore CHBRP assumes enrollees in Covered California and
mirror plans would continue to have health insurance that includes cost sharing limits for prescription
drugs. Therefore, 81% of all enrollees in the individual market and 23% of all enrollees in the small
group market have health insurance that would not change should current law sunset.
To model the expenditure impact of allowing current law to sunset, CHBRP applied an average
benefit design for enrollees in large and small group plans based on information from PwC’s
Touchstone Report (2017) and the 2017 Kaiser/HRET Survey of Employer-Sponsored Health
Benefits (KFF/HRET, 2017). The average plan design incorporated a $1,350 deductible, 20%
coinsurance, and $3,500 maximum out of pocket costs (MOOP). Under a 20% coinsurance
provision, any drug costing at least $1,000 could exceed the $200 per prescription limitation that is
currently in place. The impacts of removing limits on cost sharing for prescription drugs must be
considered in conjunction with the likelihood enrollees will reach their overall MOOP limits and be
spared further cost sharing for the year. Enrollees taking high cost oral anticancer medications
(defined as medications costing at least $1,000 per prescription) have much higher total healthcare
costs than average, and the majority of these enrollees will meet their benefit plan’s MOOP limit. As a
result, the removal of cost sharing limits on high cost oral anticancer medications has little effect on
plan costs and enrollees’ annual cost sharing amounts. Appendix A includes more detail on how
different plans have differing MOOPs and the results of a sensitivity analysis to see how estimated
impacts are affected by assumed MOOP.
Key Assumptions
Many oral anticancer medications are available in generic form, are very low cost, and have low
cost sharing requirements. Not all oral anticancer medications are placed in Tier 4 of prescription
drug formularies, which dictate cost sharing for enrollees. CHBRP is also aware that not all
enrollees have health insurance with four tiers, and therefore cost sharing may vary for some
specialty prescription drugs. For this analysis, CHBRP assumes all high cost oral anticancer
drugs are placed on Tier 4 of prescription drug formularies.
CHBRP assumes prescription drugs available in 2016 will continue to be the only drugs available
in 2020. CHBRP is unable to predict the number of these drugs nor the cost of new prescription
drugs.
CHBRP assumes deductibles apply to both medical and prescription drug benefits, though some
enrollees may have separate deductibles for medical benefits and prescription drug benefits.
CHBRP assumes plans and policies will continue to include out of pocket maximums in plan
designs in all markets. However, only nongrandfathered plans and policies offered on the small
2
CHBRP’s analysis of SB 1021 published on April 9, 2018 is available at:
http://chbrp.org/completed_analyses/index.php
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 4
group, large group and individual markets are required to include out of pocket maximums in plan
design. Although grandfathered plans in all markets are not required to include out of pocket
maximums, CHBRP has assumed that these plans include maximums.
Baseline and Post-sunset Benefit Coverage
Currently, 15.9 million enrollees are subject to the oral anticancer medication cost sharing provisions of
current law. Because enrollees with health insurance offered through Covered California or an off-
exchange mirror product are subject to Covered California standard plan benefit design rules that include
cost sharing limits for all prescription drugs, cost sharing provision mandate changes are likely not to
directly impact the benefit design of health insurance for these enrollees. Thus, excluding this group of
individual and small group enrollees, there are 13.4 million enrollees with health insurance likely to be
impacted by the sunset of current law. This represents 57% of the 23.4 million Californians who have
health insurance regulated by the state that may be subject to any state health benefit mandate law or
law affecting the terms and conditions of coverage.
3
Based on the analysis of the California Employer Benefit Survey, CHBRP estimates that approximately
1.4% of enrollees in plans regulated by DMHC or policies regulated by CDI have no coverage for
outpatient prescription drugs (OPDs) and 3.0% of these enrollees have OPD coverage that is not
regulated by DMHC or CDI. Taking this into account, CHBRP estimates that 12.4 million enrollees have
health insurance likely affected by the sunset of oral anticancer medication cost sharing limitations
included in current law.
Baseline and Post-sunset Utilization
CHBRP extracted all medical and drug claims for enrollees with at least one high cost oral anticancer
medication prescription from the 2016 MarketScan® commercial claims and enrollment data for the state
of California. Using this database, CHBRP estimates 9,200 enrollees in plans and policies subject to
current cost sharing provisions have outpatient prescription drug claims that hit the current cost sharing
limitation (Table 1). If current law sunsets, the oral anticancer medication cost sharing limit that is
currently in place will cease and affect the 9,200 enrollees who are currently subject to the cost sharing
limit. This group of 9,200 enrollees represents about 0.1% of all enrollees with health insurance likely
impacted by the sunset of current law (13.8 million). Since the majority of enrollees with high cost oral
anticancer medication will reach their MOOP limits, CHBRP predicts no change in utilization.
Impact of Out of Pocket Maximums and Deductibles
Should cost sharing limits that exist in current law sunset January 1, 2020, a majority of enrollees who
use high cost oral anticancer medications would be protected from increases in cost sharing due to health
insurance plan designs. Limitations in overall enrollee cost sharing are incorporated in virtually all medical
plan designs through maximum out of pocket (MOOP) cost provisions. MOOP provisions typically range
from $2,000 to $6,750 per benefit year and limit the total cost sharing for medical and/or prescription
drugs an enrollee is exposed to each year. To analyze the impact of a sunset of the $200 per prescription
3
State benefit mandates apply to a subset of health insurance in California, those regulated by one of California’s two
health insurance regulators: the DMHC and the CDI. Of the rest of the state’s population, a portion will be uninsured
(and therefore will have no health insurance subject to any benefit mandate), and another portion will have health
insurance subject to other state laws or only to federal laws. CHBRP’s estimates of the source of health insurance
available at: www.chbrp.org/other_publications/index.php.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 5
cost sharing limitation, it is important to consider the likelihood that enrollees would reach their benefit
plans’ MOOPs, thus protecting them from increases in cost sharing as a result of the sunset of cost
sharing provisions in current law. Approximately 90.7% of enrollees utilizing high cost oral anticancer
medications would be expected to reach their out of pocket maximums under the assumed plan design
and therefore would continue to be protected from increases in cost sharing due to the sunset of current
law. For the 9.3% of enrollees who do not meet their out of pocket maximums within the plan year,
increases in cost sharing may lead to changes in utilization of prescription drugs due to cost. However, as
described above, utilization is not expected to change for enrollees impacted by the increases in cost
sharing due to the availability of cost sharing assistance programs.
The impact of the sunset is highly dependent on the underlying plan design, and in particular, on the
MOOP limit. If the drug cost sharing limitations included in current law sunset, enrollees with high cost
oral anticancer medication prescriptions will have annual cost sharing increases ranging from 1.0% to
10.0%, on average, with the lowest impact experienced by enrollees in benefit plans with low MOOP
limits and the highest impact experienced by enrollees in benefit plans with high MOOP limits. Individual
enrollees may experience changes in cost sharing that are significantly more than that indicated by
average impact.
Goldman and colleagues (2006) found the price elasticity of oral anticancer medications could be
estimated at -0.01, meaning that enrollees who experience an increase of out-of-pocket costs for oral
anticancer medications of 100% decrease their utilization of oral anticancer medications by 1%. While
CHBRP has assumed that overall utilization of high cost oral anticancer medications will not significantly
change due to the small number of enrollees who utilize high cost oral anticancer medications, there may
be a small number of enrollees who face increases in out of pocket costs and are not able to afford this
additional burden or are not assisted by cost sharing assistance programs. For these enrollees, the
increase in cost sharing may in fact lead to decreases in utilization.
One potential outcome of the elimination of cost sharing limits for high cost drugs is that enrollees may
reach their deductibles and out of pocket maximums sooner in the plan year. Whereas previously an
enrollee who is not in a HDHP may pay a $200 cost share for a prescription drug for three months to
reach their $500 deductible, an enrollee may now reach that $500 deductible after the first month if the
prescription’s cost share at a 20% coinsurance exceeds their deductible. This may place an
insurmountable financial burden on enrollees who are lower income and are less able to afford high costs
upfront, versus spread over multiple months.
However, an enrollee’s response to increases in cost sharing is variable depending on the disease or
condition for which they are taking medications. Enrollees with cancer who are taking oral anticancer
medications are less likely to reduce utilization due to increases in cost sharing. The average annual cost
of medical and prescription drug services for enrollees taking high cost oral anticancer medications is
approximately $187,700, compared to just under $5,000 for enrollees not taking high cost oral anticancer
medications. Enrollees taking high cost oral anticancer medications are more likely to have substantial
medical needs and require additional medical services and prescriptions, therefore meeting their
deductible and out of pocket maximums.
Impact of Cost Sharing on Utilization of Other Medical Service Utilization
Utilization of other medical services could change in a variety of ways based on changes in cost sharing
for specialty prescription drugs. As described above, CHBRP assumes utilization of oral anticancer
medications will not change due to cost sharing increases. However, there may be a small number of
enrollees for whom the increase cost sharing increases due to the sunset of current law could decrease
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 6
utilization of high cost oral anticancer medications. This in turn may lead to a deterioration of health status
that could result in additional medical utilization.
However, some enrollees who may reach their deductibles or out of pocket maximums earlier in their plan
year may utilize more medical services due to the lack of cost sharing responsibility for additional
services. Enrollees who previously had not reached these limits may have delayed or forgone other
medical care until their deductible or out of pocket maximums were reached. Since these limits are
reached sooner in the plan year, if utilization of these additional medical services continue throughout the
plan year, a higher overall utilization of medical services may occur.
Average Cost of Prescriptions and Cost Sharing Assistance Programs
As discussed in the April 20, 2018 analysis of AB 1860, the average cost of oral anticancer medications
per prescription in 2019 is $1,362. However, the three most commonly prescribed oral anticancer
medications (Methotrexate, Tamoxifen citrate, and Anastrozole) account for 62% of prescriptions, but only
1.5% of total cost. The majority of prescribed oral anticancer medications have costs that would result in
cost sharing lower than $200 per prescription, assuming typical coinsurance rates of 10% to 30%.
Additionally, patient assistance programs (i.e., pharmaceutical company-sponsored rebates and coupons,
foundation payments) can help income-qualified patients pay for the more expensive oral anticancer
drugs. IMS Institute for Healthcare Informatics (2016) reported that, nationally, about 25% of patients
received pharmaceutical manufacturer coupons or rebates for retail anticancer drugs in 2015, up from 7%
in 2011. These patient assistance programs averaged patient savings of about $750 per prescription.
According to Robert Mowers, PharmD, BCPS, content expert for CHBRP’s analysis of AB 1860, almost
all patients in California receive assistance from patient assistance programs when obtaining oral
anticancer medications through specialty pharmacies, therefore protecting them against increases in cost
sharing. However, not all enrollees are guaranteed to receive this cost sharing assistance, and therefore
a small share of enrollees will likely experience cost sharing increases.
Baseline and Post-sunset Expenditures
Table 2 and Table 3 present baseline and postmandate expenditures by market segment for DMHC-
regulated plans and CDI-regulated policies. The tables present per member per month (PMPM)
premiums, enrollee expenses for both covered and noncovered benefits, and total expenditures
(premiums as well as enrollee expenses).
The sunset of oral anticancer medication cost sharing provisions would decrease annual expenditures by
$174,000 or -0.0001% for enrollees with DMHC-regulated plans and CDI-regulated policies. This
decrease is largely due to a decrease of $1,017,000 in total health insurance premiums paid by
employers and enrollees, adjusted by an increase of $844,000 in enrollee expenses. However, due to the
availability of patient assistance programs and the impact of potential utilization changes due to cost
sharing increases of prescription drugs on utilization of other medical services, these estimates may
overestimate the impact of the sunset of cost sharing limits.
Premiums
Changes in premiums as a result of the sunset of oral anticancer medication cost sharing provisions
would vary by market segment. Note that such changes are related to the number of enrollees (see Table
1, Table 2 and Table 3) with health insurance affected by the sunset of current law.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 7
The largest reduction in per member per month premium is in the CDI-regulated plans, with small group
CDI-regulated plans having the highest reduction (-0.0021%). The individual and large group DMHC-
regulated plans have the lowest changes in premiums, -0.0004% and -0.0007% respectively.
Since plans offered through Covered California and mirrored plans are not impacted by the sunset of
current law, the impacts on premiums and expenditures are larger in the grandfathered and other non-
grandfathered plans for plans and policies in the individual and small group markets. Specifically within
the DMHC-regulated small group market, premiums are estimated to decrease by -0.0011% among
grandfathered plans and by -0.0022% among other non-grandfathered plans. Within the DMHC-regulated
individual market, premiums are estimated to decrease by -0.0013% among grandfathered plans and by -
0.0038% among other non-grandfathered plans. Within the CDI-regulated small group market, premiums
are estimated to decrease by -0.0023% among grandfathered policies and -0.0026% among other non-
grandfathered policies. Within the CDI-regulated individual market, premiums are estimated to decrease
by -0.0014% among grandfathered policies and -0.0036% among other non-grandfathered policies.
Among publicly funded DMHC-regulated health plans, CalPERS HMOs are the only plans impacted by
the sunset of current law; CHBRP estimates a -0.0008% decrease in premiums for this market segment.
Enrollee Expenses
With a sunset of oral anticancer medication cost sharing limitations, enrollee out of pocket expenses for
oral anticancer medications are expected to increase for the enrollees who are currently subject to a limit
in cost sharing. Enrollee expenses for covered benefits (deductibles, copays, etc.) and enrollee expenses
for noncovered benefits would vary by market segment. The small group CDI-regulated market would
likely experience the largest increase in expenditures by enrollees at $0.0110 per member per month.
The lowest increase in expenditures by enrollees is estimated to be $0.0019 per member per month for
DMHC-regulated individual market enrollees.
Postmandate Administrative Expenses and Other Expenses
CHBRP estimates that the increase or decrease in administrative costs of DMHC-regulated plans and/or
CDI-regulated policies will remain proportional to the increase or decrease in premiums. CHBRP
assumes that if health care costs decrease as a result of decreased utilization or changes in unit costs,
there is a corresponding proportional decrease in administrative costs. CHBRP assumes that the
administrative cost portion of premiums is unchanged. All health plans and insurers include a component
for administration and profit in their premiums.
Long Term Impacts
Over time, an increasing number of enrollees utilizing oral anticancer medications may experience
increases in cost sharing due to rising drug costs or the availability of new and more expensive
medications. This may place more enrollees at risk of experiencing high cost sharing early in the plan
year and may potentially result in utilization decreases.
Over time, the share of enrollees in high deductible health plans (HDHPs) has increased. The CDC found
enrollment in employment based HDHPs increased from 24% in 2011 to 34.9% in 2016, nationally
(Cohen and Zammatti, 2017). If this trend continues, enrollees in these plans face higher upfront costs
and are at an increased risk of being adversely impacted through lower utilization due to higher cost
sharing.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org viii
Table 1. 2020 Impacts of Sunset of Cost Sharing Provisions for Oral Anticancer Medication on Benefit
Coverage, Utilization, and Cost
Baseline
Post-sunset
Increase/
Decrease
Percentage
Change
Benefit coverage
Total enrollees with
health insurance subject
to state-level benefit
mandates (a)
23,433,000
23,433,000
0
0%
Total enrollees with
health insurance subject
to cost sharing provision
in current law
15,923,000
15,923,000
0
0%
Total enrollees with
health insurance
impacted by sunset of
current law
13,383,000
13,383,000
0
0%
Total enrollees with
health insurance
impacted by sunset of
current law with OPD
coverage
12,362,000
12,362,000
0
0%
Utilization and unit cost
Number of enrollees
with high cost oral
anticancer prescription
drug claims subject to
the cost sharing
limitation
9,200
0
-9,200
-100.0%
Percentage of enrollees
with high cost oral
anticancer prescription
drug claims subject to
the cost sharing
limitation
0.1%
0.0%
-0.1%
-100.0%
Expenditures
Premiums by payer
Private Employers for
group insurance
$73,817,182,000
$73,816,508,000
-$674,000
-0.0009%
CalPERS HMO
employer expenditures
(b)
$5,598,878,000
$5,598,835,000
-$43,000
-0.0008%
Medi-Cal Managed
Care Plan expenditures
(d)
$30,139,205,000
$30,139,205,000
$0
0.0000%
Enrollees for individually
purchased insurance
$16,540,870,000
$16,540,796,000
-$74,000
-0.0004%
Individually
Purchased –
Outside Exchange
$7,043,319,000
$7,043,245,000
-$74,000
-0.0011%
Individually
Purchased –
Covered California
$9,497,551,000
$9,497,551,000
$0
0.0000%
Enrollees with group
insurance, CalPERS
HMOs, Covered
California, and Medi-Cal
Managed Care (a) (c)
$22,630,493,000
$22,630,266,000
-$227,000
-0.0010%
Enrollee expenses
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org ix
Enrollee out of pocket
expenses for covered
benefits (deductibles,
copayments, etc.)
$15,903,248,000
$15,904,092,000
$844,000
0.0053%
Enrollee expenses for
noncovered benefits (d)
$0
$0
$0
0.00%
Total expenditures
$164,629,876,000
$164,629,702,000
-$174,000
Source: California Health Benefits Review Program, 2018.
Notes: (a) This population includes persons with privately funded (including Covered California) and publicly funded (e.g., CalPERS
HMOs, Medi-Cal Managed Care Plans) health insurance products regulated by DMHC or CDI. Population includes enrollees aged 0
to 64 years and enrollees 65 years or older covered by employer-sponsored health insurance.
(b) Approximately 56.17% of CalPERS enrollees in DMHC-regulated plans are state retirees, state employees, or their dependents.
About one in five (20.5%) of these enrollees have an OPD benefit not subject to DMHC (see Appendix D in CHBRP’s April 20, 2019
analysis of AB 1860), so CHBRP has projected no impact for those enrollees. However, CalPERS could, postmandate, require
equivalent coverage for all its members (which could increase the total impact on CalPERS).
(c) Enrollee premium expenditures include contributions by employees to employer-sponsored health insurance, health insurance
purchased through Covered California, and contributions to Medi-Cal Managed Care.
(d) Includes only expenses paid directly by enrollees (or other sources) to providers for services related to the mandated benefit that
are not currently covered by insurance. This only includes those expenses that will be newly covered postmandate. Other
components of expenditures in this table include all health care services covered by insurance.
Key: CalPERS HMOs = California Public Employees’ Retirement System Health Maintenance Organizations; CDI = California
Department of Insurance; DMHC = Department of Managed Health Care; OPD = outpatient prescription drug.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 10
Table 2. Baseline (Before Sunset) Per Member Per Month Premiums and Total Expenditures by Market Segment, California, 2020
DMHC-Regulated
CDI-Regulated
Privately Funded Plans
(by Market) (a)
Publicly Funded Plans
Privately Funded Plans
(by Market) (a)
Large
Group
Small
Group
Individual
CalPERS
HMOs (b)
MCMC
(Under 65)
(c)
MCMC
(65+) (c)
Large
Group
Small
Group
Individual
Total
Enrollee counts
Total enrollees in
plans/policies subject
to state Mandates (d)
9,371,000
3,117,000
2,081,000
887,000
6,832,000
678,000
214,000
133,000
120,000
23,433,000
Total enrollees in
plans/policies subject
to cost sharing
provisions in current
law
9,371,000
3,117,000
2,081,000
887,000
0
0
214,000
133,000
120,000
15,923,000
Total enrollees in
plans/policies
impacted by sunset of
current law
9,371,000
2,381,000
313,000
887,000
0
0
214,000
107,000
110,000
13,383,000
Premiums
Average portion of
premium paid by
employer
$514.09
$366.33
$0.00
$526.01
$284.98
$832.76
$593.41
$489.18
$0.00
$109,555,265,000
Average portion of
premium paid by
employee
$130.20
$168.77
$633.86
$85.63
$0.00
$0.00
$187.26
$178.19
$494.57
$39,171,362,000
Total premium
$644.29
$535.11
$633.86
$611.64
$284.98
$832.76
$780.67
$667.37
$494.57
$148,726,627,000
Enrollee expenses
For covered benefits
(deductibles, copays,
etc.)
$51.27
$118.87
$172.03
$52.15
$0.00
$0.00
$142.65
$187.88
$121.42
$15,903,248,000
For noncovered
benefits (e)
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0
Total expenditures
$695.55
$653.97
$805.88
$663.80
$284.98
$832.76
$923.33
$855.25
$616.00
$164,629,875,000
Source: California Health Benefits Review Program, 2018.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 11
Notes: (a) Includes enrollees with grandfathered and nongrandfathered health insurance acquired outside or through Covered California (the state’s health insurance marketplace).
(b) Approximately 56.17% of CalPERS enrollees in DMHC-regulated plans are state retirees, state employees, or their dependents.
(c) Medi-Cal Managed Care Plan expenditures for members over 65 include those who are also Medicare beneficiaries. This population does not include enrollees in COHS.
(d) This population includes both persons who obtain health insurance using private funds (group and individual) and through public funds (e.g., CalPERS HMOs, Medi-Cal Managed
Care Plans). Only those enrolled in health plans or policies regulated by the DMHC or CDI are included. Population includes all enrollees in state-regulated plans or policies aged 0 to
64 years, and enrollees 65 years or older covered by employer-sponsored health insurance.
(e) Includes only those expenses that are paid directly by enrollees or other sources to providers for services related to the mandated benefit that are not currently covered by
insurance. This only includes those expenses that will be newly covered, postmandate. Other components of expenditures in this table include all health care services covered by
insurance.
Key: CalPERS HMOs = California Public Employees’ Retirement System Health Maintenance Organizations; CDI = California Department of Insurance; DMHC = Department of
Managed Health Care; MCMC = Medi-Cal Managed Care.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 12
Table 3. Postmandate (After Sunset) Per Member Per Month Premiums and Total Expenditures by Market Segment, California, 2020
DMHC-Regulated
CDI-Regulated
Privately Funded Plans
(by Market) (a)
Publicly Funded Plans
Privately Funded Plans
(by Market) (a)
Large
Group
Small
Group
Individual
CalPERS
HMOs (b)
MCMC
(Under
65) (c)
MCMC
(65+) (c)
Large
Group
Small
Group
Individual
Total
Enrollee counts
Total enrollees in
plans/policies subject to
state Mandates (d)
9,371,000
3,117,000
2,081,000
887,000
6,832,000
678,000
214,000
133,000
120,000
23,433,000
Total enrollees in
plans/policies subject to
cost sharing provisions in
current law
9,371,000
3,117,000
2,081,000
887,000
0
0
214,000
133,000
120,000
15,923,000
Total enrollees in
plans/policies impacted
by sunset of current law
9,371,000
2,381,000
313,000
887,000
0
0
214,000
107,000
110,000
13,383,000
Premiums
Average portion of
premium paid by
employer
-$0.0037
-$0.0059
$0.0000
-$0.0040
$0.0000
$0.0000
-$0.0097
-$0.0101
$0.0000
-$717,000
Average portion of
premium paid by
employee
-$0.0009
-$0.0027
-$0.0024
-$0.0007
$0.0000
$0.0000
-$0.0031
-$0.0037
-$0.0094
-$301,000
Total premium
-$0.0046
-$0.0086
-$0.0024
-$0.0047
$0.0000
$0.0000
-$0.0128
-$0.0137
-$0.0094
-$1,017,000
Enrollee expenses
For covered benefits
(deductibles, copays,
etc.)
$0.0039
$0.0069
$0.0019
$0.0040
$0.0000
$0.0000
$0.0109
$0.0110
$0.0075
$844,000
For noncovered benefits
(e)
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0
Total expenditures
-$0.0007
-$0.0017
-$0.0005
-$0.0007
$0.0000
$0.0000
-$0.0019
-$0.0027
-$0.0019
-$174,000
Percent change
Premiums
-0.0007%
-0.0016%
-0.0004%
-0.0008%
0.0000%
0.0000%
-0.0016%
-0.0021%
-0.0019%
-0.0007%
Total expenditures
-0.0001%
-0.0003%
-0.0001%
-0.0001%
0.0000%
0.0000%
-0.0002%
-0.0003%
-0.0003%
-0.0001%
Source: California Health Benefits Review Program, 2018.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 13
Notes: (a) Includes enrollees with grandfathered and nongrandfathered health insurance acquired outside or through Covered California (the state’s health insurance marketplace).
(b) Approximately 56.17% of CalPERS enrollees in DMHC-regulated plans are state retirees, state employees, or their dependents.
(c) Medi-Cal Managed Care Plan expenditures for members over 65 include those who are also Medicare beneficiaries. This population does not include enrollees in COHS.
(d) This population includes both persons who obtain health insurance using private funds (group and individual) and through public funds (e.g., CalPERS HMOs, Medi-Cal Managed Care
Plans). Only those enrolled in health plans or policies regulated by the DMHC or CDI are included. Population includes all enrollees in state-regulated plans or policies aged 0 to 64 years, and
enrollees 65 years or older covered by employer-sponsored health insurance.
(e) Includes only those expenses that are paid directly by enrollees or other sources to providers for services related to the mandated benefit that are not currently covered by insurance. This
only includes those expenses that will be newly covered, postmandate. Other components of expenditures in this table include all health care services covered by insurance.
Key: CalPERS HMOs = California Public Employees’ Retirement System Health Maintenance Organizations; CDI = California Department of Insurance; DMHC = Department of Managed Health
Care; MCMC = Medi-Cal Managed Care.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 14
APPENDIX A COST IMPACT ANALYSIS: DATA SOURCES,
CAVEATS, AND ASSUMPTIONS
The cost analysis in this report was prepared by the members of the cost team, which consists of CHBRP
task force members and contributors from the University of California, Los Angeles, and the University of
California, Davis, as well as the contracted actuarial firm, PricewaterhouseCoopers (PwC).
4
Information on the generally used data sources and estimation methods, as well as caveats and
assumptions generally applicable to CHBRP’s cost impacts analyses are available at CHBRP’s website.
5
This appendix describes analysis-specific data sources, estimation methods, caveats and assumptions
used in preparing this cost impact analysis.
Approach – Data Sources
Costs and patient counts were modeled using 2016 MarketScan® commercial claims and
enrollment data for the state of California. CHBRP extracted all medical and drug claims for
enrollees with at least one high cost oral anti-cancer prescription. These enrollees represented
approximately 0.1% of all enrollees in the California MarketScan data, and have an average
allowed cost that is 38 times that of enrollees without oral anti-cancer high cost drugs (see Table
below).
Enrollee Category:
Average 2016 Allowed Cost Per Cohort
Impacted by OPD Cost Sharing Sunset
$187,690
Not Impacted by OPD Cost Sharing Sunset
$4,920
Total CA Mandate Population Subject to Current Law
$5,050
Analysis-Specific Assumptions
This subsection discusses the caveats and assumptions specifically relevant to the sunset of enrollee
out of pocket cost-sharing limitations for oral anticancer drugs that would sunset January 1, 2019 and
January 1, 2020. This assumes that AB 1860 and SB 1021, which would extend cost sharing provisions
of current law, do not pass.
CHBRP trended the data to 2020 using the trend assumptions shown in the table below.
Because CHBRP is unable to predict the prescription drugs that will be introduced in the future
and unable to predict the potential changes in utilization of drugs due to new products or changes
in existing products, CHBRP assumed the mix of drugs remains unchanged from 2016 and no
new high cost drugs become available. Additionally, CHBRP assumes no changes in plan/insurer
methods of utilization management that may impact the coverage of medical and drug treatments
between baseline and sunset periods, such as use of prior authorization requirements and
medical review for medical treatments or mandatory generic substitutions for drug treatment.
4
CHBRP’s authorizing statute, available at www.chbrp.org/docs/authorizing_statute.pdf, requires that CHBRP use a
certified actuary or “other person with relevant knowledge and expertise” to determine financial impact.
5
See 2017 Cost Impact Analyses: Data Sources, Caveats, and Assumptions, available at
www.chbrp.org/analysis_methodology/cost_impact_analysis.php.
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 15
CHBRP also assumes no changes in use of formularies, tiered copayments, or assignment of a
drug to a formulary tier. The table below provides source information for annual cost trends.
Service Category:
Annual Cost
Trend
Source
Inpatient
2.6%
“Behind the Numbers 2018: Medical
Cost Trend” by PwC.
Outpatient/Professional
2.6%
“Behind the Numbers 2018: Medical
Cost Trend” by PwC.
Outpatient Prescription Drugs (not high-cost
drugs)
1.0%
“2017 Drug Trend Report” by Express
Scripts.
Outpatient Prescription Drugs (specialty, not
oral anticancer)
11.0%
“2016 Drug Trend Report” by Express
Scripts.
Outpatient Prescription Drugs (oral anticancer)
10.0%
“2016 Drug Trend Report” by Express
Scripts.
Cost relatively factors are also applied to 2016 MarketScan® commercial claims to adjust
covered benefits upwards to reflect estimated 2020 expenditures by plan.
Benefit Design Sensitivity Analysis
To estimate the protections afforded by MOOP benefit provisions on those enrollees who have
high cost oral anticancer prescription drugs, CHBRP modelled a range of benefit designs, varying
deductibles, coinsurance percentages, and MOOP limits. To simplify benefit cost modeling,
CHBRP assumed simplified benefit plans under which all services were covered under a common
deductible, coinsurance, and maximum out of pocket cost. Impact on member cost sharing
payments due to the cost sharing limitation was evaluated for each member identified in the
MarketScan data as having a high cost oral anti-cancer prescription drug. Due to time and data
constraints and other complexities, it was not feasible to perform date-order readjudication of the
claims to precisely calculate plan costs and member cost sharing under the baseline and sunset
scenarios, and a number of simplifying assumptions were employed. For example, CHBRP
assumed all other medical services and non-specialty drugs are subject to the plan design
deductible and MOOP before modeling the removal of the OPD cost sharing limitations on high
cost oral anticancer drugs.
To analyze the impact sensitivity due to variations in primary benefit design elements, plan costs
and member cost sharing were modeled for benefit plans with combined medical and drug
deductibles ranging from $1,350 to $3500, member coinsurance from 20% to 30%, and maximum
out of pocket cost from $3,500 to $6,750. The results of the sensitivity analysis demonstrate that
the impact of the mandate sunset is highly dependent on the underlying plan design, and in
particular, on the MOOP limit. The sensitivity analysis indicated that if the drug cost sharing
limitation is allowed to sunset, enrollees with high cost oral anti-cancer drugs will have annual
cost sharing increases ranging from 1.0% to 10.0%, on average, with the lowest impact
experienced by enrollees in benefit plans with low MOOP limits and the highest impact
experienced by enrollees in benefit plans with high MOOP limits. Individual enrollees may
experience changes in cost sharing that are significantly more than that indicated by average
impact.
To model the expenditure impact of allowing the mandate to sunset, CHBRP applied an average
benefit design for enrollees in large and small group plans based on information from PwC’s
Touchstone Report (2017) and the 2017 Kaiser/HRET Survey of Employer-Sponsored Health
Benefits. The average plan design incorporated a $1,350 deductible, 20% coinsurance, and
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 16
$3,500 MOOP. Under a 20% coinsurance provision, any drug costing at least $1,000 could
exceed the $200 per prescription limitation that is currently in place. This results in an effective
cost sharing of 1.50% before and 1.53% after current law sunsets on January 1, 2020. Effective
cost sharing refers to the enrollee cost share as a percentage of total allowed cost of all medical
and pharmacy services. Enrollees with high cost oral anticancer drugs will have annual cost
sharing increases of 2.20% (calculated as (1.53/1.50)-1).
Interaction between Spending on Outpatient Prescription Drug and Medical Services
Enrollees with high cost oral anticancer medication prescription drug claims who are affected by
the cost sharing limits in current law have higher costs of medical services and higher annual cost
sharing for these medical services ($244,690 and $4,160, respectively) compared to those who
do not reach the outpatient prescription drug limit ($6,130 and $830, respectively). This is
important to note given the annual deductibles or out of pocket maximums of health plans include
costs of both medical expenses and outpatient prescription drugs. Enrollees who have high
outpatient drug costs are likely to have high medical service costs. While CHBRP did not assume
a change in medical services due to a change in outpatient drug utilization in the cost model (i.e.
a price elasticity of demand was not applied for medical services), the potential medical and
financial consequences of a change in utilization of medical services is briefly described
qualitatively in this analysis.
The table below shows the distribution of enrollees with high cost oral anti-cancer drugs using the
average plan design (as noted above, this average plan design includes a $1,350 deductible,
20% coinsurance, and $3,500 MOOP). The majority of enrollees with high cost oral anti-cancer
drugs reach the MOOP limit under both the baseline and sunset scenarios, which means these
enrollees experience no change in total cost sharing. This has the effect of reducing the impact of
the sunset of the cost sharing limits.
Categorization:
% of those Subject to Cost
Sharing Limitation
Subject to cost sharing limitation
100.0%
1. Does not meet deductible
0.0%
2. Hits the maximum out of pocket (pre-
sunset and post-sunset)
90.7%
3. Estimated to be impacted by cost sharing
limitation
9.3%
Analysis of California Assembly Bill 1860
Current as of June 20, 2018 www.chbrp.org 17
REFERENCES
Cohen, R.A. & Zammitti, E.P. (2017). High-deductible health plans and financial barriers to medical care:
Early release of estimates from the National Health interview Survey, 2016. National Center for
Health Statistics, Centers for Disease Control and Prevention. Available at:
https://www.cdc.gov/nchs/data/nhis/earlyrelease/ERHDHP_Access_0617.pdf. Accessed June 10,
2018.
Goldman, D. P., Joyce, G. F., Lawless, G., Crown, W. H., & Willey, V. (2006). Benefit design and
specialty drug use. Health Aff (Millwood), 25(5), 1319-1331. doi:10.1377/hlthaff.25.5.1319
Henry J. Kaiser Family Foundation, Health Research and Educational Trust. 2017 Employer
HealthBenefits Survey. Menlo Park, CA: Kaiser Family Foundation; 2017. Available
at:www.kff.org/health-costs/report/2017-employer-health-benefits-survey/. Accessed March 12,
2018.
IMS Institute for Healthcare Informatics (IMS). Global Oncology Trend Report: A Review of 2015 and
Outlook to 2020. June 2016. Parsippany, NJ: IMS Institute for Healthcare Informatics; 2016.
Available at: www.iqvia.com/-/media/iqvia/pdfs/institute-reports/global-oncology-trend-
report2016.pdf?la=en&hash=815952377CC0C99649DF19EF40625F0FB5ECA00B&_=15228707
30477. Accessed March 14, 2018.
PriceWaterhouseCooper. Health and Well-being Touchstone Survey Results. 2017. Available at:
https://www.pwc.com/us/en/hr-management/publications/pdf/pwc-touchstone-2017.pdf. Accessed
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