BILL ANALYSIS

H.B. 1405

By: Smithee

Insurance

Committee Report (Unamended)

BACKGROUND AND PURPOSE

Current law prevents an issuer of a health plan that covers prescription drugs to a large employer not subject to federal law regarding voluntary, private sector pension and health plans from changing the cost of any covered prescription drug before the plan renewal date.

An enrollee who signs a contract for the purchase of health insurance makes a commitment to pay for the insurance coverage and the costs associated with the purchase of prescriptions for the life of that contract. Likewise, an enrollee should expect a health plan provider to honor that contract throughout its duration.

An individual with a chronic illness is likely to rely on prescription drugs to help manage related symptoms. Many of these drugs do not yet have generic equivalents and are therefore quite costly to the patient. High out-of-pocket costs for prescription medications have been shown to increase the risk of noncompliance with a doctor's recommendations, which increases the risk that an illness will worsen or that the course of improvement will be impeded.

Maintaining contract terms related to prescriptions allows a policy holder to budget for the cost of medications throughout the life of the contract. Unexpected changes to prescription drug costs during the contract's 12-month period can create a serious problem for a policy holder. In particular, a policy holder living on a fixed income is more likely to have difficulties adjusting to an unexpected change in the cost of medications and may not be able to afford to pay the increased cost, perhaps causing the individual to cut back on or go without essential medications, or to change medications for reasons unrelated to health.

H.B. 1405 extends contract protections already given to policy holders of large employer plans to policy holders employed by small businesses and to policy holders covered by individual plans.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 1405 amends the Insurance Code to make provisions governing the coverage of prescription drugs specified by one or more drug formularies in a health benefit plan applicable both to an individual insurance policy or insurance agreement and to a small or large employer group contract or similar coverage document in addition to the provisions' applicability to group, blanket, and franchise insurance policies and insurance agreements offered by certain plan issuers. The bill makes conforming changes, including a redefinition of "enrollee."

H.B. 1405 makes its provisions applicable only to a health benefit plan delivered, issued for delivery, or renewed on or after January 1, 2012.

EFFECTIVE DATE

September 1, 2011.