Each Wonks’ Corner, a member of Blue Shield’s government affairs team dives into a current policy topic. See our previous Wonks’ Corner blogs here.

Read our initial Wonks' Corner on the creation of the Office of Health Care Affordability

 

Health care has increasingly become more expensive for Californians. Personal health care spending has nearly tripled in California since 2000, outpacing economic indicators like median wage and median household income. A majority of Californians (57%) report skipping care in the past year due to cost, including 74% of low-income Californians.

As a non-profit health plan, our mission is to address the health care affordability crises. Together with a coalition of health care industry players, Blue Shield of California led the creation of the Office of Health Care Affordability. In June 2022, Governor Newsom signed legislation into law creating the Office of Health Care Affordability. (You can click here to read our previous Wonks’ Corner post on the creation of the Office of Health Care Affordability.)

A lot has happened since that legislation was signed: the Department of Health Care Access and Information convened a Board to oversee the Office’s work, and finalized several regulations over the past 18 months. Several venues have been created for stakeholders to provide input on topics ranging from data submission standards to how we measure primary care spending.

Here are three things to consider as the Office continues its work in 2024 and beyond:

  • Major health care transactions will be scrutinized for their effect on competition, access, and quality. The Office finalized regulations in late 2023 that establish how the Office will proceed with “cost and market impact reviews” of major health care transactions. The regulations potentially impact a wide range of transactions involving health care entities in California beyond mergers and acquisitions. The scope will also evaluate other contractual arrangements that meet the regulation’s revenue and/or fair market value thresholds. The Office will issue a final report of its findings to determine the transaction’s impact on issues like market competition and access to care, among other considerations. Stakeholders will be watching closely to see what types of transactions the Office scrutinizes in practice, how transactions are defined and analyzed in reports, and what actions the California Attorney General takes in response to these reports.

 

  • Setting a spending growth target will affect not just financial forecasting, but also market behavior.  The Office is close to finalizing proposed regulations that, if finalized as currently written, would establish a 3% spending target for health care entities including payers, provider organizations and hospitals for 2025 to 2029, with 2026 being the first year in which spending is subject to the target. Organizations like Blue Shield will need to adjust their forecasting to ensure that our projected spending growth complies with the final target. The target will affect how payers interact with other entities in the market, especially contractual relationships with providers and hospitals. It could also affect how legislators and regulators consider mandates that require increased health plan or provider spending on care.

 

  • Work remains to better measure provider organization, hospital, and drug price spending. Beginning this year, payers like Blue Shield will be required to submit to the Office a “total health care expenditures” submission that contains spending data from the previous calendar year. Spending information will provide insight into spending on primary care and alternative payment arrangements, among other issues of interest, and will be the primary method of measuring payer spending. Based on a similar submission method used in Massachusetts, the data is also intended to shed light on provider organization spending based on claims data and capitation data that payers can attribute to providers. However, given the complexities of the California market, measuring provider organization spending is likely to require us to iterate on this measurement approach. The Office and stakeholders are just now beginning work to develop an approach to measuring hospital spending, and discussions will begin at a later date regarding spending on prescription drugs—two primary drivers of health spending.

 

Adequately reviewing transactions and measuring and reining in health care spending trends across the industry will have a major impact on California health care in the years to come. Blue Shield of California continues to work alongside the Office of Health Care Affordability and other stakeholders to ensure that we can continue to provide sustainable and affordable coverage to our members.