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On August 31, the California Legislature ended the second year of the 2023-2024 legislative session. Lawmakers worked arduously until midnight of the last day of the session to decide on the future of more than 1300 bills but ultimately ran out of time to get through them all. Through their efforts, they passed approximately 990 of these measures which were presented to Governor Newsom for signing this fall. Keeping in line with recent years, the Governor vetoed 183 of the bills (a roughly 18% veto rate). Nevertheless, California successfully passed many potentially impactful bills relating to artificial intelligence, healthcare debt, costs, and the marketplace. Most of the signed bills from this year’s session are expected to become effective as of January 1, 2025, unless specified otherwise.

This month’s California Legislative Beat delves into some of the most noteworthy bills from the past session that are anticipated to shape the near future of healthcare pricing and competition.

Artificial Intelligence

The recent artificial intelligence (AI) boom has raised many questions among legislators and the public about how to regulate its use across industries. At the federal level, little progress has been made toward tackling this issue, as over 120 bills remain under consideration by Congress. This lack of federal movement has imposed a greater responsibility on states to create their own AI-specific laws. This past year, Governor Newsom signed several AI-related bills that will impact several industries, including healthcare.

WHAT PASSED

Health Care Services: Artificial Intelligence (AB-3030)

Signed into law on September 28, 2024, AB-3030 will now impose significant disclosure requirements on any health facility, clinic, physician’s office, or group practice using generative AI in patient communications. Under the new law, medical providers must now include a disclaimer to inform patients of the use of generative AI in communications between the medical practice and the patient. Providers will also be required to include clear instructions on how a patient can contact a provider or another individual at the medical facility. Communicative materials will not be subject to the disclosure and clear instruction requirements if the communication is reviewed by a licensed or certified human healthcare provider prior to distribution. These requirements apply to every single AI-impacted communication with patients, including replies to prior communications where a timely disclosure was already made.

Health Care Coverage: Utilization Review (SB-1120)

Arriving on the heels of a recent consumer class action against commercial insurers for their use of AI in the utilization review (UR) and utilization management (UM) processes, California will now require health and disability plan insurers to comply with added AI-related requirements when approving or denying services through UR and UM processes. Insurance companies have increasingly been using AI to determine the medical necessity of treatments when making coverage determinations. This new law requires insurers to make UR determinations based on relevant applicable criteria like a patient’s individualized clinical history, medical circumstances, and recorded data in lieu of group datasets. While AI is still allowed to assist insurers in determinations, insurance companies must now ensure that the software is periodically reviewed, updated, and applied to prevent harm and discrimination against enrollees. Moreover, a healthcare provider must make all final UR and UM coverage decisions, not the AI software.

California AI Transparency Act (SB-942)

The California AI Transparency Act creates new transparency standards for persons or organizations that use generative AI to interact with substantial user bases. Under the Act, “Covered Providers” are subject to specific manifest and latent disclosure policies to identify AI-generated content or risk facing civil penalties for noncompliance. The Act defines "Covered Providers" as persons who create, code, or otherwise produce generative AI systems with more than 1 million monthly visitors or users. While this Act is broadly applicable to all industries, it has the potential to significantly influence healthcare by increasing patient and provider confidence in all sorts of healthcare-related medical content, ranging from medical advice to diagnostic imagery and patient communications. This will, however, come at a cost, as healthcare AI developers will now need to work on incorporating latent disclosures into complicated medical outputs like imaging and audio consultations. The Act will go into effect on January 1, 2026.

Healthcare Debt

Over one-third of Californians report having outstanding medical debt, with almost 70% of that debt being comprised of hospital debt. Despite partaking in financial assistance programs, many Californian patients are still receiving hefty hospital bills, keeping many stuck in continued cycles of poverty, further exacerbated by racial and economic inequity. The California Legislature passed a couple of bills aimed at tackling this issue by focusing on hospital charity and discounted care programs and the erasure of medical debt from credit score or lending decisions.

WHAT PASSED

Hospital and Emergency Physician Fair Pricing Policies (AB-2297)

Most hospitals in California already provide charity and discounted care for uninsured and underinsured patients. However, up until now, there have been few rules to regulate what these programs should look like and therefore, there has been little standardization among hospitals in relation to these services. To counteract the negative effects of medical debt, the California Legislature recently required all hospitals in California to provide charity and discounted care for uninsured and underinsured hospital care recipients, while placing minimum stipulations on what the charity or discounted care must entail. This new policy prevents hospitals from imposing time limits on charity care eligibility, considering a patient's monetary assets in financial assistance eligibility proceedings, and placing liens on a patient's real property.

Consumer Debt: Medical Debt (SB-1061)

This new California bill prevents credit reports from including medical debt (e.g., unpaid hospital bills) and prohibits banks and lenders from using it to deny someone credit. Medical debt has traditionally been one of the most common reasons people receive bad credit scores and has prevented many from achieving their financial goals. Under SB-1061, patients will receive debt relief if a company knowingly continues to put their medical debt onto credit reports. Furthermore, the new law also places more requirements on hospitals that decide to sell a patient's debt to a third party, such as a debt collection company. Under the law, hospitals are required to create clear contracts for medical debt entered into on or after July 1, 2025. The bill also includes provisions against patients who fail to pay providers using insurance-provided money received for medical services. It now enables insurers to report unpaid amounts as medical debts after bypassing a 60-day to one-year wait time and sending reminders to both the patient and provider.

Healthcare Costs

The California Legislature passed several bills aimed at curbing healthcare costs, mainly by expanding insurance coverage requirements for a myriad of specific conditions. Specifically, the Legislature made progress this session on cost coverage measures affecting HIV medications, sexual and reproductive health care, medication-assisted treatment, and treatments for other types of drugs and alcohol dependency.

WHAT PASSED

Health Care Coverage: Medication-Assisted Treatment (AB-1842)

AB-1842 requires health care service plans and health insurers who offer outpatient prescription drug benefits to provide coverage free from prior authorization, step therapy, or utilization review proceedings for at least one U.S. Food and Drug Administration (FDA)-approved medication in four categories. The categories include: medication for the reversal of opioid overdose, medication for detoxification or maintenance treatment of substance use disorders, long-acting buprenorphine products, and long-acting injectable naltrexone products.

HIV Preexposure Prophylaxis and Postexposure Prophylaxis (SB-339)

California was one of several states who sought to further decrease HIV infection rates through legislation this year. Through SB-339, pharmacists may now furnish up to a 90-day supply of preexposure prophylaxis (PrEP) or post-exposure prophylaxis (PEP), so long as certain conditions are met. Pharmacists may continue to provide treatments beyond the initial 90-day approval period without immediate physician intervention if specific conditions remain satisfied.

Immediate Postpartum Contraception (AB-2129)

AB-3129 was one of a few bills passed in an effort to further increase patients' access to sexual and reproductive health care services. Under the legislation, commercial health plans will now be required to cover the cost of immediate postpartum contraception provided in hospitals or accredited birth centers. This would be considered a separate payment from the standard global obstetrics payment code.

Health Care Coverage: Rape and Sexual Assault (AB-2843)

Following in line with AB-3129’s efforts to increase patient access to sexual and reproductive health care, AB-2843 requires that health plans in California provide coverage free from cost-sharing for medical care and treatment following a rape or sexual assault.

Chemical Dependency Recovery Hospitals (AB-2376)

The state continues to make strides toward helping people who are struggling with alcohol or drug dependency. To make treatment more accessible and flexible, AB-2376 has expanded the definition of “chemical dependency recovery services” to include medications that help treat addiction and medically supervised detoxification. The bill also expands what parts of a hospital or health care center could offer addiction recovery services.

Healthcare Markets

This year the Legislature passed several bills aimed at tackling how California's healthcare market operates – both from a financial and operational standpoint. From expanding training for healthcare providers to creating new rules about what services insurance must cover and bringing on foreign providers to plug service gaps, the Legislature accomplished an ambitious agenda. The Legislature also passed AB-2063, which the California Legislative Beat previously covered. This bill was designed to extend the duration of a pilot program that sought to control healthcare costs and improve patient outcomes.

WHAT PASSED

Health Care Coverage: Cost Sharing (AB-2258)

While insurance plans currently cover many preventative health services, they do not always cover all the extra items or tests that are required to adequately diagnose preventative health concerns. Beginning on January 1, 2025, the law will prevent insurance companies from charging additional copays or deductibles for preventative care services such as at-home test kits for sexually transmitted diseases (STDs) and cancer screenings. In the event that an insurance company knowingly or unknowingly fails to cover these services, they will face monetary penalties on a per-violation basis.

California Dignity in Pregnancy and Childbirth Act (AB-2319)

This term, the California Legislature recognized biases in the healthcare system, particularly as it relates to pregnancy and childbirth. Under this new law, implicit bias training that recognizes intersectionality (i.e., the comingling of factors such as race, gender, and identity) is now required for all healthcare workers involved in pregnancy care. Current healthcare workers are required to complete this training by June 1, 2025, and new healthcare workers must complete the training within 6 months of starting their job.

California Health Benefit Exchange (AB-2435)

Covered California is California's version of the health insurance marketplace created under the Affordable Care Act. This program is run by an executive board that can make decisions and has the authority to create emergency rules when quick decisions are needed. The executive board's emergency rule authority was set to end January 1, 2025, but the Legislature voted to extend this authority to January 1, 2030.

California Health Benefit Exchange: Financial Assistance (AB-2749)

The California Legislature added protections to workers who lose their health insurance during strikes, lockouts, or other labor disputes. Under AB-2749, workers who lose their health insurance in a labor dispute can receive financial assistance to cover health insurance through Covered California until their job-based insurance is reinstated. The state will regulate this process by requiring employers and labor organizations to tell Covered California when workers have lost their health insurance through a labor dispute.

Licensed Physicians and Dentists from Mexico Program (AB-2860)

The Licensed Physicians and Dentists from Mexico Program seeks to fill important gaps in California's care by recruiting and allowing Mexican doctors and dentists to work in underserved areas in California for three years. This bill replaces an older, similar pilot program with two updated ones for doctors and dentists, respectively. The program is seen to not only address the shortage of medical workers in a quick and efficient manner, but can also simultaneously overcome the language and cultural competency barriers that exist in many California communities.

Licensed Physicians and Dentists from Mexico Pilot Program: Extension of Licenses (AB-2864)

Currently, doctors and dentists who were brought onto the Licensed Physicians and Dentists from Mexico Pilot Program (the preceding program to the one described in AB-2860) received a 3-year license. This bill permits doctors and dentists from the pilot program to request a 3-year extension on their license if it is about to expire so long as they still have an active and valid license at the time they apply and pay a fee for the extension.

What's Next

California convened its 2025-2026 Legislative Session on December 2, 2024. Stay tuned to the Source's California Legislative Beat for the latest information about the Legislature's movements.

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