California lawmakers sent several healthcare bills to Governor Gavin Newsom’s desk at the end of the legislative session last week that aim to make healthcare more accessible and affordable. Key measures include Senate Bill 40, which would cap monthly insulin costs at $35, and Senate Bill 41, which would create strict regulations for pharmacy benefit managers who serve as intermediaries between insurers and drug manufacturers. These prescription drug reforms target rising medication costs, which increased by nearly 11% between 2022 and 2023.
Two bills would streamline prior authorization processes; one eliminating requirements for treatments approved 90% of the time, and another shortening insurer response times to three days for standard requests and 24 hours for urgent ones. Assembly Bill 1312 would require hospitals to proactively screen patients for charity care eligibility before billing them, particularly targeting uninsured patients and those enrolled in means-tested programs. Senate Bill 81 would require hospitals to designate protected “non-public spaces” and restrict immigration agents from entering without judicial warrants, while another bill would allow abortion providers to prescribe pills without including names on prescription labels. Governor Newsom has until October 12 to sign or veto.
California’s reforms echo ongoing debates at the federal level around prescription drug affordability, insurance regulation, and hospital billing transparency. The state’s $35 insulin cap mirrors federal efforts under the Inflation Reduction Act of 2022, which capped insulin for Medicare beneficiaries but left commercial coverage unaddressed. Similarly, federal lawmakers have introduced bipartisan proposals to regulate pharmacy benefit managers, aligning with SB 41’s push for transparency in drug pricing. On prior authorization, the Centers for Medicare & Medicaid Services recently finalized rules requiring Medicare Advantage plans to streamline and accelerate approval timelines, reflecting the same goals as California’s proposed reforms. AB 1312’s charity care provisions also parallel federal scrutiny of nonprofit hospitals’ billing and financial assistance practices by the IRS and Government Accountability Office. Together, these state actions position California as a testing ground for policies likely to influence or accelerate national reforms.
Implications for Hospitals and Health SystemsThese bills would significantly impact hospital operations and financial structures. The charity care screening requirements under AB 1312 would mandate hospitals to implement new administrative processes to automatically check patient eligibility for financial assistance programs before billing, potentially reducing bad debt but requiring upfront investment in screening systems.Immigration protection measures would force hospitals to redesign facility layouts to create designated “non-public spaces” and establish new protocols for handling immigration enforcement requests, adding compliance costs but potentially improving patient trust and access. While the prior authorization reforms could reduce administrative burdens on hospital staff by eliminating paperwork for commonly approved treatments, hospitals may also see changes in patient mix and payment patterns as insurance dynamics shift under the new pharmacy benefit manager regulations.