BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K Alquist, Chair
BILL NO: AB 119
A
AUTHOR: Jones
B
AMENDED: June 3, 2009
HEARING DATE: June 10, 2009
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REFERRAL: Health and Judiciary
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CONSULTANT:
9
Park/
SUBJECT
Health care coverage: pricing
SUMMARY
Eliminates the exception in current law that allows health
plans and health insurers to use gender as a basis for
premium, price, or charge differentials, when based on
valid statistical and actuarial data.
CHANGES TO EXISTING LAW
Existing law:
Existing law provides for the licensure and regulation of
health care service plans (health plans) by the Department
of Managed Health Care. Existing law prohibits health plans
from charging premium, price, or charge differentials
because of the sex of any individual, but makes an
exception for differentials based on specified statistical
and actuarial data.
Continued---
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Existing law provides for the regulation of life and
disability insurers by the Department of Insurance.
Existing law prohibits life and disability insurers from
engaging in certain discriminatory practices, but specifies
that premium, price, or charge differentials because of the
sex of any individual are not prohibited when based on
specified statistical or actuarial data or sound
underwriting practices.
Existing law defines sex as having the same meaning as
gender, as defined.
Existing law requires health plans and health insurers
(disability insurers providing health insurance) that
offer, market, and sell health plan contracts or health
insurance policies to small employers (generally defined as
employers who employ between 2 and 50 employees) to use
only permissible risk categories, which are limited to age,
geographic region and family size, as specified. Existing
law requires an employee's premium to be determined based
on the rate applicable to the employee's risk category,
plus an adjustment factor of not more than and not less
than 10 percent.
This bill:
This bill would eliminate the exception in current law that
allows health plans and disability insurers to use sex to
base premium, price, or charge differentials for health
care plan contracts and health insurance policies, when
based on objective, valid, and up-to-date statistical and
actuarial data, and, in the case of disability insurers,
when based on sound underwriting practices in addition to
the preceding criteria.
For health insurance policies issued, amended, or renewed
on or after January 1, 2010, the bill would specifically
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prohibit the policy from being subject to premium, price,
or charge differentials because of the sex of any
contracting party, potential contracting party, or person
reasonably expected to benefit from the policy as a
policyholder, insured, or otherwise.
FISCAL IMPACT
According to the Assembly Appropriations Committee, there
is no direct fiscal impact on the California Department of
Managed Health Care (DMHC) or the California Department of
Insurance (CDI) to continue oversight of the individual
insurance market. Current law prohibits discriminatory
health plan and insurer practices based on demographic
factors including race, color, national origin, ancestry,
religion, marital status, sexual orientation, or age.
According to regulators, the author, and health plans and
insurers, the pricing behavior addressed in this bill has
only recently occurred, since 2007.
BACKGROUND AND DISCUSSION
Author's statement
The author states that current law permits health care service
plans and insurers to charge different premium rates to
individual enrollees based upon gender. The author cites the
National Women's Law Center (NWLC) 2008 report, "Nowhere to
Turn: How the Individual Health Insurance Market Fails Women,"
which details its investigation of gender discrimination in
health insurance premiums and other obstacles to coverage for
women. The author points out that the NWLC report found huge
variations in premiums charged to women and men for identical
health plans (the vast majority of which do not cover maternity
benefits), and concluded: "This discriminatory and arbitrary
practice creates substantial financial barriers for women
seeking to obtain the health care they need; as such the use of
gender rating should be abandoned."
The author highlights that 40 years ago, the insurance industry
voluntarily abandoned the practice of using race as a rating
factor, despite their position that it was actuarially based,
and that California already prohibits insurers from charging
higher premiums based on race, color, national origin, ancestry,
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religion, marital status and sexual orientation, regardless of
any cost differences among these groups, because the public
policy against discrimination outweighs any differences in
health care use or costs.
The author states that access to health care saves lives
and the affordability of health insurance should not be
determined by gender. The author underscores that uninsured
women are less likely to obtain preventive care, and are
therefore more likely to seek treatment only when their
health problem has become an emergency and is more costly
to treat. The author believes this leads to worse patient
outcomes, costs public hospitals more, and burdens already
over-crowded emergency rooms.
The author points out that, as a growing number of
employers are reducing or eliminating health insurance for
employees due to tough economic times, many of their
employees seek health insurance in the individual market,
and the impact of gender-rated pricing is expected to
affect an increasing number of California women. The author
believes that the wide variation in rate differentials
(from no variance to 40-50 percent variance) among health
insurers suggests higher premiums charged to women are not
based on costs or actuarial data.
The author points out that, currently, ten other states
prohibit "gender rating" of individual health insurance
rates, while two others limit it. Additionally, California
law also specifically precludes gender rating for employer
groups of 2-50 employees, and that gender discrimination in
housing, employment and other public accommodations and
services is prohibited under the California Fair Employment
and Housing Act and the Unruh Civil Rights Act.
The individual health insurance market
The individual health insurance market, which covers about
nine percent of insured Californians, or seven percent of
non-elderly Californians, is made up of individuals and
families who pay for their own coverage, generally because
group coverage is not available. In California, health
plans and insurers conduct medical underwriting, the
process of reviewing an applicant or applicants' medical
history to ascertain the financial risk posed by the
applicant or applicants, and may deny an applicant health
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insurance, limit a benefit package, or charge a higher
premium based on the assessed level of risk. Each health
plan has its own underwriting guidelines in the individual
market, which must be filed with DMHC, but are not publicly
disclosed.
In 2005, the three largest carriers offering individual
health insurance products in California accounted for over
80 percent of the individual insurance products sold in the
state. Sources estimate that approximately 2.6 to 2.9
million Californians are currently covered in the
individual market. This represents a substantial increase
from the 1.5 million Californians estimated in 2002.
In August 2004, the Kaiser Family Foundation issued a
report, which documented individual health insurance
policies sold nationally through eHealthInsurance, an
online source of health insurance for individuals,
families, and small businesses, between January and August
2003. The data showed that men accounted for approximately
52 percent of single purchasers of individual insurance,
while women accounted for almost 48 percent. Purchasers of
single coverage were led by 25-34 year olds (36.1 percent),
followed by 18-24 year olds (21.4 percent), and then by
35-44 year olds (17.8 percent). In purchases of individual
family coverage, men led women 66.4 percent to 33.6
percent, as the lead policyholder. Individual family
coverage was predominately purchased by 35-44 year olds
(37.4 percent), followed by 25-34 year olds (29.7 percent),
and 55-65 year olds (20.2 percent).
According to a RAND study on consumer decision making in
California's individual health insurance market, the
individual market in California is an important source of
long-term coverage for a sizable fraction of those who
purchase it.
National Women's Law Group report
In 2008, the National Women's Law Center (NWLC) released a
report detailing its research on the experiences of women
seeking coverage in the individual insurance market. NWLC
gathered information on more than 3,500 individual health
insurance plans between July and September 2008 from
eHealthInsurance. For California, NWLC found that, for
plans that use gender as a rating factor, there was a
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minimum premium difference of 10 percent and a maximum
premium difference of 39 percent between 40 year old men
and women.
San Francisco City Attorney's lawsuit
On January 27, 2009, San Francisco City Attorney Dennis
Herrera filed a suit to strike down provisions of state law
that permit gender rating, asserting that the statutes
violate the equal protection guarantees of the California
Constitution. The suit stated that the city seeks to
declare the laws void and enjoin the state from enforcing
these laws.
Industry data on cost differentials between men and women
According to the California Association of Health Plans
(CAHP), expected health care costs for men and women from
the 2008 Milliman Health Cost Guidelines-Commercial Rating
Structure show that health care costs for women range from
20 percent to 80 percent higher for women under 50,
depending on age, for coverage that excludes maternity
benefits. For coverage that includes maternity benefits,
costs range between 20 percent higher to two and a half
times higher, according to the same source. In the 55-59
year old bracket, costs between men and women are expected
to be comparable, while men in the 60 to 64 year old
bracket are expected to cost 1.06 times more than females
in the same age range.
Related legislation
SB 54 (Leno) is substantially similar to this measure.
Pending in the Assembly Health Committee.
Prior legislation
AB 1586 (Koretz), Chapter 421, Statutes of 2005, added
additional language to existing anti-discrimination
provisions under the Health and Safety Code and the
Insurance Code to clarify that state law prohibits
insurance companies and health care service plans from
discriminating on the basis of gender (including a person's
gender identity and gender related appearance and behavior
whether or not stereotypically associated with the person's
assigned sex at birth) in the creation or maintenance of
service contracts or the provision of benefits or coverage.
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Arguments in support
The American College of Obstetricians and Gynecologists,
District IX, (ACOG) writes that to price premiums in the
individual health insurance and HMO market on a protected
class of persons, such as race, religion, sexual
orientation, is discrimination. ACOG points out that, in
addition to paying more for coverage, women as a group earn
less than men and have less buying power, and that this
combination results in affordable coverage for women being
out of reach. ACOG believes that the bill will resolve the
inequity of gender discrimination in health insurance
premium pricing, stop and reverse the trend of more women
becoming uninsured, and possibly reduce the amount of
monies spent on covering women through public programs.
NWLC writes that the practice of gender rating has serious
implications for women's ability to find affordable health
insurance in the individual health insurance market. NWLC
points to a 2006 Commonwealth Fund study that showed nine
out of ten people who shopped for health coverage in the
individual market did not ultimately purchase a plan, a
decision largely based on difficulties finding affordable
coverage. NWLC asserts that cost is a particular obstacle
for women purchasing individual health insurance, because
women in California continue to experience higher poverty
rates on average and earn significantly less than men. NWLC
believes that gender rating is a discriminatory practice,
as an individual's sex is an immutable characteristic
determined by genetics. NWLC notes that a new federal
law-the Genetic Information Nondiscrimination Act-prohibits
insurers from using predictive genetic information to set
health insurance premiums, and believes that women should
not face discrimination based on the biological fact of
their sex.
San Francisco City Attorney Dennis Herrera writes that
gender rating is unconstitutional and is illegal in several
states. The City Attorney writes that the measure would
prevent health insurance companies from penalizing women
for seeking preventive care such as screenings for breast,
cervical, and uterine cancer. The City Attorney notes that,
in these difficult economic times, as more employers drop
health coverage, women are especially hard-hit by the high
costs of individual health insurance, as they are more
likely to work part-time and are often paid less. The City
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Attorney asserts that gender rating prices some women out
of the individual insurance market and places burdens on
the state's already overwhelmed and underfunded public
health systems. The City Attorney believes that gender
rating is a relatively recent practice, and that halting it
should not adversely affect the health insurance industry.
The California School Employees Association notes that
California's unemployment rate has exceeded 10.5 percent,
and now more women are losing their jobs and health care
coverage, forcing them into the individual market. The
California Nurses Association believes that individuals
seeking health insurance in the individual market should
have the same protections from gender discrimination as
those who have the benefits of health insurance from their
employers. Health Access California writes that existing
law prohibits discrimination on health insurance premiums
on the basis of race, ethnicity, religion and marital
status even though there is ample academic literature
documenting disparities in the need for care on the basis
of race and ethnicity, as well as differences in health
care behavior due to marital status. Health Access
believes that, like these other types of discrimination,
gender discrimination should be prohibited. Physicians for
Reproductive Choice and Health writes that maintaining the
status quo on gender rating adversely impacts nearly one
million women in California who are insured in the
individual market.
Arguments in opposition
The Association of California Life and Health Insurance
Companies (ACLHIC) writes that premiums reflect expected
costs and utilization of services based on objective,
statistical evidence, and that many factors, including
family size, geographic region, health status, age, and
gender are considered in this determination. ACLHIC states
that, by using all these factors and tailoring the price to
the individual, a more diverse and affordable marketplace
is available, particularly in the individual market where
people are more likely to choose coverage tailored to their
own needs and price sensitivity.
ACLHIC contends that young men are most likely to drop
coverage when prices increase, and as more of these low-use
and low-cost individuals leave the market, the remaining
pool of individuals will be higher-use and higher-cost,
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which will lead to increases in premiums for everyone.
The California Association of Health Plans (CAHP) believes
that the bill moves individual health insurance toward a
community rating system that will lead to higher costs for
everyone. CAHP notes that one state that previously used
community rating, New Jersey, is now allowing rating
factors, including gender, in its development of rates.
Aetna writes that in the current voluntary insurance
market, health insurers need to appropriately and
actuarially manage costs for fairness to all individuals
who purchase health coverage. Aetna states men and women
use health care services differently and, therefore, are
charged different premiums when they purchase health
insurance in the individual market.
State Farm writes that different people represent different
risks, and in no line of insurance is everyone charged the
same price. State Farm writes that a fundamental tenet of
fairness in charging for insurance and making underwriting
decisions is predicated on an assessment of the risk of a
particular insured.
PRIOR ACTIONS
Assembly Floor: 51-29
Assembly Appropriations:10-5
Assembly Health: 13-6
COMMENTS
POSITIONS
Support: American College of Obstetricians and
Gynecologists, District IX (sponsor)
Access/Women's Health Rights Coalition
American Civil Liberties Union
American Federation of State, County and Municipal
Employees
California Alliance for Retired Americans
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California Commission on the Status of Women
California Communities United Institute
California Medical Association
California National Organization for Women
California Nurses Association
California School Employees Association
California Society for Clinical Social Work
City and County of San Francisco
City of West Hollywood
Congress of California Seniors
Health Access California
MomsRising.org
National Women's Law Center
Planned Parenthood Affiliates of California
Physicians for Reproductive Choice and Health
Oppose: Aetna
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Chamber of Commerce
State Farm
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