BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 119|
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THIRD READING
Bill No: AB 119
Author: Jones (D), et al
Amended: 8/25/09 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 7-3, 6/10/09
AYES: Alquist, Cedillo, DeSaulnier, Leno, Maldonado,
Negrete McLeod, Wolk
NOES: Strickland, Aanestad, Cox
NO VOTE RECORDED: Pavley
SENATE JUDICIARY COMMITTEE : 3-1, 6/23/09
AYES: Corbett, Florez, Leno
NOES: Walters
NO VOTE RECORDED: Harman
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 51-29, 05/11/09 - See last page for vote
SUBJECT : Health care coverage: pricing
SOURCE : American College of Obstetricians and
Gynecologists,
District IX
City Attorneys Office, San Francisco
DIGEST : This bill, beginning January 1, 2011, eliminates
the exception in current law that allows health plans and
health insurers to use gender as a basis for premium,
CONTINUED
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price, or charge differentials, when used on valid
statistical and actuarial data.
Senate Floor Amendments of 8/25/09 extend the effective
date of the bill from January 1, 2010 to January 1, 2011
and add co-authors.
ANALYSIS :
Existing Law
1.Provides for the licensure and regulation of health care
service plans (health plans) by the Department of Managed
Health Care (DMHC).
2.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.
3.Provides for the regulation of life and disability
insurers by the Department of Insurance.
4.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.
5.Defines sex as having the same meaning as gender, as
defined.
6.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 two and 50 employees) to use
only permissible risk categories, which are limited to
age, geographic region and family size, as specified.
7.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
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10 percent.
This bill eliminates 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. This provision applies to
contracts that are issued, amended or renewed on or after
January 1, 2011.
For health insurance policies issued, amended, or renewed
on or after January 1, 2011, the bill specifically
prohibits 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.
Background
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
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
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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).
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/25/09)
American College of Obstetricians and Gynecologists,
District IX (co-source)
City Attorney's Office, San Francisco (co-source)
Access/Women's Health Rights Coalition
American Civil Liberties Union
American Federation of State, County and Municipal
Employees, AFL-CIO
California Alliance for Retired Americans
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
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National Women's Law Center
Planned Parenthood Affiliates of California
Physicians for Reproductive Choice and Health
OPPOSITION : (Verified 8/25/09)
Aetna
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Chamber of Commerce
State Farm
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.
The National Women's Law Center (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
an 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
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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.
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, 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.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans,
Feuer, Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
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Hernandez, Hill, Huber, Huffman, Jones, Krekorian, Lieu,
Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, John A.
Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Skinner, Solorio, Swanson, Torlakson, Torres,
Torrico, Yamada, Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Emmerson,
Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman,
Harkey, Jeffries, Knight, Logue, Miller, Nestande,
Niello, Nielsen, Silva, Smyth, Audra Strickland, Tran,
Villines
CTW:cm 8/25/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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