BILL ANALYSIS AB 2244 Page 1 Date of Hearing: April 20, 2010 ASSEMBLY COMMITTEE ON HEALTH William W. Monning, Chair AB 2244 (Feuer) - As Amended: April 5, 2010 SUBJECT : Health care coverage. SUMMARY : Prohibits, effective January 1, 2011 for children and January 1, 2014 for adults, a health care service plan or health insurer (collectively carriers) notwithstanding any other provision of state law or regulation, carriers from excluding or limiting coverage due to any preexisting condition. Prohibits a carrier contract or policy from limiting or excluding coverage for a child by type of illness, treatment, medical condition, or accident. Specifically, this bill : 1)Provides that, until January 1, 2014, only the following age categories can be used in determining premium rates for carriers: under age five; age five-15; and, age 15-19. 2)Prohibits carrier premium rates from varying more than two to one for children. 3)Requires carriers to base rates for individuals and children using only the following family size categories: single; married couple; one adult and child or children; and, married couple and child or children. 4)Requires a carrier that operates statewide to use the geographic regions, as specified, in determining rates for individuals and children. Requires that nothing in this bill be construed to require a carrier to establish a new service area or to offer health coverage on a statewide basis, outside of the carrier's existing service area. 5)Requires, effective January 1, 2011 for children and January 1, 2014 for adults, carriers to offer coverage any person that seeks coverage. 6)Prohibits, effective January 1, 2011 for children and January 1, 2014 for adults, notwithstanding any other provision of state law or regulation, carriers from excluding or limiting coverage due to any preexisting condition. Excludes coverage for which an employer makes any contribution, contracts or AB 2244 Page 2 policies for coverage of Medicare services pursuant to contracts with the United States government, Medicare supplement, Medi-Cal contracts with the State Department of Health Services, Healthy Families, long-term care coverage, or specialized carrier contracts or policies. 7)Requires, effective January 1, 2010 for children and January 1, 2014 for adults, a carrier to fairly and affirmatively offer, market, and sell all of the carrier's contracts and policies that are offered and sold to individuals. 8)Prohibits, effective January 1, 2011 for children and January 1, 2014 for adults, a carrier from rejecting an application for a carrier contract or policy. 9)Prohibits a carrier, or solicitor, directly or indirectly, from: a) Encouraging or directing an individual or responsible party for a child to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation of the individual or child, or geographic location provided that it is within the carrier's approved service area; and, b) Encouraging or directing individuals or children to seek coverage from another carrier because of the health status, claims experience, industry, occupation of the individual or child, or geographic location, provided that it is within the carrier's approved service area. 10)Prohibits a carrier from, directly or indirectly, entering into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a carrier contract or policy to be varied because of the health status, claims experience, industry, occupation, or geographic location of the individual or child. Prohibits this from applying to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage does not vary because of the health status, claims experience, industry, occupation, or geographic area of the individual or child. 11)Prohibits, effective January 1, 2011, a carrier contract or policy that covers a child from establishing rules for AB 2244 Page 3 eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the carrier plan or policy based on specified health status-related factors. 12)Requires, effective January 1, 2014, the provisions in 1) to 11) above to apply to all individuals and children obtaining coverage with no contribution from an employer. 13)Requires the carriers, after an individual or the responsible party for a child submits a completed application form for a carrier contract or policy, within 30 days, to notify the individual or responsible party for a child of actual premium charges for that carrier contract or policy. Requires the individual or responsible party for a child to have 30 days in which to exercise the right to buy coverage at the quoted premium charges. 14)Requires that when an individual or the responsible party for a child submits a premium payment, based on the quoted premium charges, and that payment is delivered or postmarked, whichever occurs earlier, within the first 15 days of the month, coverage under the carrier contract or policy becomes effective no later than the first day of the following month. Requires that when that payment is neither delivered nor postmarked until after the 15th day of a month, coverage becomes effective no later than the first day of the second month following delivery or postmark of the payment. 15)Requires that during the first 60 days after the effective date of the carrier contract or policy, the individual or responsible party for a child to have the option of changing coverage to a different carrier contract or policy offered by the same carrier, as specified. 16)Prohibits, effective January 1, 2011 for children and January 1, 2014 for adults, a carrier from excluding coverage for someone who would otherwise be entitled to health care services on the basis of an actual or expected health condition. Prohibits a carrier contract or policy from limiting or excluding coverage by type of illness, treatment, medical condition, or accident. 17)Requires all carrier contracts or policies, offered to an individual or child, to provide to subscribers and enrollees AB 2244 Page 4 at least all basic health care services, as specified. 18)Prohibits a carrier from being required to offer coverage, or accept coverage applications, in the following cases: a) To an individual or child, if the individual or child who is to be covered by the carrier contract or policy does not work or reside within the carrier's approved service areas; b) Within a specific service area or portion of a service area, if the carrier reasonably anticipates and demonstrates to the satisfaction of regulators that it will not have sufficient health care delivery resources to ensure that health care services will be available and accessible because of its obligations to existing enrollees or insureds. Prohibits a carrier that cannot offer coverage because it is lacking in sufficient health care delivery resources from offering coverage in the area until the carrier notifies regulators that it has the ability to deliver services and certifies that it will enroll all individuals requesting coverage in that area, unless the plan has met the requirements, as specified. Requires that nothing in this bill be construed to limit the regulator authority to develop and implement a plan of rehabilitation for a carrier whose financial viability or organizational and administrative capacity has become impaired; c) To an individual or child that, within 12 months of application for coverage, disenrolled from a carrier contract or policy offered by the carrier; and, d) A carrier's regulator approves a certification, as specified, that the number of eligible employees and dependents enrolled exceeds 10% of the total enrollment of the carrier in California as of December 31 of the preceding year for self-funded plans or 8% of the total enrollment of the carrier in California as of December 31 of the preceding year non-self-funded plans. Prohibits, if that certification is approved, the carrier from offering coverage to small employers during the remainder of the current year. 19)Permits regulators to require a carrier to discontinue the offering of contracts or policies or acceptance of applications from any individual or child upon a determination that the carrier does not have sufficient financial viability or organizational and administrative capacity to ensure the AB 2244 Page 5 delivery of health care services to its enrollees, as specified. 20)Requires all contracts and policies to be renewable at the option of the enrollee, with specified exceptions. 21)Requires, effective January 1, 2011 and only for coverage for children, the premium to be determined for an eligible child in a particular risk category after applying a risk adjustment factor to the carrier's standard risk rates, as specified. 22)Requires, in connection with the offering coverage for children, each carrier to make a reasonable disclosure, as part of its solicitation and sales materials, regarding rates, guaranteed issue, benefit plan designs, service areas, 23)Requires carriers to prepare a brochure that summarizes all of its carrier contracts or policies offered to children and to make this summary available to any responsible party for a child and to solicitors upon request, as specified. Requires carriers to prepare a more detailed evidence of coverage, as specified, and make it available to responsible parties, solicitors, and solicitor firms upon request. Requires carriers to provide, upon request, and as specified standard risk rates. Requires carriers to provide copies of the current summary brochure to all solicitors and solicitor firms contracting with the carrier, as specified. 24)Requires every solicitor or solicitor firm contracting with one or more carriers to solicit enrollments or subscriptions from responsible parties for children, notify and advise the responsible party of specified information related to rates and benefit design. 25)Requires solicitors to, prior to filing an application for a responsible party for a child for a particular contract or policy, to provide the child's responsible party with specified information about benefits, evidence of coverage, and rates. 26)Requires, at least 30 business days prior to offering, renewing, or amending a contract or policy, carrier to file a notice of material modification with regulators, as specified. Requires any regulatory action to disapprove, suspend, or postpone the carrier's use of a carrier contract to be in AB 2244 Page 6 writing, specifying the reasons that the carrier contract is not in compliance with the requirements, as specified. 27)Requires, prior to making any changes in the risk categories, risk adjustment factors, or standard risk rates filed with regulators, carriers to file as an amendment a statement setting forth the changes and certifying that the carrier is in compliance, as specified. 28)Permits periodic changes to the standard risk rate that a carrier proposes to implement over the course of up to 12 consecutive months to be filed in conjunction with the certified statement, as specified. 29)Requires each carrier to maintain at its principal place of business all of the information required to be filed with regulators. 30)Requires each carrier to make available to regulators, on request, the risk adjustment factor used in determining the rate for any particular child. 31)Permits the Department of Managed Health Care Director or the California Department of Insurance Commissioner to issue regulations that are necessary to carry out the purposes of this bill, as specified. FISCAL EFFECT : This bill has not yet been analyzed by a fiscal committee. COMMENTS : 1)PURPOSE OF THIS BILL. According to the author, the newly enacted federal health care reform law prohibits use of pre-existing condition exclusions for children in the individual market. The author maintains there was a dispute between insurers and the federal government about whether the new federal law requires guaranteed issue and this bill would clarify that for California. According to the author, the new federal law also does not specifically address rating rules in the individual market prior to 2014 or prohibit insurers from refusing to sell to entire market segments. The author maintains that this bill will align California law with the federal health care reform law and will ensure that children cannot be denied health insurance coverage or be charged more AB 2244 Page 7 because of a pre-existing condition. 2)FEDERAL HEALTH CARE REFORM . On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (the Affordable Care Act); P. L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010; P. L. 111-152. Among other provisions, the new law prohibits group health plans or individual health insurance carriers from imposing any preexisting condition exclusion on coverage. The rollout of the law begins with children. On September 23, 2010, insurers will no longer be able to exclude children with preexisting conditions from being covered by their family policies. For current policies, that means insurers will have to rescind pre-existing-condition exclusions. Insurers will not have to take the same steps for adults until January 2014. According to a March 28, 2010 New York Times news article, just days after the President signed the Affordability Act, there was a dispute over the language in the law regarding the pre-existing conditions coverage provisions. The New York Times article stated that while insurers agreed that health insurance carriers offering individual or group coverage were unable to impose preexisting condition exclusions beginning in September, insurers initially disagreed that the law required them to write insurance at all for the child or family, providing what they call in the insurance world "guaranteed issue" until 2014. The Secretary of the federal Department of Health and Human Services (DHHS) issued clarification in a letter to the president of the America's Health Insurance Plans (AHIP) stating that, "To ensure that there is no ambiguity on this point, I am preparing to issue regulations in weeks ahead ensuring that the preexisting condition exclusion applies to both a child's access to a plan and his or her benefits once he or she is in the plan." The Secretary further noted that regulations would make clear that by September, "children with pre-existing conditions may not be denied access to their parents' health insurance plans." In response, AHIP's president wrote to the Secretary that AHIP would accept the clarification of the new law and, fully comply with it. AHIP further added that, "AHIP members would be ready to work with DHHS to implement the new regulations." 3)PRE-EXISTING CONDITIONS . Private health plans and insurers AB 2244 Page 8 use "medical underwriting" to screen applicants for individual health coverage and determine the individual's risk profile and potential need for health care services. Health insurers typically deny coverage or charge higher rates to individuals with pre-existing serious health conditions, such as cancer or heart disease. In addition, individuals with any previous health service use, even for conditions that no longer exist or with chronic conditions that are successfully being treated (such as mental illness, diabetes, or asthma) are also often denied coverage. In many cases, other health-related factors, such as being overweight or being a tobacco user can result in a coverage denial. There is limited data on the extent of coverage denials in the individual health insurance market because health plans and insurers are not required to report the data. A September 2006 Commonwealth Fund national survey found that 89% of working-age adults who sought coverage in the individual market during the past three years ended up never buying a plan. A majority (58%) found it very difficult or impossible to find affordable coverage. One-fifth (21%) of those who sought to buy coverage were turned down, were charged a higher price because of a pre-existing condition, or had a health problem excluded from coverage. 4)SUPPORT . According to the California School Employees Association (CSEA), health care should be a right and not a privilege. CSEA maintains that under no circumstances should a child be denied health insurance because of a preexisting condition or sold insurance that does not cover preexisting conditions. PICO California and The 100% Campaign, a collaborative effort of The Children's Partnership, Children Now, and Children's Defense Fund state that a child in California should not be denied coverage or charged more because they have asthma, diabetes, or risk factors for those conditions. 5)RELATED LEGISLATION. AB 1887 (Villines) establishes the state temporary high risk pool program in order to be eligible for high risk pool funds under the Affordable Care Act. AB 1887 is set for hearing on April 20, 2010 in the Assembly Health Committee. AB 2345 (De La Torre) requires carriers, after January 1, 2011, to meet the requirements of specified provisions of the federal Public Health Service Act, related to federal health AB 2244 Page 9 care reform. AB 2345 is set for hearing on April 20, 2010 in the Assembly Health Committee. AB 2477 (Jones) deletes the provision that requires Mid-Year Status Reports for children from January 1, 2011 to July 1, 2012, therefore establishes continuous eligibility for children in the Medi-Cal Program. AB 2477 is pending in the Assembly Appropriations Committee. SB 900 (Alquist) establishes the California Health Benefits Exchange within the California Health and Human Services Agency and would requires the Exchange to, among other things, implement specified functions imposed by the Affordable Care Act. SB 900 is set for hearing in the Senate Health Committee on April 21, 2010. SB 1088 (Price) prohibits, with a specified exceptions, the limiting age for dependent children from being less than 27 years of age. SB 1088 is set for hearing in the Senate Health Committee on April 21, 2010. REGISTERED SUPPORT / OPPOSITION : Support Health Access California (sponsor) Alliance of Californians for Community Empowerment California School Employees Association Congress of California Seniors Consumers Union PICO California 100% Campaign Opposition None on file. Analysis Prepared by : Tanya Robinson-Taylor / HEALTH / (916) 319-2097