BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2244 (Feuer)
Hearing Date: 8/12/2010 Amended: 7/1/2010
Consultant: Katie Johnson Policy Vote: Health 6-1
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BILL SUMMARY: AB 2244 would require the guaranteed issue of
health care service plan and health insurance products to
children commencing January 1, 2011, and would include adults
January 1, 2014. The bill would also establish standard
individual market rating factors, such as age, geographic
region, and would limit premium variations, as specified. The
bill would limit premium variation for children's coverage by
requiring health plans and insurers to use "rate bands" that
limit premium variation to no more than a specified percentage
of a standard rate for a child in each particular rating
category and benefit plan.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
CDI oversight $365 $0 $0 Special*
DMHC oversight likely in the hundreds of thousands
Special**
of dollars in FY 2010-2011
*Insurance Fund
**Managed Care Fund
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STAFF COMMENTS: SUSPENSE FILE.
This bill would prohibit a health plan or insurer from excluding
or limiting coverage due to any preexisting condition, also
known as guarantee issue, for children commencing January 1,
2011, and would include adults January 1, 2014, for those same
populations on those same dates. Effective January 1, 2011, a
covered child would be placed in a particular risk category and
their premium would be further determined by applying a risk
adjustment factor to the plan's standard risk rates to gradually
limit and eliminate the deviation of rates from standard rates
based on a child's health status. Premiums would be permitted to
vary depending on an individual's age and geographic region.
These provisions would not apply to any coverage to which an
employer makes any contribution or to contracts with the United
States government for Medicare, the Department of Health Care
Services (DHCS) for Medi-Cal services, and the Managed Risk
Medical Insurance Board for the Healthy Families Program;
effectively, this bill would apply to only the individual health
insurance market.
At least 30 days prior to offering, renewing, or amending a
contract or policy or adjusting the risk categories, risk
factors, or standard risk rates subject to these provisions,
plans
and insurers would be required to file a notice of material
modification or amendment with the Department of Managed Health
Care (DMHC) and California Department of
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AB 2244 (Feuer)
Insurance (CDI). Any regulations promulgated would be permitted
to be adopted as emergency regulations until December 31, 2015,
and would be eligible for renewal for an additional year as
emergency regulations until December 31, 2016.
In order to review new or amended contracts and policies, DMHC
and CDI would need resources as follows: CDI would need $365,000
in FY 2010-2011 and DMHC would probably need similar resources.
Ongoing costs would be minor.
There could be potential cost avoidance and savings to the
extent this bill were to increase enrollment in private health
plans and insurers and to correspondingly reduce enrollment in
publicly funded health care coverage programs such as Medi-Cal,
Healthy Families, and the California Children's Services (CCS)
programs. California currently spends about $2 billion on CCS, a
program that provides coverage for children, many with
preexisting conditions that may otherwise be uninsurable. Some
of these costs could shift to the private health insurance
market.
The Patient Protection and Affordable Care Act (Public Law
111-148) (ACA) requires each health insurance issuer in the
individual or group market to accept every employer and
individual that applies for coverage. For children, this would
commence in the plan year following September 23, 2010. For
adults, guarantee issue would begin on January 1, 2014. The
Secretary of the federal Health and Human Services Department
(HHS) must promulgate regulations regarding enrollment periods
and qualifying events related to guarantee issue; as of the
writing of this analysis, they have yet to be released.
While this bill would align several of its provisions with the
ACA, other provisions, such as the specified "risk rating band"
requirements would exceed federal law. If federal law were to be
amended or repealed at some later date, by enacting these
provisions, there would be cost pressure on the Managed Care
Fund and the Insurance Fund for DMHC and CDI to continue to
enforce them.