BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 54
S
AUTHOR: Leno
B
AMENDED: As Introduced
HEARING DATE: April 1, 2009
5
REFERRAL: Judiciary
4
CONSULTANT:
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.
Existing law provides for the regulation of life and
Continued---
STAFF ANALYSIS OF SENATE BILL SB 54 (Leno) Page 2
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 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 gender
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.
By eliminating this exception, this bill would
categorically prohibit a health plan from using the sex of
any enrollee to base premium, price, or charge
differentials, and categorically prohibit health insurance
policies from being subject to premium, price, or charge
differentials because of the sex of any individual.
FISCAL IMPACT
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Unknown.
BACKGROUND AND DISCUSSION
Author's statement
The author states that California law bars health insurance
companies from charging higher monthly premiums to
individuals on the basis of race, sexual orientation, or
religion; yet the same laws expressly permit insurance
companies to discriminate on the basis of sex with respect
to the amount of premiums charged for health insurance on
the individual market. The author states that gender
rating results in women being charged substantially higher
premiums than men for individually purchased health
insurance, even for plans that exclude maternity coverage,
and that this practice denies women equal access to health
care and violates California's constitutional guarantee
that the law applies equally to all persons.
The author believes that by charging different rates
purportedly based on the use of preventive care, which some
believe account for the actuarial variance in health care
costs between men and women, health insurers discourage
consumers from being proactive about diseases such as
colon, breast, ovarian, and cervical cancers for which
early detection and treatment are important.
The author asserts that, while both federal and state law
prohibit gender rating with respect to employer-sponsored
group insurance plans, women are less likely to receive
coverage through their employers, in part because they are
more likely to work part-time.
The author contends that ten states - including New York,
Oregon, and Washington- that already prohibit gender rating
still have robust individual markets for health insurance.
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
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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
from the 1.5 million Californians estimated in 2002.
In August 2004, 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
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plans that use gender as a rating factor, there was a
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. For
coverage that includes maternity, 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
AB 119 (Jones) 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.
Arguments in support
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San Francisco City Attorney Dennis Herrera, the sponsor of
this measure, 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 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.
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
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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.
Arguments in opposition
The Association of California Life and Health Insurance
Companies (ACLHIC) writes that prohibiting insurers from
using gender as a rating factor could result in rate
increases for young, healthy men, and older women. 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.
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 that it was the
first national insurance company to endorse the concept of
requiring individuals to purchase coverage, which would
make insurance more affordable for everyone and ultimately
reduce the need to use many rating or underwriting factors.
The California Association of Health Plans (CAHP) writes
that, by requiring some lower risk individuals to pay
higher premiums and cross subsidize the cost of higher risk
individuals, the bill will make it more difficult to enroll
this lower risk population. 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 allowing rating factors, including gender,
in its development of rates.
State Farm writes that different people represent different
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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.
POSITIONS
Support: City and County of San Francisco, City
Attorney's Office (sponsor)
American Civil Liberties Union
American College of Obstetricians and Gynecologists,
District IX (California)
American Federation of State, County and Municipal
Employees, AFL-CIO
California Alliance for Retired Americans
California Communities United Institute
California Medical Association
California Nurses Association
California School Employees Association, AFL-CIO
City and County of San Francisco, Department on the
Status of Women
Congress of California Seniors
Equal Rights Advocates
Health Access California
National Women's Law Center
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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