BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 54
Senator Leno
As Introduced
Hearing Date: April 14, 2009
Health & Safety Code; Insurance Code
GMO:jd
SUBJECT
Health Care Coverage: Eliminating Sex Discrimination in Pricing
DESCRIPTION
This bill would prohibit gender as a rating basis in the pricing
of individually-purchased health insurance contracts and
policies.
BACKGROUND
The sponsors of the bill, the San Francisco City Attorney and
the American College of Obstetricians and Gynecologists,
District IX (California), state that nearly one million women in
California currently purchase health insurance on the individual
plan market and that for many more, the higher premiums charged
under gender rating place affordable health insurance out of
reach. In fact, the National Women's Law Center (NWLC), in a
2008 study entitled "Nowhere to Turn: How the Individual Health
Insurance Market Fails Women," estimates that 18percent of
American women between the ages of 18 and 64 are currently
uninsured, because they lack access to employer coverage or they
earn too much to qualify for public programs, leaving them to
the often-unaffordable individual insurance market as a last
resort for coverage. For California, the NWLC found that, for
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 in
the individual health insurance plans on the market.
On January 27, 2009, the San Francisco City Attorney filed a
complaint for declaratory relief and to enjoin the state from
(more)
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enforcing the statutes that permit gender rating, asserting that
the statutes violate the equal protection guarantees of the
California Constitution.
CHANGES TO EXISTING LAW
1.Existing law , the Knox Keene Health Care Service Plan Act of
1975, provides for the licensure and regulation of health care
service plans (health plans) by the Department of Managed
Health Care. (Chapter 2.2, Health & Saf. Code Sec. 1340 et
seq.)
Existing law bars health insurance companies from charging
higher monthly premiums to individuals on the basis of race,
color, sexual orientation, national origin, ancestry,
religion, sex, marital status, or age, with specified
exceptions as described below. (Health & Saf. Code Sec.
1365.5.)
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. (Health & Saf. Code
Sec. 1365.5).
This bill would delete the exception from the
anti-discriminatory provision for differentials based on
specified statistical and actuarial data.
2.Existing law provides for the regulation of life and
disability insurers by the Department of Insurance. It
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 and actuarial data or sound underwriting
practices. (Ins. Code Sec. 10140 et seq.)
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
with between 2 to 50 employees) to use only permissible risk
categories, which are limited to age, geographic region, and
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family size, as specified. It 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. (Ins. Code Sec. 10700
et seq.)
This bill would prohibit use of the sex of an individual as a
risk category in determining any premium, price, or charge
differential for a health insurance policy.
COMMENT
1. Need for the bill
The author writes:
Gender rating often results in women being charged
substantially higher premiums than men for individually
purchased health insurance, even for plans that exclude
maternity leave coverage. Health insurance companies claim
they are charging women higher rates because it costs more to
provide them with care. But gender-based differentials vary
dramatically, calling into question as to what extent these
rates are tied to actuarial differences or are merely
arbitrary.
Nearly one million women in California currently purchase
health insurance on the individual market. For many more, the
higher premiums charged under gender rating place affordable
health insurance out of reach. Some women purchase
high-deductible plans; others are priced out of the health
insurance market entirely. These uninsured and underinsured
women are less likely to obtain preventive care, and are more
likely to seek treatment only when their health problems have
become an emergency. Often they are forced to seek treatment
at public hospitals, placing greater financial strain on
[California's] already overburdened public health system.
Preventive care is important to detecting and treating
diseases such as colon, breast, ovarian, and cervical cancers.
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By charging different rates purportedly based on the use of
preventive care, health insurers discourage [women] consumers
from being proactive about diseases for which early detection
and treatment are important.
...[I]t's clear that gender rating denies women equal access
to health care and arguably violates our state's
constitutional guarantee that the law applies equally to all
Californians. These women are more likely to work part-time,
less likely to receive health insurance from their employers,
and often get paid lower wages for doing the same job as men.
California shouldn't make matters worse by permitting
companies to charge women more for health insurance.
2. Gender-based differential charges, already outlawed in ten
states, are discriminatory
Recognizing that gender-based or sex-based charging
differentials are discriminatory towards women, ten states have
already passed laws prohibiting the use of gender as a factor in
the rating game. Those are the states of Maine, Massachusetts,
Minnesota, New Hampshire, New Jersey, New York, Oregon, Vermont,
and Washington. Many states that allow gender rating require
that any difference in rates between men and women be "justified
by actuarial statistics," which means that the rating
differential must be based on true variation to health costs
between women and men. (NWLC Study, supra.)
According to representatives of the insurance industry, gender
rating is "actuarially justified," because the costs of
providing health insurance to women are higher: their studies
show that women have higher hospital, physicians' and other
health care costs than men. However, over forty years ago the
industry itself abandoned the practice of using race as a rating
factor, despite their position that the practice was actuarially
based, largely because it was bad public policy to discriminate
on this basis. Supporters argue that just as in the case of
race, the use of sex as a rating factor should be banned
altogether.
Pointing to the Supreme Court's ruling in Arizona Governing
Committee for Tax Deferred Annuity and Deferred Compensation
Plan v. Norris (1983) 463 U.S. 1073, 1083 (citing City of Los
Angeles, Department of Water & Power v. Manhart (1978) 435 U.S.
702, 716-17), ("Title VII requires employers to treat their
employees as individuals, not 'as simply components of a racial,
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religious, sexual, or national class'") the NWLC and other
supporters contend that even though women as a class may have
higher health costs, an employer unlawfully discriminates if it
charges a female employee more than a male employee for the same
health coverage. Thus, they argue, the same principle should
apply to the individual market: individual insurance providers
should not charge a higher premium based on a generalization
about women as a class that is not necessarily applicable to the
individual woman being insured.
For women, other supporters argue, this differential rating
based on sex exacerbates an already grave situation, especially
in this economy. The American Civil Liberties Union writes:
Women are also 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 than men for the work they
do. Additionally, in these tough times, more and more
employers are dropping group health care coverage for their
employees, leaving those individuals to purchase their own
insurance, or to join the swelling ranks of the uninsured.
Women hurt by gender rating may be either forced to purchase a
high-deductible plan with limited coverage, or priced out of
the health insurance market altogether. SB 54 helps prevent
this from happening." (Letter dated March 26, 2009.)
Thus, the NWLC advocates the elimination of sex from the rating
factors provided by the exceptions to the anti-discriminatory
provisions of Health & Safety Code Section 1365.5 and Insurance
Code Section 10140. "Gender rating should be abandoned not only
for its harmful effects for women's access to affordable
coverage, but simply because it is a discriminatory practice.
An individual's sex is an immutable characteristic determined by
genetics. A new federal law - the Genetic Information
Nondiscrimination Act - prohibits insurers from using predictive
genetic information to set health insurance premiums.
Similarly, women should not face discrimination based on the
biological fact of their sex."
3. Opponents' concerns
Opponents such as the California Association of Joint Powers
Authorities (CAJPA), are concerned that SB 54 will eliminate the
ability to include statistical and actuarial data in premium
calculations for health care based on gender. "This needless
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elimination will drive up health care premium costs for all
employers and may likely have the unintended consequence of
shifting costs onto other groups. SB 54 will likely require
some lower risk individuals to pay a larger share of premiums in
order to subsidize the cost of higher risk individuals. CAJPA
does not believe that increasing benefit costs in these hard
economic times is neither reasonable nor prudent [sic]." The
CAJPA is an organization of local government employees that use
their joint powers mechanism to manage their workers'
compensation, liability, property, and other insurance and loss
control-related obligations.
4. Changes to be effective January 1, 2010
SB 54 specifically provides that its provisions would apply to
health care service plan contracts and health insurance policies
issued, amended, or renewed on or after January 1, 2010.
Support : Equal Rights Advocates; American Civil Liberties Union
(ACLU); Access/Women's Health Rights Coalition; National Women's
Law Center; Women LEAD for Health; City and County of San
Francisco; City and County of San Francisco Department on the
Status of Women; NARAL Pro-Choice California; Women's Foundation
of California; California Commission on the Status of Women
Opposition : California Association of Joint Powers Authorities
(CAJPA); Aetna; California Chamber of Commerce (CalChamber);
California Association of Health Plans (CAHP); Association of
California Life and Health Insurance Companies (ACLHIC)
HISTORY
Source : City and County of San Francisco City Attorney; American
College of Obstetricians and Gynecologists, District IX
(California) (co-sponsors)
Related Pending Legislation : AB 119 (Jones) also would prohibit
health plans and health insurers from charging a premium price,
or charge differential for health care coverage because of the
sex of the prospective subscriber, enrollee, policyholder, or
insured. It passed the Assembly Health Committee on March 21,
2009 on a 13-6 vote.
Prior Legislation : None Known
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Prior Vote : Not Applicable
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