BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 54|
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THIRD READING
Bill No: SB 54
Author: Leno (D)
Amended: As introduced
Vote: 21
SENATE HEALTH COMMITTEE : 8-3, 4/1/09
AYES: Alquist, Cedillo, DeSaulnier, Leno, Maldonado,
Negrete McLeod, Pavley, Wolk
NOES: Strickland, Aanestad, Cox
SENATE JUDICIARY COMMITTEE : 3-2, 4/14/09
AYES: Corbett, Florez, Leno
NOES: Harman, Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Health care coverage: pricing
SOURCE : City and County of San Francisco, City
Attorneys Office
DIGEST : This bill 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.
ANALYSIS : Existing law:
1.Provides for the licensure and regulation of health care
CONTINUED
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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.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.
6.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 eliminates 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 categorically
prohibits 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
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subject to premium, price, or charge differentials because
of the sex of any individual.
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
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).
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 4/29/09)
City and County of San Francisco, City Attorney's Office
(source)
American Civil Liberties Union
American College of Obstetricians and Gynecologists,
District IX
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
OPPOSITION : (Verified 4/29/09)
Aetna
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Chamber of Commerce
State Farm
ARGUMENTS IN SUPPORT : The California School Employees
Association notes that California's unemployment rate has
exceeded 10.5 percent, and now more women are losing their
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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.
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.
CTW:nl 4/29/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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