BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
890 (Alquist/Steinberg)
Hearing Date: 5/24/2010 Amended: 5/20/2010
Consultant: Katie Johnson Policy Vote: Health 5-0
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BILL SUMMARY: SB 890 would implement insurance market reforms
in response to the passage of the federal health reform law in
March 2010, the Patient Protection and Affordable Care Act
(Public Law-111-148) (PPACA).
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
CDI likely in the hundreds of thousands
Special*
to low millions of dollars annually
DMHC likely in the hundreds of
thousandsSpecial**
to low millions of dollars annually
Commission staff likely in the hundreds of Special*
thousands of dollars annually
Special**
*Insurance Fund
*Managed Care Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
California's two health insurance regulators, the California
Department of Insurance (CDI) and the Department of Managed
Health Care (DMHC), could expect a large influx of plan and
insurer product filings and reviews, the need to jointly
promulgate substantial related regulations, and the need to
provide staff and market expert consultants for the Individual
Insurance Market Reform Commission. This would all commence
January 1, 2011, unless otherwise specified, and would likely be
ongoing through at least January 1, 2014, the federal deadline
for health reform implementation. Although the impacts on the
respective departments are unknown, it would likely cost CDI and
DMHC hundreds of thousands to low millions of dollars annually.
Actual and ongoing costs associated with this bill could change
substantially once the Federal Secretary of Health and Human
Services (HHS) issues guidance to states regarding insurance
market reform implementation. Once the market reforms and
regulations have taken effect, ongoing costs could be lower and
more predictable.
To the extent that these reforms would cause an increase in the
number of uninsured individuals, specifically the requirement
for health insurers to cover basic benefits, including maternity
services, as noted in the 2010 analysis of this bill by the
California Health Benefits Review Program (CHBRP), there could
be cost pressure on county and
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SB 890 (Alquist/Steinberg)
federal program funds that reimburse providers for medical care
for the uninsured and on the state's high risk pool, the Major
Risk Medical Insurance Program (MRMIP), which is funded by
tobacco taxes.
More specifically, this bill would:
1) Require health care service plans and health insurers to
standardize health maintenance organization (HMO) and
preferred provider organization (PPO)
products sold in the individual market into 5 specified
benefit designs, including cost-sharing requirements;
2) Prohibit health plans and insurers from having an annual
or lifetime benefit limit;
3) Require health insurers to cover the same medically
necessary basic health care services that health plans
currently cover, including maternity benefits;
4) Require a minimum health plan and insurer medical loss
ratio (MLR) of 85 percent for large group and 80 percent
for small group and individual markets;
5) Require individual market products to change premium
rates for adults based on one-year changes in a person's
age and establish rating factors and limits on premium
variation;
6) Permit people to switch to a different individual health
plan or insurer on the annual renewal date of their current
policy;
7) Establish the Individual Insurance Market Reform
Commission that would be funded by the departments and
would, among other duties, a) develop a standardized
questionnaire that all plans and insurers would use to make
a decision on whether or not to provide coverage to an
individual; b) make suggestions to the departments on
changes or additions to the standard benefit plan designs
specified by this bill.