BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 890|
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THIRD READING
Bill No: SB 890
Author: Alquist (D), et al
Amended: 5/20/10
Vote: 21
SENATE HEALTH COMMITTEE : 5-0, 4/21/10
AYES: Alquist, Leno, Negrete McLeod, Pavley, Romero
NO VOTE RECORDED: Strickland, Aanestad, Cedillo, Cox
SENATE APPROPRIATIONS COMMITTEE : 7-2, 5/27/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Denham, Walters
NO VOTE RECORDED: Cox, Wyland
SUBJECT : Health care coverage
SOURCE : Author
DIGEST : This bill implements 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).
ANALYSIS : Existing law:
1. Provides for the regulation of health plans by the
Department of Managed Health Care (DMHC) under the
Knox-Keene Act, and for the regulation of health
insurers by the California Department of Insurance (CDI)
under provisions of the Insurance Code.
CONTINUED
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2. Requires health plan contracts to provide basic health
care services, as defined. Basic health care services
required to be provided by a health care service plan to
its enrollees include, where medically necessary, and
subject to any co-payment, deductible, or limitation of
which DMHC may approve, a specified list of health care
services, including physician services, hospital
inpatient and ambulatory services, emergency services,
and preventive health services.
3. Requires individual health plan contracts under the
jurisdiction of DMHC to additionally provide other
specific types of health care services. Existing law
requires individual and group health insurance policies
under the jurisdiction of CDI to provide specific types
of health care services, but not basic health care
services.
4. States that nothing in the Knox-Keene Act prohibits a
health plan from charging subscribers or enrollees a
co-payment or a deductible for a basic health care
service or from setting forth, by contract, limitations
on the maximum coverage of basic health care services,
provided that the co-payments, deductibles, or
limitations are reported to, and not rejected by, the
Director of DMHC and are set forth to the subscriber or
enrollee pursuant to the disclosure provisions of
existing law. The Commissioner of CDI does not have
authority to object to co-payments and deductibles.
5. Allows individuals to switch plans within their current
health plan/insurer once a year, if they have been
covered for at least 18 months under an individual plan
contract, and to transfer, without medical underwriting
(meaning the individual cannot be turned down for
coverage), to any other individual plan contract offered
by that same health plan/insurer that provides equal or
lesser benefits.
6. Requires health care service plans to use disclosure
forms or materials containing information regarding the
benefits, services, and terms of the plan contract as
the Director may require, so as to afford the public,
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subscribers, and enrollees with a full and fair
disclosure of the provisions of the plan in readily
understood language and in a clearly organized manner.
This bill:
1.Requires 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 five specified benefit
designs, including cost-sharing requirements.
2.Prohibits health plans and insurers from having an annual
or lifetime benefit limit.
3.Requires health insurers to cover the same medically
necessary basic health care services that health plans
currently cover, including maternity benefits.
4.Requires a minimum health plan and insurer medical loss
ratio of 85 percent for large group and 80 percent for
small group and individual markets.
5.Requires 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.Permits people to switch to a different individual health
plan or insurer on the annual renewal date of their
current policy.
7.Establishes 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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
CDI $900 $2,000 $1,800Special*
DMHC likely in the hundreds of thousandsSpecial**
to low millions of dollars annually
Commission staff likely in the
hundreds of Special*
thousands of dollars annuallySpecial**
*Insurance Fund
*Managed Care Fund
SUPPORT : (Verified 5/27/10)
AARP
Alliance of Californians for Community Empowerment
American Federation of State, County and Municipal
Employees
California Children's Hospital Association
California Hospital Association
California Medical Association
Congress of California Seniors
Consumers Union
Health Access California
Kaiser Permanente Medical Care Program
Local Health Plans of California
Monterey County Medical Society
San Bernardino County Medical Society
San Francisco Medical Society
Sierra Sacramento Valley Medical Society
St. Joseph Health System
Stanford Hospital and Clinics
OPPOSITION : (Verified 5/27/10)
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Anthem Blue Cross
Association of California Life and Health Insurance
Companies
California Association of Health Underwriters
ARGUMENTS IN SUPPORT : Health Access California (HAC)
writes in support that this bill provides substantial
consumer protections for those Californians who purchase
health coverage as individuals, both now and after 2014,
when federal health reform is fully implemented. HAC
writes that the requirement to cover medically necessary
care, including maternity care, eliminates "junk insurance"
under which a health insurance policy can cover only a few
days of hospitalization or a limited dollar amount for
hospital care, or only a few doctor visits a year. HAC
argues eliminating lifetime and annual caps on coverage
will help individuals facing catastrophic costs due to
cancer, a heart attack or other serious illness, and will
help reduce medical debt among those who are insured.
The Kaiser Permanente Medical Care Program (Kaiser) writes
in support that this bill provides a bridge between
California's current lackluster and inconsistent market
rules to those that will be in effect in 2014, upon full
implementation of the federal health care reform bill.
Kaiser writes, this bill levels the playing field by
requiring all health coverage in the individual market to
cover medically necessary care, including maternity care.
Kaiser states carriers wishing to offer cheaper products by
limiting benefits, or eliminating entire categories of
benefits altogether, simply move business from DMHC
regulation to CDI regulation.
Kaiser states that, of the 138 insurance choices available
in the market today, just 18 cover maternity - and 11 of
these are offered by Kaiser. Kaiser believes maternity
coverage is an important part of health care, and the
ability to carve out benefits such as maternity, or limit
drug coverage to generic coverage only, have a profound,
though not obvious effect: they attract healthy customers
to the carriers that offer plans with such features. After
the young and healthy have been skimmed from the top, the
pool that remains is sicker, and their coverage becomes
more expensive. Kaiser takes the view that a uniform and
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reasonable package of benefits should be established, and
that all carriers should offer it.
ARGUMENTS IN OPPOSITION : The Association of California
Life and Health Insurance Companies oppose the bill and
write the following, "The Association of California Life
and Health Insurance Companies (ACHHIC) has reviewed SB
890, as amended on April 27, 2010, and regrets that we must
oppose this measure. SB 890 would make major changes in
both the individual and group health insurance market well
before the implementation of the federal Patient Protection
and Affordable Care Act (PPACA). Among its many
provisions, the bill will require health insurers in the
individual market to offer a limited number of standardized
products, require health insurers to cover medically
necessary basic health care services, and allow individuals
to switch to a different health insurer on the annual
renewal date of their current policy."
CTW:nl 5/28/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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