BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 890|
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VETO
Bill No: SB 890
Author: Alquist (D), et al
Amended: 8/25/10
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
SENATE FLOOR : 23-11, 6/01/10
AYES: Alquist, Calderon, Cedillo, Corbett, Correa,
DeSaulnier, Ducheny, Florez, Hancock, Kehoe, Leno, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price,
Romero, Simitian, Steinberg, Wolk, Wright, Yee
NOES: Ashburn, Cogdill, Cox, Denham, Dutton, Harman,
Hollingsworth, Huff, Runner, Strickland, Wyland
NO VOTE RECORDED: Aanestad, Oropeza, Walters, Wiggins,
Vacancy, Vacancy
SENATE HEALTH COMMITTEE : 6-2, 8/31/10
(Roll call not available)
ASSEMBLY FLOOR : 51-27, 8/30/10 - See last page for vote
SENATE FLOOR : 22-11, 8/31/10
AYES: Alquist, Calderon, Cedillo, Corbett, Correa,
DeSaulnier, Ducheny, Florez, Hancock, Kehoe, Leno, Liu,
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Lowenthal, Padilla, Pavley, Price, Romero, Simitian,
Steinberg, Wolk, Wright, Yee
NOES: Ashburn, Blakeslee, Cogdill, Denham, Harman,
Hollingsworth, Huff, Runner, Strickland, Walters, Wyland
NO VOTE RECORDED: Aanestad, Dutton, Emmerson, Negrete
McLeod, Oropeza, Wiggins, Vacancy
SUBJECT : Health care coverage
SOURCE : Author
DIGEST : This bill requires health plans and health
insurers to categorize all individual market products into
tiers based on actuarial level, as specified, requires
health plans and health insurers to allow an individual to
transfer without medical underwriting to any other
individual plan contract offered by that same health plan
or health insurer that provides equal or lesser benefits
upon the annual renewal date of the contract or policy, and
requires health plans and health insurers to meet federal
annual and lifetime limits and the medical loss ratio
requirements in specified provisions of the federal health
care reform law, and any federal rules or regulations
issued under those provisions.
Assembly Amendments delete the provision allowing people to
switch to a competing individual health plan or insurer on
the annual renewal date of their current policy, on a
guarantee issue basis, to a policy of equal or lesser
value. The amendments instead allow a person to switch to
a policy of equal or lesser value within their current
health plan or insurer after being enrolled for 12 months,
instead of 18 months in current law. The amendments also
delete provisions requiring health plans and health
insurers in the individual market to offer standardized
products (five preferred provider organization products and
five health maintenance organization products), delete
provisions and that would have prohibited plans and
insurers from offering other products and delete provisions
that would have established specified premium rating rules.
The amendments instead require health plans and health
insurers to categorize all individual market products into
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tiers based on actuarial value, as specified. The
amendments also delete the requirement that health insurers
cover medically necessary basic health care services.
ANALYSIS :
Existing law:
1. Provides for the regulation of health plans by the
Department of Managed Health Care (DMHC) under
Knox-Keene, and for the regulation of health insurers by
the Department of Insurance (CDI) under provisions of
the Insurance Code.
2. 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.
3. 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 of DMHC may require, so as to afford the
public, 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:
Categorization into Tiers Based on Actuarial Value
1. Requires, effective July 1, 2011, health plan and health
insurers to categorize all products offered or renewed
in the individual market.
2. Requires, effective July 1, 2011 through December 31,
2013, each product to be categorized on the basis of
actuarial value into one of the following tiers:
A. Bronze level for products with have an
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actuarial value of 55% to 64%;
B. Silver level for products with have an
actuarial value of 65% to 74%;
C. Gold level for products with an actuarial value
of 75% to 84%;
D. Platinum level for products with an actuarial
value of 85% or greater; and,
E. Catastrophic coverage for products with an
actuarial value less than 55%.
3. Requires each product, effective January 1, 2014, to be
categorized on the basis of actuarial value into one of
the following tiers:
A. Bronze level for products with an actuarial
value equal to 60%;
B. Silver level for product with an actuarial
value equal to 70%;
C. Gold level for products with an actuarial value
equal to 80%;
D. Platinum level for products with an actuarial
value equal to 90%; and,
E. Catastrophic coverage for products with an
actuarial value less than 60%.
4. Allows health plans and health insurers to have a de
minimus variation from the actuarial value
categorization tiers in 3) above.
5. Requires, by July 1, 2011, DMHC and CDI to jointly adopt
a common actuarial model, which is required to be used
by health plans and health insurers to categorize
products in the individual market within one year of the
date of adoption of the model. Requires the model to be
updated at least every three years and to reflect the
method of calculating actuarial value in #6 below.
Exempts the establishment of the model and updates to
the model from the rulemaking provisions of the
Administrative Procedure Act.
6. Requires, until January 1, 2014, the benefits required
to be covered under the Knox-Keene Health Care Service
Plan Act of 1975 (Knox-Keene) benefit package to be used
to determine the denominator of the actuarial value
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calculation using a standard population. Prohibits this
provision from being construed to require health
insurers to provide the Knox-Keene benefit package.
Requires, after January 1, 2014, the actuarial value to
be calculated using contained in a specified section of
the federal Patient Protection and Affordable Care Act
(PPACA), (Public Law 111-152) and any regulations
adopted pursuant to that law. Requires health plans and
health insurers to use a qualified actuary, as defined,
to certify its categorization under this bill.
7. Permits DMHC and CDI, in lieu of establishing a common
actuarial model, to require plans and insurers to
categorize their products using a qualified actuary and
the applicable method of calculation described in #6
above. Requires plans and insurers, in this case, to
submit a copy of the actuarial value calculations and a
certification signed by the qualified actuary in a
manner and format specified by DMHC and CDI.
8. Permits DMHC and the CDI to review the categorization of
any product for accuracy, and the methodology used by a
plan or insurer to establish actuarial value.
9. Permits DMHC and CDI to require the submission of any
information needed to categorize products under the
actuarial value provisions of this bill.
10.Requires health plans and health insurers, as part of
the disclosure form required by existing law, to
disclose the actuarial value of each product with an
explanation of actuarial value in easily understood
language expressed as a percent of expenses paid by
insurance versus out-of-pocket. Requires the disclosure
to include an estimate of the annual out-of-pocket
expenses of an individual in average health who is
enrolled in such a contract, and the total annual cost
(the sum of premium plus out-of-pocket cost) of a person
of average health. Requires the notice to also disclose
that the share of cost may be more or less depending on
the age, illness, or health condition of the consumer,
and to make a statement requesting that consumers
examine other features of the insurance product
carefully, as specified.
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Switching Earlier to Lower Cost Plan of Current Carrier
11.Requires health plans and health insurers to allow an
individual to transfer without medical underwriting to
any other individual plan contract offered by that same
health plan or health insurer that provides equal or
lesser benefits upon the annual renewal date of the
individual plan contract or policy. Under current law,
an individual must have been covered for at least 18
months under an individual plan contract to transfer
without medical underwriting.
State Enforcement of Federal Law
12.Requires a health plan and a health insurer that issues,
sells, renews, or offers contracts for health care
coverage to meet federal annual and lifetime limits in a
specified provision of PPACA, and any federal rules or
regulations issued under that section, to the extent
required by federal law. Requires health plans and
health insurers to meet any state laws or regulations
that do not prevent the application of those federal
annual and lifetime limit provision, to the extent
required by federal law.
13.Requires health plans and health insurer that issue,
sell, renew, or offers contracts for health care
coverage to meet the medical loss ratio requirements of
PPACA, and any rules or regulations issued under that
provision of PPACA, to the extent required by federal
law.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee, annual
fee-supported (health plan fees) special fund costs of $1
million to $1.5 million to DMHC and CDI, combined, to
establish and maintain oversight of the standardization
requirements and reforms contained in this bill.
SUPPORT : (Verified 8/30/10)
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AARP
Alliance of Californians for Community Empowerment
American Federation of State, County and Municipal
Employees
American Heart Association
Anaheim Chamber of Commerce
Anaheim Chamber of Commerce
Blue Shield of California
California Association of Health Insuring Organizations
California Children's Hospital Association
California Hospital Association
California Medical Association
Community Health Partnership
Congress of California Seniors
Consumers Union
Health Access California
International Brotherhood of Electrical Workers - Local 332
Kaiser Permanente Medical Care Program
Kern County Medical Society
Local Health Plans of California
Los Angeles County Medical Society
MemorialCare Health System
Monterey County Medical Society
Orange Coast Memorial Medical Center
Orange County Medical Association
Planned Parenthood Action Fund of Santa Barbara, Ventura
and San Luis
Obispo Counties, Inc.
Planned Parenthood Affiliates of California
Planned Parenthood Mar Monte
San Bernardino County Medical Society
San Bernardino County Medical Society
San Francisco Medical Society
San Mateo Central Labor Council
San Mateo County Board of Supervisors
San Mateo County Central Labor Council
San Mateo County Medical Association
San Mateo County Medical Association
Santa Clara Family Health Plan
Service Employees International Union
Sierra Sacramento Valley Medical Society
South Bay AFL-CIO Labor Council
St. Joseph Health System
Stanford Hospital and Clinics
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Stanislaus Medical Society
Stanislaus Medical Society
United Nurses Associations of California/Union of Health
Care
Professionals
Working Partnerships USA
OPPOSITION : (Verified 8/30/10)
Department of Finance
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
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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
reasonable package of benefits should be established, and
that all carriers should offer it.
ARGUMENTS IN OPPOSITION : The Department of Finance is
opposed to this bill for the following reasons:
? Legislation to amend health plan and health
insurance rate or coverage requirements should be held
in abeyance until California has enacted legislation
to comply with the federal Patient Protections and
Affordable Care Act (PPACA). Legislation impacting
rate or coverage requirements could conflict with any
future legislation enacted to bring California into
compliance with the PPACA requirements.
? Federal Health Care Reform may require states to
pay for the cost of health care mandates beyond those
required by the federal government, for all
participants in the state insurance exchange. This
bill appears likely to create several such mandates on
health plans and insurers.
GOVERNOR'S VETO MESSAGE:
"I am returning Senate Bill 890 without my signature.
While I appreciate the author's leadership and
efforts to help transition California's healthcare
delivery system in preparation for more significant
changes in 2014, this bill creates unnecessary and
duplicative costs by requiring health plans and
health insurers to meet disclosure requirements in
2011 that will change again in 2014. The added costs
for implementing the provisions of this bill outweigh
the potential short-term benefits for the two
regulatory entities, the affected health plans and
consumers.
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For these reasons, I cannot sign this bill."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De
Leon, Eng, Evans, Feuer, Fong, Fuentes, Furutani,
Galgiani, Gatto, Hall, Hayashi, Hernandez, Hill, Huber,
Huffman, Jones, Lieu, Bonnie Lowenthal, Ma, Mendoza,
Monning, Nava, V. Manuel Perez, Portantino, Ruskin,
Salas, Saldana, Skinner, Solorio, Swanson, Torlakson,
Torres, Torrico, Yamada, John A. Perez
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Conway, Cook, DeVore, Fletcher, Fuller, Gaines, Garrick,
Gilmore, Hagman, Harkey, Jeffries, Knight, Logue, Miller,
Nestande, Niello, Nielsen, Norby, Silva, Smyth, Audra
Strickland, Tran, Villines
NO VOTE RECORDED: Vacancy, Vacancy
CTW:nl 10/5/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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