BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 1163
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          Date of Hearing:   August 4, 2010

                                Felipe Fuentes, Chair

                     SB 1163 (Leno) - As Amended:  June 23, 2010 

          Policy Committee:                             Health Vote:13-5

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No


          This bill increases the availability of information about health  
          coverage denials, premium increases, and insurer rate filings.  
          Specifically, this bill: 

          1)Expands current law notification requirements about individual  
            health insurance market coverage denials to the small and  
            large group health insurance markets. Notifications are  
            required to include information about reason for denial and  
            detail about pending premium increases. 

          2)Increases the time health plans and insurers (carriers) are  
            required to provide advance written notice of changes in  
            premiums for individual health coverage from 30 days to 180  
            days. Requires carriers to include specified detail in rate  
            filings such as product types, rate increases, and changes in  

          3)Requires carriers to submit detailed data until January 1,  
            2014 to the California Department of Managed Health Care  
            (DMHC), the California Department of Insurance (CDI), and the  
            Managed Risk Medical Insurance Board (MRMIB) regarding  
            coverage denials. 

          4)Requires DMHC and CDI to conform to federal health reform  
            requirements contained in the Patient Protection and  
            Affordable Care Act (PL-111-148) related to premium rate  
            review, including providing a summary of consumer inquiries  
            and complaints and developing mechanisms by which to monitor  
            and report about health insurance rate filings in the  
            state-administered health exchange that will become  
            operational January 1, 2014 per requirements of federal law.


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          5)Requires DMHC and CDI to apply for grant funding from the  
            federal government for the purposes of rate review consistent  
            with the requirements of federal law, rules, and guidance.   
            Requires additional costs and expenses associated with rate  
            reviews to be supported by fees, as specified.

           FISCAL EFFECT  

          1)Increased costs of $2 million, combined, to the Department of  
            Managed Health Care (DMHC) and the California Department of  
            Insurance (CDI) to comply with the increased reporting and  
            oversight requirements established by this bill. These costs  
            would likely be supported through a combination of federal  
            funding and fee-supported (health carrier fees) special funds.  
            California recently applied to the federal government for  
            funding to comply with rate review requirements. 

          2)The federal government has allocated $250 million over a  
            five-year period to support state efforts with regard to rate  


           1)Rationale  . This bill is sponsored by Health Access and  
            supported by a variety of consumer and labor groups. The  
            author and sponsor indicate recent changes related to federal  
            health reform have opened opportunities for California to  
            increase the transparency of health coverage underwriting and  

          Supporters indicate under current law there is a lack of  
            reliable information on how many Californians are denied  
            coverage for pre-existing conditions, or how often rates are  
            increased significantly because of changes in health status.  
            The increased availability of information required in this  
            bill will aid in the transition to federal health reform over  
            the next several years, including reporting by California to  
            the federal government about rate increases, the availability  
            of coverage in a temporary high risk pool, and the guarantee  
            issue of health insurance that will be required in several  

           2)Background  . Current law requires carriers that deny health  
            coverage to an applicant in the individual insurance market to  


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            provide the specific reason for the decision in writing. This  
            bill expands this requirement to the small and large group  
            insurance markets. This bill increases the notifications about  
            premium increases from 30 to 180 days to better allow  
            individuals and families to plan accordingly. Current law  
            contains numerous requirements for health carriers with regard  
            to underwriting and related approaches. This bill increases  
            the availability of such information by making it public. 

           3)Related Legislation  . AB 2578 (Jones), pending in the Senate,  
            establishes detailed rate regulation, effective January 1,  
            2012, of California health plans and insurers under the  
            jurisdiction of DMHC and CDI. 

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081