BILL ANALYSIS Ó
AB 52
Page 1
ASSEMBLY THIRD READING
AB 52 (Feuer)
As Amended June 1, 2011
Majority vote
HEALTH 12-7 APPROPRIATIONS 9-7
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|Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield, |
| |Bonilla, Eng, Gordon, | |Bradford, Campos, Davis, |
| |Hayashi, | |Gatto, Hill, Lara, |
| |Roger Hernández, Bonnie | |Mitchell |
| |Lowenthal, Mitchell, V. | | |
| |Manuel Pérez, Williams | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Garrick, Mansoor, |Nays:|Harkey, Charles Calderon, |
| |Nestande, Pan, Silva, | |Donnelly, Nielsen, Norby, |
| |Smyth | |Solorio, Wagner |
| | | | |
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SUMMARY : Requires health care service plans (health plans)
licensed by the Department of Managed Health Care (DMHC) and
health insurers (collectively carriers) certificated by the
California Department of Insurance (CDI) (collectively
regulators), effective January 1, 2012, to apply for prior
approval of proposed rate increases, under specified conditions,
and imposes on regulators specific rate review criteria,
timelines, and hearing requirements. Specifically, this bill :
1)Prohibits any rate from being approved or remaining in effect
that is found to be excessive, inadequate, unfairly
discriminatory, or otherwise in violation of the standards
established by this bill. Prohibits carriers from
implementing a rate for a new product or change the rate it
charges, unless it submits an application and the application
is approved by regulators.
2)Permits regulators to approve, deny, or modify any proposed
rate for a new product or any rate change for an existing
product, as specified. Requires the regulators to review for
compliance, with the requirements in this bill, all rate
increases which become effective January 1, 2011, to December
31, 2011. Requires regulators to take into account
established actuarial principles. Requires regulators to
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order the refund of payments made pursuant to any such rate,
to the extent DMHC or CDI find the rate to be excessive,
inadequate, or unfairly discriminatory.
3)Requires any final finding, determination, rule, ruling, or
order made by CDI or DMHC to be subject to review by the
courts of the state, and in accordance with the Code of Civil
Procedure, such that the court is authorized and directed to
exercise its independent judgment on the evidence and unless
the weight of the evidence supports the findings,
determination, rule, ruling or order of CDI or DMHC, the same
shall be annulled.
4)Requires any petition for review of any such finding,
determination, rule, ruling or order pursuant to 3) above to
be filed within 60 days of the public notice of the order or
decision.
5)Requires that all information submitted in a rate application
and all information submitted in support of the application be
subject to the California Public Records Act, except for
financial data, where the disclosure of which would be
competitively injurious to the carrier, as determined by the
regulator.
6)Requires regulators to notify the public of rate applications
submitted by carriers through a posting on regulator Web sites
and distribution to the major statewide media and to any
member of the public who requests placement on a mailing list
or electronic mail list to receive the notice. Requires the
regulator, if it holds a hearing on the application, to issue
a decision and findings within 100 days after the hearing.
7)Authorizes an enrollee or policyholder to initiate or
intervene in any proceeding pursuant to this bill. Requires
compensation to be provided for reasonable advocate's fees,
reasonable expert witness fees, and other reasonable costs to
enrollees or policyholders for participation or intervention,
as specified. Defines an "enrollee" or "policyholder" as a
representative of one or more enrollees, subscribers, or
member of any health plan or policyholders of a health
insurer; or a group or organization authorized pursuant to its
articles of incorporation or bylaws to represent the interests
of consumer enrollees, subscribers, members, or policyholders.
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FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Annual fee-supported special fund costs of at least $30
million to DMHC and CDI, combined, to process, review,
approve, post, and monitor activities related to rate increase
approvals. Workload to DMHC and CDI includes data collection,
actuarial analysis, consumer services, rate enforcement, legal
analysis, administrative law hearings, and continued
oversight. This estimate is subject to significant
uncertainty, as workload would depend on plan behavior with
respect to the timing and number of proposed rate increases.
2)A significant increase in fee-supported special funds may be
required for several years and especially during major
coverage expansions in several years per requirements of the
federal Patient and Patient Protection and Affordable Care Act
(PPACA). Actual costs may subside earlier, depending on
patterns of health coverage expansions and related changes in
insurance product pricing.
3)PPACA includes some support for states to conduct general rate
review and report to the federal government about unjustified
rates. California has received $3 million each year for the
next three years, and may be eligible for an additional $2
million. This federal funding would offset any fee-supported
special fund costs generated by this bill.
COMMENTS : The author states that insurance rates continue to
escalate at a remarkable pace: from 1999 to 2009, health
insurance premiums for families rose 131%, while the general
rate of inflation increased just 28% during the same period,
according to a report by the Kaiser Family Foundation. The same
report concluded that states with robust and transparent rate
review and approval processes have greater power to protect
consumers from large rate increases. The author states that
this bill would bring California in line with 35 other states
that require some form of prior health insurance rate approval
by state regulators.
Regulation and oversight of health insurance in California is
split between two state departments, the DMHC and CDI. DMHC
regulates health plans, including HMOs and some Preferred
Provider Organization (PPO) plans. CDI regulates multiple lines
of insurance, including disability insurers offering health
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insurance, generally PPO plans and traditional indemnity
coverage. In California, health insurance is generally not
subject to rate regulation, with few exceptions.
This bill proposes to confer direct rate regulation authority
for health coverage on both regulators, using language similar
to that enacted when the voters passed Proposition 103 (Prop
103) in 1988. Prop 103 currently applies to auto, homeowners,
and other forms of property/casualty insurance and, generally,
requires extensive examination of any rates proposed by
insurers. Consumer advocates point out that during the decade
after Prop 103 was adopted, auto insurance rates in California
went down by 4% while auto insurance products remain broadly
available and competitive, and the uninsured motorist population
declined by 38%. Nationally, auto insurance rates rose over 25%
during this period.
On March 23, 2010, President Obama signed the PPACA. Among
other provisions, the new law makes statutory changes affecting
the regulation of and payment for certain types of private
health insurance. In August 2010, DMHC and CDI received federal
funds available under PPACA for rate review activities (DMHC
received $607,998 and CDI received $392,002) to enhance the
DMHC's and CDI's information technology infrastructure to
support data collection and public disclosure of premium rates
through the National Association of Insurance Commissioners'
System for Electronic Rate and Form Filing, and hire actuaries
or obtain contractual actuarial services to develop premium rate
review process and review rate filings. According to DMHC, the
grant funds will allow both departments to improve the
collection of premium rate information; to enhance the depth and
breadth of current rate reviews; and, to build the
infrastructure necessary to enable each department to perform
the expanded range and significantly greater volume of rate
reviews required by PPACA.
Recent high profile rate increases proposed by major California
insurers have resulted in increased public and state scrutiny
into the actuarial analysis of those increases and has resulted
in withdrawal of those rate increases. Supporters write that
health insurers are continuously increasing rates on individual
and group policyholders, and the uninsured often come from the
most vulnerable communities of the state. Supporters further
state that the increases in health insurance premiums for
individuals and small businesses revealed in recent months have
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capped years of steady increases in overall premiums.
Anthem Blue Cross writes that because insurance rates are a
function of insurance costs, adding an additional layer of
regulation will only increase the cost of delivering health care
to Californians. Kaiser Permanente Medical Program writes that
supporters of this bill assert that Prop 103 has lowered auto
insurance rates - and believes the evidence for this claim is
dubious because proponents give no consideration to the much
more likely causal factors of dramatically reduced accident
rates and decreased liability costs after the California Supreme
Court prohibited third-party bad faith lawsuits. The Civil
Justice Association states that the most troubling part of this
bill allows any person to intervene in any proceeding to
"enforce any action of the department under this article, and
enforce any provision of this article on behalf of him or
herself or members of the public."
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0001171