BILL ANALYSIS Ó
AB 151
Page 1
Date of Hearing: April 12, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 151 (Monning) - As Introduced: January 18, 2011
SUBJECT : Medicare supplement coverage.
SUMMARY : Requires guaranteed issue of a supplemental Medicare
policy for an individual enrolled in a Medicare Advantage plan,
from the same issuer through which the individual was enrolled,
if the premium increases for the Medicare Advantage plan. If
no Medicare supplement contract is available from the same
issuer, a subsidiary of the parent company of the issuer, or a
network that contracts with the parent company of the issuer,
requires guaranteed issue of a Medicare supplement contract from
any issuer. Specifically, this bill :
1)Requires guaranteed issue of a supplemental Medicare policy
for an individual enrolled in a Medicare Advantage plan, from
the same issuer through which the individual was enrolled, if
the premium increases for the Medicare Advantage plan. If no
Medicare supplement contract is available from the same
issuer, a subsidiary of the parent company of the issuer, or a
network that contracts with the parent company of the issuer,
requires guaranteed issue of a Medicare supplement contract
from any issuer.
2)Revises existing law to recognize two new Medicare supplement
plans (Plans M and N) and deletes obsolete references to
Medicare supplement plans (Plans H, I, and J) in existing law,
and makes other technical, clarifying changes.
EXISTING LAW
1)Provides for the regulation of health plans by DMHC under the
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene
Act), and for the regulation of health insurers by CDI under
provisions of the Insurance Code.
2)Requires guaranteed issue for an individual enrolled in a
Medicare Advantage plan (Medicare Part C) that reduces any of
its benefits, or increases cost sharing, or terminates certain
relationships with providers, to be eligible for Medicare
supplement coverage that is issued by the same issuer of his
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or her Medicare Advantage plan or by a subsidiary of, or a
network that contracts with, the parent company of that
issuer.
3)Requires health plans and insurers that issue Medicare
supplement contracts or policies, as defined, to make
available to specified individuals who are 64 years of age or
younger and who do not have end-stage renal disease, specified
Medicare supplement benefit plans. Prohibits, under federal
law, the issuance of new Medicare supplement plans H, I, and
J, and instead authorizes the issuance of Medicare supplement
plans M and N, as specified.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
PURPOSE OF THIS BILL . According to the author, The recent
federal Affordable Care Act, among other things, will begin to
reduce the subsidy paid to Medicare Advantage plans in 2012, and
use the savings to close the prescription drug coverage gap,
provide additional Medicare preventive services, and other
improvements. Medicare Advantage plans have been paid about 13%
more than the amount paid for coverage in Original Medicare, a
subsidy that will be reduced under a complex formula. This
subsidy has enabled Medicare Advantage plans in different
geographic areas to provide coverage or benefits that would not
have been possible without the subsidy. In some cases this has
meant plans offer coverage in higher costs areas that they would
otherwise have shunned. In other cases, this has meant that
plans offered additional benefits that would not otherwise have
been offered. The new formula will provide less total subsidy
to these Medicare Advantage plans, but will provide additional
payments to high performing plans. The author states that it is
not clear how Medicare Advantage plans will react to the new
rules in the various geographic areas, but it will undoubtedly
be different depending on differing levels of medical costs,
competition, and other factors. What is clear is that many
people in California, where Medicare Advantage plans cover a
high proportion of Medicare recipients, will be facing a
different choice than when they originally selected a Medicare
Advantage plan. Under existing law, only some of them will have
access to a Medigap plan and many may therefore feel trapped in
a Medicare Advantage plan with much higher premiums, higher cost
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sharing, and/or reduced benefits. The author states that this
bill will ensure that all Medicare recipients in a Medicare
Advantage plan facing increased costs or reduced benefits have
the option to enroll in Original Medicare and purchase a Medigap
plan to help cover the costs of coinsurance, copayments, and
deductibles.
BACKGROUND . Medicare is health insurance for people 65 or
older, people under 65 with certain disabilities, and people of
any age with End-Stage Renal Disease (ESRD). There are three
Medicare "parts:" Part A (covers hospital inpatient, skilled
nursing facility, hospice, and home health care), Part B (covers
outpatient and home health care and preventive services), and
Part D (prescription drug coverage). Medicare Advantage Plans
are HMO and PPO coverage provided by Medicare-approved private
insurance companies. Medicare Advantage Plans (also called "Part
C") include services provided under Part A, Part B, and usually
other coverage like Medicare prescription drug coverage (Part
D), sometimes for an extra cost.
"Original Medicare" is operated by the federal government and
provides all but prescription drug coverage, which can be
purchased from private companies offering Prescription Drug
Plans. Those in Original Medicare can also purchase Medicare
Supplement Insurance, often called a "Medigap" policy, to help
pay for gaps in Original Medicare coverage, such as coinsurance,
copayments, and deductibles. These gaps can be substantial.
Original Medicare pays only 80% of doctor and outpatient
services, and a lengthy hospital stay or mental health services
can result in a substantial financial exposure to consumers.
Alternatively, individuals can choose to receive their Medicare
benefits, including prescription drugs, through a "Medicare
Advantage" plan provided by a private insurance company (Part
C). If enrolled in a Medicare Advantage plan an individual does
not need and cannot use a Medigap plan.
During certain periods, an individual has a right to purchase a
Medigap policy and cannot be charged more because of
pre-existing health problems. This is the case for a six month
period when a person is both age 65 and enrolled in Part B of
Medicare. It is also the case when a person loses access to a
Medicare Advantage plan or decides within 12 months of initially
enrolling to instead enroll in Original Medicare.
There is also a limited right to purchase a Medigap policy
without being charged more due to a health condition if the
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Medicare Advantage plan reduces benefits, increases cost
sharing, or changes the network such that the individual no
longer has access to a current medical provider. In these
cases, a person can purchase a Medigap policy if and only if one
is available from the same company or a related company. Kaiser
members, for example, do not have access to a Medigap policy
because of this limitation.
SUPPORT . California Health Advocates writes that our state law
reflects the changing circumstances as people age. Current law
provides a guaranteed right to a Medigap policy if a health plan
drops the treating provider from the plan's network or increases
copayments. However, a Medicare beneficiary can only exercise
those right for 53 days at the end of a year, and then only if
their MA plan also issues Medigap coverage, which some companies
providing Medicare Advantage plans do not. CHA states that
current law doesn't allow beneficiaries the right to a Medigap
policy if the premium for their MA plan goes up. AB 151 would
add that right to existing rights, and remove the restriction
that limits them to the same company issuing the MA plan.
OPPOSITION .
REGISTERED SUPPORT / OPPOSITION :
Support
AARP (sponsor)
Opposition
>
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097