BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 151|
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THIRD READING
Bill No: AB 151
Author: Monning (D)
Amended: 6/29/11 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 5-3, 6/22/11
AYES: Hernandez, Alquist, De León, DeSaulnier, Wolk
NOES: Strickland, Anderson, Blakeslee
NO VOTE RECORDED: Rubio
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 49-25, 5/26/11 - See last page for vote
SUBJECT : Medicare supplement coverage
SOURCE : AARP
DIGEST : This bill requires health care service plans
(health plans) and health insurers offering Medicare
supplement coverage (Medigap policies) to issue coverage
for a Medigap policy on a guaranteed issue basis to an
individual enrolled in a Medicare Advantage (MA) plan
issued by the same issuer if there is an increase in the
enrollee's premium, requires all health plans and insurers
offering Medigap policies to issue such coverage on a
guaranteed issue basis to an individual enrolled in a MA
plan offered by a different health plan or insurer under
specified circumstances, and makes technical changes to the
requirements and standards that apply to Medigap policies,
CONTINUED
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for the purpose of complying with recent changes in federal
law. This bill establishes a threshold for a change in the
premium or cost sharing levels to be met before MA plan
enrollees may switch to another carrier for Medigap
coverage on a guaranteed issue basis.
ANALYSIS : Existing federal law:
1. Establishes the Medicare program as a
government-administered health insurance program for
people age 65 or older and certain people younger than
age 65, such as those with disabilities and those with
permanent kidney failure.
2. Requires states, under the Medicare Improvements for
Patients and Providers Act of 2008 (MIPPA), to adopt
changes to Medigap policies, as outlined in the model
regulations developed by the National Association of
Insurance Commissioners (NAIC). MIPPA reduces the
number of standardized Medigap policies from 14 to 11,
and makes other changes to benefit and cost-sharing
requirements, and disclosure and issuance requirements.
3. Establishes the federal Patient Protection and
Affordable Care Act (Public Law 111-148) (PPACA), which,
among other things, makes a number of changes to the
payment structures and payment methodologies for MA
plans intended to reduce federal payments to MA plans.
4. Requires, beginning January 1, 2014, each health plan or
insurer that offers health insurance coverage in the
individual or group market to accept every employer and
adult that applies for such coverage. (This requirement
is known as "guaranteed issue.")
5. Requires health plans and insurers to provide guaranteed
issue of health coverage for children beginning
September 2010.
6. Allows a health plan or insurer to restrict enrollment
in coverage to open or special enrollment periods.
Additionally, a health insurance issuer must establish
special enrollment periods for qualifying events,
pursuant to regulations promulgated by the federal
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Secretary of the Department of Health and Human
Services.
7. Makes changes to the categories of Medigap policies,
including:
A. Eliminating Medigap policies with drug coverage
that were no longer needed after the enactment of
Medicare Part D, as well those with little
enrollment, largely due to high cost-sharing (Medigap
plans H, I, and J); and
B. Adding two new Medigap policies that include some
level of cost sharing to provide lower cost options
(Medigap plans M and N).
Existing state law:
1. Provides for the regulation of health plans by the
Department of Managed Health Care (DMHC), and for the
regulation of health insurers by the Department of
Insurance (CDI).
2. Establishes standards for Medigap policies sold in
California, which provide Medicare beneficiaries who are
not enrolled in a MA plan with coverage for benefits and
cost-sharing that is not covered by Medicare. Medigap
policies are subject to the jurisdiction of either DMHC
or CDI, depending on the type of policy, in a manner
generally consistent with federal laws applicable to
Medigap policies, and are subject to benefit and
cost-sharing requirements for 11 standardized benefit
plans, open enrollment and guaranteed issue
requirements, and specified notice and disclosure
requirements pertaining to Medigap applicants and
enrollees.
3. Requires Medigap coverage to be issued on a guaranteed
issue basis to an individual who is enrolled in a MA
plan that reduces any of its benefits, increases cost
sharing or premiums, or terminates certain relationships
with providers, for Medigap coverage that is issued by
the same issuer or by a subsidiary of, or a network that
contracts with, the parent company of that issuer.
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4. 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.
This bill:
1. Requires Medigap policies to be issued on a guaranteed
issue basis to an individual enrolled in a MA plan for
Medigap coverage by the same issuer of the MA plan if
there is an increase in his/her premium.
2. Requires guaranteed issue of Medigap coverage to an
individual who is enrolled in a MA plan from any issuer
if his/her MA plan issuer, a subsidiary of the parent
company of the issuer, or a network that contracts with
the parent company of the issuer does not offer
supplement plans and any of the following occur:
A. A reduction in benefits;
B. An increase in cost sharing;
C. An increase in premiums; or
D. A discontinuation of the relationship or contract
under the plan with a provider who is currently
furnishing services to the individual, for other than
good cause relating to quality of care.
3. Makes technical changes to conform state law with
federal requirements that:
A. Eliminate Medigap policies with drug coverage that
were no longer needed after the enactment of Medicare
Part D, as well those with little enrollment, largely
due to high cost sharing (Medigap plans H, I, and J);
and
B. Add two new Medigap policies that include some
level of cost sharing to provide lower cost options
(Medigap plans M and N).
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4. Establishes a threshold for a change in the premium or
cost sharing levels to be met before a MA plan enrollees
may switch to another carrier for Medigap coverage on a
guaranteed issue basis.
5. States that enrollees must have a 15 percent increase in
premiums or copayments to be able to switch to a Medigap
plan offered by another carrier without undergoing
medical underwriting. Provides that these switches must
be concurrent with the annual open enrollment period for
the MA plan, unless the MA plan has discontinued its
relationship with the enrollee's current provider.
6. Clarifies that these provisions do not allow an
individual to enroll in a group Medigap policy if the
individual does not meet the eligibility requirements
for the group.
Background
Medigap policies . While original Medicare provides
extensive benefits, it is not designed to cover the total
cost of medical care for Medicare beneficiaries. The
percentage of out-of-pocket health care expenses for
Medicare beneficiaries can be sizable and typically
increases with age. As the Medicare fee-for-service
program pays only 80 percent of approved charges for doctor
and outpatient services, these coverage gaps can be
substantial. Many people who do not have coverage from a
current or previous employer that covers these gaps choose
to get some type of additional coverage to pay some of the
costs not covered by original Medicare, such as
coinsurance, copayments, and deductibles. A Medigap policy
is a health insurance policy sold by private insurance
companies specifically to fill "gaps" in original Medicare
coverage. A Medigap policy typically provides coverage for
some or all of the deductible and coinsurance amounts
applicable to Medicare-covered services, and sometimes
covers items and services that are not covered by Medicare.
By law, health plans and insurers can offer only 10
standardized Medigap benefit packages, referred to as
Medigap plans A through N (plans A, B, C, D, F, G, K, L, M
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and N. All must offer the core benefits listed below:
1. Coinsurance for 61 to 90 hospital days ($283 per day in
2011) and coinsurance for the 60 lifetime reserve days
($566 per day in 2011);
2. 100 percent of the cost of hospital care beyond 150 days
covered by Medicare, up to a maximum of 365 lifetime
days;
3. Cost sharing for hospice care;
4. 20 percent coinsurance of Medicare-approved charges,
after the $162 annual Part B Medicare deductible has
been met; and
5. The first 3 pints of blood in each calendar year.
Some plans may also cover other health care costs that
Medicare does not cover, such as foreign travel emergency
medical care.
Medigap policies are "guaranteed issue" at certain times
for eligible beneficiaries as specified in state and
federal law. For example, at the point where an individual
first becomes eligible for Medicare there is an "open
enrollment" period where they can purchase any Medigap
policy without medical underwriting. Beneficiaries are
also guaranteed coverage when certain events occur, such as
losing access to employer-sponsored Medigap coverage,
losing access to a MA plan, or deciding within 12 months of
initially enrolling in a MA plan to instead enroll in
Medicare fee-for-service. There is also a limited right to
purchase a Medigap policy on a guaranteed issue basis if
the MA 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 one is available
from the same company or a related company.
Unless eligible for open enrollment or guaranteed issue,
Medicare beneficiaries wishing to purchase Medigap coverage
or change plans are subject to medical underwriting, and
can be denied coverage based on their health status or
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claims experience. Medigap policies are guaranteed
renewable as long as the premium is paid and, generally
speaking, cannot be cancelled because of a person's health
condition or for any reason other than non-payment of the
premium. Insurers can, however, at their discretion,
increase the premiums for Medigap coverage.
In June 2010, the array of standardized Medigap plans
changed after a congressionally mandated review by NAIC.
(NAIC represents state insurance regulators and develops
and publishes model insurance laws and regulations.) These
changes eliminated Medigap policies with drug coverage that
were no longer needed after the enactment of Medicare Part
D, as well as others that had little enrollment, largely
due to high cost sharing. Some plans were modified and two
new plans were added that include some level of cost
sharing in an attempt to provide lower cost options.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 7/11/11)
AARP (source)
Alzheimer's Association, California Council
American Federation of State, County and Municipal
Employees
California Alliance of Retired Americans
California Association of Health Underwriters
California Department of Insurance
California Health Advocates
California Primary Care Association
Congress of California Seniors
Health Access California
ARGUMENTS IN SUPPORT : AARP, the sponsor of this bill,
writes that the PPACA will reduce federal subsidies to MA
plans starting next year and, as a result, plans can be
expected to reduce benefits, increase premiums and/or cost
sharing, and perhaps withdraw from areas they now serve.
AARP states that, in any case, consumers will undoubtedly
see a different array of plan offerings, and should have
the option to continue with the MA plan or to switch to
original Medicare and purchase a supplemental policy to
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cover the gaps in coverage.
California Health Advocates (CHA) writes that 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 rights during their
annual open enrollment period, and then only if their MA
plan also issues Medigap coverage, which some companies
providing MA plans do not. CHA states that current law
does not allow beneficiaries the right to a Medigap policy
if the premium for their MA plan goes up, and that this
bill adds that right to existing rights, and remove the
restriction that limits them to the same company issuing
the MA plan.
Health Access California states that seniors who rely on
Medicare expect to be able to obtain Medigap coverage when
there is a change in other Medicare coverage. The Congress
of California Seniors writes that this bill will increase
fairness for seniors eligible for Medicare. The
Alzheimer's Association, California Council writes that
this bill will enable consumers to purchase coverage in
order to ensure they can pay for their vital hospital and
physician visits, medications, and preventative services.
The American Federation of State, County and Municipal
Employees states that it is vital that seniors receive the
health care they deserve regardless of pre-existing medical
conditions, and that this bill facilitates the enrollment
into the adequate health care policy that suits a senior's
particular needs. The California Primary Care Association
writes that this bill will make Medicare prescriptions more
affordable and provide increased access to preventive care,
and that community clinics and health centers will be
better able to provide care to this population.
ASSEMBLY FLOOR : 49-25, 5/26/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Chesbro,
Dickinson, Eng, Feuer, Fong, Fuentes, Galgiani, Gatto,
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Gordon, Hall, Hayashi, Roger Hernández, Hill, Huber,
Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza,
Mitchell, Monning, Pan, Perea, V. Manuel Pérez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. Pérez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, Beth Gaines, Garrick, Grove, Hagman, Halderman,
Harkey, Jeffries, Knight, Logue, Mansoor, Miller,
Morrell, Nielsen, Norby, Olsen, Silva, Smyth, Valadao,
Wagner
NO VOTE RECORDED: Cedillo, Davis, Furutani, Gorell, Jones,
Nestande
CTW:kc 7/11/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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