BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1083|
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THIRD READING
Bill No: AB 1083
Author: Monning (D), et al.
Amended: 8/15/12 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 5-2, 6/29/11
AYES: Hernandez, Alquist, De León, DeSaulnier, Wolk
NOES: Strickland, Anderson
NO VOTE RECORDED: Blakeslee, Rubio
SENATE APPROPRIATIONS COMMITTEE : 6-2, 8/15/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Emmerson
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR : 50-27, 5/27/11 - See last page for vote
SUBJECT : Health care coverage
SOURCE : Health Access California
Small Business Majority
DIGEST : This bill makes conforming and other changes to
state law governing the sale of small group health
insurance products to implement provisions in the
Affordable Care Act (ACA).
Senate Floor Amendments of 8/15/12 change the format of
this bill to (1) apply existing law to nongrandfathered
small employer plans until
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January 1, 2014; (2) apply existing law to grandfathered
plans; and (3) establish a new Article in law that applies
to nongrandfathered small group plans with respect to plan
years beginning on or after January 1, 2014, and make other
substantive changes.
ANALYSIS : Existing federal law, the federal Patient
Protection and Affordable Care Act (PPACA), enacts various
health care coverage market reforms that take effect with
respect to plan years on or after January 1, 2014. Among
other things, PPACA requires each health insurance issuer
that offers health insurance coverage in the individual or
group market in a state to accept every employer and
individual in the state that applies for that coverage and
to renew that coverage at the option of the plan sponsor or
the individual. PPACA prohibits a group health plan and a
health insurance issuer offering group or individual health
insurance coverage from imposing any preexisting condition
exclusion with respect to that plan or coverage. PPACA
allows the premium rate charged by a health insurance
issuer offering small group or individual coverage to vary
only by family composition, rating area, age, and tobacco
use and prohibits discrimination against individuals based
on health status, as specified. PPACA specifies that
certain of these provisions do not apply to grandfathered
health plans, as defined.
Existing law:
1.The Knox-Keene Health Care Service Plan Act of 1975
provides for the regulation of health care service plans
by the Department of Managed Health Care and makes a
willful violation of the act a crime.
2.Provides for the regulation of health insurers by the
Department of Insurance.
3.Provides for the regulation of health care service plans
and health insurers that offer health benefit plans to
small employers with regard to eligible employees, as
defined.
4.Requires a plan or insurer to offer, market, and sell all
of its small employer health benefit plans to all small
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employers in each service area in which the plan provides
or arranges for the provisions of health care services
and provides certain limits on the rates for these plans.
5.Prohibits a group health benefit plan from excluding
coverage for an individual on the basis of a preexisting
condition provision for a period greater than six months,
except as specified.
This bill:
1.Applies existing law to nongrandfathered small employer
plans until January 1, 2014.
2.Applies existing law to grandfathered plans.
3.Sets up a new Article in law that applies to
nongrandfathered small employer health benefit plans with
respect to plan years beginning on or after January 1,
2014.
A. Defines "small employer" for plan years commencing
on or after January 1, 2014, and on or before December
31, 2015, as any person, firm, proprietary or
nonprofit corporation, partnership, public agency, or
association that is actively engaged in business or
service, that, on at least 50 percent of its working
days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no
more than 50, eligible employees, the majority of whom
are employed in this state, that was not formed
primarily for purposes of buying health care service
plan contracts, and in which a bona fide
employer-employee relationship exists. For plan years
after January 1, 2016, a small employer can have no
more than 100 eligible employees. This is to be
implemented to the extent consistent with the ACA.
Applies this definition to grandfathered plans.
B. Defines "eligible employee" as a full-time employee
who works an average of 30 hours per week over the
course of a month.
C. For plan years commencing on or after January 1,
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2014, the definition of an employer, for purposes of
determining whether an employer with one employee
shall include sole proprietors, certain owners of "S"
corporations, or other individuals, shall be
consistent with Section 1304 of the ACA.
D. Makes enrollment periods consistent with the ACA
with regard to the Small Business Health Option
Program Exchange with specified exceptions.
E. Prohibits a health care service plan or insurance
carrier from requiring an eligible employee or
dependent to fill out a health assessment or medical
questionnaire prior to enrollment under a small
employer health care service plan contract.
F. Defines rating period as the period for which
premium rates established by a plan are in effect and
shall be from January 1, to December 31, inclusive.
G. In terms of health status-related factors in which
plans may not establish rules for eligibility,
recognizes any other health status-related factor as
determined by any federal regulations, rules, or
guidance issued pursuant to Section 2705 of the
federal Public Health Service Act. Applies to
grandfathered plans.
H. Revises definition of dependent to include domestic
partners.
I. Revises definition of child to mean a child
described in Section 22775 of the Government Code and
in subdivisions (n) to (p), inclusive, of Section
599.500 of the California Code of Regulations.
J. Requires a small employer health care service plan
to provide subscribers and enrollees at least all of
the essential health benefits as defined by the state
pursuant to Section 1302 of the ACA.
AA. Requires premium rates to vary only the following
for nongrandfathered plans:
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(1) Age, as described in regulations adopted by the
department in conjunction with the Department of
Insurance that do not prevent the application of the
ACA. Rates based on age shall be determined based
on the individual's birthday. A plan shall not use
any age bands for rating purposes that are
inconsistent with the age bands established by the
U.S. Secretary of Health and Human Services.
(2) Geographic ratings based on 13 regions, as
specified.
(3) Whether the contract covers an individual or
family.
A. Allows departments to implement through all plan
letters until regulations are adopted. Requires
emergency regulations to be adopted by August 31,
2013. Allows one readoption period.
B. Prohibits a nongrandfathered plan for group or
individual coverage or a grandfathered plan for group
coverage from imposing any preexisting condition or
waivered condition upon any enrollee.
C. Permits a grandfathered plan to exclude coverage on
the basis of a waivered or preexisting condition for a
period no greater than 12 months following the
effective date of coverage, as specified.
D. Allows waiting periods for group coverage of up to
60 days as a condition of employment if applied
equally to all eligible employees and dependents and
if consistent with the ACA. Waiting periods or
affiliation periods shall not be based on preexisting
condition, health status, or any other factor, as
specified.
E. Requires on or after October 1, 2013, and annually
thereafter, a health care service plan and insurance
carrier to issue a notice to all subscribers enrolled
in a grandfathered small employer plan contract
informing subscribers about new health care options
available on and after January 1, 2014, as specified.
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F. Requires disclosure of enrollment of products and
policies, including administrative services only
business lines beginning March 1, 2013.
Background
California's small group health insurance market . In 1992,
under AB 1672 (Margolin and Hansen), Chapter 1128, Statutes
of 1992, California enacted a number of reforms to the
small group market, making health insurance more accessible
to small employers through guaranteed issue and
renewability provisions, regulating pre-existing conditions
limitations, underwriting protections, and disclosure
requirements. Before AB 1672, a carrier would examine an
employer's health history and could either increase the
premiums significantly or decline the entire group.
California's small group market has been shaped by
guaranteed issue and other protections established in small
group reform in 1992. In this market, carriers may impose
participation requirements (i.e. 70 percent of eligible
employees must enroll) and contribution requirements (i.e.
employer must pay at least pay half of the premium). As a
result, enrollees in small group coverage typically pay a
fraction of their premium.
A 2011 California HealthCare Foundation report indicates
that 3.4 million, or nine percent, of Californians have
health coverage through small group insurance products.
Roughly 67 percent of small group products are regulated by
the Department of Managed Health Care, compared to 33
percent regulated by the Department of Insurance. In
addition, there are 2.2 million people who purchase
insurance for themselves in the individual market. Of
those 2.2 million, 32 percent are self-employed and another
26 percent work for small employers. Another 3 million
people who are uninsured have a head of family who works
for a small employer or is self-employed.
Small group reforms in PPACA . On March 23, 2010, President
Obama signed the PPACA. This federal law makes several
significant changes to the group and individual insurance
markets. In general, PPACA requires individuals, beginning
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in 2014, to maintain health insurance coverage, with some
exceptions. Employers are not explicitly required to
provide health benefits, although certain employers with
more than 50 employees may be required to pay a penalty if
they either (1) do not provide insurance, under certain
circumstances, or (2) the insurance they provide does not
meet specified requirements. PPACA also eliminates the
pricing of premiums based on health status, limits the
range of premiums based on age, adds the self-employed to
those eligible for guaranteed issue of coverage, includes
wellness incentives in the coverage available to small
businesses and expands the rules to employers with one to
100 employees.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
Unknown with latest amendments.
SUPPORT : (Verified 8/20/12)
Health Access California (co-source)
Small Business Majority (co-source)
California Medical Association
California Optometric Association
California Retired Teachers Association
CALPIRG
Congress of California Seniors
Latino Health Alliance
OPPOSITION : (Verified 8/20/12)
Anthem Blue Cross
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Chamber of Commerce
Safeway, Inc.
ASSEMBLY FLOOR : 50-27, 5/27/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
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Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes,
Galgiani, 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, Gatto, Grove, Hagman,
Halderman, Harkey, Jeffries, Jones, Knight, Logue,
Mansoor, Miller, Morrell, Nestande, Nielsen, Norby,
Olsen, Smyth, Valadao, Wagner
NO VOTE RECORDED: Furutani, Gorell, Silva
CTW:RM:n 8/20/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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