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: 8/24/12 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 8/24/12 make technical and
clarifying changes, define registered domestic partners,
delete December to January contract rate dates and instead
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require rates to be in effect no less than 12 months from
the date of issuance or renewal, prohibit a health plan or
insurer form acquiring or requesting information that
relates to a health status-related factor from the
applicant or his or her dependent or nay other source prior
to enrollment, add provisions which tie the guaranteed
issue and rating provisions of this bill to those provision
in federal law and reinstate existing law, defer the
requirements on age bands and family size to the United
States Secretary of Health and Human Services, increase the
geographic rating regions to 19 and require no later than
June 1, 2017, the Department of Managed Health Care in
collaboration with the Exchange and the Department of
Insurance to review the geographic rating regions and
submit a report to the appropriate policy committees. (See
analysis section below for details of amendments.)
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.
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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
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
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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,
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 and
prohibits a health plan or insurance carrier form
acquiring or requesting information that relates to a
health status-related factor from the applicant or his
or her dependent or nay other source prior to
enrollment.
F. Defines rating period as the period for which
premium rates established by a plan are in effect no
less than 12 months from the date of issuance or
renewal.
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.
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H. Revises definition of dependent to include
registered domestic partners, as defined.
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:
(1) Age, pursuant to age bands for rating purposes
that are inconsistent with the age bands
established by the U.S. Secretary of Health and
Human Services. Age bands shall not vary by more
than three to one for adults.
(2) Geographic ratings based on 19 regions, as
specified. Requires no later than June 1, 2017,
the Department of Managed Health Care in
collaboration with the Exchange and the Department
of Insurance to review the geographic rating
regions and submit a report to the appropriate
policy committees.
(3) Whether the contract covers an individual or
family.
BB. 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.
CC. 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.
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DD. 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.
EE. 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.
FF. Requires disclosure of enrollment of product types
and policy types, including administrative services
only business lines and grandfathered plans beginning
March 1, 2013.
8/24/12 Amendment
Senate Floor Amendments make the following changes to both
the Health and Safety Code and the Insurance Code:
1. Establish rating periods to be no less than 12 months
from the date of issuance or renewal.
2. Prohibit a health care service plan or insurer from
acquiring or requesting information that relates to a
health status factor from the applicant or his or her
dependent or any other source prior to enrollment of
the individual.
3. Require that if the ACA provisions on guarantee issue
and rating factors are repealed in the ACA, the related
sections in state law would also be repealed.
4. Establish the following geographic rating regions:
A. Region 1 shall consist of the counties of Alpine,
Del Norte, Siskiyou, Modoc, Lassen, Shasta, Trinity,
Humboldt, Tehama, Plumas, Nevada, Sierra, Mendocino,
Lake, Butte, Glenn, Sutter, Yuba, Colusa, Amador,
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Calaveras, and Tuolumne.
B. Region 2 shall consist of the counties of Napa,
Sonoma, Solano, and Marin.
C. Region 3 shall consist of the counties of
Sacramento, Placer, El Dorado, and Yolo.
D. Region 4 shall consist of the county of San
Francisco.
E. Region 5 shall consist of the county of Contra
Costa.
F. Region 6 shall consist of the county of Alameda.
G. Region 7 shall consist of the county of Santa
Clara.
H. Region 8 shall consist of the county of San
Mateo.
I. Region 9 shall consist of the counties of
Santa Cruz, Monterey, and San Benito.
J. Region 10 shall consist of the counties of
San Joaquin, Stanislaus, Merced, Mariposa, and Tulare
AA. Region 11 shall consist of the counties of
Madera, Fresno, and Kings.
BB. Region 12 shall consist of the counties of San
Luis Obispo, Santa Barbara, and Ventura.
CC. Region 13 shall consist of the counties of Mono,
Inyo, and Imperial.
DD. Region 14 shall consist of the county of Kern.
EE. Region 15 shall consist of the ZIP Codes in Los
Angeles County starting with 906 to 912, inclusive,
915, 917, 918, and 935.
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FF. Region 16 shall consist of the ZIP Codes in Los
Angeles County other than those identified in
subparagraph (xv).
GG. Region 17 shall consist of the counties of San
Bernardino and Riverside.
HH. Region 18 shall consist of the county of Orange.
II. Region 19 shall consist of the county of San
Diego.
1. Authorizes the Department of Managed Health Care, in
consultation with the Department of Insurance and the
California Health Benefit Exchange, to review the
geographic rating regions and submit a report to the
Legislature.
2. Deletes the authority to implement through all-plan
letters. Authorizes limited emergency regulation
authority to the Department of Managed Health Care and
the Department of Insurance to implement.
3. Clarifies the term "dependent" to mean spouse or
registered domestic partners.
4. Deletes the notification requirement to enrollees in
the small group market in a grandfathered plan.
5. Requires carriers to report the number of enrollees,
by product type, as of December 31 of the prior year,
that receive health care coverage in a grandfathered
plan. This is in addition to the current requirement to
report.
6. Deletes the requirement to establish age bands and
instead defers to the federal government.
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
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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
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
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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 Public Interest Research Group
California Retired Teachers Association
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,
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
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NO VOTE RECORDED: Furutani, Gorell, Silva
CTW:RM:n 8/27/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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