BILL ANALYSIS Ó
AB 1461
Page 1
ASSEMBLY THIRD READING
AB 1461 (Monning)
As Amended April 9, 2012
Majority vote
HEALTH 13-6 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield, |
| |Bonilla, Eng, Gordon, | |Bradford, Charles |
| |Hayashi, | |Calderon, Campos, Davis, |
| |Roger Hernández, Bonnie | |Gatto, Ammiano, Hill, |
| |Lowenthal, Mitchell, Pan, | |Lara, Mitchell, Solorio |
| |V. Manuel Pérez, Williams | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Garrick, Mansoor, |Nays:|Harkey, Donnelly, |
| |Nestande, Silva, Smyth | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Reforms California's health insurance market for
individual purchasers and implements provisions of the Patient
Protection and Affordable Care Act (ACA) prohibiting preexisting
condition exclusions, requiring guaranteed issuance of products,
establishing statewide open and special enrollment periods, and
limiting premium rating factors to age, geography, and family
size. Specifically, this bill :
1)Prohibits a health benefit plan contract for individual
coverage that is issued, amended, or renewed on or after
January 1, 2014, and that is not a grandfathered health plan,
as specified, from imposing any preexisting condition provision
upon any individual.
2)Requires on or after January 1, 2014, a health plan or health
insurance policy to fairly and affirmatively offer, market, and
sell all of the plan's and insurer's health benefit plans that
are sold in the individual market to all individuals in each
service area in which the plan or insurer provides or arranges
for the provision of health care services. Requires a plan or
insurer to limit enrollment to open enrollment periods and
special enrollment periods, as specified.
3)Requires a plan or insurer to provide an initial open
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enrollment period from October 1, 2013, to March 31, 2014,
inclusive, and annual enrollment periods for plan years on or
after January 1, 2015, from October 15 to December 7, inclusive
of the preceding calendar year.
4)Requires a plan or insurer to allow an individual to enroll in
or change individual health benefit plans, subject to specific
triggering events, such as the loss of minimum essential
coverage, as defined in the Internal Revenue Code, as
specified, gaining a dependent or becoming a dependent through
marriage, birth, adoption, or placement for adoption.
5)Prohibits a health plan or health insurer from conditioning the
issuance or offering of an individual health benefit plan on
specified factors including health status, claims experience
and genetic information.
6)Requires all individual health benefit plans to conform to
specified requirements in existing law, and to be renewable at
the option of the enrollee except as permitted to be canceled,
rescinded, or not renewed, as specified. Requires any plan
that ceases to offer for sale new individual health benefit
plans, as specified, to continue to be governed by existing
law, as specified.
7)Requires a health plan to use only the following
characteristics of an individual, and any dependent thereof,
for purposes of establishing the rate of the individual health
benefit plan:
a) Age, as described in regulations adopted by the
Department of Managed Health Care (DMHC) and the California
Department of Insurance (CDI) that do not prevent the
application of the ACA. Requires the rates to be determined
based on the individual's birthday and requires them not to
vary by more than three to one for adults;
b) Geographic region. Requires, with respect to the 2014
plan year, the regions to be the same as those used by a
health benefit plan or contract entered into with the Board
of Administration of the Public Employees' Retirement
System. For subsequent plan years, the regions shall be
determined by the California Health Benefit Exchange
(Exchange) in consultation with DMHC, CDI, and other private
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and public purchasers of health care coverage; and,
c) Family size, as described in the ACA.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time special fund costs to CDI and the DMHC
exceeding $200,000 (Managed Care Fund and Insurance Fund) to
modify regulations, to ensure plan licensure documentation and
practices reflect compliance with this bill's provisions, and to
handle consumer inquiries. Unknown, potentially significant
annual state costs to CDI and DMHC to enforce the provisions of
this bill depending upon insurer compliance with the new
provisions and the volume of consumer complaints. If the Supreme
Court strikes down provisions in federal law that this bill
mirrors, the individual market reforms in this bill would have
two major impacts beginning in 2014: 1) Demand on the state's
high-risk pool program would be dramatically reduced, resulting
in direct state cost savings. The state currently spends $31.8
million in Proposition 99 tobacco tax revenues on the program,
subject to a maintenance of effort requirement until January 1,
2014; and, 2) If this bill is implemented in absence of an
individual mandate, new market dynamics would have uncertain
impacts on the demand for uncompensated care. Premiums in the
individual market may rise due to adverse selection, which could
price additional people out of the market and result in more
uninsured individuals and more uncompensated care.
On the other hand, individuals previously unable to purchase
insurance due to preexisting conditions would have greater
ability to purchase coverage, since they would be guaranteed an
offer of coverage at community-rated prices. This could result
in less demand for uncompensated care. Care for the uninsured is
generally a local responsibility, paid for by health facilities
that provide charity care, local funds, and federal grants and
supplemental payments to health facilities.
COMMENTS : According to the author, this bill is necessary to
implement provisions of the ACA in California's individual health
insurance market. California has a history of strong consumer
protections in its insurance market for small group purchasers
but California's individual market has been referred to the "wild
west of health insurance," with little or no restrictions on
health insurers in terms of their ability to deny coverage based
on preexisting conditions and from charging higher rates based on
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health status, employment, or any other factor. The ACA limits
what factors plans can use to determine premium rates, eliminates
the use of preexisting condition exclusions and requires plans to
issue and renew policies for willing purchasers. The rules
established in this bill will affect plans operating through the
Exchange and in the outside commercial insurance market for
individual purchasers. For consistency and to ensure a balanced
mix of health risk inside the Exchange, the author is attempting
to keep the rules for the commercial market outside the Exchange
the same, as much as possible, as inside the Exchange.
Health Access California (HAC) writes in support that this bill
requires guaranteed issue of coverage, ending the practice of
denying Californians coverage based on preexisting conditions,
prohibits basing premiums on health status, and ends lock-in so
that individuals will be able to change carriers and products.
In response to the issues about the individual mandate, HAC
points out that Maine has guaranteed issue, guaranteed
renewability, and community rating without an individual mandate.
The percent of the uninsured is low, the market has stabilized
and it is no longer a monopoly market with a single carrier with
over 90% of the market.
The Greenlining Institute believes this bill will establish
parity in California with federal regulations. According to the
Greenlining Institute these measures are of critical importance
to communities of color, who experience health disparities
resulting from factors such as environmental hazards, poverty,
and various forms of discrimination. The California Primary Care
Association indicates that this bill provides numerous consumer
protections. The California Pan-Ethnic Health Network contends
that this bill will ensure that Californians regardless of health
status will be able to get the coverage they need. The
California Black Health Network asserts that preexisting
conditions occur more frequently with age and disproportionately
occur in communities of color and among lower income populations
and this bill will ensure that all, regardless of health status,
can gain coverage and will help diminish any adverse
consequences.
The California Association of Health Plans (CAHP) believes this
bill is missing key components, such as tying some individual
market and underwriting changes of the ACA to an individual
coverage requirement that was designed to help mitigate the cost
impacts of adverse selection. CAHP believes the ACA changes can
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only work when its central provisions are working in harmony.
Such provisions are the guaranteed issuance of coverage
regardless of preexisting conditions, a community rating
structure that limits premium variance, and an individual mandate
that requires broad participation in the insurance market.
According to CAHP, states that have instituted guaranteed issue
and community rating without a mandate have experienced
incredible market disruption. CAHP would also require charging
higher premium rates based on tobacco use because they cause $96
billion in health care expenditures per year in the United
States. CAHP also believes many laws will be obsolete under the
ACA and should be repealed.
Blue Shield of California has concerns because Blue Shield
believes any attempt to enact guaranteed issue and community
rating in California law must be coupled with a corresponding
coverage requirement (individual mandate). According to Blue
Shield experience in other states has conclusively demonstrated
that premiums will skyrocket if carriers are forced to take the
sick at any time without any encouragement to bring in the
healthy. Blue Shield also has concerns with other provisions and
omissions from this bill, such as the ACA allows health plans to
charge higher premiums for tobacco users. According to Blue
Shield this is an important factor influencing premiums and
should be included in this bill.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0003970