BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1461 (Monning) - Individual health care coverage.
Amended: April 9, 2012 Policy Vote: Health 6-3
Urgency: No Mandate: Yes
Hearing Date: August 16, 2012
Consultant: Brendan McCarthy
SUSPENSE FILE.
Bill Summary: AB 1461 would make several changes to the
individual market for health care coverage. In particular, the
bill would require the guaranteed issue of coverage and prohibit
the use of preexisting conditions as a means of setting rates.
Fiscal Impact:
One-time costs of about $370,000 to the Department of
Managed Health Care to adopt regulations, review health plan
filings, and respond to consumer questions (Managed Care
Fund).
One-time costs of about $600,000 to the Department of
Insurance to adopt regulations and review health plan
filings (Insurance Fund). The higher projected costs to the
Department of Insurance reflect the fact that the changes in
this bill will change the business practices of health
insurers more than health plans. Therefore, there will be
greater workload to adopt regulations and review changes to
insurance policies.
Background: Beginning in 2014, under the federal Patient
Protection and Affordable Care Act (Affordable Care Act), health
plans and health insurers that offer coverage in the individual
market are required to accept every employer or individual that
wishes to purchase coverage and to renew coverage at the
individual or employer's request. The Affordable Care Act
prohibits health plans or insurers from imposing any exclusion
of coverage based on a preexisting condition. Federal law also
limits the "rating factors" used to determine the price of a
health plan or insurance policy to a narrow list of factors,
including age, geographic region, family size, and tobacco use.
AB 1461 (Monning)
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Federal law exempts plans in effect on March 23, 2010
("grandfathered plans") from these requirements, as long as no
changes are made to those plans.
Proposed Law: AB 1461 would make several changes to state law
governing health plans and health insurance policies to conform
to federal requirements of the Affordable Care Act. The bill
would also make certain policy changes to state law governing
health plans and health insurance, as allowed by the Affordable
Care Act.
Provisions conforming California law to federal law include:
Prohibiting health plans and insurance policies from
imposing preexisting condition exclusions.
Requiring the guaranteed issue of coverage.
Requiring health plans and insurers to offer for sale all
plans sold in the individual market to all individuals in
the health plan or insurer's service area.
Prohibiting health plans, insurers, agent or brokers from
encouraging or directing individuals to or away from certain
products due to health status or other factors.
Allowing health plans and insurers to only use age,
geographic region, and family size as rating factors when
setting rates for individual policies.
Provisions implementing policy choices available to the state
include:
Exempting grandfathered plans from the changes made in the
bill.
Excluding tobacco use as a rating factor.
Requiring health plans and insurers to use open enrollment
periods (October 15th to December 7th) that align with those
to be used in the California Health Benefit Exchange.
Initially designating the geographic regions used by
CalPERS as the rating regions for the individual market. In
future years, the California Health Benefit Exchange will
determine the rating regions.
Related Legislation:
AB 1453 (Monning) would designate the Kaiser Small Group
HMO as the state's essential health benefit benchmark plan.
That bill will be heard in this committee.
AB 1461 (Monning)
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SB 951 (Hernandez) would designate the Kaiser Small Group
HMO as the state's essential health benefit benchmark plan.
That bill is in the Assembly Appropriations Committee.
SB 961 (Hernandez) requires health plans to comply with
federal requirements in the individual market. That bill is
in the Assembly Appropriations Committee.
Staff Comments: As noted above, there will be direct costs to
the Department of Managed Health Care and the Department of
Insurance to adopt regulations, review filings from regulated
health plans and insurers, and enforce the provisions of the
bill.
Because these departments are already required to enforce the
state's existing laws and regulations governing health plans and
insurers and the departments are budgeted to do so, costs to
provide general enforcement of the provisions of the bill will
likely be absorbable within existing resources. However, because
the Affordable Care Act and this bill make substantial changes
to the way that the individual market works, it is possible that
the departments will receive more complaints from consumers than
under current law, driving up costs. The extent of this effect
is unknown.
Under the bill, the only costs that may be incurred by a local
agency relate to crimes or infractions. Under the California
Constitution, such costs are not reimbursable by the state.