BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1761| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1761 Author: John A. Pérez (D), et al. Amended: 8/14/12 in Senate Vote: 21 SENATE HEALTH COMMITTEE : 9-0, 6/20/12 AYES: Hernandez, Harman, Alquist, Anderson, Blakeslee, De León, DeSaulnier, Rubio, Wolk SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/13/12 AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price, Steinberg ASSEMBLY FLOOR : 74-0, 4/26/12(Consent) - See last page for vote SUBJECT : California Health Benefit Exchange SOURCE : Author DIGEST : This bill prohibits an individual or entity from holding himself, herself, or itself out as representing, constituting, or otherwise providing services on behalf of the Exchange unless that individual or entity has a valid agreement with the Exchange to engage in those activities. ANALYSIS : Existing law: 1.Requires, under the federal Patient Protection and Affordable Care Act (ACA), as amended by the Health Care CONTINUED AB 1761 Page 2 Education and Reconciliation Act of 2010, each state, by January 1, 2014, to establish an American Health Benefit Exchange that makes qualified health plans available to qualified individuals and qualified employers. If a state does not establish an Exchange, the federal government administers the Exchange. The ACA establishes requirements for the Exchange and for health plans participating in the Exchange, and the ACA defines who is eligible to receive coverage in the Exchange. 2.Allows, under the ACA and effective January 1, 2014, eligible individual taxpayers, whose household income equals or exceeds 100 percent, but does not exceed 400 percent, of the federal poverty level (FPL), an advanceable and refundable tax credit for a percentage of the cost of premiums for coverage under a qualified health plan offered in the Exchange. The ACA also requires a reduction in cost sharing for individuals with incomes below 250 percent of the FPL, and a lower maximum limit on out-of-pocket expenses for individuals whose incomes are between 100 and 400 percent of the FPL. Legal immigrants with household incomes less than 100 percent of the FPL who are ineligible for Medicaid because of their immigration status are also eligible for the premium tax credit and the cost-sharing reductions. 3.Defines, under the Insurance Code, unfair methods of competition and unfair and deceptive acts or practices in the business of insurance. Makes any person who engages in any unfair method of competition or any unfair or deceptive act or practice liable to the state for a civil penalty to be fixed by the Insurance Commissioner, not to exceed $5,000 for each act or, if the act or practice was willful, a civil penalty not to exceed $10,000 for each act. 4.Permits, under the Knox-Keene Health Care Service Act of 1975 (Knox-Keene Act), the Director of the Department of Managed Health Care (DMHC) to require that solicitors and solicitor firms and principal persons engaged in the supervision of solicitation for plans of solicitor firms to meet such reasonable and appropriate standards with respect to training, experience, and other qualifications as the Director finds necessary and appropriate in the AB 1761 Page 3 public interest or for the protection of subscribers, enrollees, and plans. 5.Prohibits plans, solicitors, solicitor firms, or representatives from using or permitting the use of any advertising or solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. This bill: 1.Prohibits an individual or entity from holding himself, herself, or itself out as representing, constituting, or otherwise providing services on behalf of the Exchange unless that individual or entity has a valid agreement with the Exchange to engage in those activities. Makes any individual or entity who aids or abets another individual or entity in violation of this prohibition to also be in violation of this prohibition. 2.Makes it an unfair business practice under the Knox-Keene Act for a solicitor or solicitor firm to hold himself, herself, or itself out as representing, constituting, or otherwise providing services on behalf of the Exchange unless the solicitor or solicitor firm has a valid agreement with the Exchange to engage in those activities. 3.Makes it an unfair business practice for a health plan to hold itself out as representing, constituting, or otherwise providing services on behalf of the Exchange unless the plan has a valid agreement with the Exchange to engage in those activities. 4.Makes it an unfair method of competition and an unfair and deceptive act or practice in the business of insurance, under the Insurance Code, to hold oneself out as representing, constituting, or otherwise providing services on behalf of the Exchange without a valid agreement with the Exchange to engage in those activities. Background AB 1761 Page 4 During the 2009-10 Session, the Legislature passed and then-Governor Schwarzenegger signed into law two bills establishing the California Health Benefit Exchange. SB 900 (Alquist), Chapter 659, Statutes of 2010, established the Exchange as an independent public entity within state government and requires the Exchange to be governed by a board composed of the Secretary of the California Health and Human Services Agency, or his or her designee, and four other members appointed by the Governor and the Legislature who meet specified criteria. AB 1602 (John A. Pérez), Chapter 655, Statutes of 2010, specifies the powers and duties of the Exchange relative to determining eligibility for enrollment in the Exchange and arranging for coverage under qualified health plans and establishes requirements for health plans in and outside the Exchange. According to estimates in a recent study in the health policy journal Health Affairs by Peter Long and Jonathan Gruber, the ACA will provide health insurance for an additional 3.4 million people in California in 2016. The authors state this will mean that nearly 96 percent of documented residents of California under age 65 will be insured. The authors estimate 4 million people are expected to enroll in the state's Exchange. At some point following the signing of those bills into law and when the Exchange began having public board meetings, Google searches for the California Health Benefit Exchange identified a website operated by a private company of health benefit consultants and brokers, instead of the official site maintained by the Exchange. When the Exchange begins offering health coverage, people going to such a website to purchase coverage could end up paying more for health coverage as the state-administered Exchange is the only place where consumers can purchase individual coverage with premium and cost-sharing subsidies and a lower out-of-pocket maximum. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: The Department of Managed Health Care indicates that it AB 1761 Page 5 may incur enforcement costs in the tens of thousands (Managed Care Fund). Enforcement costs to the Department of Insurance are expected to be minor (Insurance Fund). Enforcement costs to the California Health Benefit Exchange are expected to be minor (federal funds). SUPPORT : (Verified 8/14/12) ACCESS Women's Health Justice California Association of Health Underwriters California Black Health Network California Chiropractic Association California Immigrant Policy Center California Pan-Ethnic Health Network California Rural Legal Assistance Foundation California Teachers Association Children Now Children's Defense Fund California The Children's Partnership Having Our Say Coalition Health Access California Insurance Brokers and Agents of the West National Association of Insurance and Financial Advisors of California United Ways of California Western Center on Law and Poverty ARGUMENTS IN SUPPORT : Western Center on Law & Poverty (WCLP) writes in support that there are websites using the Exchange name when in fact they are run by private entities. WCLP states Californians need a trusted place to go for reliable information about their health coverage options, and only the Exchange itself and those entities with whom it contracts should be permitted to hold itself out as the Exchange. The Insurance Brokers and Agents of the West, the California Association of Health Underwriters and the National Association of Insurance and Financial Advisors of California write this bill is an important element to help to deter unauthorized persons or entities from conducting misleading advertising or solicitations. Health Access California states that almost from the moment AB 1761 Page 6 that the Exchange was created, there have been misleading websites put up by agents and brokers that appear to be the official website of the Exchange, and this bill takes the simple step of saying that only an individual or entity with a valid, in-force agreement with the Exchange can hold themselves out as acting on behalf of the Exchange. ASSEMBLY FLOOR : 74-0, 4/26/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove, Hagman, Hall, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Cedillo, Furutani, Halderman, Harkey, Jones, Smyth CTW:n 8/14/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****