BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 51 (Alquist) Hearing Date: 5/26/2011 Amended: 5/9/2011 Consultant: Katie Johnson Policy Vote: Health 6-3 _________________________________________________________________ ____ BILL SUMMARY: SB 51 would require health care service plans and insurers to meet federal annual and lifetime limits, medical loss ratio, and annual rebate payment requirements in accordance with federal law and guidance. The bill would also specify a timeframe in which rebate payments would be made. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund DMHC regulations, oversight $445 $750 $750Special* and rebate determinations *Managed Care Fund _________________________________________________________________ ___ STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED. This bill would require health care service plans and health insurers to comply with the annual and lifetime limit requirements set forth in Section 2711 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-11) and any subsequent rules or regulations issued under that section. This bill would codify the medical loss ratio (MLR) requirements in Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-11), as amended by Section 1001 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the federal Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), (ACA), and would require health care service plans and health insurers to comply with the provisions. This bill would permit the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) to adopt emergency regulations and normal regulations in accordance with the federal law. SB 51 (Alquist) Page 1 Any costs to CDI to implement these provisions would be minor and absorbable. On January 25, 2011, the Office of Administrative Law approved emergency regulations promulgated by CDI that give the Insurance Commissioner the authority to enforce federal MLR requirements in the individual market; they expire July 26, 2011, and CDI is in the process of promulgating non-emergency regulations to meet these requirements. Costs to DMHC for regulations and for staff actuaries and financial examiners to ensure that rebates were made annually would be approximately $445,000 in FY 2011-2012, $750,000 in both FY 2012-2013 and FY 2013-2014, and $900,000 annually ongoing in special funds. Federal guidance regarding MLR implementation was adopted by the federal Secretary for Health and Human Services (HHS) in November 2010 as interim guidance. Since there are expected to be significant changes in the insurance market in 2014, the interim guidance only addresses 2011 - 2013. As such, this bill and any regulations issued by CDI or DMHC would likely need to be revised when HHS releases guidance for 2014 and beyond. This bill would require health plans and insurers to provide any rebate owing to an enrollee or policyholder no later than August 1 of the year following the year in which the rate was in effect. This deadline is not in federal law; however, federal law does not specify a date by which the rebate would be paid. Staff recommends that this bill be amended to require health plans and insurers and DMHC and CDI to implement this bill to the extent required by Sections 2711 and 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-11 and 42 U.S.C. Sec. 300gg-18), the ACA, and any federal rules and regulations issued under that section. The author's proposed amendments would add clarifying amendments related to the rebates. The committee's proposed amendments would amend this bill to require health plans and insurers and DMHC and CDI to implement this bill to the extent required by federal law and to comply with, and not exceed, Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18), the ACA, and any federal rules and regulations issued under that section. SB 51 (Alquist) Page 2