BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING
          SB 51 (Alquist)
          As Amended September 1, 2011
          Majority vote

           SENATE VOTE  :25-15  
           
           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, Hall, Hill, Lara,  |
          |     |Lowenthal, Mitchell, Pan, |     |Mitchell, Solorio         |
          |     |V. Manuel Pérez, Williams |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Logue, Garrick, Mansoor,  |Nays:|Harkey, Donnelly,         |
          |     |Nestande, Silva, Smyth    |     |Nielsen, Norby, Wagner    |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY :  Establishes enforcement authority in California law to 
          implement provisions of the federal Patient Protection and 
          Affordable Care Act (PPACA) related to Medical Loss Ratio (MLR) 
          requirements on health plans and health insurers and 
          prohibitions on annual and lifetime benefits.  Specifically, 
           this bill  :  

          1)Requires, to the extent required by federal law, every health 
            plan and health insurer that issues, sells, renews, or offers 
            contracts or policies for health care coverage to comply with 
            the annual and lifetime benefit requirements of PPACA and any 
            rules or regulations issues under that section, in addition to 
            any state laws or regulations that do not prevent the 
            application of those requirements.

          2)Requires every health plan and health insurer that issues, 
            sells, renews, or offers health plan contracts or policies for 
            health care coverage, including a grandfathered health plan or 
            insurer, but not including specialized health plan contracts 
            or policies, to provide an annual rebate to each enrollee 
            under such coverage if certain conditions exist, relating to 
            the following MLRs:








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             a)   85% for a health plan or health insurer in the large 
               group market; or,

             b)   80% for a health plan or health insurer in the small 
               group or individual market.

          3)Permits the Director of the Department of Managed Health Care 
            (DMHC) and the Insurance Commissioner (IC) of the California 
            Department of Insurance (CDI) to adopt regulations in 
            accordance with the Administrative Procedure Act that are 
            necessary to implement the MLR as described in PPACA and any 
            federal rules or regulations issued under that section.

          4)Permits the Director of the DMHC and the IC to also adopt 
            emergency regulations, as specified, when it is necessary to 
            address specific conflicts between state and federal law that 
            prevent implementation of federal law and guidance.
          5)Requires DMHC and CDI to consult with each other in adopting 
            necessary regulations, and in taking any other action for the 
            purpose of implementing this bill.

          6)Requires this bill to only be implemented to the extent 
            required by federal law and to comply with, and not exceed, 
            the scope of definitions in the federal Public Health Services 
            Act and the MLR requirements of PPACA, and any rules or 
            regulations issued under that section.

          7)Requires that nothing in this bill's Health and Safety Code 
            provisions relating to MLR be construed to apply to provisions 
            of the Knox Keene Health Care Service Plan Act of 1975 
            pertaining to financial statements, assets, liabilities, and 
            other accounting items, as specified.
           
          FISCAL EFFECT  :  According to the Assembly Appropriations 
          Committee:

          1)One-time fee-supported (health plan fees) special fund costs 
            of $40,000 to DMHC to ensure plan compliance with the filing 
            requirements and to adopt regulations.  CDI has already 
            promulgated time-limited emergency regulations and is in the 
            process of adopting regulations.  Detailed rules implementing 
            federal MLR provisions have also been released by the federal 
            Department of Health and Human Services.









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          2)CDI and DMHC will experience enforcements costs to review 
            financial statements, expand or conduct new audits, and 
            enforce rebate provisions.  Costs to CDI are likely to be 
            minor and absorbable based on the department's existing 
            capacity to conduct similar reviews and audits.  As this bill 
            will require DMHC to expand actuarial and financial review 
            capacity, DMHC will costs are likely to be in the range of 
            $200,000 to $600,000 in special fund costs annually.

          3)The fiscal impact of MLR enforcement is uncertain. The actual 
            costs would depend upon plan compliance with the measure, 
            whether plans are meeting MLR requirements or must issue 
            rebates, and the extent to which there is disagreement between 
            carriers and regulators over the details of the calculations, 
            including actuarial assumptions and the allocation of costs to 
            the appropriate categories. 

           COMMENTS  :  The CDI is sponsoring this bill to further strengthen 
          health insurance rate regulation in California by expanding the 
          MLR requirements to all health insurance and by requiring 
          rebates in conformity to current federal law.  According to CDI, 
          this compliance allows consumers with the benefit of federal MLR 
          from the outset of the rate, rather than having to wait from 
          eight to 20 months for a premium refund.  The federal law is 
          measured retrospectively on an annual basis, based solely on 
          actual experience, aggregating all of a company's policies in a 
          given market segment in a single MLR figure.  CDI states that 
          this bill implements broader protections to California consumers 
          by conforming California law to the minimum MLR requirements of 
          federal health reform.  The California Teachers Association and 
          others support the provisions that require compliance with 
          prohibitions on annual and lifetime limits on the dollar value 
          of benefits.  Proponents argue that illnesses like cancer can 
          easily cause individuals to reach such limits.


           Analysis Prepared by  :    Teri Boughton / HEALTH / (916) 319-2097 
                                                       FN: 0002498