BILL ANALYSIS Ó SB 51 Page 1 SENATE THIRD READING SB 51 (Alquist) As Amended September 1, 2011 Majority vote SENATE VOTE :25-15 HEALTH 13-6 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |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: SB 51 Page 2 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. SB 51 Page 3 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