BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 961|
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THIRD READING
Bill No: SB 961
Author: Hernandez (D), et al.
Amended: 4/9/12
Vote: 21
SENATE HEALTH COMMITTEE : 6-2, 4/18/12
AYES: Hernandez, Alquist, De León, DeSaulnier, Rubio, Wolk
NOES: Harman, Anderson
NO VOTE RECORDED: Blakeslee
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/24/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
SUBJECT : Individual health care coverage
SOURCE : Author
DIGEST : This bill reforms Californias individual market
in accordance with federal health care reform and applies
its provisions to health plans and disability insurers in
the individual market; requires guaranteed issue of
individual market health plans and health insurance
policies; prohibits the use of preexisting conditions
provisions; establishes open and special enrollment periods
consistent with the California Health Benefit Exchange
(Exchange); prohibits conditioning the issuance or offering
based on specified discriminatory factors; prohibits
specified marketing and solicitation practices consistent
with small group requirements; requires guaranteed
CONTINUED
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renewability of plans and permits rating factors based on
age, geographic region and family size only.
ANALYSIS : Existing federal law:
1. Establishes the Patient Protection Affordability Care
Act (ACA), which imposes various requirements, some of
which take effect on January 1, 2014, on states,
carriers, employers, and individuals regarding health
care coverage.
2. Requires each health insurance issuer that offers
coverage in the individual or group market to accept
every employer and individual that applies for that
coverage and to renew that coverage at the option of the
plan sponsor or the individual.
3. Prohibits a group health plan and a health insurance
issuer offering group or individual health insurance
coverage from imposing any preexisting condition
exclusion with respect to that plan or coverage.
4. Allows the premium rate charged by a health insurance
issuer offering small group or individual coverage to
vary only as specified, and prohibits discrimination
against individuals based on health status.
5. Defines "grandfathered plan" as any group or individual
health insurance product that was in effect on March 23,
2010.
Existing state law:
1. Provides for regulation of health insurers by the
Department of Insurance (CDI) under the Insurance Code
and provides for the regulation of health plans by the
Department of Managed Health Care (DMHC) pursuant to the
Knox-Keene Health Care Service Plan Act of 1975.
2. Requires health plans to fairly and affirmatively offer,
market, and sell health coverage to small employers.
This is known as "guaranteed issue."
3. Defines a preexisting condition provision as a contract
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provision that excludes coverage for charges or expenses
incurred during a specified period following the
employee's effective date of coverage, as a condition
for which medical advice, diagnosis, care, or treatment
was recommended or received during a specified period
immediately preceding the effective date of coverage.
4. Prohibits a plan contract for group coverage from
imposing any preexisting condition provision upon any
child under 19 years of age.
5. Prohibits a plan contract for individual coverage that
is not a grandfathered health plan within the meaning of
the ACA from imposing any preexisting condition
provision upon any children under 19 years of age.
6. Prohibits, with respect to the individual market child
coverage, except to the extent permitted by federal law,
carriers from conditioning the issuance or offering of
individual coverage on any of the following factors:
A. Health status;
B. Medical condition, including physical and mental
illness;
C. Claims experience;
D. Receipt of health care;
E. Medical history;
F. Genetic information;
G. Evidence of insurability, including conditions
arising out of acts of domestic violence;
H. Disability; and
I. Any other health status-related factor as
determined by the regulators.
7. Defines a "rating period" as the period for which
premium rates established by a plan are in effect, and
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requires them to be in effect no less than six months.
8. Establishes the following risk categories for rating
purposes in the small group market: age, geographic
region, and family composition, plus the health benefit
plan selected by the small employer. Specifies age
categories, family size categories, and nine geographic
regions, as determined by the carriers.
9. Prohibits a plan in the small group market from,
directly or indirectly, entering into any contract,
agreement, or arrangement with a solicitor that provides
for or results in the compensation paid to a solicitor
for the sale of a health plan contract to be varied
because of the health status, claims experience,
industry, occupation, or geographic location of the
small employer.
10.Prohibits a policy or contract that covers two or more
employees from establishing rules for eligibility,
including continued eligibility, of an individual, or
dependent of an individual, to enroll under the terms of
the plan based on any of the following health
status-related factors:
A. Health status;
B. Medical condition, including physical and mental
illnesses;
C. Claims experience;
D. Receipt of health care;
E. Medical history;
F. Genetic information;
G. Evidence of insurability, including conditions
arising out of acts of domestic violence; and
H. Disability.
11.Establishes and specifies the duties and authority of
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the Exchange within state government in a manner that is
consistent with the ACA. Requires, as a condition of
participation in the Exchange, carriers that sell any
products outside the Exchange to fairly and
affirmatively offer, market, and sell all products made
available in the Exchange to individuals and small
employers purchasing coverage outside of the Exchange.
This bill:
1. Applies its provisions to health plans and disability
insurers in the individual market and exempts
grandfathered plans.
2. Prohibits a health benefit plan for group coverage and a
plan contract for individual coverage (except
grandfathered plans, as specified) issued, amended, or
renewed on or after January 1, 2014, from imposing any
preexisting condition provision upon any individual.
3. Repeals a provision effective January 1, 2014, that
would have required the rate for any child to be
identical to the standard risk rate.
4. Sunsets existing law, on December 31, 2013, related to
rating categories for child coverage.
5. Requires guaranteed issue of individual market health
plans and health insurance policies.
6. Requires every health plan and health insurer offering
individual health benefit plans, in addition to
complying with the Knox-Keene Act and specified
provisions of the Insurance Code and rules adopted there
under, to comply with this bill.
7. Requires a plan, on or after January 1, 2014, to fairly
and affirmatively offer, market, and sell all of the
plan's and insurer's health benefit plans that are sold
in the individual market to all individuals in each
service area in which the plan or insurer provides or
arranges for the provision of health care services.
Requires a plan or insurer to limit enrollment to open
enrollment periods and special enrollment periods, as
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specified.
8. Requires a plan or insurer to provide an initial open
enrollment period from October 1, 2013, to March 31,
2014, inclusive, and after January 1, 2015 annual
enrollment periods from October 15 to December 7,
inclusive, of the preceding calendar year.
9. Requires a plan or insurer to allow an individual to
enroll in or change individual health benefit plans, as
a result of the following triggering events:
A. He/she loses minimum essential coverage (MEC), as
defined in the Internal Revenue Code, as specified.
Loss of MEC includes loss of that coverage due to the
individual's failure to pay premiums on a timely
basis or situations allowing for a rescission, as
specified;
B. He/she gains a dependent or becomes a dependent
through marriage, birth, adoption, or placement for
adoption.
C. He/she becomes a resident of California.
D. He/she is mandated to be covered pursuant to a
valid state or federal court order.
E. With respect to individual health benefit plans
offered through the Exchange, the individual meets
any of the requirements listed in federal
regulations, as specified.
10.Requires an individual, with respect to individual
health benefit plans offered inside or outside the
Exchange, to have 63 days from the date of a triggering
event identified above to apply for coverage from a
health plan or insurer subject to this bill.
11.Requires a health plan, with respect to individual
health plans offered outside the Exchange, after an
individual submits a completed application form for a
plan, to notify, within 30 days, the individual of the
individual's actual premium charges for that plan.
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Requires the individual to have 30 days in which to
exercise the right to buy coverage at the quoted premium
charges.
12.Specifies effective dates associated with initial and
annual open enrollment periods depending upon when
payment is delivered or postmarked with respect to
health benefit plans offered inside and outside of the
Exchange.
13.Prohibits, on or after January 1, 2014, a health plan or
health insurer from conditioning the issuance or
offering of an individual health benefit plan on any of
the following factors:
A. Health status;
B. Medical condition, including physical and mental
illness;
C. Claims experience;
D. Receipt of health care;
E. Medical history;
F. Genetic information;
G. Evidence of insurability, including conditions
arising out of acts of domestic violence;
H. Disability; and
I. Any other health status-related factor as
determined by DMHC or CDI.
14.Prohibits a health plan offering coverage in the
individual market from rejecting the request of a
subscriber during an open enrollment period to include a
dependent of the subscriber.
15.Prohibits a health plan, health insurer, solicitor,
agent or broker, on or after January 1, 2014, from
directly or indirectly, engaging in the following
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activities:
A. Encouraging or directing an individual to refrain
from filing an application for individual coverage
with a plan because of the health status, claims
experience, industry, occupation, or geographic
location, provided that the location is within the
plan's approved service area; and
B. Encouraging or directing an individual to seek
individual coverage from another plan or health
insurer or the Exchange because of the health status,
claims experience, industry, occupation, or
geographic location, provided that the location is
within the plan's approved services area.
16.Prohibits a health plan or insurer, on or after January
1, 2014, from not, directly or indirectly, entering into
contracts, agreement, or arrangement with a solicitor,
agent or broker that provides for or results in the
compensation paid to a solicitor for the sale of an
individual health benefit plan to be varied because of
health status, claims experience, industry, occupation,
or geographic location of the individual. Prohibits
this provision from applying to a compensation
arrangement that provides compensation to a solicitor,
agent or broker on the basis of percentage of premium,
provided that the percentage shall not vary because of
the health status, claims experience, industry,
occupation, or geographic area.
17.Requires all individual health plans to conform to
specified requirements, and to be renewable at the
option of the enrollee except as permitted to be
canceled, rescinded, or not renewed, as specified.
Requires any plan that ceases to offer for sale new
individual health benefit plans, as specified, to
continue to be governed by specified law with respect to
business conducted under the specified law.
18.Requires health plans issued, amended, or renewed on or
after January 1, 2014, to use only the following
characteristics of an individual, and any dependent
thereof, for purposes of establishing the rate of the
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individual health benefit plan covering the individual
and the eligible dependents thereof, along with the
health benefit plan selected by the individual:
A. Age, as described in regulations adopted by DMHC
and CDI that do not prevent the application of the
ACA. Requires the rates to be determined based on
the individual's birthday and requires them not to
vary by more than three to one for adults.
B. Geographic region . Requires, with respect to the
2014 plan year, the regions to be the same as those
used by a health benefit plan or contract entered
into with the Board of Administration of the Public
Employees' Retirement System. For subsequent plan
years, requires the regions to be determined by the
Exchange in consultation with DMHC, CDI, and other
private and public purchasers of health care
coverage.
C. Family size, as described in the ACA.
19.Requires the rating period for rates not to vary by any
factor not described above.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
One-time costs in the low hundreds of thousands to adopt
regulations and review health plan and insurance plan
filings (Insurance Fund and Managed Care Fund).
Unknown ongoing enforcement costs (Insurance Fund and
Managed Care Fund).
SUPPORT : (Verified 5/25/12)
AFSCME, AFL-CIO
California Chiropractic Association
California Commission on Aging
California Pan-Ethnic Health Network
California Primary Care Association
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Consumers Union
Health Access California
National Association of Social Workers
The Greenlining Institute
United Nurses Associations of California/Union of Health
Care Professionals
OPPOSITION : (Verified 5/25/12)
Blue Shield of California
California Association of Health Plans
ARGUMENTS IN SUPPORT : The California Commission on Aging
writes in support of this bill that by requiring health
plans to offer guaranteed coverage, portability, and
prohibiting discriminatory premiums based on health status,
this bill helps assure that all Californians can access the
health care they need. The National Association of Social
Workers writes this bill provides a smooth transition to
meeting federal health care law requirements. The
California Chiropractic Association writes in support that
having access to cost-effective health care coverage is
essential in creating and maintaining long-term health and
wellness. The California Primary Care Association writes
that California's leading role in implementing the
provisions of the ACA is essential to its success. The ACA
provides for numerous consumer protections and it is
important that these are codified into state statute. This
bill ensures that state statute reflects the protections
provided for in the ACA.
ARGUMENTS IN OPPOSITION : The California Association of
Health Plans (CAHP) writes that this bill places some of
the individual market and underwriting changes of the ACA
into state law without tying those changes to an individual
coverage requirement. CAHP argues that the individual
coverage requirement was designed to help mitigate the cost
impacts of adverse selection. CAHP and Blue Shield of
California are also opposed to this bill not including
tobacco use in rate development as allowed under the ACA.
Blue Shield writes in opposition to this bill stating that
if guaranteed issue and community rating are placed into
state law, they must be tied to an effective and
enforceable individual coverage requirement.
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CTW:kc 5/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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