BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: ABX1 2
AUTHOR: Pan
AMENDED: April 1, 2013
HEARING DATE: April 10, 2013
CONSULTANT: Trueworthy
SUBJECT : Health care coverage.
SUMMARY : Reforms California's individual market in accordance
with the federal Patient Protection and Affordable Care Act
(ACA) and applies its provisions to insurers regulated by the
California Department of Insurance (CDI) in the individual
market; requires guaranteed issue of individual market health
insurance policies; prohibits the use of preexisting condition
exclusions; establishes open and special enrollment periods
consistent with the California Health Benefit Exchange (Covered
California); prohibits conditioning issuance or offering based
on specified rating factors; prohibits specified marketing and
solicitation practices consistent with small group requirements;
requires guaranteed renewability of plans; and permits rating
factors based on age, geographic region and family size only.
Makes conforming changes to California's small group law enacted
in AB 1083 (Monning) Chapter 852, Statutes of 2012.
Existing federal law:
1.Establishes the ACA, which imposes various requirements on
states, issuers, 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 employer or the individual. This
is known as guaranteed issue and guaranteed renewability.
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
Continued---
AB X1 2 | Page 2
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 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
(Knox-Keene Act), collectively referred to as insurers. ABX1 2
applies to insurers regulated by CDI.
2.Establishes Covered California, to facilitate the purchase of
Qualified Health Plans (QHPs) through Covered California by
qualified individuals and qualified small employers by January
1, 2014.
3.Requires, as a condition of participation in Covered
California, insurers that sell any products outside Covered
California to fairly and affirmatively offer, market, and sell
all products made available in Covered California to
individuals and small employers purchasing coverage outside of
Covered California.
4.Requires health plans to fairly and affirmatively offer,
market, and sell health coverage to small employers, known as
"guaranteed issue."
5.Defines a preexisting condition provision as a contract
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.
6.Prohibits a plan contract for group coverage from imposing any
preexisting condition provision upon any child under 19 years
of age.
7.Prohibits a plan contract for individual coverage that is not
a grandfathered health plan, as defined by the ACA, from
imposing any preexisting condition provision upon any children
under 19 years of age.
8.Prohibits, with respect to the individual market coverage for
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children, except to the extent permitted by federal law,
insurers 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.
9.Defines a "rating period" as the period for which premium
rates established by a plan are in effect, and requires the
rating period to be in effect no less than six months.
10.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 up to nine geographic regions, as determined
by the insurers.
11.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.
12.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;
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e. Medical history;
f. Genetic information;
g. Evidence of insurability, including conditions arising
out of acts of domestic violence; and
h. Disability.
This bill:
Conforming provisions to the ACA:
1.Prohibit an insurer (except grandfathered plans, as specified)
from imposing any preexisting condition provision upon any
individual.
2.Require guaranteed issue of individual market health insurance
policies.
3.Require insurers to fairly and affirmatively offer, market,
and sell all of the insurer's health benefit plans that are
sold in the individual market to all individuals in each
service area in which the insurer provides or arranges for the
provision of health care services.
4.Require an 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.
5.Require insurers to set premium rates based only on the
following:
a.Age, using age bands established by the Secretary of Health
and Human Services (HHS) and the age-rating curve established
by the Centers for Medicare & Medicaid Services (CMS);
b.Geographic region as described in #23 below; and
c.Whether the contract covers an individual or family, as
defined in the ACA.
6.Require an insurer to allow an individual to enroll in or
change individual health benefit plans as a result of the
following triggering events:
a. Loses minimum essential coverage (MEC), as defined in
the Internal Revenue Code, as specified. Loss of MEC does
not include loss of that coverage due to the individual's
failure to pay premiums on a timely basis, or situations
allowing for a rescission;
b. Gains a dependent or becomes a dependent through
marriage, birth, adoption, or placement for adoption;
c. Becomes a resident of California;
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d. Released from incarceration;
e. Health benefit plan substantially violated a material
provision of the contract;
f. Gains access to a new health benefit plan as a result of
a move; or
g. Meets any of the requirements listed in federal
regulations, as specified, with respect to individual
health benefit plans offered through Covered California.
7.Establish, for special enrollment effective dates, coverage to
be effective no later than the first day of the first calendar
month beginning after the date the plan receives the request,
except in the case of birth, adoption, or placement for
adoption, which is the effective date of the birth, adoption,
or placement for adoption.
8.Require an individual, with respect to plans offered inside or
outside Covered California, to have 60 days from the date of a
triggering event identified above to apply for coverage.
9.Require an insurer, with respect to individual health plans
offered outside Covered California, after an individual
submits a completed application form for a plan, to notify the
individual of the individual's actual premium charges for that
plan within 30 days. Require the individual to have 30 days in
which to exercise the right to buy coverage at the quoted
premium charges.
10.Prohibit an 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
federal regulations, rules, or guidance.
11.Require an insurer to consider the claims experience of all
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insureds in its non-grandfathered individual health benefit
plans to be part of a single-risk pool and to consider the
claims experience of all insured in non-grandfathered small
employer health benefit plans to be part of another
single-risk pool. Student health coverage is exempt from the
risk-pool requirements.
12.Require 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. Require 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.
13.Permit an insurer to vary premium rates for a particular plan
from its index rate based only on the following actuarially
justified plan-specific factors:
a. The actuarial value and cost-sharing design of the
health benefit plan;
b. The health benefit plan's provider network, delivery
system characteristics, and utilization management
practices;
c. The benefits provided by the insurer that are in
addition to the essential health benefits (EHB). These
additional benefits are required to be pooled with similar
benefits within a single-risk pool and the claims
experience from those benefits to be utilized to determine
rate variations for plans that offer those benefits in
addition to EHB; and
d. With respect to catastrophic plans, the expected impact
of the specific eligibility categories for those plans.
1.Modify the exceptions from the guarantee issue requirement in
existing small group law and the manner in which an insurer
determines premium rates for a small employer health benefit
plan, as specified.
Non-conforming provisions:
15.Repeal existing law that would have required the rate for any
child to be identical to the standard-risk rate.
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16.Sunset existing law, on December 31, 2013, related to rating
categories for child coverage.
17.Exempt grandfathered plans from the ACA requirements as
allowed under federal law.
18.Modify the small employer special enrollment periods and
coverage-effective dates for purposes of consistency with the
draft federal rules.
19.Add the following triggering events that will require a plan
or insurer to allow an individual to enroll in or change
individual health benefit plans, as a result of the following:
a. Receiving services from a contracting provider and that
provider is no longer participating in the health benefit
plan; or
b. Demonstrates that they did not enroll during the
available enrollment period because they were misinformed
about MEC.
c. Being a member of the reserve forces of the United
States military returning from active duty or a member of
the California National Guard returning from active duty
service.
20.Prohibit an insurer, solicitor, agent or broker from,
directly or indirectly, engaging in the following 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
Covered California because of the health status, claims
experience, industry, occupation, or geographic location,
provided that the location is within the plan's approved
services area.
21.Prohibit an insurer, from 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. Does not apply to a compensation
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arrangement that provides compensation to a solicitor, agent
or broker on the basis of percentage of premium, provided that
the percentage cannot vary because of the health status,
claims experience, industry, occupation, or geographic area.
22.Prohibit tobacco use from being a rating factor.
23.Establish the following 19 rating regions, which were
approved by CCIIO on April 1, 2013:
a. Region 1: Counties of Alpine, Del Norte, Siskiyou,
Modoc, Lassen, Shasta, Trinity, Humboldt, Tehama, Plumas,
Nevada, Sierra, Mendocino, Lake, Butte, Glenn, Sutter,
Yuba, Colusa, Amador, Calaveras, and Tuolumne.
b. Region 2: Counties of Napa, Sonoma, Solano, and Marin.
c. Region 3: Counties of Sacramento, Placer, El Dorado, and
Yolo.
d. Region 4: County of San Francisco.
e. Region 5: County of Contra Costa.
f. Region 6: County of Alameda.
g. Region 7: County of Santa Clara.
h. Region 8: County of San Mateo.
i. Region 9: Counties of Santa Cruz, Monterey, and San
Benito.
j. Region 10: Counties of San Joaquin, Stanislaus, Merced,
Mariposa, and Tulare.
aa. Region 11: Counties of Madera, Fresno, and Kings.
bb. Region 12: Counties of San Luis Obispo, Santa Barbara,
and Ventura.
cc. Region 13: Counties of Mono, Inyo, and Imperial.
dd. Region 14: County of Kern.
ee. Region 15: ZIP Codes in Los Angeles County starting with
906 to 912, inclusive, 915, 917, 918, and 935.
ff. Region 16: ZIP Codes in Los Angeles County other than
those identified in clause (xv).
gg. Region 17: Counties of San Bernardino and Riverside.
hh. Region 18: County of Orange.
ii. Region 19: County of San Diego.
1.Require, by June 1, 2017, DMHC, Covered California and CDI, to
review the geographic rating regions and the impacts of those
regions on the health care coverage market in California, and
submit a report to the appropriate policy committees of the
Legislature.
2.Require insurers to provide specified information regarding
Covered California to applicants for products offered outside
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Covered California.
3.Prohibit insurers from advertising or marketing an individual
grandfathered health plan for the purpose of enrolling a
dependent of the subscriber or policyholder in the plan.
4.Require insurers to annually issue a specified notice to those
enrolled in a grandfathered plan about the availability of
other health insurance options.
5.Prohibit an insurer from requiring an individual applicant or
his or her dependent to fill out a health assessment or
medical questionnaire prior to enrollment. Prohibit an insurer
from acquiring or requesting information that relates to a
health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment.
6.Require any data submitted by insurers to the United States
HHS Secretary for purposes of the risk adjustment program
required under the ACA to also be submitted to CDI. Allow CDI
to use this information to monitor federal implementation of
risk adjustment.
7.Authorize an insurer to meet the current summary-benefit
disclosure requirements by providing the uniform summary of
benefits required by the ACA. Requires this information to be
submitted to CDI.
8.Require the provisions of this bill to only be implemented to
the extent that it meets or exceeds the requirements set forth
in the ACA.
9.Repeal 12 months after the repeal of the federal individual
mandate the following individual market provisions:
a. Guarantee Issue;
b. Prohibition on preexisting conditions
c. Community rating; and,
d. Prohibition on eligibility rules based on health status
and other factors.
10.Repeal 12 months after the repeal of federal guarantee issue
and federal community rating provisions the following small
group provisions:
a. Guarantee Issue;
b. Community rating; and,
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c. Prohibition on eligibility rules based on health status
and other factors.
11.Authorize the Insurance Commissioner (IC) to adopt
regulations to implement the changes made by this bill
pursuant to the Administrative Procedures Act, as specified.
Requires the IC to consult with the Director of DMHC prior to
adopting any regulations for the purposes of ensuring
consistency of regulations.
FISCAL EFFECT : According to the Assembly Appropriations
Committee analysis of a prior version of this bill which
contained DMHC related provisions; ABX1 2 has the following
fiscal impact -
Special fund costs to the CDI Insurance Fund and DMHC Managed
Care Fund to adopt/modify regulations, review plan and insurer
filings and respond to consumers.
CDI costs are estimated at about $600,000 for FY 2013-14 and
$283,000 for 2014-15.
DMHC's costs will likely be in a similar but lower range
because DMHC plans will not be changing their business
practices to the same extent that will be required by CDI
insurers.
COMMENTS :
1.Author's statement. This bill is necessary to bring California
health insurance market rules in line with the ACA. This bill
also contains clean-up provisions to AB 1083 which enacted
insurance market reforms consistent with the ACA affecting
health insurance sold to small employer purchasers. More
significantly, this bill establishes insurance market reforms
consistent with the ACA affecting the health insurance market
for individual purchasers. These reforms eliminate insurance
industry practices of denying people insurance who have
preexisting medical conditions and charging higher rates
because of health history. It is necessary to put the federal
rules in state law for state regulatory enforcement purposes.
An important general objective of this ACA state-implementing
legislation is to ensure that the rules in Covered California
and outside Covered California, as well as in both the small
group and individual markets, are as similar as possible in an
effort to avoid adverse selection.
Clean-up provisions are necessary because new final federal
regulations have been issued which require updating of the AB
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1083 provisions. In addition, while the Legislature approved AB
1461 (Monning) and SB 961 (Ed Hernandez) in 2012, which would
have established insurance market rules for individual
purchasers, those bills were vetoed by the Governor because a
provision to link or "tie back" state law to federal law was
viewed as insufficient. As a result, Covered California has
initiated a QHP solicitation process based on assumptions of
what might be the individual market rules in California. Health
insurers bidding to be QHPs must submit premium bids to Covered
California by March 31, 2013, in order to ensure they receive
regulatory review in time for Covered California to begin
marketing and offering those plans in October of 2013. The
rules established and revised by this bill would apply to
health insurance sold through Covered California as well as
insurance products sold in the commercial market outside of
Covered California, and need to be in place as soon as possible
in time for the regulatory reviews required for QHPs.
On January 24, 2013, Governor Brown issued a proclamation
convening an extraordinary session of the Legislature to
consider and act upon legislation necessary to implement the ACA
in the areas of: a) California's private health insurance
market, rules and regulations governing the individual and small
group market; b) California's Medi-Cal program and changes
necessary to implement federal law; and, c) options that allow
low-cost health coverage through Covered California to be
provided to individuals who have income up to 200 percent of the
federal poverty level (FPL). This bill, along with SB 2 X1
(Hernandez), address the first of the three areas identified in
the Governor's proclamation.
2.Individual market. California's individual and small group
health insurance markets
together currently serve just fewer than 15 percent of the
state's population, with approximately 2 million people being
covered through individually purchased health insurance. In
California, 3 insurers serve over 75 percent of the market:
Anthem Blue Cross PPO, Blue Shield PPO, and Kaiser HMO.
California's two regulators allow variation in product design.
Plans under DMHC must provide a defined set of basic health care
services, while plans under CDI have more flexibility and may
offer slimmer benefits. CDI-regulated products are far more
prevalent in the individual market.
According to a 2011 report published by the California
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HealthCare Foundation (CHCF), approximately 2 million
Californians are covered through individually purchased health
insurance. About 40 percent of current individual market
purchasers would likely qualify for subsidies and another 18
percent would be eligible for Medicaid (Medi-Cal in California)
if the ACA rules were in effect today. There are between five
and seven million uninsured in the state and 39 percent (2.7
million) may be eligible for Medi-Cal, half (3.5 million) may be
eligible for subsidies to purchase individual insurance, and 11
percent (800,000) would not likely qualify for subsidies. More
than one million of the uninsured are undocumented immigrants,
who would not qualify for subsidies and would be excluded from
Covered California.
At the time, CHCF found that individual premiums varied by age
as much as five-fold, meaning a 60-year old would pay 5 times
what a 25-year old might pay. However, there is evidence that
California's individual market premiums are already closer to
the 2014 allowable 3:1 ratio. For example, 2013 premium rate
filings for the Anthem Blue Cross three most popular
non-grandfathered product families all have age ratios below
3.9. In addition, 2013 premiums in the state high-risk pool, the
Major Risk Medical Insurance Program, which bases rates on
insurer filings of premiums for open market individual coverage,
have an age ratio for 64-year olds that range from 2.3 - 2.9,
depending on the health plan. In the CHCF report, premiums
ranged from $113 to $777 a month.
Individual market insurance provides less comprehensive
coverage, with CHCF reporting that individual coverage paid an
average of 55 percent of medical expenses, compared to 80 to 90
percent of expenses for group coverage. Purchasers in the
individual market pay 100 percent of their coverage; the market
is very price sensitive and purchasers are medically screened by
insurers concerned about high-risk consumers buying and keeping
coverage.
3.Small group market. AB 1672 (Margolin and Hansen), Chapter
1128, Statutes of 1992, enacted a number of reforms to the small
group market, making health insurance more accessible to small
employers through guaranteed issue and renewability provisions,
regulating preexisting conditions limitations, underwriting
protections, and disclosure requirements. Before AB 1672, an
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insurer would examine an employer's health history and could
either increase the premiums significantly or decline the entire
group.
California's small group market has been shaped by guaranteed
issue and other protections established in small group reform in
1992. In this market, insurers may impose participation
requirements and contribution requirements. As a result,
enrollees in small group coverage typically pay a fraction of
their premium. A 2011 CHCF report indicates that 3.4 million or
9 percent, of Californians have health coverage through small
group insurance products. Roughly 67 percent of small group
products are regulated by DMHC, compared to 33 percent regulated
by CDI.
The ACA eliminates the pricing of premiums based on health
status, limits the range of premiums based on age, adds the
self-employed to those eligible for guaranteed issue of
coverage, and expands the rules to small group employers with
one to 100 employees. AB 1083 established these reforms in
California's small group health insurance market. ABX1 2 updates
these reforms to be consistent with federal rules released in
November 2012.
4.Federal health care reform. On March 23, 2010, President Obama
signed the ACA (Public Law 111-148), as amended by the Health
Care and Education Reconciliation Act of 2010 (Public Law
111-152). Among other provisions, the new law makes statutory
changes affecting the regulation of and payment for certain
types of private health insurance. Beginning in 2014,
individuals will be required to maintain health insurance or pay
a penalty, with exceptions for financial hardship (if health
insurance premiums exceed eight percent of household adjusted
gross income), religion, incarceration, and immigration status.
Several insurance market reforms are required such as the
prohibitions against health insurers imposing lifetime benefit
limits and preexisting health condition exclusions. These
reforms impose new requirements on states related to the
allocation of insurance risk, prohibit insurers from basing
eligibility for coverage on health status-related factors, allow
the offering of premium discounts or rewards based on enrollee
participation in wellness programs, impose nondiscrimination
requirements, require insurers to offer coverage on a guaranteed
issue and renewal basis, determine premiums based on adjusted
community rating (age, family, geography and tobacco use). While
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the ACA establishes these new health insurance requirements,
state law is needed to allow our state regulators to enforce
them.
5.Health Benefit Exchanges. The ACA requires each state, by
January 1, 2014, to establish an American Health Benefit
Exchange that makes QHPs available to qualified individuals and
qualified employers or a state may defer to the federal
government. Federal law establishes requirements for the
Exchange, for health plans participating in the Exchange, and
defines who is eligible to receive coverage in the Exchange.
Beginning January 1, 2014, individual taxpayers whose household
income equals or exceeds 100 percent, but does not exceed 400
percent of the FPL, will receive a refundable tax credit for a
percentage of the cost of premiums for coverage under a
qualified health plan. The ACA also allows "qualified small
employers" to elect a tax credit worth up to 35 percent of a
small business' health insurance premium costs and establishes
requirements for a qualifying employer. The ACA also requires
reductions in the maximum limits for out-of-pocket expenses for
individuals enrolled in QHPs whose incomes are between 100
percent and 400 percent of the FPL.
In 2010, California was the first state to create a state-based
exchange, today known as Covered California. State exchanges are
required to certify QHPs, operate a toll-free hotline and
website, rate QHPs, present plan options in a standard format,
inform individuals of the eligibility requirements for Medicaid
(Medi-Cal in California) and the Children's Health Insurance
Program (Healthy Families in California), provide an electronic
calculator to calculate plan costs, and grant certifications of
exemption from the individual requirement to have health
insurance.
According to Covered California's January 2013 annual report,
Covered California is currently in the process of choosing
health plan offerings and will begin testing the online
enrollment portal. Over the next few months, grants will be
awarded to community organizations for public awareness efforts,
and assisters will be trained to understand Covered California
enrollment offerings. In November 2012, Covered California
released its QHP solicitation and proposed regulations. Final
bids were submitted on March 1, 2013, and Covered California
anticipates it will conduct its selection and certification
process for QHPs in early to mid-2013 for pre-enrolment on
October 1, 2013.
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6.U.S. Supreme Court. In March of 2012, the U.S. Supreme court
held three days of testimony on the constitutionality of two
major provisions of the ACA: the individual mandate and the
Medicaid expansion, arising out of two cases in the 11th Circuit
Court of Appeals, National Federation of Independent Business v.
Sebelius and Florida v. Department of Health and Human Services.
With regard to the individual mandate, the ACA requires most
people to maintain minimum essential coverage for themselves and
their dependents. The mandate can be satisfied by obtaining
coverage through employer-sponsored insurance, individual
insurance plans, including those offered through the Exchange, a
grandfathered health plan, or government-sponsored coverage.
On a 5-4 vote the Supreme Court upheld the ACA, saying its
requirement that most Americans obtain insurance or pay a
penalty was authorized by Congress's power to levy taxes.
According to a July 2012 Kaiser Family Foundation brief, the
fact that the Court upheld the mandate under Congress' taxing
power rather than the commerce or necessary and proper powers
changes nothing about the language of the ACA or how the
individual mandate will function. The report states the mandate
will go into effect in 2014 as Congress intended, according to
the terms of the ACA.
7.Individual Mandate. The minimum essential coverage provision of
the ACA, known as the individual mandate, requires most people
to maintain a minimum level of health insurance coverage for
themselves and their tax dependents in each month beginning in
2014. The individual mandate can be satisfied by obtaining
coverage through employer-sponsored insurance, an individual
insurance plan including those to be offered through the new
health insurance exchanges, a grandfathered health plan,
government-sponsored coverage such as Medicare or Medicaid, or
similar federally recognized coverage. People exempt from the
individual mandate include undocumented immigrants, religious
objectors, and people who are incarcerated. There are also
income-related carve-outs. In 2014, people who choose not to
buy insurance and do not quality for an exemption from the
mandate will have to pay a fine of $95. The penalty increases to
$695 by 2016, and then rises annually based on a pre-determined
formula.
8.Rates. According to a February 6, 2013, Kaiser Family
Foundation article, "Why Premiums Will Change for People Who Now
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Have Nongroup Insurance," overall, it is expected that the
average, unsubsidized premiums in the individual market will be
somewhat higher under the ACA as compared to today. This is
because many people will be getting better insurance with EHB
like maternity care and mental health. (Note: California already
mandates maternity and mental health parity for severe mental
illness). Also, patient cost-sharing for out-of-pocket costs
will be capped and guaranteed access to coverage for people with
preexisting conditions may increase average premiums as well as
people with higher costs coming into the system. However, this
should be balanced by more, healthy young uninsured
participating because of the availability of subsidies and the
individual mandate requirement. The ACA provides for $20 billion
in transitional reinsurance to offset adverse selection in the
first three years of the program. The Kaiser Family Foundation
article details how each of the insurance market changes in the
ACA may raise or lower premiums overall or redistribute them
among different groups of people.
9.Final Federal Rule on 2014 Market Rules. On February 22, HHS
issued a final rule implementing several ACA health insurance
market rules. Below is a summary of the final rules pertaining
to provisions in this bill.
a.Guaranteed Availability of Coverage -As of 2014, issuers cannot
decline coverage based on preexisting conditions or any other
health factor, and the availability of individual policies will
be guaranteed during open enrollment periods, as well as when
individuals experience qualifying events, similar to the group
market today. All policies in the group market will be
continuously available.
b.Insurance Premiums - Issuers may vary premiums only based on age
(within a 3:1 ratio for adults), tobacco use (within a 1.5:1
ratio for adults and subject to wellness program requirements in
the small group market), family size, and geography. States can
adopt more stringent rating criteria.
c.Guaranteed Renewability - Individuals' and employers' existing
coverage renewal protections while including several additional
consumer protections.
d.Single-Risk Pools - Issuers will maintain one statewide risk
pool for each of their individual and small employer markets,
unless a state chooses to merge the individual and small group
pools.
e.Geographic Rating Regions - The November 2012 proposed rule had
limited states to no more than seven rating areas based on
counties, three-digit zip codes, or metropolitan statistical
areas unless HHS permitted a different actuarially justified
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approach. The final rule expands state discretion, continuing to
require rating areas to be based on counties, three-digit zip
codes, or Metropolitan Statistical Areas (MSAs), but permitting
states to use geographic rating areas legally established by
January 1, 2013, or after January 1, 2013, as long as the number
of rating areas does not exceeding the number of MSAs in the
state plus one. States may still establish more geographic
rating areas with HHS approval.
f.Age Bands - For all states and markets a single age band for
children 0 to 20, one-year age bands for adults 21 through 64,
and a single age band for adults 64 and older. Age will be
determined only once a year, at the time of policy issuance or
renewal. States may adopt their own age-rating curve, but for
states that fail to do so, HHS will adopt the default- rating
curve found in the proposed rule and a rating factor of .635 for
children. ABX1 2 defers to the federal age-rating curve.
10.Related legislation SBX1 2 (Hernandez) is the companion
measure to ABX1 2 and applies the same provisions to health
plans regulated by DMHC. SBX1 2 will be heard in Assembly
Health Committee on March 12, 2013.
11.Prior legislation. SB 961 (Hernandez) and AB 1461 (Monning)
both of 2012, were identical bills that would have reformed
California's individual market similar to the provisions in SBX1
2. SB 961 and AB 1461 were vetoed by Governor Brown.
AB 1083 (Monning) Chapter 854, Statutes of 2012, establishes
reforms in the small group health insurance market to implement
the ACA.
SB 951 (Hernandez) Chapter 866, Statutes of 2012, and AB 1453
(Monning) Chapter 854, Statutes of 2012, designates the Kaiser
Small Group HMO as California's benchmark plan to serve as the
EHB standard, as required by the ACA.
SB 51 (Alquist), Chapter 644, Statutes of 2011, establishes
enforcement authority in California law to implement provisions
of the ACA related to medical loss ratio requirements on health
plans and health insurers and enacted prohibitions on annual and
lifetime benefits.
AB 2244 (Feuer), Chapter 656, Statutes of 2010, requires
guaranteed issue of health plan and health insurance products
for children beginning in January 1, 2011.
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SB 900 (Alquist), Chapter 659, Statutes of 2010, and AB 1602
(Perez), Chapter 655, Statutes of 2010, establishes the
California Health Benefit Exchange.
AB 1X 1 (Nunez) of 2008 would have enacted the Health Care
Security and Cost Reduction Act, a comprehensive health reform
proposal. AB 1X 1 died in the Senate Health Committee.
12.Support. Health Access California (HAC), a statewide health
care consumer advocacy coalition, writes in support stating the
bill will reform California's individual insurance market to
provide guaranteed issue and modified community rating. HAC
writes that the repeal or modification of the protections of the
ACA are highly unlikely and, if in the future, the ACA
provisions on the individual market are repealed or altered, the
first choice should not be to revert to the status quo ante in
which consumers may be denied health insurance for any reason or
no reason. The first choice should be to figure out a policy
response that protects consumers and gives them the opportunity
to obtain affordable coverage. Other states have done this, and
HAC argues California should protect its own consumers and do
the same.
HAC also supports the provision of the bill that limits rate
increases to once annually arguing consumers should be able to
budget and plan. HAC is concerned about the limits imposed on
guaranteed issue writing that people will not be able to get
coverage at any time but only during limited open enrollment
periods. While these restrictions will limit the availability of
coverage for Californians during much of the year, HAC
reluctantly accepts this given the federal rule on Exchanges
which impose the same rules.
The 100% campaign writes in support stating they are committed
to creating an equitable market for consumers and ensuring
standardized and consistent premium risk rating rules for
children with all types of health insurance coverage. The 100%
campaign also supports and appreciates the interim coverage
opportunities created for children and youth in advance of 2014.
California Public Interest Research Group writes in support of
the bill and the importance of ending denials for preexisting
conditions and limiting the ability of insurers to charge
consumers different rates. The Transgender Law Center writes
that the bill contains multiple provisions that will optimize
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19
coverage for all Californians. The Greenlining Institute states
this bill is of critical importance to communities of color who
suffer disproportionally from preventable chronic illnesses but
who are less likely to have health insurance. The Greenlining
Institute argues the bill will improve access to and
affordability of health insurance for communities of color.
AFSCME writes in support that the bill will help expand health
insurance coverage in the commercial market.
13.Oppose Unless Amended (Prior version). CDI writes that the
selection of the geographic rating regions is one of the most
significant choices the state has to make that will impact the
affordability of health insurance for consumers. CDI is greatly
concerned that geographic rating regions contained in AB 1083,
will result in premium increases and should not be adopted in
this legislation. CDI is proposing an alternative 18 geographic
ratings region proposal.
SUPPORT AND OPPOSITION (Prior Version) :
Support: AARP
American Cancer Society Cancer Action Network
American Federation of State, County and Municipal
Employees, AFL-CIO
American Heart Association
California Academy of Family Physicians
California Chiropractic Association
California Healthcare Institute
California Optometric Association
California Pan-Ethnic Health Network
California Primary Care Association
Congress of California Seniors
Consumers Union
Epilepsy California
Greenlining Institute
Health Access California
Latino Coalition for a Healthy California
National Multiple Sclerosis Society - California
Action Network
Transgender Law Center
United Nurses Associations of California/Union of
Health Care Professionals
100% Campaign
-- END --
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