BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB X1 2 (Pan) - Health care coverage.
Amended: April 1, 2013 Policy Vote: Health 8-1
Urgency: No Mandate: No
Hearing Date: April 15, 2013
Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB X1 2 would make several changes to the
individual market for health care coverage. In particular, the
bill would require the guaranteed issue of coverage and prohibit
the use of preexisting conditions as a means of setting rates.
This bill applies those changes only to the Insurance Code.
The bill would also make several changes to the recently enacted
reforms to the small group market for health care coverage, to
conform to recent federal policies or to the policies proposed
in this bill for the individual market.
Fiscal Impact: One-time costs of about $600,000 to the
Department of Insurance to adopt regulations and review health
policy filings (Insurance Fund).
Background: Beginning in 2014, under the federal Patient
Protection and Affordable Care Act (Affordable Care Act), health
plans and health insurers that offer coverage in the individual
market are required to accept every employer or individual that
wishes to purchase coverage and to renew coverage at the
individual or employer's request. The Affordable Care Act
prohibits health plans or insurers from imposing any exclusion
of coverage based on a preexisting condition. Federal law also
limits the "rating factors" used to determine the price of a
health plan or insurance policy to a narrow list of factors,
including age, geographic region, family size, and tobacco use.
Federal law exempts plans in effect on March 23, 2010
("grandfathered plans") from these requirements, as long as no
changes are made to those plans.
Proposed Law: AB X1 2 would make several changes to state law
AB X1 2 (Pan)
Page 1
governing the individual market for health insurance policies to
conform to federal requirements of the Affordable Care Act. The
bill would also make certain policy changes to state law
governing health insurance, as allowed by the Affordable Care
Act.
Provisions conforming California law relating to the individual
market to federal law include:
Prohibiting insurance policies from imposing preexisting
condition exclusions.
Requiring the guaranteed issue of coverage.
Requiring insurers to offer for sale all plans sold in the
individual market to all individuals in the insurer's
service area.
Prohibiting insurers, agents or brokers from encouraging or
directing individuals to or away from certain products due
to health status or other factors.
Allowing insurers to only use age, geographic region, and
family size as rating factors when setting rates for
individual policies.
Provisions implementing policy choices regarding the individual
market available to the state include:
Exempting grandfathered plans from the changes made in the
bill.
Excluding tobacco use as a rating factor.
Requiring insurers to use open enrollment periods (October
15th to December 7th) that align with those to be used in
the California Health Benefit Exchange.
Establishing 19 rating regions for the individual market
(the same rating regions that were adopted for the small
group market in SB 1083 of 2012).
Requiring the Department of Managed Health Care, the
Department of Insurance, the California Health Benefit
Exchange to report to the Legislature by June 1, 2017 on the
impact of the rating regions established in the bill.
Establishing a "tie-back" provision to the federal
Affordable Care Act. Under this provision, if the federal
individual mandate to maintain health care coverage is
repealed or amended, provisions of the bill requiring
guaranteed issue, prohibition of preexisting condition
exclusions, community rating, and rating factors would be
inactive within 12 months.
AB X1 2 (Pan)
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Provisions of the bill modifying existing state law governing
the small group market (AB 1083, Monning, Statutes of 2012)
include:
Conforming open enrollment periods to federal requirements
(October 15th to December 7th).
Deleting provisions of AB 1083 that made guaranteed issue
and community rating requirements contingent on the
continued operation of those provisions in the federal
Affordable Care Act.
Enactment of this bill is contingent on the enactment of SB X1 2
(Hernandez).
Related Legislation:
AB 1083 (Monning, Statutes of 2012) made changes to the
regulation of the small group health care coverage market,
in conformity with the Affordable Care Act.
SB 961 (Hernandez, 2012) and AB 1461 (Monning, 2012) would
have enacted reforms to the individual market (substantially
similar to this bill). Those bills were vetoed by Governor
Brown, because of concern that the bills were not
sufficiently contingent on the continued operation of the
federal Affordable Care Act.
SB X1 2 (Hernandez) makes changes to the Health and Safety
Code regulating health plans substantially similar to the
changes made in this bill. That bill is in the Assembly
Health Committee.
Staff Comments: As noted above, this bill is substantially
similar to SB 961and AB 1461 from last session. Differences
between this bill and those bills include provisions (such as
open enrollment dates) that have been changed to reflect recent
federal guidance.