BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2 X1
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 2 X1 (Pan)
          As Amended April 1, 2013
          Majority vote
           
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          |ASSEMBLY:  |53-25|(February 28,   |SENATE: |27-9 |(April 25,     |
          |           |     |2013)           |        |     |2013)          |
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           Original Committee Reference:    HEALTH  

           SUMMARY  :  Establishes health insurance market reforms contained  
          in the Patient Protection and Affordable Care Act (ACA) specific  
          to individual purchasers, such as prohibiting insurers from  
          denying coverage based on preexisting conditions; and makes  
          conforming changes to small employer health insurance laws  
          resulting from final federal regulations.

           The Senate amendments  : 

          1)Apply this bill's provisions only to the Insurance Code.

          2)Expand provisions tying provisions of California law to  
            federal law as follows:

             a)   Makes inoperative 12 months after the repeal of federal  
               guarantee issue and federal community rating provisions,  
               the following California small group provisions:

               i)     Guarantee issue;

               ii)    Community rating; and,

               iii)   Prohibition on eligibility rules based on health  
                 status and other factors.

             b)   Makes operative prior California small group law  
               (pre-ACA) related to guarantee issue and rating  
               requirements if federal guarantee issue and federal  
               community rating are repealed;

             c)   Makes inoperative 12 months after the repeal of the  
               federal individual mandate, the following California  
               individual market provisions:  








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               i)     Guarantee issue;

               ii)    Community rating;

               iii)   Prohibitions on preexisting condition provisions;  
                 and,

               iv)    Prohibitions on eligibility rules based on health  
                 status and other factors.

             d)   Makes operative 12 months after the repeal of the  
               federal individual mandate the following California  
               individual market provisions:

               i)     Written policies on underwriting;

               ii)    Rescission requirements; and,

               iii)   Guarantee issue for children.

          3)Require the California Department of Insurance (CDI) to use  
            risk adjustment information to monitor federal implementation  
            of risk adjustment in the state and to ensure that insurers  
            are in compliance with federal requirements.

          4)Require, on and after January 1, 2014, a disability insurer  
            subject to the federal uniform explanation of coverage  
            documents to satisfy existing state law by providing the  
            uniform summary information required under federal law, as  
            specified.  Require the insurer to ensure that all applicable  
            disclosures are met, as specified.

          5)State that health coverage through an association that is not  
            related to employment to be considered individual coverage  
            pursuant to federal regulations.

          6)Prohibit a carrier or agent or broker (in both the individual  
            and small group markets) from discriminating based on the  
            individual's race, color, national origin, present or  
            predicted disability, age, sex, gender identity, sexual  
            orientation, expected length of life, degree of medical  
            dependency, quality of life, or other health conditions.   
            Require this provision to be enforced in the same manner as  
            other sections of the Insurance Code, as specified.








                                                                  AB 2 X1
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          7)Revise single risk pool provisions as follows:  a carrier must  
            consider, as a single risk pool for rating purposes in the  
            small employer market (and individual market), the claims  
            experience of all insureds in all nongrandfathered small  
            employer (and individual market) health benefit plans offered  
            by the carrier in this state, whether offered as health care  
            service plan contracts or health insurance policies, including  
            those insureds and enrollees who enroll in coverage through  
            the California Health Benefit Exchange (Exchange), now called  
            Covered California, and insureds and enrollees covered by the  
            carrier outside of the Exchange.

          8)Prohibit student health insurance coverage, as defined in  
            federal regulations, to be included in a health insurer's  
            single risk pool for individual coverage.

          9)Allow a carrier to vary premiums based on administrative  
            costs, excluding any user fees required by the Exchange.

          10)Revise the geographic rating regions (in both the individual  
            and small group markets) to include the same 19 regions as in  
            AB 1089 (Monning), Chapter 852, Statutes of 2012.

          11)Delete provisions related to Health Insurance Portability and  
            Accountability Act of 1996.

          12)Allow for a limited open enrollment period for an individual  
            enrolled in noncalendar-year individual health plan contracts  
            prior to the date the policy year ends in 2014.

          13)Require a dependent that is a registered domestic partner to  
            have the same effective date of coverage as a spouse.

          14)Add a special enrollment opportunity for an individual who is  
            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 under  
            federal law.

          15)Reduced from 63 to 60 the number of days an individual has to  
            enroll in a special enrollment circumstance.

          16)Revise the notice to people in an individual market  
            grandfathered plan as follows:








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                 New improved health insurance options are available  
                 in California.  You currently have health insurance  
                 that is not required to follow many of the new laws.   
                 For example, your policy may not provide preventive  
                 health services without you having to pay any cost  
                 sharing (copayments or coinsurance).  Also your  
                 current policy may be allowed to increase your rates  
                 based on your health status while new policies  
                 cannot.  You have the option to remain in your  
                 current policy or switch to a new policy.  Under the  
                 new rules, a health insurance company cannot deny  
                 your application based on any health conditions you  
                 may have.  For more information about your options,  
                 please contact Covered California at ___, the Office  
                 of Patient Advocate at ___, your policy  
                 representative, or insurance agent, or an entity paid  
                 by Covered California to assist with health coverage  
                 enrollment, such as a navigator or an assister.

          17)Delete Children's Health Insurance Program Continuation  
            Coverage.

          18)Add limited emergency regulation authority for CDI.

          19)Define family to mean the policyholder and his or her  
            dependents.

          20)Clarify that policy year means the period from January 1, to  
            December 31, inclusive.

          21)Include other technical and conforming changes to make this  
            bill consistent with SB 2 X1 (Ed Hernandez).

           AS PASSED BY THE ASSEMBLY  , this bill: 

          1)Revised rating factors in existing small group law as follows:  
             includes references to the age rating curve established by  
            the Centers for Medicare and Medicaid Services, using the  
            individual's age as of the effective date of the contract and  
            specifies the three to one variation limitation is based upon  
            like individuals of different ages who are 21 years of age or  
            older, as described in federal regulations; and, six  
            geographic regions and for 2015 and thereafter, subject to  
            federal approval, 13 geographic regions.  Requires the total  








                                                                  AB 2 X1
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            premium charged to be determined by the sum of the premiums of  
            covered employees and dependents in accordance with federal  
            regulations.  
          
          2)Required a health plan or insurer to fairly and affirmatively  
            offer, market, and sell all of the plan's health benefit plans  
            that are sold in the individual market for policy years on or  
            after January 1, 2014, to all individuals and dependents in  
            each service area in which the plan provides or arranges for  
            health care services.  Limited enrollment to open enrollment  
            and special enrollment periods, as specified.  

          3)Prohibited in the individual and small group market a health  
            plan or insurer from imposing any preexisting condition  
            provision upon any individual.  
          
          4)Prohibited in the individual market a health plan or insurer  
            from establishing rules for eligibility, including continued  
            eligibility, of any individual to enroll under the terms of an  
            individual health benefit plan based 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 issued pursuant to  
               federal law.

             7)   Specified that a health plan or insurer is not required  








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               to offer an individual health benefit plan or accept  
               applications for the plan under specified circumstances,  
               such as when an individual does not live or reside within  
               the plan's approved service areas.

          8)Established as an initial open enrollment period from October  
            1, 2013, to March 31, 2014, and annually after that from  
            October 15 to December 7.  This is the period when individuals  
            can purchase health insurance through the Exchange and in the  
            commercial market.  In addition, gives individuals 63 days to  
            enroll under one of the following special enrollment trigger  
            events:  

             a)   Loss of minimum essential coverage, as specified under  
               federal requirements;

             b)   Gaining a dependent or becoming a dependent;

             c)   Mandated coverage due to court order;

             d)   Released from incarceration;

             e)   Health benefit plan substantially violated a material  
               provision of the contract;

             f)   Gained access to a new health benefit plan as a result  
               of a permanent move;

             g)   Provider no longer participating in a plan and  
               individual has a specified condition;
             h)   Misinformed about minimum essential coverage; and,

             i)   For Covered California, any events listed under federal  
               regulations.

          9)Required any data submitted by a health plan or health insurer  
            to the US Secretary of Health and Human Services, or her  
            designee, for purposes of the risk adjustment program  
            described in the ACA, to also be concurrently submitted to the  
            Department of Managed Health Care (DMHC) or CDI.
          
          10)Required health plans and insurers to provide a notice to all  
            applicants for coverage related to guarantee issue for  
            children about other options for enrollment including new open  
            enrollment options.  Authorized DMHC to develop a model notice  








                                                                  AB 2 X1
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            requirement, in consultation with CDI.  Authorized CDI to  
            develop a model notice requirement, in consultation with DMHC.  
             Exempted this model notice authority from the Administrative  
            Procedures Act.  Sunset this article on January 1, 2014.

          11)Established definitions for individual market provisions,  
            similar to the definitions established for the small group in  
            existing law.  Defined health benefit plan as any individual  
            or group health plan or policy of health insurance as defined,  
            and specifies what it does not include, such as Medi-Cal.   
            Defined a dependent as the spouse or registered domestic  
            partner or child of an individual, subject to applicable terms  
            of the health benefit plan. 

          12)Required a health plan or insurer outside the Exchange to  
            inform an applicant for coverage that he or she may be  
            eligible for lower cost coverage through the Exchange and the  
            Exchange enrollment period.  (Did not apply to grandfathered  
            plans.)

          13)Required a health plan or insurer outside the Exchange to  
            issue a notice to a subscriber that he or she may be eligible  
            for lower cost coverage through the Exchange and shall inform  
            the subscriber of the applicable open enrollment period  
            provided through the Exchange.  (Did not apply to  
            grandfathered plans.)

          14)Required a grandfathered health benefit plan to issue a  
            notice annually and in any renewal material, as specified.

          15)Required a plan participating in the Healthy Families program  
            to notify a qualified beneficiary within 30 days of the  
            operative date of opportunities to purchase or maintain  
            coverage.  Permit a qualified beneficiary to elect coverage  
            within 60 days of the mailing of the notice.

          16)Required a qualified beneficiary receiving coverage pursuant  
            to this part to make premium payments of not more than 110% of  
            the average per subscriber payment made by the board or  
            department to all participating plans for coverage provided.

          17)Prohibited a health plan or health insurer from advertising  
            or marketing an individual health benefit plan that is  
            grandfathered for the purpose of enrolling a dependent for  
            policy years on or after January 1, 2014.  Nothing prevented a  








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            grandfathered plan from adding a dependent.

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee, one-time costs of about $600,000 to CDI to adopt  
          regulations and review health policy filings (Insurance Fund).

           COMMENTS  :  This bill contains clean-up provisions to AB 1083  
          which enacted insurance market reforms consistent with the ACA  
          affecting health insurance sold to small employer purchasers and  
          establishes insurance market reforms consistent with the ACA  
          affecting the health insurance market for individual purchasers.  
           An important general objective of the ACA state implementing  
          legislation is to ensure that the rules in the Exchange and  
          outside the Exchange, 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 final federal regulations have been issued which require  
          updating of the AB 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, both 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 Qualified Health Plan (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.  It is necessary to put the federal rules in state law for  
          state regulatory enforcement purposes.  

          On January 24, 2013, Governor Brown issued a proclamation to  
          convene the Legislature in Extraordinary Session to consider and  
          act upon legislation necessary to implement the ACA in the areas  
          of:  1) California's private health insurance market, rules and  
          regulations governing the individual and small group market; 2)  
          California's Medi-Cal program and changes necessary to implement  
          federal law; and, 3) options that allow low-cost health coverage  
          through Covered California to be provided to individuals who  








                                                                  AB 2 X1
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          have income up to 200% of the federal poverty level.  This bill  
          along with SB 2 X1 address the first of the three areas  
          identified in the Governor's proclamation. 


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


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