BILL ANALYSIS Ó AB 2 X1 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2 X1 (Pan) As Amended April 1, 2013 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |53-25|(February 28, |SENATE: |27-9 |(April 25, | | | |2013) | | |2013) | ----------------------------------------------------------------- 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related to guarantee issue and rating requirements if federal guarantee issue and federal community rating are repealed; c) Makes inoperative 12 months after the repeal of the federal individual mandate, the following California individual market provisions: AB 2 X1 Page 2 i)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 Page 3 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: AB 2 X1 Page 4 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 Page 5 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 AB 2 X1 Page 6 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 Page 7 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 AB 2 X1 Page 8 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 Page 9 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 FN: 0000201