BILL ANALYSIS �
AB 314
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Date of Hearing: March 19, 2013
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 314 (Pan) - As Introduced: February 12, 2013
SUBJECT : Health care coverage: self-funded student plans and
policies.
SUMMARY : Requires provisions of the federal Affordable Care Act
(ACA) specifically dealing with annual and lifetime limits to
apply to a health insurance policy directly offered by a bona
fide public or private institution of higher learning only to
its students, faculty, staff, administration, and their
respective dependents (self-funded student health arrangements).
EXISTING LAW :
1)Provides for the regulation of health plans by the Department
of Managed Health Care under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene Act), except that a plan
directly operated by a bona fide public or private institution
of higher learning which directly provides health care
services only to its students, faculty, staff, administration,
and their respective dependents is exempt from the Knox-Keene
Act. Provides for the regulation of health insurers by the
California Department of Insurance under provisions of the
Insurance Code.
2)Requires, to the extent required by federal law, every health
plan and health insurer that issues, sells, renews, or offers
contracts or policies for health care coverage to comply with
the annual and lifetime benefit requirements of the ACA and
any rules or regulations issued under that law, in addition to
any state laws or regulations that do not prevent the
application of those requirements.
3)Permits, under the ACA, restricted annual limits on coverage
for essential health benefits (EHBs) through 2013, and
prohibits health plans and health insurers from establishing
lifetime or annual limits on the dollar value of benefits that
are not EHBs, to the extent such limits are otherwise
permitted, for any participant or beneficiary starting in
2014.
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4)Establishes as California's EHBs the Kaiser Small Group Health
Maintenance Organization plan along with the following 10 ACA
mandated benefits:
a) Ambulatory patient services;
b) Emergency services;
c) Hospitalization;
d) Maternity and newborn care;
e) Mental health and substance use disorder services,
including behavioral health treatment;
f) Prescription drugs;
g) Rehabilitative and habilitative services and devices;
h) Laboratory services;
i) Preventive and wellness services and chronic disease
management; and,
j) Pediatric services, including oral and vision care.
5)Permits individuals to retain any group or individual coverage
in which the individual was enrolled on September 23, 2010 in
a "grandfathered plan." Under a grandfathered plan coverage
can be renewed, additional family members can be added, and
new employees and their families can be added.
6)Applies some, but not all, provisions of the ACA to
grandfathered health plans and insurers. Subjects
grandfathered health plans and insurers to the prohibition on
lifetime limits, the restrictions on rescission, the
prohibition on excessive waiting periods, the requirement to
cover adult children to age 26, and for employer based
coverage, the prohibition on preexisting condition
restrictions on children and prohibition on restriction of
annual limits. To remain grandfathered, plans cannot make
significant coverage changes that reduce benefits or increase
costs.
7)Requires that, under provisions of the ACA beginning January
1, 2014, all US residents maintain minimum essential coverage,
or pay a penalty, unless the individual falls into one of the
following exceptions:
a) Individuals with a religious conscience exemption
(applies only to certain faiths);
b) Incarcerated individuals;
c) Undocumented aliens;
d) Individuals who cannot afford coverage (i.e. required
contribution exceeds 8% of household income);
e) Individuals with a coverage gap of less than three
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months;
f) Individuals in a hardship situation (as defined by the
Secretary of the federal Department of Health and Human
Services (HHS));
g) Individuals with income below the tax filing threshold;
and,
h) Members of Indian tribes.
8)Makes available, under provisions of the ACA, beginning
January 1, 2014, for qualifying individuals (generally
individuals with income up to 400% of the federal poverty
level), advanceable, refundable tax credits toward the
purchase of an exchange plan. An individual eligible for but
not enrolled in an employer sponsored plan could be eligible
for these subsidies if the employee's contribution for
self-only coverage exceeds 9.5% of household income or the
plan covers less that 60% of the total allowed costs. Also
makes available to subsidy eligible individuals assistance
paying required cost-sharing if the individual is enrolled in
an exchange plan at the silver tier.
9)Defines, pursuant to federal regulations, student health
insurance coverage as a type of individual health insurance
coverage that is a written agreement between an institution of
higher education and a health insurance issuer, and provided
to students enrolled in that institution and their dependents
who meet certain conditions.
10)Requires, pursuant to federal regulations, student health
insurance for policy years beginning on or after January 1,
2014, to comply with the annual dollar limit requirements, as
specified. Phases in the prohibition prior to 2014 by
allowing before 2012 limits no lower than $100,000, and after
2012 but before 2014 limits no lower than $500,000. These
regulations do not apply to self-funded student health plan
arrangements.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, the provision
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in the federal ACA which prohibits health insurance issuers
from capping the amount of coverage they provide is a
significant reform to ensure health insurance provides
adequate coverage especially when it is needed most. Lifetime
or annual dollar limits essentially render an insured person
uninsured when treatment costs exceed these limits. Any
healthcare costs beyond the limits established by the health
care plan are the financial responsibility of the beneficiary.
This typically can occur with a serious diagnosis such as
cancer.
Some institutions of higher learning impose mandates on students
to have insurance coverage, and if students don't already have
insurance, the university requires the purchase of student
health insurance. In the case of the University of California
(UC), students are required to purchase coverage through the
self-funded health plan, which is permitted to have caps
because as a self-funded student health plan none of the
provisions of the ACA apply. When UC students exceed the UC
health plan lifetime cap of $400,000, they will pay
out-of-pocket expenses that most Americans, let alone college
students, cannot afford. One example of a student who
exceeded the lifetime benefits cap due to a cancer diagnosis
required approximately $1 million in care. The author states
that this bill addresses this problem by indicating that
health plans and health insurance policies operated directly
by an institution of higher learning cannot impose lifetime or
annual dollar limits on coverage.
2)BACKGROUND . The ACA [Public Law (P.L.) 111-148] was signed
into law on March 23, 2010. On March 30, 2010, the ACA was
amended by P.L. 111-152, the Health Care and Education
Reconciliation Act of 2010. In general, P.L. 111-148 and its
amendments are referred to as the ACA. ACA provisions require
that group plans with annual dollar limits set those limits at
increasingly higher amounts until January 1, 2014 when most
plans issued or renewed are banned from having an annual
dollar limit on coverage. Annual or lifetime dollar benefit
limits are dollar maximums imposed by a health plan on the
amount of medical services covered for an enrollee. An
insurance company could impose a total lifetime dollar limit
on benefits or limits on specific benefits, or a combination
of the two. After a lifetime limit is reached, the insurance
plan will no longer pay for covered services. Self-funded
student health insurance plans do not have to comply with ACA
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provisions, including provisions related to lifetime and
annual dollar limit benefits. According to proposed federal
rules on minimum essential coverage, self-funded plans offered
by institutions of higher education will be designated as
minimum essential coverage for the purposes of the ACA. It is
not yet clear if individuals offered minimum essential
coverage through self-funded student health plans would be
eligible for subsidies in the new health benefit exchanges
created by the ACA.
3)STUDENT HEALTH INSURANCE . According to the preamble of the
federal student health insurance regulations, industry sources
indicate that nationwide approximately 1,500 to 2,000
institutions offer student health plans, and the vast majority
of these plans are insured (rather than self-funded) plans.
Self-funded student plans are not subject to the requirements
of the federal Public Health Services Act or the ACA.
Self-funded student plans are not currently regulated under
California's Knox-Keene Act. While fully insured student
health plans will be subject to the ACA as individual market
products, self-funded plans are essentially not subject to any
of the state or federal laws governing health insurance. In
the preamble to the final regulation, HHS indicates that these
self-funded student health plans may be regulated by the
states. The HHS estimates that there are approximately
200,000 students covered through student health plan
arrangements that are self-funded through colleges and
universities.
4)UC SHIP . The University of California Student Health
Insurance Plan (UC SHIP) is governed by an advisory board and
executive committee that include plan administrators and
student representatives from each campus. According to UC
SHIP, in the fall of 2012, more than 138,000 UC undergraduate
and graduate students and their dependents were enrolled in
the plan. Current benefit caps for the UC SHIP include a
$400,000 lifetime coverage cap and a $10,000 annual
prescription drug cap. The UC SHIP advisory board considered
removing the lifetime maximum last year but did not support it
for 2012-13 because of the resulting estimated increase that
it would cause to student premiums. Since 2010, UC SHIP
administrators estimate that 11 students have surpassed the
lifetime benefits cap, and approximately 150 students have
exceeded the prescription drug benefit cap. UC indicates that
UC SHIP voluntarily complies with benefit levels and consumer
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protections required of group and individual health plans
under the ACA including: EHBs; 100% coverage of preventive
care services including women's health services; full benefit
parity for behavioral health and substance abuse treatment;
guaranteed coverage to all eligible students; no pre-existing
condition exclusions or waiting periods; and, no individual
rating based on age or health status.
5)COMPARED TO EMPLOYER INSURANCE . While not specific to student
health insurance, a report by the UC Berkeley Labor Center
indicates that about 40% of Californians with job-based
insurance were subject to lifetime limits in 2010. However,
83% of plans with maximum lifetime limits in 2010 had limits
of $2 million or more, so the impact of the change regarding
lifetime limits is expected to be minimal on most employers
but would be quite meaningful for the small number of
employees who reach these limits. With these trends in
employer coverage and the ACA it appears students who are
mandated to get coverage through self-funded student health
plans, and who could be barred from participating in the
exchange subsidies because of this coverage, will be the few
who have such limitations placed on their coverage.
6)SUPPORT . Proponents argue that beginning in 2014, millions of
Americans will benefit from new consumer protections,
including health care coverage for preventive benefits and
numerous other improvements to our health care system. These
protections represent the new standard for healthcare coverage
for all Americans. However, due to exemptions in federal
regulation standards, certain health plans, such as the plan
administered by UC, do not have to maintain certain standards
in the ACA. Currently, the UC SHIP plan leaves students who
face catastrophic illness such as cancer, without appropriate
coverage, and often times they are faced with paying the
entire cost of care past their benefits coverage.
Additionally, proponents argue that if an individual believes
they may reach the benefits cap, they often self-select
themselves out of the health program by discontinuing their
higher education program or through other means.
7)RELATED LEGISLATION . AB 2 X1 (Pan) and SB 2 X1 (Ed Hernandez)
conform California's individual insurance market rules to the
ACA.
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8)PREVIOUS LEGISLATION .
a) AB 1453 (Monning), Chapter 854, Statutes of 2012 and SB
951 (Ed Hernandez), Chapter 866, Statutes of 2012,
establish California's EHBs.
b) SB 51 (Alquist), Chapter 644, Statutes of 2011, conforms
California law to provisions of the ACA related to Medical
Loss Ratio requirements on health plan and health insurers
and prohibitions on annual and lifetime benefits.
c) AB 1602 (John A. P�rez), Chapter 655, Statutes of 2010,
enacted the California Patient Protection and Affordable
Care Act. SB 900 (Alquist and Steinberg), Chapter 659,
Statutes of 2010, created the California Health Benefit
Exchange (the Exchange). These bills together specify the
powers and duties of the board governing the Exchange
relative to determining eligibility for enrollment in the
Exchange and arranging for coverage under qualified health
plans, and would require the board to facilitate the
purchase of qualified health plans through the Exchange by
qualified individuals and qualified small employers by
January 1, 2014.
REGISTERED SUPPORT / OPPOSITION :
Support
University of California Student Association (co-sponsor)
UC Student Workers Union - UAW Local 2865 (co-sponsor)
American Federation of State, County and Municipal Employees -
Local 3299
California Labor Federation
California College Democrats
Health Access California
Young Invincibles
Opposition
None on file.
Analysis Prepared by : Paula Villescaz / HEALTH / (916)
319-2097
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