BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 314
AUTHOR: Pan
AMENDED: April 9, 2013
HEARING DATE: June 26, 2013
CONSULTANT: Valderrama
SUBJECT : Health care coverage: student plans and policies.
SUMMARY : Prohibits a health care service plan directly operated
by a public or private college or university that provides
health care services only to its students, faculty, staff,
administration, and their respective dependents from
establishing an annual or a lifetime limit on the dollar value
of benefits for any participant or beneficiary.
Existing law:
Provides for the regulation of health plans by the Department of
Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene Act).
1.Defines health care service plan as any person who undertakes
to arrange for the provision of health care services to
subscribers or enrollees, or to pay for or to reimburse any
part of the cost for those services, in return for a prepaid
or periodic charge paid by or on behalf of the subscribers or
enrollees.
2.Exempts health plans directly operated by a bona fide public
or private institution of higher learning that directly
provides health care services only to its students, faculty,
staff, administration and their dependents from the Knox-Keene
Act.
3.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 federal
Patient Protection and Affordable Care Act (ACA) and any rules
or regulations issued under that law.
4.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
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annual or lifetime limits on the dollar value of EHBs for any
participant starting in 2014.
5.Exempts, under federal law, self-funded insurance plans from
various provisions of the ACA, including the prohibition of
limits on the dollar value of benefits as described in 5)
above.
This bill: Prohibits a health care service plan (health plan)
directly operated by a public or private college or university
that provides health care services only to its students,
faculty, staff, administration, and their respective dependents
from establishing an annual or a lifetime limit on the dollar
value of benefits for any participant or beneficiary.
FISCAL EFFECT : According to Assembly Appropriations Committee,
minor enforcement costs to the DMHC totaling less than $100,000
annually.
PRIOR VOTES :
Assembly Health: 14- 5
Assembly Appropriations:12- 5
Assembly Floor: 52- 21
COMMENTS :
1. Author's statement. This bill is necessary to ensure health
plans administered by the University of California and other
institutions of higher learning cannot impose lifetime or
annual limits on the amount of money spent on treating
illnesses or injuries. The federal health reform under the ACA
prohibits health plans from placing caps on the lifetime or
annual dollar limits of benefits provided to a participant.
However, federal regulations exempt self-insured plans operated
by institutions of higher learning from the ACA. According to
the Department of Health and Human Services (HHS), self-funded
plans are not regulated by HHS. The University of California
Student Health Insurance Plan (UC SHIP), the plan mandated for
approximately 140,000 students, is one such plan. Current plan
benefits limits include a $400,000 lifetime coverage cap and a
$10,000 annual prescription drug cap. This policy leaves
students who face a catastrophic illness without appropriate
coverage, and often times they are faced with paying the entire
cost of care past their benefits coverage. HHS states that
these self-funded student health plans may be regulated by the
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States.
2. The ACA and benefit limits. 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), into law. Among other provisions, the ACA
includes a number of health insurance market reforms including
a prohibition on lifetime benefit limits on any plan sold or
renewed after September 23, 2010 and a phased in prohibition of
annual limits on the dollar value of EHBs. Under the phased in
restricted annual limits provision the current minimum annual
limit allowed is two million dollars. However, policy years
beginning on or after January 1, 2014 may no longer include any
annual limits on EHBs. The prohibition on lifetime limits
applies whether or not a plan qualifies as a grandfathered plan
under the ACA. The prohibition on annual limits and the
restricted annual limit provisions apply to group plans
regardless of their grandfathered status but do not apply
individual market grandfathered plans. Nothing in the ACA
prohibits plans from placing either lifetime or annual limits
on non-EHBs.
3. Student health plans (SHP). Federal regulations define
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. Over one million students are currently
covered under one of the approximately 2,000 SHPs offered by
colleges and universities nationwide, according to the American
Council on Education. These plans meet the definition of
minimal essential coverage under the ACA, and HHS regulations
extend many of the consumer protections contained within the
ACA to enrollees covered by a SHP. For instance, annual and
lifetime benefit limits, pre-existing condition exclusions for
students under age 19, arbitrary rescission and conditioning
enrollment on health status factor are all prohibited by these
regulations for SHPs.
HHS estimates that approximately 200,000 of the one million
students currently enrolled in SHPs are in a self-funded plan.
Since self-funded student health plans are neither health
insurance coverage nor group health plans, as defined under the
Public Health Services Act, HHS has no authority to regulate
them. Nonetheless, these self-funded SHPs may be regulated by
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the States.
4. Self-funded plans. According to the US Department of Labor,
self-funded plans, unlike fully insured plans, are generally
plans in which the sponsor retains the direct risk associated
with paying covered health expenses, rather than paying a
premium and transferring the risk to an insurance company.
Self-insurance is more common among larger sponsors, mainly
because the health expenses of larger groups are more
predictable and therefore larger sponsors face less risk.
Self-funded plans are explicitly exempted from certain
requirements of the ACA including the requirements to provide
minimum essential benefits, comply with medical loss ratios,
participate in a risk adjustment system, undergo rate review
and comply with the 3-1 age pricing compression. The
prohibition on annual and lifetime benefit limits also do not
apply to these plans.
5. UC SHIP. According to the UC, UC SHIP is a system wide,
self-funded insurance plan providing health care benefits for
enrolled students and is governed by an advisory board and
executive committee that include plan administrators and
student representatives from each campus. UC SHIP indicates
that in the fall of 2012, more than 138,000 UC undergraduate
and graduate students and their dependents were enrolled in the
plan. At the time this bill was introduced, the UC SHIP plan
included a $400,000 lifetime benefit limit as well as a $10,000
annual prescription drug limit. These limits gained widespread
attention after a January 29, 2013 San Francisco Chronicle
article entitled "Obamacare Loophole Threatens UC Students"
detailed the hardship a graduate student named Kenya Wheeler
experienced when he exceeded his lifetime limit as a result of
a cancer diagnosis.
The UC indicates that in May of this year the chancellors of
the ten UC campuses agreed unanimously with an advisory
committee's recommendation to eliminate the lifetime maximum
and other caps on EHBs for the upcoming plan year to coincide
with the ACA requirement that these limits be eliminated by
2014.
6. Double referral. This bill is double referred. Should it
pass out of this committee, it will be referred to the Senate
Committee on Education.
7. Prior legislation. SB X1 2 (Hernandez), Chapter 2, Statutes
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of 2013, and AB X1 2 (Pan), Chapter 1, Statutes of 2013
reformed California's individual market in accordance with
federal health care reform and implemented provisions
prohibiting pre-existing condition exclusions, requiring
guaranteed issuance of products, establishing statewide open
and special enrollment periods, and limiting premium rating
factors to age, geography and family size.
8. Support. The University of California Student Association,
who is a co-sponsor of this bill, argues that by ensuring that
health plans operated by an institution of higher learning
comply with ACA benefit standards, this bill ensures UC
students receive the same quality health care benefits that all
other Americans receive under the ACA. AFSCME Local 3299,
another co-sponsor of the bill, states that their members play
key roles in the health care services of the UC system and
should be allowed to administer the level of care that students
deserve without their patients going broke. The California
Healthcare Institute maintains they support access to continued
coverage at all levels and this bill will ensure the future
leaders and innovators at the UC will have equal access to the
benefits of health care reform. The California School
Employees Association states that annual and lifetime benefit
limits expose college students, who can least afford it, to
huge medical bills if they suffer from a serious or
catastrophic health condition.
9. Opposition. The Association of Independent Colleges and
Universities (AICCU) states that if this bill were to pass the
few AICCU institutions that currently offer a self-insured
health plan would need to increase premiums by 100 percent to
540 percent. They also argue that beginning in 2014 consumers,
including students, will have a variety of health care options
to choose from under the ACA and it is to the benefit of
students that affordable, self-insured student health plans, as
currently exist, remain an option. Loma Linda University
contends that institutions who offer a self-insured health plan
have found it's the most cost effective way to deliver health
care to their students and that all universities should have
the flexibility to offer coverage that meets the specific needs
of the student population on each campus.
10. Concerns. An April 9, 2013, letter from the UC expresses
concerns that, as drafted, this bill would not allow for limits
on services that are not considered EHBs. The UC argues that
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the ACA does not prohibit annual and lifetime limits on non-EHB
benefits and that the bill would place additional costly
requirements on colleges and universities in California who
chose to directly provide additional services like fertility
treatments to their students, faculty and staff.
11. Policy comments.
a. The author and sponsors state the need for this
bill is to prohibit annual and lifetime benefit limits
from being included in the UC SHIP health plan. Since the
bill's introduction, the UC chancellors have voted to
eliminate these limits imposed by UC SHIP to comply with
the ACA requirement that annual and lifetime benefit
limits be eliminated by 2014. It is unclear how many
other institutions of higher learning in California offer
a self-funded student health plan. As a result, it is
difficult to determine what the net effect of this bill
would be.
b. Given that nothing in the ACA prohibits plans from
placing either lifetime or annual benefit limits on
non-EHBs, the author may wish to consider amending to
clarify that this bill only applies to EHBs.
SUPPORT AND OPPOSITION :
Support: University of California Student Association (sponsor)
AFSCME 3299 (sponsor)
UAW Local 2865 (co-sponsor)
American Association of University Women - California
American Federation of State, County and Municipal
Employees, AFL-CIO
California College Democrats
California Council of Community Mental Health Agencies
California Healthcare Institute
California School Employees Association, AFL-CIO
California Teachers Association
Health Access California
National Association of Social Workers, California
Chapter
Young Invincibles
Oppose: Association of Independent California Colleges and
University
California Catholic Conference
Loma Linda University
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