BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1180
Author: Pan (D)
Amended: 9/3/13 in Senate
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 9-0, 7/3/13
AYES: Hernandez, Anderson, Beall, De León, DeSaulnier, Monning,
Nielsen, Pavley, Wolk
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 69-1, 5/24/13 - See last page for vote
SUBJECT : Health care coverage: federally eligible defined
individuals
SOURCE : Author
DIGEST : This bill makes inoperative because of the federal
Patient Protection and Affordable Care Act (ACA) several
provisions in existing law that implement the health insurance
laws of the federal Health Insurance Portability and
Accountability Act of 1996 (HIPAA) and additional provisions
that provide former employees rights to convert their group
health insurance coverage to individual market coverage without
medical underwriting.
ANALYSIS :
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Existing law:
1.Establishes the Department of Managed Healthcare (DMHC) to
regulate health plans under the Knox-Keene Health Care
Services Plan Act of 1975 in the Health and Safety Code;
California Department of Insurance (CDI) to regulate health
insurers under the Insurance Code, and Covered California to
compare and make available through selective contracting with
health plans and health insurers (collectively known as
carriers) for individual and small business purchasers as
authorized under the ACA.
2.Defines a grandfathered health plan as having the same meaning
as is defined in the ACA. Federal law defines a grandfathered
health plan as any group health plan or health insurance
coverage that existed as of March 23, 2010, which permits new
enrollment only for new employees or dependents.
3.Prohibits a non-grandfathered health benefit plan for group or
individual coverage from imposing any pre-existing condition
provision or waivered condition upon any enrollee, and
requires on or after October 1, 2013, a plan to fairly and
affirmatively offer, market, and sell all small employer
health plan contracts for plan years on or after January 1,
2014, to all small employers in each service area, as
specified (pursuant to AB 1083 (Monning), Chapter 852,
Statutes of 2012).
4.Establishes that premium rates for small employer health
benefit plan contracts can vary only by age, pursuant to age
bands, established by the federal Secretary of the Department
of Health and Human Services (HHS), and based on the
individual's birthday and shall vary by no more than three to
one for adults; includes 19 geographic regions, as specified,
with a report no later than June 1, 2017 reviewing the impact
of the regions on the coverage market in California; and,
whether the contract covers an individual or family, as
described in the ACA.
5.Establishes a formula establishing the upper limit for premium
charges for health care plans and health insurance.
Authorizes the carrier to adjust the premium based on family
size, as specified.
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6.Requires carriers to continue to provide the same coverage for
18 months, or 29 or 36 months as specified, to individuals who
leave their employment. The federal law that governs this is
referred to as the Consolidated Omnibus Budget Reconciliation
Act (COBRA), applies to employers who have more than 20
employees, and requires the terminated employee to pay 102% of
the premium. The state law that governs this is referred to
as Cal-COBRA, applies to employers that have two to 19
employees, and requires the terminated employee to pay 110% of
the premium.
7.Requires plans and insurers to offer continued guaranteed
eligibility and guaranteed renewal for health insurance to
individuals who have exhausted their COBRA or Cal-COBRA. The
federal law is known as HIPAA and provides national rules for
all insurers operating in the small employer marketplace.
HIPAA allows states to implement an "acceptable alternative
mechanism" to determine the rules for HIPAA. State law allows
an eligible individual to pick either a "conversion policy" or
a "HIPAA policy."
8.Creates the Managed Risk Medical Insurance Board (MRMIB) which
administers the Major Risk Medical Insurance Program (MRMIP)
to provide major risk medical coverage to residents who are
unable to secure adequate private health coverage due to
chronic illness or high-risk medical conditions.
This bill:
1.Makes several provisions in existing law inoperative on
January 1, 2014, related to:
A. HIPAA and conversion policies comparative benefit
matrices pursuant to AB 1401 (Thomson, Chapter 794,
Statutes of 2002);
B. Conversion to non-group coverage when the group policy
has been terminated by the employer including requirements
on carriers without individual market products to offer the
most popular health maintenance organization (HMO) model
plan or the most popular preferred provider organization
(PPO) plan with the greatest number of enrolled individuals
for its type of plan as of January 1 of the prior year, as
reported to DMHC or CDI under the same cost sharing terms
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and conditions (AB 1401);
C. Requirements that at least once a year a carrier permit
an individual who has been covered for at least 18 months
in an individual market plan to transfer to another plan or
policy with equal or lesser benefits without medical
underwriting pursuant to AB 2889 (Frommer, Chapter 826,
Statutes of 2006);
D. Requirements included in HIPAA conformity law pursuant
to SB 265 (Speier, Chapter 810, Statutes of 2000);
E. Conversion policy for employees or members with
insurance on an expense-incurred or service basis, other
than for a specific disease or for accidental injuries only
whose coverage has been terminated pursuant to SB 1846
(Russell, Chapter 1186, Statues of 1982);
F. Except with regard to specified provisions, on and after
January 1, 2014, that are applicable only to grandfathered
individual health plan contracts previously issued to
federally eligible defined individuals; and
G. Requirements regarding health care service plan coverage
provided after the termination of the pilot program under
MRMIP (AB 1401).
1.Repeals #1 above if the federal mandate on individuals to
purchase insurance is repealed or amended to no longer apply
to the individual market.
2.Requires carriers to issue notices to individuals affected by
this bill informing them of changes in insurance laws
beginning January 1, 2014. Requires uniform model notices to
be adopted by CDI and DMHC no later than September 1, 2013,
and exempts the departments from Administrative Procedure Act
for purposes of adopting the model notices. Permits the
Directors of CDI and DMHC to modify these model notices
specifically for the purposes of clarity, readability and
accuracy. Includes in this authority notices related to the
ending of the MRMIP pilot program and pursuant to provisions
under AB 792 (Bonilla Chapter 851, Statutes of 2011).
3.Provides authority for MRMIB to promulgate emergency
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regulations regarding the shortening of the reconciliation
process upon the termination of MRMIP.
4.Deletes the current formula and establishes a rate cap for
individuals enrolled in HIPAA grandfather products by limiting
the premium charged for coverage provided in 2014 to the rate
charged in 2013 multiplied by 1.09 and limits the rate of
growth thereafter, as specified. Establishes a formula with
respect to the rate charged for coverage provided in 2015 and
each subsequent year.
5.Deletes a provision which requires a health plan or disability
insurance policy to notify the former spouse of an employee
about the right to a conversion plan or policy, as specified,
and deletes obsolete inoperative dates (AB 254 (Montañez,
Chapter 64, Statutes of 2004).
6.Deletes a provision in existing law allowing carriers to elect
to establish a mechanism or method to share in the financing
of high risk individuals (AB 265 (Speier, Chapter 810,
Statutes of 2000).
7.Incorporates additional changes to the Insurance Code,
proposed by AB 1391 (Assembly Insurance Committee) that become
operative only if AB 1391 and this bill are both chaptered and
become effective, on or before January 1, 2014, and this bill
is chaptered last.
Background
According to the Senate Health Committee analysis, the basic
intent of HIPAA's health insurance provisions is to lower the
possibility that people and small employers will lose existing
health plan coverage, and to make it easier for individuals to
switch plans or to purchase coverage on their own if they lose
employer-offered coverage. The health insurance reforms ensure
that people who are moving from one job to another or from
employment to unemployment are not denied health insurance
because they have a pre-existing medical condition (portability)
and limit the waiting time before a plan covers any pre-existing
medical condition for participants and beneficiaries in group
health plans. The reforms were also intended to guarantee that
individuals and employers who choose to purchase coverage are
able to find a plan (guaranteed issue) and that individuals
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already covered, as well as employers that offer coverage to
their employees, are able to renew their coverage (guaranteed
renewal). Finally, the health insurance provisions prohibit
discrimination on the basis of health status (nondiscrimination)
and require plans to offer special enrollment periods.
Tie back state law to the ACA. AB 1461 (Monning) and SB 961
(Hernandez), both of 2012, would have implemented ACA individual
market reforms in California were vetoed by Governor Brown
because the tie back provision was not sufficient to meet the
Governor's concerns. The Brown Administration requested a
broader tie back to the ACA. AB X1 2 (Pan) and SB X1 2
(Hernandez) were introduced in 2013 which together implement
health insurance reforms in California in the individual market,
and include the following tie back provisions:
1.Makes inoperative 12 months after the repeal of federal
guarantee issue and federal community rating provisions the
following California small group provisions:
Guarantee Issue;
Community rating; and
Prohibition on eligibility rules based on health status
and other factors.
1.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.
2.Makes inoperative 12 months after the repeal of the federal
individual mandate the following California individual market
provisions:
Guarantee issue;
Community rating;
Prohibitions on pre-existing condition provisions; and,
Prohibitions on eligibility rules based on health status
and other factors.
1.Makes operative 12 months after the repeal of the federal
individual mandate the following California individual market
provisions:
Written policies on underwriting;
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Rescission requirements; and,
Guarantee issue for children.
Prior Legislation
SB 265 (Speier, Chapter 810, Statutes of 2000) put HIPAA in
place in California which became law on January 1, 2001, revises
existing law to conform to the federal HIPAA, including
requiring carriers to issue their two most popular health
coverage products to federally eligible individuals, as defined.
AB 1401 (Thomson, Chapter 794, Statutes of 2002) provides 36
months of Cal-COBRA coverage to individuals with less than that
length of coverage under COBRA or Cal-COBRA, and creates a
four-year pilot program to provide coverage to the medically
uninsurable by implementing changes in the MRMIP and the private
individual health insurance market.
AB 2759 (Levine, Chapter 489, Statutes of 2004) preserves
individual health care coverage to subscribers of health plans
and policyholders of insurance plans that withdraw from a
California service area.
AB 254 (Montanez, Chapter 64, Statutes of 2004) eliminates
senior COBRA health insurance eligibility for individuals who
would have been eligible on or after to January 1, 2005 (because
HIPAA) offered more affordable options.
AB 2889 (Frommer, Chapter 826, Statutes of 2006) requires
carriers to permit an individual who has been covered for at
least 18 months under an individual contract or policy to
transfer, without medical underwriting, to any other individual
contract or policy, as specified.
AB 1083 (Monning, Chapter 852, Statutes of 2012) reforms
California's small group health insurance laws to enact the ACA.
Eliminates pre-existing condition requirements and establishes
premium rating factors based only on age, family size, and 19
geographic regions, except for grandfathered plans. New
guaranteed issue provisions and the rating provisions are tied
to those provisions in the ACA. Should guaranteed issue and
rating factors be repealed in the ACA, California's existing
small group guaranteed issue and rating law pre-ACA would become
operative.
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SB 961(Hernandez) and AB 1461(Monning) of 2012 would have
reformed the individual market consistent with the ACA but both
bills were vetoed.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
One-time costs of about $240,000 for DMHC to review health
plan filings, develop model notices for health plans, and
develop regulations (Managed Care Fund).
One-time costs of $22,000 to develop the required notice to
consumers and ongoing costs of about $10,000 per year for
enforcement by CDI (Insurance Fund).
SUPPORT : (Verified 8/30/13)
100% Campaign
AFSCME
Association of California Life and Health Insurance Companies
California Association of Health Plans
California Association of Health Underwriters
California Coverage and Health Initiatives
Children Now
Children's Defense Fund-California
Children's Partnership
Health Access California
PICO California
United Ways of California
ARGUMENTS IN SUPPORT : The California Association of Health
Plans writes that this bill allows for transition of individuals
eligible for guarantee issue coverage under HIPAA into the new
guarantee issue market under the ACA. Further, this bill would
require health plans to provide HIPAA and conversion members
with appropriate and timely notice about their options in the
new guarantee issue market while simultaneously making
inoperative laws that are non-ACA compliant. California
Association of Health Underwriters writes that this bill will
provide an urgently needed state and federal conformity that
will avoid the problem of health plans having to sell products
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out of compliance with the ACA.
ASSEMBLY FLOOR : 69-1, 5/24/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bradford, Brown, Buchanan,
Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Daly, Dickinson, Eggman, Fong, Fox, Frazier, Beth Gaines,
Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Hagman, Hall,
Harkey, Roger Hernández, Jones, Jones-Sawyer, Levine, Linder,
Logue, Lowenthal, Maienschein, Mansoor, Medina, Mitchell,
Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,
Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,
Salas, Stone, Ting, Wagner, Weber, Wieckowski, Williams,
Yamada, John A. Pérez
NOES: Donnelly
NO VOTE RECORDED: Bonta, Dahle, Grove, Holden, Melendez,
Skinner, Waldron, Wilk, Vacancy, Vacancy
JL:nl 9/3/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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