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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