BILL ANALYSIS Ó AB 1962 Page 1 ASSEMBLY THIRD READING AB 1962 (Skinner) As Amended May 23, 2014 Majority vote HEALTH 15-3 APPROPRIATIONS 13-2 ----------------------------------------------------------------- |Ayes:|Pan, Maienschein, |Ayes:|Gatto, Bigelow, | | |Ammiano, Holden, Bonilla, | |Bocanegra, Bradford, Ian | | |Bonta, Chesbro, Gomez, | |Calderon, Campos, Eggman, | | |Gonzalez, Roger | |Gomez, Holden, Pan, | | |Hernández, Nazarian, | |Quirk, | | |Nestande, Ridley-Thomas, | |Ridley-Thomas, Weber | | |Wieckowski, Eggman | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Mansoor, Patterson, |Nays:|Linder, Wagner | | |Wagner | | | | | | | | ----------------------------------------------------------------- SUMMARY : Requires dental plans to file annual reports on medical loss ratios (MLRs). Specifically, this bill : 1)Requires health plans and insurers that issue, sell, renew, or offer specialized dental plans or policies to file an annual report with state regulators - the California Department of Insurance (CDI) or the Department of Managed Health Care (DMHC), as appropriate - that is organized by group and product type and contains the same information required to be reported by health plans and insurers under the federal Patient Protection and Affordable Care Act (ACA). 2)Requires state regulators, if they decide to conduct a financial examination, as provided under current law, to verify the dental plan's representations in the MLR annual report, to notify the dental plan 30 days in advance. Requires dental plans to submit all requested records, books, and papers to state regulators within 30 days of notification. 3)Requires state regulators to make available to the public all of the data provided to them under this bill. AB 1962 Page 2 4)Requires state regulators to submit an annual report to the Legislature that includes an analysis of the filings. 5)Exempts from the reporting requirements in this bill the Medi-Cal program, the Healthy Families Program, the Access for Infants and Mothers Program, the California Major Risk Medical Insurance Program, and the Federal Temporary High Risk Insurance Pool, to the extent consistent with federal law. 6)State intent that the data reported under this bill be considered by the Legislature in adopting an MLR standard for dental plans by January 1, 2018. EXISTING LAW requires health plans and insurers to provide an annual rebate to each enrollee, on a pro rata basis, if the amount of the premium revenue expended for clinical services and quality improvement activities, or MLR, is less than 85% for health plans and insurers offering large group health coverage or less than 80% for health plans and insurers offering individual and small group health coverage. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)One-time costs, likely under $200,000 to DMHC (Managed Care Fund) and under $100,000 to CDI to modify information technology systems and develop reporting requirements. 2)Ongoing minor costs, under $50,000 annually to DMHC and CDI (Managed Care Fund/ Insurance Fund) to examine reports, review compliance, and report to the Legislature. COMMENTS : The ACA includes numerous provisions that change the way commercial health insurance is offered and regulated in an effort to provide better value to consumers and increase transparency, including MLR standards. MLR limits the portion of premium that health insurers may spend on administration, marketing and profits. Under the ACA, health insurers must publicly report the MLR in each state where they offer coverage and if they fail to meet the minimum MLR standards must pay rebates to consumers. Dental plans and other plans providing "excepted benefits" are exempted from these requirements. The MLR is a basic financial indicator, traditionally referring to the percentage of insurance premium revenues health insurers spent on enrollee medical claims. The MLR definition in the ACA AB 1962 Page 3 differs from the traditional MLR definition, most notably because it allows insurers to include in their expenses spending on activities to improve health care quality and to deduct from their revenues certain tax payments and fees. According to DMHC, dental health plans under their jurisdiction reported average dental loss ratios (DLRs) of just over 60% in 2012. However, the range varies substantially by health plan from a low of 31% to a high of 81% and is not broken down by market, individual, small or large group. DMHC points out that the reported DLRs are not based on standardized measurement or calculation as is required for MLR and that a relatively low DLR does not necessarily mean that the dental plan is in strong financial condition or that the plan is earning huge profits. This bill requires dental plans to report information required in the standardized form required for plans under the ACA. Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097 FN: 0003798