BILL ANALYSIS Ó AB 1962 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1962 (Skinner) As Amended August 4, 2014 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |76-0 |(May 28, 2014) |SENATE: |32-4 |(August 21, | | | | | | |2014) | ----------------------------------------------------------------- Original Committee Reference: HEALTH SUMMARY : Requires health plans and insurers that issue, sell, renew, or offer specialized dental plans or policies to file an annual report with appropriate state regulators 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). The Senate amendments delay the required date for plans and insurers to file an initial report to September 30, 2015, delete annual reporting requirements to the Legislature, and authorize state regulators, until January 1, 2018, to issue guidance regarding compliance with these provisions, as specified. 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 medical loss ratios (MLRs), 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 Senate Appropriations Committee, one-time costs of approximately $400,000 to develop guidance and regulations and renew initial reports. Ongoing costs of $170,000 per year to review and analyze reports by the Department of Insurance. One-time costs of $500,000 in 2014-15 and $290,000 in 2015-16 for the development of policies, implementation of information technology upgrades and review of plan filings. Ongoing costs of $250,000 per year for enforcement by the Department of Managed Health Care (DMHC). COMMENTS : The ACA includes numerous provisions that change the AB 1962 Page 2 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 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 : Paula Villescaz / HEALTH / (916) 319-2097 FN: 0004889