BILL ANALYSIS Ó
AB 1962
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CONCURRENCE IN SENATE AMENDMENTS
AB 1962 (Skinner)
As Amended August 4, 2014
Majority vote
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|ASSEMBLY: |76-0 |(May 28, 2014) |SENATE: |32-4 |(August 21, |
| | | | | |2014) |
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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
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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