BILL ANALYSIS Ó
AB 2088
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Date of Hearing: May 14, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 2088 (Hernandez) - As Amended: April 21, 2014
Policy Committee: HealthVote:13-6
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires a health plan or insurer, as a condition of
selling a plan that is other than a comprehensive health plan or
insurance policy to a large group, to require that potential
enrollees are also covered by a comprehensive health insurance
policy.
FISCAL EFFECT
1)Likely minor one-time and ongoing costs to CDI to ensure
compliance.
2)Costs to the Department of Managed Health Care (DMHC) as
follows (Managed Care Fund):
a) One-time cost for workload related to issuance of
regulations estimated at $60,000.
b) Plan licensing and enforcement workload estimated at
$135,000 for the first year of implementation, $65,000
ongoing.
COMMENTS
1)Purpose . According to the author, this bill is needed to
close a gap in existing state law for large group health
coverage which allows insurers to sell specialized,
disease-specific, and hospital indemnity products to large
employers without clear disclosure that the policies do not
constitute minimum essential coverage for purposes of the
employer requirement or the individual mandate under federal
law. This bill ensures that policies with less than 60%
AB 2088
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minimum value will only be sold as supplemental to coverage
sufficient to comply with the individual mandate in federal
law.
2)Employer Responsibility provisions under the federal Patient
Protection and Affordable Care Act (ACA) require businesses
with 50 or more employees to either: (a) offer affordable
health coverage that covers at least 60% of the total expected
benefits cost, or (b) pay an Employer Shared Responsibility
payment if at least one of its full-time employees receives a
premium tax credit for purchasing individual coverage on a
health insurance exchange. The rationale for these payments
is to encourage businesses to maintain coverage for employees.
If businesses do not offer coverage, the Employer Shared
Responsibility payment is equal to the number of full-time
employees the employer employed for the year (minus up to 30)
multiplied by $2,000. If businesses do offer coverage, the
payment is equal to 1/12 of $3,000 on a monthly basis, times
the number of employees receiving a premium tax credit for
that month.
The author argues a large employer with low-wage workers could
potentially have a financial incentive to offer coverage that
complies with the letter but not the spirit of the law, in
order to put itself in the latter category of a business
offering coverage. However, while the coverage offered may
technically meet the required minimum value, it may be an
indemnity-style or specialized plan that does not offer
comprehensive coverage for all health care services. In this
case, employees would be expected to seek comprehensive
coverage through Medicaid or a health insurance exchange, but
the business would only be penalized for the individuals who
received subsidized coverage through an Exchange. There are no
penalties for businesses whose employees are eligible for
coverage through Medicaid. In this case, the employer may
reduce their overall financial responsibility, particularly if
many of their employees are eligible coverage through
Medicaid. This bill seeks to close what the sponsor terms a
loophole, by ensuring that specialized plans and
indemnity-style policies can only be sold as supplemental to
comprehensive health insurance coverage.
In addition, this bill requires disclosure that supplemental
policies are being offered as such, and not a substitute for
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essential health benefits or minimum essential coverage as
defined in federal law.
3)Opposition . Insurers oppose this bill, arguing it puts
insurers in the role of policing their potential customers as
to whether they offer comprehensive health insurance, as a
condition of offering for sale a plans such as dental, vision,
or other specialized or indemnity plans. They cite a lack of
evidence that that insurers are inappropriately offering or
marketing minimum value plans as a substitute for minimum
essential coverage. Finally, they argue it is critical to put
all of our resources toward implementing the federal ACA in a
meaningful way, rather than implementing costly and
unnecessary requirements.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081