BILL ANALYSIS Ó AB 2088 Page 1 ASSEMBLY THIRD READING AB 2088 (Roger Hernández) As Amended April 21, 2014 Majority vote HEALTH 13-6 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Pan, Ammiano, Holden, |Ayes:|Gatto, Bocanegra, | | |Bonilla, Bonta, Chesbro, | |Bradford, | | |Gomez, Gonzalez, Roger | |Ian Calderon, Campos, | | |Hernández, Nazarian, | |Eggman, Gomez, Holden, | | |Ridley-Thomas, | |Pan, Quirk, | | |Wieckowski, Eggman | |Ridley-Thomas, Weber | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Maienschein, Chávez, |Nays:|Bigelow, Donnelly, Jones, | | |Mansoor, Nestande, | |Linder, Wagner | | |Patterson, Wagner | | | | | | | | ----------------------------------------------------------------- SUMMARY : Requires health plans and insurers that sell products in the large group market that do not provide a minimum value of at least 60%, as defined under federal law, to require that individuals to be covered by the product have comprehensive health coverage. Requires plans that offer products with a minimum value of less than 60% to file a certification with state regulators and to disclose to potential purchasers that the product is a supplement to health insurance and is not a substitute for essential health benefits or minimum essential coverage as defined in federal law. EXISTING LAW : 1) Requires health plans and insurers issuing health benefit plans in the individual and small group markets to comply with specific rules in the offering, sale and scope of that coverage, including that the coverage must, at a minimum, cover 10 essential health benefits (EHBs) as outlined in federal and state law. 2) Excludes from this requirement certain insurance policies, if the insurer certifies that the policy is being offered as supplemental health insurance, and not as a AB 2088 Page 2 substitute for the minimum EHBs, and the insurer requires that the persons who will be covered have other health coverage that is not designed to serve as a supplement. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)Likely minor one-time and ongoing costs to the California Department of Insurance to ensure compliance. 2)Costs to the Department of Managed Health Care 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 : 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 minimum value 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 the federal Patient Protection and Affordable Care Act. The author states that this bill closes the gap by applying the same disclosures and requirement that there be underlying comprehensive coverage as now apply in state law for the individual and small group market to large group coverage and extending those protections to any large group coverage that is less than minimum value. This bill ensures that policies with less than 60% minimum value will only be sold as supplemental to coverage sufficient to comply with the individual mandate in federal law. According to Health Access California, sponsor of this bill, this bill closes an important gap that could lead employers to offer inadequate coverage for workers. However, the employer penalty would be $3,000 for each employee who enrolls in Covered California and receives premium assistance while the employer penalty for failing to offer any coverage is $2,000 for every full time employee. Health Access acknowledges that California law cannot regulate the health benefits provided by employers to AB 2088 Page 3 employees, but California can regulate what insurers sell to large employers. Supporters, primarily labor organizations, argue that most large employers do the right thing and buy comprehensive coverage for their workers, but given the federal employer contribution and potential penalties some employers and insurers may be tempted to pass off limited benefit coverage as meeting the individual mandate. The Association of California Life and Health Insurance Companies (ACLHIC), in opposition, argues that this bill puts insurers in the role of policing employers to ensure they are providing comprehensive coverage. ACLHIC suggests that these requirements could threaten the continued availability of important specialty products to employees. Finally, ACLHIC states that there is no evidence to show that insurers are inappropriately offering or marketing minimum value plans as a substitute for minimum essential coverage. Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097 FN: 0003749