BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2088
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          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
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               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  








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          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 


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