BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB X1 2 (Hernandez) - Health care coverage.
Amended: As introduced. Policy Vote: Health 7-2
Urgency: No Mandate: Yes
Hearing Date: February 21, 2013
Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB X1 2 would make several changes to the
individual market for health care coverage. In particular, the
bill would require the guaranteed issue of coverage and prohibit
the use of preexisting conditions as a means of setting rates.
The bill would also make several changes to the recently enacted
reforms to the small group market for health care coverage, to
conform to recent federal policies or to the policies proposed
in this bill for the individual market.
Fiscal Impact:
One-time costs of about $370,000 to the Department of
Managed Health Care to adopt regulations, review health plan
filings, and respond to consumer questions (Managed Care
Fund).
One-time costs of about $600,000 to the Department of
Insurance to adopt regulations and review health plan
filings (Insurance Fund). The higher projected cost to the
Department of Insurance reflects the fact that the changes
in this bill will change the business practices of health
insurers more than health plans. Therefore, there will be
greater workload to adopt regulations and review changes to
insurance policies.
Background: Beginning in 2014, under the federal Patient
Protection and Affordable Care Act (Affordable Care Act), health
plans and health insurers that offer coverage in the individual
market are required to accept every employer or individual that
wishes to purchase coverage and to renew coverage at the
individual or employer's request. The Affordable Care Act
prohibits health plans or insurers from imposing any exclusion
of coverage based on a preexisting condition. Federal law also
SB X1 2 (Hernandez)
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limits the "rating factors" used to determine the price of a
health plan or insurance policy to a narrow list of factors,
including age, geographic region, family size, and tobacco use.
Federal law exempts plans in effect on March 23, 2010
("grandfathered plans") from these requirements, as long as no
changes are made to those plans.
Proposed Law: SB X1 2 would make several changes to state law
governing the individual market for health plans and health
insurance policies to conform to federal requirements of the
Affordable Care Act. The bill would also make certain policy
changes to state law governing health plans and health
insurance, as allowed by the Affordable Care Act.
Provisions conforming California law relating to the individual
market to federal law include:
Prohibiting health plans and insurance policies from
imposing preexisting condition exclusions.
Requiring the guaranteed issue of coverage.
Requiring health plans and insurers to offer for sale all
plans sold in the individual market to all individuals in
the health plan or insurer's service area.
Prohibiting health plans, insurers, agent or brokers from
encouraging or directing individuals to or away from certain
products due to health status or other factors.
Allowing health plans and insurers to only use age,
geographic region, and family size as rating factors when
setting rates for individual policies.
Provisions implementing policy choices regarding the individual
market available to the state include:
Exempting grandfathered plans from the changes made in the
bill.
Excluding tobacco use as a rating factor.
Requiring health plans and insurers to use open enrollment
periods (October 15th to December 7th) that align with those
to be used in the California Health Benefit Exchange.
Initially designating six specified rating regions for the
individual market for 2014. For 2015 and following years,
the bill designates 13 rating regions, pending approval of
those regions by the federal government.
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Linking premiums for HIPAA continuing coverage policies to
a specified plan to be offered through the California Health
Benefit Exchange.
Provisions of the bill modifying existing state law governing
the small group market (AB 1083, Monning, Statutes of 2012)
include:
Conforming open enrollment periods to federal requirements
(October 15th to December 7th).
Deleting provisions of AB 1083 that made guaranteed issue
and community rating requirements contingent on the
continued operation of the federal Affordable Care Act
(sometimes referred to as "tie-back" provisions).
Unlike prior market reform bills implementing the Affordable
Care Act, this bill does not include any "tie-back" language
making it contingent on the continued operation of the federal
Affordable Care Act.
Related Legislation:
AB 1083 (Monning, Statutes of 2012) made changes to the
regulation of the small group health care coverage market,
in conformity with the federal Affordable Care Act.
SB 961 (Hernandez, 2012) and AB 1461 (Monning, 2012) would
have enacted reforms to the individual market (substantially
similar to this bill). Those bills were vetoed by Governor
Brown, because of the Governor's concern that the bills were
not sufficiently contingent on the continued operation of
the federal Affordable Care Act.
AB X1 2 (Pan) is identical to this bill. That bill is in
the Assembly Appropriations Committee.
Staff Comments: As noted above, this bill is substantially
similar to SB 961and AB 1461 from last session. Differences
between this bill and those bills include:
Enforcement of this bill's provisions is not contingent on
continued operation of the federal Affordable Care Act (no
tie-back provisions).
Certain provisions (such as open enrollment dates and the
number of rating regions) have been changed to reflect
recent federal guidance.
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There are several issues addressed by the bill that have not
been fully resolved and are likely to be amended at a later
date, including:
Whether enforcement of the bill's provisions should be
contingent on the continued operation of the federal
Affordable Care Act.
How many rating regions should be allowed and how to
determine those rating regions.
Conforming existing state requirements that health plans
provide certain information on benefits with new federal
requirements in this area.
Linking premiums for HIPAA continuing coverage policies to
a specified plan to be offered through the California Health
Benefit Exchange.
Whether and how health plans and insurers should provide
information on risk factors to state regulators that must be
submitted to the federal government.
Because the only mandated costs on local governments under the
bill relate to crimes or infractions, the state is not liable
under the Constitution to reimburse those local costs.