BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 639 (Hernandez) - Health care coverage. Amended: April 9, 2013 Policy Vote: Health 6-2 Urgency: No Mandate: Yes Hearing Date: May 6, 2013 Consultant: Brendan McCarthy This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 639 would make several changes to the regulation of health plans and health insurance, by limiting out of pocket expenditures, establishing maximum deductibles, and defining levels of coverage. These changes implement requirements of the federal Affordable Care Act or enact state-level policies allowed under the Affordable Care Act. Fiscal Impact: One-time costs of $400,000 to review plan filings and ongoing costs of $60,000 for enforcement of the bill's provisions by the Department of Managed Health Care (Managed Care Fund). Potential ongoing costs in the tens of thousands to low hundreds of thousands for enforcement of the bill's provisions by the Department of Insurance. (Insurance Fund). Background: Beginning in 2014, under the federal Patient Protection and Affordable Care Act (Affordable Care Act), total annual out-of-pocket expenditures for health care coverage in the individual, small group, and health benefit exchange markets will be limited (to roughly $6,000 for an individual and $13,000 for a family). In addition, annual deductibles in the small group market will generally be limited to $2,000 for an individual and $4,000 for a family. The Affordable Care Act also requires health care coverage inside and outside of a health benefit exchange to meet specified levels of coverage - referred to as "metal tiers". For example, a bronze tier plan must cover 60% of the average individual's annual health care costs and a platinum tier plan must cover 90% of the average individual's annual health care costs. SB 639 (Hernandez) Page 1 The Affordable Care Act requires a health insurance plan offered in the group or individual market that provides coverage for emergency services to cover emergency services without prior authorization and at the same level of cost sharing regardless of the medical provider. Proposed Law: SB 639 would make several changes to the regulation of health plans and health insurance, pursuant to the Affordable Care Act. Provisions of the bill implementing requirements of federal law would: Limit out-of-pocket expenses for non-grandfathered products in the individual and small group markets; Limit out-of-pocket expenses for non-grandfathered products in the large group market (with a one-year exemption for certain kinds of supplemental coverage); Limit deductibles in the small group market; Define the levels of coverage for non-grandfathered products in the individual and small group markets to conform to the metal tiers in the Affordable Care Act; Require insurance plans in the group or individual market to cover emergency services without prior authorization and at uniform cost sharing. Provisions of the bill implementing state policies allowed by the Affordable Care Act would: Prohibit a non-grandfathered product in the individual market from being offered at any of the metal tiers, unless it is a standardized product. (In other words, the plan must meet the standard benefit designs developed by the California Health Benefit Exchange for sale in the Exchange.) Define actuarial value and authorize state departments to develop a state actuarial value calculator. Authorize a plan to offer supplemental benefits, provided those supplemental benefits do not change the overall risk mix of the plan. Related Legislation: AB X1 2 (Pan, Enrolled to the Governor) and SB X1 2 (Hernandez, Enrolled to the Governor) would make several changes to the individual market for health care coverage, SB 639 (Hernandez) Page 2 including requiring the guaranteed issue of coverage and prohibiting the use of preexisting conditions as a means of setting rates. SB 961 (Hernandez, 2012) and AB 1461 (Monning, 2012) would have made changes similar to AB X1 2 and SB X1 2. Both bills were vetoed by Governor Brown. AB 1083 (Monning, Statutes of 2012) made changes to the small group health insurance market, pursuant to the Affordable Care Act. Staff Comments: The only mandated costs on local governments under the bill relate to crimes and infractions for violations of the regulatory authority of the Department of Insurance. Such costs are not a reimbursable mandate under the California Constitution.