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 23, 2013      Consultant: Brendan McCarthy
          
          SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
          
          
          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)
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          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)
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              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.

          Proposed author's amendments: would make technical changes.