BILL ANALYSIS Ó
SB 639
Page 1
SENATE THIRD READING
SB 639 (Ed Hernandez)
As Amended September 6, 2013
Majority vote
SENATE VOTE :28-11
HEALTH 13-5 APPROPRIATIONS 12-5
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|Ayes:|Pan, Ammiano, Atkins, |Ayes:|Gatto, Bocanegra, |
| |Bonilla, Bonta, Chesbro, | |Bradford, |
| |Gomez, | |Ian Calderon, Campos, |
| |Roger Hernández, | |Eggman, Gomez, Hall, |
| |Lowenthal, Mitchell, | |Holden, Pan, Quirk, Weber |
| |Nazarian, V. Manuel | | |
| |Pérez, Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Maienschein, Mansoor, |Nays:|Harkey, Bigelow, |
| |Nestande, Wagner, Wilk | |Donnelly, Linder, Wagner |
| | | | |
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SUMMARY : Places in California law provisions of the Patient
Protection and Affordable Care Act (ACA) relating to
out-of-pocket limits on health plan enrollee and health insured
cost-sharing, health plan and insurer actuarial value coverage
levels and catastrophic coverage requirements, and requirements
on health insurers with regard to coverage for out-of-network
emergency services. Applies health plan enrollee and insured
out-of-pocket limits to specialized products that offer
essential health benefits (EHBs) and large group market
coverage. Permits a health care service plan or health insurer
to establish an index rate for the small employer market at
least each calendar year and no more frequently than each
calendar quarter. Specifically, this bill :
1)Requires a health care service plan contract or a health
insurance policy for nongrandfathered products in the
individual and small group market that is issued, amended or
renewed on or after January 1, 2014, to provide for a limit on
annual out-of-pocket expenses for all covered benefits that
meet the definition of EHBs, as specified including
out-of-network emergency care that does not exceed $6,350 for
individual coverage and $12,700 for family coverage. This
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does not apply to specialized health plans and insurance
policies.
1)Requires, for 2014, for products in the individual and small
group market when a health care service plan or a health
insurer uses a separate service provider to administer
pediatric oral care benefits, a separate limit on annual
out-of-pocket expenses that does not exceed exceed $1,000 for
one child and $2,000 for more than one child.
2)Prohibits the application of a separate out-of-pocket maximum
to mental health or substance use disorder benefits.
3)Prohibits for nongrandfathered health care service plan
contracts and health insurance policies in the large group
markets total out-of-pocket maximums from exceeding $6,350 for
individual coverage and $12,700 for family coverage with
respect to basic health care services, and services except
prescription drugs required under state mental health parity
and autism requirements.
a) Limits out-of-pocket maximum on other coverage to the
same dollar thresholds in 3) above.
b) Limits an enrollee/insured to no more than two limits on
annual out-of-pocket expenses for covered benefits that
meet the definition of EHBs.
c) Prohibits a separate out-of-pocket maximum for mental
health or substance use disorder benefits.
4)Sunsets 1) and 2) above on January 1, 2016.
5)Requires, for plan years beginning on or after January 1,
2015, if an EHB is offered by a specialized health insurance
policy the total annual out-of-pocket maximum for all EHBs not
exceed the limit federal Internal Revenue Code with dollar
amounts adjusted as specified in the ACA.
6)Requires a health care service plan contract or a health
insurance policy for nongrandfathered products in the large
group market on or after January 1, 2014, to provide for a
limit on annual out-of-pocket expenses for covered benefits,
including out-of-network emergency care consistent with
existing law. Limits this provision to EHBs covered under the
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policy to the extent that this bill does not conflict with
federal law or guidance on out-of-pocket maximums for
nongrandfathered products in the large group market. This does
not apply to specialized health plans and insurance policies.
7)Includes in the out-of-pocket limit any copayment,
coinsurance, deductible, and any other form of cost sharing
for all covered benefits, including prescription drugs, as
specified. Limits out-of-pocket maximums from exceeding the
ACA limit and any subsequent rules, regulations or guidance.
8)Allows the Department of Managed Health Care (DMHC) or the
California Department of Insurance (CDI) for small group
products at the bronze level of coverage to offer a higher
deductible in order to meet the actuarial value requirement of
the bronze level. Requires DMHC/CDI to consider affordability
of cost sharing for enrollees and whether enrollees may be
deterred from seeking appropriate care because of higher cost
sharing. States that nothing in this provision allows a plan
contract to have a deductible that applies to preventive
services, as specified.
9)Establishes in state law the ACA levels of coverage for the
nongrandfathered individual and small group market (Bronze,
Silver, Gold, and Platinum). Defines catastrophic coverage.
10)Establishes in state law the ACA requirements on actuarial
value for nongrandfathered individual and small group health
care service plan contracts or health insurance policies.
11)Allows DMHC/CDI to use the actuarial value methodology
developed consistent with the ACA.
12)Requires DMHC/CDI, in consultation with each other and the
Exchange, to consider whether to exercise state-level
flexibility with respect to the actuarial value calculator in
order to take into account the unique characteristics of the
California health care coverage market, including the
prevalence of health care service plans, total cost of care
paid for by the carrier, price of care, patterns of service
utilization, and relevant demographic factors.
13)Requires a group or individual health insurance policy
issued, amended, or renewed on or after January 1, 2014, that
provides or covers any benefits with respect to service in an
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emergency department of a hospital to cover emergency services
as follows:
a) Without the need for any prior authorization
determination;
b) Regardless of whether the health care provider
furnishing the services is a participating provider with
respect to those services;
c) In a manner so that, if the services are provided to an
insured by a nonparticipating healthcare provider, with or
without prior authorization; the services will be provided
without imposing any requirement under the policy for prior
authorization of services or any limitation on coverage
that is more restrictive than the requirements or
limitations that apply to providers who do have a
contractual relationship with the insurer; and,
d) If the services are provided to an insured
out-of-network, the cost-sharing requirement, expressed as
a copayment amount or coinsurance rate, is the same
requirement that would apply if the services were provided
in-network.
14)Exempts multiple employer welfare arrangements, as specified,
from a section of this bill dealing with deductible
requirements.
15)Permits a health care service plan or health insurer to
establish an index rate for the small employer market at least
each calendar year and no more frequently than each calendar
quarter.
FISCAL EFFECT : According the Assembly Appropriations Committee,
one-time costs in the range of hundreds of thousands of dollars
each to the CDI (Insurance Fund) and the DMHC (Managed Care
Fund). Costs will be incurred for rulemaking, as well as review
and enforcement related to adoption of the definition of
out-of-pocket maximum established in this bill. Both
departments report activities related to the federal
requirements codified in this bill are already being undertaken,
so codifying these requirements should not result in additional
costs.
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COMMENTS : The September 6, 2013 floor amendments revise
provisions from AB X1 2 (Pan), Chapter 1, Statutes of 2013 First
Extraordinary Session, and SB X1 2 (Ed Hernandez), Chapter 2,
Statutes of 2013 First Extraordinary Session, which were health
care Special Session bills, that require health insurance
carriers to establish "an index rate" (singular) for its small
group business "each calendar year" rather than more frequently.
The index rate is based on the total combined claims costs for
providing EHBs within the single risk pool required by the ACA.
Existing law requires the index rate to be adjusted on a market
wide basis based on the total expected market wide payments and
charges under the risk adjustment and reinsurance programs
established for the state under the ACA.
With AB X1 2 and SB X1 2, the index rate will be updated on a 12
month basis. According to the DMHC, a change to quarterly
indexing is necessary because otherwise carriers will apply the
same base rate for all small employers. When a carrier has to
project too far in advance, uncertainty is created, causing
carriers to price products higher. Allowing for quarterly
indexing will result in more accurate rate setting. According
to DMHC, DMHC and CDI actuaries estimate that the current law
(if not changed) will result in January 1, 2014 premium rates
that are about 3-5% higher than if quarterly updates are
permitted.
DMHC indicates that proposed federal rule 45 CFR 156.80(d) (3)
and subsequent pronouncements allow for quarterly updates as
well as instructions contained in Covered California's SHOP.
The solicitation instructed issuers to bid under the assumption
that rates could be updated quarterly. Failure to amend the
current law could result in increases to the small group rates
negotiated with SHOP participants and already published by
Covered California. According to the author, the DMHC and the
CDI are currently reviewing and approving Exchange products with
no statutory authority to enforce the requirements of the ACA
with respect to cost sharing. As such, this bill codifies
several provisions of the ACA related to cost sharing, coverage
tiers, and emergency services. The author states that the ACA
limits maximum out-of-pocket costs for all health insurance to
$6500 for an individual and about $13,000 for a family: these
limits are consistent with those for Health Savings Accounts
(HSAs). This bill specifies that the maximum out-of-pocket
limits apply to EHBs as defined in state and federal law. All
cost sharing, including not only the deductible but any copays,
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coinsurance, or other cost sharing applies toward the maximum
out-of-pocket limit. In addition, consistent with federal law,
this bill codifies the requirement that deductibles for small
employer products are limited to $2,000 for an individual and
$4,000 for a family, consistent with the ACA provisions. This
bill codifies the precious metal tiers of the ACA. The ACA
categorizes coverage in the individual and small employer
markets into five tiers (Bronze, Silver, Gold, Platinum,
Catastrophic) based on actuarial value, that is, the percent of
health costs covered across a population. According to the
author, states have the opportunity to adopt a state-specific
actuarial value calculator because utilization is different in
California (such as shorter hospital stays), a
California-specific calculator is important. This bill permits
DMHC and CDI to adopt a California-specific calculator.
The National Multiple Sclerosis Society supports this bill
because it will establish cost sharing limits on health
insurance and will help people living with chronic diseases like
MS who are frequent users of the health care system and rely on
expensive medicines. Four of the disease modifying therapies
used to treat MS are routinely placed on specialty tiers and
require patients to pay coinsurance, which can force patients
with chronic conditions to make desperate choices between vital
medical care and mortgage and groceries. The Western Center on
Law and Poverty says that California has already implemented
many elements of the ACA, but the state must still codify
cost-sharing. The California HealthCare Foundation found in
2011 that 70% of California's uninsured are low to moderate
income. This bill helps provide peace of mind to consumers for
what they are purchasing and how much they will pay for it,
regardless of if they get coverage in or out of the Exchange.
Opponents argue that this bill contains provisions that conflict
with or go beyond requirements of the ACA and federal guidance.
They believe that certain other provisions differ from the
out-of-pocket requirements in federal law or restrict the use of
incentives.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0002603
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