Amended in Senate April 16, 2013

Amended in Senate April 9, 2013

Senate Bill No. 746

Introduced by Senator Leno

February 22, 2013

An act to amend Section 1385.04 of the Health and Safety Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

SB 746, as amended, Leno. Health care coverage: premium rates.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law requires health care service plans, for large group plan contracts, at least 60 days in advance of a rate change, to file with the department all specified rate information for unreasonable rate increases and, with that filing, to disclose specified aggregate data.

This bill would instead require the plans to begin delete file all specified rate information for rate increases that exceed the Consumer Price Index as published by the United States Bureau of Labor Statistics end delete begin insert disclose that aggregate data on an annual basis end insert . The bill would also require a health plan that exclusively contracts with no more than 2 medical groups in the state to begin insert annually end insert disclose certain information begin insert with respect to its large group plan contracts end insert to the department, including the plan’s overall annual medical trend factor assumptions by major service category and the amount of begin delete its actual trend experience for the prior contract year by aggregate benefit category end delete begin insert the projected aggregate trend in the large group market attributable to the use of services, price inflation, or fees and risk for annual plan contract trends by each major service category end insert , as specified, and to provide claims or other data to large group purchasers that demonstrate the ability to comply with privacy laws, as specified. begin delete The bill would require the department, if it determines that a proposed rate is unreasonable, to inform the California Health Benefit Exchange of its determination. end delete

Because a willful violation of the bill’s requirements would be a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1385.04 of the Health and Safety Code
is amended to read:

1385.04.  

(a) For large group health care service plan contracts,
all health plans shall file with the department at least 60 days prior
to implementing any rate change all required rate information for
begin delete any rate increase that exceeds the Consumer Price Index as
published by the United States Bureau of Labor Statistics end delete
begin insert unreasonable rate increases end insert . This filing shall be concurrent with
the written notice described in subdivision (a) of Section 1374.21.

(b) For large group rate filings, health plans shall submit all
information that is required by PPACA. A plan shall also submit
any other information required pursuant to any regulation adopted
by the department to comply with this article.

(c) A health care service plan begin delete subject to subdivision (a) end delete shall
also disclose begin insert annually end insert the following aggregate data for all rate
filings in the large group health plan market:

(1) Number and percentage of rate filings reviewed by the
following:

(A) Plan year.

(B) Segment type.

(C) Product type.

(D) Number of subscribers.

(E) Number of covered lives affected.

(2) The plan’s average rate increase by the following categories:

(A) Plan year.

(B) Segment type.

(C) Product type.

begin insert

(D) Benefit category.

end insert

(3) Any cost containment and quality improvement efforts since
the plan’s last rate filing for the same category of health benefit
plan. To the extent possible, the plan shall describe any significant
new health care cost containment and quality improvement efforts
and provide an estimate of potential savings together with an
estimated cost or savings for the projection period.

(d) A health care service plan that exclusively contracts with
no more than two medical groups in the state to provide or arrange
for professional medical services for the enrollees of the plan shall
begin insert also end insert disclose begin insert annually end insert all of the following begin insert for its large group health
care service plan contracts end insert :

(1) The plan’s overall annual medical trend factor assumptions
in the aggregate for large group rates by major service category,
including all of the following:

(A) Hospital inpatient.

(B) Outpatient visits.

(C) Outpatient surgical or other procedures.

(D) Professional medical.

(E) Mental health.

(F) Substance abuse.

(G) Skilled nursing facility, if covered.

(H) Prescription drugs.

(I) Other ancillary services.

(J) Laboratory.

(K) Radiology or imaging.

(2) A plan may provide aggregated additional data that
demonstrates or reasonably estimates year-to-year cost increases
in begin insert each of the end insert specific service categories begin delete in end delete begin insert specified in paragraph
(1) for each of the end insert major geographic regions of the state.

begin delete

(3) The amount of its actual trend experience for the prior
contract year by aggregate benefit category, using benefit categories
that are, to the maximum extent possible, the same or similar to
those used for the individual and small group markets.

(4)

end delete

begin insert (3) end insert  The amount of the projected aggregate trend in the large
group market attributable to the use of services, price inflation, or
fees and risk for annual plan contract trends by begin insert each end insert major service
category begin delete , including hospital inpatient, hospital outpatient, physician
services, prescription drugs, other ancillary services, laboratory,
and radiology end delete begin insert specified in paragraph (1) end insert .

begin delete

(5) The amount of its actual trend experience in the aggregate
for the prior contract year by aggregate benefit category, using
benefit categories that are, to the maximum extent possible, the
same or similar to those in paragraph (1).

(6)

end delete

begin insert (4) end insert  The amount of projected trend attributable to the following
categories:

(A) Use of services by service and disease category.

(B) Price changes in physician costs, including compensation.

(C) Price changes in hospital contracts.

(D) Price changes in other provider contracts.

(E) Price changes in supplier contracts.

(F) Cost changes in administrative costs for the health plan.

(G) Cost changes in administrative costs for each contracting
medical group.

(H) Capital investment for care locations, including, but not
limited to, hospitals and medical office buildings.

(I) Other capital investments.

(J) Community benefit expenditures, excluding bad debt and
valued at cost.

(K) All other budgetary expenditures, with additional detail as
may be required by the department.

begin delete

(7)

end delete

begin insert ( end insert begin insert 5) end insert  The amount and proportion of costs attributed to the medical
groups that would not have been attributable as medical losses if
incurred by the health plan rather than the medical group.

begin delete

(e) If the department determines that a proposed rate is
unreasonable, it shall inform the California Health Benefit
Exchange of its determination. The Exchange shall use this
information in the same manner as other information on
unreasonable rates.

end delete begin delete

(f)

end delete

begin insert (e) end insert  (1) A health care service plan that exclusively contracts
with no more than two medical groups in the state to provide or
arrange for professional medical services for the enrollees of the
plan shall provide claims data at no charge to a large group
purchaser if the large group purchaser requests the information
and if the large group demonstrates that it is able to comply with
relevant state and federal privacy laws.

(2) If claims data is not available, the plan shall provide begin delete data end delete begin insert ,
at no charge, all of the following: end insert

begin insert (A) end insert begin insert   end insert begin insert Data end insert sufficient for the large group purchaser to calculate
the cost of obtaining similar services from other health plans and
evaluate cost-effectiveness by service and disease category. begin delete In the
absence of claims data, the data shall include patient-level end delete

begin insert (B) end insert begin insert   end insert begin insert Patient-level end insert data on demographics, prescribing, encounter,
inpatient services, outpatient services, and any other data as may
be required of the health plan to comply with risk adjustment,
reinsurance, or risk corridors as required by the PPACA. begin delete In the
absence of claims data, the plan shall provide patient-level end delete

begin insert (C) end insert begin insert   end insert begin insert Patient-level end insert utilization data used to experience rate the
large group, including diagnostic and procedure coding and costs
assigned to each service.

begin delete

(g)

end delete

begin insert (f) end insert  The department may require all health care service plans to
submit all rate filings to the National Association of Insurance
Commissioners’ System for Electronic Rate and Form Filing
(SERFF). Submission of the required rate filings to SERFF shall
be deemed to be filing with the department for purposes of
compliance with this section.

SEC. 2.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.