BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 746|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 746
Author: Leno (D)
Amended: 4/30/13
Vote: 21
SENATE HEALTH COMMITTEE : 7-2, 4/24/13
AYES: Hernandez, Beall, De Le�n, DeSaulnier, Monning, Pavley,
Wolk
NOES: Anderson, Nielsen
SENATE APPROPRIATIONS COMMITTEE : 5-0, 5/13/13
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
SUBJECT : Health care coverage: premium rates
SOURCE : California Teamsters Public Affairs Council
United Food and Commercial Workers
UNITE HERE
DIGEST : This bill requires health care service plans (health
plans) to annually disclose specified aggregate data for
products in the large group market. Requires health plans that
exclusively contract with no more than two medical groups in the
state to: (1) annually disclose certain additional information
to the Department of Managed Health Care (DMHC), including the
plan's overall annual medical trend factor assumptions by major
service category; and (2) provide claims or other data, to large
group purchasers that demonstrate the ability to comply with
privacy laws, as specified.
CONTINUED
SB 746
Page
2
ANALYSIS :
Existing federal law:
1. Requires, under the federal Patient Protection and Affordable
Care Act (ACA), the federal Secretary (Secretary) of the
Department of Health and Human Services (DHHS), in
conjunction with states, to establish a process for the
annual review of unreasonable increases in premiums for
health insurance coverage, beginning with the 2010 plan year.
2. Requires the rate review process to require health insurance
issuers to submit to the Secretary and the state a
justification for an unreasonable premium increase prior to
the implementation of the increase. Requires health plans
and insurers to prominently post such information on their
Internet Web sites. Requires the Secretary to ensure the
public disclosure of information on such increases and
justifications for all health plans and insurers.
Existing state law:
1. Provides for the licensure and regulation of health plans by
DMHC under the Knox-Keene Health Care Service Plan Act of
1975 (Knox-Keene Act).
2. Prohibits any provision of the Knox-Keene Act to be construed
to permit the Director of DMHC to establish the rates charged
subscribers and enrollees for contractual health care
services, and prohibits the Director's enforcement of the
requirements of the state's small group health law from being
deemed to establish the rates charged subscribers and
enrollees for contractual health care services.
3. Requires health plans, for large group plan contracts, at
least 60 days in advance of a rate change, to file with the
DMHC all specified rate information for unreasonable rate
increases and to disclose specified aggregate data.
This bill:
1. Requires, in addition to all information required by the ACA,
a health plan to disclose annually the following aggregate
CONTINUED
SB 746
Page
3
data for products in the large group health plan market:
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. Requires the plan's average rate increase by the following
categories:
A. Plan year.
B. Segment type.
C. Product type.
D. Benefit category.
E. Number of covered lives affected.
3. Requires a health 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 to disclose annually all of the following for its
large group health care service plan contracts:
A. The plan's overall annual medical trend factor
assumptions in the aggregate for large group rates by
major service category, as specified.
B. A plan may provide aggregated additional data that
demonstrates or reasonably estimates year-to-year cost
increases in each of the specific service categories for
each of the major geographic regions of the state.
C. The amount of the projected aggregate trend in the
large group market attributable to the use of services,
CONTINUED
SB 746
Page
4
price inflation, or fees and risk for annual plan contract
trends by each major service category, as specified.
D. The amount of projected trend attributable to specified
categories.
E. 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.
4. Requires a health care 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 to provide claims data at no charge to a large
group purchaser if the large group purchaser requests the
information and demonstrates that it is able to comply with
relevant state and federal privacy laws.
5. Requires, if claims data is not available, the plan to
provide, at no charge, all of the following:
A. Data 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.
B. De-identified patient-level data on demographics,
prescribing, encounters, 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 ACA.
C. De-identified patient-level data used to experience
rate the large group, including diagnostic and procedure
coding and costs assigned to each service.
Background
Federal health care reform . On March 23, 2010, President Obama
signed the ACA (Public Law 111-148), as amended by the Health
Care and Education Reconciliation Act of 2010 (Public Law
111-152). Among other provisions, the ACA includes a number
transparency provisions, including requiring the Secretary of
CONTINUED
SB 746
Page
5
the DHHS, in conjunction with states, to establish a process for
the annual review, beginning with the 2010 plan year, of
"unreasonable increases in premiums" for health insurance
coverage. This process must require health plans and insurers
to submit to the Secretary and the relevant state a
justification for an unreasonable premium increase prior to the
implementation of the increase. Health plans and insurers must
prominently post such information on their Internet Web sites.
The Secretary of DHHS is required to carry out a program to
award grants to states during the five-year period beginning
with fiscal year 2010 to assist states in carrying out the
annual review of unreasonable increases in premiums for health
insurance coverage. As a condition of receiving a grant, a
state, through its Commissioner of Insurance, must provide the
Secretary with information about trends in premium increases in
health insurance coverage in premium rating areas in the state;
and make recommendations, as appropriate, to the state Exchange
(Exchanges are entities required to be established by federal
health care reform) about whether particular health insurance
issuers should be excluded from participation in the Exchange
based on a pattern or practice of excessive or unjustified
premium increases.
Rate review in California . SB 1163 (Leno, Chapter 661, Statutes
of 2010) requires carriers to submit detailed data and actuarial
justification for small group and individual market rate
increases at least 60 days in advance of increasing their
customers' rates. The carriers also must submit an analysis
performed by an independent actuary who is not employed by a
plan or insurer.
For large group filings, SB 1163 requires health plans to submit
all information required by ACA and any additional information
adopted through regulation by DMHC necessary to comply with the
bill. The rate review provisions in ACA have not been applied
to the large group market and DMHC/Department of Insurance have
not adopted regulations to establish rate review for the large
group market in California. Though regulators do not have the
authority to modify or reject rate changes found to hurt
consumers, rate review has increased transparency on rate
increases in the individual and small group market.
Prior legislation
CONTINUED
SB 746
Page
6
SB 1163 (Leno, Chapter 661, Statutes of 2010) requires carriers
to file specified rate information for individual and small
group coverage at least 60 days prior to implementing any rate
change, as specified. Requires the filings for large group
contracts only in the case of unreasonable rate increases, as
defined by the ACA, prior to implementing any such rate change.
Increases, from 30 days to 60 days, the amount of time that a
health plan or insurer provides written notice to an enrollee or
insured before a change in premium rates or coverage becomes
effective. Requires carriers that decline to offer coverage to
or deny enrollment for a large group applying for coverage, or
that offer small group coverage at a rate that is higher than
the standard employee risk rate to, at the time of the denial or
offer of coverage, to provide the applicant with reason for the
decision, as specified.
SB 51 (Alquist, Chapter 644, Statutes of 2011) requires carriers
to meet federal annual and lifetime limits and medical loss
ratio (MLR) requirements in specified provisions of the federal
health care reform law, as specified. Authorizes the Director
and the Insurance Commissioner to issue guidance, as specified,
and promulgate regulations to implement requirements relating to
MLRs, as specified.
SB 1196 (Hernandez, Chapter 869, States of 2012) prohibits any
health plan or health insurance contract between a carrier and a
provider, including a provider of supplies, from prohibiting,
conditioning, or in any way restricting the disclosure of claims
data related to health care services provided to enrollees,
insured, or beneficiaries of any self-funded health coverage
arrangement to an entity certified by the Center for Medicare
and Medicaid Services to generate public reports on the
performance of health care providers.
AB 2578 (Jones and Feuer of 2010) would have required carriers
to file a complete rate application with regulators for a rate
increase that will become effective on or after January 1, 2012.
Would have prohibited a health plan or insurer's premium rate
(defined to include premiums, co-payments, coinsurance
obligations, deductibles, and other charges) from being approved
or remaining in effect that is excessive, inadequate, unfairly
discriminatory, as specified. AB 2578 died on the Senate Floor.
CONTINUED
SB 746
Page
7
AB 52 (Feuer of 2011) would have required health plans and
health insurers to apply for prior approval of proposed rate
increases, under specified conditions, and would have imposed on
the Department of Insurance and DMHC specific rate regulation
criteria, timelines, and hearing requirements. AB 52 died on
the Senate Floor.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriation Committee, minor ongoing
costs to review rate filings by DMHC (Managed Care Fund).
SUPPORT : (Verified 5/15/13)
California Teamsters Public Affairs Council (co-source)
United Food and Commercial Workers (co-source)
UNITE HERE (co-source)
AFSCME
California Chiropractic Association
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Pan-Ethnic Health Network
California Public Interest Research Group
California School Employees Association
California Teachers Association
Engineers and Scientists of California
International Longshore and Warehouse Union
Professional and Technical Engineers, Local 21
Union of Health Care Professionals
United Food and Commercial Workers Union, Western States Council
United Nurses Association of California
Utility Workers Union of America, Local 132
OPPOSITION : (Verified 5/15/13)
Aetna
America's Health Insurance Plans
Association of California Life and Health Insurance Companies
California Association of Health Plans
California Chamber of Commerce
Health Net
Kaiser Permanente
CONTINUED
SB 746
Page
8
ARGUMENTS IN SUPPORT : UNITE HERE, a sponsor of this bill,
writes that their union cannot sustain double digit rate
increases in health insurance without any opportunity to manage
care to reduce costs and that strike after strike, labor dispute
after labor dispute, is about how much they pay for health
benefits. UNITE HERE states that Kaiser refuses to give them
data that they know they must have, that they or comparable
organizations produce for other reasons or in other states, and
that would allow them to better manage care in order to improve
outcomes and reduce costs. The California Teamsters Public
Affairs Council asserts that one of their biggest problems as
they negotiate health care costs is getting the information
necessary to make an accurate assessment of what those costs
should be and this problem is at its worst with Kaiser
Permanente. Health Access California writes that they have been
disappointed that, contrary to the intent of SB 1163, DMHC has
failed to implement rate review for large employer coverage.
The California Public Interest Research Group states that
increasing the oversight and transparency of rate increases will
discourage unnecessary rate hikes and keep Californians more
informed about companies that raise rates beyond what is
reasonable.
ARGUMENTS IN OPPOSITION : The California Association of Health
Plans (CAHP) writes that the ACA requires states to establish
rate review programs for the small group and individual markets,
and in 2010, California quickly enacted a law establishing this
review for state health plans and insurers. CAHP states that if
the federal government chooses to require states to extend rate
review to the large group employer market, California is well
positioned since it has a statutory process for large group rate
review that would become immediately operative and therefore
believe that this bill is unnecessary. Kaiser Permanente writes
that this bill contains language mandating that Kaiser, and only
Kaiser, provide to any large group purchaser volumes of
patient-specific medical information at any time, upon request,
and that would require them to reveal to employers the
patient-level data of hundreds of thousands of employees that
they serve without any limitations on its use. Kaiser
Permanente states that the employee would likely be unaware that
their sensitive medical information is being transmitted to
their employer at this granular level, and while they are
certain this is not the sponsor or author's intent, forcing a
health care provider to reveal such detailed information to the
CONTINUED
SB 746
Page
9
employer could lead to serious unintended consequences for the
employees. The Association of California Life and Health
Insurance Companies states that it is critical to put all of
their resources toward implementing the ACA in a meaningful way
that creates a smooth and seamless transition for all consumers
rather than implementing costly, unnecessary and time-consuming
new requirements that have not been identified by the federal
government as essential to the implementation of federal health
care reform.
JL:d 5/15/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED