Senate BillNo. 1182


Introduced by Senator Leno

February 20, 2014


An act to amend Sections 1385.03 and 1385.04 of the Health and Safety Code, and to amend Section 10181.4 of the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

SB 1182, as introduced, Leno. Health care coverage: rate review.

Existing law, the federal Patient Protection and Affordable Care Act (PPACA), requires the United States Secretary of Health and Human Services to establish a process for the annual review of unreasonable increases in premiums for health insurance coverage in which health insurance issuers submit to the secretary and the relevant state a justification for an unreasonable premium increase prior to implementation of the increase. 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 also provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan or health insurer in the individual, small group, or large group markets to file rate information with the Department of Managed Health Care or the Department of Insurance. For individual and small group contracts and policies, existing law requires a plan or insurer to file rate information at least 60 days prior to implementing a rate change and requires a plan or insurer to disclose with each filing specified information by aggregate benefit category. Existing law allows a health care service plan that exclusively contracts with no more than 2 medical groups to provide or arrange for professional medical services for enrollees of the plan to meet this requirement by disclosing its actual trend experience for the prior year using benefit categories that are the same or similar to those used by other plans.

This bill would specify the benefit categories to be used for that purpose and would make other related changes.

For large group plan contracts and policies, existing law requires a plan or insurer to file rate information with the department at least 60 days prior to implementing an unreasonable rate increase, as defined in PPACA. Existing law requires the plan or insurer to also disclose specified aggregate data with that rate filing.

This bill would instead require the plan or insurer to file rate information with the department at least 60 days prior to implementing a rate increase that exceeds 5% of the prior year’s rate. The bill would also require that the plan or insurer disclose the aggregate data for all rate filings submitted under these provisions on an annual basis. The bill would require a plan or insurer to annually disclose additional aggregate data for all products sold in the large group market and to provide deidentified claims data at no charge to a large group purchaser that requests the information and meets specified conditions.

Because a willful violation of the bill’s requirements by a health care service plan would be a crime, the 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:

P2    1

SECTION 1.  

Section 1385.03 of the Health and Safety Code
2 is amended to read:

3

1385.03.  

(a) (1) All health care service plans shall file with
4the department all required rate information for individual and
5small group health care service plan contracts at least 60 days prior
6to implementing any rate change.

7(2) For individual health care service plan contracts, the filing
8shall be concurrent with the notice required under Section 1389.25.

P3    1(3) For small group health care service plan contracts, the filing
2shall be concurrent with the notice required under subdivision (a)
3of Section 1374.21.

4(b) A plan shall disclose to the department all of the following
5for each individual and small group rate filing:

6(1) Company name and contact information.

7(2) Number of plan contract forms covered by the filing.

8(3) Plan contract form numbers covered by the filing.

9(4) Product type, such as a preferred provider organization or
10health maintenance organization.

11(5) Segment type.

12(6) Type of plan involved, such as for profit or not for profit.

13(7) Whether the products are opened or closed.

14(8) Enrollment in each plan contract and rating form.

15(9) Enrollee months in each plan contract form.

16(10) Annual rate.

17(11) Total earned premiums in each plan contract form.

18(12) Total incurred claims in each plan contract form.

19(13) Average rate increase initially requested.

20(14) Review category: initial filing for new product, filing for
21existing product, or resubmission.

22(15) Average rate of increase.

23(16) Effective date of rate increase.

24(17) Number of subscribers or enrollees affected by each plan
25contract form.

26(18) The plan’s overall annual medical trend factor assumptions
27in each rate filing for all benefits and by aggregate benefit category,
28including hospital inpatient, hospital outpatient, physician services,
29prescription drugs and other ancillary services, laboratory, and
30radiology. A plan may provide aggregated additional data that
31demonstrates or reasonably estimates year-to-year cost increases
32in specific benefit categories in major geographic regions of the
33state. For purposes of this paragraph, “major geographic region”
34shall be defined by the department and shall include no more than
35nine regions. A health plan that exclusively contracts with no more
36than two medical groups in the state to provide or arrange for
37professional medical services for the enrollees of the plan shall
38instead disclose the amount of its actual trend experience for the
39prior contract year by aggregate benefit category, usingbegin delete benefitend delete
40begin insert serviceend insert categories that are, to the maximum extent possible, the
P4    1same or similar tobegin delete thoseend deletebegin insert the benefit categoriesend insert used by other plans.
2begin insert For this purpose, benefit categories shall be those specified in
3subdivision (e) of Section 1385.04.end insert

4(19) The amount of the projected trend attributable to the use
5of services, price inflation, or fees and risk for annual plan contract
6trends by aggregate benefit category, such as hospital inpatient,
7hospital outpatient, physician services, prescription drugs and other
8ancillary services, laboratory, and radiology. A health plan that
9exclusively contracts with no more than two medical groups in the
10state to provide or arrange for professional medical services for
11the enrollees of the plan shall instead disclose the amount of its
12actual trend experience for the prior contract year by aggregate
13begin delete benefitend deletebegin insert serviceend insert category, usingbegin delete benefitend deletebegin insert serviceend insert categories that are,
14to the maximum extent possible, the same or similar to those used
15by other plans.begin insert For this purpose, benefit categories shall be those
16specified in subdivision (e) of Section 1385.04.end insert

17(20) A comparison of claims cost and rate of changes over time.

18(21) Any changes in enrollee cost-sharing over the prior year
19associated with the submitted rate filing.

20(22) Any changes in enrollee benefits over the prior year
21associated with the submitted rate filing.

22(23) The certification described in subdivision (b) of Section
231385.06.

24(24) Any changes in administrative costs.

25(25) Any other information required for rate review under
26PPACA.

27(c) A health care service plan subject to subdivision (a) shall
28also disclose the following aggregate data for all rate filings
29submitted under this section in the individual and small group
30health plan markets:

31(1) Number and percentage of rate filings reviewed by the
32following:

33(A) Plan year.

34(B) Segment type.

35(C) Product type.

36(D) Number of subscribers.

37(E) Number of covered lives affected.

38(2) The plan’s average rate increase by the following categories:

39(A) Plan year.

40(B) Segment type.

P5    1(C) Product type.

2(3) Any cost containment and quality improvement efforts since
3the plan’s last rate filing for the same category of health benefit
4plan. To the extent possible, the plan shall describe any significant
5new health care cost containment and quality improvement efforts
6and provide an estimate of potential savings together with an
7estimated cost or savings for the projection period.

8(d) The department may require all health care service plans to
9submit all rate filings to the National Association of Insurance
10Commissioners’ System for Electronic Rate and Form Filing
11(SERFF). Submission of the required rate filings to SERFF shall
12be deemed to be filing with the department for purposes of
13compliance with this section.

14(e) A plan shall submit any other information required under
15PPACA. A plan shall also submit any other information required
16pursuant to any regulation adopted by the department to comply
17with this article.

18

SEC. 2.  

Section 1385.04 of the Health and Safety Code is
19amended to read:

20

1385.04.  

(a) For large group health care service plan contracts,
21all health plans shall file with the department at least 60 days prior
22to implementing any rate change all required rate information for
23begin delete unreasonableend delete rate increasesbegin insert that exceed 5 percent of the prior
24year’s rateend insert
. This filing shall be concurrent with the written notice
25described in subdivision (a) of Section 1374.21.

26(b) For large group rate filings, health plans shall submit all
27information that is required by PPACA. A plan shall also submit
28any other information required pursuant to any regulation adopted
29by the department to comply with this article.

30(c) A health care service plan subject to subdivision (a) shall
31alsobegin insert annuallyend insert disclose the following aggregate data for all rate
32filings submitted under this sectionbegin delete in the large group health plan
33marketend delete
:

34(1) Number and percentage of rate filings reviewed by the
35following:

36(A) Plan year.

37(B) Segment type.

38(C) Product type.

39(D) Number of subscribers.

40(E) Number of covered lives affected.

P6    1(2) The plan’s average rate increase by the following categories:

2(A) Plan year.

3(B) Segment type.

4(C) Product type.

begin insert

5(D) Benefit category.

end insert
begin insert

6(E) Number of covered lives affected.

end insert

7(3) Any cost containment and quality improvement efforts since
8the plan’s last rate filing for the same category of health benefit
9plan. To the extent possible, the plan shall describe any significant
10new health care cost containment and quality improvement efforts
11and provide an estimate of potential savings together with an
12estimated cost or savings for the projection periodbegin insert, including an
13estimate of any reduction in the rate within the next five years of
14implementation of those effortsend insert
.

begin insert

15(d) Except as provided in subdivision (e), a health care service
16plan shall annually disclose the following aggregate data for all
17products sold in the large group market:

end insert
begin insert

18(1) Plan year.

end insert
begin insert

19(2) Segment type.

end insert
begin insert

20(3) Product type.

end insert
begin insert

21(4) Number of subscribers.

end insert
begin insert

22(5) Number of covered lives affected.

end insert
begin insert

23(6) The plan’s average rate increase by the following:

end insert
begin insert

24(A) Plan year.

end insert
begin insert

25(B) Segment type.

end insert
begin insert

26(C) Product type.

end insert
begin insert

27(D) Benefit category, including, but not limited to, hospital,
28medical, ancillary, and other benefit categories reported publicly
29for individual and small employer rate filings.

end insert
begin insert

30(E) Trend attributable to cost and trend attributable to
31utilization by benefit category.

end insert
begin insert

32(e) A health care service plan that is unable to provide
33information on rate increases by benefit categories, including, but
34not limited to, hospital, outpatient medical, and mental health, or
35information on trend attributable to cost and trend attributable to
36utilization by benefit category pursuant to subdivision (d), shall
37annually disclose all of the following aggregate data for its large
38group health care service plan contracts:

end insert
begin insert

39(1) (A) The plan’s overall aggregate data demonstrating or
40reasonably estimating year-to-year cost increases in the aggregate
P7    1for large group rates by major service category. The plan shall
2distinguish between the increase ascribed to the volume of services
3provided and the increase ascribed to the cost of services provided
4for those assumptions that shall include the following categories:

end insert
begin insert

5(i) Hospital inpatient.

end insert
begin insert

6(ii) Outpatient visits.

end insert
begin insert

7(iii) Outpatient surgical or other procedures.

end insert
begin insert

8(iv) Professional medical.

end insert
begin insert

9(v) Mental health.

end insert
begin insert

10(vi) Substance abuse.

end insert
begin insert

11(vii) Skilled nursing facility, if covered.

end insert
begin insert

12(viii) Prescription drugs.

end insert
begin insert

13(ix) Other ancillary services.

end insert
begin insert

14(x) Laboratory.

end insert
begin insert

15(xi) Radiology or imaging.

end insert
begin insert

16(B) A plan may provide aggregated additional data that
17demonstrate or reasonably estimate year-to-year cost increases
18in each of the specific service categories specified in subparagraph
19(A) for each of the major geographic regions of the state.

end insert
begin insert

20(2) The amount of projected trend attributable to the following
21categories:

end insert
begin insert

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

end insert
begin insert

23(B) Capital investment.

end insert
begin insert

24(C) Community benefit expenditures, excluding bad debt and
25valued at cost.

end insert
begin insert

26(3) The amount and proportion of costs attributed to contracting
27medical groups that would not have been attributable as medical
28losses if incurred by the health plan rather than the medical group.

end insert
begin insert

29(f) (1) A health care service plan shall annually provide claims
30data at no charge to a large group purchaser if the large group
31purchaser requests the information. The health care service plan
32shall provide claims data that a qualified statistician has
33determined are deidentified so that the claims data do not identify
34or do not provide a reasonable basis from which to identify an
35individual.

end insert
begin insert

36(2) Information provided to a large group purchaser under this
37subdivision is not subject to Section 1385.07.

end insert
begin insert

38(3) (A) If claims data are not available, the plan shall provide,
39at no charge to the purchaser, all of the following:

end insert
begin insert

P8    1(i) Deidentified data sufficient for the large group purchaser to
2calculate the cost of obtaining similar services from other health
3plans and evaluate cost-effectiveness by service and disease
4category.

end insert
begin insert

5(ii) Deidentified patient-level data on demographics,
6prescribing, encounters, inpatient services, outpatient services,
7and any other data as may be required of the health plan to comply
8with risk adjustment, reinsurance, or risk corridors pursuant to
9the federal Patient Protection and Affordable Care Act (Public
10Law 111-148), as amended by the federal Health Care and
11Education Reconciliation Act of 2010 (Public Law 111-152), and
12any rules, regulations, or guidance issued thereunder.

end insert
begin insert

13(iii) Deidentified patient-level data used to experience rate the
14large group, including diagnostic and procedure coding and costs
15assigned to each service.

end insert
begin insert

16(B) The health care service plan shall obtain a formal
17determination from a qualified statistician that the data provided
18pursuant to this paragraph have been deidentified so that the data
19do not identify or do not provide a reasonable basis from which
20to identify an individual. The statistician shall certify the formal
21determination in writing and shall, upon request, provide the
22protocol used for deidentification to the department.

end insert
begin insert

23(4) Data provided pursuant to this subdivision shall only be
24provided to a large group purchaser that meets both of the
25following conditions:

end insert
begin insert

26(A) Is able to demonstrate its ability to comply with state and
27federal privacy laws.

end insert
begin insert

28(B) Is a large group purchaser that is either an
29employer-sponsored plan with an enrollment of greater than 1,000
30covered lives or a multiemployer trust.

end insert
begin delete

31(d)

end delete

32begin insert(g)end insert The department may require all health care service plans to
33submit all rate filings to the National Association of Insurance
34Commissioners’ System for Electronic Rate and Form Filing
35(SERFF). Submission of the required rate filings to SERFF shall
36be deemed to be filing with the department for purposes of
37compliance with this section.

38

SEC. 3.  

Section 10181.4 of the Insurance Code is amended to
39read:

P9    1

10181.4.  

(a) For large group health insurance policies, all
2health insurers shall file with the department at least 60 days prior
3to implementing any rate change all required rate information for
4begin delete unreasonableend delete rate increasesbegin insert that exceed 5 percent of the prior
5year’s rateend insert
. This filing shall be concurrent with the written notice
6described in Section 10199.1.

7(b) For large group rate filings, health insurers shall submit all
8information that is required by PPACA. A health insurer shall also
9submit any other information required pursuant to any regulation
10adopted by the department to comply with this article.

11(c) A health insurer subject to subdivision (a) shall alsobegin insert annuallyend insert
12 disclose the following aggregate data for all rate filings submitted
13under this sectionbegin delete in the large group health insurance marketend delete:

14(1) Number and percentage of rate filings reviewed by the
15following:

16(A) begin deletePlan end deletebegin insertPolicy end insertyear.

17(B) Segment type.

18(C) Product type.

19(D) Number of insureds.

20(E) Number of covered lives affected.

21(2) The insurer’s average rate increase by the following
22categories:

23(A) begin deletePlan end deletebegin insertPolicy end insertyear.

24(B) Segment type.

25(C) Product type.

begin insert

26(D) Benefit category.

end insert
begin insert

27(E) Number of covered lives affected.

end insert

28(3) Any cost containment and quality improvement efforts since
29the health insurer’s last rate filing for the same category of health
30insurance policy. To the extent possible, the health insurer shall
31describe any significant new health care cost containment and
32quality improvement efforts and provide an estimate of potential
33savings together with an estimated cost or savings for the projection
34periodbegin insert, including an estimate of any reduction in the rate within
35the next five years of implementation of those effortsend insert
.

begin insert

36(d) Except as provided in subdivision (e), a health insurer shall
37annually disclose the following aggregate data for all products
38sold in the large group market:

end insert
begin insert

39(1) Policy year.

end insert
begin insert

40(2) Segment type.

end insert
begin insert

P10   1(3) Product type.

end insert
begin insert

2(4) Number of policyholders.

end insert
begin insert

3(5) Number of covered lives affected.

end insert
begin insert

4(6) The insurer’s average rate increase by the following:

end insert
begin insert

5(A) Policy year.

end insert
begin insert

6(B) Segment type.

end insert
begin insert

7(C) Product type.

end insert
begin insert

8(D) Benefit category, including, but not limited to, hospital,
9medical, ancillary, and other benefit categories reported publicly
10for individual and small employer rate filings.

end insert
begin insert

11(E) Trend attributable to cost and trend attributable to
12utilization by benefit category.

end insert
begin insert

13(e) A health insurer that is unable to provide information on
14rate increases by benefit categories, including, but not limited to,
15hospital, outpatient medical, and mental health, or information
16on trend attributable to cost and trend attributable to utilization
17by benefit category pursuant to subdivision (d), shall annually
18disclose all of the following aggregate data for its large group
19health insurance policies:

end insert
begin insert

20(1) (A) The insurer’s overall aggregate data demonstrating or
21reasonably estimating year-to-year cost increases in the aggregate
22for large group rates by major service category. The insurer shall
23distinguish between the increase ascribed to the volume of services
24provided and the increase ascribed to the cost of services provided
25for those assumptions that shall include the following categories:

end insert
begin insert

26(i) Hospital inpatient.

end insert
begin insert

27(ii) Outpatient visits.

end insert
begin insert

28(iii) Outpatient surgical or other procedures.

end insert
begin insert

29(iv) Professional medical.

end insert
begin insert

30(v) Mental health.

end insert
begin insert

31(vi) Substance abuse.

end insert
begin insert

32(vii) Skilled nursing facility, if covered.

end insert
begin insert

33(viii) Prescription drugs.

end insert
begin insert

34(ix) Other ancillary services.

end insert
begin insert

35(x) Laboratory.

end insert
begin insert

36(xi) Radiology or imaging.

end insert
begin insert

37(B) An insurer may provide aggregated additional data that
38demonstrate or reasonably estimate year-to-year cost increases
39in each of the specific service categories specified in subparagraph
40(A) for each of the major geographic regions of the state.

end insert
begin insert

P11   1(2) The amount of projected trend attributable to the following
2categories:

end insert
begin insert

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

end insert
begin insert

4(B) Capital investment.

end insert
begin insert

5(C) Community benefit expenditures, excluding bad debt and
6valued at cost.

end insert
begin insert

7(3) The amount and proportion of costs attributed to contracting
8medical groups that would not have been attributable as medical
9losses if incurred by the health insurer rather than the medical
10group.

end insert
begin insert

11(f) (1) A health insurer shall annually provide claims data at
12no charge to a large group purchaser if the large group purchaser
13requests the information. The health insurer shall provide claims
14data that a qualified statistician has determined are deidentified
15so that the claims data do not identify or do not provide a
16reasonable basis from which to identify an individual.

end insert
begin insert

17(2) Information provided to a large group purchaser under this
18subdivision is not subject to Section 10181.7.

end insert
begin insert

19(3) (A) If claims data are not available, the insurer shall
20provide, at no charge to the purchaser, all of the following:

end insert
begin insert

21(i) Deidentified data sufficient for the large group purchaser to
22calculate the cost of obtaining similar services from other health
23insurers and plans and evaluate cost-effectiveness by service and
24disease category.

end insert
begin insert

25(ii) Deidentified patient-level data on demographics,
26prescribing, encounters, inpatient services, outpatient services,
27and any other data as may be required of the health insurer to
28comply with risk adjustment, reinsurance, or risk corridors
29pursuant to the federal Patient Protection and Affordable Care
30Act (Public Law 111-148), as amended by the federal Health Care
31and Education Reconciliation Act of 2010 (Public Law 111-152),
32and any rules, regulations, or guidance issued thereunder.

end insert
begin insert

33(iii) Deidentified patient-level data used to experience rate the
34large group, including diagnostic and procedure coding and costs
35assigned to each service.

end insert
begin insert

36(B) The health insurer shall obtain a formal determination from
37a qualified statistician that the data provided pursuant to this
38paragraph have been deidentified so that the data do not identify
39or do not provide a reasonable basis from which to identify an
40individual. The statistician shall certify the formal determination
P12   1in writing and shall, upon request, provide the protocol used for
2deidentification to the department.

end insert
begin insert

3(4) Data provided pursuant to this subdivision shall only be
4provided to a large group purchaser that meets both of the
5following conditions:

end insert
begin insert

6(A) Is able to demonstrate its ability to comply with state and
7federal privacy laws.

end insert
begin insert

8(B) Is a large group purchaser that is either an
9employer-sponsored plan with an enrollment of greater than 1,000
10covered lives or a multiemployer trust.

end insert
begin delete

11(d)

end delete

12begin insert(g)end insert The department may require all health insurers to submit all
13rate filings to the National Association of Insurance
14Commissioners’ System for Electronic Rate and Form Filing
15 (SERFF). Submission of the required rate filings to SERFF shall
16be deemed to be filing with the department for purposes of
17compliance with this section.

18

SEC. 4.  

No reimbursement is required by this act pursuant to
19Section 6 of Article XIII B of the California Constitution because
20the only costs that may be incurred by a local agency or school
21district will be incurred because this act creates a new crime or
22infraction, eliminates a crime or infraction, or changes the penalty
23for a crime or infraction, within the meaning of Section 17556 of
24the Government Code, or changes the definition of a crime within
25the meaning of Section 6 of Article XIII B of the California
26Constitution.



O

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