BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1182
AUTHOR: Leno
AMENDED: April 10, 2014
HEARING DATE: April 24, 2014
CONSULTANT: Boughton
SUBJECT : Health care coverage: rate review.
SUMMARY : Requires health plans and insurers to submit to
regulators for rate review any large group plan contract or
policy rate increases that exceed five percent of the prior
year's rate.
Establishes new data reporting requirements on all health plans
and insurers applicable to products sold in the large group
market and establishes new deidentified claims data reporting
requirements to be provided to purchasers, if requested, at no
cost, if the purchaser can demonstrate its ability to comply
with state and federal privacy laws, and is either an employer
with an enrollment of greater than 1,000 covered lives or
multiemployer trust.
Existing law:
1.Requires individual and small group health plan contract and
insurance policy rate information to be filed with Department
of Managed Health Care (DMHC) or Department of Insurance (CDI)
concurrent with required notices explaining reasons for
denials, increases in premium rates, and the plan's average
rate increase by plan year, segment type, and product type.
2.Requires plans and policies for individual and small group
health care contracts to be filed with regulators at least 60
days prior to implementing any rate change, including
disclosures such as average rate increase initially requested,
average rate increase, and effective date of rate increase.
Authorizes a plan or insurer to provide aggregated additional
data that demonstrates, or reasonably estimates, year-to-year
cost increases in specific benefit categories in major
geographic regions, defined by regulators, but not more than
nine regions.
3.Requires plan filings to include certification by an
independent actuary or actuarial firm that the rate increase
is reasonable or unreasonable; if unreasonable, that the
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justification for the increase is based on accurate and sound
actuarial assumptions and methodologies.
4.Requires rate increase information to be made public 60 days
prior to implementation, including justification for any
unreasonable rate increases including all information and
supporting documentation as to why the rate change is
justified.
5.Requires the regulators to accept and post to their Internet
Web sites any public comment on a rate increase submitted to
each department during the 60-day period prior to
implementation, as specified.
6.Requires, if DMHC or CDI find that an unreasonable rate
increase is not justified or that a rate filing contains
inaccurate information, DMHC or CDI to post their findings on
their Internet Web sites.
7.Establishes the following provisions related to disclosure
requirements for 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:
a. With regard to the plan's overall annual
medical trend factor to disclose 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 by other plans; and,
b. With regard to the amount of the projected
trend attributable to the use of services, price
inflation, or fees and risk for annual plan contract
trends by aggregate benefit category, such as hospital
inpatient, hospital outpatient, physician services,
etc., to instead disclose 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 by other plans.
8.For the large group market, requires health plans and health
insurers to file with the DMHC and CDI, at least 60 days prior
to implementing any rate change, all required rate information
for unreasonable rate increases. Requires all information
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that is required by the Affordable Care Act (ACA), and any
other information required pursuant to state regulations to be
submitted. Requires disclosure of the following aggregate
data for all rate filings submitted:
a. Number and percentage of rate filings reviewed
by the following:
i. Plan year;
ii. Segment type;
iii. Product type;
iv. Number of subscribers; and,
v. Number of covered lives affected.
b. The plan's average rate increase by the
following categories:
i. Plan year;
ii. Segment type; and,
iii. Product type.
9.Prohibits a health plan from releasing any information to an
employer that would directly or indirectly indicate to the
employer that an employee is receiving or has received
services from a health care provider covered by the plan
unless authorized to do so by the employee. Prohibits an
insurer that has, pursuant to an agreement, assumed the
responsibility to pay compensation, as specified, from being
considered an employer. States that nothing in this provision
prohibits a health plan from releasing relevant information
for the purposes of fraud prevention, as specified.
10.Establishes under federal law, the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), which
among various provisions, mandates industry-wide standards for
health care information on electronic billing and other
processes; and requires the protection and confidential
handling of protected health information.
11.Establishes under state law, the Confidentiality of Medical
Information Act which governs the disclosure of medical
information by health care providers, Knox-Keene regulated
plans, health care clearinghouses and employers.
This bill:
1.Requires health plans and insurers to submit information to
regulators to review the rates of any large group plan
contract or policy 60 days prior to implementing rate
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increases that exceed five percent of the prior year's rate.
2.Requires annual disclosures of information specified in
existing law related to the number and percentage of rate
filings and adds to the categories associated with the plan's
average rate increase disclosure, benefit category and number
of covered lives affected. Changes "plan" year to "policy"
year in the Insurance Code. States that nothing in this bill
prohibits a health plan or insurer from releasing relevant
information, as described, for the purposes set forth in
existing law related to rate review.
3.Requires a health plan or health insurer, subject to 1) above,
to disclose for each rate filing that exceeds five percent of
the prior year's rate for that group the following:
a. Company name and contact information;
b. Number of plan contract forms covered by the
filing;
c. Plan contract form numbers covered by the
filing;
d. Product type, such as preferred provider
organization or health maintenance organization;
e. Segment type;
f. Type of plan involved, such as for profit or
not for profit;
g. Whether the products are opened or closed;
h. Enrollment in each plan contract and rating
form;
i. Enrollee months in each plan contract form;
j. Annual rate;
aa. Total earned premiums in each plan contract
form;
bb. Total incurred claims in each plan contract
form;
cc. Average rate increase initially requested;
dd. Review category: initial filing for new
product, filing for existing product, or resubmission;
ee. Average rate of increase;
ff. Effective date of rate increase;
gg. Number of subscribers or enrollees affected by
each plan contract form;
hh. The plan's overall annual medical trend factor
assumptions in each rate filing for all benefits and
by aggregate benefit category, including hospital
inpatient, hospital outpatient, physician services,
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5
prescription drugs and other ancillary services,
laboratory and radiology. Authorizes a plan to
provide aggregated additional data that demonstrates
or reasonably estimates year-to-year cost increases in
specific benefit categories in major geographic
regions of the state;
Limits geographic regions to nine, and requires them to
be defined by DMHC and CDI. Requires a health plan
that exclusively contracts with no more than two
medical groups to disclose the amount of its actual
trend experience for the prior contract year by
aggregate benefit category, as specified;
ii. The amount of the projected trend attributable
to the use of services, prices inflation, or fees and
risk for annual plan contract by aggregate benefit
category, as specified. Requires a plan that
exclusively contracts with no more than two medical
groups, as specified, to disclose the amount of its
actual trend experience for the prior contract year by
aggregate services category, as specified;
jj. A comparison of claims cost and rate of
changes over time;
aaa. Any changes in enrollee cost-sharing over the
prior year associated with the submitted rate filing;
bbb. Any changes in enrollee benefits over the
prior year associated with the submitted rate filing;
ccc. A certification of actuarially sound filing,
as described;
ddd. Any changes of administrative cost; and,
eee. Any other information required for rate review
under the ACA.
4.Requires, except as provided in 5) below, annual disclosure of
the following aggregate data for all products sold in the
large group market:
a. Plan/policy year;
b. Segment type;
c. Product type;
d. Number of subscribers;
e. Number of covered lives affected;
f. The plan's average rate increase by the
following:
i. Plan/policy year;
ii. Segment type;
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iii. Product type;
iv. Benefit category, as specified;
and,
v. Trend attributable to cost and
trend attributable to utilization by benefit
category.
5.Requires a health plan or insurer that is unable to provide
information on rate increases by benefit categories, as
specified, or information on trend attributable to cost and
utilization by benefit category pursuant to 4) to annually
disclose all of the following aggregate data for its large
group contracts or policies:
a. The plan's or insurer's overall aggregate data
demonstrating or reasonably estimating year-to-year
cost increases in the aggregate for large group rates
by major service category. Requires the plan or
insurer to distinguish between the increase ascribed
to the cost of services provided for those assumptions
and that include the following categories:
i. Hospital inpatient;
ii. Outpatient visits;
iii. Outpatient surgical or other
procedures;
iv. Professional medical;
v. Mental health;
vi. Substance abuse;
vii. Skilled nursing facility, if
covered;
viii. Prescription drugs;
ix. Other ancillary services;
x. Laboratory; and,
xi. Radiology or imaging;
b. Authorizes a plan or insurer to provide
aggregated additional data that demonstrate, or
reasonably estimate, year-to-year cost increases in
each of the specific service categories specified in
a) for each of the major geographic regions in the
state;
c. The amount of projected trend attributable to
use of services by service and disease category,
capital investment, and community benefit
expenditures, excluding bad debt and valued at cost;
and,
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d. The amount and proportion of costs attributed
to contracting medical groups that would not have been
attributable as medical losses if incurred by the plan
or health insurer rather than the medical group.
6.Requires a health plan or insurer annually to provide claims
data at no charge to a large group purchaser if the large
group purchaser requests the information. Requires the plan
or insurer to provide claims data that a qualified
statistician has determined are deidentified so that the
claims data do not identify or do not provide a reasonable
basis from which to identify an individual.
7.Makes the information provided under 6) through 10) not
subject to public availability, as specified.
8.Requires, if claims data are not available, at no charge to
the purchaser, all of the following:
a. Deidentified data sufficient for the large
group purchaser to calculate the cost of obtaining
similar services from other health plans or health
insurers and evaluate cost-effectiveness by service
and disease category;
b. Deindentified patient-level data of
demographics, prescribing, encounters, inpatient
services, outpatient services, and any other data as
may be required of the health plan or insurer to
comply with risk adjustment, reinsurance, or risk
corridors pursuant to the ACA; and,
c. Deidentified patient-level data used to
experience rate the large group, including diagnostic
and procedure coding and costs assigned to each
service.
9.Requires the health plan or insurer to obtain a formal
determination from a qualified statistician that the data
provided pursuant to 6) through 8) have been deidentified so
that the data do not identify or do not provide a reasonable
basis from which to identify an individual. Requires the
statistician to certify the formal determination in writing
and to, upon request, provide the protocol used for
deidentification to the regulators.
10.Requires data provided pursuant to 6) through 8) to only be
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provided to a large group purchaser that is able to
demonstrate its ability to comply with state and federal
privacy laws, and is either an employer with enrollment of
greater than 1,000 covered lives or a multiemployer trust.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, the rising cost
of health care is a major concern for employers in California,
and the lack of transparency in pricing for the large group
market has contributed to uncontrolled cost increases for
large employers and union trusts. According to the 2014
California Employer Health Benefits Survey, health premiums in
California rose by 185 percent since 2002, more than five
times the state's overall inflation rate. In addition, one in
four California employers reported that they reduced benefits
or increased employee cost sharing in the last year because of
the rising cost of health care.
The ACA requires state regulators to collect detailed
information regarding premium increases and to make this
information publicly available. SB 1163 (Leno), Chapter 661,
Statutes of 2010 requires health plans and insurers to provide
regulators and consumers with critical data and information
documenting the true drivers of premium increases. Since its
enactment in 2011, SB 1163 has saved California consumers in
the individual and small group markets over $300 million. SB
1182 furthers our transparency efforts and protects large
employers and their employees and dependents from
unjustifiable rate increases through transparency and helps
them to better understand why health premiums are increasing
each year.
2.Employer Health Benefits. Key findings from the California
HealthCare Foundation, California Employer Health Benefits
Survey indicate the proportion of California employers
offering coverage has declined significantly over the last
decade, from 69 percent in 2000 to 61 percent in 2013.
Coverage is offered to employees at a higher rate at larger
firms, firms with higher wages, and firms with some union
workers. California workers paid an average of 22 percent of
the total premium for single coverage and 33 percent for
family coverage in 2013, significantly higher shares than in
the previous year. California's HMO premiums have been higher
than the national average since 2010 - a change from the
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previous decade. Nearly one-third of covered workers in small
firms had a deductible of $1,000 or more for single coverage
in 2013, up from just seven percent in 2006. In large firms,
only nine percent had a deductible of $1,000 or more. One in
four California firms reported that they reduced benefits or
increased cost sharing in the last year. California employers
viewed consumer directed health plans, disease management, and
changes in care delivery and payment as the most effective at
controlling health care costs.
3.Rate review in California. SB 1163 (Leno) 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 and CDI 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, rate review has
increased transparency on rate increases in the individual and
small group market.
4.Related legislation. SB 959 (Hernandez) would prohibit a
change in premium rate or coverage for an individual plan
contract or policy unless the plan or insurer delivers a
written notice of the change at least 15 days prior to the
start of the annual enrollment period applicable to the
contract or 60 days prior to the effective date of renewal,
whichever occurs earlier in the calendar year. Makes several
corrections and clarifications to provisions of law governing
individual and small group health insurance, including
clarifying that health plans and insurers have a single risk
pool for enrollees and insureds. SB 959 is currently scheduled
to be heard in Senate Appropriations Committee on April 28th.
SB 1340 (Hernandez) would make a number of technical and
clarifying changes to existing law prohibiting contracts
between health plans or insurers and hospitals restricting the
ability of the health plan/insurer from furnishing information
concerning the cost range of procedures at the hospital or
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facility or the quality of services performed by the hospital
or facility to subscribers or enrollees. Includes self-funded
health coverage arrangement administered by the health plan or
other persons entitled to access services through a network
established by the health care service plan in the prohibition
of a contract gag clause. Requires health plans and insurers
to give a provider or supplier an advance opportunity of 30
days (rather than at least 20 days) to review the methodology
and data developed and compiled by the health plan or insurer.
SB 1340 is currently pending on the Senate Floor.
SB 1322 (Hernandez) would require the Governor to convene the
California Health Care Quality Improvement and Cost
Containment Commission to research and recommend appropriate
and timely strategies for promoting high-quality care and
containing health care costs. Requires the commission to be
composed of 13 members who are knowledgeable about the health
care system and health care spending. Requires the commission
to, on or before July 1, 2015, or within six months of the
convening of the commission, whichever occurs later, issue a
report to the Legislature and the Governor making
recommendations for health care quality improvement and cost
containment. SB 1322 is currently scheduled to be heard in
this committee on April 24th.
5.Prior legislation. SB 746 (Leno) would have established new
data reporting requirements on all health plans applicable to
products sold in the large group market and establishes new
specific data reporting requirements related to annual medical
trend factors by service category, as well as claims data or
deidentified patient-level data, as specified, for a health
care service plan (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 (referring to Kaiser Permanente). SB 746 was
vetoed by the Governor. In his veto message, the Governor
stated:
This bill would require all health plans and
insurers to disclose
every year broad data relating to services used by
large employer
groups, including aggregate rate increases by
benefit category. The
bill also requires that one health plan
additionally provide
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anonymous claims data or patient level data upon
request and without
charge to large purchasers.
I support efforts to make health care costs more
transparent, and my
administration is moving forward to establish
transparency programs
that will cover all health plans and systems.
I urge all parties to work together in this effort.
If these
voluntary efforts fail, I will seriously consider
stronger actions.
6.Support. The California Labor Federation believes this bill
will help the public understand premium increases. Employers
are increasingly shifting the burden of health coverage to
workers and workers are forced to forego wage increases as
health care eats up more of employers' and workers' budgets.
The ACA implements some cost containment measures and gives
states to implement more. SB 1163 was intended to require
Kaiser Permanente to provide detail on changes in costs by
benefits. Kaiser has failed to comply, even though it
provides some of this data to selected large purchasers and
for out-of-network emergency services. The San Diego
Electrical Health and Welfare Trust indicates that the large
group provisions of SB 1163 have yet to be implemented due to
a lack of definition of "unreasonable rate increase." This
bill will afford large group purchasers with access to the
same detailed information to substantiate the basis for
increased health premiums, and it will help identify whether
health plans or HMOs may be subsidizing their individual and
small group experience by way of charging large purchasers
premium rates loaded with experience from other markets. The
Teamsters writes that some of their trust funds spend more per
hour on health benefits than the San Francisco minimum wage.
The California School Employees Association believes this bill
will help large group purchasers understand what is driving
increases and develop strategies to address it.
7.Opposition. The America's Health Insurance Plans (AHIP)
writes that this bill fails to offer any solution to address
the problem of rising health care costs that threaten the
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affordability of health care coverage in California. AHIP
states that the large group market is extremely competitive
and the U.S. Department of Health and Human Services
determined that regulatory review was unnecessary at this
time. AHIP adds that the data described in this bill is not
developed and would require extensive administrative tracking.
Kaiser writes that this bill inserts the Legislature into
private and voluntary contractual discussions between two
entities by mandating what information one party must provide
to the other. Kaiser indicates that they provide robust
information to their large group purchasers during renewal and
during the contract year and are working hard to expand the
amount of information provided. Kaiser is also concerned
about revealing patient level medical information to
employers. Kaiser believes it is unclear what the information
will be used for and doesn't require employee consent. Kaiser
writes that this bill requires large group rate information to
be filed at DMHC without specifying the purpose of such a
filing and how that information will be used. The California
Chamber of Commerce believes this bill creates uncertainty and
delays for employers by creating an unworkable rate review
process. Anthem Blue Cross argues that this bill creates an
added substantial compliance burden for plans and state
regulators. Anthem Blue Cross already provides a significant
amount of information to its large group purchasers and the
utilization of health services. This bill could potentially
require thousands of new filings to be done with regulators.
8.Policy Comment. Existing law prohibits a health plan from
releasing any information to an employer that would directly
or indirectly indicate to the employer that an employee is
receiving or has received services from a health care provider
covered by the plan unless authorized by the employee. This
bill would make it clear that information provided under the
rate review statute, including amendments regarding
deidentified claims data, proposed by this bill, would not be
prohibited from release under the law. Even in a group with
over 1,000 it seems that one could easily identify an employee
with a rare condition. Protection of employee health
information from employers is an important antidiscrimination
safeguard which should not be jeopardized. The author and
sponsor have tried to address this concern by requiring the
data to be certified as deidentified by a qualified
statistician prior to the release of such information.
SUPPORT AND OPPOSITION :
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Support: California Labor Federation (sponsor)
San Diego Electrical Health & Welfare Trust
(co-sponsor)
American Federation of State, County and Municipal
Employees, AFL-CIO
California Conference of Board of the Amalgamated
Transit Union
California Conference of Machinists
California Nurses Association
California School Employees Association
California Teachers Association
California Teamster Public Affairs Council
Congress of California Seniors
Engineers & Scientists of California, IFPTE Local 20,
AFL-CIO
International Longshore and Warehouse Union
Professional & Technical Engineers, IFPTE Local 21,
AFL-CIO
State Building and Construction Trades Council
UNITE-HERE AFL-CIO
Utility Workers Union of America, Local 132
Oppose: Association of California Life and Health Insurance
Companies
America's Health Insurance Plans
Anthem Blue Cross
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
Kaiser Permanente
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