BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1182 (Leno) - Health care coverage: rate review.
          
          Amended: April 10, 2014         Policy Vote: Health 7-1
          Urgency: No                     Mandate: Yes
          Hearing Date: May 23, 2014      Consultant: Brendan McCarthy
          
          SUSPENSE FILE.
          
          
          Bill Summary: SB 1182 would require health insurers and health  
          plans in the large group market to provide specified information  
          to the Department of Insurance or the Department of Managed  
          Health Care in order for those departments to review rate  
          increases over 5 percent from the prior year. The bill would  
          require health insurers and health plans to provide specified  
          information to certain large employers who purchase coverage for  
          their employees.

          Fiscal Impact: 
              Likely costs in the tens of thousands to low hundreds of  
              thousands per year to develop regulations, review insurance  
              plan rate filings, respond to complaints, and take  
              enforcement actions by the Department of Insurance  
              (Insurance Fund).

              One-time costs of about $715,000 in 2014-15 and $960,000 in  
              2015-16 and ongoing costs of about $685,000 per year  
              thereafter to develop regulations, review health plan rate  
              filings, respond to complaints, and take enforcement actions  
              by the Department of Managed Health Care (Managed Care  
              Fund).

          Background: Under current law, the Department of Insurance  
          regulates health insurers and the Department of Managed Health  
          Care regulates health plans (collectively, these are referred to  
          as "carriers"). Current law requires carriers in the individual  
          and small group markets to provide information regarding rate  
          increases to their respective regulators annually. The  
          regulators use this information to conduct reviews of the  
          proposed rates. The regulators are authorized to make their  
          findings public, but they do not have the power to reject  
          proposed rate increases by carriers.








          SB 1182 (Leno)
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          In the large group market, current law requires carriers to  
          submit certain information on rate increases to their respective  
          regulators for "unreasonable" rate increases. The federal  
          government has not provided guidance on what constitutes  
          unreasonable rate increases in the large group market and  
          neither department has adopted regulations to implement this  
          provision of law.

          Proposed Law: SB 1182 would require carriers in the large group  
          market to provide specified information to the Department of  
          Insurance or the Department of Managed Health Care in order for  
          those departments to review rate increases over 5 percent from  
          the prior year. 

          Specifically, the bill would:
              Replace the term "unreasonable rate increase" in statute  
              with a rate increase of 5 percent over the prior year to  
              trigger rate review in the large group market;
              Expands the information that carriers would be required to  
              provide to the regulators to facilitate rate review in the  
              large group market;
              Require all carriers in the large group market to provide  
              specified information on costs and benefit categories to the  
              regulators.

          The bill would require carriers to provide specified information  
          to certain large employers who purchase coverage for their  
          employees.

          Specifically, the bill would:
              Require a carrier to provide claims data to a requesting  
              purchaser (typically an employer or multiemployer trust)  
              with an enrollment of more than 1,000 covered lives;
              Require the information above be provided at no cost by the  
              carrier;
              Specify the method for providing information by a carrier  
              that does not have claims data (specifically, a fully  
              integrated health system such as Kaiser Permanente);
              Put specified privacy protections in place to prevent the  
              identification of employees by health care usage or health  
              status based on the claims data.

          Related Legislation: SB 746 (Leno, 2013) would have established  








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          new data reporting requirements on health plans in the large  
          group market and would have required Kaiser Permanente to  
          provide claims data (or the equivalent) to certain large  
          purchasers. That bill was vetoed by Governor Brown.

          Staff Comments: The only costs that may be incurred by a local  
          agency under the bill relate to crimes and infractions. Under  
          the California Constitution, such costs are not reimbursable by  
          the state.