BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  SB 1182
          Author:   Leno (D)
          Amended:  4/10/14
          Vote:     21

           
           SENATE HEALTH COMMITTEE  :  7-1, 4/24/14
          AYES:  Hernandez, Beall, De León, DeSaulnier, Evans, Monning,  
            Wolk
          NOES:  Morrell
          NO VOTE RECORDED:  Nielsen

           SENATE APPROPRIATIONS COMMITTEE  : 5-2, 05/23/14
          AYES: De León, Hill, Lara, Padilla, Steinberg
          NOES: Walters, Gaines


           SUBJECT  :    Health care coverage:  rate review

           SOURCE  :     California Labor Federation
                      UNITE HERE


           DIGEST  :    This bill requires health plans and insurers to  
          submit to regulators for rate review any large group plan  
          contract or policy rate increases that exceed 5% of the prior  
          years 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  
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          covered lives or multiemployer trust.

           
          ANALYSIS  :    

          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  
             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  

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             inaccurate information, DMHC or CDI to post their findings on  
             their Internet Web sites.

          7. Establishes specified 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.

          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 that is required by the Affordable Care Act  
             (ACA), and any other information required pursuant to state  
             regulations to be submitted.  Requires disclosure of  
             specified aggregate data for all rate filings submitted.

          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  
             increases that exceed 5% 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 5% of  
             the prior year's rate for that group specified information  
             including:

             A.    Company name and contact information;

             B.    Number of plan contract forms covered by the filing;


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             C.    Product type, such as preferred provider organization  
                or health maintenance organization;

             D.    Enrollment in each plan contract and rating form;

             E.    Annual rate;

             F.    Total incurred claims in each plan contract form;

             G.    Average rate increase initially requested;

             H.    Average rate of increase;

             I.    Number of subscribers or enrollees affected by each  
                plan contract form;

             J.    A comparison of claims cost and rate of changes over  
                time;

             K.    Any changes in enrollee cost-sharing over the prior  
                year associated with the submitted rate filing;

             L.    Any changes in enrollee benefits over the prior year  
                associated with the submitted rate filing;

             M.    A certification of actuarially sound filing, as  
                described;

             N.    Any changes of administrative cost; and

             O.    Any other information required for rate review under  
                the ACA.

          4. Requires, except as provided in #5) below, annual disclosure  
             of specified aggregate data for all products sold in the  
             large group market.

          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 specified aggregate data for its large group  
             contracts or policies.


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          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  
             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.

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           Background
           
           Rate review in California  .  SB 1163 (Leno, Chapter 551, Statutes  
          of 2011) 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.

           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 Brown.  In his veto message, the Governor stated:   

             This bill would require all health plans and insurers to  
             disclose very 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 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  

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             together in this effort. If these voluntary efforts fail,  
             I will seriously consider stronger actions.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes


          According to the Senate Appropriations Committee:


           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 CDI (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 DMHC (Managed Care Fund).

           SUPPORT  :   (Verified  5/22/14)

          California Labor Federation (co-source)
          UNITE HERE (co-source)
          AFSCME
          California Alliance of Retired Americans
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Nurses Association
          California Professional Firefighters
          California Retired Teachers Association
          California School Employees Association
          CALPIRG
          California Teachers Association
          California Teamsters Public Affairs Council 
          Congress of California Seniors
          Engineers and Scientists of CA, IFPTE Local 20, AFL-CIO
          Health Access
          International Longshore and Warehouse Union
          Professional and Technical Engineers, IFPTE Local 21, AFL-CIO
          San Diego Electrical Health and Welfare Trust
          SEIU California
          State Building and Construction Trades Council

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          Utility Workers Union of America, Local 132

          OPPOSITION  :    (Verified  5/22/14)

          America's Health Insurance Plans
          Anthem
          Association of California Life & Health Insurance Companies
          California Association of Health Plans
          California Association of Health Underwriters
          California Chamber of Commerce
          Kaiser Permanente

           ARGUMENTS IN SUPPORT  :    The California Labor Federation, a  
          co-sponsor, 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 authority 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.

           ARGUMENTS IN OPPOSITION  :    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 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  

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          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 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 and says this bill could  
          potentially require thousands of new filings to be done with  
          regulators.  
           

          JL:d  5/25/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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