BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1182
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          SENATE THIRD READING
          SB 1182 (Leno)
          As Amended August 18, 2014
          Majority vote

           SENATE VOTE  :21-12  
           
           HEALTH              13-6        APPROPRIATIONS      12-5        
           
           ----------------------------------------------------------------- 
          |Ayes:|Pan, Ammiano, Bonilla,    |Ayes:|Gatto, Bocanegra,         |
          |     |Bonta, Chesbro, Gomez,    |     |Bradford,                 |
          |     |Gonzalez,                 |     |Ian Calderon, Campos,     |
          |     |Roger Hernández,          |     |Eggman, Gomez, Holden,    |
          |     |Lowenthal, Nazarian,      |     |Pan, Quirk,               |
          |     |Ridley-Thomas, Rodriguez, |     |Ridley-Thomas, Weber      |
          |     |Wieckowski                |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Maienschein, Chávez,      |Nays:|Bigelow, Donnelly, Jones, |
          |     |Mansoor, Waldron,         |     |Linder, Wagner            |
          |     |Patterson, Wagner         |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Requires health plans and insurers in the large group  
          market to file aggregate rate information with state regulators  
          and requires health plans and insurers to share specified data  
          with purchasers that have 1,000 or more enrollees or that are  
          multiemployer trusts.  Specifically,  this bill  :  

          Large Group Rate Filing:

          1)Requires health plans and insurers to submit to regulators  
            (the Department of Managed Health Care (DMHC), and the  
            Department of Insurance (CDI) specified aggregate information  
            for rates in the large group market, including total earned  
            premiums, total incurred claims, average rate of increase, and  
            number of enrollees affected.

          2)Requires health plans and insurers to also submit the  
            methodology used to develop rates, including:  base rates;  
            factors used to adjust the base rates; variations in rates due  
            to geography, covered benefits, or benefit design; enrollment  
            in products based on actuarial value; information about  








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            modified community rating; and year-to-year changes in the  
            methodology.

          3)Requires health plans and insurers to submit additional  
            information about large group market products, both in  
            aggregate and categorized by actuarial value, including:   
            average rate changes; average rates implemented; average rates  
            requested; a comparison of rate changes over time to claims  
            costs; changes to enrollee cost sharing and benefits; and  
            changes in administrative costs.

          4)Requires health plans and insurers to submit aggregate  
            information regarding trend factors used to develop the change  
            in rate, including trends in benefits aggregated by benefit  
            category, including hospital inpatient or outpatient,  
            physician services, prescription drugs and other ancillary  
            services, laboratory, and radiology.  Requires a health plan  
            with exclusively contracts with no more than two medical  
            groups in the state to provide or arrange for its enrollees'  
            medical services (i.e. Kaiser Permanente), to use benefit  
            categories that are, to the maximum extent possible, the same  
            or similar to benefit categories used by other plans.
          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, to annually disclose  
            specified aggregate data for its large group contracts or  
            policies, including:  estimated year-to-year cost change by  
            major service category, both due to increased volume of  
            services and increased cost of services; the amount projected  
            trend attributable to use of services by service and disease  
            category, capital investment, and community benefit  
            expenditures; and costs attributed to contracting medical  
            groups, as specified.

          6)Allows DMHC and CDI to require all health plans and insurers,  
            respectively, to submit all rate filing to the National  
            Association of Insurance Commissioners' System for Electronic  
            Rate and Form Filing.  Deems such submission to satisfy the  
            rate filing requirements of this bill.

          Sharing Of Claims And Other Patient-Level Data:

          7)Requires a health plan or insurer annually to provide  








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            deidentified claims data at no charge to a large group  
            purchaser upon request, if the purchaser 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.   
            Requires health plans and insurers to obtain a determination  
            by a qualified statistician that the claims data do not  
            provide a reasonable basis from which to identify an  
            individual. 

          8)Makes the information shared not subject to public  
            availability, as specified.

          9)Requires a health plan or insurer, if claims data are not  
            available, to provide:  deidentified  data sufficient for the  
            purchaser to compare costs of similar services from other  
            health plans or insurers; and deidentified patient level data  
            that includes demographics and encounter data, including data  
            used to experience rate the group, as specified.  Requires the  
            health plan or insurer, for purposes of this requirement, to  
            obtain a formal determination, in writing, from a qualified  
            statistician that the shared data do not provide a reasonable  
            basis from which to identify an individual.  

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:

          1)One-time costs to DMHC of $250,000 to issue regulations, as  
            well as the following ongoing costs (all costs are Managed  
            Care Fund):

             a)   Costs in the range of $1 million to review aggregate  
               data filings.

             b)   Potential enforcement costs of $100,000 ongoing to  
               address complaints and staff trials regarding alleged  
               violations.  

          1)One-time costs to CDI of $250,000 to issue regulations, as  
            well as the following ongoing costs (all costs are Insurance  
            Fund):

             a)   Costs in the range of $350,000 to review required rate  
               increase information and aggregate data filings.








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             b)   Unknown, likely minor enforcement costs.
          3)Unknown, significant cost pressure to CalPERS for the  
            provision of health benefits, assuming costs of compliance are  
            passed on to large-group customers in the form of a general  
            increase in administrative costs. 

           COMMENTS  :  The author writes 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.  This bill is intended to bring transparency  
          to this market in an effort to control costs.

          According to the Medical Expenditure Panel Survey (MEPS), a  
          survey of employers conducted by the United States Census Bureau  
          that collects information on employer-sponsored health  
          insurance, premiums for employer-based coverage have increased  
          significantly over the past decade.  MEPS data from 2012 show  
          the average annual premium for individual private sector  
          employer coverage in California is $5,422, an 85% increase since  
          2002.  For family coverage, the average premium was $15,898, a  
          90% increase since 2002.  For comparison, prices for goods and  
          services increased 27.6% during this period, according to the  
          Bureau of Labor Statistics' Consumer Price Index.

          The federal Patient Protection and Affordable Care Act (ACA)  
          requires the federal Department of Health and Human Services  
          Secretary, in conjunction with states, to establish a process  
          for the annual review of "unreasonable increases in premiums"  
          for health insurance coverage.  Under the ACA, starting  
          September 1, 2011, insurance companies seeking to increase  
          premium rates in the individual or small group markets, as  
          specified, are required to justify and submit for review by  
          experts, the need for the rate increase by providing information  
          on the factors contributing to the proposed increase.  However,  
          the rate review provisions in the 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.  Under current rate review law, and under the  
          provisions of this bill, regulators do not have the authority to  
          modify or reject rate changes; however, rate review has  
          increased transparency on rate increases in the individual and  
          small group market.









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          The California Labor Federation (Labor Fed), a co-sponsor of  
          this bill, writes that rising health care costs are taking a  
          toll on employers, workers, and union trust funds.  The Labor  
          Fed argues every dollar that large purchasers have to put toward  
          health coverage is a dollar that comes out of workers' pockets.   
          The Labor Fed suggests that this bill's rate filing requirement  
          could similarly create savings in the large group market.   
          Finally, the Labor Fed argues that this bill's requirement for  
          health plans to disclose claims data to large purchasers will  
          help those purchasers understand health care cost drivers,  
          institute cost savings programs, and bargain effectively with  
          health plans.  

          Health Access California, in support, states that contrary to  
          expectations, the federal government has not established  
          criteria to implement rate review in the large group market.   
          California Public Interest Research Group (CALPIRG), in support,  
          argues that by holding insurers accountable for justifying their  
          requested rate increases and allowing for a public dialogue,  
          rate review can be a powerful tool to prevent excessive rate  
          hikes from private insurers.  CALPIRG asserts that state  
          regulators have reported an estimated $349 million in savings  
          for consumers in the individual and small group markets due to  
          rate review since 2011.  Since large group products serve the  
          majority of the private insurance market in California, CALPIRG  
          predicts this bill will enable state regulators to save  
          consumers millions of dollars more.

          America's Health Insurance Plans (AHIP), in opposition, argue  
          large group plans are very sophisticated in their product  
          designs, which are often tailored to the needs of the large  
          group purchaser.  AHIP notes the U.S. Department of Health and  
          Human Services determined that regulatory review of large groups  
          was unnecessary under the ACA on the basis that market forces  
          that keep premiums from being unreasonable in the large group  
          market.  AHIP argues that this bill, by placing an  
          administrative burden on large groups, will encourage the groups  
          to move to self-insured plans, which are outside the regulatory  
          jurisdiction of the state and which do not provide the state  
          with revenue through premium taxes.  

          The California Association of Health Plans, also in opposition,  
          argues that current law creates an adequate framework for large  
          group rate review, should the federal government choose to  








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          require it.  The Association of California Life and Health  
          Insurance Companies states it is critical to put all resources  
          toward implementing the ACA in a meaningful way rather than  
          implementing costly, unnecessary, and time-consuming new  
          requirements.  


           Analysis Prepared by  :    Ben Russell / HEALTH / (916) 319-2097 


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