BILL ANALYSIS Ó
AB 248
Page 1
Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
248 (Roger Hernández) - As Amended April 14, 2015
-----------------------------------------------------------------
|Policy |Health |Vote:|12 - 3 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill prohibits, with specified exemptions for "limited
wraparound coverage," the marketing, offering, amendment, or
renewal of a large-group health care service plan or insurance
AB 248
Page 2
policy that provides a minimum value of less than 60 percent of
expected health care costs.
FISCAL EFFECT:
Minor and absorbable costs to the California Department of
Insurance and the Department of Managed Health Care to verify
plans and policies comply with this requirement. The large
majority of plans and policies already comply.
COMMENTS:
1)Purpose. According to the author, large employers, unlike
individual and small employers, are not required to provide
essential health benefits to their workers, resulting in some
health insurers selling limited benefit health plans, such as
prevention-only or indemnity insurance to large employers,
primarily those with low-wage workers. The author states that
through a loophole in federal law, these large employers have
financial incentives to offer limited benefit plans, often
referred to as "skinny plans," to their employees, leaving
workers with substandard coverage. The author argues that
this bill closes this federal loophole by ensuring that a
limited benefit plan can only be sold as supplemental to
comprehensive coverage.
2)Employer Responsibility provisions under the federal Patient
Protection and Affordable Care Act (ACA) require businesses
with 50 or more employees to either: (a) offer affordable
health coverage that covers at least 60% of the total expected
benefits cost, or (b) pay an Employer Shared Responsibility
payment, if at least one of its full-time employees receives a
premium tax credit for purchasing individual coverage on a
AB 248
Page 3
health insurance exchange. The rationale for these payments
is to encourage businesses to maintain coverage for employees.
If businesses do not offer coverage, the Employer Shared
Responsibility payment is equal to the number of full-time
employees for the year (minus up to 30) multiplied by $2,000.
If businesses do offer coverage, but the coverage does not
meet the minimum value, the payment is equal to 1/12 of $3,000
on a monthly basis, times the number of employees receiving a
premium tax credit for that month. However, there are no
penalties for businesses whose employees are eligible for
coverage through Medicaid. Thus, by offering "skinny" plans,
thereby providing an incentive to their employees to seek
coverage through Medicaid instead of accepting
employer-sponsored coverage, a California employer with
low-wage workers could, theoretically, minimize its overall
financial responsibility, avoiding the higher penalties
associated with not offering coverage at all and reducing
their employee health care costs by shifting their employees'
health care costs to Medi-Cal.
Furthermore, if employees accept employer-provided coverage
that does not meet "minimum essential coverage" requirements,
recent Internal Revenue Service guidance prohibits employees
from seeking coverage through the a state Health Insurance
Exchange (such as Covered California). Thus, even a free
"skinny plan" offered to an employee comes with a hefty cost -
employees who accept it forfeit their ability to get
subsidized comprehensive coverage that offers true financial
protection. On top of this, individuals that lack minimum
essential coverage are subject to a tax penalty for each month
in which they lacked coverage.
AB 248
Page 4
3)Opposition. Opponents, primarily health insurance brokers,
state that this bill would unnecessarily bar employers from
combining health care insurance products to create a health
benefit package for their workers unless the core plan meets
at least 60% minimum value requirements. Opponents argue that
nothing in the ACA dictates just how a large employer may
construct their health care benefits package in order to reach
60% minimum value, and that this bill inappropriately attempts
to stop large employers from using legally permissible
building blocks of coverage when the first building block is
not a 60% minimum value plan. The author indicates
conversations are ongoing about potential ways to address this
concern.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081