BILL ANALYSIS Ó AB 248 Page 1 ASSEMBLY THIRD READING AB 248 (Roger Hernández) As Amended April 14, 2015 Majority vote -------------------------------------------------------------------- |Committee |Votes |Ayes |Noes | |----------------+------+---------------------+----------------------| |Health |12-3 |Bonta, Bonilla, |Maienschein, Lackey, | | | |Burke, Chiu, Gomez, |Patterson | | | |Nazarian, | | | | |Ridley-Thomas, | | | | |Rodriguez, Santiago, | | | | |Thurmond, Waldron, | | | | |Wood | | |----------------+------+---------------------+----------------------| |Appropriations |12-5 |Gomez, Bloom, Bonta, |Bigelow, Chang, | | | |Calderon, Daly, |Gallagher, Jones, | | | |Eggman, Eduardo |Wagner | | | |Garcia, Holden, | | | | |Quirk, Rendon, | | | | |Weber, Wood | | | | | | | | | | | | -------------------------------------------------------------------- SUMMARY: Prohibits a health care service plan or insurer offering plans or policies in the large group market from marketing, offering, amending or renewing a large group plan contract that provides a minimum value of less than 60%. Specifically, this AB 248 Page 2 bill: 1)Prohibits a health plan or insurer, except a specialized plan or policy, from marketing, offering, amending, or renewing a large group contract that provides a minimum value of less than 60%. This means that no plan or insurer can offer a large group contract where the plan or insurer's share of the total cost of benefits is less than 60%. 2)Specifies that a health plan or insurer provides a minimum value of at least 60% if it complies with specified federal requirements regarding employer-sponsored minimum essential coverage (MEC), including affordability and minimum value requirements. FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill has 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: According to the author, large employers, unlike individual and small employers are not required to provide essential health benefits (EHBs) 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 and vulnerable if they get sick. The author argues that this bill closes this federal loophole by ensuring that a limited benefit plan can only be sold as supplemental insurance. The author concludes by stating that if our small business community is required to provide comprehensive insurance to its employees, large employers have no excuse to not offer the same. AB 248 Page 3 1)Differences in large group coverage. Health coverage for the large group market (50 or more employees) is subject to different rules than individual and small group coverage under the Patient Protection and Affordable Care Act (ACA). For example, plans and policies sold in the large group market are not required offer benefit packages that include all EHBs. Additionally, while individual and small group plans must meet specified actuarial value requirements, plans and policies sold in the large group market adhere to minimum value. Under the ACA, for the purposes of employer and individual responsibility requirements, employer-sponsored coverage must have 60% minimum value. However, current law does not prohibit plans or policies that have less than 60% minimum value from being sold in the large group market. 2)Minimum essential coverage. The ACA requires individuals and their family members to have qualifying health coverage, known as MEC. Individuals who do not meet requirements for MEC may be subject to a penalty (currently the greater of $325 or 2% of income) when filing their federal income tax return. The ACA provides certain exceptions to MEC requirements. For example, an individual is exempt from requirements to maintain MEC when the lowest-price coverage available would cost more than 9.5% of household income, or if the individual's employer-sponsored coverage does not meet 60% minimum value. However, recent federal guidance, reviewed and updated by the issued by the Internal Revenue Service on March 27, 2015, states that individuals who enroll an employer-sponsored may not be eligible for the premium tax credit even if the plan is unaffordable or fails to provide minimum value. As such, an individual who accepts employer-sponsored coverage that does not meet 60% minimum value may not be eligible for premium tax credits through Covered California. AB 248 Page 4 3)Employer responsibility requirements. The ACA also imposes a penalty on employers, with at least 50 full-time employees, which do not offer qualifying coverage, meaning coverage that meets 60% minimum value, and which have at least one full-time employee who qualifies for premium tax credits to purchase insurance through an exchange. The penalty is $2,000 for each full-time employee. Additionally, the ACA imposes penalties on large employers that do offer coverage, but that offer coverage that does not meet 60% minimum value or that is not affordable to employees. In this scenario, the penalty is set at the lesser of $3,000 for each employee receiving a premium tax credit through an exchange, or $2,000 for each of their full-time employees (again, excluding the first 30 employees). Support. Supporters state that large employers that offer subminimum coverage to their employees and dependents avoid employer responsibility penalties, and render their employees ineligible for tax credits for coverage through Covered California because they have employer-sponsored coverage. Supporters state that this bill closes a loophole left by federal guidance, and protects consumers by assuring that employer coverage sold in California meets the minimum standard of 60% minimum value. Opposition. Opponents 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. Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097 FN: 0000240 AB 248 Page 5