BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                       AB 248


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          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  








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          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.









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          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.










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          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








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