BILL ANALYSIS Ó
AB 248
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ASSEMBLY THIRD READING
AB
248 (Roger Hernández)
As Amended April 14, 2015
Majority vote
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|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 | |
| | | | |
| | | | |
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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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