BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 248
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|AUTHOR: |Roger Hernández |
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|VERSION: |June 10, 2015 |
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|HEARING DATE: |June 24, 2015 | | |
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|CONSULTANT: |Teri Boughton |
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SUBJECT : Health insurance: minimum value: large group market
policies.
SUMMARY : Prohibits non-grandfathered health plans or health insurers
that offer, amend, or renew a large group health plan contract
or health insurance policy from marketing, offering, amending,
or renewing a large group plan contract or health insurance
policy that provides a minimum value of less than 60%. Requires
a life licensee who is authorized to transact accident and
health insurance, as described, that offers coverage of health
benefits to a large group purchaser to document to the Insurance
Commissioner that the health benefits provided to insureds
provides at least 60% minimum value and prohibits the licensee
from offering, selling or transacting coverage that does not
provide at least 60% minimum value.
Existing law:
1)Enacts, in federal law, the Affordable Care Act (ACA) to,
among other things, impose a penalty on employers, with at
least 50 full-time employees, that do not offer qualifying
coverage of minimum value (which means the plan's share of the
total allowed costs of benefits provided under the plan is
less than 60% of such costs), or that offer coverage that is
not affordable (employee's premium is more than 9.5% of annual
household income) if at least one full-time employee qualifies
for premium tax credits to purchase insurance in a health
benefit exchange.
2)Applies the employer responsibility provisions described above
to firms with 100 or more full-time equivalent employees
starting in 2015 and employers with 50 or more full-time
equivalent employees starting in 2016.
AB 248 (Roger Hernández) Page 2 of ?
3)Requires effective January 1, 2014, that all individuals with
access to affordable coverage have minimum essential coverage
or pay a penalty of $95 or 1% of income (whichever is greater)
for 2014, $325 or 2% of income for 2015, $695 or 2.5% of
income (up to a cap of the premium for a Bronze plan) for
2016, and caps adjusted by increases in cost of living after
2016.
4)Establishes exceptions to the individual responsibility
requirements described in 4) above for individuals not
lawfully present in the U.S., religious objectors,
incarcerated individuals, taxpayers with income below the
filing threshold, members of Indian tribes, those granted a
hardship waiver and individuals who were not covered for less
than three months of the year.
5)Establishes as minimum essential coverage, health insurance
coverage provided by an employer, health insurance purchased
through an exchange, coverage provided under a
government-sponsored program (including Medicare, Medicaid,
and health care programs for veterans), health insurance
purchased directly from an insurance company, and other health
insurance coverage that is recognized by the Department of
Health & Human Services (HHS) as minimum essential coverage.
6)Requires employers with over 50 employees to report to HHS
whether it offers minimum essential coverage to its employees
and their dependents.
7)Defines grandfathered plans as coverage in place in 2010 when
the ACA was enacted.
8)Provides, in state law, for the regulation of health plans by
the Department of Managed Health Care (DMHC) under the
Knox-Keene Act, including a requirement that health plans
cover basic health care services such as physician, inpatient
and ambulatory services.
9)Provides for the regulation of health insurers by the
California Department of Insurance (CDI) under the Insurance
Code.
10)Requires non-grandfathered individual and small group health
plan and health insurance products to cover essential health
benefits (EHBs) which consists of ten federally mandated
AB 248 (Roger Hernández) Page 3 of ?
benefit categories and additional state mandated benefits.
11)Defines health benefit plan as any group or individual policy
of health insurance, and excludes from the definition
specified policies or certificates where the carrier issues a
statement to CDI that the policies or certificates are
supplemental health insurance and not a substitute for
coverage that provides EHBs or minimum essential coverage.
12)Requires the carrier to require that the insured person is
covered by an individual or group policy or contract that
arranges or provides medical, hospital, and surgical coverage
not designed to supplement other private or governmental
plans.
13)Establishes California's Health Benefit Exchange (Covered
California) as an independent entity in state government not
affiliated with any state agency or department, governed by a
five member board. Requires the Covered California board to
establish and use a competitive process to select
participating carriers and other contractors.
This bill:
1)Prohibits a non-grandfathered health plan or health insurer
that offers, amends, or renews a large group health plan
contract or health insurance policy from marketing, offering,
amending, or renewing a large group plan contract or health
insurance policy that provides a minimum value of less than
60%.
2)Excludes from the prohibition in 1) above a health plan
offering a specialized health plan contract, or an insurer
issuing a specialized health insurance policy. Excludes
limited wraparound coverage, as specified. Excludes a
grandfathered health insurance policy that provides basic
health care services, as defined, without annual or lifetime
limits for any of the basic health care services.
3)Requires a life licensee who is authorized to transact
accident and health insurance, as described, that offers
coverage of health benefits to a large group purchaser to
document to the Insurance Commissioner that the health
benefits provided to insureds provides at least 60% minimum
AB 248 (Roger Hernández) Page 4 of ?
value and prohibits the licensee from offering, selling or
transacting coverage that does not provide at least 60%
minimum value. States that health reimbursement accounts do
not constitute benefits provided to insureds.
4)Finds and declares that an employee of a large employer who
accepts health coverage from his or her employer that is less
than 60% minimum value is barred by federal guidance from
obtaining federal tax credits for affordable health coverage
through Covered California.
5)States legislative intent in enacting this act to ensure that
employees of large employers who are offered health coverage
by their employers are offered coverage that meets or exceeds
60% minimum value, the minimum standard for comprehensive
employer coverage under federal law. This requirement applies
if an employer purchases that health coverage from a health
plan or health insurer regulated by the State of California.
FISCAL
EFFECT : According to the Assembly Appropriations Committee,
minor and absorbable costs to CDI and DMHC to verify plans and
policies comply with this requirement. The large majority of
plans and policies already comply.
PRIOR
VOTES :
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|Assembly Floor: |51 - 27 |
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|Assembly Appropriations Committee: |12 - 5 |
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|Assembly Health Committee: |12 - 3 |
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COMMENTS :
1)Author's statement. According to the author, AB 248 creates a
consistent baseline for health insurance requirements in the
State of California. Large employers (50 full time employees
or more) health insurance, unlike individual and small
employer health insurance, is not required to provide EHBs.
AB 248 (Roger Hernández) Page 5 of ?
This has created a federal loophole so that large employers
are not held to the same minimum benefits standards as small
employers and individuals. The result has been some health
insurers selling limited benefit or "skinny" health plans,
such as prevention-only or indemnity insurance to large
employers, primarily those with low-wage workers. Some of
these so called skinny plans do not cover doctor visits,
hospital stays, emergency rooms, prescription drugs, x-rays,
hospice or other preventative care. This can leave workers
vulnerable to thousands of dollars in medical bills when they
get sick. We need to end this loophole that rewards bad
behavior. If our small business community is required to
provide comprehensive health insurance to its employees, large
employers have no excuse to not offer the same. AB 248
protects the spirit of the ACA, and everyone's access to
affordable and comprehensive health coverage.
2)Federal Health Reform. On March 23, 2010, the federal
government enacted the ACA (Public Law 111-148), which was
further amended by the Health Care Education Reconciliation
Act (H.R. 4872). The ACA, as modified by the U.S. Supreme
Court ruling, gives states the option to expand eligibility in
the Medicaid program to include adults without children, and
it contains other required program simplifications. Regarding
the private health insurance market, the ACA primarily
restructures the individual and small group markets, setting
minimum standards for health coverage, providing financial
assistance to individuals with income below 400 % of the
federal poverty level (FPL), tax credits for small employers,
and the establishment of health benefit exchanges and
essential health benefits that are required to be offered by
qualified health plans (QHPs), which are plans participating
the small group and individual market through Exchanges. QHPs
are required to offer coverage at one of four levels: bronze,
silver, gold, or platinum and a catastrophic plan which can
only be offered by plans participating in the Exchange.
Levels are based on a specified share of full actuarial value
of the EHBs (see below). Catastrophic plans are also permitted
only in the individual market for young adults (under age 30)
and for those persons exempt from the individual mandate. Some
individuals with income under 400% FPL will receive
advanceable, refundable tax credits toward the purchase of an
Exchange plan. The payment will go directly to the insurer
and will reduce the premium liability for that individual.
There are also cost sharing reductions for those who qualify.
AB 248 (Roger Hernández) Page 6 of ?
3)Actuarial Value Categories. The ACA establishes four benefit
categories-bronze, silver, gold, and platinum-all of which
will cover the EHBs. Policies cannot be sold in the
small-group and individual market or exchanges that do not
meet the actuarial standards for the benefit categories
established by law. All carriers selling in the individual
and small group markets are at least required to offer silver
and gold plans under the federal law.
a. The bronze package represents minimum creditable
coverage with an actuarial value of 60% (i.e., covering
60% of enrollees' medical costs) with out-of-pocket
spending limited to that which is defined for health
savings accounts (HSAs), or $6,450 for individual
policies and $12,900 for family policies in 2015;
b. The silver benefit package has an actuarial value of
70% and the same out-of-pocket limits;
c. The gold package has an actuarial value of 80% and
the same out-of-pocket limits, and,
d. The platinum package covers 90% of costs with the
same out-of-pocket limits.
e. A catastrophic benefit package can be made available
for adults younger than age 30, similar to HSA-eligible,
high-deductible plans, with EHBs, preventive services
excluded from the deductible as under current HSA law,
three primary care visits, and cost-sharing to HSA
out-of-pocket limits. People who are unable to find a
plan with a premium that is 8% or less of their income
will be able to purchase the young adult plan as well,
regardless of age.
4)Employer Survey. According to the 2014 California Employer
Health Benefits Survey, the percentage of employers offering
coverage continues to decline in California and many covered
workers are seeing reduced benefits and increased cost
sharing. Eighty percent of covered California workers had an
HMO (which is more comprehensive coverage) option in 2014,
compared to only 31% of covered workers nationally, and
California workers were less likely to have a high deductible
plan. Sixty-five percent of all California firms offered a
high deductible health plan in 2014 and 11% of them also
offered health reimbursement accounts, while 33% offered
health savings accounts. Thirty percent of Californians were
enrolled in a partly or completely self-insured plan in 2014,
AB 248 (Roger Hernández) Page 7 of ?
compared with 61% nationally. The gap between the state and
national figures is associated with California's high HMO
enrollment, since HMOs are less likely than other plans to be
self-insured.
5)Prior legislation. AB 2088 (Hernandez, 2014) would have
required a health plan or insurer that offers, amends, or
renews a group plan contract or policy that does not provide a
minimum value of at least 60% to a large group to require that
the persons to be covered by the plan contract or policy are
covered by an individual or group plan contract or policy that
arranges or provides medical, hospital, and surgical coverage
not designed to supplement other private or governmental plans
and that provides at least 60% minimum value. In his veto
message, the Governor writes, this bill seeks to prevent
substandard health care coverage from being sold in the
employer market by setting a minimum threshold for value.
While well-intentioned, to the extent this bill would outlaw
any "grandfathered plans" - those products that have been
continuously sold to an employer prior to the passage of the
Affordable Care Act - it may violate federal law.
6)Support. Health Access California writes that the rules for
large employers are different than the rules for small
businesses: small businesses can only purchase coverage that
is at least 60% actuarial value. Large employers that offer
subminimum coverage to their employees and dependents avoid
the employer responsibility penalty and their employees are
not eligible for tax credits because they have
employer-sponsored coverage. Guidance issued by the Internal
Revenue Service means that if a large employer offers coverage
that "fails to provide minimum value" and the employee accepts
that subminimum coverage, the employer escapes the employer
penalty and the employee is not eligible for the premium tax
credit. Health Access describes one product, called Freedom
Care that does not cover hospital, emergency or prescription
drug coverage. Blue Shield of California writes that this
measure will protect working Californians from being offered
substandard health insurance coverage by ensuring that a
limited benefit plan can only be sold as supplemental to
comprehensive insurance. Anthem believes these limited
benefit plans place their provider partners at much greater
risk of bad debt and also places consumers in a position where
they are more likely to not understand what their coverage
includes. The California Professional Firefighters writes
AB 248 (Roger Hernández) Page 8 of ?
that this bill protects workers from being offered on-the-job
coverage that is below the minimum value standards. The
California School Employees Association makes sure that these
barebones plans will not be offered instead of comprehensive
health coverage and, if offered at all, they must be
supplemental to comprehensive coverage.
7)Opposition. The California Association of Health
Underwriters (CAHU), the Independent Insurance Agents and
Brokers of California (IIABCal), the National Association of
Insurance and Financial Advisors of California (NAIFA
California), and the California Association of Small Employer
Health Plans (CASEHP) write that this bill would make
providing health care even more expensive for large employers
by insisting the employer-plan hit 60% minimum value before
other products can be added. This bill would negatively
impact employers with multi-state operations as they would
have to have a different health plan for one state versus all
49 other states, and that nothing in the ACA dictates just how
a large employer may construct their health benefit package in
order to reach the 60% minimum value. There are a number of
health care products of varying types that can be placed
together to create a health care package that meets the
minimum value requirements of the ACA. CAHU, NAIFA, IIABCal
and CASEHP believe this bill inappropriately attempts to stop
large employers from using legally permissible building blocks
of coverage because the first building block is not a 60%
minimum value plan.
8)Amendments. The author requests the committee adopt
amendments to delete subdivision (d) in Insurance Code section
10112.9 on page 4, lines 22-30 related to requirements on a
life licensee who is authorized to transact accident and
health insurance.
SUPPORT AND OPPOSITION :
Support: Health Access California (sponsor)
American Federation of State, County and Municipal
Employees, AFL-CIO
Anthem Blue Cross
Blue Shield of California
California Black Health Network
California Conference Board of the Amalgamated Transit
Union
AB 248 (Roger Hernández) Page 9 of ?
California Conference of Machinists
California Immigrant Policy Center
California Labor Federation
California Nurses Association
California Pan-Ethnic Health Network
California Professional Firefighters
California School Employees Association
California State Council of the Service Employees
International Union
California Teachers Association
California Teamsters Public Affairs Council
Community Clinic Association of Los Angeles County
Consumers Union
Engineers & Scientists of California
International Longshore & Warehouse Union
LIUNA Local 777
LIUNA Local 792
Professional & Technical Engineers
UNITE-HERE, AFL-CIO
Utility Workers Union of America
Western Center on Law and Poverty
Oppose: California Association of Health Underwriters
California Association of Small Employer Health Plans
Independent Insurance Agents and Brokers of California
National Association of Insurance and Financial
Advisors of California
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