BILL ANALYSIS Ó
AB 1305
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ASSEMBLY THIRD READING
AB
1305 (Bonta)
As Amended May 5, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+---------------------+---------------------|
|Health |18-0 |Bonta, Maienschein, | |
| | |Bonilla, Burke, | |
| | |Chávez, Chiu, Gomez, | |
| | |Gonzalez, Lackey, | |
| | |Nazarian, Patterson, | |
| | |Ridley-Thomas, | |
| | |Rodriguez, Santiago, | |
| | |Steinorth, Thurmond, | |
| | |Waldron, Wood | |
| | | | |
|----------------+------+---------------------+---------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Gordon, Holden, | |
| | |Jones, Quirk, | |
| | |Rendon, Wagner, | |
AB 1305
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| | |Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Requires family health plan contracts and insurance
policies to include a maximum deductible and out-of-pocket cost
sharing limit for each individual covered by the plan or policy,
that is no greater than the deductible or out-of-pocket limit for
an individual plan or policy. Makes exceptions for family
high-deductible health plans (HDHPs) by requiring them to include
a per-individual deductible within the plan or policy that is
equal to the minimum deductible required under federal law or the
deductible for individual coverage under the plan, whichever is
greater.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, the California Health Benefit Review Program estimates:
1)No impact on publicly funded health insurance programs.
2)Reduced expenditures in the private market of tens of millions
of dollars, mostly in the form of reduced premium payments for
individually purchased insurance, based on individual
cost-sharing amounts going up to family cost-sharing amounts for
some consumers. However, California Health Benefits Review
Program (CHBRP) states this is likely an overestimate due to
data limitations. Any impact on expenditures would depend on how
product offerings and consumer behavior changed to comply with
this bill's provisions.
COMMENTS: According to the author, this bill prohibits a health
plan or insurer from imposing a higher deductible and
out-of-pocket cost limit on an individual simply because the
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individual is a member of a family. The author states that some
family plans and policies include deductibles and out-of-pocket
limits for each individual in the plan or policy, so each family
member only has to reach his or her individual deductible or
cost-sharing limit in order for coverage to kick-in. However, the
author states other plans and insurers do not embed these
individual deductibles and out-of-pocket costs limits within the
family plan or policy, which means that a family member who
becomes ill has to meet the entire family deductible or
out-of-pocket cost sharing limit before coverage kicks in. The
author argues that under this structure, families with one member
with high health care costs are forced to pay thousands of dollars
in out-of-pocket expenses simply because they are in a family.
The author states that this bill creates parity between what
consumers pay in individual and family plans and protects
consumers from having to pay more toward their care because they
are a family member covered under a family plan. The author
states that this bill aligns with regulations set by our state's
health benefits exchange (Exchange), which require Exchange plans
and policies to include individual deductibles and out-of-pocket
limits in family plans. The author also states that this bill is
consistent with federal regulations regarding limits on
out-of-pocket cost sharing, and will make California a national
leader in terms of individual deductibles embedded in family
plans.
1)Deductibles and other consumer out-of-pocket cost sharing. In a
family plan, deductibles and maximum out-of-pocket limits may be
structured in two ways. Some plans and policies impose an
aggregate deductible or out-of-pocket maximum in family
coverage. Under the aggregate structure, the total family
deductible must be paid out-of-pocket before health insurance
starts paying for health care services incurred by any family
member. Take, for example, a plan or policy that has a $5,000
deductible for individual coverage, and a $10,000 deductible for
a family coverage. Under this structure of aggregate
deductibles, an individual in the family who falls ill would
have to reach the $10,000 deductible before coverage would
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start, even though that same individual would have a $5,000
deductible if they had an individual plan.
In contrast, most family plans and policies, in addition to an
overall family deductible and out-of-pocket limit, embed lower
deductibles and out-of-pocket limits for each individual in the
family plan. Under this structure, one individual in the family
plan has to reach his or her own lower individual deductible or
out-of-pocket limit for coverage to commence, regardless of
whether the larger family deductible is met. Using the same
example in the preceding paragraph, the individual in the family
who falls ill would only have to meet a $5,000 deductible before
his or her coverage kicks in. This bill would require plans and
policies to use this structure of embedded deductibles and
out-of-pocket limits.
2)Federal regulations. On February 27, 2015, the United States
Department of Health and Human Services (HHS) issued a notice of
final regulations regarding cost sharing parameters, clarifying
that the out-of-pocket limit for individual coverage applies to
all individuals regardless of whether the individual is covered
by an individual plan or a family plan. HHS states that in both
of these cases, an individual's cost sharing for EHBs may never
exceed the individual cost sharing limits. These federal
regulations do not apply to deductibles. On May 8, 2015, the
federal government issued guidance on the implementation of
embedded out-of-pocket limits in family plans or policies.
3)Exchange standard benefit plan design. Each year, the Exchange
sets a standard benefit design that plans and insurers must use
when selling products through the Exchange. On May 21, 2015,
the Exchange board adopted regulations to implement its 2016
standard benefit design, which contains provisions similar to
those in this bill, limiting deductibles and out-of-pocket
limits in all plans and policies to the individual amount.
4)CHBRP analysis. CHBRP conducted an evidence-based assessment of
the previous version of this bill which was published on April
22, 2015. According to CHBRP, approximately 98% of enrollees in
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plans or policies subject to this bill are covered by plans and
policies that have no deductible, or already have an embedded
deductible. CHBRP found that HDHPs, which can be paired with
tax-advantaged HSAs or health reimbursement accounts would be
the only products affected by this bill. As such, this bill
would affect the insurance of approximately 2.1% (506,722) of
the 24.6 million Californians who have health insurance
regulated by the state that may be subject to any state health
benefit mandate law.
With regard to cost-impact, CHBRP estimates a decrease total net
annual expenditures of consumers by $37.7 million, with the
majority of the savings coming from reduced premiums in the
individual market, reduction in cost-sharing as individuals may
reduce utilization due to a higher deductible, and families
benefitting from having the embedded deductible in their plan.
Staff Comment. As previously stated, CHBRP's cost impact estimate
is based on the previous version of this bill. Under the previous
version of this bill, family HDHPs may have fallen out of
compliance with federal rules regarding minimum deductibles. As
such, CHBRP based its cost estimate on assumptions that plans and
insurers would respond by increasing individual HDHP deductibles
to avoid federal noncompliance. Recent amendments to this bill
address this issue, and ensure that HDHPs would not violate
federal rules.
According to CHBRP, it is unable to provide a quantitative
estimate on the current version of this bill due limitations on
data from plans and insurers. As such, at this time, the cost
impact of the current version of this bill is unclear.
Support. Health Access California (HAC), the sponsor of this
bill, states that this bill would assure that no Californian has a
deductible or out-of-pocket limit higher than the individual
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deductible or out-of-pocket limit, respectively. HAC states that
one of the most important protections of the ACA is the maximum
out-of-pocket limit, which will save Americans from medical
bankruptcy. HAC asserts that this bill will further protect
Californians by assuring that no individual with family coverage
will have higher medical costs simply because they belong to a
family. Other supporters state that this bill removes the
inequality between individuals and families, by limiting
deductibles and out-of-pocket maximums to the individual limit
when the individual is a member of a family, will make sure that
individuals are not financially penalized because they get sick
and are in a family plan, and will prevent financial insecurity
and overwhelming debt for families when one family member has
significant health needs.
Opposition. The California Chamber of Commerce (Chamber) states
that this bill will drive up premium costs for employers and
employees, that stricter caps on cost-sharing requirements do not
address overall health care affordability. The Chamber states
that this bill will have a disproportionate impact on small-group
premiums because small group plans are subject to a deductible
limit. The Chamber argues that, due to the limitations on
cost-sharing imposed by this bill, all families would have to pay
higher premiums, and it makes little sense to help families afford
their out-of-pocket costs if it jeopardizes their ability to
afford coverage altogether. The Chamber concludes that the fact
that deductibles, cost-sharing, and premiums are prohibitively
expensive for some individuals and families reflects the
unsustainable costs of our health care system, and this problem
cannot be addressed by simply capping out-of-pocket costs.
Analysis Prepared by: Kelly Green / HEALTH /
(916) 319-2097 FN: 0000717
AB 1305
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