BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1305| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1305 Author: Bonta (D) Amended: 9/4/15 in Senate Vote: 21 SENATE HEALTH COMMITTEE: 8-0, 7/1/15 AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen, Pan, Roth NO VOTE RECORDED: Wolk SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen ASSEMBLY FLOOR: 78-0, 6/1/15 - See last page for vote SUBJECT: Limitations on cost sharing: family coverage SOURCE: Author DIGEST: This bill requires maximum out-of-pocket limits and deductibles for health plan or health insurance coverage for families to include maximum out-of-pocket limits and deductibles for each individual of the family to be less than or equal to the maximum out-of-pocket limit and deductibles that apply for coverage purchased for an individual. This bill implements the individual deductible requirement in the large group market on contracts and policies issued, amended, or renewed on or after July 1, 2016. Senate Floor Amendments of 9/4/15 clarify that the provisions AB 1305 Page 2 that place limits on the out-of-pocket maximum and deductibles for an individual member of a family cannot be greater that those limits for an individual. The amendments also revise the adjustment factor on the deductibles for small group coverage and delay the large group market implementation date to January 1, 2017. ANALYSIS: Existing law: 1)Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance policies. 2)Establishes specified limits on annual out-of-pocket expenses for covered benefits that meet the definition of California essential health benefits (EHBs). Identifies as California EHBs, 10 federally mandated categories of coverage, state mandated benefits, and benefits covered under a state-selected benchmark plan. 3)Prohibits the limits described above from exceeding the limit on high deductible health plans (HDHPs), as defined in the federal Internal Revenue Code (IRC) adjusted annually, as described in the ACA, and any subsequent rules, regulations, or guidance issued under the ACA. 4)Limits the deductible for a small employer health plan contract or insurance policy offered, sold, or renewed on or after January 1, 2014, to $2,000 in the case of a plan contract covering a single individual, and $4,000 in the case of any other plan contract or policy. Indexes these amounts consistent with a specified section of the ACA and any federal rules or guidance pursuant to that section. AB 1305 Page 3 5)Requires this limitation to be applied in a manner that does not affect the actuarial value of any small employer health plan contract or insurance policy, and for small group products at the bronze level of coverage, and authorizes DMHC and CDI to permit plans to offer a higher deductible in order to meet the actuarial value requirement of the bronze level. This bill: 1)Prohibits coverage purchased for a family that has a maximum out-of-pocket limit for each individual covered by the plan or policy from having an individual limit that is greater than the maximum out-of-pocket limit for coverage purchased for an individual. 2)Prohibits coverage purchased for a family that includes a deductible for each individual covered by the plan or policy from having an individual deductible that is greater than the deductible for coverage purchased for an individual. 3)Includes an exception in 2) for an HDHP. 4)Implements provisions above in the large group market on contracts and policies issued, amended, or renewed on or after January 1, 2017. 5)Corrects a cross reference in existing law with regard to the indexing of small employer health plan and policy deductible amounts. Comments Author's statement. According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and limit on out-of-pocket costs on an individual simply because the individual is a member of a family. Health plans and insurance policies often include a deductible amount, as well as limits on the amount out-of-pocket costs a person or AB 1305 Page 4 family may incur in a year. The author states that some family plans and policies include deductibles and out-of-pocket limits for individuals in the plan or policy, so when a family member gets sick, he or she only has to reach the individual deductible or cost-sharing limit in order for coverage to kick-in. However, other plans and insurers do not include these individual deductibles and out-of-pocket cost limits within a family plan or policy, which means that families with one member who has more expensive health care needs would have to reach the family limits before coverage kicks in. 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 plan. This bill creates parity between what consumers pay in individual and family plans by embedding individual deductibles and out-of-pocket limits in family plans, and ensures consumers are not unfairly charged for doing what is right by getting family coverage. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee: 1)One-time costs of about $440,000 for policy development and adopting regulations and ongoing costs of about $340,000 per year for DMHC to update policies and respond to public information requests (Managed Care Fund). 2)One-time costs of about $40,000 in 2015-16 and $45,000 in 2016-17 to review plan filings for compliance by CDI (Insurance Fund). Ongoing costs are expected to be minor. 3)No significant costs to the Medi-Cal program or for health care coverage provided by CalPERS are anticipated. According to the California Health Benefits Review Program, health plans and health insurance policies provided by Medi-Cal and CalPERS are already compliant with the requirements of the bill and therefore would not experience any increased costs. SUPPORT: (Verified9/4/15) AB 1305 Page 5 Health Access California (source) American Cancer Society Cancer Action Network American Federation of State, County, and Municipal Employees California Black Health Network California Chapter of the American College of Emergency Physicians California Chapter of the National Association of Social Workers California Chronic Care Coalition California Labor Federation California Pan-Ethnic Health Network California Primary Care Association California School Employees Association California Teachers Association CALPIRG Children Now Children's Defense Fund California Congress of California Seniors Consumers Union The Children's Partnership Western Center on Law and Poverty OPPOSITION: (Verified9/4/15) None received ARGUMENTS IN SUPPORT: Health Access California writes that this bill assures that no Californian has a deductible or out of pocket limit higher than the individual deductible or out of pocket limit. The California School Employees Association indicates that if one person in a family plan gets sick it is unfair for the family to be exposed to the out-of-pocket maximum of $13,300. For classified school employees who earn modest incomes, the maximum out-of-pocket costs could equal their entire salary. This bill would provide much needed relief. According to the Western Center on Law and Poverty this bill could save a family as much as $6,600 in out-of-pocket costs, which is significant for a family with someone facing a serious illness. The California Chapter of the American College of Emergency Physicians believes this bill is an important measure that will prohibit health plans and health insurers from giving an enrollee a higher deductible and out-of-pocket limit because AB 1305 Page 6 the person has a family insurance plan. The California Labor Federation indicates that this solution will provide parity with those enrolled in individual and family health care plans. ASSEMBLY FLOOR: 78-0, 6/1/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Beth Gaines, Hadley Prepared by:Teri Boughton / HEALTH / 9/8/15 16:26:15 **** END ****