BILL ANALYSIS Ó
SB 125
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Date of Hearing: May 12, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
SB
125 (Ed Hernandez) - As Amended May 6, 2015
SENATE VOTE: 38-0
SUBJECT: Health care coverage.
SUMMARY: Establishes an annual open enrollment period in the
individual health insurance market that is consistent with
federal open enrollment dates; conforms state law to federal
requirements regarding how to count employees for the purposes
of determining employer size with regard to small or large group
health insurance markets; extends the sunset date of the
California Health Benefits Review Program (CHBRP) to June 30,
2017, and makes other changes regarding CHBRP analyses and
timelines; contains an urgency clause to make the bill effective
upon enactment. Specifically, this bill:
1)Requires health plans and insurers to provide annual open
enrollment periods for plan or policy years beginning on or
after January 1, 2016, from November 1, of the preceding
calendar year, to January 31 of the benefit year, inclusive.
2)Revises, for plan years commencing on or after January 1,
2016, the definition of small employer to require the use of a
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full-time equivalent (FTE) employee counting method for
determining the size of the employer, specifically whether the
employer is a small employer.
3)Extends CHBRP's sunset date to June 30, 2017, and extends a
fee assessed on health plans and insurers to support CHBRP to
fiscal year 2016-17.
4)Requests CHBRP to:
a) Analyze the impact of legislation proposing or repealing
a benefit or service mandate on essential health benefits
(EHBs), and the California Health Benefits Exchange
(Exchange), referred to as Covered California;
b) Assess legislation that impacts health insurance benefit
design, costs sharing, premiums, and other health insurance
topics;
c) Provide analyses to the appropriate committees of the
Legislature in a manner pursuant to a timeline agreed upon
by the Legislature and CHBRP; and,
d) Submit a report to the Governor and Legislature by
January 1, 2017, regarding the implementation of the
program.
5)Expands the public health impact analysis CHBRP conducts to
include diseases and conditions where there are disparities in
outcomes associated with social determinants of health, as
well as sexual orientation or gender identity.
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EXISTING LAW:
1)Establishes, under federal law, the Patient Protection and
Affordable Care Act (ACA), which sets forth various
requirements on states; plans and insurers; employers; and,
individuals regarding health care coverage.
2)Establishes the Knox-Keene Health Care Service Plan Act of
1975, the body of law governing plans in the state, and
provides for the licensure and regulation of plans by the
Department of Managed Health Care (DMHC).
3)Provides for the regulation of health insurers by the
California Department of Insurance (CDI).
4)Establishes the Exchange for the purposes of facilitating the
purchase of qualified health plans (QHPs) by qualified
individuals and small employers.
5)Requires health plans and insurers to fairly and affirmatively
offer, market, and sell all of the health benefit plans and
policies that are sold in the individual or small group
markets to all individuals (and dependents), or small
employers, respectively, in each of the plan's or insurer's
service area or geographic region.
6)Requires health plans and insurers issuing health benefit
plans in the individual and small group market to comply with
specified requirements regarding the offering, sale, and scope
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of coverage provided, including requirements to cover the
following 10 categories of EHBs: ambulatory patient services;
emergency services; hospitalization; maternity and newborn
care; mental health and substance use disorder services,
including behavioral health treatment; prescription drugs;
rehabilitative and habilitative services and devices;
laboratory services; preventive and wellness services and
chronic disease management; and, pediatric services, including
oral and vision care.
7)Requires plans and insurers to limit enrollment in individual
health benefit plans to annual open enrollment periods, and
special enrollment periods, as specified.
8)Requires plans and insurers to provide an annual open
enrollment period for the policy year beginning January 1,
2015, from November 15, 2014 to February 15, 2015, and annual
enrollment periods for policy years beginning on or after
January 1, 2016, from October 15 to December 7 of the
preceding calendar year.
9)Defines "small employer" for plan years commencing on or after
January 1, 2014, and on or before December 31, 2015, as any
person, firm, proprietary or nonprofit corporation,
partnership, public agency or association that is actively
engaged in business or service, that, on at least 50% of its
working days, as specified, employed at least one, but not
more than 50 eligible employees. For plan years commencing on
or after January 1, 2016, defines a "small employer" as one
with at least one but not more than 100 eligible employees.
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10)Defines "eligible employee" as any permanent employee who is
actively engaged on a full-time basis with a normal workweek
of an average of 30 hours per week over the course of a month,
at the small employer's regular places of business, as
specified. Deems permanent employees who work at least 20
hours, but not more than 29 hours, as eligible employees if
specified criteria are met.
11)Requests the University of California (UC) to establish CHBRP
to assess legislation proposing to mandate or repeal a benefit
or service, as defined, and to prepare a written analysis with
relevant data on the public health, medical, and financial
impact of the mandated or repealed benefit or service.
12)Authorizes the appropriate policy or fiscal committee
chairperson, the Speaker of the Assembly, or the President pro
Tempore of the Senate, to request a written analysis as
described in 11) above, and requires CHBRP to provide the
analysis within 60 days of the request.
13)Assesses each plan and insurer an annual fee to fund the
actual and necessary expenses of CHBRP, and limits the total
annual assessment to $2 million to be deposited into the
Health Care Benefits Fund. Authorizes the fees to be assessed
for fiscal years 2010-11 to 2014-15.
14)Requires the UC to submit a report to the Governor and the
Legislature by January 1, 2014 regarding the implementation of
CHBRP.
15)Sunsets CHBRP on December 31, 2015 (although funding for
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CHBRP is only authorized through June 30, 2015, see 13)
above).
FISCAL EFFECT: According to the Senate Appropriations
Committee, this bill, as amended April 6, 2015, does not create
significant costs for CDI or DMHC, but would result in:
1)Minor administrative costs for the Exchange to revise existing
regulations to conform to the updated open enrollment period;
and,
2)Annual costs of $2 million to support CHBRP. These costs are
supported by an assessment on health plans and health
insurers.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, this bill
updates California statute to reflect the new, post-ACA
environment by reauthorizing CHBRP for two years,
incorporating EHBs and the Exchange into its work, and
expanding the breadth of CHBRP analyses by requesting the
inclusion of impacts from legislation on health insurance
benefit design, cost sharing, premiums, and other health
insurance topics in their assignments. The author states that
this bill also allows for more flexibility in turn-around time
for CHBRP reports.
The author also states that this bill revises the open
enrollment period in the individual market to remain
consistent with federal regulations beginning with the 2016
benefit year. The author asserts that changes in open
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enrollment dates not only align with federal regulations, but
also allow consumers adequate time for plan choice or changes
to their plan prior to a January 1 effective date of coverage.
Finally, the author states that recent federal regulations
require health benefit exchanges to count employees for the
purposes of determining employer group size using a full time
equivalent standard for plan years beginning on or after
January 1, 2016. The author states that this standard is
slightly different than how California currently counts
employees for purposes of determining group size, and that
this bill updates California law so that Exchange plans are
not in conflict with federal regulations and so that the same
requirements apply to non-Covered California plans.
2)BACKGROUND.
a) Open enrollment. The ACA provides for numerous
significant insurance market reforms, such as prohibitions
against health insurers imposing preexisting health
condition exclusions, and a requirement that health plans
and insurers offer EHBs in the individual and small group
markets. Additionally, under the ACA, individuals are
required to maintain health insurance or pay a penalty,
with exceptions for financial hardship, religion,
incarceration, and immigration status.
Open enrollment periods serve as a safeguard against people
waiting to become sick to enroll. Individuals are
generally unable to enroll in individual coverage outside
of the open enrollment period unless they experience a
qualifying life event, which triggers a special enrollment
opportunity. Such events include loss of eligibility for
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other coverage, gaining a dependent, divorce, or a large
change in income.
The ACA requires the U.S. Health and Human Services (HHS)
Secretary to establish open enrollment periods for health
plans sold through state exchanges and requires individual
market plans sold outside an exchange to be offered during
this open enrollment period as well. Under the ACA, an
initial open enrollment period of October 1, 2013 to March
31, 2014 was established, as well as an annual open
enrollment period of November 15, 2014 to February 15,
2015, for the 2015 benefit year.
The federal HHS initially issued a regulation to maintain
the open enrollment period, for benefit years beginning on
or after January 1, 2016, from November 1 to December 15,
inclusive, of the preceding calendar year. However, on
February 20, 2015, HHS issued rules requiring the annual
open enrollment period for the 2016 benefit year to be
November 1, of the preceding calendar year, to January 31
of the benefit year. According to HHS, these changes were
made to give health insurance carriers additional time
before they would need to set their 2016 rates and submit
their applications to participate in state health benefit
exchanges; give states and HHS more time to prepare for
open enrollment; and give consumer more time to shop for
coverage.
b) Small employer definition. Federal and state laws
define a "small employer" as an employer with one to 100
employees, as specified. Federal law allows states to
define small employers as those with one to 50 employees
for plan years prior to January 1, 2016. California
currently exercises this option, so under California law,
until December 31, 2015, small employers are defined as
having one to 50 employees. However, beginning January 1,
2016, a small employer is defined under state law as one
with 1 to 100 employees, as specified.
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While both federal and state laws use similar definitions
of a small employer, the laws vary with respect to how
employees are counted to determine whether or not an
employer can purchase health insurance in the small group
market or the large group market. With respect to
exchanges, federal regulations require, for plan years
beginning on or after January 1, 2016, employees to be
counted using an FTE method. Under the FTE method,
employers are required, in addition to the number of
full-time employees, to count the number of FTE employees
to determine the total number of its employees. This
counting method takes part-time employees into account in
order to determine the size of the employer for the
specific purposes of exchanges.
California law does not require the use of the FTE method
to count employees to determine the size of an employer.
Instead, under California law, "eligible employees" are
counted. "Eligible employees" are defined as permanent
employees actively engaged on a full-time basis with a
normal workweek of an average of 30 hours per week.
Permanent employees who work between 20 and 29 hours per
week may also be deemed eligible employees if specified
criteria are met.
Historically, the federal government has allowed states to
use methods to count employees that differ from federal
methods. Specifically, in 2012, HHS issued a transitional
policy stating that it would not take enforcement action
against an exchange for including a group in the small
group market based on a definition that does not include
part-time employees when the group should have been
classified as part of the large group market based on the
federal definition. HHS also indicated that, given the
option for states to define small employers as those with
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one to 50 employees, states would generally take
legislative action before January 1, 2016 to redefine small
employers to conform to the federal definition of one to
100 employees. HHS assumed that, at that time, states
could also act to adopt an employee counting method that is
consistent with federal law.
California law already complies with the federal definition
of small employers having one to 100 employees. However,
as previously stated, it does not conform to the FTE method
of counting employees. The federal government recently
indicated in the 2014 Notice of Benefit and Payment
Parameters regulations that states must conform to the FTE
method for products sold in the Exchange for the 2016 plan
year. This bill conforms state law to those federal
regulations, and applies to plans and insurers both inside
and outside of the Exchange.
c) CHBRP. Established in 2002, pursuant to AB 1996
(Thomson), Chapter 795, Statutes of 2002, CHBRP responds to
requests from the Legislature to provide independent
analysis of the medical, financial, and public health
impacts of proposed health insurance benefit mandates and
repeals. CHBRP is administered in the UC Office of the
President, and has staff that supports faculty from six UC
campuses and three private universities to complete each
analysis. Health plans and insurers are assessed an annual
fee to fund CHBRP in an amount not to exceed $2 million.
Since 2004, CHBRP has analyzed 112 bills, 45 of which were
passed by the Legislature and enrolled to the Governor.
Thirty-three of those bills analyzed were vetoed, and 11
were signed into law. Since CHBRP's inception, the number
of bills mandating benefits and services has fluctuated.
When AB 1996 was under considered by the Legislature, the
author cited more than 14 mandate bills introduced during
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the 2001-02 legislative session. In 2003, the first year
that the UC received requests for analysis of mandate
bills, only four were introduced and analyzed. The
following year, there were 13 mandate bills analyzed.
Between 2005 and 2014, the number of mandate bills
introduced has varied, with the largest number (15 mandate
bills) in 2011.
In 2015, to date, CHBRP has analyzed seven bills, and is
currently in the process of completing analyses on two
additional bills. Not all of these contain benefit
mandates. However, those that do not are considered to have
potential market impacts worthy of analysis. Additionally,
in previous years, CHBRP has analyzed bills that did not
contain specific benefit mandates, but that had similar
effects as a mandate on coverage requirements.
With the passage of the ACA, and the establishment of EHBs,
policymakers have generally endeavored to discourage
additional legislation to alter state mandated benefits
until the ACA has been implemented and the implications of
EHBs were known. Further, the state must defray the costs
of federal subsidies to cover any benefit mandate enacted
that exceeds EHBs. As such, the potential costs to the
state may serve as a deterrent for bills mandating benefits
not already covered by EHBs. These factors combined may
result in fewer mandate bills for CHBRP to analyze.
Additionally, some legislative proposals that may not
include a direct benefit mandate may contain provisions
that could have a similar effect on coverage requirements.
As such, flexibility in the types of bills sent to CHBRP
for analysis may be warranted.
CHBRP analyses are to be provided within 60 days of receipt
of a request from the Legislature. However, CHBRP had
developed a model that has resulted in some analyses not
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being completed prior to the 60-day deadline. According to
CHBRP's 2013 report to the Legislature, the 60-day clock is
initiated upon receipt of a request from a Senate or
Assembly Health Committee, and it uses a 60-day timeline
that details which activities occur on what day. CHBRP
indicated that it must have sufficient capacity to perform
multiple analyses on simultaneous 60-day timelines. CHBRP
faculty, actuaries, librarians, reviewers, and staff must
produce and review multiple drafts on multiple bills in a
very compressed timeframe, given their model.
This timeline has led to some challenges for incorporating
CHBRP's assessment into policy committee analyses used by
Legislators and the public at the time of the bill hearing,
particularly for benefit mandate bills that are introduced
close to the bill introduction deadline. Since the bill
introduction deadline is around 60 days prior to the
deadline for policy committees to hear bills, mandate bills
introduced at or near the deadline are almost always
scheduled for the final hearing prior to the policy
committee deadline for fiscal bills, leaving a short period
of time between the receipt of the CHBRP analysis and the
time the committee analysis must be completed. This
arrangement gives the Health Committees little time to
incorporate its findings in a meaningful way into the
Committee analysis.
3)SUPPORT. Proponents support this bill's provisions regarding
CHBRP, stating that CHBRP provides a valuable, independent
analysis of the medical, financial, and public health impacts
of proposed benefit mandates and repeals, making it possible
for the Legislature to properly weigh the potential health
benefits and costs to the system. Supporters also note the
need to maintain consistency between open enrollment periods
set forth in state law and federal regulation.
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4)SUPPORT IF AMENDED. Health Access California (HAC) states
that the bill's language requesting CHBRP to assess
legislation that impacts health insurance benefit design, cost
sharing, premiums, and other health insurance topics lacks
focus, and is so broad it could encompass any health insurance
legislation, and depending on the interpretation, could also
include legislation regarding Medi-Cal. HAC seeks amendments
to limit the language to apply only to legislation impacting
benefit design or cost sharing for private health insurance,
and to ensure that an analysis on such legislation includes
the likely impact on premiums and actuarial value.
5)OPPOSITION. The California Right to Life Committee (CRLC)
states that, under this bill, CHBRP analyses must include the
impact on EHBs. CRLC states that EHBs include "preventative"
services which can include reproductive health and abortion
services. CRLC opposes any effort to include or require that
abortion is an essential service or one called "preventative."
6)RELATED LEGISLATION. AB 1102 (Santiago) requires a health
plan insurer to allow an individual to enroll in or change an
individual plan or policy, outside of open enrollment periods,
as a result of pregnancy. AB 1102 is pending in the Assembly
Appropriations Committee.
7)PREVIOUS LEGISLATION.
a) AB 1578 (Pan) of 2014 would have extended CHBRP's sunset
date to June 30, 2016. AB 1578 failed passage in the
Assembly.
b) SB 20 (Ed Hernandez), Chapter 24, Statutes of 2014,
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requires a plan or insurer to provide annual enrollment
periods for policy years beginning on or after January 1,
2016, from October 15 to December 7, inclusive, of the
preceding calendar year.
c) SB 1465 (Committee on Health), Chapter 442, Statutes of
2014, extends the CHBRP's sunset date to December 31, 2015.
d) AB 1083 (Monning), Chapter 852, Statutes of 2012,
reforms California's small group health insurance laws to
enact the ACA, including requirements for all small group
health insurance to provide coverage for EHBs, and defines
small employers for plan years commencing on or after
January 1, 2014, as having 1 to 50 eligible employees, and
commencing on or after January 1, 2016, 1 to 100 eligible
employees, as specified.
e) AB 1540 (Committee on Health), Chapter 298, Statutes of
2009, extends CHBRP's sunset date to June 30, 2015.
f) SB 1704 (Kuehl), Chapter 684, Statutes of 2006, extends
CHBRP's sunset date to January 1, 2011 and added
legislation proposing to repeal a mandated benefit or
service to the types of legislation that the Legislature
requests CHBRP assess. Extended the sunset date of the
program to January 1, 2011.
g) AB 1996 (Thomson), Chapter 795, Statutes of 2002,
requests the UC to establish CHBRP to, within 60 days of
receiving a request by the Legislature, review legislation
proposing to mandate or repeal a health plan or health
insurance benefit or service for public health, medical,
and financial impacts; sunsets CHBRP on January 1, 2007.
8)POLICY COMMENTS.
a) This bill applies FTE method of counting employees to
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determine employer size for products sold both inside and
outside of the Exchange. An overarching goal in the
implementation of the ACA in California is to ensure, to
the extent possible, that laws applicable to plans and
insurers participating in the Exchange are also applied to
plans and insurers sold outside of the Exchange so as to
ensure a level regulatory playing field, and parity between
the markets. While federal regulations require the use of
the FTE method to determine employer size solely for the
purposes of the Exchange, this bill is consistent with this
goal by requiring the use of the FTE method both inside and
outside of the Exchange.
b) Clarifying CHBRP's sunset date. It is commonly stated
that CHBRP will sunset on June 30, 2015, even though its
statutory sunset date is December 31, 2015. For
clarification, under current law, the fee assessed on
health plans and insurers to support CHBRP is authorized
only through the end of the 2014-15 for fiscal year, which
is June 30, 2015. Thus, while CHBRP is set to sunset on
December 31, 2015, funding to support CHBRP is only
available through June 30, 2015.
9)SUGGESTED AMENDMENT. The author may wish to consider the
following clarifying amendment:
Proposed Health and Safety Code Section 1357.500(k)(3) and
Insurance Code Section 10753(q)(3):
For plan years commencing on or after January 1, 2016, the
definition of small employer, for purposes of determining the
number of employees that count towards whether the employer
group is subject to this article, shall be determined using
the method for counting full-time equivalent employees set
forth in Section 4980(c)(2) of the Internal Revenue Code.
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REGISTERED SUPPORT / OPPOSITION:
Support
Anthem Blue Cross (previous version)
Association of California Life and Health Insurers (previous
version)
California Association of Health Plans (previous version)
California Chamber of Commerce (previous version)
California Immigrant Policy Center (previous version)
Health Access California (if amended)
Western Center on Law and Poverty (previous version)
Opposition
California Right to Life Committee (previous version)
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Analysis Prepared by:Kelly Green / HEALTH / (916)
319-2097