BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 546 (Leno) - Health care coverage: rate review
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|Version: April 30, 2015 |Policy Vote: HEALTH 5 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 18, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 546 would establish a rate review process for large
group heath care coverage products.
Fiscal
Impact:
One-time costs of $575,000 to develop and adopt regulations by
the Department of Insurance (Insurance Fund).
Ongoing costs of $1.1 million per year to review rate filing
information and conduct actuarial reviews of rate filing
information by the Department of Insurance (Insurance Fund).
Annual costs of $2.9 million in 2015-16 and $4.9 million per
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year thereafter to development of regulations, review plan
filings, analyze actuarial information, conduct public
hearings, and respond to requests for information from the
public by the Department of Managed Health Care (Managed Care
Fund).
Background: Under current law, the Department of Insurance regulates
health insurers and the Department of Managed Health Care
regulates health plans (collectively, these are referred to as
"carriers"). Current law requires carriers in the individual and
small group markets to provide information regarding rate
increases to their respective regulators annually. The
regulators use this information to conduct reviews of the
proposed rates. The regulators are authorized to make their
findings public, but they do not have the power to reject
proposed rate increases by carriers.
In the large group market, current law requires carriers to
submit certain information on rate increases to their respective
regulators for "unreasonable" rate increases. The federal
government has not provided guidance on what constitutes
unreasonable rate increases in the large group market and
neither department has adopted regulations to implement this
provision of law.
Beginning in 2018, the federal Affordable Care Act imposes an
excise tax on health care coverage that exceeds a specified cost
threshold ($10,200 for individual coverage or $27,500 for family
coverage). The tax would apply to expenditures above the
threshold and would be paid by employers (but the premium
threshold includes both the employer and employee
contributions). This excise tax has been referred to as the
"Cadillac tax".
Proposed Law:
SB 546 would establish a rate review process for large group
heath care coverage products.
Specific provisions of the bill would:
Expand the current requirement to file information on changes
in premium rates or coverage, to also require information
regarding whether the premium rate increase will exceed
specified thresholds or would result in the imposition of the
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federal excise tax on the product;
Require carriers to annually file with their regulator
regarding rate changes, aggregated across the large group
market;
Expand the information that must be filed by carriers for
aggregate large group filings;
Require carriers to also file information on premium rate
increases for specific products when the premium rate increase
for that product is greater than the carrier's average premium
rate increase across the large group market or when a
product's premium rate increase would trigger the federal
excise tax;
Require the Department of Insurance or the Department of
Managed Health Care to determine whether a filing regarding an
individual product (that is reported pursuant to the preceding
bullet) is reasonable.
Related
Legislation:
SB 26 (Hernandez) would require the California Health and
Human Services Agency to establish an all payer claims
database, to allow for analysis of health care expenditures.
That bill will be heard in this committee.
SB 1182 (Leno, Statutes of 2014) requires carriers in the
large group market to share specified data with certain large
purchasers.
SB 746 (Leno, 2013) would have required additional reporting
by large group carriers SB 1182. That bill was vetoed by
Governor Brown.
Staff
Comments: The bill would require carriers to provide
information on aggregate rate increases across all the carrier's
large group products. The bill would also require carriers to
provided product-specific information on rate increases for all
the products whose annual rate increase exceeds the average rate
increase for that carrier. Carriers tend to have many products
in the large group market that are tailored to the specific
needs of their purchasers. Depending on how the rate setting
works for each of those individual products, carriers may be
obligated to provide detailed information for half or more of
their large group products each year. Reviewing this detailed
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information will require considerable staff resources by the
Department of Insurance and the Department of Managed Health
Care
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