BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 546|
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THIRD READING
Bill No: SB 546
Author: Leno (D)
Amended: 6/2/15
Vote: 21
SENATE HEALTH COMMITTEE: 5-2, 4/22/15
AYES: Hernandez, Mitchell, Monning, Pan, Wolk
NOES: Nguyen, Nielsen
NO VOTE RECORDED: Hall, Roth
SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
SUBJECT: Health care coverage: rate review
SOURCE: California Labor Federation
California Teamsters Public Affairs Council
UNITE HERE
DIGEST: This bill establishes a rate review process for a
health plan's or insurer's aggregated large group market
products and requires the Department of Managed Health Care and
the California Department of Insurance to conduct a public
meeting regarding large group rate changes for each plan or
insurer that offers coverage in the large group market between
November 1, 2016, and March 1, 2017, and annually thereafter.
This bill establishes a rate review process for specific large
group health insurance products prior to the implementation of
any rate increase that is 150% greater than the average rate
increase for the large group market enrollees covered in the
aggregated filing or if the rate increase would trigger the
excise tax.
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ANALYSIS: Existing law requires health plans and health
insurers for their large group market products, to file with the
Department of Managed Health Care (DMHC) and the California
Department of Insurance (CDI), at least 60 days prior to
implementing any rate change, specified rate information related
to unreasonable rate increases, including all information that
is required by the Affordable Care Act (ACA). These provisions
have never been implemented.
This bill:
1)Requires health plans and insurers to include in a notice
required 60 days before contract renewal the amount that a
rate change is greater than the average rate increase for
individual market products approved by the California Health
Benefit Exchange, the amount that a rate change is greater
than the average rate increase approved by CalPERS, and
whether the rate change would trigger the excise tax.
2)Requires health plans and insurers for their large group
market products to file required rate information for rate
changes aggregated for their entire large group market on or
before October 1, 2016, and on or before October 1, annually
thereafter.
3)Establishes large group rate filing requirements including
that health plans and health insurers report the average rate
increase for the large group market enrollees or insureds
covered in the filing with the average rate weighted by the
number of covered lives.
4)Requires large group product rate filings 60 days prior to
implementing any rate increase that is:
a) Greater than150% of the average rate increase determined
in 3) above; or
b) Causes the plan for the large group purchaser to incur
the excise tax.
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5)Requires plans and insurers to disclose specified information
for each rate filing required in 4) above similar to the
requirements applicable to the aggregate rate filings and
requires additional disclosures.
6)Requires a plan to submit any other information required under
the ACA, and any other information required pursuant to any
regulation adopted by DMHC or CDI to comply with this bill.
7)Requires DMHC and CDI to conduct a public meeting regarding
large group rate changes for each plan or insurer that offers
coverage in the large group market between November 1, 2016,
and March 1, 2017, and annually thereafter between November 1
and March 1 of the subsequent year. Requires the public
meeting to be scheduled based on the number of covered lives
for each plan with the largest plan first, and the smallest
last.
Comments
1)Author's statement. According to the author, the rising cost
of health care is a major concern for large purchasers in
California, and the lack of transparency in pricing for the
large group market has contributed to uncontrolled cost
increases for large employers and union trusts. According to
the 2014 California Employer Health Benefits Survey, health
premiums in California rose by 185% since 2002, more than five
times the state's overall inflation rate. In addition, one in
four California employers reported that they reduced benefits
or increased employee cost sharing in the last year because of
the rising cost of health care.
SB 1163 (Leno, Chapter 661, Statutes of 2010) requires health
plans and insurers to provide regulators and consumers with
critical data and information documenting the true drivers of
premium increases in the individual and small group markets.
Since its enactment in 2011, SB 1163 has saved California
consumers over $300 million. However, the same protections
have not been implemented for large employers and their
employees. SB 546 extends the transparency and reporting from
SB 1163 to the large group market and triggers prior approval
by a regulator for increases that hit a certain threshold to
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protect employers and workers from unjustified rate increases.
2)ACA and large groups. Not all of the ACA health insurance
reforms apply to issuers in the large group market. According
to a 2014 Congressional Research Report on private market
reforms some key provisions of the ACA impacting the fully
insured large group market include guaranteed issue and
guaranteed renewability, no cost-sharing for preventive health
services, coverage of preexisting health conditions, limits
for annual out-of-pocket spending, and the prohibition on life
time and annual limits. Large employers are required under
the ACA to issue notices about the new insurance market place,
and starting in 2015, large employers not offering affordable
coverage (or coverage that does not meet minimum value) may be
required to pay an assessment if at least one full-time
employee (average of at least 30 hours per week) receives a
premium tax credit to purchase coverage in an exchange. There
are also reporting requirements on employers with 50 or more
full-time employees regarding health coverage offered and tax
and withholding requirements which may apply. According to a
2013 Health Affairs Robert Wood Johnson Foundation Health
Policy Brief, a 40% excise tax will be assessed, beginning in
2018, on the cost of coverage for health plans that exceed a
certain annual limit ($10,200 for individual coverage and
$27,500 for family coverage) subject to adjustment based on
cost increases in the Federal Employees Health Benefits
Program. Health insurance issuers and sponsors of self-funded
group health plans must pay the tax of 40% of any dollar
amount beyond the cap that is considered "excess" spending.
Prior Legislation
SB 1182 (Leno, Chapter 577, Statutes of 2014) requires health
plans and insurers to share specified data with purchasers that
have 1,000 or more enrollees, insureds or that are multiemployer
trusts.
SB 1163 (Leno, Chapter 661, Statutes of 2010) requires carriers
to submit detailed data and actuarial justification for small
group and individual market rate increases at least 60 days in
advance of increasing their customers' rates.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee:
1)One-time costs of $575,000 to develop and adopt regulations by
CDI (Insurance Fund).
2)Ongoing costs of $1.1 million per year to review rate filing
information and conduct actuarial reviews of rate filing
information by CDI (Insurance Fund).
3)Annual costs of $2.9 million in 2015-16 and $4.9 million per
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 DMHC (Managed Care Fund).
SUPPORT: (Verified5/28/15)
California Labor Federation (co-source)
California Teamsters Public Affairs Council (co-source)
UNITE HERE (co-source)
American Federation of State, County, and Municipal Employees,
AFL-CIO
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Federation of Teachers
California Nurses Association
California Pan-Ethnic Health Network
California Professional Firefighters
California Retired Teachers Association
California School Employees Association
California Teachers Association
CALPIRG
Campaign for a Healthy California
Communications Workers of America, District 9, AFL-CIO
Engineers and Scientists of California, IFPTE Local 20, AFL-CIO
Gray Panthers of San Francisco
Health Access California
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International Longshore and Warehouse Union
Laborers' International Union of North America Local 777
Laborers' International Union of North America Local 792
Professional and Technical Engineers, IFPTE Local 21, AFL-CIO
SEIU California
Utility Workers Union of America
OPPOSITION: (Verified5/28/15)
Aetna
America's Health Insurance Plans
Anthem Blue Cross
Association of California Life and Health Insurance Plans
Blue Shield of California
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
California Hospital Association
Culver City Chamber of Commerce
Family Business Association
Fresno Chamber of Commerce
Fullerton Chamber of Commerce
Health Net
Kaiser Permanente
Orange County Business Council
Rancho Cordova Chamber of Commerce
Redondo Beach Chamber of Commerce and Visitors Bureau
San Jose Silicon Valley Chamber
Santa Maria Valley Chamber of Commerce Visitor and Convention
Bureau
Simi Valley Chamber of Commerce
South Bay Association of Chambers of Commerce
Southwest California Legislative Council
ARGUMENTS IN SUPPORT: The California Labor Federation
cosponsors this bill to protect large employers and workers from
unjustified increases in the cost of their health benefits. In
2018, the ACA imposes a tax of 40% on plans over a certain
threshold and in the first year alone, the excise tax is
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anticipated to hit 17% of the U.S. businesses, and 38% of large
employers. Purchasers in California will be particularly hard
hit because the tax is based on national costs and California
premiums are now 5% to 15% more than the national average.
UNITE HERE, also a cosponsor, indicates real progress has been
made to help manage costs but it is not enough. This bill will
for the first time explain how rates are established and trended
forward in the large purchaser market. The insurance market
rules which apply to the individual and small employer markets
do not apply to large purchasers. This bill builds on the
existing rate review infrastructure established under SB 1163
and is within the ACA. Health Access California writes that
this bill will help consumers and purchasers understand how
rates are established and trended forward in the large group
market, factors used in setting rate and rate increases.
ARGUMENTS IN OPPOSITION: The California Association of
Health Plans (CAHP) writes that this bill increases
administrative, legal and state costs compounding affordability
problems and DMHC would need a sizeable number of additional
staff and resources to complete the overwhelming influx of new
work in a timely fashion. CAHP adds that they removed their
opposition to SB 1182 last year and see no compelling reason to
now require large group rating information to state regulators.
America's Health Insurance Plans (AHIP) writes that this bill
fails to offer any solution to address the problem of rising
health care costs that threaten the affordability of health care
coverage in California. AHIP points out that large group rates
are actively negotiated with the large group purchaser and
filing them 60 days in advance is nearly impossible because
rates are often adjusted during the negotiating process to
reflect benefit, network, or other changes that may be discussed
with the large group purchaser throughout the process. The
California Chamber of Commerce (CalChamber) states this bill
"[t]hreatens employers with higher premiums and interferes with
their ability to negotiate with health plans by imposing
unnecessary and burdensome new reporting requirements on health
plans and insurers in the large group market. 'Job killer' tag
removed due to April 30 amendments eliminating authorization for
state regulators to veto or unilaterally alter large-group rate
changes, but CalChamber remains opposed."
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Prepared by:Teri Boughton / HEALTH /
6/3/15 10:40:35
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