BILL ANALYSIS Ó SB 546 Page 1 SENATE THIRD READING SB 546 (Leno) As Amended August 31, 2015 Majority vote SENATE VOTE: 23-16 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Health |11-8 |Bonta, Bonilla, Chiu, |Maienschein, Burke, | | | |Gomez, Gonzalez, |Chávez, Lackey, | | | |Roger Hernández, |Patterson, | | | |Nazarian, Rodriguez, |Ridley-Thomas, | | | |Santiago, Thurmond, |Steinorth, Waldron | | | |Wood | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |12-5 |Gomez, Bloom, Bonta, |Bigelow, Chang, | | | |Calderon, Nazarian, |Gallagher, Jones, | | | |Eggman, Eduardo |Wagner | | | |Garcia, Holden, | | | | |Quirk, Rendon, Weber, | | | | |Wood | | | | | | | | | | | | ------------------------------------------------------------------ SB 546 Page 2 SUMMARY: Requires health care service plans and health insurers (collectively referred to as carriers) to file specified information regarding rate changes aggregated for the entire large group market, and the Department of Managed Health Care (DMHC) and the Department of Insurance (CDI) to conduct a public meeting regarding aggregate large group rate changes. Specifically, this bill: 1)Requires large group carriers to include in a written notice to purchasers of a change in premium rates or coverage whether the rate proposed is greater than the average rate increase for individual market products negotiated by the California Health Benefit Exchange (referred to as Covered California), greater than the average rate increase negotiated by the California Public Employees' Retirement System, and whether the rate change includes any portion of the excise tax paid by the carrier. 2)Requires carriers, for large group contracts, to file with the DMHC or CDI the weighted average increase, as specified, for all large group benefit designs during the preceding calendar year. 3)Requires DMHC and CDI to each conduct an annual public meeting, to be held in the Los Angeles or San Francisco Bay areas, regarding large group rates within three months of posting the aggregate large group rate information in order to permit a public discussion of the reasons for changes in rates, benefits, and cost sharing in the large group market. 4)Requires carriers, by October 1, 2016, and annually thereafter, to disclose specified information related to the large group market aggregate rate information submitted to DMHC and CDI, including the number and percentage of rate changes, as SB 546 Page 3 specified; factors affecting the base rate; the plan's overall annual medical trend factor assumptions for all benefits, and by benefit category; the amount of projected trend attributable to use of services, price inflation, and fees and risk by aggregate benefit category; a comparison of the aggregate per enrollee per month costs and rate of changes over the last five years; changes in enrollee cost sharing and benefits; cost containment and quality improvement efforts; and, the number of products covered by the information that incurred the excise tax paid by the health plan. FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill will result in: 1)Estimated costs to DMHC in the range of $1.2 million for the first two years and $1 million ongoing (Managed Care Fund). 2)Estimated costs to CDI in the low hundreds of thousands for first two years. Ongoing costs could be in the range of $250,000 (Insurance Fund) annually. COMMENTS: 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. The author states that, in order to preserve employer-sponsored insurance, more needs to be done to contain costs. The author cites SB 1163 (Leno), Chapter 661, Statutes of 2010, which requires 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. The author states that the same protections have not been implemented for large employers and their employees, and this bill will extend the transparency requirements to the large group market. SB 546 Page 4 In order to increase transparency with regard to rate increases for large purchasers, state law requires carriers to provide at no charge, upon request, specified de-identified claims data or equivalent cost information to any large group purchaser that is an employer-sponsored plan with more than 1,000 covered lives or a multiemployer trust, and that demonstrates its ability to comply with applicable privacy laws. The Patient Protection and Affordable Care Act established a 40% excise tax, 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), as specified. Health insurance issuers and sponsors of self-funded group health plans must pay the tax of 40% of any dollar amount beyond the caps that is considered "excess" spending. The premium includes both the portion paid by the employer and the employee contribution. The excise tax is also referred to as the "Cadillac" tax. This bill is sponsored by the California Labor Federation (CLF), California Teamsters Public Affairs Organization, and UNITE HERE, and is supported by labor organizations and consumer advocates. Supporters argue that health insurance premiums for employer-sponsored coverage in California climbed 180% between 2002 and 2014, outpacing a 33% rise in overall inflation. Supporters argue that getting more information on rate setting in this market is the next logical step in controlling and reducing health care costs, and that this bill will help consumers and large purchasers understand how rates are established and trended forward in the large group market by collecting information about large group rates on an aggregate basis. CLF adds that this bill is urgently needed because of the looming excise tax which will increase pressure on large purchasers to contain costs to stay under the taxation thresholds. SB 546 Page 5 Carriers oppose the previous version of this bill, primarily due to requirements for rate review in the large group market. Opponents state that the volume of filings would be overwhelming, that this bill will drive up state costs and premiums by expanding DMHC and CDI workload, that the bill may drive more large employers to self-insure, and that the bill does nothing to address underlying causes of increasing health care costs. Business groups oppose the previous version of the bill questioning its effectiveness in reducing health care costs, and arguing that this bill will increase state costs and premiums. Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097 FN: 0001725