BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      SB 546


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         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                  |                    |
         |                |     |                      |                    |
         |                |     |                      |                    |
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                                                                      SB 546


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         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


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           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


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         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


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         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