BILL ANALYSIS Ó
SB 546
Page 1
SENATE THIRD READING
SB
546 (Leno)
As Amended August 31, 2015
Majority vote
SENATE VOTE: 23-16
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|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
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
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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