BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 546|
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UNFINISHED BUSINESS
Bill No: SB 546
Author: Leno (D)
Amended: 8/31/15
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
SENATE FLOOR: 23-16, 6/3/15
AYES: Allen, Beall, Block, De León, Galgiani, Hall, Hancock,
Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva,
Liu, McGuire, Mendoza, Monning, Pan, Pavley, Wieckowski, Wolk
NOES: Anderson, Bates, Berryhill, Cannella, Fuller, Gaines,
Glazer, Huff, Moorlach, Morrell, Nguyen, Nielsen, Roth,
Runner, Stone, Vidak
NO VOTE RECORDED: Mitchell
ASSEMBLY FLOOR: 51-27, 9/10/15 - See last page for vote
SUBJECT: Health care coverage: rate review
SOURCE: California Labor Federation
California Teamsters Public Affairs Council
UNITE HERE
DIGEST: This bill establishes weighted average rate increase
disclosure requirements for a health plan's or insurer's
aggregated large group market products and requires the
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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 also creates a notice
to employers 60 days prior to renewal about the rate increase
relative to rate increases negotiated by the California Health
Benefit Exchange and CalPERS, and whether the rate change
includes any portion of the excise tax paid by the plan.
Assembly Amendments (1) delete requirements that health plans
and insurers for their large group market products 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; and (2) delete the large
group product rate filing requirements from the Senate version
of this bill.
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 whether the rate
proposed is greater than the average rate increase for
individual market products negotiated by the California Health
Benefit Exchange, the amount that a rate change is greater
than the average rate increase negotiated by CalPERS, and
whether the rate change includes any portion of the excise tax
paid by the plan.
2)Establishes large group rate filing requirements including
that health plans and health insurers report the weighted
average rate increase for all large group benefit designs
during the 12 months period ending January 1 of the following
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calendar year.
3)Requires plans and insurers to disclose specified information
for the aggregate rate information similar to the requirements
applicable to the aggregate rate filings and requires
additional disclosures.
4)Requires a plan to submit any other information required by
DMHC or CDI to comply with this bill.
5)Requires DMHC and CDI to conduct an annual public meeting
regarding large group rate changes for each plan or insurer
that offers coverage in the large group market.
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 similar transparency and
reporting from SB 1163 to the large group market.
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
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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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee:
1)Estimated costs to DMHC in the range of $1.2 million for the
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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.
SUPPORT: (Verified9/10/15)
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 Public Employees' Retirement System
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
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
The Beverly Hilton
UPS
Utility Workers Union of America
OPPOSITION: (Verified9/10/15)
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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
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
builds on the existing rate review infrastructure established
under SB 1163 and is within the ACA.
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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 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.
ASSEMBLY FLOOR: 51-27, 9/10/15
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chau, Chiu, Chu, Cooper, Dababneh, Daly, Dodd, Eggman,
Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin,
Jones-Sawyer, Levine, Linder, Lopez, Low, McCarty, Medina,
Mullin, Nazarian, O'Donnell, Quirk, Rendon, Rodriguez, Salas,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Weber,
Williams, Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Cooley, Dahle, Beth Gaines, Gallagher, Grove, Hadley,
Harper, Jones, Kim, Lackey, Maienschein, Mathis, Mayes,
Melendez, Obernolte, Olsen, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Perea, Ridley-Thomas
Prepared by: Teri Boughton / HEALTH /
9/10/15 23:28:06
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