BILL ANALYSIS                                                                                                                                                                                                    Ó




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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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