BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 908
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|AUTHOR: |Hernandez |
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|VERSION: |March 29, 2016 |
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|HEARING DATE: |April 6, 2016 | | |
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|CONSULTANT: |Teri Boughton |
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SUBJECT : Health care coverage: premium rate change: notice:
other health coverage
SUMMARY : Requires health plans and health insurers to notify contract
holders in the individual and small group market if premium
rates have been determined unreasonable or unjustified. Gives
contract holders the option of 60 additional days at the prior
rate to choose another health plan or health insurance policy
and specifies notification requirements that must be provided to
contract holders.
Existing law:
1)Establishes the Department of Managed Health Care (DMHC) to
regulate health care service plans (health plans) and the
California Department of Insurance (CDI) to regulate insurers,
including health insurers.
2)Requires health plans and health insurers, for the small group
and individual markets, to file with DMHC and CDI, at least 60
days prior to implementing any rate change, specified rate
information so that the departments can review the information
for unreasonable rate increases.
3)Requires DMHC and CDI to accept and post to their Internet Web
sites any public comment on a rate increase submitted to the
departments during the 60-day period.
4)Requires DMHC and CDI to report to the Legislature at least
quarterly on all unreasonable rate filings, and post on their
Internet Web sites any changes submitted by the insurer to the
proposed rate increase, including any documentation submitted
by the insurer supporting those changes.
SB 908 (Hernandez) Page 2 of ?
5)Requires DMHC and CDI to post on their Internet Web sites any
decision that an unreasonable rate increase is not justified
or that a rate filing contains inaccurate information.
6)Requires, pursuant to federal Centers for Medicare and
Medicaid Services (CMS) regulations, if a health insurance
issuer implements a rate increase determined to be
unreasonable, with the later of 10 business days after the
implementation of such increase or the health insurance
issuer's receipt of final determination that a rate increase
is an unreasonable rate increase, the health insurance issuer
to submit a final justification and prominently post it on its
Web site in a form and in a manner prescribed by the federal
Secretary of the Department of Health and Human Services for
at least three years. CMS will also post the issuer's final
justification on the CMS Website for at least three years.
This bill:
1)Requires, for the small group market, if DMHC or CDI
determines a rate unreasonable or not justified, the health
plan or insurer to notify the contract holder of this
determination, and to offer the contract holder coverage of no
less than 60 days at the prior rate in order for the contract
holder to obtain other coverage, including coverage from
another health plan or insurer. Requires the notification to
state the following in 14-point type:
The DMHC/CDI has determined that the rate for this product is
not reasonable or not justified. All health coverage offered
to employers like you is reviewed to determine whether the
rates are reasonable and justified. For the next 60 days from
the date of this notice you have the option to obtain other
coverage from this health plan/insurer or another health
plan/insurer. During this 60 day period, the prior rate shall
remain in effect. For small business purchasers, you may
contact Covered California at www.coveredca.com for help in
obtaining coverage.
2)Requires, in the individual market, if DMHC/CDI determines
that a rate is unreasonable or not justified, to notify the
contract holder of this determination and if the open
enrollment period has closed for the applicable rate year or
there are fewer than 60 days remaining in the open enrollment
period for the applicable rate year, the plan/insurer to offer
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the contract holder, coverage of no less than 60 days to
obtain other coverage. Requires during the 60-day period, the
prior rate to remain in effect.
3)Requires the notification to state the following in 14-point
type, for the individual market if it is prior to open
enrollment:
The DMHC/CDI has determined that the rate for this product is
not reasonable or not justified. All health coverage offered
to individuals like you is reviewed to determine whether the
rates are reasonable and justified. Open enrollment is from
(insert day of month and year) to (insert day of month and
year). During that time, you have the option to obtain other
coverage from this health plan/insurer or another health
plan/insurer. You may also contact Covered California at
www.coveredca.com for help in obtaining coverage. Many
Californians are eligible for financial assistance from
Covered California to help pay for coverage.
4)Requires the notification to state the following in 14-point
type, for the individual market if it is after open enrollment
or if there are less than 60 days remaining in the open
enrollment period:
The DMHC/CDI has determined that the rate for this product is
not reasonable or not justified. All health coverage offered
to individuals like you is reviewed to determine whether the
rates are reasonable and justified. For the next 60 days from
the date of this notice you have the option to obtain other
coverage from this health plan or another health plan. During
this 60 day period the prior rate shall remain in effect. You
may also contact Covered California at www.coveredca.com for
help in obtaining coverage. Many Californians are eligible
for financial assistance from Covered California to help pay
for coverage.
5)Requires the notification to be provided to the solicitor or
insurance agent for the contract holder, if any, so that the
solicitor may assist the purchaser in finding other coverage.
6)Requires, for individual market coverage, the notice to
constitute a trigger event for purposes of special enrollment
if the open enrollment period has closed for the applicable
rate year or there are fewer than 60 days remaining in the
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open enrollment period for the applicable rate year.
FISCAL
EFFECT : This bill has not been analyzed by a fiscal committee.
COMMENTS :
1)Author's statement. According to the author, most health
plans and health insurers (carriers) do not receive
unreasonable rate determinations and many reduce or withdraw
their rates during the rate review process. However, some
carriers choose to move forward with unreasonable rates even
after the rate has been determined unreasonable by DMHC or
CDI. In those cases, the departments issue press releases to
let the public know about the unreasonable rate determination.
But no one tells the individual consumer or the small business
owner who purchased the coverage if the rate has been found
unreasonable or unjustified. This means consumers and small
business owners can be unwittingly locked into an unreasonable
rate because they are not aware that it is unreasonable. SB
908 will require a health plan or insurer whose rate has been
determined unreasonable to share that information with the
purchasers of that product or policy and allow those
purchasers to shop around for more reasonably priced coverage.
In a world where people are compelled to purchase health
insurance, we must empower consumers to make informed
decisions about the coverage they are choosing.
2)Rate Review in California. Under the Affordable Care Act (ACA)
and SB 1163 (Leno), Chapter 661, Statutes of 2010, carriers
must 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. Rates
must be submitted to both the regulator and their customer's
at least 60 days in advance of the increase. CDI has
encouraged insurers to allow at least 120 days for CDI to
review rates. The carriers also must submit an analysis
performed by an independent actuary who is not employed by a
plan or insurer. Regulators do not have the authority to
modify or reject rate changes.
3)Rate Development. For plans participating in Covered
California, the rate negotiation process with Covered
California typically begins in May of the year prior to the
applicable rate year. Preliminary rates are announced near the
end of the summer and final rates are published in the fall
prior to the open enrollment period. Small businesses are not
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subject to a uniform open enrollment period. Coverage can be
issued any time during the year. In the small group market,
carrier contracts with the small business purchaser typically
cover a 12 month period and are guaranteed renewable but not
necessarily at the prior year's rate.
4)Rate Review Report. The California Public Interest Research
Group has published an analysis of implementation of
California's Health Insurance Rate Review: the First Five
Years. This CALPIRG report indicates that health insurance
carriers have filed 565 proposed rate changes in the
individual and small group markets. Carriers have voluntarily
reduced or withdrawn 69 rate filings after beginning the rate
review process (12% of the total number of filings posted).
Regulators estimate that Californians have saved $417 million
dollars as a result of rate increases that were filed with the
regulator and subsequently reduced. Carriers pushed ahead
their rate increases despite regulators declaring them
unreasonable at least 26 times. Over the last five years, over
one million Californians have been subject to rate hikes that
were declared unreasonable but still went into effect. Many
of the same companies have had multiple rate hikes declared
unreasonable.
5)Prior legislation. SB 546 (Leno), Chapter 801, Statutes of
2015, establishes weighted average rate increase disclosure
requirements for a health plan's or insurer's aggregated large
group market products and requires DMHC and CDI to conduct a
public meeting regarding large group rate changes, as
specified.
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 746 (Leno, of 2013), would have established new data
reporting requirements on all health plans and insurers
applicable to products sold in the large group. SB 746 was
vetoed by the Governor. In his veto message, the Governor
stated:
This bill would require all health plans
and insurers to disclose every year broad
data relating to services used by large
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employer groups, including aggregate rate
increases by benefit category. The bill
also requires that one health plan
additionally provide anonymous claims data
or patient level data upon request and
without charge to large purchasers.
I support efforts to make health care costs
more transparent, and my administration is
moving forward to establish transparency
programs that will cover all health plans and
systems.
I urge all parties to work together in this
effort. If these voluntary efforts fail, I
will seriously consider stronger actions.
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.
6)Support. Health Access California writes that today it is
challenging for an individual consumer or small business owner
to know that their health insurance rate has been found
unreasonable or unjustified. This bill lets the market work
by informing individual consumers and small business owners if
the rate for their product is found unreasonable or
unjustified and giving them the opportunity to shop for other
coverage.
The organization of SMUD Employees, San Diego County Court
Employees Association and the San Luis Obispo County Employees
Association write that each year, millions of individual
consumers and employers shop for coverage and have virtually
no way of knowing if the premium has been found unreasonable
or unjustified and no chance to shop for other coverage. The
California Labor Federation writes that given the success of
California's rate review law, notification of consumers is a
logical next step to broaden the impact of the process and to
continue to discourage unreasonable and unjustified rate
hikes.
CALPIRG writes that the experience of the program to date
suggests that some insurance carriers are not receptive to
regulators' requests for rate reductions when they find that
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the increases are not justified. When that happened consumers
can become locked in to unreasonable policies without their
informed consent. Western Center on Law and Poverty believes
consumers and small business owners deserve to know if their
health plan is charging unreasonable or unjustified rates and
should have the option to switch plans. The Asian Law
Alliance writes this bill would let the market work.
7)Oppose. America's Health Insurance Plans (AHIP) 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. AHIP believes this bill is
unnecessary because federal regulations have been promulgated
governing the obligation to disclose unreasonable rate
increases. AHIP also believes there is no need for a special
enrollment period and that rates are being reviewed
surrounding the annual open enrollment period or a small
group's renewal period. Anyone receiving the notice in this
bill would be able to choose a new plan at that time. The
California Association of Health Plans (CAHP) believes this
bill will subject health plans to new administrative burdens
and inadvertently disrupt the health insurance market by
adding additional and overlapping enrollment options and rate
freezes. CAHP also writes that the new notice requirement
fails to include a critical feature of federal regulations
which allows the health plan to explain its rationale for
moving forward with a rate. CAHP states that it is virtually
impossible to go back in time and change rates if the
regulator makes an unreasonable determination after the annual
open enrollment period.
Blue Shield of California writes that this bill will cause
confusion for consumers and disruption in market segments that
are already working appropriately to inform customers of
premium charges. In the small group market, Blue Shield points
out that an employer can switch coverage at any time and the
notice in this bill does not provide any new benefit or
additional information that does not exist today. Blue Shield
writes that neither the current rate review process nor this
bill creates a timeline for the regulator to make a
determination of whether a rate is reasonable or justified.
SUPPORT AND OPPOSITION :
Support: Health Access California (sponsor)
American Cancer Society Cancer Action Network
American Federation of State, County and Municipal
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Employees, AFL-CIO
Asian Law Alliance
California Labor Federation
California Medical Association
CALPIRG
Coalition of California Welfare Rights Organizations,
Inc.
Consumers Union
Los Angeles County Professional Peace Officers
Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
The Organization of SMUD Employees
Western Center on Law and Poverty
Oppose: America's Health Insurance Plans
Association of California Life and Health Insurance
Companies (unless amended)
Blue Shield of California (unless amended)
California Association of Health Plans
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