BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 908 (Hernandez) - Health care coverage: premium rate change: notice: other health coverage ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: March 29, 2016 |Policy Vote: HEALTH 7 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: April 18, 2016 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 908 would require health plans and health insurers to notify contract holders if a proposed premium rate increase has been found to be unreasonable by the appropriate regulatory agency. In those cases, the bill would give contract holders the ability to continue coverage at the prior rate for 60 days and to choose other health coverage. Fiscal Impact: No significant enforcement costs are anticipated for the Department of Managed Health Care. No significant enforcement costs are anticipated for the Department of Insurance. One-time costs, likely in the low hundreds of thousands, for the adoption of regulations by Covered California (California Health Trust Fund). According to Covered California, it will need to adopt regulations applying the bill's requirements to SB 908 (Hernandez) Page 1 of ? health plans in the small group market and to create processes and procedures for special enrollment periods when proposed rate increases are found to be unreasonable. Unknown information technology costs for the third party administrator that manages Covered California's small group market to make the required system changes to allow for special enrollments when proposed rate increases are found to be unreasonable (California Health Trust Fund). Background: Under current law, proposed rate increases in the individual market and small group markets are reviewed by either the Department of Insurance or Department of Managed Health Care to determine whether they are reasonable. Neither department has the authority to regulate proposed rates, even if they are found to be unreasonable. Since the rate review process was instituted in the state, there have been 565 proposed rate changes in the individual and small group market. Of those, 26 rate filings have been found to be unreasonable and were subsequently enacted by the health insurer or health plan. Proposed Law: SB 908 would require health plans and health insurers to notify contract holders if a proposed premium rate increase has been found to be unreasonable by the appropriate regulatory agency. In those cases, the bill would give contract holders the ability to continue coverage at the prior rate for 60 days and to choose other health coverage. Specific provisions of the bill would: In the small group market, if the Department of Insurance or the Department of Managed Health Care finds that a proposed rate increase is unreasonable, the health plan or health insurer would be required to notify the contract holder and to offer the contract holder coverage for 60 days at the prior rate; In the individual market, if the Department of Insurance or the Department of Managed Health Care finds that a proposed rate increase is unreasonable, the health plan or health insurer would be required to notify the contract holder; In the individual market, if the open enrollment period for the year is closed or has less than 60 days remaining, the health insurer or health plan must offer the contract holder SB 908 (Hernandez) Page 2 of ? coverage at the prior rate for 60 days; In the individual market, requires that notification of an unreasonable rate provides an individual with a special enrollment period (allowing the individual to purchase other coverage outside of the annual open enrollment period). Staff Comments: For the 2017 plan year, the Department of Insurance and the Department of Managed Health Care have adopted timelines for submittal of proposed rate increases in the individual market and review of those rate increases that will allow consumers to be notified of unreasonable rate increases before the open enrollment period for 2017. Because there are no specific open enrollment periods in the small group market and health insurers and health plans can file rate changes quarterly, Covered California indicates that implementation of the bills requirements allowing contract holders to continue coverage at the prior rate and to change coverage will be somewhat more complicated. The only costs that may be incurred by a local agency relate to crimes and infractions. Under the California Constitution, such costs are not reimbursable by the state. -- END --