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
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|Version: March 29, 2016 |Policy Vote: HEALTH 7 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: April 18, 2016 |Consultant: Brendan McCarthy |
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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
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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
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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.
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