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  







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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  








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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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