BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 908|
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THIRD READING
Bill No: SB 908
Author: Hernandez (D)
Amended: 5/31/16
Vote: 21
SENATE HEALTH COMMITTEE: 7-2, 4/6/16
AYES: Hernandez, Hall, Mitchell, Monning, Pan, Roth, Wolk
NOES: Nguyen, Nielsen
SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
SUBJECT: Health care coverage: premium rate change: notice:
other health coverage
SOURCE: Health Access California
DIGEST: This bill 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 to choose another health plan or health insurance policy
and specifies notification requirements that must be provided to
contract holders.
ANALYSIS:
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.
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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, 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 receipt of final
determination, 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 Web site 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 no less than
60 days in order for the contract holder to obtain other
coverage, including coverage from another health plan or
insurer. Specifies the notification requirements.
2)Requires, in the individual market, if DMHC or CDI determines
that a rate is unreasonable or not justified, the health plan
or insurer 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 or insurer to offer 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 be provided to the solicitor or
insurance agent for the contract holder, if any, so that the
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solicitor may assist the purchaser in finding other coverage.
4)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
open enrollment period for the applicable rate year.
5)Permits the plan or insurer to include in any of the
notifications described above the Internet Web site address at
which the plan or insurer's final justification for
implementing an increase that has been determined unreasonable
can be found pursuant to federal regulations, as specified.
Comments
1)Author's statement. According to the author, most health
plans and health insurers (issuers) do not receive
unreasonable rate determinations and many reduce or withdraw
their rates during the rate review process. However, some
issuers 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.
The individual consumer or the small business owner who
purchased the coverage is not directly informed 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
has been determined unreasonable. According to a 2016 report
published by the California Public Interest Research Group,
issuers 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. 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
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compelled to purchase health insurance, we must empower
consumers to make informed decisions about the coverage they
are choosing.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee:
No significant enforcement costs are anticipated for DMHC.
No significant enforcement costs are anticipated for CDI.
No significant costs are anticipated for system changes at
Covered California.
SUPPORT: (Verified 5/31/16)
Health Access California (source)
American Cancer Society Cancer Action Network
American Federation of State, County and Municipal 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
OPPOSITION: (Verified 5/31/16)
America's Health Insurance Plans
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Association of California Life and Health Insurance Companies
Blue Shield of California
California Association of Health Plans
Kaiser Permanente
ARGUMENTS IN 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. 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 issuers are not
receptive to regulators' requests for rate reductions when they
find that the increases are not justified. When this happens
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 will let the market work.
ARGUMENTS IN OPPOSITION: 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. 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. Blue Shield of California
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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.
Prepared by:Teri Boughton / HEALTH /
5/31/16 22:23:53
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