BILL ANALYSIS Ó SB 908 Page 1 Date of Hearing: August 3, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 908 (Hernandez) - As Amended June 30, 2016 ----------------------------------------------------------------- |Policy |Health |Vote:|11 - 7 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill requires notification of unreasonable health plan and insurer rate increases, establishes standards related to the determination of reasonableness, and allows individuals to SB 908 Page 2 obtain other coverage following a finding that a rate is unreasonable or unjustified. Specifically, this bill: 1)Requires notification to individuals and small groups when a regulator has determined the health plan or health insurance policy rate is unreasonable or not justified 2)Requires plans and insurers to comply with regulators' requests for additional information within specified timelines. 3)Requires rate information to be filed 120 days, instead of 60 days, prior to implementing a rate change in the individual or small-group market. 4)Requires a regulator to determine reasonableness no later than 60 days following receipt of all information required to make a determination. 5)Allows individual no fewer than 60 days to obtain other coverage, at the individual's option, if open enrollment is closed or there are fewer than 60 days left in open enrollment (as purchase of health plans and policies is only available during specified open enrollment dates, this creates a new special enrollment period for purchasing health coverage). FISCAL EFFECT: 1)Minor costs to the Department of Managed Health Care (Managed Care Fund) to verify plans and insurers comply with this requirement, and $130,000 ongoing to the California Department of Insurance (Insurance Fund) to expedite determinations of SB 908 Page 3 reasonableness. 2)Any costs incurred by Covered California-for example, to train staff about handling special enrollments-are expected to be minor and absorbable (California Health Trust Fund). COMMENTS: 1)Purpose. 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 DMHC and CDI 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 bill attempts to inform consumers the rate was determined unreasonable, and provide an option for them to change plans. 2)Rate Review in California. Under the federal 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 customers 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 SB 908 Page 4 modify or reject rate changes. 3)Support and Opposition. This bill is supported by health advocates, senior, and labor groups. Health plans and insurers oppose the bill, citing workability concerns. The California Association of Health Plans (CAHP) states that this bill will subject health plans to new administrative burdens and inadvertently disrupt the health insurance market with additional and overlapping enrollment options and rate freezes. Kaiser Permanente writes that trying to create consumer protections after the plan is in market is confusing. The Association of California Life and Health Insurance Companies (ACLHIC) opposes, unless significant amendments are made. ACLHIC requests that the rate notice be provided at the time of renewal and that the bill include a requirement that the regulator perform a timely review of the proposed rates. 4)Staff Comments. This bill provides for a special enrollment period to allow consumers to comparison shop after receiving a notice that a rate was deemed unreasonable. Although it makes sense that a consumer notice should be actionable, and a notice without the possibility to shop is arguably not useful, it could benefit both industry and consumers to ensure rates are reviewed pursuant to a deadline that would allow the determination to be made prior to open enrollment. This would obviate the need for a special enrollment period, reducing consumer confusion and frustration, as well as reducing health plan administrative costs, because consumers would be armed with full information during the open enrollment period instead of receiving a notice after purchasing a product. Such a benefit could be weighed against potential increased administrative burden to regulators to ensure a timely determination. SB 908 Page 5 Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081