BILL ANALYSIS Ó
SB 908
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 908
(Hernandez) - As Amended June 30, 2016
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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
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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
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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
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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.
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Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081