BILL ANALYSIS Ó
SB 908
Page 1
SENATE THIRD READING
SB
908 (Hernandez)
As Amended June 30, 2016
Majority vote
SENATE VOTE: 24-12
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Health |11-7 |Wood, Bonilla, Burke, |Maienschein, |
| | |Campos, Chiu, Gomez, |Lackey, Olsen, |
| | | |Patterson, |
| | | | |
| | |Roger Hernández, | |
| | |Nazarian, Rodriguez, |Ridley-Thomas, |
| | |Santiago, McCarty |Steinorth, Waldron |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Chang, |
| | |Bonilla, Bonta, |Gallagher, Jones, |
| | |Calderon, Daly, |Obernolte, Wagner |
| | |Eggman, Eduardo | |
| | |Garcia, Holden, | |
| | |Quirk, Santiago, | |
| | |Weber, Wood, Chau | |
| | | | |
SB 908
Page 2
| | | | |
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SUMMARY: Requires health care service plans (health plans) or
health insurers to provide notice to contractholders or
policyholders of unreasonable or not justified rate
determinations in the individual and small group markets.
Requires, in the individual market, health plans or health
insurers to offer the option of coverage of no less than 60 days
in order for the contractholder or policyholder to obtain other
coverage. Specifically, this bill:
1)Requires notification to individuals and small groups when the
Department of Managed Health Care (DMHC) or California
Department of Insurance (CDI) has determined the health plan
or health insurance policy rate is unreasonable or not
justified.
2)Requires health plans and insurers to comply with DMHC or
CDI's requests for additional information within specified
timelines.
3)Requires rate information to be filed 120 days, prior to
implementing a rate change in the individual or small group
market.
4)Requires the DMHC or CDI to determine reasonableness no later
than 60 days following receipt of all information required to
make a determination.
5)Allows an 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
SB 908
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(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: According to the Assembly Appropriations
Committee:
1)Minor costs to the DMHC (Managed Care Fund) to verify plans
and insurers comply with this requirement, and $130,000
ongoing to the CDI (Insurance Fund) to expedite determinations
of 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: 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 means consumers and small business owners can
be unwittingly locked into an unreasonable rate because they are
not aware that it is unreasonable. This bill requires 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. The author states that in a world
where people are compelled to purchase health insurance, we must
empower consumers to make informed decisions about the coverage
they are choosing.
SB 908
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Rate Review Report. The California Public Interest Research
Group (CALPIRG) has published an analysis of implementation of
California's Health Insurance Rate Review: the First Five Years.
The CALPIRG analysis included posted rate filings that were
scheduled to go into effect between January 1, 2011 and January
1, 2016. The CALPIRG report indicates that carriers have filed
565 proposed rate changes in the individual and small group
markets within those five years. Carriers have voluntarily
reduced or withdrawn 69 rate filings after beginning the rate
review process (12% of the total number of filings posted).
Between 2011 and 2016, DMHC and CDI estimate that Californians
have saved $417 million dollars as a result of rate increases
that were filed with the regulator and subsequently reduced.
Carriers pushed ahead with 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.
Health Access California, sponsor of this bill, writes that this
bill informs individual consumers and small business owners if
the rate for their product is unreasonable or unjustified and
gives them the opportunity to shop for other coverage. The
California State Council of the Service Employees International
Union writes that when California's $123 billion health
insurance industry is allowed to increase rates without
justification, it contributes to the problem of spiraling health
care costs, which cuts into wages and benefits for California's
workers.
The Association of California Life and Health Insurance
Companies (ACLHIC) states that the rate notice should be
clarified to include an explanation as to why the insurer
decided to go forward with that rate, as they are currently
allowed to do so under the federal guidelines. Additionally,
SB 908
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ACLHIC notes that the rate notice should be provided at the time
of renewal, and include a requirement that the regulator perform
a timely review of the proposed rates. The California
Association of Health Plans 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.
Analysis Prepared by:
Kristene Mapile / HEALTH / (916) 319-2097 FN:
0003759