BILL ANALYSIS Ó SB 908 Page 1 SENATE THIRD READING SB 908 (Hernandez) As Amended June 30, 2016 Majority vote SENATE VOTE: 24-12 ------------------------------------------------------------------ |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 | | | | | ------------------------------------------------------------------ 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 Page 3 (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 Page 4 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 Page 5 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