BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 923
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|AUTHOR: |Hernandez |
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|VERSION: |January 28, 2016 |
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|HEARING DATE: |March 30, 2016 | | |
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|CONSULTANT: |Teri Boughton |
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SUBJECT : Health care coverage: cost sharing changes
SUMMARY : Prohibits a health plan contract or health insurance policy
from changing any cost sharing requirements during the plan or
policy year, except when required by a change in state or
federal law. Applies this prohibition to non-grandfathered
health plan contracts and health insurance policies in the
individual and small group markets and grandfathered health plan
contracts and insurance policies in the individual market that
are issued, amended, or renewed on or after January 1, 2017.
Existing state law:
1)Establishes the Department of Managed Health Care (DMHC) to
regulate health plans and the California Department of
Insurance (CDI) to regulate insurers, including health
insurers.
2)Prohibits a health plan or health insurer, with regard to
group contracts, from changing the premium rates or applicable
copayments, coinsurances or deductibles for the length of the
contract, except, when authorized or required in the contract,
when the contract is a preliminary agreement subject to
execution of a definitive agreement, or when the plan and
contract-holder mutually agree in writing. (Enacted prior to
the Affordable Care Act [ACA]).
3)Defines rating period for the individual market as the
calendar year for which premium rates are in effect, and for
the non-grandfathered small group market as the period for
which premium rates established by a plan are in effect and
are no less than 12 months from the date of issuance or
renewal of the plan contract. (Enacted after the ACA)
SB 923 (Hernandez) Page 2 of ?
This bill:
1)Prohibits a health plan contract or health insurance policy
from changing any cost sharing requirements during the plan or
policy year, except when required by a change in state or
federal law.
2)Applies 1) directly above to non-grandfathered health plan
contracts and health insurance policies in the individual and
small group markets and grandfathered health plan contracts
and insurance policies in the individual market that are
issued, amended, or renewed on or after January 1, 2017.
3)Defines cost sharing as any copayment, coinsurance,
deductible, or any other form of cost sharing by the enrollee
other than the premium or share of premium.
4)Defines plan year and policy year as the meaning set forth in
federal regulations. Defines plan or policy year for
non-grandfathered health plan contracts and health insurance
policies in the individual market as the calendar year.
FISCAL
EFFECT : This bill has not been analyzed yet by a fiscal
committee.
COMMENTS :
1)Author's statement. According to the author, the ACA provides
many new consumer protections to make health insurance more
affordable and available. These include protections on
cost-sharing, such as actuarial value requirements and placing
annual limits on out-of-pocket costs. One of the many
individual market reforms California enacted while
implementing the ACA was a provision that prohibited plans and
insurers from altering premiums during the plan year. This
essential patient protection, while meaningful on its own,
does not currently apply to cost sharing requirements across
all markets. This bill will ensure health care consumers are
actually provided what they were promised when signing up for
coverage by prohibiting a health care service plan contract or
health insurance policy from changing any cost sharing
requirements during the plan year. Numerous consumer
protections passed by California over the last several years
were designed to put an end to "bait and switch" tactics
previously employed by health plans and insurers. This bill
continues that tradition by advancing the basic tenant that
consumers should get what they pay for.
SB 923 (Hernandez) Page 3 of ?
2)Health Insurance and the ACA. The health insurance market is
segmented into group and nongroup markets. In the group
market there are companies that issue health insurance plans
or policies to large employers or small employers, or both,
and in the nongroup market plans or policies are issued to
individual purchasers who buy insurance for themselves and/or
their family members. Both small group and individual
insurance plans or policies are available for purchase in
health benefit exchanges and outside health benefit exchanges
(Covered California in this state). The laws that apply to
specific market segments are not always the same.
The ACA represents a major expansion of U.S. health care
coverage through an expansion and simplification of the
Medicaid program and the adoption of major reforms of the
health insurance market. Most transformational are changes to
the small group and individual insurance markets, such as
mandating guaranteed issuance of coverage, eliminating
pre-existing condition exclusions, and limiting factors upon
which premium rates can be developed. The ACA requires
carriers to provide essential health benefits with
standardized tiers of cost-sharing. Under the ACA,
out-of-pocket limits for health plans are subject to the limit
that currently applies to health savings account-qualified
health plans. ACA regulations on grandfathered plans or
policies address how health plans or policies can retain a
"grandfathered" exemption from certain ACA requirements. Some,
but not all, of the ACA requirements apply to grandfathered
plans or policies, and there are differences in requirements
that apply to grandfathered large group, small group, and
nongroup plans or policies.
The ACA requires health plans and insurers offering
non-grandfathered health plans or policies inside and outside
of health benefit exchanges in the individual and small group
markets to assure that any offered product must meet distinct
levels of coverage called "metal tiers." Each metal tier
corresponds to an actuarial value, calculated based on the
cost-sharing features of the plan. Actuarial value is the
percentage of health care costs that would be paid for by a
person's health plan or policy coverage, versus out-of-pocket
costs at the point of service (e.g., co-payments, co-insurance
or the deductible). For example, a health plan or policy with
an actuarial value of 60% would pay for 60% of an average
SB 923 (Hernandez) Page 4 of ?
individual's health care costs (using a standard population),
while the individual would be responsible for the remaining
40%. Federal law, effective 2014, requires health plans and
health insurers to categorize products based on actuarial
value as follows: Bronze - 60%, Silver - 70%, Gold - 80%, and
Platinum - 90%.
For both small group and individual group plans or policies,
California law establishes either a 12 month or calendar year
rating period meaning rates have to be based on a 12 month
period. Prior to the ACA, California law already prohibited in
group contracts, plans and policies which allowed changing the
premium rates, copayments, coinsurances or deductibles for the
length of the contract, with certain exceptions, like the
parties to the contract agree in writing. The law was passed
because a health plan changed the premium rates after the open
enrollment period closed. The law applies only to large group
plans and policies, and grandfathered small group plans and
policies. According to an article in the Los Angeles Times, in
October of 2015, a major health plan settled an $8.3 million
lawsuit that was brought because in 2011 the company was
altering deductible requirements mid-year. As part of the
settlement the plan assumed no wrong doing and argued that
neither state law nor their existing contracts prohibited this
practice. There were 50,000 affected consumers including one
individual who received a $19,000 award because the individual
had paid particularly high out-of-pocket costs. Affected
consumers stated that they felt their plan was changing the
rules of the game in the middle of that game. SB 923 would
apply to all individual market plans and policies as well as
non-grandfathered small group plans and policies.
3)Prior legislation.
SB 639 (Hernandez, Chapter 316, Statutes of 2013) placed in
California law, provisions of the ACA relating to
out-of-pocket limits on health plan enrollee and insured
cost-sharing, health plan and insurer actuarial value coverage
levels and catastrophic coverage requirements, and
requirements on health insurers with regard to coverage for
out-of-network emergency services. Applies health plan
enrollee and insured out-of-pocket limits to specialized
products that offer essential health benefits.
ABX1 2 (Pan, Chapter 1, Statutes of 2013) and SBX1 2
(Hernandez, Chapter 2, Statutes of 2013) establish health
SB 923 (Hernandez) Page 5 of ?
insurance market reforms contained in the ACA specific to
individual purchasers, such as prohibiting insurers from
denying coverage based on preexisting conditions; and make
conforming changes to small employer health insurance laws
resulting from final federal regulations.
SB 961 (Hernandez of 2012) and AB 1461 (Monning), were
identical bills that would have reformed California's
individual market similar to the provisions in SBX1 2. SB 961
and AB 1461 were vetoed by Governor Brown.
AB 1083 (Monning, Chapter 854, Statutes of 2012) established
reforms in the small group health insurance market to
implement the ACA.
SB 951 (Hernandez, Chapter 866, Statutes of 2012) and AB 1453
(Monning, Chapter 854, Statutes of 2012) designated the Kaiser
Small Group HMO as California's benchmark plan to serve as the
essential health benefit standard, as required by federal
health care reform.
SB 51 (Alquist, Chapter 644, Statutes of 2011), established
enforcement authority in California law to implement
provisions of the ACA related to medical loss ratio
requirements on health plans and health insurers and enacted
prohibitions on annual and lifetime benefits.
AB 2244 (Feuer, Chapter 656, Statutes of 2010), requires
guaranteed issue of health plan and health insurance products
for children beginning in January 1, 2011.
SB 900 (Alquist, Chapter 659, Statutes of 2010, and AB 1602
(Perez, Chapter 655, Statutes of 2010), established the
California Health Benefit Exchange.
AB 2052 (Goldberg, Chapter 336, Statutes of 2002), prohibits a
group health plan or health insurer from making any change in
premium rates or cost sharing after acceptance of a contract
or after the annual open enrollment period.
4)Support. Consumers Union writes that if enacted this bill
would confer on policyholders the stability that comes with
knowing that the health plan consumers diligently researched,
and which they determined they could afford and would cover
SB 923 (Hernandez) Page 6 of ?
their needs, will remain the same plan throughout the year
until at least the next open enrollment period. In so doing,
consumers will have the ability to make informed purchasing
decisions that will remain valid throughout the plan or policy
year. Health Access California writes that this is a clean-up
measure and that it was always the intent that both premiums
and cost sharing be stable for a year at a time. California
patients deserve this basic security. The National Multiple
Sclerosis Society - CA Action Network writes that individuals
who enroll in a health insurance plan depend on the cost
sharing information provided by the insurer to plan and budget
for their annual out-of-pocket expenses for medical services
and prescription drugs. Consumers are surprised and
unprepared when cost sharing increases in the middle of the
contract year.
SUPPORT AND OPPOSITION :
Support: American Federation of State, County and Municipal
Employees, AFL-CIO
California Labor Federation
California State Council of the Service Employees
International Union
California Optometric Association
Consumers Union
Health Access California
National Association of Social Workers-CA Chapter
National Multiple Sclerosis Society - CA Action
Network
Western Center on Law and Poverty
Oppose: None received
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