BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 923


                                                                    Page  1





          Date of Hearing:   June 21, 2016


                            ASSEMBLY COMMITTEE ON HEALTH


                                   Jim Wood, Chair


          SB  
          923 (Hernandez) - As Amended May 31, 2016


          SENATE VOTE:   29-5


          SUBJECT:  Health care coverage: cost-sharing changes.


          SUMMARY:  Prohibits health care service plans (health plans) and  
          health insurance policies (health policies) from changing cost  
          sharing requirements during a plan or policy year in the  
          individual or small group markets.  Specifically, this bill:  


          1)Applies to grandfathered and nongrandfathered health plan  
            contracts and health policies in the individual or small group  
            markets that are issued, amended, or renewed on or after  
            January 1, 2017.


          2)Prohibits health plans and health policies from changing cost  
            designs during the plan or policy year.


          3)Provides for an exception for changes when required by state  
            or federal law.










                                                                     SB 923


                                                                    Page  2





          4)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.


          5)Defines plan and policy year as set forth in existing federal  
            law.  Defines plan and policy year for nongrandfathered health  
            plan contracts and health insurance policies in the individual  
            market as the calendar year.


          6)Defines cost sharing design as the amount or proportion of  
            cost sharing applied to a covered benefit.  


          EXISTING LAW:  


          1)Establishes the Department of Managed Health Care to regulate  
            health plans and the California Department of Insurance to  
            regulate health insurers.

          2)Establishes the federal Patient Protection and Affordable Care  
            Act (ACA), which enacts various health care coverage market  
            reforms.  

          3)Establishes the Exchange (now called Covered California)  
            within state government, as an independent public entity not  
            affiliated with an agency or department, and requires the  
            Exchange to compare and make available through selective  
            contracting health insurance for individual and small business  
            purchasers as authorized under the ACA.  Specifies the powers  
            and duties of the board governing the Exchange, and requires  
            the board to facilitate the purchase of qualified health plans  
            though the Exchange by qualified individuals and small  
            employers.  


          4)Requires health plans, for certain contracts, to provide 60  








                                                                     SB 923


                                                                    Page  3





            days' notice to contract holders prior to the effective date  
            of the contract renewal for any change in premium rate or  
            coverage. 

          5)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. 

          6)Defines rating period for the individual market as the  
            calendar year for which premium rates are in effect, and for  
            the nongrandfathered 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.  

          7)Defines a plan year as a 12-month period of benefits coverage  
            under a group health plan which may not be the same as the  
            calendar year. Defines a policy year as a 12-month period for  
            individual health insurance policies.
          
          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.  
           


          COMMENTS:


          1)PURPOSE OF THIS BILL.  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  








                                                                     SB 923


                                                                    Page  4





            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 plan contract  
            or health 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. The author concludes, this bill continues  
            that tradition by advancing the basic tenet that consumers  
            should get what they pay for. 

          2)BACKGROUND.  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 health plans  
            or policies are available for purchase in health benefit  
            exchanges (Covered California in this state) and outside  
            health benefit exchanges.  The laws that apply to specific  
            market segments are not always the same. 

            The ACA includes a number of provisions that reform the health  
            insurance market.  These reforms help put American consumers  
            back in charge of their health coverage and care, ensuring  
            they receive value for their premium dollars.  The ACA creates  
            a more level playing field by cracking down on unreasonable  
            health insurance premiums and holding insurance companies  
            accountable for unjustified premium increases.  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  
            (EHBs) with standardized tiers of cost-sharing.  With  








                                                                     SB 923


                                                                    Page  5





            standardized benefits, consumers can more accurately compare  
            plans and policies because the benefits are the same for all  
            plans offered in the Exchange marketplace.  Additionally,  
            standardizing benefits ensures that the selected health  
            insurance plans define what consumers get and limit the  
            consumer's out-of-pocket costs by type of service.


            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 health plans or policies address how health  
            plans or policies can retain a "grandfathered" exemption from  
            certain ACA requirements.  Grandfathered plans are health  
            plans that were in existence on March 23, 2010, and haven't  
            been changed in ways that substantially cut benefits or  
            increase costs for plan holders.  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.

            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 health contracts, plans, and policies which allowed  
            changing the premium rates, copayments, coinsurances, or  
            deductibles for the length of the contract, with certain  
            exceptions (i.e. when the parties to the contract agree in  
            writing).  The ACA was passed because a health plan changed  
            the premium rates after the open enrollment period closed.   
            The ACA 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,  








                                                                     SB 923


                                                                    Page  6





            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 health plan was changing the rules  
            in the middle of the game.  This bill would apply to all  
            individual market plans and policies as well as  
            non-grandfathered small group plans and policies.

          3)SUPPORT.  Health Access California, sponsor of this bill,  
            states that this bill requires health plans and insurers to  
            keep cost sharing designs for a specific product in place  
            during the entire rate year.  Additionally, the sponsor  
            explains that cost sharing design refers to what the copays or  
            coinsurances are for a specific benefit.  The American  
            Federation of State, County and Municipal Employees, AFL-CIO,  
            writes in support as this bill holds health care providers  
            accountable for their services and patients.  The National  
            Association of Social Workers, California Chapter supports  
            this bill because it will help consumers budget their health  
            care expenditures and will allow consumers to understand their  
            potential costs during the plan year.  The California School  
            Employees Association, AFL-CIO, states that this bill stops  
            the unfair practice of the health plan increasing co-payments,  
            or any other cost sharing requirements throughout the year.   
            The National Multiple Sclerosis Society states that this bill  
            serves as an important consumer protection cost measure  
            essential to maintaining access to vital and often lifesaving  
            treatment.  The American Cancer Society Cancer Action Network  
            states that this bill continues the tradition of numerous  
            consumer protections designed to put an end to "bait and  
            switch" tactics previously employed by health plans and  
            insurers.  

          4)PREVIOUS LEGISLATION.  

             a)   SB 43 (Hernandez), Chapter 648, Statutes of 2015,  
               updates existing law to reflect that the Kaiser Foundation  








                                                                     SB 923


                                                                    Page  7





               Health Plan Small Group HMO 30 plan, as offered during the  
               first quarter of 2014, is California's EHB benchmark for  
               plan contracts and policies issued, amended, or renewed on  
               or after January 1, 2017.

             b)   AB 339 (Gordon), Chapter 619, Statutes of 2015, requires  
               health plans and health insurers that provide coverage for  
               outpatient prescription drugs to have formularies that do  
               not discourage the enrollment of individuals with health  
               conditions, and requires combination antiretrovirals drug  
               treatment coverage of a single-tablet that is as effective  
               as a multitablet regimen for treatment of Human  
               Immunodeficiency Virus infection and Acquired Immune  
               Deficiency Syndrome, as specified.  AB 339 places in state  
               law, federal requirements related to pharmacy and  
               therapeutics committees, access to in-network retail  
               pharmacies, standardized formulary requirements, formulary  
               tier requirements similar to those required of health plans  
               and insurers participating in Covered California, and  
               copayment caps of $250 and $500 for a supply of up to 30  
               days for an individual prescription, as specified. 

             c)   SB 639 (Hernandez), Chapter 316, Statutes of 2013,  
               codifies provisions of the ACA relating to out-of-pocket  
               limits on cost-sharing.  

             d)   ABX1 2 (Pan), Chapter 1, Statutes of 2013-14 First  
               Extraordinary Session and SBX1 2 (Hernandez), Chapter 2,  
               Statutes of 2013-14 First Extraordinary Session, establish  
               health 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.

             e)   SB 961 (Hernandez) and AB 1461 (Monning) of 2012 were  
               identical bills that would have reformed California's  
               individual market similar to the provisions in SBX1 2.  SB  








                                                                     SB 923


                                                                    Page  8





               961 and AB 1461 were vetoed by Governor Brown who indicated  
               that without the strong foundation that federal law  
               provides, a state-level mandate on insurers alone could  
               encourage healthy people to wait until they got sick or  
               injured before purchasing coverage.  This would lead to  
               skyrocketing premiums, making coverage more unaffordable.

             f)   AB 1083 (Monning), Chapter 854, Statutes of 2012,  
               establishes reforms in the small group health insurance  
               market to implement the ACA.

             g)   SB 951 (Hernandez), Chapter 866, Statutes of 2012, and  
               AB 1453 (Monning), Chapter 854, Statutes of 2012,  
               designates the Kaiser Small Group HMO as California's  
               benchmark plan to serve as the EHBs, as required by the  
               ACA.  

             h)   SB 51 (Alquist), Chapter 644, Statutes of 2011,  
               establishes 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.  

             i)   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.

             j)   SB 900 (Alquist), Chapter 659, Statutes of 2010, and AB  
               1602 (Perez), Chapter 655, Statutes of 2010, established  
               the California Health Benefit Exchange.

             aa)  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.











                                                                     SB 923


                                                                    Page  9





          REGISTERED SUPPORT / OPPOSITION:




          Support


          Health Access California (sponsor)


          American Cancer Society Cancer Action Network 


          American Federation of State, County and Municipal Employees,  
          AFL-CIO


          California Immigrant Policy Center


          California Labor Federation 


          California Optometric Association


          California School Employees Association, AFL-CIO


          California State Council of the Service Employees International  
          Union


          California Teachers Association 


          CALPIRG









                                                                     SB 923


                                                                    Page  10






          Congress of California Seniors


          Consumers Union


          National Alliance on Mental Illness


          National Association of Social Workers - California Chapter


          National Health Law Program


          National Multiple Sclerosis Society- California Action Network


          Western Center on Law and Poverty 




          Opposition


          None on file.  




          Analysis Prepared by:Kristene Mapile / HEALTH / (916)  
          319-2097













                                                                     SB 923


                                                                    Page  11