BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 923|
|Office of Senate Floor Analyses | |
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UNFINISHED BUSINESS
Bill No: SB 923
Author: Hernandez (D)
Amended: 5/31/16
Vote: 21
SENATE HEALTH COMMITTEE: 7-0, 3/30/16
AYES: Hernandez, Hall, Mitchell, Monning, Pan, Roth, Wolk
NO VOTE RECORDED: Nguyen, Nielsen
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SENATE FLOOR: 29-5, 5/2/16
AYES: Allen, Beall, Berryhill, Block, Cannella, De León,
Fuller, Galgiani, Glazer, Hall, Hancock, Hernandez, Hill,
Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza,
Mitchell, Monning, Pan, Pavley, Roth, Vidak, Wieckowski, Wolk
NOES: Anderson, Bates, Gaines, Morrell, Stone
NO VOTE RECORDED: Hertzberg, Huff, Moorlach, Nguyen, Nielsen,
Runner
ASSEMBLY FLOOR: 75-0, 8/4/16 - See last page for vote
SUBJECT: Health care coverage: cost-sharing changes
SOURCE: Health Access California
DIGEST: This bill prohibits a health plan contract or health
insurance policy from changing any cost sharing design during
the plan or policy year, except when required by 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
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are issued, amended, or renewed on or after January 1, 2017.
Assembly Amendments clarify the bill to prohibit changes in cost
sharing "design" during the plan or policy year rather than cost
sharing "requirements," and define cost sharing design as the
amount or proportion of cost sharing applied to a covered
benefit.
ANALYSIS:
Existing 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)
This bill:
1)Prohibits a health plan contract or health insurance policy
from changing any cost sharing design during the plan or
policy year, except when required by a state or federal law.
2)Applies 1) directly above to non-grandfathered health plan
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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 cost sharing design as the amount or proportion of
cost sharing applied to a covered benefit.
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 tenet that
consumers should get what they pay for.
2)Health insurance and the ACA. 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
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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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee analysis,
costs to DMHC and CDI are expected to be minor and absorbable,
if any (Managed Care Fund/Insurance Fund).
SUPPORT: (Verified 8/4/16)
Health Access California (source)
American Federation of State, County and Municipal Employees,
AFL-CIO
California Association of Health Underwriters
California Labor Federation
California School Employees Association
California State Council of the Service Employees International
Union
California Optometric Association
CALPIRG
Consumers Union
Congress of California Seniors
Independent Insurance Agents and Brokers of California
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National Association of Insurance and Financial Advisors
National Association of Social Workers-CA Chapter
National Multiple Sclerosis Society - CA Action Network
Retired Public Employees Association
Western Center on Law and Poverty
OPPOSITION: (Verified8/4/16)
None received
ARGUMENTS IN 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 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.
ASSEMBLY FLOOR: 75-0, 8/4/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chiu, Chu, Cooper, Dababneh,
Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
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Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Rendon
NO VOTE RECORDED: Chávez, Cooley, Beth Gaines, Harper, Roger
Hernández
Prepared by:Teri Boughton / HEALTH / (916) 651-4111
8/5/16 14:03:21
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