BILL ANALYSIS
AB 786
Page 1
Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 786 (Jones) - As Amended: April 22, 2009
Policy Committee: Health Vote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires the California Department of Managed Care
(DMHC) and the California Department of Insurance (CDI) to
develop a system to categorize all individual health coverage
products. Specifically, this bill:
1)Requires DMHC and CDI to develop by September 1, 2010, via
regulations, a system to categorize all individual health plan
and health insurance policies and related notices related to
categorized plans. Requires the establishment of four standard
categories and an additional category for specified
CDI-regulated policies.
2)Establishes characteristics of a standardized system which
should include and address:
a) A continuum of coverage
b) Reasonable benefit variation
c) Consistent enforcement between regulators
d) A standard health maintenance organization (HMO) product
and a standard preferred provider organization (PPO)
product in each category
e) A maximum limit on out-of-pocket (OOP) costs within each
coverage category
f) Standard terminology
g) Midpoint reference points for each of the coverage
categories
h) Feedback from the California Health Benefits Review
Program, administered by the UC
3)Requires health plans and insurers to submit to DMHC and CDI
by April 2011 all individual health plans they would like to
AB 786
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sell and requires annual reporting by regulators about
subsequent enrollments.
FISCAL EFFECT
Annual fee-supported special fund costs of $1 million, combined,
to the DMHC and CDI to establish the system to categorize all
individual health coverage into standard categories and continue
oversight of the provisions established by this bill.
COMMENTS
1)Rationale . This bill is sponsored by Health Access and
provides standardized information about insurance coverage in
the individual market to help consumers determine costs and
benefits relative to a dizzying array of choices. Currently,
there are more than 100 health plan or insurer products in the
individual market in California. According to the author,
consumers are forced to decide what to purchase with no
transparent or uniform way to choose from products.
2)The Individual Market . While most Californians receive health
coverage via employer-sponsored plans or public programs such
as Medi-Cal or Healthy Families, approximately three million
individuals purchase health coverage in the individual
insurance market, which has distinctly different rules than
either the small employer or large employer group insurance
markets. Medical underwriting and diversity in product
offerings in the individual market translates to widely
varying benefit packages and premiums. Cost comparisons are
more central to health access issues in the individual market
than in the group insurance market.
According to recent research published by the California
HealthCare Foundation, annual out-of-pocket costs of some
common insurance products in the individual market range from
$500 to $2,400, depending on if the consumer is enrolled in an
HMO product or a PPO product, with total annual expenditures
(including premiums) ranging from $3,600 to $6,500. This bill
reduces the wide variability into narrower ranges with more
clearly defined trade-offs between costs and benefits of
various products.
3)Concerns . The California Association of Health Plans (CAHP)
opposes this bill. CAHP indicates required uniformity could
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negatively impact the ability of health plans to provide
flexible products at affordable prices.
4)Related Legislation . AB 1522 (Steinberg) in 2008 was similar
to this bill and failed passage on the Assembly Floor.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081