BILL ANALYSIS
AB 786
Page 1
ASSEMBLY THIRD READING
AB 786 (Jones)
As Amended June 2, 2009
Majority vote
HEALTH 13-6 APPROPRIATIONS 10-5
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|Ayes:|Jones, Ammiano, Block, |Ayes:|De Leon, Ammiano, Charles |
| |Carter, De La Torre, | |Calderon, Davis, Hall, |
| |De Leon, Hall, Hayashi, | |John A. Perez, Price, |
| |Hernandez, Bonnie | |Skinner, Torlakson, |
| |Lowenthal, Nava, V. | |Krekorian |
| |Manuel Perez, Salas | | |
| | | | |
|-----+--------------------------+-----+---------------------------|
|Nays:|Fletcher, Adams, Conway, |Nays:|Nielsen, Duvall, Harkey, |
| |Emmerson, Gaines, Audra | |Miller, |
| |Strickland | |Audra Strickland |
| | | | |
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SUMMARY : Requires the Director of the Department of Managed
Health Care (DMHC) and the Commissioner of the California
Department of Insurance (CDI) to jointly develop a system to
categorize all health coverage products sold to individuals, as
specified. Specifically, this bill :
1)Requires, on or before September 1, 2010, DMHC and CDI to
develop, by regulation, and in consultation with stakeholders,
a system to categorize all individual health plan contracts
and individual health insurance policies offered and sold by
health care service plans (health plans) and disability
insurers selling health insurance (health insurers) into six
coverage choice categories (choice categories) that do all of
the following:
a) Include four choice categories applicable to both
individual health plan contracts and individual health
insurance policies, with a fifth and sixth category
applicable only to health insurance policies under the
jurisdiction of CDI. Requires the fifth and sixth
categories to be based on the highest cost-sharing and the
lowest benefit levels for health insurance policies that do
not otherwise meet the requirements imposed on health plans
subject to the jurisdiction of the DMHC under the
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Knox-Keene Health Care Service Plan Act of 1975
(Knox-Keene) or be based on benefit limits that are not
permissible under Knox-Keene regardless of cost sharing or
the comprehensiveness of coverage;
b) Reflect a reasonable continuum between the choice
category with the lowest level of health care benefits and
the choice category with the highest level of health care
benefits;
c) Permit reasonable benefit variation within each choice
category;
d) For the four categories that apply to both health plan
contracts and health insurance policies, require DMHC and
CDI to coordinate the development of the categories to
ensure consistent interpretation across products and
markets and ease of comparison for consumers;
e) Include, within each choice category, at least one
standard health maintenance organization (HMO) and one
standard Preferred Provider Organization health benefit
plan, each of which is the lowest benefit level in the
choice category, except for the fifth and sixth categories
that only apply to health insurance policies, in which case
there would be no standard HMO plan. Allows health plans
and health insurers to meet this requirement with DMHC and
CDI products for a subsidiary or affiliate of the plan;
f) Establish, for each choice category, a maximum limit on
annual out-of-pocket costs, (what consumers must pay
directly) including, but not limited to, copayments,
coinsurance, and deductibles for covered benefits; and,
g) Take into account any written analysis provided by the
University of California (UC) as requested in this bill.
2)Requires health plans and health insurers to submit filings,
no later than April 1, 2011, for all individual products that
will be offered or sold after that date, and requires DMHC and
CDI to categorize each product submitted to them into a choice
category within 90 days of the date filed. Requires,
thereafter, any other individual plans and policies to be
filed with DMHC or CDI.
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3)Prohibits health plans and health insurers from offering or
selling an individual health benefit plan until DMHC or CDI
has categorized the health benefit plan pursuant to 2) above.
4)Exempts from the coverage and coverage tiers in this bill
health benefit plans renewed on or before April 1, 2011.
5)To facilitate consumer comparison shopping, requires all of
the following:
a) Health plans and health insurers to offer products in
any choice category, but for health plans that offer a
product in the fifth category, the health plan must offer
the standard product in that category, the standard product
in either the first or second category, and the standard
product in the third category;
b) DMHC and CDI to develop a notice that provides
information about the choice categories, including the
range of cost sharing and the benefits and services,
including any variation in the benefits and services in
each choice category; and,
c) Every health plan, health insurer, or agent and broker
to provide the notice in 5) b) above when marketing any
individual health benefit plan, and requires the notice to
accompany marketing, purchase, and renewal of individual
coverage.
6)Establishes the basic parameters of the six choice categories
to be developed by DMHC and CDI so that the first category is
the most comprehensive category with the lowest cost sharing,
the third category reflects the mid-point of individual market
products covering medical, surgical, and hospitals expenses,
and the fifth category, applicable only to health insurance
policies, includes coverage for medical, surgical, and
hospital expenses, and is consistent with benefit requirements
applicable to policies sold pursuant to the Insurance Code.
7)Requires health plans and health insurers to establish prices
for individual health benefit plans that reflect a reasonable
continuum between the products offered in the lowest choice
category and the highest choice category. Prohibits health
plans and health insurers from establishing a standard risk
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rate for a health benefit plan in a choice category lower than
a health benefit plan in a lower choice category. Exempts
from these requirements specified products required to be
guaranteed issue pursuant to existing law; specifically,
individual conversion policies and coverage subject to the
requirements of the Health Insurance Portability and
Accountability Act.
8)Requires the director of DMHC and the CDI commissioner to
report annually on the health benefit plans offered in each
choice category, and on enrollment in each choice category,
commencing January 1, 2013, and every three years thereafter,
the director of DMHC and the CDI commissioner to jointly
determine if the choice categories should be revised to meet
consumer needs.
9)Requests UC, through the California Health Benefits Review
Program (CHBRP) administered by UC, to assist the director of
DMHC and the CDI commissioner in implementing this bill by
providing a written analysis with relevant data of all of the
following:
a) Products sold and purchased in the individual market;
b) The benefits and services covered by the individual
health benefit plans, including any limitations or
exclusions;
c) Cost sharing applicable to individual health benefit
plans, including deductibles, copayments, coinsurance,
maximum out-of-pocket limits, and other limits or
exclusions that require individual consumers to pay for
basic health care services in whole or in part;
d) The distribution of products purchased in terms of
benefits and services as well as cost sharing; and,
e) The share of the individual market that is short-term
coverage, conversion coverage, renewal of existing
coverage, or sale to a person not previously covered by
individual coverage.
10)Requests CHBRP in providing the information requested in 9)
above to distinguish between products regulated by DMHC and
CDI.
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11)Requires the CHBRP report requested under 9) above to be due
three months prior to the implementation of the choice
category provisions of this bill and three months prior to the
annual reports and triennial reviews required by the director
and the commissioner in this bill.
12)Requires all health insurance policies, except for a
specialized health insurance policy, offered and sold to
individuals after January 1, 2011, to cover hospital, medical,
and surgical services, and to meet existing coverage
requirements, at a minimum. Effective January 1, 2011, for
the fifth and sixth choice category, sets the maximum
out-of-pocket expenditure at up to $10,000 per year with
automatic annual adjustments based on the Medical Consumer
Price Index.
13)Requires every health insurance policy sold under the fifth
category, which may only be offered by health insurers under
the Insurance Code to provide the following disclosure in 14
point type on all marketing materials as well as the offer of
coverage:
Insurance products in this category include
significant limits on benefits and the health care
services that are covered. If you have a serious
injury, a serious illness such as a heart attack or
cancer, or ongoing health care costs associated with a
chronic condition such as diabetes or heart disease,
coverage under this policy may not pay for a
substantial share of the costs of doctors, hospitals,
or other treatments. You may face additional
out-of-pocket costs for doctors, hospitals and other
services even if you have met your deductible or
out-of-pocket maximum. This product does not provide
maternity coverage. Please examine this policy
carefully before purchasing.
14)Requires, on or after January 1, 2011, all health benefit
plans offered or sold to groups or individuals to contain a
maximum limit on out-of-pocket costs, including, but not
limited to, copayments, coinsurance, and deductibles for
covered benefits.
EXISTING LAW provides for regulation of health plans by DMHC
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under Knox-Keene and for regulation of health insurers by the
CDI under the Insurance Code. Authorizes health plans to offer
and sell health care service plan contracts and authorizes
health insurers to offer and sell health insurance policies, as
specified. Requires every health plan and every health insurer,
to cover, or offer coverage for, specified mandated benefits or
types of coverage, with different benefit requirements
applicable to health plans under DMHC and health insurers under
CDI.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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 : According to the author, this bill is needed because
health insurers and health plans are currently able to sell
consumers health coverage without any standards for co-payments,
deductibles, level of coverage, or covered benefits. The author
states that California consumers seeking to buy individual
health insurance face confusing choices, and that because the
different products have varying deductibles, copayments, yearly
and lifetime maximums and covered benefits, it is nearly
impossible for consumers to compare premiums and coverage. In
addition, the author points out, while health plans regulated by
DMHC are required to cover doctors, hospitals and preventive
care, and other basic health care services, health insurers
regulated by CDI are permitted to sell hospital-only or
physician-only coverage, as well as insurance that pays only a
small fraction of the actual cost of care. According to the
author, this bill organizes the individual insurance market and
makes it understandable for consumers. Finally, the author
states that this bill will eliminate "junk insurance" which is
marketed as quality coverage but only has limited coverage for
hospitalization or covers only a small fraction of the actual
costs consumers may face.
Consumer, labor, and provider organizations support this bill as
a way to help consumers more effectively comparison shop among
individual coverage options. Health Access California, sponsor
of this bill, sees this bill as a way to organize the individual
insurance market so that consumers can shop knowledgably.
Health Access California contends that the sorting of products
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into categories will provide consumers with basic information in
a manner similar to the regulations for Medicare supplement
coverage which help seniors better determine whether they are
getting value for their dollar or not. Health Access California
also argues that this bill would eliminate junk insurance by
requiring all health insurance policies to at least cover
hospital, medical and surgical care and requiring regulators to
establish out-of-pocket maximums for all coverage. Consumers
Union supports this bill and states that in today's individual
market it is impossible for consumers to make plan comparisons
given the lack of clear information and the variation in cost
sharing and covered services.
Anthem Blue Cross (Anthem) has an oppose unless amended position
and states that this bill is confusing and could lead to
unintended consequences, including a reduction in consumer
choice, an increase in health insurance premiums, and an
increase in the number of uninsured-outcomes that are contrary
to the goals of health care reform. Anthem states it is
supportive of categorizing health care products into clearly
identifiable categories based on actuarial value. Anthem
contends that helping consumers to better understand their
health care choices is an important and worthy undertaking, but
educating consumers and forcing them to pay more for their
health care are two different things.
Health plans, insurers, and business organizations oppose this
bill expressing concerns that the requirements could negatively
impact the ability of health plans to provide flexible products
to individuals at affordable prices. Health plans argue that
they are currently able to keep policies affordable by ensuring
that health risk is accurately assessed and through flexibility
in product design to lower premiums. Health insurers in
opposition state their support for transparency of health plan
choices so that individuals can compare options, but state that
this bill goes beyond that and has the very real possibility of
eliminating lower cost options in the market. Blue Shield of
California opposes this bill and states that it is supportive of
removing so-called junk insurance from the market, but is
concerned that this bill may remove more than "junk" insurance
from the market depending on how its provisions are interpreted
by regulators.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097
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