BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
786 (Jones)
Hearing Date: 8/24/2009 Amended: 8/18/2009
Consultant: Katie Johnson Policy Vote: Health 7-3
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BILL SUMMARY: AB 786 would require the Department of Managed
Health Care and the Department of Insurance to jointly
promulgate regulations to develop standard definitions and
terminology for covered health benefits and cost-sharing
provisions applicable to individual health care contracts and
individual health insurance policies and to develop a system to
categorize all contracts and policies to be offered and sold to
individuals on and after September 1, 2012. The bill would
require the Office of the Patient Advocate to develop and post
on its Internet Web site a description of each coverage choice
category and a uniform benefit matrix of all available
individual health plan contracts and individual health insurance
policies.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
CDI regulations, oversight, $500
$1,000$1,000Special*
policy filing reviews
DMHC regulations, oversight, $950 $950
$360Special**
plan filing reviews
OPA development, posting, $0 $0
$200Special**
and maintenance of
category descriptions and
benefit matrix on website
*Insurance Fund
**Managed Care Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing law provides for the regulation of health care service
plans by the Department of Managed Health Care (DMHC) and for
the regulation of health insurers by the California Department
of Insurance (CDI).
This bill would require DMHC and CDI to jointly promulgate
regulations by December 31, 2011, to develop standard
definitions and terminology for covered benefits and
cost-sharing provisions, including, but not limited to,
copayments, coinsurance, deductibles, limitations, and
exclusions for individual health care service plan contracts and
health insurance policies. Health plans and insurers would be
required to comply with the new standard definitions and
terminology for all new individual plan contracts and insurance
policies issued one year after they are developed. Additionally,
this bill would require
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AB 786 (Jones)
existing individual plan contracts and insurance policies to
comply with the newly developed standard definitions and
terminology within three years of the adoption of the
regulations. A plan or insurer may offer a covered individual
the opportunity to transfer, without medical underwriting, to a
new contract or policy that complies with the standard
definitions and terminology in lieu of complying with the
regulations.
This bill would also require DMHC and CDI to develop a system to
categorize all health plan contracts and insurance policies to
be offered and sold to individuals on and after September 1,
2012, into up to 10 coverage choice categories to facilitate
transparency and consumer comparison shopping that would be
based on the actuarial value of each product and identified on
the benefits covered and the consumer cost sharing elements.
This bill would require DMHC and CDI to categorize each health
plan and insurance policy into the appropriate coverage choice
category by June 30, 2012.
This bill would require all individual health plan contracts and
insurance policies issued, amended, or renewed on or after
January 1, 2011, to contain a maximum limit not to exceed
$15,000 per person per year on out-of-pocket costs. Those costs
would include copayments, coinsurance, and deductibles, for
covered benefits provided by in-network contracted providers. It
is unclear whether or not "out-of-pocket" costs includes or does
not include monthly premiums. Staff recommends that the bill be
amended to clarify that out-of-pocket costs does not mean
premiums. The maximum out-of-pocket limit would be indexed to,
and would increase annually with, the consumer price index and
would be calculated by DMHC and CDI by September 1 each year.
This bill would permit a contract or policy to include a
separate out-of-pocket limit for prescription drug cost sharing,
which the contract or policy would clearly disclose.
This bill would require the Office of the Patient Advocate
(OPA), an independent office created in 2000 in conjunction with
DMHC to represent the interests of health plan members, to
develop and maintain on its website descriptions of each
coverage choice category and a uniform benefits matrix of all
available health plan contracts and insurance policies arranged
by coverage category, as specified.
In order for DMHC to coordinate with CDI to promulgate what are
anticipated to be complicated regulations and to conduct an
initial review of several plan exhibits to ensure compliance,
the department would likely need approximately $1.9 million to
fund 6 positions for the first year. Ongoing costs would be
about $360,000 annually.
Similarly, for CDI to coordinate with DMHC to promulgate
regulations and to ensure initial and continuing insurer
compliance with the new requirements, the department would
likely need an estimated $500,000 in FY 2009-2010 and $1,000,000
in FY 2010-2011 and ongoing.
Additionally, OPA would need approximately $200,000 initially to
develop definitions of the coverage choice categories and the
uniform benefit matrix as well as an estimated $50,000 annually
thereafter to ensure website maintenance.
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AB 786 (Jones)
This bill is similar to AB 1522 (Steinberg) of 2008, which would
have required DMHC and CDI to jointly promulgate regulations to
develop 5 coverage choice categories, among other requirements.
AB 1522 died on the Assembly Floor.
Staff recommends the following technical amendment: Page 7,
line 29, change "on" to "one".