BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 786|
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THIRD READING
Bill No: AB 786
Author: Jones (D)
Amended: 9/1/09 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 7-3, 7/15/09
AYES: Alquist, Cedillo, DeSaulnier, Leno, Negrete McLeod,
Pavley, Wolk
NOES: Strickland, Aanestad, Cox
NO VOTE RECORDED: Maldonado
SENATE APPROPRIATIONS COMMITTEE : 8-5, 8/27/09
AYES: Kehoe, Corbett, Hancock, Leno, Oropeza, Price, Wolk,
Yee
NOES: Cox, Denham, Runner, Walters, Wyland
ASSEMBLY FLOOR : 48-28, 6/3/09 - See last page for vote
SUBJECT : Health care coverage
SOURCE : Health Access California
DIGEST : This bill requires 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,
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2012. This bill requires 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.
ANALYSIS : 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 Department of Insurance (CDI).
This bill requires 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
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 also requires 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 requires DMHC and CDI to
categorize each health plan and insurance policy into the
appropriate coverage choice category by June 30, 2012.
This bill requires all individual health plan contracts and
insurance policies issued, amended, or renewed on or after
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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. Defines "out-of-pocket" costs to not
include premium payments or prepaid period charges paid by
the subscriber or enrollee.
This bill requires 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.
This bill is similar to AB 1522 (Steinberg), 2007-08
Session, which would have required DMHC and CDI to jointly
promulgate regulations to develop five coverage choice
categories, among other requirements. The bill died on the
Assembly Floor.
Background
The author's office states that this bill is needed
because, despite the large number of Californians who are
covered in the individual market, it is nearly impossible
for consumers to make price comparisons for individual
health insurance, since each product from each insurer has
different deductibles, copayments, out-of-pocket maximums,
benefits, or networks. The author's office states that it
is hard for consumers to determine what their plan covers
or how comprehensive their coverage is, and the result is
that some consumers think they are well covered, but find
out otherwise, only when it is too late. The author's
office asserts that some coverage is marketed as quality
coverage, but may actually only cover hospitalization,
while some plans leave consumers with significant gaps in
coverage, with unlimited exposure to medical bills. The
author's office states that this bill organizes the
individual insurance market and makes it understandable for
consumers. The author's office adds that the bill also
weeds out "junk" insurance, such as coverage with no
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maximum on out-of-pocket expenses, which deceptively offers
coverage, but leaves consumers with large medical bills.
NOTE: See the Senate Health Committee analysis for
further background materials.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
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
SUPPORT : (Verified 9/1/09)
Health Access California (source)
American Association of Retired Persons
American College of Obstetricians and Gynecologists,
District IX/CA
American Federation of State, County and Municipal
Employees, AFL-CIO
California Federation of Teachers
California Medical Association
California Pan-Ethnic Health Network
California Psychological Association
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California Teachers Association
Disability Rights Education and Defense Fund
Jericho
National Multiple Sclerosis Society
Service Employees International Union
Western Center on Law and Poverty
OPPOSITION : (Verified 9/1/09)
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
Health Net
ARGUMENTS IN SUPPORT : 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, the bill's sponsor,
writes that this bill will help organize the individual
insurance market so that consumers can shop knowledgably,
and prevent insured consumers from being surprised with
significant medical debt. Health Access also argues that
this bill would eliminate junk insurance - plans with no
maximum on out-of-pocket expenses, which deceptively offer
coverage but leave consumers with unlimited exposure - by
establishing a $10,000 out-of-pocket maximum for all
coverage. The California Psychological Association writes
that this bill empowers individuals to know what level of
service they are getting before they purchase the coverage,
including coverage for mental health. Western Center on
Law and Poverty writes that maximum limits on out-of-pocket
costs are needed in our current market. They note that, in
2007, an estimated 25 million non-elderly adults were
underinsured, which represented a 60 percent increase since
2003.
ARGUMENTS IN OPPOSITION : The Association of California
Life and Health Insurance Companies (ACLHIC) writes that it
supports transparency of health plan choices so that
individuals can compare options, but that this bill goes
beyond that and may eliminate lower cost options in the
market. ACLHIC believes that the bill also assumes that
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CDI products are less comprehensive than DMHC-licensed
products, and puts CDI products at a competitive
disadvantage, based on the disclosure requirement that
applies to CDI products only. ACLHIC also writes that the
requirement to establish standard definitions and
terminology for covered benefits and cost-sharing
provisions may create a considerable operational burden and
believes the time frames in the bill are unworkable.
Health Net writes that the standard definitions and
terminology requirement may require massive revamping of
information technology systems and retraining of staff, and
also opposes the disclaimer required by the Insurance Code
that benefits may not include maternity coverage or may not
pay a substantial portion of costs, absent determination by
regulators about what the categories are and where the
benefit plans should go. Anthem Blue Cross (Blue Cross)
writes that it is opposed to the bill, unless it is amended
to categorize health care products in the individual market
based on actuarial value, and set the annual out-of-pocket
maximum for in-network medical services at $15,000 per
person, to be updated annually, according to the medical
consumer price index. Blue Cross additionally echoes many
of the objections stated above. The California Association
of Health Underwriters (CAHU) writes that it is opposed to
mandating maximum out-of-pocket expenses at $10,000, and
believes that this will have the effect of regulating
product design and premium rates. CAHU states that the
medical consumer price index has risen twice as fast as
wages for the last 20 years, and that, over time, it will
limit carriers' ability to design affordable products.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer,
Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Huber, Huffman, Jones, Krekorian, Lieu,
Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, John A.
Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Skinner, Solorio, Swanson, Torlakson, Torres,
Bass
NOES: Adams, Anderson, Tom Berryhill, Blakeslee, Conway,
Cook, DeVore, Duvall, Emmerson, Fletcher, Fuller, Gaines,
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Garrick, Gilmore, Hagman, Harkey, Jeffries, Knight,
Logue, Miller, Nestande, Niello, Nielsen, Silva, Smyth,
Audra Strickland, Tran, Villines
NO VOTE RECORDED: Bill Berryhill, Block, Torrico, Yamada
DLW:mw 9/1/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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