BILL ANALYSIS
AB 812
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Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 812 (De La Torre) - As Amended: May 5, 2009
Policy Committee: Health Vote:12-4
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires health plans and health insurers to report to
the California Department of Managed Health Care (DMHC) and the
California Department of Insurance (CDI) the medical loss ratio
(MLR) for each policy issued amended or renewed in California
each year. The MLR refers to the proportion of premium spending
attributable to patient care, rather than profit or
administration. Requires DMHC and CDI to adopt joint regulations
to ensure the uniformity of information submitted.
FISCAL EFFECT
One-time fee-supported special fund costs in the range of
$200,000, combined, to DMHC and CDI to promulgate regulations
for health plans and insurers to comply with the requirements of
this bill.
COMMENTS
1)Rationale . This bill increases the information about how much
of health care premiums are spent on patient care. The author
indicates this bill will aid patients in comparing insurance
products and may result in different insurance choices.
Supporters indicate this bill improves health carrier
accountability for spending, and increases consistency in the
regulatory frameworks between DMHC and CDI.
2)Medical Association MLR Report . Each year the California
Medical Association (CMA) publishes the Knox-Keene Health Plan
Expenditures Report to demonstrate key indicators of health
carriers' commitment to patient care, as measured through
financial data. The Knox-Keene Act governs health plans
AB 812
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regulated by DMHC, which releases financial data to the public
on health plans. Data on CDI-regulated insurers is not
released publicly. In the CMA report released in 2008, a new
measure was provided to show how much more spending would be
dedicated to patient care if health plans complied with an 85%
threshold. According to CMA, if the 12 health plans reported
as spending below the 85% mark were to increase spending, more
than $1 billion in patient care would result. An unknown
portion of this increased spending would be paid to
physicians.
3)Concerns . Health plans and health insurers oppose the
reporting of MLR. They indicate that the MLR is inaccurate as
a measure of efficiency and quality. Along with some health
policy researchers, the opposition does not believe MLR is a
good measure of performance. Historically, MLR has been used
as a measure of financial solvency in the indemnity insurance
context, not in a managed care environment. In addition, the
reliability of MLR as a measure of financial performance was
much more stable prior to the extensive integration of today's
health care marketplace, which includes medical groups,
integrated networks, companies marketing across state lines,
and rapid geographic expansion and contraction.
4)Related Legislation . AB 316 (Alquist), pending on the Suspense
File of the Senate Appropriations Committee, requires health
plans and insurers to comply with an 85% MLR (spending of at
least 85 percent of premiums on health care benefits). SB 1440
(Kuehl) in 2008 required health plans and health insurers to
comply with an 85% MLR and was vetoed due to concerns about
the bill's piecemeal approach.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081