BILL ANALYSIS                                                                                                                                                                                                    






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                        Senator Elaine K. Alquist, Chair


          BILL NO:       AB 1759                                      
          A
          AUTHOR:        Blumenfield                                  
          B
          AMENDED:       June 24, 2010                               
          HEARING DATE:  June 23, 2010                                
          1
          CONSULTANT:                                                 
          7
          Chan-Sawin                                                  
          5
                                                                       
                                         9
                                        
                                     SUBJECT
                                         
                      Health care coverage: premium rates

                                     SUMMARY  

          Changes the circumstances under which a health care service  
          plan (health plan) or health insurer may, mid-contract  
          term, make changes to the premium rates or applicable  
          copayments, coinsurances, or deductibles for large group  
          health plan contracts or insurance policies.  Exempts a  
          violation of this prohibition by a health plan from being  
          subject to the crime provision that applies to the  
          Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene  
          Act).

                             CHANGES TO EXISTING LAW  

          Existing law:
          Provides for the regulation of health plans and insurers by  
          the Department of Managed Health Care (DMHC) and the  
          California Department of Insurance (CDI), respectively.

          Prohibits a health plan or insurer from changing premium  
          rates or applicable copayments, coinsurances, or  
          deductibles for group health plan contracts or group health  
          insurance policies after the contract or policy holder has  
                                                         Continued---



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          delivered written acceptance of the contract or policy,  
          after the start of the open enrollment period, or after  
          receipt of the premium payment for the first month of  
          coverage.

          Specifies that changes in the premium rates, applicable  
          copayments, coinsurances, or deductibles of a contract may  
          be changed when: 1) authorized or required in the contract  
          or policy; 2) the contract was agreed to under a  
          preliminary agreement that states that it is subject to  
          execution of a definitive agreement; or, 3) the plan or  
          insurer and the contract or policy holder mutually agree in  
          writing.

          Defines "small employers" as 1) any person, firm,  
          proprietary or nonprofit corporation, partnership, public  
          agency, or association that is actively engaged in business  
          or service, that, on at least 50 percent of its working  
          days, as specified, employed at least 2, but no more than  
          50, eligible employees, as specified; or, 2) any guaranteed  
          association, as defined in Section 1357 (n), that purchases  
          health coverage for members of the association.

          This bill:
          Deletes the provision that allows changes in the premium  
          rates, applicable copayments, coinsurances, or deductibles,  
          when authorized or required in the contract or policy.

          Narrows the provision that allows changes in the premium  
          rates, applicable copayments, coinsurances, or deductibles  
          of a contract from any types of changes the plan or insurer  
          and the contract or policyholder mutually agrees to in  
          writing, to only coverage changes.

          Specifies that premium rates, applicable copayments,  
          coinsurances, or deductibles of a contract may be changed  
          when a change in applicable copayments, coinsurance, or  
          deductible is required by law.

          Exempts the contracts and policies issued to a small  
          employer from requirements in existing law limiting health  
          plans and insurers from changing premium rates or  
          cost-sharing, except under certain specified circumstances.

          Exempts the willful violation of this prohibition by health  




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          plans from being subject to penalties specified in the  
          Knox-Keene Act.

          Makes other technical changes.

                                  FISCAL IMPACT  

          This bill is keyed non-fiscal.

                            BACKGROUND AND DISCUSSION  

          According to the author, existing law permits health plans  
          and insurers to change rates mid-year "when authorized or  
          required in the group contract," and group insurance  
          contracts and policies typically contain language similar  
          to the following: "the health plan reserves the right to  
          re-rate the premium if enrollment varies by more than 10  
          percent."  Such clauses allow insurers to adjust rates  
          mid-contract.  The author states that this bill is  
          necessary to protect large group purchasers from a  
          mid-contract rate change, and would provide greater  
          stability in premium rates for employers and employees.

          The author contends that a mid-year rate change is a  
          significant issue in the current economic environment of  
          lay-offs and corporate down-sizing, and can be devastating  
          for an employer who is seeing a reduction in business.  
          According to labor reports, California lost more than half  
          a million jobs in 2009.  Payrolls shrank by 38,800 jobs in  
          December 2009, and the unemployment rate remained flat at  
          12.4 percent.  A mid-year rate change for employers buying  
          coverage for employees could mean financial pressures to  
          reduce or cancel employer coverage.  For workers, the  
          mid-contract rate increases could have major impact,  
          including leaving workers without employer-sponsored  
          coverage or unable to purchase more expensive health  
          coverage.  A mid-year rate change is also a significant  
          issue for the growing and financially healthy employer.  In  
          either case, employees are the ones most hurt financially  
          when there is a mid-year rate increase.
          2010 health coverage rate increases in the individual  
          market
          In February 2010, Anthem Blue Cross notified CDI of their  
          intention to raise rates up to 39 percent for policyholders  
          in the individual market.  The decision by Anthem Blue  




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          Cross to implement these premium increases after similar  
          increases in 2009 caused great concern, not only in  
          California, but across the nation, as reports of other  
          health plans and insurers raising rates similarly were made  
          public.  The California Assembly Committee on Health held  
          an oversight hearing in late February 2010 on the rate  
          increases, as did the Congressional House Energy & Commerce  
          Subcommittee on Oversight and Investigations on February  
          24, 2010.  

          Wellpoint, Anthem Blue Cross' parent company, in response  
          to an inquiry from Kathleen Sebelius, Secretary of the U.S.  
          Department of Health and Human Services, stated that an  
          independent actuarial firm concluded that their rates are  
          actuarially sound and necessary, reflecting the expected  
          medical costs associated with the membership in their  
          plans, and that they satisfy or exceed the medical loss  
          ratio required by California law.  The letter went on to  
          state that rate increases reflect the increasing underlying  
          medical costs in the delivery system which are  
          unsustainable.  Specifically, Wellpoint explained that  
          rates in the individual market were rising faster than  
          medical inflation due to a number of factors, including: a)  
          a less healthy risk pool; b) individuals moving to  
          lower-cost options; c) individuals aging into a higher age  
          category; and, d) "deductible leveraging," when enrollee  
          deductibles and copayments do not increase with medical  
          inflation, and medical costs increases disproportionately  
          fall on the premiums.

          At the request of Insurance Commissioner, Steve Poizner,  
          Anthem Blue Cross agreed to delay the increases until May  
          1, 2010 to allow an independent actuary to review their  
          rates.  In April 2010, the independent actuarial review  
          found numerous errors in the methodology used by Anthem to  
          project total lifetime loss ratios, which is a projection  
          of the amount of services that is potentially used.   
          Specifically, mathematical errors in the double counting of  
          aging in the calculating medical trend caused Anthem to  
          overstate the initial medical trends used to project costs  
          for known risk factors.  Once these numerous mathematical  
          errors were fixed, the average rate increase across Anthem  
          products was reduced from 25.4 percent to 15.2 percent,  
          reducing the initial rate increase on average by 10.2  
          percent.




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          While the rate hikes were rescinded by the insurer, Anthem  
          indicated premiums may be adjusted "more frequently."  Some  
          employers have interpreted these recent rate hikes as a  
          cautionary warning for future hikes in the group market.   
          As noted in the February 2010 congressional hearing, while  
          working families struggled with rising health care costs  
          and a recession, the 5 largest health insurance companies -  
          WellPoint, Cigna, UnitedHealth Group, Aetna and Humana -  
          had combined profits of $12.2 billion, up 56 percent from a  
          year earlier.  Health insurance company profits grew while  
          the gross domestic product decreased by 1 percent over same  
          period. 

          Health plan and health insurance regulation in California 
          California's regulatory agencies, DMHC and CDI, oversee  
          roughly 200 health plans and insurers, which collectively  
          provide coverage for 27 million people.  DMHC regulates  
          health plans, including Health Maintenance Organizations  
          (HMOs) and some Preferred Provider Organization (PPO)  
          plans.  CDI regulates multiple lines of insurance,  
          including disability insurers offering health insurance,  
          which are generally PPO plans and traditional indemnity  
          coverage.  Five HMOs-Kaiser, Blue Cross, HealthNet,  
          Pacificare, and Blue Shield-currently account for 76.0  
          percent of health plan enrollment in the state.   
          Collectively, these plans cover 20 million Californians.

          Although DMHC and CDI both regulate health plans and  
          insurers providing health coverage, each regulator employs  
          a different approach, based on historical differences.  At  
          the heart of the difference is the "promise-to-pay" versus  
          the "promise-to-deliver care."  DMHC-licensed health plans  
          arrange for, and organize the delivery of, health care and  
          services through contracted or owned providers and  
          facilities, and are required to cover all medically  
          necessary services.  Disability insurers protect against  
          (indemnify) the expense or charges (losses) associated with  
          illness or injury, and typically provide coverage for  
          defined benefits that may be specifically limited in the  
          policy, such as number of visits or annual dollar limits.   
          The distinction between the two regulatory frameworks has  
          become blurred over time because of the historical  
          exceptions made for two large PPO health plans and  
          insurers, Blue Cross and Blue Shield, who offer PPO  




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          products under both DMHC and CDI, but fundamental  
          differences remain in the expectations and regulatory  
          oversight by each regulator. 

          DMHC enforces the provisions of the Knox-Keene Act, which  
          sets rules for mandatory basic services; financial  
          stability; availability and accessibility of providers;  
          review of provider contracts; cost sharing; onsite medical  
          surveys, including review of patient medical records; and  
          consumer disclosure and grievance requirements.  Knox-Keene  
          licensed plans must submit for review and approval all of  
          the types of contracts it will offer, as well as its  
          standard provider contracts and payment methods, audited  
          financial statements, administrative structure, financial  
          viability, actuarial analyses, proposed advertising and  
          marketing materials, and proposed service areas.  However,  
          DMHC does not have authority to regulate rates except in a  
          few specified circumstances.

          CDI requires premium rates to be filed for individual  
          health insurance, and rating plans to be filed by small  
          groups, but does not approve the rates per se.  For  
          individual health insurance, CDI reviews rates after they  
          are filed, and may disapprove policies that provide no  
          economic benefit to the consumer and require that benefits  
          be reasonable in relation to use.  The Commissioner can  
          also withdraw an individual health insurance policy upon a  
          finding that rates are unreasonable in relation to the  
          benefits.  

          Medicare supplement policies and contracts sold by both  
          health plans and insurers are subject to prior approval and  
          regulation of their medical loss ratios.  Some other types  
          of health insurance are subject to rating restrictions, but  
          generally are not subject to rate regulation.  Health plans  
          and insurers are subject to rating rules relating to health  
          coverage sold to small employer groups of 2 to 50 eligible  
          employees, but these rules do not limit the rate, per se,  
          that may be charged.  

          CDI oversees 11 percent of group policies in California,  
          compared to 39 percent of individual market policies.  In  
          contrast, DMHC oversees 89 percent of the group policies  
          and 61 percent of individual policies.  





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          Group insurance
          Group coverage is a health policy or contract purchased by  
          an employer, and offered to eligible employees (and often  
          to the employees' family members) as a benefit of working  
          for that company. The majority of Americans have group  
          health insurance coverage through their employer or the  
          employer of a family member.

          Large group health insurance contracts, unlike small group  
          contracts and policies, do not have to be offered on a  
          guaranteed-issue basis, so a health insurance company could  
          reject an entire large employer group based on its claims  
          history. However, no individual employee who is eligible  
          for benefits can be excluded from large group coverage  
          based on medical history. If a company issues a policy to a  
          large employer, then all of its eligible employees must be  
          issued coverage.

          Federal law mandates all group insurance contracts,  
          including large group contracts, be renewed every year at  
          the employer's discretion, unless there is non-payment of  
          premium, the employer has committed fraud or intentional  
          misrepresentation, or the employer has not complied with  
          the terms of the contract or policy.  Large group health  
          insurance is medically underwritten at the time of purchase  
          with rates based on employee participation and prior claims  
          experience, as well as any overall increases in the cost of  
          providing coverage (an example of such costs would be  
          changes in laws that may impact operating expenses).   
          Individual employees are not generally asked to fill out a  
          medical questionnaire prior to obtaining coverage. 

          Many employers contract with state regulated health  
          insurance companies to provide its employees health  
          benefits.  However, larger group health plans (usually  
          several hundred employees or larger) may choose to either  
          fully, or partially, self-insure their group benefit plans.  
           This means that instead of paying health insurance  
          premiums to a company, the employer sets a pool of funds in  
          reserve, and assumes its own risk for health benefit  
          claims.  Companies that self-insure generally buy what is  
          known as a "stop-loss insurance policy" to protect  
          themselves against losses above a certain threshold.  Such  
          companies contract with either a third-party administrator  
          or a health plan to administer benefits and handle claims.   




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          Self-funded plans are regulated federally by the Department  
          of Labor under the Employee Retirement Income Security Act  
          of 1974 (ERISA), so they are sometimes known as ERISA  
          plans.  

          According to the California Health Benefits Review Program,  
          in 2010, an estimated 19 million Californians were  
          privately insured.  Of these, roughly 4 million, or 21  
          percent were in self-funded, ERISA plans, compared to  
          roughly 9.8 million, or 51.3 percent who were insured in  
          the large group market and 3.3 million, or 17.5 percent in  
          the small group market.  There were roughly 2 million  
          individuals, or 10.3 percent, who bought coverage on an  
          individual basis.

          Employer Sponsored Coverage in California
          According to the 2009 California Employer Health Benefits  
          Survey published by the California HealthCare Foundation,  
          nine percent of California companies provided  
          employer-sponsored coverage in the large group market in  
          2009 for seventy-three percent of California workers.   
          Premiums for individuals, across all firms in California,  
          averaged $5,133 annually, with an average cost-sharing to  
          the employee of $564, or roughly 11 percent.  Premiums for  
          family coverage in the state were $13,525 on average, with  
          the employee contributing $3,398 annually, or roughly 25  
          percent.

          Across the state, 30 percent of employers saw a premium  
          increase of 10 percent or more from 2008 to 2009.  Compared  
          to smaller firms, larger employers experienced smaller  
          premium increases and were less likely to see premium  
          increases over 15 percent.  In addition, 15 percent of  
          California's employers reduced benefits or increased  
          cost-sharing in response to the economic downturn.  Eleven  
          percent of employers increased employee's premiums.

          The survey also found that 44 percent of large employers  
          and 20 percent of small employers indicated that they were  
          "very likely" to increase premium cost-sharing to their  
          employers in 2010.  Six percent of employers indicated that  
          they were "very likely" to drop coverage entirely in the  
          upcoming year, compared to one percent in 2008.  

          Grandfather rule in federal health reform




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          In March of this year, the President signed the federal  
          health reform law, the Patient Protection and Affordable  
          Care Act (PPACA) and its sister Act, the Affordable Care  
          Act.  Once implemented, both acts would make significant  
          changes to the California health insurance market and its  
          regulatory environment.  

          During the health reform debate, President Obama made clear  
          to Americans "if you like your health plan, you can keep  
          it."  He emphasized that nothing in the health reform law  
          would force businesses or consumers to change health plans  
          or change their doctor.  This promise was ensured in the  
          grandfather rule, which enables businesses and families to  
          keep their plan while adding important new benefits for all  
          Americans with private insurance.  Grandfathered plans are  
          plans that existed, as of March 23, 2010.  Plans can keep  
          their grandfathered status so long as they only make  
          routine changes.  These routine changes include cost  
          adjustments to keep pace with medical inflation, adding new  
          benefits, making modest adjustments to existing benefits,  
          voluntarily adopting new consumer protections under the new  
          law, or making changes to comply with state or other  
          federal laws. Plans will lose their "grandfather" status if  
          they choose to significantly cut benefits or increase  
          out-of-pocket spending for consumers - and consumers in  
          plans that make such changes will gain new consumer  
          protections.  

          The grandfather rule is silent about changes in premiums,  
          and would apply to both state-regulated health plans and  
          insurers, as well as federally regulated plans.  It is  
          unclear how the grandfather rules in health reform will  
          change market competition between state regulated health  
          plans and insurers, and federally regulated ERISA plans.

          Arguments in support
          The sponsor, Pacific Federal, writes that a mid-year rate  
          change is a significant issue in this economic environment  
          of lay-offs and corporate downsizing, and could be  
          devastating for the employer which is seeing a reduction in  
          business.  Consumer Attorneys of California concurs,  
          stating that recent rate increases have hit small business  
          owners hard, and this bill is a common sense measure that  
          will benefit both consumers and business owners alike, as  
          they struggle to keep shop doors open and provide adequate  




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          health coverage for employees.  The California Teachers  
          Association states that this measure would contribute to  
          affordable, stable health costs for Californians.  
          
          Writing in support, the Association of California Water  
          Agencies state that, as the economy has worsened and  
          continues to decline, many employers have implemented  
          layoffs in an attempt to curtail budgetary shortfalls.  As  
          employment ranks have shrunk, often the laid off employees  
          are younger, newer employees who tend to use less health  
          benefits.  This bill would curtail any rate increases in  
          insurance premiums mid contract.

          Arguments in opposition
          Anthem Blue Cross opposes this bill, stating that by  
          limiting what health plans and insurers use in contracts  
          will have unintended consequences that will lead to  
          increased costs to group contracts.  Anthem Blue Cross  
          asserts that these clauses are necessary, and primarily  
          used only when the risk profile of a particular business is  
          different than what was initially described and agreed to  
          prior to signing the contract.  This flexibility affords  
          plans and insurers the ability to change rates when  
          circumstances require it without having to rate each  
          customer at a higher rate overall to account for the  
          potential that the risk of the group may change  
          significantly.

          Blue Shield of California writes that various geographic  
          locations have large disparities in the cost of medical  
          services throughout the state (rural vs. urban, for  
          example), and this bill would prohibit premium changes  
          based on those factors, even when the changes are favorable  
          to the employer.  

          Health Net writes that health plans and insurers  
          aggressively compete to attract and retain business and,  
          given the costs associated with attracting new business,  
          health plans and insurers strive to renew business when the  
          contract period ends.  Health Net argues that a unilateral,  
          mid-term premium increase without a legitimate  
          justification is contrary to plans and insurers' goal of  
          attracting and retaining business.  Health Net further  
                                                                        states that, should there be a material, not trivial,  
          change in the composition of the group, the contracts  




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          signed by those groups authorize Health Net to review and  
          adjust the rates.  
          
          Kaiser Permanente points out, as part of its opposition,  
          that this bill establishes rules to tie the hands of health  
          plans and insurers regulated under California law, but  
          would impose no such restrictions on the bill's chief  
          proponent - administrators of self-funded plans for large  
          employer groups.  These self-funded arrangements, which are  
          exempt from state regulation under federal law, simply pay  
          claims for health care costs as they are incurred - in  
          effect, automatically adjusting for changes in the heath  
          status of the employer group regularly.  Kaiser points out  
          that this is exactly the kind of adjustment the proponents  
          would prevent their competitors in the marketplace from  
          being able to make.
          
          Related bills
          SB 1163 (Leno) of 2010 would, among other things, require  
          health plans and insurers to give 180 days written notice  
          of changes in the premium rate or coverage before such a  
          change takes effect, as specified.  Set for hearing on June  
          29, 2010 in the Assembly Health Committee.
          
          AB 591 (De La Torre) of 2009 would, among other things,  
          provide a moratorium on increases in health insurance  
          premium rates for 90 days after this bill becomes  
          operative, prohibit a health plan or insurer from  
          increasing premium rates by more than the average  
          percentage increase in the medical care component of the  
          consumer price index for the immediately preceding calendar  
          year, as specified, and prohibit a health plan or insurer  
          from increasing the premium rate it charges a subscriber or  
          policyholder during the 12 months following the last  
          premium rate increase.  Set for hearing on August 4, 2010  
          in the Senate Health Committee.

          AB 2042 (Feuer) among other things, provides predictability  
          in the individual insurance market by limiting rate and  
          benefit changes to once per year.  Pending hearing in  
          Senate Appropriations Committee. 

          AB 2170 (Bonnie Lowenthal) prohibits health plans and  
          insurers covering prescription drug benefits and using a  
          formulary from changing the applicable copayments or  




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          deductibles or coinsurances for prescription drug benefits  
          for the length of the contract or policy.  Failed passed in  
          Assembly Appropriations Committee.

          AB 2578 (Jones and Feuer) requires health plans and  
          insurers, effective January 1, 2012, to apply for prior  
          approval of proposed rate increases, under specified  
          conditions, and imposes on DMHC and CDI specific rate  
          review criteria, timelines and hearing requirements.   
          Pending hearing in Senate Appropriations Committee.

          Prior legislation
          AB 1218 (Jones) of 2009 would have required health plans  
          and insurers to annually submit for prior approval to the  
          respective regulator any increase in the rate charged to a  
          subscriber or insured, as specified, and would have imposed  
          on DMHC and CDI specific rate review criteria, timelines,  
          and hearing requirements.  Failed passage in Assembly  
          Health Committee.

          AB 1554 (Jones) of 2008 was substantively similar to AB  
          1218 (Jones) of 2009.  Failed passage in Senate Health  
          Committee.

          SB 425 (Ortiz) of 2006 would have required health plans and  
          insurers to obtain prior approval for a rate increase,  
          defined in a similar manner to rates under AB 1218 of 2009.  
           Failed passage in Senate Health Committee.

          AB 2889 (Frommer), Chapter 826, Statutes of 2006, requires  
          health plans and insurers to permit an individual who has  
          been covered for at least 18 months under an individual  
          contract or policy to transfer, without medical  
          underwriting, to any other individual contract or policy,  
          as specified.
          
          SB 26 (Figueroa) of 2004 would have required health plans  
          and health insurers to obtain prior approval of rate  
          increases from DMHC and CDI, as specified, and would have  
          potentially required significant refunds of premiums  
          previously collected.  Failed passage in Senate Insurance  
          Committee.

          AB 2052 (Goldberg), Chapter 336, Statutes of 2002,  
          prohibits a health care service plan or insurer from making  




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          any change in premium rates or cost sharing after  
          acceptance of a contract or after the open enrollment  
          period.

                                  PRIOR ACTIONS

           Assembly Health Committee:    44-28
          Assembly Floor:               12-6 
                                     COMMENTS
           
        1.Current bill continues to limit premium changes due to  
          changes in enrollment.  Previous version of the bill would  
          have prohibited a health plan or insurer from using a  
          change in enrollment as the basis for a premium rate change  
          during the length of the contract.  Recent amendments,  
          which remove the ability of health plans and insurers to  
          include a clause in the group contract that would allow  
          them to re-rate the premium if enrollment varies by more  
          than 10 percent, would have the same effect.  The current  
          version of the bill prevents plans and insurers being able  
          to make a change in premiums or cost-sharing rates mid-year  
          that is not based on changes in applicable copayments,  
          coinsurance, or deductibles, as required by law, or that  
          are mutually agreed upon by both parties.  The effect of  
          this bill could be anticompetitive for state-regulated  
          health plans and insurers.
          
        2.The bill would also limit changes due to composition of  
          workforce.  It is unclear if there are other mutually  
          agreed upon changes, such as a change in network, that may  
          be cause for premium or other cost-sharing rate changes.   
          The author and sponsor believe that employers would be  
          willing to forgo such opportunities for predictability in  
          health care costs over the term of the contract.  However,  
          if an employer has an increase in younger workers or a  
          decrease in older workers, this bill would preclude premium  
          rates from adjusting downward.  This situation is likely,  
          given the increasing rate of retirement of aging baby  
          boomers.  The effect of this bill could be anticompetitive  
          for state-regulated health plans and insurers.
          
        3.Clarifying amendment to narrow the scope of the bill to  
          large employers.  The author's intent is to limit the  
          provisions of this bill to large employer contracts without  
          making changes to small employer contracts.  The bill, as  




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          currently written, removes the prohibition on health plans  
          and insurers from changing premium rates or cost-sharing  
          more than once a year, with respect to small employers.   
          Staff suggests the following clarifying amendments:
          
                 (a)     On   page  2  ,   line  14, after "contract"  insert:

                   with an employer that does not meet the definition  
                  of "small employer," as defined in Section 1357,  
               
                (b)     On   page  3  ,  delete lines 3-4 and replace with  :


                   (c) Changes to the premium rates or applicable  
                  copayments or coinsurances or deductibles of a  
                  contract with a small employer, as defined in  
                  Section 1357, shall, subject to the plan meeting  
                  the requirements of this article, be allowed in any  
                  of the following circumstances: 


                  (1) When authorized or required in the group  
                  contract. 


                  (2) When the contract was agreed to under a  
                  preliminary agreement that states that it is  
                  subject to execution of a definitive agreement. 


                  (3) When the plan and contractholder mutually agree  
                  in writing. 

                
                (c)     On   page  3  ,   line  25, after "policy"  insert:

                   with an employer that does not meet the definition  
                  of "small employer," as defined in Section 10700, 
               
                (d)     On   page  3  ,  delete lines 3-4 and replace with  :
                  
                   (c) Changes to the premium rates or applicable  
                  copayments or coinsurances or deductibles of a  
                  contract or policy with a small employer, as  
                  defined in Section 10700, shall, subject to the  




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                  insurer meeting the requirements of this chapter,  
                  be allowed in any of the following circumstances:

                  (1) When authorized or required in the group  
                  contract or policy.

                  (2) When the contract or policy was agreed to under  
                  a preliminary agreement that states that it is  
                  subject to execution of a definitive agreement.

                  (3) When the insurer and the policyholder or  
                  contractholder mutually agree in writing.
                   
         1.What approach, if any, should California take to regulate  
          rates and/or benefits?  This bill is one of three Assembly  
          Bills aimed at addressing the substantial rate hikes levied  
          by health plans and insurers earlier this year.  The other  
          two bills were heard on June 23, 2010 in Senate Health  
          Committee, and offer two different approaches:
          
                (a)     AB 2042 (Feuer), limits rate and benefit  
                  changes in the individual insurance market to once  
                  per year.  AB 1759 may be complementary to AB 2042.

                (b)     AB 2578 (Jones/Feuer) directly regulates  
                  premiums, in both the individual and group market,  
                  by requiring plans and insurers to apply for prior  
                  approval of proposed rate increases with DMHC and  
                  CDI.  AB 2578 may have the same deterrent effect in  
                  the group market as AB 1759, but is a more direct  
                  method of rate regulation.  

          1.Other technical amendment:  
          
                 (a)     On   page  3  ,  delete lines 8-9  

                                   POSITIONS  
          
          Support:  Pacific Federal (sponsor)
                 American Federation of State, County and Municipal  
          Employees (AFSCME)
                 Association of California Water Agencies
                 California Chapter of the American College of  
          Emergency Physicians
                 California Chiropractic Association




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                 California Communities United Institute
                 California Medical Association
                 California Psychological Association
                 California School Employees Association
                 California Teachers Association
                 Consumer Attorneys of California
                 Neighborhood Legal Services of Los Angeles County
                 Valley Industry and Commerce Association

          Oppose:  Anthem Blue Cross
                 Association of California Life and Health Insurance  
          Companies
                 Blue Shield of California
                 California Association of Health Plans
                 Health Net
                 Kaiser Permanente

                                        
                                   -- END --