BILL ANALYSIS
AB 2042
Page 1
ASSEMBLY THIRD READING
AB 2042 (Feuer)
As Amended April 20, 2010
Majority vote
HEALTH 13-6 APPROPRIATIONS 12-5
-----------------------------------------------------------------
|Ayes:|Monning, Ammiano, Carter, |Ayes:|Fuentes, Ammiano, |
| |Brownley, De Leon, Eng, | |Bradford, |
| |Hayashi, Hernandez, | |Charles Calderon, Coto, |
| |Jones, Bonnie Lowenthal, | |Davis, |
| |Nava, V. Manuel Perez, | |De Leon, Hall, Skinner, |
| |Salas | |Solorio, Torlakson, |
| | | |Torrico |
|-----+--------------------------+-----+--------------------------|
|Nays:|Fletcher, Conway, Adams, |Nays:|Conway, Harkey, Miller, |
| |Gaines, Smyth, Audra | |Nielsen, Norby |
| |Strickland | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Prohibits health care service plans and health
insurers (collectively carriers) from, more than once in a
calendar year, altering rates (as defined) or benefits of
individual plan contracts and policies that are issued, amended,
or renewed on or after January 1, 2011, with certain exceptions.
Specifically, this bill :
1)Prohibits carriers from, more than once in a calendar year,
altering rates or benefits of individual plan contracts and
policies that are issued, amended, or renewed on or after
January 1, 2011.
2)Permits carriers to alter rates if an enrollee or insured
changes geographic region or family composition, but requires
the change in the rate offered reflects only those two
changes.
3)Requires the term "rate," for the purposes of this bill to
include, but not be limited to, premiums, copayments,
coinsurance obligations, deductibles, out-of-pocket costs, and
any other charges for covered benefits.
4)Prohibits this bill, if coinsurance obligations are based on a
AB 2042
Page 2
percentage of the cost of services, from preventing a change
in provider rates during the term of the contract even if that
change increases the charge for covered benefits to the
enrollee or insured.
5)Excludes the provisions of this bill from contracts and
policies issued through a publicly funded state health care
coverage program, including, but not limited to, the Medi-Cal
Program and the Healthy Families Program, or to Medicare
supplement contracts.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, minor absorbable workload to the California
Department of Managed Health Care and the California Department
of Insurance to continue oversight of carrier product pricing.
COMMENTS : According to the author, several carriers have
proposed substantial rate hikes over the last several months,
most notably, Anthem Blue Cross proposed fee increases that
averaged around 25% and ranged up to 39%. The effect of these
types of dramatic increases is to drive more and more people out
of the market and thus leaving them without any health care
coverage. According the UCLA Center for Health Policy Research,
the number of California residents without insurance increased
by nearly 2 million over 2008 and 2009 (from 6.4 million to 8.2
million) due substantially to a decrease in private health care
coverage. The author states that while federal health care
reform will bring much more certainty to the market (through
health insurance exchanges, guaranteed issuance, and community
rating), many of these elements will not take effect until 2014
and given that California still has a significant period of
economic recovery ahead, it is essential that we take
appropriate actions to stabilize the individual market and
provide Californians with the predictability they deserve.
According to a study published in the journal Health Affairs in
2007, premiums paid by employees for small group coverage (2-50
employees) in California increased 53% between 2003 and 2006,
from $250 to $382 per month, and premiums for individual
coverage rose 23% between 2002 and 2006, from $211 to $259 per
month. In 2006, a single person age 32-52 earning the median
income who purchased individual insurance spent, on average, 16%
of income on premiums and out-of-pocket medical expenses. In
addition to an increase in premiums, for individual insurance,
AB 2042
Page 3
the share of medical expenses paid by insurance as opposed to
patients declined from 2002 to 2006. In 2003, individual market
policies paid 75% of medical costs on average. That figure had
dropped to 55% just three years later. In the small-group
market the proportion of claims paid by insurers for a
standardized population remained constant. Small group market
policies retained their actuarial value, paying for roughly 83%
of medical expenses across a similar period.
The 2009 edition of the California HealthCare Foundation's
"Healthcare Costs 101" (based on the latest health spending
information available from the HHS, Centers for Medicare and
Medicaid Services) stated that although there has been some
moderation in health spending growth in recent years, its share
of the economy continues to grow. In 2007, national health care
spending reached $2.2 trillion ($7,421 per person). If left
unchecked, health care spending is projected to reach 20% of the
country's gross domestic product (GDP) by 2018. The report also
highlighted the following trends:
1)Health spending grew 6.1% in 2007, the smallest increase since
1998, extending a five-year decelerating trend. Nevertheless,
health spending continues to outpace inflation and is
projected to reach $2.5 trillion this year.
2)Projections indicate that the recession will more than offset
the recent moderation in health spending. Health care's share
of the GDP is expected to rise rapidly, to 17.6% of GDP this
year.
3)Nationally, per-person costs for health care increased 81%
between 1997 and 2007.
Health Access and the California Congress of Seniors write that
this bill is a common-sense measure to give consumers a modicum
of predictability for their health insurance by simply requiring
that consumers have an enrollment period when they know what
their premiums, benefits, copays, and deductibles will be for
the next twelve months. Supporters further state that this bill
will prevent insurers and health maintenance organizations (or
HMOs) from hiking rates and cutting benefits every month.
Health Net writes that there are legitimate reasons why a
product's cost-sharing arrangements may change during a contract
AB 2042
Page 4
year. For instance the enrollee or insured age may change during
the term of the coverage or as occasionally occurs, a lower cost
generic drug comes onto the market replacing a higher cost name
brand drug. Additionally, Health Net and Blue Shield of
California state that not all of possible changes occur at the
same time in a calendar year, making compliance with this bill
difficult. California Association of Health Underwriters writes
that this bill would prohibit certain individuals from receiving
a lower rate, which occurs when an individual gets a divorce or
drops a dependent. The California Association of Health Plans
asserts that health plans are preparing to implement the most
important and expansive health care reform bill in decades and
advancing piecemeal legislation at the state level in the midst
of major reform is counterproductive.
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097
FN: 0004258