BILL ANALYSIS
AB 2042
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2042 (Feuer)
As Amended August 12, 2010
Majority vote
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|ASSEMBLY: |48-27|(May 13, 2010) |SENATE: |22-13|(August 23, |
| | | | | |2010) |
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Original Committee Reference: HEALTH
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.
The Senate amendments :
1)Define "cost sharing" to include, but not be limited to,
copayments, coinsurance obligations, deductibles, out-of-pocket
costs, and charges for covered benefits other than the premium.
2)Prohibit the application of a lower cost-sharing rate for a generic
drug than that of the brand name version from constituting an
alteration in benefits, in the case that a generic version of a
brand name prescription drug becomes available. Prohibits the
placement of the brand drug into another formulary tier or
increasing the copayment for that brand from constituting an
alteration of benefits or rate increase, if a generic equivalent
becomes available. Prohibits this bill from otherwise permitting a
health plan or insurer to change the structure, tiers, or cost
sharing for generic and brand name drugs during the course of the
year.
3)Prohibit this bill from preventing a health plan or insurer from
providing coverage for newly approved treatments, therapies, and
prescription drugs related to an existing benefit or service
provided under the contract. Prohibits the bill's provisions from
being construed to provide any limitation on medically necessary
services.
4)Require this bill's provisions to be implemented to the extent that
it does not conflict with federal laws and regulations.
AB 2042
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AS PASSED BY THE ASSEMBLY , this bill prohibits health care service
plans and health insurers 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.
FISCAL EFFECT : According to the Senate Appropriations Committee
pursuant to Senate Rules 28.8, negligible state costs.
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, 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" stated that although there has been some
AB 2042
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moderation in health spending growth in recent years, its share of
the economy is growing. 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. 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. 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 17.6% of GDP this year. Nationally, per-person costs for
health care increased 81% between 1997 and 2007.
Analysis Prepared by : Melanie Moreno / HEALTH / (916) 319-2097
FN: 0006050