BILL ANALYSIS
AB 2110
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 2110 (De La Torre) - As Amended: April 13, 2010
SUBJECT : Health insurance: premium payments: grace periods.
SUMMARY : Requires health insurance policies issued, amended, or
renewed on or after January 1, 2011 to provide a grace period of
50 days for the payment of each premium falling due after the
first premium, during which grace period the policy continues in
force. Requires insurers, upon issuance, amendment, or renewal
of a policy, to provide a notice to the insured of the grace
period. Prohibits this bill from limiting the right of insurers
to recover unpaid premiums from an insured consistent with state
and federal law.
EXISTING LAW :
1)Provides for the regulation of health insurers by the
California Department of Insurance and requires health
insurance policies to include a provision setting forth a
grace period for making premium payments.
2)Requires the grace period to be no less than seven days for
weekly premium policies, no less than 10 days for monthly
premium policies, and no less than 31 days for all other
policies.
FISCAL EFFECT : None
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, while existing
law requires a grace period before an insurance policy is
cancelled, this time period is not adequate to reflect
challenging economic times. Once cancelled, consumers have to
re-enroll in their health plans, putting them at risk of
having to purchase the same policy at a higher rate or being
denied coverage altogether. The author states that this bill
will change the current sub-standard grace period so that
consumers have an adequate opportunity to make payments and
keep their coverage.
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2)LA TIMES ARTICLE . The author provided the Committee, as
background material, an article that appeared in the Los
Angeles Times on December 16, 2009 regarding the grace period
policy of Blue Shield of California for products in the
individual market. According to the article, in December
2009, Blue Shield sent a letter to their policyholders
notifying them that effective January 1, 2010, coverage could
be immediately dropped if a payment is missed. If dropped,
customers could reapply for coverage, but could be declined
based upon the customer's medical condition. The article also
asserted that Blue Shield was reducing their grace period from
43 days to 28 days, taking "a key benefit away." A Blue
Shield spokesman stated that the change was meant to "make
everything uniform," but that the grace period policy was not
changing. In comparison, the article cited Kaiser
Permanente's policy of offering a 50-day grace period before a
policy is cancelled. According to Kaiser, who has no position
on this bill, if a member has been terminated more than three
times in a 12 month period for non-payment of premiums, the
member must wait 12 months to reapply and must undergo medical
screening.
3)NAIC STANDARDS . The National Association of Insurance
Commissioners (NAIC), which provides a forum for the
development of uniform policy when appropriate, has adopted
model law provisions related to grace periods. The "Uniform
Individual Accident and Sickness Policy Provision Law"
includes the following grace period language:
"A grace period of [insert a number not less than 7 for
weekly premium policies, 10 for monthly premium policies
and 31 for all other policies] days will be granted for
the payment of each premium falling due after the first
premium, during which grace period the policy shall
continue in force."
The grace period language in NAIC's "Group Health Insurance
Standards Model Act" states:
"A provision that the policyholder is entitled to a grace
period of thirty-one (31) days for the payment of any
premium due except the first. During the grace period the
policy shall continue in force, unless the policyholder
has given the insurer written notice of discontinuance in
advance of the date of discontinuance and in accordance
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with the terms of the policy. The policy may provide that
the policyholder shall be liable to the insurer for the
payment of a pro rata premium for the time the policy was
in force during the grace period."
4)SUPPORT . Health Access writes that there have been reports of
predatory behavior in which insurers are slow to give notice
to consumers of payment due for health insurance, the insurer
then cancels the policy for late payment, and offers to
provide new coverage only if the consumer passes medical
underwriting. Health Access states that while the recently
enacted federal health reform will require guaranteed issue of
health insurance in 2014, in the meantime there is nothing to
prevent insurers from providing consumers unreasonably short
notice of overdue premiums and using this as an excuse to drop
sick customers and keep healthy ones. The California Labor
Federation writes that in the current economic downturn,
families are struggling to make ends meet and pay for basic
necessities. The Labor Federation states that the extra days
that this bill provides will give families the time to scrape
together payments to keep their insurance that protects them
from additional hardship in the case of an accident or
sickness. The California Medical Association states that this
bill will add some flexibility to the current grace period so
that consumers have an adequate opportunity to make payments
and keep coverage.
5)OPPOSITION . The Association of California Life and Health
Insurance Companies (ACLHIC) states that if someone fails to
pay their premiums and loses coverage as a result, the cost of
services that were provided during the grace period usually
becomes the responsibility of the provider or the health
insurer. ACLHIC states that in either circumstance, costs
rise for consumers in California because the health insurer
will be forced to absorb these costs, or the provider will
look for ways to recover the unpaid payments. ACLHIC asserts
that by increasing the grace period to 50 days, the frequency
of unpaid care will increase, and therefore shift the cost to
providers or the consumers. America's Health Insurance Plans
(AHIP) writes that grace periods currently required by
California law are in line with national standards of consumer
protection, including NAIC model laws, which were carefully
calculated to not only ensure that policyholders are able to
continue receiving care, but to protect them from the pitfalls
of arrears. AHIP further states that while it may seem
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helpful to extend grace periods, unfortunately there are often
circumstances when an individual is unable to become current
on their premium payments after entering the grace period.
AHIP states that for individuals unable to become current
after 31-days, it is even less likely that they will be able
to repay past premiums while "catching up" to pay current
premiums.
6)POLICY CONCERN . This bill requires a 50-day a grace period
for premiums on products offered by insurers regulated by CDI,
but does not place the same requirements on health care
service plans (health plans) regulated by the Department of
Managed Health Care. Existing law related to cancellation of
coverage for non-payment of health plan premiums permits
cancellation after 15 days have lapsed since the premium was
due. It is unclear why this bill does not place the same
requirements on health plans that are placed on health
insurers.
REGISTERED SUPPORT / OPPOSITION :
Support
Health Access (sponsor)
AARP
American Federation of State, County and Municipal Employees
California Labor Federation
California Medical Association
Opposition
America's Health Insurance Plans
Association of California Life and Health Insurance Companies
California Chamber of Commerce
Health Net
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097