BILL ANALYSIS
AB 2110
Page 1
ASSEMBLY THIRD READING
AB 2110 (De La Torre)
As Amended May 12, 2010
Majority vote
HEALTH 13-6 APPROPRIATIONS 11-5
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|Ayes:|Monning, Ammiano, Carter, |Ayes:|Fuentes, Hill, Bradford, |
| | | |Charles Calderon, Coto, |
| |De La Torre, De Leon, | |Davis, Hall, Skinner, |
| |Eng, Hayashi, Hernandez, | |Solorio, Torlakson, |
| |Jones, Bonnie Lowenthal, | |Torrico |
| |Nava, V. Manuel Perez, | | |
| |Salas | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Fletcher, Conway, |Nays:|Conway, Harkey, Miller, |
| |Emmerson, Gaines, Smyth, | |Nielsen, Norby, |
| |Audra Strickland | | |
| | | | |
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SUMMARY : Requires health insurance policies and health care
service contracts 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.
Specifically, this bill :
1)Requires health insurance policies and health plan contracts
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.
2)Makes enrollees and insureds, if they fail to pay the premium
owed during the grace period, fully liable for any medical
cots incurred during the grace period.
3)Requires health insurers and health plans, upon issuance,
amendment, or renewal of a policy, to provide a notice to the
insured of the grace period, as specified.
4)Prohibits this bill from limiting the right of insurers to
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recover unpaid premiums from an insured consistent with state
and federal law.
FISCAL EFFECT : None
COMMENTS : 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.
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.
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
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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 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."
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.
The Association of California Life and Health Insurance
Companies (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
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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 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.
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097
FN: 0004305