BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2110|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2110
Author: De La Torre (D)
Amended: 5/12/10 in Assembly
Vote: 21
SENATE HEALTH COMMITTEE : 5-2, 6/30/10
AYES: Alquist, Cedillo, Leno, Pavley, Romero
NOES: Strickland, Aanestad
NO VOTE RECORDED: Cox, Negrete McLeod
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 47-27, 6/2/10 - See last page for vote
SUBJECT : Health care coverage: premium payments: grace
periods
SOURCE : Health Access
DIGEST : This bill 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 the policy continues in
force, and makes enrollees and insureds, if they fail to
pay the premium owed during the grace period, liable for
any medical costs incurred during the grace period, except
as specified.
ANALYSIS :
CONTINUED
AB 2110
Page
2
Existing law
1. 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.
2. Requires existing insurance policies regulated by CDI to
include a provision setting forth a grace period for
making premium payments, in specified formats.
3. Requires the grace period to be no less than seven days
for weekly premium policies, no less than ten days for
monthly premium policies, and no less than thirty-one
days for all other policies.
4. Prohibits the Insurance Commissioner from approving a
policy for issuance or delivery, and authorizes the
Commissioner to withdraw approval for a policy, if it
fails to meet these requirements.
This bill:
1. Requires individual health insurance policies and
individual 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 the
policy continues in force.
2. Makes enrollees and insureds, if they fail to pay the
premium owed during the grace period, liable for any
medical costs incurred during the grace period, except
as specified.
3. Requires health plans and insurers, upon issuance,
amendment, or renewal of an individual contract or
policy, to provide a notice to the enrollee or insured
of the grace period, as specified.
4. Prohibits this bill from limiting the right of health
plans and insurers to recover unpaid premiums from an
enrollee or insured consistent with state and federal
law.
CONTINUED
AB 2110
Page
3
Background
Blue Shield's changes in grace period policy . On December
16, 2009, an article appeared in the Los Angeles Times
regarding Blue Shield's change in its grace period policy
for products in the individual market. According to the
article, 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 reported that by Blue Shield reducing their
grace period from 43 days to 28 days, Blue Shield was
taking "a key benefit" away. According to a Blue Shield
spokesman who was quoted in the article, 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 canceled. According to Kaiser,
which has no position on this bill, if a member has been
terminated more than 3 times in a 12-month period for
non-payment of premiums, the member must wait 12 months to
reapply and must undergo a medical screening. Anthem Blue
Cross has publicly stated that it will not offer any more
than the state mandated grace period.
NAIC standard grace period . 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 [insert a
number not less than 7 for weekly premium policies, 10 for
CONTINUED
AB 2110
Page
4
monthly premium policies and 31 for all other policies]
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."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 6/30/10)
Health Access (source)
AARP
America Federation of State, County and Municipal Employees
California Chiropractic Association
California Labor Federation
California Medical Association
Consumers Union
JERICHO
Planned Parenthood of California
Planned Parenthood Mar Monte
Planned Parenthood: Shasta-Diablo
OPPOSITION : (Verified 6/30/10)
America's Health Insurance Plans
Association of California Life & Health Insurance Companies
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
Health Net
Irvine Chamber of Commerce
Sacramento Metropolitan Chamber of Commerce
ARGUMENTS IN SUPPORT : Health Access writes that there
have been reports of predatory behavior, in which insurers
are slow to give premium notices to consumers, then cancel
the policy for late payment and offer to provide new
CONTINUED
AB 2110
Page
5
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, 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 in the meantime.
The California Labor Federation writes that, in the current
economic downturn, families are struggling to make ends
meet and pay for basic necessities. The California 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.
A number of patient advocacy organizations, including AARP
and Consumers Union, write in support, stating that, in
this period of economic uncertainty, people sometimes need
extra time to be able to make payments and keep coverage.
Various provider groups, such as the California Medical
Association and the California Chiropractic 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.
ARGUMENTS IN OPPOSITION : The Association of California
Life and Health Insurance Companies (ACLHIC) states that,
under this bill, costs will rise for consumers in
California because the health insurer will be forced to
absorb the additional costs, or providers 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 result in a cost
shift to providers or the consumers. America's Health
Insurance Plans (AHIP) writes that the grace periods
currently required by California law are in line with
national standards of consumer protection, including NAIC
model laws, which were carefully calculated not only to
ensure that policyholders are able to continue receiving
care, but to protect them from the pitfalls of falling
behind on premium payments. AHIP further states that,
CONTINUED
AB 2110
Page
6
while it may seem helpful to extend grace periods, there
are unfortunately often circumstances when an individual is
unable to become current on their premium payments after
entering the grace period. AHIP states that, for these
individuals, it is even less likely that they will be able
to repay past premiums while "catching up" to pay current
premiums.
Health Net opposes this bill , arguing that, by extending
the grace period to 50 days, the bill will lead to health
plans and insurers absorbing the additional cost of
uncompensated care, the cost of which will be made up in
the form of higher premiums paid by other insureds and
enrollees. Contrary to the author's statements, Health Net
believes that the bill does not make an enrollee or
insured, who ultimately fails to pay their premium, liable
for their medical expenses incurred during the grace
period, as this provision does not apply when the medical
service is authorized by the plan or insurer. This does
not provide any meaningful protection for health plans or
insurers, since health plans and insurers continue to
authorize treatment during the grace period; to do
otherwise would not be in the best interest of Californians
covered in the individual market.
The California Association of Health Plans asserts that
this bill would increase health costs for all consumers, as
the cost of care provided during the extended grace period
must be taken into account by the plan. The California
Association of Health Underwriters also points out that the
current standard for all but a few products is 31 days, and
that 50 days is arbitrary.
The California Chamber of Commerce opposes this bill,
stating that it could further exacerbate California's
budget crisis by increasing health insurance costs at a
time that this state is still struggling through an
economic crisis, evidenced by one of the highest
unemployment rates in the nation.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Carter, Chesbro,
Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer,
CONTINUED
AB 2110
Page
7
Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Huffman, Jones, Bonnie Lowenthal, Ma,
Mendoza, Monning, Nava, V. Manuel Perez, Portantino,
Ruskin, Salas, Saldana, Skinner, Solorio, Swanson,
Torlakson, Torres, Torrico, Yamada, John A. Perez
NOES: Adams, Anderson, Bill Berryhill, Blakeslee, Conway,
Cook, DeVore, Emmerson, Fletcher, Fuller, Gaines,
Garrick, Gilmore, Hagman, Harkey, Huber, Jeffries,
Knight, Logue, Miller, Nestande, Niello, Nielsen, Silva,
Smyth, Tran, Villines
NO VOTE RECORDED: Tom Berryhill, Charles Calderon, Lieu,
Norby, Audra Strickland, Vacancy
CTW:do 8/2/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED