BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2244|
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THIRD READING
Bill No: AB 2244
Author: Feuer (D)
Amended: 8/20/10 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 6-1, 6/23/10
AYES: Alquist, Cedillo, Leno, Negrete McLeod, Pavley,
Romero
NOES: Aanestad
NO VOTE RECORDED: Strickland, Cox
SENATE APPROPRIATIONS COMMITTEE : 7-4, 8/12/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Ashburn, Emmerson, Walters, Wyland
ASSEMBLY FLOOR : 50-25, 6/1/10 - See last page for vote
SUBJECT : Health care coverage
SOURCE : Health Access California
DIGEST : This bill prohibits the exclusion or limitation
of coverage for children due to any preexisting condition,
except as specified. The bill requires plans and insurers
offering coverage in the individual market to offer
coverage for a child subject to specified requirements.
The bill prescribes its limits on the rates that may be
imposed for coverage of a child depending on, among other
things, whether the child applies for coverage during an
open enrollment period, as defined, or is a late enrollee,
CONTINUED
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as defined, and would, effective January 1, 2014, require
plans and insurers to apply standard risk rates to the
child coverage, except as specified. The bill prohibits a
plan or carrier that does not or ceases to write new plan
contracts or policies for children from offering new
individual plan contracts or policies in this state for
five years. The bill authorizes the Department of Managed
Health Care and the Department of Insurance to issue
guidance for purposes of implementing these provisions.
Senate Floor Amendments of 8/20/10 narrow the ability of
children to obtain "guarantee issue" coverage, change the
premium limits contained in the current version of this
bill, and delete provisions affecting health insurance
coverage offered to adults in the individual market.
ANALYSIS :
Existing federal law
1 Requires each health insurance issuer that offers health
insurance coverage in the individual or group market to
accept every employer and individual that applies for
such coverage. This requirement is known as "guaranteed
issue." PPACA allows a health insurance issuer to
restrict enrollment in coverage to open or special
enrollment periods. Additionally, a health insurance
issuer must establish special enrollment periods for
qualifying events. The federal Secretary of the
Department of Health and Human Services (DHHS) must
promulgate regulations regarding enrollment periods and
qualifying events.
2. Establishes rating factors for individual and small
group health insurance, effective January 1, 2014, that
prohibit rates from varying with respect to the
particular plan only by the following factors.
A. Whether the plan or coverage covers an
individual or family.
B. The geographic rating area (each state must
establish one or more rating areas within the
state).
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C. Age, except that rates are prohibited from
varying by more than 3 to 1 for adults, consistent
with federal law.
D. Tobacco use, except that rates are prohibiting
from varying by more than 1.5 to 1.
3. Prohibits a group or individual health plan from
imposing any pre-existing condition exclusion. This
provision becomes effective for adults in 2014 and for
children on September 23, 2010.
4. Establishes a requirement to maintain minimum essential
health coverage, establishes phased-in tax penalties for
failure to maintain such coverage, and allows exemptions
from this requirement, such as for religious reasons,
hardship, or because an individual is low-income. The
requirement to maintain minimum essential health
coverage takes effect January 1, 2014 and is referred to
as the "individual mandate."
Existing state law
1. Licenses and regulates health plans, by the Department
of Managed Health Care (DMHC), and health insurers, by
the California Department of Insurance (CDI).
2. Does not require guarantee issue or limit the premiums
for individuals in the individual health insurance
market, except premiums are regulated for individuals
eligible under federal law who previously had 18 months
of group coverage and who have exhausted COBRA/Cal-COBRA
coverage.
3. Existing law establishes requirements for health plans
that provide coverage to small employers. Specifically,
this body of law:
A. Requires health plans to fairly and
affirmatively offer, market, and sell health
coverage to small employers. This is known as
"guaranteed issue."
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B. Requires health plans to offer, market, and sell
all of the health plan's contracts that are sold to
small employers, to any small employers in each
service area in which the plan provides health care
services. This is known as an "all products"
requirement.
C. Requires renewal of coverage, at the option of
the policyholder, unless there is fraud or
nonpayment of premium or the health plan leaves the
market. This is known as "guaranteed renewal."
D. Restricts a plan's ability to set initial and
renewal premium rates to a group of specified risk
categories (age, region, family size, and health
benefit plan) and allows only a limited premium
variance of plus or minus 10 percent from a
standard rate based on health status. The
limitation on premium variance is referred to as
"rate bands."
E. Limits pre-existing condition exclusions to six
months from the individuals' effective date of
coverage, with a requirement that health plans
credit policyholders for the time the individual
was covered under previous coverage.
4. Prohibits pre-existing condition exclusions of more than
12 months in policies and contracts covering one or two
individuals, with a requirement that plans credit
enrollees for the time the individual was covered under
prior coverage.
"Guaranteed issue" coverage is when a health plan or health
insurer cannot turn down an individual for coverage.
This bill limits the ability of children to enroll in
guaranteed issue coverage to the month of the child's
birthday, and on the effective date of this bill and for 60
days after that date (referred to as an open enrollment
period and initial open enrollment period). During these
open enrollment periods, health plans and insurers must
offer coverage to the responsible party of a child that
does not exclude or limit coverage due to any pre-existing
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condition. Health plans and insurers must also offer
guaranteed issue coverage to individuals who are "late
enrollees." Late enrollees are children without coverage
who did not enroll in coverage during the open enrollment
period for specified reasons, such as the child losing
dependent coverage due to a change in employment status,
divorce, legal separation, loss of coverage under public
programs, and the child becoming a new state resident.
This bill provides that health plans and insurers are not
required to offer guaranteed issue coverage for children in
grandfathered plan coverage. Grandfathered plan coverage
is coverage that was in effect on the date (March 23, 2010)
that the federal health care reform legislation was signed
into law.
Health plans and insurers are also allowed (under the
amendments) to establish rules for eligibility for coverage
for children and adults based on factors otherwise
authorized under federal and state law in addition to those
offered on a guaranteed issue basis during an open
enrollment period for children.
Health plans and insurers must fairly and affirmatively
offer, market and sell all of the plan's contracts that are
offered and sold to a child, or the responsible party of
the child, during the month of a child's birthday (the open
enrollment period), to late enrollees, and during any other
period in which state or federal law, rules or regulations,
or guidance expressly provides that a plan or insurer
cannot condition offer or acceptance of coverage on any
pre-existing condition.
Under this bill, individual health plans and insurers are
prohibited, except to the extent permitted by federal law,
rules, regulations or guidance issued by the relevant
federal agency, from conditioning the issuance or offering
of coverage on any of the following health status-related
factors:
Health status.
Medical condition, including physical and mental
illnesses.
Claims experience.
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Receipt of health care.
Medical history.
Genetic information.
Evidence of insurability, including conditions
arising out of acts of domestic violence.
Disability.
Any other health status-related factor determined
appropriate by department.
Grandfathered health plan contracts and health insurance
polices in effect on March 23, 2010 are exempt from the
prohibition against issuing or offering coverage on the
above health status-related factors.
This bill permits plans and insurers to use age, geographic
region, family composition and health plan contract/policy
selected for purposes of establishing the rate for the
child, where consistent with federal health care reform.
The amendments delete the specific age categories and
family size categories and the premium rating limits
currently in the bill.
The bill establishes new premium rating limits. From the
effective date of this bill until December 31, 2013, rates
are subject to the following limits:
During any open enrollment period or for late enrollees,
the rate for any child due to health status cannot be more
than two times the standard risk rate (the lowest rate that
can be offered to a child).
The rate for a child is subject to a 20 percent surcharge
above the highest allowable rate on a child applying for
coverage who is not a late enrollee and who failed to
maintain coverage with any health plan or insurer for the
90-day period prior to the date of the child's application.
The 20 percent surcharge applies for the 12-month period
following the effective date of the child's coverage.
A health plan or health plan or health insurer may rate a
child based on health status during any period other than
an open enrollment period if the child is not a late
enrollee. This provision applies if expressly allowed
under federal health care reform and any rules, regulations
or guidance issued under that law.
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A health plan or insurer may condition offer or acceptance
of coverage on any pre-existing condition or other health
status related factor for a period other than during an
open enrollment period and other than for a child who is
not a late enrollee. This provision applies if expressly
allowed under federal health care reform and any rules,
regulations or guidance issued under that law.
For individual health plan contracts and health insurance
policies issued, sold or renewed prior to December 31,
2013, the plan or insurer must provide a disclosure
statement stating that failing to maintain continuous
coverage may result in a higher premium.
A child who applied for coverage between September 23, 2010
and the end of the initial open enrollment period is deemed
to have maintained coverage during that period.
This bill allows health plans to require documentation from
applicants relating to their coverage history.
Effective January 1, 2014, the rate for any child must be
identical to the standard risk rate, except for individual
grandfathered health plan coverage.
This bill requires health plan contracts and health
insurance policies offered to a child to meet specified
existing law requirements, and would be required to be
guaranteed renewable except as allowed to be canceled,
rescinded or not renewed pursuant to existing law
provisions specifying when coverage can be canceled or not
renewed.
This bill permits the director of the Department of Managed
Health Care and the Commissioner of the California
Department of Insurance to issue guidance to health plans
and insurers regarding compliance with this bill, and would
exempt that guidance from the rule making provisions of the
Administrative Procedure Act (APA). However, the guidance
would only be effective until the director or commissioner
jointly adopt regulations pursuant to the APA.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: Yes
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
CDI oversight $365 $0 $0 Special*
DMHC oversight likely in
the hundreds of thousands Special**
of dollars in FY 2010-2011
*Insurance Fund
**Managed Care Fund
SUPPORT : (Verified 8/17/10)
Health Access California (source)
AARP
American Federation of State, County and Municipal
Employees, AFL-CIO
California School Employees Association
Congress of California Seniors
Consumers Union
The 100% Campaign
OPPOSITION : (Verified 8/17/10)
Anthem Blue Cross
Association of California Life & Health Insurance Companies
California Association of Health Plans
ARGUMENTS IN SUPPORT : This bill is sponsored by Health
Access California (HAC) and supported by children's and
consumer groups, which argue no child should be denied
health insurance because of a pre-existing medical
condition, that no child should be sold insurance that does
not cover pre-existing conditions, and premiums for
children should be based on age and geographic region and
not health status. HAC intends this measure to provide
early implementation of federal health reform for a segment
of the market that already has substantial subsidies
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available (through Medi-Cal and Healthy Families coverage
up to 250 percent of the federal poverty level) for low-
and moderate-income children. HAC also intends this bill
to provide a transition to health reform modeled on the
successful small employer market rules by phasing in
modified community rating, and by limiting and then
eliminating premium variation based on health status. HAC
argues that not all families with children who are eligible
for Medi-Cal and Healthy Families can afford premiums for
private insurance, but HAC argues a greater number could
afford it if premiums for private insurance were no longer
increased due to health conditions, and that this could
produce state savings to the General Fund in the tens or
hundreds of millions of dollars from reduced enrollment in
Healthy Families and Medi-Cal.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De
Leon, Eng, Evans, Feuer, Fong, Fuentes, Furutani,
Galgiani, Hall, Hayashi, Hernandez, Hill, Huber, Huffman,
Jones, Lieu, 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, Conway, Cook,
DeVore, Emmerson, Fletcher, Fuller, Gaines, Garrick,
Gilmore, Hagman, Harkey, Jeffries, Knight, Logue, Miller,
Nestande, Niello, Nielsen, Norby, Silva, Smyth, Tran
NO VOTE RECORDED: Tom Berryhill, Blakeslee, Audra
Strickland, Villines, Vacancy
CTW:do 8/20/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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