BILL ANALYSIS
SB 890
Page 1
Date of Hearing: June 29, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 890 (Alquist) - As Amended: June 15, 2010
SENATE VOTE : 23-11
SUBJECT : Health care coverage.
SUMMARY : Allows an individual enrolled in an individual health
plan or health insurer to change to a different benefit plan
design, with the same or lower coverage, issued by the same
health plan, or by a different health plan or health insurer, on
a guarantee issue basis on the individual's annual renewal date.
Requires health plans and health insurers offering individual
plan contracts to fairly and affirmatively offer and market
standard benefit plan designs (five HMO benefit plan designs and
five PPO benefit plan designs) in five coverage choice
categories. Specifies the cost-sharing requirements for each
product in each coverage choice category. Requires health
insurers to cover medically necessary basic health care
services. Prohibits health insurers from having an annual or
lifetime benefit limit. Requires health plans to change premium
rates for adults based on one-year changes in a person's age and
establishes standard rating factors and limits on premium
variation. Specifically, this bill :
Portability
1)Allows an individual enrolled in an individual health plan or
health insurer to change to a different benefit plan design,
with the same or lower coverage, issued by the same health
plan, or by a different health plan or health insurer, on a
guarantee issue basis on the individual's annual renewal date.
Requires notice of an individual's right to change benefit
plan designs and to switch to a different health insurer or
health plan to be included in the evidence of coverage, and in
the notice of premium increases required under current law.
Standardized Benefit Plan Designs in Individual Market
2)Requires health plans and health insurers offering individual
plan contracts to fairly and affirmatively offer and market
standard benefit plan designs (five HMO benefit plan designs
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and five PPO benefit plan designs) in five coverage choice
categories.
3)Designates the five coverage choice categories as platinum,
gold, silver, bronze, and catastrophic, and specifies the
cost-sharing requirements (deductibles, co-payments, and
out-of-pocket maximums) for services covered under each
coverage choice category, for individuals, and for families
(see chart under "Standardized products" and on pages 11 and
30 of the bill). Requires the plan design in the catastrophic
choice category to have cost-sharing and an out-of-pocket
maximum that enables it to be offered with a health savings
account (HSA).
4)Requires health plans and health insurers to market one
standard benefit plan in each of the five coverage choice
categories and prohibits them from offering benefit plan
designs other than those listed in this bill. Creates a
"grandfathering" exception that would allow individuals and
their dependents to renew health benefit plan designs issued
prior to July 1, 2011 until July 1, 2014.
5)Requires the individual heath insurance market requirements
enacted by this bill, and any regulations adopted under this
bill, to be enforced consistently between health plans and
health insurers, regardless of licensure. Prohibits anything
in this bill from requiring guaranteed issue of coverage.
Individual Insurance Market Reform Commission
6)Establishes an 11-member Individual Insurance Market Reform
Commission (Commission), as specified, and requires the
Commission to:
a) Develop a standardized enrollment questionnaire to be
used by all health plans and health insurers that offer and
sell individual coverage; and,
b) Review and, if necessary, suggest changes to the
standard benefit plan designs required to be offered by
health plans and health insurers in the individual market.
Requires the review to be conducted within six months of
the effective date of regulations adopted under a provision
of the federal Patient Protection and Affordable Care Act
(PPACA) requiring "essential health benefits" to be
defined, and at least every two years thereafter.
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7)Requires, if the Commission suggests changes to the standard
benefit plan designs, or suggests standard benefit plan
designs that are in addition to those established under this
bill, the Director of the Department of Managed Health Care
(DMHC) and the Insurance Commissioner to jointly adopt
regulations that contain standardized benefits and
cost-sharing and that are substantially based on the standard
benefit plan designs suggested by the Commission.
Medically Necessary Basic Health Care Services
8)Requires a health insurance policy issued, amended, or renewed
on or after January 1, 2011 that is regulated by the
California Department of Insurance (CDI), to provide coverage
for medically necessary basic health care services, as defined
in existing law and regulations affecting health plans
regulated by DMHC.
Annual and Lifetime Limit Prohibition
9)Prohibits a health insurance policy issued, amended, or
renewed on or after January 1, 2011, from having annual or
lifetime benefit limits on basic health care services.
10) States that the two provisions above do not prohibit a
health insurer from charging policyholders or insureds a
co-payment or a deductible for a basic health care service, or
from setting limitations on maximum coverage of basic health
care services, provided that the co-payments, deductibles, or
limitations are reported to, and not objected to, by the
Insurance Commissioner, and are disclosed to the policyholder
or insured.
Standardized Enrollment Questionnaire
11) Requires the Commission to develop a standardized
enrollment questionnaire, written in clear and
easy-to-understand language, to be used by all health plans
and health insurers that offer and sell individual coverage.
Requires the questionnaire to provide for an objective
evaluation of the potential subscriber's health status, and
that of his or her dependents applying for coverage, by
assigning a discrete measure, such as a system of point
scoring, to each potential subscriber. Requires the
Commission to establish a methodology for the graduation of
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accepted risk into three risk categories based on responses to
the questionnaire: "higher risk," "standard risk," and
"preferred risk."
12) Requires health plans and insurers, at least six months
following the date the Commission develops the standardized
enrollment questionnaire, to exclusively use the questionnaire
and to utilize the objective evaluation developed by the
Commission in determining whether to provide coverage.
13) Prohibits health plans and insurers, on and after January
1, 2014, from requiring, requesting, or obtaining health
information as part of the application process for an
applicant who is eligible for guaranteed issuance of coverage,
and requires the application form to include a clear and
conspicuous statement that such an applicant is not required
to provide health information.
Individual Market Rating Rules
14) Allows, in rating (pricing) individuals for individual
coverage, only the following characteristics of an individual
to be used: age; geographic region; family composition; health
benefit plan design; and, until January 1, 2014, health
status.
15) Requires, in using age as a rating factor, benefit plan
designs in the individual market to use single-year age
categories for individuals above 18 years of age and under 65
years of age.
16) Requires, in using geographic region as a rating factor,
health plans and health insurers to use the same geographic
rating requirements required in the state's small group health
insurance law.
17) Requires health plans and insurers to base rates on family
size for individuals using no more than six family size
categories.
18) Prohibits, on and after January 1, 2011, rates between the
plan or insurer's highest risk category and the lowest risk
category to vary by more than a ratio of two to one within
each standard benefit plan design offered by a health
plan/insurer within each coverage choice category.
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19) Establishes limits on the annualized premium rate increase
of a health plan/insurer by requiring, after taking into
account a change in premium because of an increase in an
individual's age, that rates not vary by more than 10% above
or below the weighted average premium rate increase calculated
across all of the plan or insurer's health benefit plan
designs.
20) Prohibits, in addition to 19) above, the highest standard
premium rate for a standard benefit plan design offered in the
individual market by a health plan (at any age, geographic
area, family size, contract type, network, and effective date)
from exceeding the lowest standard premium rate for a standard
benefit plan design offered in the individual market by the
health plan/insurer (at the same age, geographic area, family
size, contract type, network, and effective date) by more than
50%, after taking into consideration the actuarial difference
of the standard benefit plan designs offered.
Lifetime Limits Prohibition and MLR
21) Requires health plans and insurers to meet applicable
requirements of PPACA related to the prohibition on lifetime
limits for benefits and medical loss ratios (MLR).
EXISTING LAW :
1)Provides for the regulation of health plans by DMHC under the
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene
Act), and for the regulation of health insurers by CDI under
provisions of the Insurance Code.
2)Requires health plan contracts to provide basic health care
services, as defined. Basic health care services required to
be provided by a health care service plan to its enrollees
include, where medically necessary, and subject to any
co-payment, deductible, or limitation of which DMHC may
approve, a specified list of health care services, including
physician services, hospital inpatient and ambulatory
services, emergency services, and preventive health services.
3)Requires individual health plan contracts under the
jurisdiction of DMHC to additionally provide other specific
types of health care services. Existing law requires
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individual and group health insurance policies under the
jurisdiction of CDI to provide specific types of health care
services, but not basic health care services.
4)States that nothing in the Knox-Keene Act prohibits a health
plan from charging subscribers or enrollees a co-payment or a
deductible for a basic health care service or from setting
forth, by contract, limitations on the maximum coverage of
basic health care services, provided that the co-payments,
deductibles, or limitations are reported to, and not rejected
by, the Director of DMHC and are set forth to the subscriber
or enrollee pursuant to the disclosure provisions of existing
law. The Commissioner of CDI does not have authority to
object to co-payments and deductibles.
5)Allows individuals to switch plans within their current health
plan/insurer once a year, if they have been covered for at
least 18 months under an individual plan contract, and to
transfer, without medical underwriting (meaning the individual
cannot be turned down for coverage), to any other individual
plan contract offered by that same health plan/insurer that
provides equal or lesser benefits.
6)Requires health care service plans to use disclosure forms or
materials containing information regarding the benefits,
services, and terms of the plan contract as the Director of
DMHC may require, so as to afford the public, subscribers, and
enrollees with a full and fair disclosure of the provisions of
the plan in readily understood language and in a clearly
organized manner.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
CDI $900 $2,000 $1,800 Special*
DMHC likely in the hundreds of
thousandsSpecial**
to low millions of dollars annually
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Commission staff likely in the hundreds of Special*
thousands of dollars annually
Special**
*Insurance Fund
**Managed Care Fund
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author this bill would
address many of the shortcomings in the state's individual
health insurance market, and will provide a bridge to the full
implementation of federal health insurance reforms in 2014 by
phasing in some of these reforms starting next year. The
author states that to address individuals facing significant
premium increases in the individual market, this bill will
allow people to switch individual coverage on their annual
renewal date to a different plan offered by a competing plan
or insurer with equal or lower benefits. The author states
that to address the dizzying array of products that makes
comparison shopping difficult, this bill requires standardized
products so people buying coverage can make a comparison of
identical products. The author argues standardizing products
forces price competition on the provider network and quality
of the plan, and not on widely varying and
difficult-to-compare benefit designs.
The author states that this bill would establish a standard
application with standard scoring that would ensure that a
person with a given health history would get the same response
from any plan they apply to for individual coverage, and will
also allow individuals to apply for multiple plans at one
time. To create a level playing field and ensure coverage of
basic health care services, this bill requires all health
insurance products to cover medically necessary care with no
annual or lifetime limits. The author argues allowing
insurers to exclude services, such as maternity, means only
people who want to have children buy maternity coverage, which
defeats the purpose of insurance where you have a large pool
of people whose health costs are spread across the group.
2)FEDERAL HEALTH CARE REFORM . On March 23, 2010, President
Obama signed the PPACA (Public Law 111-148). Among other
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provisions, the new law makes statutory changes affecting the
regulation of and payment for certain types of private health
insurance. There are a number of health insurance provisions
that will take effect in 2010, including some of those related
to this bill:
a) Benefit package. PPACA defines an essential health
benefits package that all qualified health plans must
cover, at a minimum, with some exceptions. The package
will be determined by the federal Department of Health and
Human Services Secretary and must include, at a minimum,
ambulatory patient services; emergency services;
hospitalizations; maternity and newborn care; mental health
and substance use disorder services, including behavioral
health; prescription drugs; rehabilitative services and
devices; laboratory services; preventive services,
including services recommended by the Task Force on
Clinical Preventive Services and vaccines recommended by
the Director of the Centers for Disease Control and
Prevention; and, chronic disease management. In addition,
the plans must cover pediatric services, including vision
and oral care.
b) Four benefit categories. PPACA establishes four benefit
categories-bronze, silver, gold, and platinum - all of
which will have the essential health benefits package.
Policies cannot be sold in the small-group and individual
market or exchanges that do not meet the actuarial
standards for the benefit categories established by law.
All carriers selling in the individual and small-group
markets are at least required to offer silver and gold
plans. The bronze package will represent minimum
creditable coverage with an actuarial value of 60% (i.e.,
covering 60% of enrollees' medical costs) with
out-of-pocket spending limited to that which is defined for
HSAs, or $5,950 for individual policies and $11,900 for
family policies. The silver benefit package will have an
actuarial value of 70% and the same out-of-pocket limits;
the gold package will have an actuarial value of 80% and
the same out-of-pocket limits, and the platinum package
will cover 90% of costs with the same out-of-pocket limits.
A catastrophic benefit package could be made available for
adults younger than age 30, similar to HSA-eligible,
high-deductible plans, with the essential benefits package,
preventive services excluded from the deductible as under
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current HSA law, three primary care visits, and
cost-sharing to HSA out-of-pocket limits. People who are
unable to find a plan with a premium that is 8% or less of
their income will be able to purchase the young adult plan
as well, regardless of age. Deductibles of greater than
$2,000 for individuals and $4,000 for families will be
prohibited in the small-group market.
c) New rating rules. New federal rules for the individual
and group markets, including requiring all insurance
carriers to accept every individual who applies for
coverage (guaranteed issue and renewability), and
prohibiting rating on the basis of health status. Premiums
can reflect age, but cannot vary by more than 3:1, tobacco
use (maximum variation of 1.5:1), family composition,
participation in a health promotion program, and geography.
States will have the option to merge the pooling and
rating requirements of the individual and small-group
markets.
d) Medical Loss Ratio. PPACA requires health plans and
insurers to have a MLR of 85% in the large group market and
80% in the small group and individual markets.
e) Prohibitions Against Lifetime Benefit Caps. Group
health plans or insurance companies providing group or
individual market coverage are prohibited from setting
lifetime limits on the dollar value of benefits and from
setting unreasonable annual limits on the dollar value of
benefits, effective in September 2010. Annual limits will
be banned completely in 2014.
3)CHBRP ANALYSIS . AB 1996 (Thomson), Chapter 795, Statutes of
2002, requests the University of California to assess
legislation proposing a mandated benefit or service, and
prepare a written analysis with relevant data on the medical,
economic, and public health impacts of the proposed health
plan and health insurance benefit mandate legislation. The
California Health Benefits Review Program (CHBRP) was created
in response to AB 1996 and extended for four additional years
in SB 1704 (Kuehl), Chapter 684, Statutes of 2006.
Subsequent to the request that CHBRP analyze a portion of this
bill, President Obama signed PPACA into law. CHBRP's analysis
of mandate bills typically address the marginal effects of the
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bill, specifically how the mandate would impact coverage,
utilization, costs, and the public health, holding all other
factors constant. PPACA will require plans and policies to
cover certain preventive services at first dollar, with no
copayments and with preventive services being exempt from
deductibles (effective six months after enactment). Since
these would be covered, the marginal cost impact and public
health impacts projected in the CHBRP analysis may be
diminished. CHBRP analyzed this bill's provisions that would:
a) Require CDI-regulated health insurance policies to
provide coverage for "basic health care services" (BHCS),
as specified;
b) Prohibit such policies from having an annual limit or
lifetime limit on BHCS;
c) Establish that BHCS must be covered per medical
necessity, and thus create a medical necessity standard for
these services for CDI-regulated health insurance policies;
and,
d) Provide the Insurance Commissioner the authority to
approve copayments, deductibles, or limitations.
Following are some of the findings of CHBRP's analysis of this
bill:
a) Medical Effectiveness:
i) Physical exams: Adults who receive periodic
health evaluations were more likely to receive three
screening tests for which there is evidence of
effectiveness: cholesterol screening; fecal occult
blood testing for colorectal cancer; and, gynecological
examinations/Pap tests for cervical cancer. Findings
from studies of the effects of periodic health
evaluations on adults' receipt of counseling regarding
health behaviors, immunization, and mammography were
inconsistent. Findings regarding the effects of
periodic health evaluations on health outcomes for
adults were inconsistent. No studies of the
effectiveness of periodic health examinations for
children were identified.
ii) Immunizations: The CDC recommends a number of
immunizations based on evidence from randomized
controlled trials and nonrandomized studies.
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iii) Health education: CHBRP states that there is
evidence that some health education services that can
be delivered as part of routine office visits improve
adults' behaviors associated with prevention of illness
or injury, particularly for alcohol misuse, smoking
cessation, sexually transmitted infections, arthritis,
asthma, diabetes, and other chronic conditions.
iv) Vision screening: No studies of the effectiveness
of screening adults for refractive error (i.e.,
nearsightedness, farsightedness, and astigmatism) were
identified. There is insufficient evidence to assess
the effectiveness of screening adults for glaucoma. No
studies were identified that compared prevalence of
amblyopia (i.e., lazy eye) or refractive error among
screened and unscreened children were identified.
CHBRP noted that the lack of evidence for the
effectiveness of either screening is not evidence that
screening provides no benefit. Evidence from a large,
well-designed randomized control trial suggests that
children who are screened multiple times as infants or
toddlers are less likely to have amblyopia at age 7.5
years than children who are screened only once.
v) Hearing screening: Evidence from nonrandomized
studies with comparison groups suggest that
participation in a universal newborn screening program
increases the likelihood that a child with permanent
congenital hearing loss will be diagnosed by age nine
months. Children with permanent congenital hearing
loss diagnosed through universal screening programs
have higher scores on tests of receptive and expressive
language than children with permanent hearing loss who
did not participate in a universal screening program.
vi) Physical, Occupational, and Speech Therapy: CHBRP
states that there is evidence that some forms of
physical, occupational, and speech therapy are
effective for treatment of some injuries, illnesses,
and conditions.
vii) Home Health Services: CHBRP states that there is
clear and convincing evidence that home health services
are associated with statistically significant
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reductions in days of hospitalization and nursing home
use and with a nonsignificant decrease in mortality
relative to usual care. There is clear and convincing
evidence that home-based rehabilitation is associated
with fewer days of hospitalization than inpatient
rehabilitation. There is insufficient evidence to
determine whether home care improves physical or mental
health outcomes for children with very low birth
weight, genetic disorders, or chronic conditions.
viii) Hospice Care Services: CHBRP states that the
preponderance of evidence suggests that hospice care
reduces some symptoms associated with terminal illness,
but the evidence of the effects on pain and quality of
life is ambiguous.
ix) Maternity Services: CHBRP has completed three
reports on the effectiveness of prenatal care services,
which have concluded that many prenatal care services
reduce the likelihood of poor birth outcomes for
mothers and newborns.
b) Utilization, Cost, and Coverage Impacts:
i) This bill would affect 2,438,000 people enrolled
in CDI-regulated policies. This bill does not directly
affect privately purchased plans regulated by DMHC nor
would it directly affect publicly purchased
DMHC-regulated plans, California Public Employees'
Retirement System Health Maintenance Organizations
(CalPERS HMOs), Medi-Cal Managed Care, or Healthy
Families. The main cost effect of this bill is driven
by additional coverage for maternity services within
the CDI-regulated individual market. Currently,
216,000 individuals are covered for maternity care in
this market, and the mandate would extend this coverage
to 963,000 individuals without maternity services
coverage. This represents a 446% increase.
ii) Other Coverage: Currently, 97% of enrollees in
the group market and 88% in the individual market have
coverage for adult preventive services. Coverage for
physical, occupation, and speech therapy are estimated
to be approximately 100% in the group market and 85% in
the individual market. Coverage for home health and
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hospice services is estimated to be approximately 100%
in the group markets and 88% in the individual market.
Coverage for maternity services is estimated to be 100%
in the group market (due to existing federal
requirements) and 18% in the individual market.
iii) Utilization: Utilization for specific BHCS is
estimated to increase by a range: approximately 1.8%
(for home health visits) to 2.4% (for adult physical
exams) over premandate levels. CHBRP assumed no
increase in utilization of childhood immunizations,
vision exams, and maternity services as a result of the
mandate. CHBRP estimates no increase in utilization
for maternity services as result of coverage since (1)
most women deliver in a hospital, so utilization for
maternity-related hospitalization is not estimated to
change; and, (2) most women are likely to continue to
face large out-of-pocket expenditures for maternity
services (including prenatal care), regardless of
whether or not their insurance policy includes
maternity benefits. This is because about 70% of the
women in CDI-regulated individual policies are
currently in high-deductible health plans.
iv) Premiums and Expenditures: The total net annual
expenditures for all plans and policies are estimated
to increase by $49,075,000 (0.06%) for the year
following implementation of the mandate. Approximately
82% of the expenditure increase is attributable to
maternity services, and the other 18% is associated
with other BHCS. The increase in out-of-pocket
expenditures for benefits that would be newly covered
(e.g., copayments and deductibles) are estimated to
increase by $32,342,000 (0.54%). Total premiums
expenditures for private employers purchasing group
insurance are estimated to increase by $4,380,000
(0.01%). Total premiums expenditures for enrollees in
the group market are estimated to increase by
$1,355,000 (0.01%). Total premium expenditures for
individuals purchasing individual insurance are
estimated to increase by $127,949,000 (2.14%).
c) Public Health Impacts: CHBRP estimated that as a result
of this bill, there will be an increase in adult preventive
services in 10,763 more physical examinations, 12,380
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immunizations, 4,427 vision exams, and 2,615 hearing/speech
exams. Although CHBRP is unable to estimate precisely the
impact these services will have on public health, some
improvement in public health would be expected. CHBRP
estimates that as a result of this bill, utilization of
physical, occupational, and speech therapy will increase by
4,489 visits. Some public health benefit would be expected
from this increased utilization. CHBRP estimates that
8,300 pregnancies would be newly covered as a result of
this bill. CHBRP is not able to predict exactly what the
impact of this bill would be on the utilization of
effective prenatal services would be, but it stands to
reason that some reduction in pregnant women smoking,
low-birth weight births, hepatitis B transmissions, HIV
transmissions, cases of preeclampsia, and cases of
respiratory distress syndrome would be expected. CHBRP
estimates that as a result of this bill, utilization will
increase by 2,772 home health visits, and a corresponding
decrease in the number of hospitalizations would be
expected. No increase in utilization of hospice care is
expected as a result of this bill. CHBRP estimates that
utilization of specific BHCS will increase by 1.8%-2.5%.
Although CHBRP is unable to determine precisely the impact
of this bill on premature death, over time, this bill could
potentially contribute to the reduction in premature death
in California.
4)SUPPORT . Health Access California (HAC) writes in support
that this bill provides substantial consumer protections for
those Californians who purchase health coverage as
individuals, both now and after 2014, when federal health
reform is fully implemented. HAC writes that the requirement
to cover medically necessary care, including maternity care,
eliminates "junk insurance" under which a health insurance
policy can cover only a few days of hospitalization or a
limited dollar amount for hospital care, or only a few doctor
visits a year. HAC argues eliminating lifetime and annual
caps on coverage will help individuals facing catastrophic
costs due to cancer, a heart attack or other serious illness,
and will help reduce medical debt among those who are insured.
HAC states that today insurers use the illusion of consumer
choice to select the customers they want and discourage the
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customers they do not want. Insurers invent new products
designed to attract consumers who are healthy and discourage
those with significant medical needs from seeking individual
coverage. The new federal health care reform law will require
insurers to take all comers, but further action is needed to
assure that insurers cannot game the new system as they
manipulate the existing market to cherry pick the healthy
while avoiding those who need health care. HAC argues this
bill proposes the same solution for this problem that
currently exists in Medi-Gap, CalPERS, and most large employer
coverage---and a solution similar to what the Massachusetts
Connector is in the process of adopting. The solution is to
specify the products that can be offered rather than allowing
insurers to design these products to benefit the insurer first
and foremost. This bill proposes one HMO product and one PPO
product for each level of coverage that will be available to
individuals in 2014.
HAC states that today, an individual consumer facing premium
hikes of 39% or more must be offered coverage with comparable
or lesser benefits by the insurer currently covering them.
But in order to move from one insurer to another, individuals
must undergo medical underwriting, and an unknown but
significant proportion of those who seek coverage fail
underwriting. HAC states this bill allows consumers facing
high premiums and lower benefits to vote with their feet by
changing insurers to obtain lower premiums for comparable or
lesser benefits. HAC also states this bill will limit premium
variation for individual consumers by age and product
category, smoothing out increases in premiums by requiring
that premium increases above a certain threshold be spread
across the entire market.
The Kaiser Permanente Medical Care Program (Kaiser) writes in
support that this bill provides a bridge between California's
current lackluster and inconsistent market rules to those that
will be in effect in 2014, upon full implementation of the
federal health care reform bill. Kaiser writes that this bill
levels the playing field by requiring all health coverage in
the individual market to cover medically necessary care,
including maternity care. Kaiser states carriers wishing to
offer cheaper products by limiting benefits, or eliminating
entire categories of benefits altogether, simply move business
from DMHC regulation to CDI regulation.
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Kaiser states that, of the 138 insurance choices available in
the market today, just 18 cover maternity - and 11 of these
are offered by Kaiser. Kaiser believes maternity coverage is
an important part of health care, and the ability to carve out
benefits such as maternity, or limit drug coverage to generic
coverage only, have a profound, though not obvious effect:
they attract healthy customers to the carriers that offer
plans with such features. After the young and healthy have
been skimmed from the top, the pool that remains is sicker,
and their coverage becomes more expensive. Kaiser takes the
view that a uniform and reasonable package of benefits should
be established, and that all carriers should offer it.
Kaiser also writes the standard benefit plan designs will
substantially strengthen the ability of consumers to choose in
the individual health plan marketplace, and close off
opportunities for plans and insurers to avoid aggressive price
competition. Every plan wishing to compete in the market must
offer only these plans and not others, which will provide
fierce competition on quality and price alone to proceed.
Kaiser states that today's insurance market would be made more
competitive if consumers were armed with the ability to make
"apples-to-apples" comparison through a structured market, and
if carriers were forced to abandon today's practice of
designing benefits to attract one type of customer (namely the
healthy types) over another.
Kaiser writes that this bill establishes important limits on
how health plans and insurers set prices for different groups
of individuals by creating standard geographic regions, and
allowing health plans and insurers to increase rates for
specific regions and products no more than 10% above or below
that plan's average increase. This bill also requires annual
increases for age, rather than grouped into age bands of five
or 10 years (e.g., ages 45-49). In so doing, this bill should
eliminate much of the extreme price volatility that has been
the focus of much concern in recent months. This bill also
standardizes the extent to which consumers can be "rated up"
when their health status is less than ideal. Finally, Kaiser
writes this bill eliminates lifetime and annual caps on
coverage, and establishes in state law minimum "MLRs,"
consistent with the provisions of federal reform. Kaiser
concludes that it believes these are appropriate reforms, and
that California law, which presently conflicts with these new
federal provisions, should be updated to reflect them.
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The California Medical Association (CMA) writes in support
that this bill would make it easier for Californians
purchasing health insurance in the individual market to
compare products and "vote with their feet" when they are
unhappy with their coverage. CMA states the individual market
today is confusing and intimidating, and the coverage that is
available falls short in many ways. By leveling the playing
field among all carriers and mandating comprehensive coverage,
this bill will address the migration of insurance from HMO
products regulated under DMHC to PPO products regulated with
much less oversight under CDI.
CMA states this bill also puts an end to the ability of health
insurers to create a Catch-22 situation for enrollees by
offering a confusing and ever-changing array of PPO products
that attract enrollees with low rates and skinny coverage and
then raise rates on captive enrollees. CMA states it would
like to continue to work with the author to ensure that
physicians are fairly represented as the implementation goes
forward via the Commission and that the MLR provisions of the
bill are meaningful and as strong or stronger than what will
ultimately be effective in federal law, the details of which
are still in flux.
5)OPPOSITION . Anthem Blue Cross (ABC) writes that this bill
requires richer products without offering subsidies to people
who want to buy health insurance, and those who cannot afford
these more expensive insurance products will likely go
uninsured. ABC further states that by making health insurance
more expensive and not providing subsidies for those
purchasing in the individual market, this bill will force more
individuals into the high risk pool. ABC also objects to
limiting the market to five products per company/regulator as
it takes out choice and innovation in the marketplace.
Furthermore, ABC states that if plans are limited to only 10
products across CDI and DMHC, and those products, by law, must
be identical, there is no incentive to provide coverage
through both regulatory agencies and choice is eliminated in
the marketplace. ABC asserts that if every carrier's products
have to be removed from the market and re-filed, this will
create a huge disruption in the individual marketplace unless
the state found some way to pay for more staff at CDI and
DMHC. ABC writes that the provision allowing consumers to
switch between different insurers is problematic under a
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scenario where a consumer gets a serious disease and be in a
closed network-HMO plan that does not include a provider or
institution which would provide the best treatment for his/her
condition. ABC states that under this bill, that person could
switch to a PPO plan and access the very best provider network
for the treatment of his/her illness. ABC states that this is
a gaming of the system before federal health care reform takes
effect in 2014. ABC writes that the statutory price-fixing
provisions contained in this bill do little to address the
overall costs of health care, and that plans will have to
raise the overall costs to healthier people and increase the
price of lower-tiered products to meet the criteria of this
bill. ABC states that this will lead to younger, healthier
people leaving the market because they will be unable to
afford coverage. ABC further writes that it is unclear why a
third regulator is needed when there are already two in
California (the only state with dual regulators). Finally,
ABC states that this bill accelerates huge pieces of federal
health care reform but misses a critical element: an
individual mandate. So while this bill increases costs, only
those who can afford care or are in need of care will purchase
it, further diluting the risk pool and leading to high costs
prior to 2014.
The Association of California Life and Health Insurance
Companies (ACLHIC) echoes ABC's opposition to the provisions
in this bill related to standard benefit design, the
requirement that health insurers meet the product design
standards in the Knox-Keene Act, and the portability
provisions. ACLHIC writes that under PPACA, the individual
market will be redesigned by 2014 and that by the end of this
year alone, nine new benefits will be added to all policy
forms as well as new Web-based portals and other consumer
disclosures that will make comparison and shopping easier and
more transparent. ACLHIC believes that it is neither
necessary, nor appropriate, for California's individual and
group market to be overhauled in the next few years before
undergoing the necessary changes in accordance with federal
law. In addition, ACLHIC asserts that this bill's redesign,
unlike the federal law's changes, will not have the guidance
of federal regulations to make the transformation as easy as
possible. ACLHIC writes that their members' time and
resources would be better spent on implementing the provisions
of PPACA that are required in the next few years, and not on
California-specific requirements that will eventually have to
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be reworked once the PPACA is implemented.
The California Association of Health Underwriters (CAHU)
writes that this bill is the antithesis of an open marketplace
and that in considering PPACA, Congress considered requiring
specific plan designs and rejected it. CAHU further states
that the provisions creating a commission to oversee the
individual market is redundant and adds confusion to who
actually has regulatory authority over these products while
increasing the cost to the taxpayer or premium payer. CAHU
reiterates ABC and ACLHIC's assertion that requiring rich
benefit plan designs will lead to increased premiums without
federal subsidies, which will result in an increase in the
number of uninsured. Finally, CAHU states that this bill
creates a completive advantage for plans that only operate in
urban areas where there is intense price competition among
physician groups.
6)CONCERNS . Blue Shield of California (BSC) writes that they
are very concerned that by unraveling certain components of
PPACA from the larger fabric of federal reform, this bill will
increase the number of uninsured between now and 2014,
disparately impact lower income Californians and unnecessarily
increase premiums. BSC states that the fundamental problem
with early enactment of rich minimum benefit requirements is
that federal subsidies to purchase these more expensive
products will not be available to Californians until 2014.
BSC also expresses concern with the portability provisions
under this bill, and states that health plans with broad
networks will have a disproportionate number of seriously ill
individuals transferring into their products while health
plans with narrow networks will shed those individuals from
their rolls, which will result in significantly higher
premiums for those individuals who are members of health plans
that have the broadest networks. BSC writes that under PPACA,
product offerings in the individual market will undergo a
complete redesign in the next four years, but this bill would
overlay a second complete redesign of the same exact product
offerings ahead of the federal schedule and without the
benefit of federal regulations to guide the effort. BSC
states that until we see what the federal regulations will
look like, we should not be forcing massive product changes
onto the marketplace that may or may not survive once the 2014
requirements are unveiled.
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REGISTERED SUPPORT / OPPOSITION :
Support
Health Access California (sponsor)
Kaiser Permanente Medical Care Program (sponsor)
AARP
Alliance of Californians for Community Empowerment
American Federation of State, County and Municipal Employees
American Heart Association
Anaheim Chamber of Commerce
California Association of Physician Groups
California Children's Hospital Association
California Hispanic Chambers of Commerce
California Hospital Association
California Medical Association
CALPIRG
Community Health Partnership
Congress of California Seniors
Consumers Union
International Brotherhood of Electrical Workers - Local 332
Kern County Medical Society
Local Health Plans of California
Los Angeles County Medical Society
MemorialCare Health System
Monterey County Medical Society
Orange Coast Memorial
Orange County Hispanic Chamber of Commerce
Orange County Medical Association
Planned Parenthood Affiliates of California
San Bernardino County Medical Society
San Francisco Medical Society
San Mateo Central Labor Council
San Mateo County Board of Supervisors
San Mateo County Medical Association
Santa Clara Family Health Plan
Service Employees International Union
Sierra Sacramento Valley Medical Society
Six Rivers Planned Parenthood
South Bay AFL-CIO Labor Council
St. Joseph Health System
Stanford Hospital and Clinics
Stanislaus Medical Society
United Nurses Associations of California/Union of Health Care
Professionals
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Working Partnerships USA
Opposition
Anthem Blue Cross
Association of California Life and Health Insurance Companies
California Association of Health Underwriters
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097