BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1163|
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THIRD READING
Bill No: SB 1163
Author: Leno (D), et al
Amended: 4/28/10
Vote: 21
SENATE HEALTH COMMITTEE : 5-0, 4/21/10
AYES: Alquist, Leno, Negrete McLeod, Pavley, Romero
NO VOTE RECORDED: Strickland, Aanestad, Cedillo, Cox
SENATE APPROPRIATIONS COMMITTEE : 7-3, 5/27/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Denham, Walters, Wyland
NO VOTE RECORDED: Cox
SUBJECT : Health care coverage: denials: premium rates
SOURCE : Health Access California
DIGEST : This bill requires health plans and insurers to
give 180 days written notice of changes in the premium rate
or coverage before such change takes effect. This bill
extends requirements placed on health plans and insurers
when they deny individual coverage to when plans and
insurers deny group purchasers. This bill requires health
plans and insurers to provide data and demographic
information on individual and large group denials of
coverage, any changes in rates, any changes in cost
sharing, and any changes in covered benefits. This bill
requires health plans and insurers to provide to its
regulator specified information, such as provider prices
CONTINUED
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and utilization increases, with respect to rate increases
for each product.
ANALYSIS : Existing law requires health plans and health
insurers that decline to offer coverage or that deny
enrollment of an individual or his/her dependents applying
for individual coverage, or that offer individual coverage
at a rate that is higher than the standard rate, to provide
the individual applicant with the specific reason for the
decision in writing at the time of the denial or offer of
coverage.
Existing law prohibits health plans from changing the
premium rate or coverage for an individual plan contract
unless the plan has delivered a written notice of the
change at least 30 days prior to the effective date of the
contract renewal, or the date on which the rate or coverage
changes. Existing law requires a notice of an increase in
the premium rate to include the reasons for the rate
increase.
Existing law requires individual health plans and health
insurers to have written policies, procedures, or
underwriting guidelines establishing the criteria and
process by which the plan or insurer makes its decision to
provide or to deny coverage to individuals applying for
coverage, and sets the rate for that coverage. These
guidelines, policies, or procedures are required to assure
that the plan rating and underwriting criteria comply with
all other applicable provisions of state and federal law.
Existing law requires health plans and health insurers to
annually file with its regulator a general description of
the criteria, policies, procedures, or guidelines the plan
or insurer uses for rating and underwriting decisions
related to individual health plan contracts, including
automatic declinable health conditions, health conditions
that may lead to a coverage decline, height and weight
standards, health history, health care utilization,
lifestyle, or behavior that might result in a decline for
coverage or severely limit the plan products for which they
would be eligible.
Existing law permits a plan or insurer to comply with this
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requirement by submitting to its regulator underwriting
materials or resource guides provided to plan solicitors or
solicitor firms, provided that those materials include the
information required to be submitted.
This bill extends, from 30 days to 180 days, the
requirement that plans and insurers provide advance written
notice of changes in the premium rate or coverage for an
individual plan contract before such change takes effect,
and applies this 180-day notice to group contracts.
This bill extends the following requirements currently
placed on health plans and insurers selling individual
coverage, to health plans and insurers selling group
coverage:
1. Health plans and insurers that decline to offer coverage
or deny enrollment for a group applying for coverage or
that offer coverage at a rate that is higher than the
standard rate must, at the time of the denial or offer
of coverage, provide the applicant with the specific
reason for the decision in writing, in clear, easily
understandable language.
2. A notice of an increase in the premium rate must include
the reasons for the rate increase. The notice must
state in italics either the actual dollar amount of the
premium rate increase or the specific percentage by
which the current premium will be increased. The notice
must describe in plain, understandable English any
changes in the plan design or any changes in benefits,
including a reduction in benefits or changes to waivers,
exclusions, or conditions, and highlight this
information by printing it in italics. The notice must
also specify in a minimum of 10-point bold typeface, the
reason for a premium rate change or a change to the plan
design or benefits.
3. This bill makes a notice provided to a group employer a
private and confidential communication. At the time of
application, the plan must give the individual applicant
the opportunity to designate the address for receipt of
the written notice in order to protect the
confidentiality of any personal or privileged
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information.
This bill requires the current notices health plans and
insurers must provide regarding denials of individual
coverage to be in clear and easily understandable language.
This bill requires a health plan/insurer that declines to
offer coverage or denies enrollment to any individual or
large group to quarterly provide to the Department of
Managed Health Care (DMHC), the Department of Insurance
(CDI), the Managed Risk Medical Insurance Board, and the
public all of the following until January 1, 2014:
1. The number and proportion of applicants for individual
coverage and large group coverage that were denied
coverage for each product offered by the health
plan/insurer.
2. The health status and risk factors for each applicant
denied coverage, by product. For individual coverage,
this information must also include age, gender, language
spoken, occupation, and geographic region of the
applicant, by product.
3. Demographic information about applicants denied
coverage, including gender, age, language spoken,
occupation, and geographic region of the applicant, by
product.
4. The written policies, procedures, or underwriting
guidelines by which the health plan/insurer makes its
decision to provide or to deny coverage to applicants.
The regulators would be required to post on their
respective Internet Web sites the following information for
each product offered by a health plan/insurer, and for all
products offered by the health plan/insurer:
1. The number and proportion of applicants for individual
coverage denied coverage, as well as aggregate
information about health status and demographics of
those denied coverage.
2. The number and proportion of applicants for large group
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coverage denied coverage, as well as aggregate
information about health status and demographics of the
employees of those large groups denied coverage.
3. The written policies, procedures, or underwriting
guidelines whereby the plan/insurer makes its decision
to provide or to deny coverage to applicants.
This bill deletes the prohibition against the public
disclosure of company-specific rating and underwriting
criteria and practices submitted to the director.
This bill requires health plans and insurers to disclose to
its regulator the following:
1. The written policies, procedures or underwriting
guidelines whereby the plan makes its decision to
determine the standard rate and to issue a policy at a
rate higher or lower than the standard rate.
2. For each product in the individual and small group
market, the rates, including both the standard rate,
rates that are higher than standard rates, and rates
that are lower than standard rates.
3. For the individual, small group and large group markets,
the number and proportion of policyholders charged a
standard rate, a rate that is higher than the standard
rate, or a rate that is lower than the standard rate.
For each of these categories, demographic information
must be provided, including age, gender, language spoken
and geographic region.
This bill requires the regulators to disclose such
information to the public, both in summary fashion its Web
site and in full on request.
This bill requires health plans and health insurers, on or
before June 1, 2011, and no less than annually thereafter,
to disclose to their respective regulators all of the
following with respect to rate increases for each product:
1. Any change in rate.
2. Any change in cost sharing.
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3. Any change in covered benefits.
This bill requires, on or before June 1, 2011, and no less
than annually thereafter, a health plan and insurer to also
disclose to its regulator all of the following with respect
to rate increases for each product:
1. Actuarial memorandum.
2. Assumptions on trends in medical inflation, including
justification.
3. Specific worksheets or exhibits documenting increases in
costs.
4. Enrollee population characteristics that increase or
decrease costs.
5. Utilization increases.
6. Provider prices.
7. Administrative costs.
8. Medical loss ratios.
9. Reserves and surplus levels, including tangible net
equity and reserves in excess of tangible net equity.
10.Changes in cost sharing.
This bill requires that reports to the public maintain
patient privacy.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
DMHC review of data $240 $130
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$140Special*
CDI review of data $125 $210
$210Special**
* Managed Care Fund
** Insurance Fund
SUPPORT : (Verified 5/27/10)
Health Access California (source)
American Federation of State, County and Municipal
Employees
California Alliance for Retired Americans
California Chiropractic Association
California Pan-Ethnic Health Network
California Retired Teachers Association
California School Employees Association
California Teachers Association
Congress of California Seniors
Consumers Union
OPPOSITION : (Verified 5/27/10)
Anthem Blue Cross
Association of California Life and Health Insurance
Companies
California Association of Health Plans
Health Net
ARGUMENTS IN SUPPORT : According to the author, this bill
seeks to provide California consumers, regulatory agencies
and policymakers with critical information regarding the
actuarial basis and justification for premium increases as
well as data regarding denial and coverage rates.
The author states that the provisions of this bill
requiring detailed data and actuarial justification for
premium increases and non-standard premium charges are
necessary in response to provisions contained in the
recently enacted federal health reform legislation
requiring California regulatory agencies to provide
detailed information regarding premium trends and to
identify inappropriate premium increases. In addition, the
author states the recent public furor over annual premium
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rate hikes as high as 39 percent led policymakers and
regulators, including the Attorney General, to seek
detailed information justifying the rate increases.
Failure to comply with these requests forced the Attorney
General to file subpoenas seeking the kind of information
that regulators are required to provide to the federal
government
The author states that uncontrolled increases in health
care premiums are bankrupting California families and
businesses. According to a 2009 Kaiser Family Foundation
report, premiums for employer-based health insurance have
more than doubled since 2000, a growth rate three times
that of wages. The same report found that worker
out-of-pocket financial liability has dramatically
increased since 2006. By 2025, one in every four dollars
in our nation's economy will be spent on health care.
This bill increases the length of notice time that plans
and insurers must provide to purchasers of individual
coverage who experience changes in rates or coverage, from
30 days to 180 days, and extends this 180-day notice
requirement to group purchasers. The author states this
change is intended to provide consumers with adequate time
to research and shop for comparable products as 30 days is
completely insufficient for consumers to either make
alternative arrangements for coverage, or to plan for the
increased burden for their household or business. Finally,
this bill additionally requires plans and insurers to
report detailed information regarding their coverage and
denial rates in the individual and large group market
(small group purchasers are protected with guaranteed issue
of coverage).
Rather than constructively working with providers to lower
costs and premiums, the author and bill's sponsors contend
that health plans and insurers have responded to the
premium backlash by increasing their efforts to identify
and reduce high-risk consumers from their products.
Because any group of patients who are identified as likely
to cost more than the premiums they will pay are
unprofitable to the plan or insurer, there is a competitive
disincentive to maintain good coverage for groups of
Californians who have high medical costs. Because of this
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competitive disincentive, the author argues this means that
certain geographic areas, women and occupations are
potentially being singled out for coverage denials.
Unfortunately, there is little available data regarding
coverage and denial decisions made by insurance companies.
The author asserts obtaining such information is absolutely
paramount to ensuring fair access to health care coverage
for all Californians.
ARGUMENTS IN OPPOSITION : The California Association of
Health Plans (CAHP) argues that this bill requires health
plans and insurers to disclose the basic competitive
factors that shape the marketplace. CAHP argues this
information has no value to consumers because consumers are
protected by extensive statutory and regulatory provisions
to ensure that health care coverage is provided fairly.
Federal anti-trust law was designed to protect consumers by
prohibiting competitors from sharing information about
future or present pricing, allowances, premiums, costs,
profits, profit margins, market studies, or strategies.
CAHP argues this bill, in contrast to federal anti-trust
law and state law, illuminates the competitive factors
behind pricing, premiums, and market strategy for health
plans and insurers, and CAHP fails to see the value in this
requirement. Finally, CAHP argues that federal health care
reform will completely change the health insurance market
in California and across the country, and requiring health
plans to post detailed information regarding underwriting
is a waste of precious health care resources, because,
starting in 2014, individuals may not be declined coverage
and underwriting will be changed to reflect federal rating
restrictions.
HealthNet argues that extending the 30-day notice to six
months is an unreasonably long period of time to allow for
any modifications of premiums and benefits, especially as
it relates to changes to drug formularies. Finally,
HealthNet and Anthem Blue Cross argue the administrative
effort and costs to implement the changes and reporting
requirements of this bill are difficult to justify when
they are likely to change when the federal government
issues its guidelines.
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CTW:mw 5/27/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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