BILL ANALYSIS
SB 1163
Page 1
SENATE THIRD READING
SB 1163 (Leno)
As Amended August 18, 2010
Majority vote
SENATE VOTE :23-12
HEALTH 13-5 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Carter, |Ayes:|Fuentes, Bradford, |
| |De La Torre, De Leon, | |Huffman, Coto, Davis, De |
| |Eng, Hayashi, Hernandez, | |Leon, Gatto, Hall, |
| |Jones, Bonnie Lowenthal, | |Skinner, Solorio, |
| |Nava, V. Manuel Perez, | |Torlakson, Torrico |
| |Salas | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Fletcher, Conway, Gaines, |Nays:|Conway, Harkey, Miller, |
| |Smyth, Audra Strickland | |Nielsen, Norby |
| | | | |
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SUMMARY : Requires health care service plans (health plans) and
health insurers to file with the Department of Managed Health
Care (DMHC) and the California Department of Insurance (CDI)
(regulators) specified rate information for individual and small
group at least 60 days prior to implementing any rate change.
Requires the filings in the case of large group contracts only
for unreasonable rate increases, as defined by the Patient
Protection and Affordable Care Act (PPACA) (Public Law 111-148),
prior to implementing any such rate change. Increases, from 30
days to 60 days, the amount of time that health plan or insurer
provides written noticed to an enrollee or insured before a
change in premium rates or coverage becomes effective. Requires
health plans and insurers that decline to offer coverage to or
deny enrollment for a group applying for coverage or that offer
group coverage at a rate that is higher than the standard rate
to, at the time of the denial or offer of coverage, provide the
applicant with the specific reason or reasons for the decision
in writing, in clear, easily understandable language.
Specifically, this bill :
Rate Review
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1)Requires health plans and insurers to file with regulators all
required rate information for individual and small group at
least 60 days prior to implementing any rate change. Requires
the filings in the case of large group contracts only for
unreasonable rate increases, as defined by PPACA, prior to
implementing any such rate change.
2)Requires health plans and insurers to disclose to regulators
information regarding identifying and contact information,
contract forms, product and segment type, enrollment, annual
rates, earned premiums, incurred claims, average rate
increases and effective date of increase, review category,
number of affected subscribers/enrollees, overall annual
medical trend factor assumptions, amount of the projected
trend attributable to the use of certain factors, claims cost
and rate of changes, enrollee/insured cost-sharing, changes in
benefits, and consumer inquiries and complaints.
3)Requires health plan subject to 1) above to also disclose
specified aggregate data for all rate filings in the
individual, small group, and large group health plan markets
related to the number and percentage of rate filings and the
plan's average rate increase by the following categories, as
specified.
4)Permits regulators to require health plans and insurers to
submit all rate filings to the National Association of
Insurance Commissioners' (NAIC) System for Electronic Rate and
Form Filing (SERFF). Requires submission of rate filings to
SERFF to be deemed to be filing with regulators for purposes
of compliance with the rate filing requirements of this bill,
but requires plans and insurers to submit any other
information required comply with this bill.
5)Requires rate filings to be consistent with applicable state
and federal laws, roles, and regulations, as specified.
Requires rate filings to be actuarially sound and to include a
certification by an independent actuary or actuarial firm that
the rate increase is reasonable or unreasonable and, if
unreasonable, that the justification for the increase is based
on accurate and sound actuarial assumptions. Prohibits the
actuary or actuarial firm from being be an affiliate or a
subsidiary of, nor in any way owned or controlled by, a health
plan, health insurer or a trade association of health plans or
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insurers.
6)Prohibits an actuary or actuarial firm board member, director,
officer, or employee from serving as a board member, director,
or employee of a health plan or insurer. Prohibits a health
plan, health insurer, or a trade association of health plans
board member, director, or officer from serving a board
member, director, officer, or employee of the actuary or
actuarial firm.
7)Prohibits anything in this bill from being construed to
preclude regulators from reviewing a proposed rate increase
for actuarial soundness or consistency with applicable state
or federal laws, roles, or regulations.
8)Requires all information submitted under this bill to be made
publicly available except, that contracted rates between a
health plan or insurer and an individual provider, including,
but not limited to, a health professional, medical group,
hospital, or hospital system, is deemed confidential
information that will not be divulged.
9)Requires all information to be submitted electronically.
Requires health plans and insurers to file the following
information, in plain language and in a manner and format
specified by regulators:
a) Justifications for any unreasonable rate increases,
including all information and supporting documentation as
to why the rate increase is justified;
b) Overall annual medical trend factor assumptions in each
rate filing for all benefits;
c) Actual costs, disaggregated by aggregate benefit
category to include hospital inpatient, hospital
outpatient, physician services, prescription drugs and
other ancillary services, laboratory, and radiology; and,
d) The amount of the projected trend attributable to the
use of services, price inflation, or fees and risk for
annual plan contract trends by aggregate benefit category,
such as hospital inpatient, hospital outpatient, physician
services, prescription drugs and other ancillary services,
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laboratory, and radiology.
10)Requires the above information to be made readily available
to the public on regulators' Web site and the plan/insurer Web
site. Requires the information to be made public for 60 days
prior to the implementation of the rate increase, but permits
this period to be extended if regulators need more time to
complete the rate review. Requires regulators to consider any
public comment on a rate increase submitted to the DMHC during
the 60-day period.
11)Exempts a number of programs and contracts from the rate
review provisions, including specialized health plan
contracts, Medicare supplement plans; Medi-Cal managed care,
Healthy Families Program, Access for Infants and Mothers
Program, the California Major Risk Medical Insurance Program,
the Federal Temporary High Risk Pool, and health plan
conversion contracts.
12)Permits regulators, in consultation with each other and on or
after July 1, 2011, to issue guidance to plans and insurers
regarding compliance with this bill. Exempts such guidance
from being subject to the Administrative Procedure Act.
Permits regulators, in consultation with each other, to adopt
regulations to implement this bill. Requires regulators to
work in consultation with each other in taking any action for
the purpose of implementing this bill.
13)Permits regulators, whenever it appears that any person has
engaged, or is about to engage, in any act or practice
constituting a violation of this bill, including the filing of
inaccurate or unjustified rates or inaccurate or unjustified
rate information, to review the rate filing to ensure
compliance with the law. Requires regulators, at a minimum,
to review for consistency with 5) above any unreasonable rate
increase. Requires regulators to also review a proposed rate
increase if the plan proposing the increase is found to have a
pattern of filing inaccurate, unjustified, or unreasonable
rate increases.
14)Permits regulators to review other filings.
15)Requires regulators to report at least quarterly to the
Legislature on all rate filings that are unreasonable, not
actuarially sound, or otherwise not consistent with applicable
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state or federal laws or regulations, including, but not
limited to, those governing contracts, medical loss ratio,
rating rules, benefit designs, and benefit standards.
16)Requires regulators, after conducting a rate review, to post
on its Web site any changes to the proposed rate increase,
including any documentation supporting those changes.
Requires regulators to post findings on its website if it
finds that an unreasonable rate increase is not justified or
that a rate filing contains inaccurate information.
17)Requires regulators, in a manner consistent with applicable
federal laws, rules, and regulations, to:
a) Provide data to the United States Secretary of Health
and Human Services on health care service plan rate trends
in premium rating areas;
b) Provide to the United States Secretary of Health and
Human Services the number of, and a summary of the nature
of, inquiries and complaints related to health care service
plan rates that have been received for the past two plan
years; and,
c) Provide to the American Health Benefit Exchange
(established in California pursuant to the PPACA,
commencing with its creation, such information as may be
necessary to allow compliance with federal law, roles,
regulations, and guidance. Requires regulators to develop
an interagency agreement with the Exchange to facilitate
the reporting of information regarding rate filings that is
consistent with the responsibilities of the Exchange.
Consumer notification
18) Requires health plans and insurers that decline to offer
coverage to or deny enrollment for a group applying for
coverage or that offer group coverage at a rate that is higher
than the standard rate to, at the time of the denial or offer
of coverage, provide the applicant with the specific reason or
reasons for the decision in writing, in clear, easily
understandable language, as specified.
19) Increases, from 30 days to 60 days, the amount of time
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that a health plan or an insurer provides written noticed to
an enrollee or insured before a change in premium rates or
coverage becomes effective. Requires the notice in 18) above,
and written notices regarding rate changes in existing law to
be in 12-point type.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Increased costs of $1 million, combined, to DMHC and CDI to
comply with the increased reporting and oversight requirements
established by this bill. These costs will likely be
supported by a federal grant. California recently applied to
the federal government for $1 million in funding to comply
with rate review requirements.
2)The federal government has allocated $250 million over a
five-year period to support state efforts with regard to rate
review.
COMMENTS : According to the author, this bill seeks to provide
California consumers, regulatory agencies and policymakers 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 rate hikes as high as 39% led policymakers
and DMHC and CDI, 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 DMHC and CDI are required to provide to
the federal government. The author further states that provisions
of the bill increase the amount of time consumers have to research
and shop for comparable products, from 30 days to 60 days, because
existing law does not provide sufficient time for consumers to
either make alternative arrangements for coverage, or to plan for
the increased burden for their household or business.
On March 23, 2010, President Obama signed the PPACA. The PPACA
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makes several fundamental changes to the private health insurance
market, including requiring the federal Department of Health and
Human Services (DHHS) Secretary, in conjunction with states, to
establish a process for the annual review, beginning with the 2010
plan year, of "unreasonable increases in premiums" for health
insurance coverage. This process must require health plans and
insurers to submit to the Secretary of DHHS and the relevant state a
justification for an unreasonable premium increase prior to the
implementation of the increase. Health plans and insurers must
prominently post such information on their Internet Web sites.
The Secretary of DHHS is required to carry out a program to
award grants to states during the five-year period beginning
with fiscal year 2010 to assist states in carrying out the
annual review of unreasonable increases in premiums for health
insurance coverage. As a condition of receiving a grant, a
state, through its Commissioner of Insurance, must provide the
Secretary of DHHS with information about trends in premium
increases in health insurance coverage in premium rating areas
in the state; and make recommendations, as appropriate, to the
state Exchange (Exchanges are entities required to be
established by federal health care reform) about whether
particular health insurance issuers should be excluded from
participation in the Exchange based on a pattern or practice of
excessive or unjustified premium increases.
The PPACA appropriated to the Secretary of DHHS $250 million to be
available for expenditure for grants to states. The Secretary of
DHHS is required to establish a formula for determining the amount
of any grant to a state that considers the number of plans of health
insurance coverage offered in each state, and the population of the
state. No state qualifying for a grant can receive less than $1
million or more than $5 million for a grant year.
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097
FN: 0006312