BILL ANALYSIS
SB 1163
Page 1
SENATE THIRD READING
SB 1163 (Leno)
As Amended August 25, 2010
Majority vote
SENATE VOTE :23-12
HEALTH 15-1
--------------------------------
|Ayes:|Monning, Fletcher, |
| |Ammiano, Carter, Conway, |
| |De La Torre, De Leon, |
| |Eng, |
| |Gaines, Hayashi, |
| |Hernandez, Jones, Nava, |
| |V. Manuel Perez, Salas |
| | |
|-----+--------------------------|
|Nays:|Audra Strickland |
| | |
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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 rate filings to be actuarially sound and to include a
certification by an independent actuary that any increase is
reasonable or unreasonable. 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 large
group applying for coverage or that offer small group coverage
at a rate that is higher than the standard employee risk rate
to, at the time of the denial or offer of coverage, provide the
applicant with reason for the decision, as specified.
Specifically, this bill :
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Rate Review
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, at least 60
days prior to implementing any such rate change.
2)Requires health plans and insurers, for individual and small
group contracts, 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 administrative costs, actuarial certification, consumer
inquiries and complaints, and any other information required
to be reported under the PPACA.
3)Requires health plan subject to 1) above to also disclose
specified aggregate data for all rate filings in the
individual and small group health plan markets related to the
number and percentage of rate filings and the plan's average
rate increase by the 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 to comply with this bill.
5)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 and methodologies.
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6)Requires plans and insurers to contract with an independent
actuary to comply with 5) above. 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 insurers.
Prohibits a contracted 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 permit
regulators to establish rates for contractual health care
services.
8)Requires all information submitted under this bill to be made
publicly available by regulators except, that contracted rates
between a health plan or insurer and a provider or a large
group are deemed confidential information that will not be
made public.
9)Requires all information to be submitted to regulators
electronically. Requires the information below to be made
available on regulators' and plan/insurers Web sites, as
specified, 60 days prior to the implementation of the rate
increase:
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 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
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annual plan contract trends by aggregate benefit category,
such as hospital inpatient, hospital outpatient, physician
services, prescription drugs and other ancillary services,
laboratory, and radiology. Requires a health plan or
insurer that exclusively contracts with no more than two
medical groups to instead disclose the amount of their
actual trend experience for the prior contract year by
aggregate benefit category, using benefit categories that
are to the maximum extent possible the same or similar to
those used by other plans.
10)Requires regulators to accept and post to their websites any
public comment on a rate increase submitted during the 60-day
period in 9) above.
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, 2012, to issue guidance to plans and insurers
regarding compliance with this bill. Exempts such guidance
from being subject to the Administrative Procedure Act.
Requires regulators to consult with each other when issuing
guidance, adopting necessary regulations, or posting
information on their websites.
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.
14)Permits regulators to review other filings.
15)Requires regulators to report at least quarterly to the
Legislature on all unreasonable rate filings.
16)Requires regulators to post on its Web site any changes to
the proposed rate increase, including any documentation
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supporting those changes. Requires regulators to post
findings on its Web site 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 the U.S.
Department of Health and Human Services (DHHS) on health
care service plan rate trends in premium rating areas;
b) Provide to the California Health Benefit Exchange
(established pursuant to the PPACA) commencing with its
creation, such information as may be necessary to allow
compliance with federal law, roles, regulations, and
guidance.
Consumer notification
18) Requires health plans and insurers that decline to offer
coverage to or deny enrollment for a large 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
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.
Grandfathered Plans
20)Deems a health plan or a health insurer to be in compliance
with the requirement in the small employer health insurance
law that health plans and health insurers fairly,
affirmatively offer, market and sell all of the benefit plans
designs it makes available (known as the "all products"
requirement) with respect to grandfathered plan contracts
under the PPACA, as long as:
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a) The plan/insurer offers to renew the grandfathered plan
contract unless the plan withdraws the plan contract/policy
from the small employer market;
b) The plan/insurer provides appropriate notice of the
grandfathered status of the plan in any materials provided
to an enrollee of the contract describing the benefits
provided under the contract, as required under PPACA; and,
c) The plan/insurer makes no changes to the benefits set
forth in the grandfathered plan contract other than those
required by state or federal law, regulation, rule or
guidance and those permitted to be made to a grandfathered
plan under PPACA.
FISCAL EFFECT : According to the Assembly Appropriations
Committee analysis of a previous version of this bill:
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,
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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.
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097
FN: 0006802