BILL ANALYSIS �
AB 151
Page 1
Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 151 (Monning) - As Introduced: January 18, 2011
SUBJECT : Medicare supplement coverage.
SUMMARY : Requires guaranteed issue to an individual enrolled in
a Medicare Advantage (MA) Plan for Medicare supplement coverage
by the same issuer of the MA plan if there is an increase in his
or her premium. Requires guaranteed issue to an individual
enrolled in a MA plan for supplement coverage from any issuer
under specified circumstances if his/her issuer, as specified,
does not offer supplement plans. Specifically, this bill :
1)Requires guaranteed issue to an individual enrolled in a MA
Plan for Medicare supplement coverage by the same issuer of
the MA plan if there is an increase in his/her premium.
2)Requires guaranteed issue to an individual enrolled in a MA
plan for supplement coverage from any issuer if his/her MA
plan issuer, a subsidiary of the parent company of the issuer,
or a network that contracts with the parent company of the
issuer does not offer supplement plans and any of the
following occur:
a) A reduction in benefits;
b) An increase in cost sharing;
c) An increase in premiums; or,
d) A discontinuation of its relationship or contract under
the plan with a provider currently furnishing services to
the individual for other than good cause relating to
quality of care.
3)Revises existing law to recognize two new Medicare supplement
plans (Plans M and N) and deletes obsolete references to
Medicare supplement plans (Plans H, I, and J) in existing law,
and makes other technical, clarifying changes.
EXISTING LAW :
1)Provides for the regulation of health plans by the Department
of Health Care Services under the Knox-Keene Health Care
Service Plan Act of 1975, and for the regulation of health
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insurers by the California Department of Insurance under
provisions of the Insurance Code.
2)Requires guaranteed issue to an individual enrolled in a MA
plan that reduces any of its benefits, or increases cost
sharing, or terminates certain relationships with providers,
for Medicare supplement coverage that is issued by the same
issuer of his or her MA plan or by a subsidiary of, or a
network that contracts with, the parent company of that
issuer.
3)Requires health plans and insurers that issue Medicare
supplement contracts or policies, as defined, to make
available to specified individuals who are 64 years of age or
younger and who do not have end-stage renal disease (ESRD),
specified Medicare supplement benefit plans. Prohibits, under
federal law, the issuance of new Medicare supplement plans H,
I, and J, and instead authorizes the issuance of Medicare
supplement plans M and N, as specified.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, the recent
federal Patient Protection and Affordable Care Act (PPACA),
among other things, will begin to reduce the subsidy paid to
Medicare Advantage plans in 2012 and use the savings to close
the prescription drug coverage gap, provide additional
Medicare preventive services, and implement other
improvements. MA plans have been paid about 13% more than the
amount paid for coverage in Original Medicare, a subsidy that
will be reduced under a complex formula. This subsidy has
enabled Medicare Advantage plans in different geographic areas
to provide coverage or benefits that would not have been
possible without the subsidy. The author states that in some
cases this has meant plans offer coverage in higher costs
areas that they would otherwise have shunned. In other cases,
this has meant that plans offered additional benefits that
would not otherwise have been offered. The new formula will
provide less total subsidy to these Medicare Advantage plans,
but will provide additional payments to high performing plans.
The author states that many Medicare enrollees will face a
different choice than when they originally selected a Medicare
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Advantage plan and that this bill will ensure that all
Medicare recipients in a Medicare Advantage plan facing
increased costs or reduced benefits have the option to enroll
in Original Medicare and purchase a Medigap plan to help cover
the costs of coinsurance, copayments, and deductibles.
2)BACKGROUND . Medicare is health insurance for people 65 or
older, people under 65 with certain disabilities, and people
of any age with ESRD. There are three Medicare "parts:" Part
A (covers hospital inpatient, skilled nursing facility,
hospice, and home health care); Part B (covers outpatient and
home health care and preventive services); and, Part D
(prescription drug coverage). MA plans are HMO and PPO
coverage provided by Medicare-approved private insurance
companies. MA plans (also called "Part C") include services
provided under Part A, Part B, and usually other coverage like
Medicare prescription drug coverage (Part D), sometimes for an
extra cost. Medicare supplement insurance (often called a
"Medigap" policy) helps pay for gaps in Medicare coverage,
such as coinsurance, copayments, and deductibles. "Original"
Medicare pays 80% of doctor and outpatient services.
Under existing state law, during certain periods an individual
has a right to purchase a Medigap policy and cannot be charged
more because of pre-existing health problems. This is the
case for a six month period when a person is both age 65 and
enrolled in Medicare Part B. It is also the case when a
person loses access to a MA plan or decides within 12 months
of initially enrolling to instead enroll in Original Medicare.
There is also a limited right to purchase a Medigap policy
without being charged more due to a health condition if the MA
plan reduces benefits, increases cost sharing, or changes the
network such that the individual no longer has access to a
current medical provider. In these cases, a person can
purchase a Medigap policy if one is available from the same
company or a related company.
3)SUPPORT . AARP, the sponsor of this bill, writes that PPACA
will reduce federal subsidies to MA plans starting next year,
and it is expected to result in plans reducing benefits,
increasing premiums and/or cost sharing, and perhaps
withdrawing from areas they now serve. AARP states that in
any case, consumers will undoubtedly see a different offering
and should have the option to continue with the MA plan or to
switch to original Medicare and purchase a supplemental policy
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to cover the gaps in coverage. California Health Advocates
writes that our state law reflects the changing circumstances
as people age. Current law provides a guaranteed right to a
Medigap policy if a health plan drops the treating provider
from the plan's network or increases copayments. However, a
Medicare beneficiary can only exercise those rights for 53
days at the end of a year, and then only if their MA plan also
issues Medigap coverage, which some companies providing MA
plans do not. CHA states that current law doesn't allow
beneficiaries the right to a Medigap policy if the premium for
their MA plan goes up and that this bill would add that right
to existing rights, and remove the restriction that limits
them to the same company issuing the MA plan. The American
Federation of State, County and Municipal Employees, AFL-CIO
contends that this bill facilitates enrollment into the
adequate health care policy that suits senior citizens'
particular needs. Health Access California states that
seniors who rely on Medicare expect to be able to obtain
Medigap coverage when there is a change in other Medicare
coverage. The Congress of California Seniors writes that this
bill will increase fairness for seniors eligible for Medicare.
The Alzheimer's Association, California Council writes that
this bill will enable consumers to purchase coverage in order
to ensure they can pay for their vital hospital and physician
visits, medications, and preventative services. The California
Primary Care Association writes that this bill will make
Medicare prescriptions more affordable and provides increased
access to preventive care and that community clinics and
health centers will be better able to provide care to this
population.
4)OPPOSITION . The America's Health Insurance Plans (AHIP)
writes that this bill would allow beneficiaries to game the
system by switching into and out of coverage according to
their changing medical needs. AHIP contends that, in effect,
they would make Medigap the insurer of last resort, eroding
the essential incentives to purchase insurance before it is
needed and hold it over time. The Association of California
Life and Health Insurance Companies (ACLHIC) states that
because Medicare supplement policies are significantly more
expensive than MA plans, they believe there would be little
incentive to switch to a supplement plan unless there was a
perceived benefit to the insured, such as utilizing medical
services in a more broad provider/facility network. ACLHIC
states that shifting risk to Medicare supplement policies will
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lead to higher premiums for these products, and make them a
less affordable option for those who choose to supplement
their Medicare coverage through an insurance plan rather than
enroll in a MA plan. The California Association of Health
Plans states that this bill is disruptive because there is no
standard on how much of a premium increase would trigger these
broad new guarantee issue opportunities.
REGISTERED SUPPORT / OPPOSITION :
Support
AARP (sponsor)
Alzheimer's Association, California Council
American Federation of State, County and Municipal Employees,
AFL-CIO
California Association of Health Underwriters
California Health Advocates
California Primary Care Association
Congress of California Seniors
Health Access California
Opposition
America's Health Insurance Plans
Association of California Life and Health Insurance Companies
California Association of Health Plans
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097