BILL ANALYSIS �
AB 1083
Page 1
Date of Hearing: May 3, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1083 (Monning) - As Amended: March 29, 2011
SUBJECT : Health care coverage.
SUMMARY : Effective January 1, 2014, conforms state law to
provisions in the federal Patient Protection and Affordable Care
Act (PPACA). Requires solicitors to notify the small employer
of the availability of coverage through the California Health
Benefit Exchange (Exchange), makes premium rates established by
health care service plans and health insurers (carriers) in
effect for 12 months, prohibits carriers from entering into
contracts with solicitors for varied compensation based on
whether the employer obtains coverage through the Exchange or
directly from a carrier. Specifically, this bill :
SMALL GROUP CONFORMING
1)Expands definition of eligible employee by calculating the
hours in a normal work week as an average of, rather than at
least 30 hours over the course of a month.
2)Prohibits, effective January 1, 2014, carriers from limiting
or excluding coverage for any individual based on a
preexisting condition, whether or not any medical advice,
diagnosis, care, or treatment was recommended or received
before that date.
3)Eliminates the ability of carriers to impose a risk adjustment
factor to premium rates effective January 1, 2014.
4)Allows premium rate variation based upon age of no more than
three to one for adults effective January 1, 2014.
5)Maintains existing state definition of small employer (two to
50 eligible employees) until January 1, 2017, except that this
bill adds to the definition, on or after January 1, 2014, a
self-employed individual who obtains at least 50% of annual
income from self-employment as demonstrated through personal
income tax filings for the current or prior year.
6)Implements federal definition of small employer as having at
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least one, but no more than 100 eligible employees, as
specified, on or after January 1, 2017.
7)Replaces an obsolete reference to an employer purchasing
program that is no longer in existence with a reference to the
Exchange.
8)Requires employer contribution requirements to be consistent
with PPACA.
9)Prohibits carriers from establishing rules for eligibility,
including continued eligibility, of an individual, or
dependent of an individual, based on any other health
status-related factor as determined by the regulators (The
Department of Managed Health Care (DMHC) for health care
service plans under the Knox-Keene Health Care Service Plan
Act of 1975 (Knox-Keene) and the Department of Insurance (CDI)
for health insurers under the Insurance Code).
10)Repeals authority for carriers to exclude late enrollees or
for the satisfaction of a preexisting condition clause,
initial coverage of an eligible employee, based on actual or
expected health condition on January 1, 2014. Prohibits
carriers from excluding any eligible employee or dependent who
would otherwise be entitled to health care service on the
basis of an actual or expected heath condition on or after
January 1, 2014.
11)Repeals authority for carriers to impose up to a six month
preexisting condition exclusion period related to medical
conditions, as specified, on January 1, 2014 and on or after
January 1, 2014 prohibits preexisting condition provisions
from excluding coverage following the individual's effective
date of coverage for a condition based on the fact the
condition was present before the date of enrollment.
12)Repeals authority for carriers who do not utilize a
preexisting condition provision to impose a waiting or
affiliation period, not to exceed 60 days, before coverage is
issued, on January 1, 2014, and prohibits waiting or
affiliation periods from being imposed on or after January 1,
2014.
13)Repeals authority for carriers to exclude late enrollees from
coverage for more than 12 months from the date of the
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application on January 1, 2014, and permits carriers to
exclude late enrollees from coverage for up to 90 days from
the date of the late enrollee's application. Prohibits
premiums from being charged to the late enrollee until the
exclusion period has ended.
14)Repeals authority for carriers to notify the small employer
about rate increases on January 1, 2014, and, on or after
January 1, 2013, requires carriers to notify the small
employer, that effective July 1, 2013, the actual rates are
required to be the same for all small employers.
15)Defines wellness incentive or wellness program as a program
of health promotion or disease prevention that is designed to
promote health or prevent disease and that meets the standards
specified in 22) below.
16)Establishes requirements for a carrier implemented wellness
program as contemplated in PPACA which prohibits in contracts
offered on or after January 1, 2012, a rebate, discount, or
other incentive offered under the wellness program from
resulting in a variation in the premium of greater than 1.2 to
one.
SMALL GROUP NOT CONFORMING
17)Increases the minimum hours an employee must work to be
eligible under other specified circumstances to 20 (from 10)
hours per normal work week for at least 50% of the weeks in
the previous calendar quarter.
18)Permits a self-employed individual with specified income to,
at his or her discretion, enroll in the Exchange as an
individual rather than a small employer.
19)Requires solicitors to notify the small employer of the
availability of coverage through the Exchange.
20)Makes premium rates established by the carrier in effect for
12 (rather than 6) months.
21)Prohibits carriers, effective January 1, 2014, from directly
or indirectly, entering into any contract, agreement, or
arrangement with a solicitor for the sale of a health plan
contract to be varied based on whether the small employer
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obtains coverage through the Exchange or directly from a
carrier.
22)Requires carriers to file a notice of material modification
with their respective regulators at least 60 business days
(rather than 20) prior to renewing or amending a plan
contract, as specified.
23)Requires that a carrier wellness program be based on
demonstrated scientific evidence to improve health outcomes as
documented by peer-reviewed scientific evidence involving
multiple studies over time as demonstrated by the regulators,
includes additional standards.
INDIVIDUAL AND GROUP CONFORMING
24)Changes the definition of health benefit plan to include
essential health benefits as defined consistent with PPACA on
or after January 1, 2014.
25)Prohibits carriers from establishing any preexisting
condition exclusion or limitation for any individual or
dependent of an individual, whether or not any medical advice,
diagnosis, care, or treatment was recommended or received
before that date on or after January 1, 2014.
26)Repeals authority for carriers to impose up to a six month
preexisting condition exclusion period related to medical
conditions on contracts that cover three or more enrollees on
January 1, 2014.
27)Repeals authority for carriers to impose up to a 12 month
preexisting condition provision related to medical condition
on contracts that cover one or two individuals on January 1,
2014.
28)Repeals authority for carriers that do not impose a
preexisting condition provision to impose an up to 60 day
waiting or affiliation period on January 1, 2014.
29)Repeals authority for carriers that do not impose a
preexisting condition provision to impose a 12 month exclusion
of coverage for a waivered condition on contracts that cover
one or two individuals on January 1, 2014.
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30)Repeals authority for carriers to impose a coverage exclusion
period of no more than 12 months on late enrollees on January
1, 2014.
31)Prohibits, effective January 1, 2014, any plan contract that
covers one or more enrollees from excluding coverage for any
individual on the basis of preexisting condition. Prohibits a
plan contract for group coverage from imposing any preexisting
condition provision upon any individual. Prohibits a plan
contract for individual coverage that is not a grandfathered
health plan within the meaning of PPACA from imposing any
preexisting condition provisions upon any individual. Permits
carriers to impose a 90-day waiting period from the date of
the late enrollee's application for coverage. Prohibits
carriers issuing group coverage from imposing a preexisting
condition exclusion based on health-status-related factors, as
specified.
32)Repeals authority for carriers to exclude from coverage based
on health status, and other conditions, as specified late
enrollees or for the satisfaction of a preexisting condition
clause, initial coverage of an eligible employee on January 1,
2014. Prohibits carriers from excluding any eligible employee
or dependent who would otherwise be entitled to health care
services on the basis of health status, and other conditions,
as specified, on or after January 1, 2014.
EXISTING LAW :
1)Provides for the regulation of health plans by DMHC under the
Knox-Keene, and for the regulation of health insurers by CDI
under provisions of the Insurance Code.
2)Requires carriers to fairly and affirmatively offer, market,
and sell all of the plan's contracts that are sold to small
employers to all small employers in the state.
3)Defines a small employer as any person, firm proprietary or
nonprofit corporation, partnership public agency, or
association that is actively engaged in business or service,
that, on at least 50% of its working days during the preceding
calendar quarter or preceding calendar year, employed at least
two, but no more 50, eligible employees, the majority of whom
were employed within this state.
4)Defines an eligible employee as any permanent employee who is
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actively engaged on a full time-basis in the conduct of the
business of the small employer with a normal workweek of at
least 30 hours, at the employer's place of business, who has
met any statutory waiting periods. Deems permanent employees
who work at least 20 hours but not more than 29 hours eligible
if certain conditions apply.
5)Defines preexisting condition provision as a contract
provision that excludes coverage for charges or expenses
incurred during a specified period following the employee's
effective date of coverage, as to a condition for which
medical advice, diagnosis, care, or treatment was recommended
or received during a specified period immediately preceding
the effective date of coverage.
6)Prohibits a plan contract for group coverage from imposing any
preexisting condition provision upon any child under 19 years
of age.
7)Prohibits a plan contract for individual coverage that is not
a grandfathered health plan within the meaning in PPACA from
imposing any preexisting condition provision upon any children
under 19 years of age.
8)Prohibits, with respect to the individual market child
coverage, except to the extent permitted by federal law,
carriers from conditioning the issuance or offering of
individual coverage on any of the following factors:
a) Health status;
b) Medical condition, including physical and mental
illness;
c) Claims experience;
d) Receipt of health care;
e) Medical history;
f) Genetic information;
g) Evidence of insurability, including conditions arising
out of acts of domestic violence;
h) Disability; and,
i) Any other health status-related factor as determined by
the regulators.
9)Defines a rating period as the period for which premium rates
established by a plan are in effect and requires them to be in
effect no less than six months.
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10)Establishes the following risk categories for rating
purposes: age, geographic region, and family composition,
plus the health benefit plan selected by the small employer.
Specifies age categories, family size categories, and nine
geographic regions.
11)Prohibits a plan from, directly or indirectly, entering into
any contract, agreement, or arrangement with a solicitor that
provides for or results in the compensation paid to a
solicitor for the sale of a health plan contract to be varied
because of the health status, claims experience, industry,
occupation, or geographic location of the small employer.
12)Prohibits a policy or contract that covers two or more
employees from establishing rules for eligibility, including
continued eligibility, of an individual, or dependent of an
individual, to enroll under the terms of the plan based on any
of the following health status-related factors:
a) Health status;
b) Medical condition, including physical and mental
illnesses;
c) Claims experience;
d) Receipt of health care;
e) Medical history;
f) Genetic information;
g) Evidence of insurability, including conditions arising
out of acts of domestic violence; and,
h) Disability.
13)Establishes the Exchange in California and its authority in a
manner that is consistent with PPACA.
14)Requires as a condition of participation in the Exchange,
carriers that sell any products outside the Exchange to fairly
and affirmatively offer, market and sell all products made
available in the Exchange to individuals and small employers
purchasing coverage outside of the Exchange.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
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1)PURPOSE OF THIS BILL . Approximately 3.4 million Californians
enjoy the protections brought about by California's landmark
small employer group health insurance rating and underwriting
rules which have applied to employer groups with two to 50
workers since 1993. These rules require carriers to offer
health plan contracts and insurance policies (health
insurance) to small employer purchasers on a guaranteed issue
(accept a group applying for coverage regardless of the health
status or claims experience of group members). They also
require carriers to offer renewal contracts, limit the rating
factors carriers can employ in pricing small group products,
require carriers to guarantee issue all small employer
products to all small group purchasers, and limit the ways in
which carriers can exclude coverage for existing health care
conditions. PPACA includes several significant reforms to
the health insurance market, including numerous provisions
that interact with California's small group laws. According
to the author, implementation of PPACA small group reforms in
California has the potential to bring millions of people into
the small group market. This bill is intended to revise
California law to conform to the federal law in order to bring
more uninsured into coverage.
There are some provisions in this bill that go beyond PPACA.
For example, this bill limits the variation in compensation
for insurance agents and brokers so that they cannot be paid
more for selling products outside of the California Health
Benefit Exchange (in effect steering employers away from
participating in the Exchange). Also, this bill requires
carrier rates to be in effect for no less than 12, rather than
six months, and requires carriers to notify small employers of
the availability of coverage through the Exchange. This bill
also makes conforming changes in California law that applies
to the individual and group market.
2)SMALL GROUP MARKET IN CA . A 2003 report published by the
California HealthCare Foundation (CHCF) describes features of
California's small group laws, established under AB 1672
(Margolin and Hansen), Chapter 1128, Statutes of 1992. The
comparison chart below describes many of the provisions in
California's small group law. A 2011 CHCF report indicates
that 3.4 million or 9% of Californians have health coverage
through small group insurance products. There are 2.2 million
people who purchase insurance for themselves in the individual
market. Of those 2.2 million, 32% are self-employed and
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another 26% work for small employers. Another 3 million
people who are uninsured have a head of family who works for a
small employer or is self-employed.
3)PPACA . The PPACA �Public Law (P.L.) 111-148] was signed into
law on March 23, 2010. On March 30, 2010, PPACA was amended
by P.L. 111-152, the Health Care and Education Reconciliation
Act of 2010. In general, P.L. 111-148 and its amendments are
referred to as PPACA. The federal law makes several
significant changes to the group and individual insurance
markets. As an example, PPACA eliminates the pricing of
premiums based on health status, limits the range of premiums
based on age, adds the self-employed to those eligible for
guaranteed issue of coverage, includes wellness incentives in
the coverage available to small businesses and expands the
rules to employers with one to 100 employees. The comparison
chart below describes many of the provisions affecting small
groups in PPACA.
4)COMPARISON CHART
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| |California Law |PPACA |AB 1083 |
|-----------+----------------------+-----------------+----------------|
|Small |At least two but not |At least one but |Two to 50 until |
|employer |more than 50 eligible |not more than |1/1/2017. |
| |employees. |100 employees. |After 1/1/2017, |
| | |State option to |one to 100. |
| | |define at least | |
| | |one but not more | |
| | |than 50 as small | |
| | |before 1/1/2016. | |
|-----------+----------------------+-----------------+----------------|
|Employee |Normal workweek of at |Full-time |Average of 30 |
| |least 30 hours at |employee means, |hours over the |
| |place of employment. |with respect to |course of a |
| |Permanent employees |any month, an |month. |
| |who work at least 20 |employee who is |Permanent |
| |hours but not more |employed on |employees who |
| |than 29 hours are |average at least |work at least |
| |deemed eligible under |30 hours of |10 but not more |
| |specified |service per |than 29, and at |
| |circumstances |week. |least 10 hours |
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| |including worked at | |per normal work |
| |least 20 hours per | |week for at |
| |normal work week for | |least 50% of |
| |at least 50% of weeks | |weeks in |
| |in previous quarter. | |previous |
| | | |quarter. |
|-----------+----------------------+-----------------+----------------|
|Guaranteed |Requires carriers to |Requires |Requires |
|issue |fairly and |carriers who |carriers to |
| |affirmatively offer, |offer in the |offer coverage |
| |market and sell to |individual or |that includes |
| |small employers. |group market to |the "essential" |
| | |accept every |health benefits |
| | |employer and |package, with |
| | |individual who |restrictions on |
| | |applies. |cost-sharing. |
| | |Authorizes open | |
| | |or special | |
| | |enrollment | |
| | |provisions. | |
|-----------+----------------------+-----------------+----------------|
|Guaranteed |Requires renewal of |If carrier |No change. |
|renewal |coverage, at the |offers health | |
| |option of policy |insurance | |
| |holder, unless there |coverage in the | |
| |is fraud or |individual or | |
| |nonpayment of premium |group market | |
| |or carrier leaves the |must renew or | |
| |market. |continue at the | |
| | |option of the | |
| | |plan sponsor or | |
| | |individual. | |
|-----------+----------------------+-----------------+----------------|
|Rating |Allows premium |Prohibits |Makes risk |
|rules |variance of plus or |carriers from |adjustment |
| |minus 10% from a |pricing based on |factor zero |
| |standard rate based |health factors |effective |
| |on health status. |but allows for |January 1, |
| |Restricts a plan's |age (3 to 1 |2014. |
| |ability to set |ratio for |Premiums can |
| |initial and renewal |adults), |vary for age by |
| |premium rates to a |geography, |no more than 3 |
| |group of specified |gender and |to 1. |
| |risk categories (age, |family. |Maintains |
| |geographic region, |Allows for |geographic |
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| |family size, and |tobacco rating |region, family |
| |plan). |of 1.5 to 1. |size, and plan. |
| | | | |
|-----------+----------------------+-----------------+----------------|
|Limitations|Only for one period |Prohibits |No preexisting |
| on the |of six months from |carriers from |conditions |
|use of |the effective date of |imposing a |allowed for |
|pre-existin|coverage with credit |pre-existing |adults 1/1/14. |
|g |for time the |condition |Allows 90 day |
|condition |individual was |exclusion for |waiting period |
|exclusions |previously covered |children 9/23/10 |for late |
| |under a different |and adults |enrollees. |
| |plan. Prohibits |1/1/14. | |
| |pre-existing | | |
| |condition exclusions | | |
| |of more than | | |
| |12-months in policies | | |
| |and contracts | | |
| |covering one or two | | |
| |individuals, with | | |
| |credit for previous | | |
| |coverage. No | | |
| |pre-existing | | |
| |exclusions for | | |
| |children. | | |
|-----------+----------------------+-----------------+----------------|
|Health |Prohibits carriers in |Prohibits |Prohibits |
|status |individual market |carriers in |carriers in |
|discriminat|with respect to child |group and |group market |
|ion |coverage from |individual |from |
| |conditioning coverage |market from |conditioning |
| |on health status |establishing |coverage on |
| |factors, including |rules for |health status |
| |any other health |eligibility |factors, |
| |status-related factor |based on health |including any |
| |as determined by |status factors, |other health |
| |regulators. |including any |status-related |
| | |other health |factor as |
| | |status-related |determined by |
| | |factor |regulators. |
| | |determined | |
| | |appropriate by | |
| | |the Secretary of | |
| | |the federal | |
| | |Department Of | |
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| | |Health and Human | |
| | |Services. | |
|-----------+----------------------+-----------------+----------------|
|Steering |Carriers cannot pay | |Carriers cannot |
| |agent and brokers | |pay agent and |
| |varied compensation | |brokers varied |
| |based on health | |compensation on |
| |status, claims | |products |
| |experience, industry, | |obtained |
| |occupation, etc. | |through the |
| | | |Exchange or |
| | | |directly from |
| | | |carrier. |
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5) SUPPORT . The Small Business Majority (SBM) writes in
strong support for this bill, that it is critical to pass
this legislation to strengthen safeguards in California.
SBM indicates that this bill eliminates the practice of
determining rates based on health status, reins in rates
based on age by limiting premiums that an older person must
pay to a maximum of three times the amount a younger person
pays, and guarantees coverage for the self-employed. The
Latino Health Alliance supports this bill because it
conforms and phases-in new insurance market rules for small
businesses, particularly so that small employers don't get
additional premium spikes based on the health of their
workforce. Health Access California supports this bill
because it will make health insurance more available to 5.3
million small business owners, their employees and
self-employed Californians.
6) OPPOSITION UNLESS AMENDED . The California Association
of Health Plans (CAHP) opposes this bill unless it is
amended to carefully and precisely conform to federal law.
CAHP believes this bill is ambitious and notes that several
provisions are not contained in the federal law or differ
from the federal law, such as a provision that makes
changes to how (broker and agent) commissions are handled,
how employers calculate coverage for part time employees
and notification requirements.
7) OPPOSITION . The California Association of Health
Underwriters (CAHU) is in opposition to this bill. They
are specifically opposed to the "anti-steering" language in
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this bill. CAHU asserts that this creates a situation
where the California Health Benefit Exchange is setting
commissions for agents - even for products outside the
Exchange.
8) AUTHOR'S AMENDMENTS . The author intends to amend this
bill to address some technical inconsistences with the
drafting, date corrections, implement federal small
employer definition of one to 50 employees on January 1,
2014, specify material modification submissions
requirements of 60 "calendar" rather than "business" days,
and to eliminate sections 10 and 33, which establish
standards for carrier implemented wellness programs.
REGISTERED SUPPORT / OPPOSITION :
Support
Health Access California
Small Business Majority
Latino Health Alliance
Opposition
California Association of Health Underwriters
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097