BILL ANALYSIS �
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 1083
A
AUTHOR: Monning
B
AMENDED: June 27, 2011
HEARING DATE: June 29, 2011
1
CONSULTANT:
0
Chan-Sawin
8
3
SUBJECT
Small group health insurance coverage
SUMMARY
Effective January 1, 2014, makes a number of changes to
state laws governing the sale of small group insurance
products to conform state law to provisions in the federal
Patient Protection and Affordable Care Act (PPACA),
pertaining to definitions of "small employer" and
"employee," pre-existing condition exclusions, waiting
periods, and other provisions. Makes other changes to laws
governing the offering and sale of small group insurance
products that become effective January 1, 2012, pertaining
to self-employed individuals, duration of premium rates,
notification of availability of coverage, and notice of
material modifications by carriers.
CHANGES TO EXISTING LAW
General provisions
Existing federal law:
Continued---
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Establishes the PPACA (Public Law 111-148), which imposes
various requirements, some of which take effect on January
1, 2014, on states, carriers, employers, and individuals
regarding health care coverage, including coverage in the
small group health insurance market.
Defines "grandfathered plan" as any group or individual
health insurance product that was in effect on March 23,
2010.
Existing state law:
Provides for the regulation of health plans by the
Department of Managed Health Care (DMHC) under the
Knox-Keene Health Care Service Plan Act of 1975, and for
the regulation of health insurers by the California
Department of Insurance (CDI) under provisions of the
Insurance Code (collectively referred to as regulators).
Establishes and specifies the duties and authority of the
Exchange within state government in a manner that is
consistent with PPACA.
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.
Requires health plans to fairly and affirmatively offer,
market, and sell health coverage to small employers. This
is known as "guaranteed issue."
Requires health plans to offer, market, and sell all of the
health plan's contracts that are sold to small employers,
to any small employers in each service area in which the
plan provides health care services. This is known as an
"all products" requirement.
PROVISIONS CONFORMING TO PPACA
Definition of "small employer"
Existing federal law:
Defines "small employer" as an employer who employed an
average of at least 1, but not more than 100 employees on
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business days during the preceding calendar year.
Allows states the option to, prior to January 1, 2016,
define "small employer" as an employer who employed an
average of at least 1, but not more than 50 employees.
Existing state law:
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 percent of its working days
during the preceding calendar quarter or preceding calendar
year, employed at least two, but no more than 50, eligible
employees, the majority of whom were employed within this
state
This bill:
Maintains the existing state definition of small employer
(2 to 50 eligible employees) until January 1, 2014, and
implements the federal option to define small employer as 1
to 50 from January 1, 2014, until December 31, 2015.
Implements the federal definition of small employer as
having at least 1, but no more than 100 eligible employees,
as specified, on or after January 1, 2016.
Adds to the definition, on or after January 1, 2014, a
self-employed individual who obtains at least 50 percent of
annual income from self-employment as demonstrated through
personal income tax filings for the current or prior year.
Replaces an obsolete reference to an employer purchasing
program that is no longer in existence with a reference to
the Exchange.
Requires employer contribution requirements to be
consistent with PPACA.
Definition of "eligible employee"
Existing federal law:
Defines the term "full-time employee" to mean, with respect
to any month, an employee who is employed on average at
least 30 hours of service per week.
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Existing state law:
Defines an eligible employee as any permanent employee who
is 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.
This bill:
Effective January 1, 2012, expands the definition of
eligible employee by calculating the hours in a normal work
week as an average of, rather than a minimum of, 30 hours
per week over the course of a month.
Effective January 1, 2012, 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.
Pre-existing condition exclusions
Existing federal law:
Prohibits, effective January 1, 2014, any carrier offering
group or individual health insurance coverage that imposes
any pre-existing condition exclusions.
Prohibits a carrier, except for grandfathered plans, from
imposing any pre-existing condition provision upon any
child less than 19 years of age.
Existing state law:
Permits plans to exclude a "pre-existing condition" for
charges or expenses incurred during a specified period
following the employee's effective date of coverage, as to
a pre-existing condition, defined as 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.
Prohibits a plan contract for individual or group coverage,
other than grandfathered plans, from imposing any
pre-existing condition provision upon any child less than
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19 years of age.
This bill:
Prohibits, effective January 1, 2014, carriers from
limiting or excluding coverage for any individual based on
a pre-existing condition, whether or not any medical
advice, diagnosis, care, or treatment was recommended or
received before that date.
Waiting periods
Existing federal law:
Effective January 1, 2014, prohibits all insurance products
from requiring a waiting periods for individual or group
coverage longer than 90 days.
Existing state law:
Allows carriers who use pre-existing condition exclusions
in their products to impose up to a six month pre-existing
condition waiting period related to medical conditions.
Allows carriers who do not use pre-existing condition
exclusions in their products to impose a waiting period of
up to 60 days.
This bill:
Effective January 1, 2014, prohibits a carrier from
imposing a waiting period based on a pre-existing
condition, health status, or any other factor, as
specified.
Effective January 1, 2014, allows a carrier to impose a
waiting period of up to 90 days as a condition of
enrollment, if applied equally to all full-time employees
and if consistent with PPACA and any subsequent federal
rules, regulations or guidance.
Beginning January 1, 2013, requires a carrier providing
aggregate or specific stop-loss coverage, or any other
assumption of risk with reference to a health benefit plan,
to ensure that the plan meets all the waiting period
provisions in state law pertaining to small group insurance
policies.
Late enrollees
Existing state law:
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Allows carriers to exclude late enrollees from group
coverage for more than 12 months from the date of the
application.
This bill:
Repeals authority for carriers to exclude late enrollees
from coverage for more than 12 months from the date of the
application on January 1, 2014, and instead 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.
Health status
Existing federal law:
Effective in January 1, 2014, prohibits all health
insurance products, except grandfathered plans and
self-insured plans, from discriminating based on health
status, including medical history, domestic violence,
claims experience, and genetic information.
Existing state law:
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.
Allows carriers to use a risk adjustment factor of +/- 10
percent from the standard employee rate in determining an
individual employee's premium rate, as specified.
This bill:
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Effective January 1, 2012, adds to the list of health
status-related factors in existing law a prohibition based
on any other health status-related factor as determined by
the regulator.
Effective January 1, 2014, prohibits the use of a risk
adjustment factor in the determination of an individual
employee's premium within a group.
Essential health benefits
Existing federal law:
Establishes a list of categories of "essential health
benefits package" which individual and small group
insurance products must provide beginning in 2014.
Existing state law:
Requires DMHC-regulated health plans to provide all
medically necessary basic health care services, as defined.
Permits DMHC to define the scope of the services and to
exempt plans from the requirement for good cause. No
similar provision is applicable to health insurers
regulated by CDI.
Defines disability insurance to include insurance
appertaining to injury, disablement, or death resulting to
the insured from accidents or sickness.
Defines, for statutes effective on or after January 1,
2002, the term "health insurance" to mean an individual or
group disability insurance policy that provides coverage
for hospital, medical, or surgical benefits, as specified.
Defines, for statutes effective on or after January 1,
2008, the term "specialized health insurance policy" to
mean a policy of health insurance for covered benefits in a
single specialized area of health care, including
dental-only, vision-only, and behavioral health-only
policies.
This bill:
Changes the definition of health benefit plan to include
essential health benefits on or after January 1, 2014, as
defined consistent with PPACA.
Defines, for statutes effective on or after January 1,
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2014, the term "health insurance" to mean individual or
group disability insurance policies, except for
grandfathered policies that provides essential health
benefits as defined in PPACA, as specified.
PROVISIONS NOT CONFORMING TO PPACA
Premium rates
Existing federal law:
Effective January 1, 2014, permits carriers to vary
premiums in the individual and small group markets only
based on a geographic rating area, age of policyholder,
tobacco use, and whether the policy is for an individual or
family.
Prohibits premiums from varying by more than three to one
for adults.
Prohibits premiums from varying by more than 1.5 to one for
smokers.
Allows for the provision of wellness incentives by
employers to vary premiums up to 30 percent. May be
increased up to 50 percent up approval by the Secretary of
the federal Health and Human Services Agency.
Existing state law:
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.
Prohibits rates from being adjusted annually more than 10
percent, up or down, from the filed premium rates based on
an employer's industry, geographic location, occupation, or
claims experience. This is called the risk adjustment
factor.
This bill:
Eliminates the ability of carriers to impose a risk
adjustment factor to premium rates effective January 1,
2014.
Allows premium rate variation based upon age of no more
than three to one for adults effective January 1, 2014.
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Does not allow for provisions of wellness incentives.
Does not provide for smokers' premiums to vary.
OTHER PROVISIONS NOT ADDRESSED IN PPACA
Self-employed individuals
This bill:
Effective January 1, 2014, permits certain self-employed
individuals to, to the extent permitted under federal law,
at his or her discretion, enroll in the Exchange as an
individual rather than a small employer. Eligible
self-employed individuals are defined as those with at
least 50 percent of annual income from self-employment, and
whose modified adjusted gross income is under 400 percent
of the federal poverty level.
Rating periods
Existing state law:
Prohibits carriers, during the term of a group plan
contract or policy, from changing the rate of the premium,
copayment, coinsurance, or deductible during specified time
periods.
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.
This bill:
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 twelve months (instead of
six).
Notifications
Existing state law:
Prohibits health plans and insurers from changing premium
rates or coverage policies without prior written
notification of the change to the contract holder or
policyholder.
This bill:
Modifies the requirements for carriers to notify the small
employer about rate increases, and instead, on or after
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January 1, 2013, requires carriers to notify the small
employer that the actual rates are required to be the same
for all small employers.
Requires solicitors to notify the small employer of the
availability of tax credits for certain employers, and
beginning January 1, 2014, of the availability of coverage
and tax credits through the Exchange.
Carrier filing requirements
Existing state law:
Requires carriers to file a notice of material modification
with their respective regulators at least 20 business days
prior to renewing or amending a plan contract, as
specified.
This bill:
Requires carriers to file a notice of material modification
with their respective regulators at least 60 calendar days
(rather than 20 business days) prior to renewing or
amending a plan contract, as specified.
FISCAL IMPACT
According to the Assembly Appropriations Committee
analysis, minor and absorbable state costs as a result of
this bill. The numerous provisions in this bill, including
some that go beyond federal law, largely affect the
small-group private insurance markets and have negligible
cost implications for the state. In the normal course of
DMHC and CDI's existing regulatory duties, regulators would
respond to complaints and provide oversight to ensure that
carriers were complying with state laws governing how
health insurance must be offered and sold. There may be
minor up-front costs to departments to respond to the
health care coverage and insurance market changes, but
these would happen under existing federal law.
BACKGROUND AND DISCUSSION
According to the author, 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 2 to 50 workers since 1993. These
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rules require carriers to offer health plan contracts and
insurance policies to small employer purchasers on a
guaranteed issue basis (i.e. accepting 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.
The author states that the federal health reform law,
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. The author
also states that there are some provisions in AB 1083 that
go beyond PPACA, such as requiring carrier rates to be in
effect for no less than 12, rather than 6 months, and
requires carriers to notify small employers of the
availability of coverage through the Exchange.
California's small group health insurance market
In 1992, under AB 1672 (Margolin and Hansen), Chapter 1128,
Statutes of 1992, California enacted a number of reforms to
the small group market, making health insurance more
accessible to small employers through guaranteed issue and
renewability provisions, regulating pre-existing conditions
limitations, underwriting protections, and disclosure
requirements. Before AB 1672, a carrier would examine an
employer's health history and could either increase the
premiums significantly or decline the entire group.
California's small group market has been shaped by
guaranteed issue and other protections established in small
group reform in 1992. In this market, carriers may impose
participation requirements (i.e. 70 percent of eligible
employees must enroll) and contribution requirements (i.e.
employer must pay at least pay half of the premium). As a
result, enrollees in small group coverage typically pay a
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fraction of their premium.
A 2011 California HealthCare Foundation report indicates
that 3.4 million, or 9 percent, of Californians have health
coverage through small group insurance products. Roughly
67 percent of small group products are regulated by DMHC,
compared to 33 percent regulated by CDI. In addition,
there are 2.2 million people who purchase insurance for
themselves in the individual market. Of those 2.2 million,
32 percent are self-employed and another 26 percent 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.
Small group reforms in PPACA
On March 23, 2010, President Obama signed the PPACA. This
federal law makes several significant changes to the group
and individual insurance markets. In general, PPACA
requires individuals, beginning in 2014, to maintain health
insurance coverage, with some exceptions. Employers are
not explicitly required to provide health benefits,
although certain employers with more than 50 employees may
be required to pay a penalty if they either (1) do not
provide insurance, under certain circumstances, or (2) the
insurance they provide does not meet specified
requirements. PPACA also 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.
Related bills
SB 51 (Alquist) would require health plans and insurers to
meet federal annual and lifetime limits and medical loss
ratio (MLR) requirements in specified provisions of the
federal health care reform law, as specified. Would also
authorize the Director of DMHC and the Insurance
Commissioner to issue guidance, as specified, and
promulgate regulations to implement requirements relating
to MLRs, as specified. Set for hearing on July 5, 2011 in
the Assembly Health Committee.
AB 52 (Feuer and Huffman) requires, effective January 1,
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2012, health plans and insurers to apply for prior approval
of proposed rate increases, under specified conditions, and
imposes on CDI and DMHC specific rate regulation criteria,
timelines, and hearing requirements. Set for hearing on
June 29, 2011 in the Senate Health Committee.
Prior legislation
SB 890 (Alquist) of 2010 would have, among other things,
required health plans and insurers to meet federal annual
and lifetime limits and the MLR requirements in PPACA.
Vetoed by the Governor.
SB 900 (Alquist), Chapter 659, Statutes of 2010,
established the California Health Benefit Exchange as an
independent public entity within state government, required
the Exchange to be governed by a board composed of the
Secretary of California Health and Human Services, or his
or her designee, and four other members appointed by the
Governor and the Legislature, who meet specified criteria.
SB 1163 (Leno), Chapter 661, Statutes of 2010 requires
health plans and insurers to file with DMHC and CDI
specified rate information for at least 60 days prior to
implementing any rate change. Requires rate filings to be
actuarially sound. Increases, from 30 days to 60 days, the
amount of time that a carrier must provide written notice
before a change in premium rates or coverage becomes
effective. Requires health plans and insurers that decline
to offer coverage or that 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 provide the applicant with reason for the
decision.
AB 1602 (John A. P�rez), Chapter 655, Statutes of 2010,
specified the powers and duties of the Exchange relative to
determining eligibility for enrollment in the Exchange and
arranging for coverage under qualified health plans,
required the Exchange to provide health plan products in
all five of the federal benefit levels (platinum, gold,
silver, bronze and catastrophic), required health plans
participating in the Exchange to sell at least one product
in all five benefit levels in the Exchange, required health
plans participating in the Exchange to sell their Exchange
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products outside of the Exchange, and required health plans
that do not participate in the Exchange to sell at least
one standardized product designated by the Exchange in each
of the four levels of coverage, if the Exchange elects to
standardize products.
AB 2042 (Feuer) of 2010 would have prohibited carriers from
altering rates, as specified, or any benefits more than
once per calendar year, for individual plan contracts and
policies that are issued, amended, or renewed on or after
January 1, 2011, with certain exceptions including allowing
a plan or contract to lower premiums if it does not
otherwise alter cost sharing or any benefits and if the
reduction in premium is consistent with other provisions of
state and federal law. Vetoed.
AB 2244 (Feuer), Chapter 656, Statutes of 2010, requires
guaranteed issue for children in 2011 and adults in 2014.
Establishes standard individual market rating factors (age,
geographic region, family composition and health benefit
plan design). Limits premium variation for children's
coverage until 2014 by requiring health plans and health
insurers to use "rate bands" that limit premium variation
to no more than a specified percentage of a standard rate
for a child in each particular rating category and benefit
plan for children who are in an open enrollment period.
AB 2578 (Jones and Feuer) of 2010 would have required
health plans and insurers to file a complete rate
application with DMHC and CDI for a rate increase that will
become effective on or after January 1, 2012. Would have
prohibited a health plan or insurer's premium rate (defined
to include premiums, co-payments, coinsurance obligations,
deductibles, and other charges) from being approved or
remaining in effect that is excessive, inadequate, unfairly
discriminatory, as specified. Failed passage off the
Senate Floor.
SB 316 (Alquist) of 2009 would have, among other things,
broadened an existing MLR disclosure requirement that
currently applies to individuals and groups of 25 or fewer
individuals, to instead apply to individuals and groups of
50 or fewer individuals. An earlier version of the bill
contained similar MLR requirements to SB 51. Failed
passage out of Assembly Health Committee.
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AB 812 (De La Torre) of 2009 would have required health
plans and health insurers to report to their respective
regulators the MLR of each health care plan product or
health insurance policy. Failed passage out of Assembly
Appropriations Committee.
AB 1218 (Jones) of 2009 was substantively similar to AB
2578 (Jones and Feuer) of 2010. Failed passage out of the
Assembly Health Committee.
SB 1440 (Kuehl) of 2008 was an identical measure to SB 316
as introduced. Vetoed by the Governor.
AB 1554 (Jones) of 2007 was substantively similar to AB
2578 (Jones and Feuer) of 2010 and AB 1219 (Jones) of 2009.
Failed passage out of Senate Health Committee.
ABX1 1 (Nunez) of 2007 among its provisions, would have, on
and after July 1, 2010, required full-service health plans
and health insurers to expend no less than 85 percent of
the after-tax revenues they receive from dues, fees,
premiums, or other periodic payments, on health care
benefits. The bill would have allowed plans and insurers
to average their administrative costs across all of the
plans and insurance policies they offer, with the exception
of Medicare supplement plans and policies and certain other
limited benefit policies, and would have allowed DMHC and
CDI to exclude any new contracts or policies from this
limit for the first two years they are offered in
California. "Health care benefits" would have been broadly
defined to include the costs of programs or activities
which improve the provision of health care services and
improve health care outcomes, as well as disease management
services, medical advice, and pay-for-performance payments.
Failed passage out of Senate Health Committee.
AB 8 (Nunez) of 2007 contained similar provisions to ABX1 1
with regard to the amount health plans and health insurers
would have been required to expend on health care benefits.
Vetoed by the Governor.
SB 1591 (Kuehl) of 2006 would have prohibited health
insurers from spending on administrative costs in any
fiscal year an excessive amount of aggregate dues, fees, or
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other periodic payments received by the insurer. Provides,
for purposes of the bill, that administrative costs include
all costs identified in current regulations applying to
health plans. Would have required CDI to develop
regulations to implement the bill by January 1, 2008, and
provided that the bill is to take effect on July 1, 2008.
These provisions were amended out of the bill.
SB 425 (Ortiz) of 2006 would have required carriers to
obtain prior approval for a rate increase, defined in a
similar manner to rates under AB 1218 of 2009. Failed
passage out of Senate Health Committee.
SB 26 (Figueroa) of 2004 would have required carriers to
obtain prior approval of rate increases from DMHC and CDI,
as specified, and would have potentially required
significant refunds of premiums previously collected.
Failed passage out of the Senate Insurance Committee.
AB 1672 (Margolin and Hansen), Chapter 1128, Statutes of
1992, enacted a number of reforms to the small group
market, including guaranteed issue, renewability
provisions, regulating pre-existing conditions limitations,
underwriting protections, and disclosure requirements.
Arguments in support
Health Access California, co-sponsor of AB 1083, writes in
support and states that this bill will make health
insurance more available to 5.3 million small business
owners, their employees and self-employed Californians.
The Small Business Majority (SBM), the other co-sponsor of
the bill, concurs and points out that California's small
businesses have suffered from skyrocketing health insurance
costs. SBM believes that it is critical to pass this
legislation to strengthen safeguards in California as the
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
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workforce.
CALPIRG argues that, by expanding guaranteed issue to
self-employed individuals and sole proprietors, this bill
gives individuals more mobility and spurs economic growth
by allowing them to start new business ventures without the
risk of losing coverage. CALPIRG also points out that the
newly-included businesses, which are generally not
sufficiently large to negotiate the good health insurance
deals enjoyed by the largest businesses, will benefit from
the protections in the small group market, including
eligibility for the Exchange.
The California Medical Association agrees with the
proponents that it is important to strengthen safeguards in
California that are consistent with PPACA, and to make
insurance more available to small business owners, their
employees, and self-employed Californians.
Arguments in opposition
The California Association of Health Plans (CAHP) opposes
this bill unless it is amended to carefully and precisely
conform to federal law to avoid regulatory confusion,
stating that California should use great caution in passing
state laws intended to implement federal reform while so
many questions about the details of the federal law are
pending regulatory action by federal agencies. CAHP also
argues that this bill is ambitious and notes that several
provisions are not contained or differ from the federal
law.
The Association of California Life and Health Insurance
Companies (ACLHIC) concurs with CAHP, stating that it would
be prudent to take a bit more time to await guidance from
federal regulators before moving forward with implementing
any changes to the small group market.
PRIOR ACTIONS
Assembly Health: 13- 6
Assembly Appropriations:11- 6
Assembly Floor: 50- 27
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COMMENTS
1.Recent amendments. Amendments taken recently by the author
make the following changes:
a. Effective date of existing law. Changes the
effective date of the some of the bill's changes from
January 1, 2014 to December 31, 2013.
b. Use of risk adjustment factors. Clarify that there
will be no risk adjustment factor used in the
determination of rates effective January 1, 2014.
c. References to PPACA. Adds "to the extent permitted
under (or consistent with) PPACA and any rules,
regulations or guidance issued consistent with that
law" throughout bill
d. Definition of small group. Changes the effective
date of group size going up to 100, from January 1,
2017 to January 1, 2016, to be consistent with PPACA.
e. Agent and broker provisions. Deletes anti-steering
provisions originally proposed and restores existing
law.
f. Waiting periods. Clarifies that a waiting period
of up to 90 days is permitted as a condition of
employment if applied equally to all fulltime
employees and if consistent with PPACA and any
subsequent rules, regulations, and guidance.
g. Disability insurance. Defines "health insurance"
in Insurance Code Section 106 to mean individual or
group disability insurance policy that provides
essential health benefits as defined consistent with
Section 1302 of PPACA, but not grandfathered coverage.
h. Other technical and clarifying changes, such as
correcting federal code references used in the bill
and making parallel changes between the Insurance and
Health & Safety Code provisions.
1.Effect of the bill. The bill largely conforms state law
related to small group health insurance to federal
requirements established in PPACA, except for the following
provisions:
a. Self-employed. Federal and state law is silent on
whether the self-employed individuals qualify as an
individual or as an employer (for group coverage) in
the context of the Exchange. AB 1083 would provide a
choice to those self-employed individuals whose
STAFF ANALYSIS OF ASSEMBLY BILL 1083 (Monning) Page
19
modified adjusted gross income is below 400 percent
FPL and who receives at least 50 percent of their
annual income from self-employment.
b. Rating periods. Current state law requires small
group premium rates to be in effect no less than six
months. AB 1083 would extend the rating period from
six to twelve months. This is not addressed in
federal law, but recent amendments specify that the
rating period provision would be implemented to the
extent permitted under federal laws and regulations.
c. Notification requirements on carriers and
solicitors. This bill requires carriers to notify
small employers that the actual rates are required to
be the same for all small employers, and requires
solicitors to notify the small employer of the
availability of tax credits for certain employers, and
beginning January 1, 2014, of the availability of
coverage and tax credits through the Exchange.
d. Carrier filing requirements. AB 1083 requires
carriers to file notices of material modification with
their respective regulators at least 60 calendar days
(rather than 20 business days) prior to renewing or
amending a plan contract, to conform with rate review
filing requirements established in SB 1163 (Leno),
Chapter 661, Statutes of 2010.
2.Should the state implement the federal option to define
small employers as 1 to 50? PPACA defines small employers
as those with 1 to 100 employees beginning in 2014, but
allows states the option to define small employers 1 to 50
employees between 2014 and 2016. AB 1083 defines small
employers as 1 to 50 between 2014 and 2016, a change from 2
to 50 in existing law, and defines small employers as 1 to
100 after 2016. By phasing in the definition of 1 to 100
consistent with federal law, the author and sponsors
believe that it would make the adjustment easier on the
market.
3.Premium rating based on tobacco use or wellness incentives
not allowed. PPACA also allows premium rating differences
based on tobacco use or financial wellness incentives. The
effect of the bill would prohibit premium rates to vary for
smokers and for those who may qualify for plan or employer
based wellness incentives.
STAFF ANALYSIS OF ASSEMBLY BILL 1083 (Monning) Page
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4.Suggested technical amendments to provide references to
federal law and subsequently issued federal rules,
regulations or guidance:
(a) On page 9, line 10, after "month." insert:
"This subdivision shall be implemented to the
extent permitted under the federal Patient
Protection and Affordable Care Act (Public Law
111-148) and any rules, regulations, or guidance
issued consistent with that law."
(b) On page 20, line 36, after "month." insert:
"This paragraph shall be implemented to the extent
permitted under the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any
rules, regulations, or guidance issued consistent
with that law."
(c) On page 62, line 10, after "month." insert:
"This subdivision shall be implemented to the
extent permitted under the federal Patient
Protection and Affordable Care Act (Public Law
111-148) and any rules, regulations, or guidance
issued consistent with that law."
(d) On page 78, line 28, after "month." insert:
"This paragraph shall be implemented to the extent
permitted under the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any
rules, regulations, or guidance issued consistent
with that law."
POSITIONS
Support: Health Access California (co-sponsor)
Small Business Majority (co-sponsor)
California Medical Association
California Optometric Association
California Retired Teachers Association
CALPIRG
STAFF ANALYSIS OF ASSEMBLY BILL 1083 (Monning) Page
21
Congress of California Seniors
Latino Health Alliance
Oppose:Association of California Life and Health Insurance
Companies
California Association of Health Plans
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