BILL ANALYSIS �
AB 1334
Page 1
Date of Hearing: May 3, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1334 (Feuer) - As Introduced: February 18, 2011
SUBJECT : Health care coverage.
SUMMARY : Requires each product offered or renewed in the
individual market from July 1, 2012 to December 31, 2013 to
disclose whether or not it offers minimum essential benefits.
Requires, on or after January 1, 2014, a health plan or insurer
to categorize products offered or renewed in the individual
market on the basis of actuarial value using the method
contained in the Patient Protection and Affordable Care Act
(PPACA) into one of five tiers. Also authorizes the Department
of Managed Health Care (DMHC) and the California Department of
Insurance (CDI) to review categorization of any product pursuant
to this bill. Specifically, this bill :
1)Requires, effective July 1, 2012, a health plan or insurer to
categorize all products offered or renewed in the individual
market.
2)Requires each product offered or renewed in the individual
market from July 1, 2012 to December 31, 2013, inclusive, to
disclose whether or not it offers minimum essential benefits,
as defined, and whether or not it offers an actuarial value of
at least 70%.
3)Requires, on and after January 1, 2014, each product offered
or renewed in the individual market to be categorized on the
basis of actuarial value, calculated using the method
contained in the PPACA, into one of the following tiers:
a) Bronze level for products with an actuarial value equal
to 60%;
b) Silver level for products with an actuarial value equal
to 70%;
c) Gold level for products with an actuarial value equal to
80%;
d) Platinum level for products with an actuarial value
equal to 90%; and,
e) Catastrophic coverage for products with an actuarial
value less than 60%.
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4)Authorizes a health plan or health insurer to have a de
minimis variation from the actuarial values set forth in 3)
above in categorizing the actuarial value of products.
Requires a health plan or insurer to use a qualified actuary
to certify the accuracy of its calculations. Defines
"qualified actuary" as an actuary who is a member of the
American Academy of Actuaries, and who meets other specified
qualifications.
5)Authorizes DMHC and CDI to review the categorization of any
product under this bill for accuracy, including, but not
limited to, the methodology used by the plan to establish an
actuary value and to require the submission of any information
needed to categorize products.
6)Requires health plans and insurers, as part of disclosure
requirements in existing law, to include the actuarial value
of the particular product reflected in the contract or policy,
along with an explanation of the actuarial value in easily
understood language expressed as a percentage of expenses paid
by the plan or policy versus out of pocket. Requires an
estimate of the annual out-of-pocket expenses and total annual
cost to an individual in average health who is enrolled in the
product.
7)Requires the disclosure of a statement that an individual's
share of cost may be more or less depending on his or her age,
illness, or health condition, and the following statement:
"Please examine the other features of this product
carefully including prescription drug coverage,
exclusion of specific conditions, and other costs such
as copayments and deductibles."
8)Exempts Medicare supplement contracts and policies,
specialized health care service plan contracts and policies,
CHAMPUS-supplement, specified disease, TRICARE supplement,
accident-only insurance policies, or insurance policies
excluded from the definition of "health insurance," as
specified.
EXISTING LAW :
1)Provides for the regulation of health plans by DMHC under the
Knox-Keene Health Care Service Plan Act of 1975, and for the
regulation of health insurers by CDI under provisions of the
Insurance Code.
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2)Requires health plans to use disclosure forms or materials
containing information regarding the benefits, services, and
terms of the plan contract as the Director of DMHC may
require, so as to afford the public, subscribers, and
enrollees with a full and fair disclosure of the provisions of
the plan in readily understood language and in a clearly
organized manner.
3)Requires each insurer to provide, in easily understood
language and in a uniform, clearly organized manner, as
prescribed and required by the Insurance Commissioner, such
summary information about each disability insurance policy
offered by the insurer as the commissioner finds is necessary
to provide for full and fair disclosure of the provisions of
the policy.
4)Establishes the American Health Benefit Exchange (Exchange) in
California and its authority in a manner that is consistent
with PPACA.
5)Requires the Exchange to utilize a standardized format for
presenting health benefit plan options in the Exchange,
including the use of the uniform outline of coverage
established under PPACA.
6)Authorizes the Exchange to standardize products to be offered
through the Exchange.
7)Requires a health plan or health insurer participating in the
Exchange to fairly and affirmatively offer, market, and sell
in the Exchange at least one product within each of the five
levels of coverage contained in PPACA. Authorizes the
Exchange board to require plans to sell additional products
within each of those levels of coverage.
8)Requires, commencing January 1, 2014, a health plan or health
insurer that does not participate in the Exchange to, with
respect to health plan contracts that cover hospital, medical,
or surgical benefits, offer at least one standardized product
that has been designated by the Exchange in each of the four
levels of coverage contained in the PPACA. Applies this
provision only if the Exchange board exercises its authority
under 6) above.
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FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, purchasing
health care coverage in the individual market can be an
extremely confusing experience for most people. A dizzying
array of choices for covered benefits is further confused by a
variety of options on copays, deductibles, and other cost
sharing. The author asserts that insurance companies and
health plans frequently use the combination of benefits and
cost-sharing (e.g. low premiums - high deductibles - bare
bones coverage) to risk select consumers, and are armed with
vast actuarial data and sophisticated statistical modeling in
developing and marketing their policies. The author believes
the average consumer faces a difficult challenge in making a
sensible choice about the balance of benefits and costs given
the unpredictability of health care needs for any individual
and the complexity of the product offered.
2)FEDERAL HEALTH CARE REFORM . On March 23, 2010, President
Obama signed the PPACA (Public Law 111-148). Among other
provisions, the new law makes statutory changes affecting the
regulation of and payment for certain types of private health
insurance. There are a number of health insurance provisions
that took effect in 2010, including some of those related to
this bill:
a) Standardization. PPACA, requires the Secretary of the
federal Department of Health and Human Services (HHS) to
develop standards for use by a group health plan and a
health insurance issuer offering group or individual health
insurance coverage, in compiling and providing to
applicants, enrollees, and policyholders or certificate
holders a summary of benefits and coverage explanation that
accurately describes the benefits and coverage under the
applicable plan or coverage. The National Association of
Insurance Commissioners submitted standards to the HHS
Secretary in December 2010. A Notice of Proposed Rule
Making is being finalized and will be released in the
coming weeks.
b) Benefit package. PPACA defines an essential health
benefits package that all qualified health plans must
cover, at a minimum, with some exceptions. The package will
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be determined by the Secretary of HHS and must include, at
a minimum: ambulatory patient services; emergency services;
hospitalizations; maternity and newborn care; mental health
and substance use disorder services, including behavioral
health; prescription drugs; rehabilitative services and
devices; laboratory services; preventive services,
including services recommended by the Task Force on
Clinical Preventive Services and vaccines recommended by
the director of the Centers for Disease Control and
Prevention; and, chronic disease management. In addition,
the plans must cover pediatric services, including vision
and oral care.
PPACA requires the Secretary of HHS to ensure that the
scope of the essential health benefits is equal to the
scope of benefits provided under a typical employer plan.
As part of the process the Institute of Medicine is
conducting a study on what constitutes essential benefits.
In addition the federal Department of Labor conducted a
survey, published April 15, 2011, of employer-sponsored
coverage to determine benefits typically covered by
employers. The study identified 12 services for which
reliable data were available, as illustrated in the
following chart.
c) Four benefit categories. PPACA establishes four benefit
categories-bronze, silver, gold, and platinum-all of which
will have the essential health benefits package. Policies
cannot be sold in the small-group and individual market or
exchanges that do not meet the actuarial standards for the
benefit categories established by law. All carriers
selling in the individual and small-group markets are at
least required to offer silver and gold plans.
i) The bronze package will represent minimum creditable
coverage with an actuarial value of 60% (i.e., covering
60% of enrollees' medical costs) with out-of-pocket
spending limited to that which is defined for health
savings accounts (HSAs), or $5,950 for individual
policies and $11,900 for family policies.
ii) The silver benefit package will have an actuarial
value of 70% and the same out-of-pocket limits.
iii) The gold package will have an actuarial value of 80%
and the same out-of-pocket limits, and
iv) The platinum package will cover 90% of costs with
the same out-of-pocket limits.
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v) A catastrophic benefit package can be made available
for adults younger than age 30, similar to HSA-eligible,
high-deductible plans, with the essential benefits
package, preventive services excluded from the deductible
as under current HSA law, three primary care visits, and
cost-sharing to HSA out-of-pocket limits.
vi) People who are unable to find a plan with a premium
that is 8% or less of their income will be able to
purchase the young adult plan as well, regardless of age.
3)INDIVIDUAL MARKET . According to a 2011 report on the
individual and small group health insurance markets published
by the California HealthCare Foundation, there were between
1.9 and 2.2 million Californians covered in the individual
market between 2009 and 2011. Since 2006, individual coverage
enrollment declined 25% (representing 750,000 enrollees).
Three carriers (Anthem Blue Cross, Blue Shield, and Kaiser)
serve over three-fourths of the individual market with
preferred provider organization (PPO) products covering the
majority of the individual market. Individual insurance
purchasers, who pay 100% of their premium, are far more likely
to be enrolled in high-deductible plans. Individual coverage
enrollment has shifted to products regulated by CDI and
actuarial values confirm that the coverage obtained through
the individual market is substantially less comprehensive than
that provided by employers. A typical individual plan pays
55% of expenses incurred. This compares to the group market
where 80% to 90% of expenses incurred are paid by the plan.
4)ACTUARIAL VALUE . According to an October 2008 publication of
the California HealthCare Foundation, actuarial value is a
summary measure of likely payments by a health plan that
consumers can use to compare the relative value of different
benefit packages. It measures the percentage of medical
expenses paid by a health plan for a standard population. It
can range from 0 (plan pays nothing) to 1 (plan pays 100%) of
medical expenses. Premium level and actuarial value are not
highly correlated, meaning a plan with a high premium plan
doesn't translate to a high actuarial value plan. Plans that
have similar actuarial value can have different premium
levels. An April 2011 publication of the Kaiser Family
Foundation demonstrates the potential for substantial
variation in plan designs that meet the actuarial thresholds
in the PPACA. There can be significant potential differences
in coverage options across plans.
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5)PRIOR LEGISLATION .
a) SB 890 (Alquist), which was vetoed in 2010, would have
required health plans and health insurers to categorize all
individual market products into tiers based on actuarial
level. Under SB 890, health plans could use ranges prior
to 2014. Governor Schwarzenegger vetoed SB 890. In his
veto message, the Governor said that SB 890 creates
unnecessary and duplicative costs by requiring health plans
and health insurers to meet disclosure requirements in 2011
that will change again in 2014. The added costs for
implementing the provisions of this bill outweigh the
potential short-term benefits for the two regulatory
entities, the affected health plans, and consumers.
b) AB 1602 (John A. P�rez), Chapter 655, Statutes of 2010,
enacted the California PPACA to implement the federal PPACA
in California. AB 1602 clarifies the powers and duties of
the board governing the California Exchange relative to the
administration of the Exchange, determining eligibility and
enrollment in the Exchange, and arranging for coverage
under qualified carriers. AB 1602 was contingent upon
enactment of SB 900 (Alquist), Chapter 659, Statute of 2010
which created the Exchange and establishes its governance.
6)SUPPORT . The Western Center on Law and Poverty writes in
support that 370,000 Californians with income below 200% of
the Federal Poverty Level purchase their own health insurance
and have little guidance on how to choose a plan and how to
compare plan choices. CALPIRG believes changes are critically
needed in the individual market. CALPIRG asserts that the
framework provided by this bill will help consumers understand
their options and compare value. Having Our Say contends
consumers should be able to understand what they are buying,
what it covers and what costs they will face when they use
care. Insurers should compete on improving care while holding
down overall costs, not slicing and dicing benefits with
confusing copays and deductibles in order to attract the
healthy. The California Medical Association says physicians
believe it is important to make it easier for consumers to
shop for coverage in the very complex individual market.
7)OPPOSITION . The Association of California Life and Health
Insurance Companies (ACLHIC) oppose this bill. According to
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ACLHIC, this bill would require health insurers, commencing
July 1, 2012, to categorize all products offered in the
individual market into five tiers according to actuarial
value, and disclose this value and other information in
certain disclosure forms. ACLHIC supports the concept behind
this measure but believes this bill has the possibility of
eliminating lower cost health insurance options in the market.
ACLHIC indicates that the individual market is the most price
sensitive and even the smallest increases in premium push
individuals to drop coverage altogether. The California
Association of Health Plans (CAHP) also writes in support.
CAHP states that the federal government is taking regulatory
action to clarify and define aspects of the PPACA and has yet
to issue guidance in key areas. CAHP believes if California
acts before the federal government issues its guidance we
could find ourselves in conflict with federal law.
8)DRAFTING CONCERNS . The intent of subdivision (a) in Health
and Safety code section 1366.5 and Insurance code section
10112.58 is unclear. The provisions require health plans and
health insurers to categorize all products offered or renewed
in the individual market effective July 1, 2012 in accordance
with this bill. This appears to be in conflict with
subdivision (c) in those same sections which requires
categorization on the basis of actuarial value of each product
offered or renewed on and after January 1, 2014, as specified.
The author may wish to delete subdivision (a) in the
respective codes.
9)TECHNICAL AMENDMENTS .
a) On page 2, Health and Safety code section 1366.5 should
be amended as follows (b) From July 1, 2012, to December
31, 2013, inclusive, for each product offered or renewed in
the individual market a health care service plan shall
disclose?
b) On page 2, Health and Safety code section 1366.5 should
be amended as follows (c) On and after January 1, 2014, a
health care service plan shall categorize each product
offered or renewed in the individual market shall be
categorized on the basis of?
c) On page 4, Insurance code section 10112.58 should be
amended as follows (b) From July 1, 2012, to December 31,
2013, inclusive, for each product offered or renewed in the
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individual market a health insurer shall disclose?
d) On page 4, Insurance code section 10112.58 should be
amended as follows (c) On and after January 1, 2014, a
health insurer shall categorize each product offered or
renewed in the individual market shall be categorized on
the basis of?
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
California Academy of Family Physicians
California Medical Association
CALPIRG
Having Our Say
Health Access California
Western Center on Law and Poverty
Opposition
Association of California Life & Health Insurance Companies
California Association of Health Plans
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097