BILL ANALYSIS �
AB 1334
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Date of Hearing: May 18, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1334 (Feuer) - As Amended: May 5, 2011
Policy Committee: HealthVote:12-4
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes standardization and disclosure
requirements for health care service plans and insurance plans
sold in the individual market. Specifically, this bill:
1)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.
1)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%.
e) Catastrophic coverage for products with an actuarial
value less than 60%.
1)Requires plans to disclose the actuarial value, along with an
easily understood explanation of its meaning, and the
estimated annual out-of-pocket costs that an individual in
average health can expect to incur.
2)Authorizes the Department of Managed Health Care (DMHC) and
the California Department of Insurance (CDI) to review
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categorization of any product pursuant to this bill.
FISCAL EFFECT
1)First-year costs to DMHC and CDI to ensure plans comply with
the new disclosure requirements of this bill could range from
$50,000 to over $200,000.
2)Ongoing costs to DMHC and CDI for oversight of these new
requirements could range from minor to over $100,000 annually.
3)This bill authorizes, but does not require, regulators to
review plans' statements about actuarial value. If DMHC and
CDI chose to do so, costs would be on the higher end of the
ranges specified above.
COMMENTS
1)Rationale . 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 co-payments, deductibles, and other cost
sharing. The author believes the average individual market
consumer faces a difficult challenge in making a sensible
choice about the balance of benefits and costs, and that this
bill would make it easier to comparison-shop between plans.
2)Standardization Provisions in Affordable Care Act . The ACA
creates new state-run health insurance exchanges that will
organize the individual and small-group market, and offer
federal subsidies for eligible individuals to purchase
coverage. All plans offered through exchanges are required to
cover certain categories of benefits, called essential health
benefits (EHBs). The federal Secretary of Health and Human
Services (HSS) is expected to publish guidance later in 2011
and 2012 that will further define these categories.
The ACA also establishes the "precious metal" (platinum, gold,
silver, bronze, and catastrophic) categories. All health plans
and insurers participating in California's exchange must offer
plans at the each of these levels. Beginning in 2014, most
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people will be required to have insurance that is at least at
the bronze level (60% actuarial value) or pay a tax penalty.
This bill would apply the "precious metal" categorization
scheme to plans outside the Exchange.
3)Actuarial Value . 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
can range from 0 (plan pays nothing) to 100 (plan pays 100%)
of medical expenses. For example, a plan with an actuarial
value of 70% means that, for a standard population, the plan
will pay 70% of their health care expenses, while the
enrollees will pay 30% through some combination of
deductibles, co-payments, and coinsurance.
Plans that have similar actuarial value can have different
premium levels, and very different deductible, coinsurance,
and co-payment structures. 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. This report also demonstrated that
the calculations of plan designs that meet certain actuarial
values are highly dependent on the assumptions made about the
characteristics and health care utilization of a standard
population.
4)Related Legislation . SB 890 (Alquist), which was vetoed in
2010, contained similar provisions to this bill and included
additional requirements. In his veto message, the governor
said SB 890 created unnecessary and duplicative costs by
requiring health plans and health insurers to meet disclosure
requirements in 2011 that will change again in 2014.
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.
Analysis Prepared by : Lisa Murawski / APPR. / (916)
319-2081
AB 1334
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