BILL ANALYSIS �
AB 1334
Page 1
ASSEMBLY THIRD READING
AB 1334 (Feuer)
As Amended May 5, 2011
Majority vote
HEALTH 12-4 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield, |
| |Bonilla, Eng, Gordon, | |Bradford, Charles |
| |Hayashi, | |Calderon, Campos, Davis, |
| |Bonnie Lowenthal, | |Gatto, Hall, Hill, Lara, |
| |Mitchell, Pan, | |Mitchell, Solorio |
| |V. Manuel P�rez, Williams | | |
| | | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Mansoor, Nestande, |Nays:|Harkey, Donnelly, |
| |Silva | |Nielsen, Norby, Wagner |
| | | | |
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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 a health plan or insurer for 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%. Makes this
provision effective 30 days after federal guidance is issued.
2)Requires, on and after January 1, 2014, a health plan or
insurer to categorize into specified tiers each product
offered or renewed in the individual market on the basis of
actuarial value, calculated using the method contained in the
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PPACA.
3)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.
4)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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill's 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. Ongoing costs
to DMHC and CDI for oversight of these new requirements could
range from minor to over $100,000 annually. 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 : 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.
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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:
1)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. 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.
2)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 be determined
by the Secretary of HHS and must include, at a minimum 10
benefits including, ambulatory services, emergency services;
hospitalizations and maternity.
3)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.
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
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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.
The Association of California Life and Health Insurance
Companies (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 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.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0001041