BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 1761
AUTHOR: John A. Pérez
INTRODUCED: February 17, 2012
HEARING DATE: June 20, 2012
CONSULTANT: Bain
SUBJECT : California Health Benefit Exchange (Exchange).
SUMMARY : Prohibits an individual or entity from holding
himself, herself, or itself out as representing, constituting,
or otherwise providing services on behalf of the Exchange unless
that individual or entity has a valid agreement with the
Exchange to engage in those activities.
Existing law:
1.Requires, under the federal Patient Protection and Affordable
Care Act (ACA) (Public Law 111-148), as amended by the Health
Care Education and Reconciliation Act of 2010 (Public Law
111-152), each state, by January 1, 2014, to establish an
American Health Benefit Exchange that makes qualified health
plans available to qualified individuals and qualified
employers. If a state does not establish an Exchange, the
federal government administers the Exchange. The ACA
establishes requirements for the Exchange and for health plans
participating in the Exchange, and the ACA defines who is
eligible to receive coverage in the Exchange.
2.Allows, under the ACA and effective January 1, 2014, eligible
individual taxpayers, whose household income equals or exceeds
100 percent, but does not exceed 400 percent, of the federal
poverty level (FPL), an advanceable and refundable tax credit
for a percentage of the cost of premiums for coverage under a
qualified health plan offered in the Exchange. The ACA also
requires a reduction in cost sharing for individuals with
incomes below 250 percent of the FPL, and a lower maximum
limit on out-of-pocket expenses for individuals whose incomes
are between 100 and 400 percent of the FPL. Legal immigrants
with household incomes less than 100 percent of the FPL who
are ineligible for Medicaid because of their immigration
status are also eligible for the premium tax credit and the
cost-sharing reductions.
3.Defines, under the Insurance Code, unfair methods of
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competition and unfair and deceptive acts or practices in the
business of insurance. Makes any person who engages in any
unfair method of competition or any unfair or deceptive act or
practice liable to the state for a civil penalty to be fixed
by the Insurance Commissioner, not to exceed $5,000 for each
act or, if the act or practice was willful, a civil penalty
not to exceed $10,000 for each act.
4.Permits, under the Knox-Keene Health Care Service Act of 1975
(Knox-Keene Act), the Director of the Department of Managed
Health Care (DMHC) to require that solicitors and solicitor
firms and principal persons engaged in the supervision of
solicitation for plans of solicitor firms to meet such
reasonable and appropriate standards with respect to training,
experience, and other qualifications as the Director finds
necessary and appropriate in the public interest or for the
protection of subscribers, enrollees, and plans.
5.Prohibits plans, solicitors, solicitor firms, or
representatives from using or permitting the use of any
advertising or solicitation which is untrue or misleading, or
any form of evidence of coverage which is deceptive.
This bill:
1.Prohibits an individual or entity from holding himself,
herself, or itself out as representing, constituting, or
otherwise providing services on behalf of the Exchange unless
that individual or entity has a valid agreement with the
Exchange to engage in those activities. Makes any individual
or entity who aids or abets another individual or entity in
violation of this prohibition to also be in violation of this
prohibition.
2.Makes it an unfair business practice under the Knox-Keene Act
for a solicitor or solicitor firm to hold himself, herself, or
itself out as representing, constituting, or otherwise
providing services on behalf of the Exchange unless the
solicitor or solicitor firm has a valid agreement with the
Exchange to engage in those activities.
3.Makes it an unfair business practice for a health plan to hold
itself out as representing, constituting, or otherwise
providing services on behalf of the Exchange unless the plan
has a valid agreement with the Exchange to engage in those
activities.
4.Makes it an unfair method of competition and an unfair and
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deceptive act or practice in the business of insurance, under
the Insurance Code, to hold oneself out as representing,
constituting, or otherwise providing services on behalf of the
Exchange without a valid agreement with the Exchange to engage
in those activities.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, potential for minor, absorbable enforcement workload
and associated administrative fine and penalty revenue to the
California Department of Insurance and DMHC.
PRIOR VOTES :
Assembly Health: 19- 0
Assembly Appropriations:17- 0
Assembly Floor: 74- 0
COMMENTS :
1.Author's statement. In January 2014, the Exchange will become
operational and will need an outreach and marketing strategy to
create awareness for its products. The federal health care reform
law requires that the Exchange develop "navigators" who will help
reach and educate potential enrollees. However, the navigators'
specific roles and responsibilities have yet to be defined by the
state. Also under federal health care reform, individuals will be
required to maintain health coverage beginning in 2014. Consumers
may be presented with various options for health coverage that are
available to them. Therefore there will be a need to ensure that
there is clarity and transparency about what products are being
offered, including what is being offered or not offered through
the Exchange.
2.Background. During the 2009-10 session, the Legislature passed
and then-Governor Schwarzenegger signed into law two bills
establishing the California Health Benefit Exchange. SB 900
(Alquist), Chapter 659, Statutes of 2010, established the
Exchange as an independent public entity within state
government and requires the Exchange to be governed by a board
composed of the Secretary of the California Health and Human
Services Agency, or his or her designee, and four other
members appointed by the Governor and the Legislature who meet
specified criteria. AB 1602 (John A. Pérez), Chapter 655,
Statutes of 2010, specifies the powers and duties of the
Exchange relative to determining eligibility for enrollment in
the Exchange and arranging for coverage under qualified health
plans and establishes requirements for health plans in and
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outside the Exchange.
According to estimates in a recent study in the health policy
journal Health Affairs by Peter Long and Jonathan Gruber, the
ACA will provide health insurance for an additional 3.4
million people in California in 2016. The authors state this
will mean that nearly 96 percent of documented residents of
California under age 65 will be insured. The authors estimate
4 million people are expected to enroll in the state's
Exchange.
At some point following the signing of those bills into law
and when the Exchange began having public board meetings,
Google searches for the California Health Benefit Exchange
identified a website operated by a private company of health
benefit consultants and brokers, instead of the official site
maintained by the Exchange. When the Exchange begins offering
health coverage, people going to such a website to purchase
coverage could end up paying more for health coverage as the
state-administered Exchange is the only place where consumers
can purchase individual coverage with premium and cost-sharing
subsidies and a lower out-of-pocket maximum.
3.Related legislation. SB 1313 (Lieu) would, among several
provisions in that bill, prohibit health plans, health
insurers, agents, solicitors, solicitor firms, or
representatives from making any statement that is known or
should have been known to be deceptive or a misrepresentation
regarding the requirements of the ACA. SB 1313 failed passage
on the Senate Appropriations Committee suspense file.
4.Support. Western Center on Law & Poverty (WCLP) writes in
support that there are websites using the Exchange name when
in fact they are run by private entities. WCLP states
Californians need a trusted place to go for reliable
information about their health coverage options, and only the
Exchange itself and those entities with whom it contracts
should be permitted to hold itself out as the Exchange. The
Insurance Brokers and Agents of the West, the California
Association of Health Underwriters and the National
Association of Insurance and Financial Advisors of California
write this bill is an important element to help to deter
unauthorized persons or entities from conducting misleading
advertising or solicitations. Health Access California states
that almost from the moment that the Exchange was created,
there have been misleading websites put up by agents and
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brokers that appear to be the official website of the
Exchange, and this bill takes the simple step of saying that
only an individual or entity with a valid, in-force agreement
with the Exchange can hold themselves out as acting on behalf
of the Exchange.
SUPPORT AND OPPOSITION :
Support: ACCESS Women's Health Justice
American Federation of State, County and Municipal
Employees, AFL-CIO
California Association of Health Underwriters
California Black Health Network
California Chiropractic Association
California Immigrant Policy Center
California Pan-Ethnic Health Network
California Rural Legal Assistance Foundation
California Teachers Association
Children Now
Children's Defense Fund California
The Children's Partnership
Having Our Say
Health Access California
Insurance Brokers and Agents of the West
National Association of Insurance and Financial
Advisors of California
United Ways of California
Western Center on Law and Poverty
Oppose: None received.
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