BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          SB 51 (Alquist)
          
          Hearing Date: 5/26/2011         Amended: 5/9/2011
          Consultant: Katie Johnson       Policy Vote: Health 6-3
          _________________________________________________________________
          ____
          BILL SUMMARY: SB 51 would require health care service plans and 
          insurers to meet federal annual and lifetime limits, medical 
          loss ratio, and annual rebate payment requirements in accordance 
          with federal law and guidance. The bill would also specify a 
          timeframe in which rebate payments would be made.
          _________________________________________________________________
          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
           DMHC regulations, oversight   $445      $750      $750Special*
          and rebate determinations

          *Managed Care Fund
          _________________________________________________________________
          ___

          STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
          
          This bill would require health care service plans and health 
          insurers to comply with the annual and lifetime limit 
          requirements set forth in Section 2711 of the federal Public 
          Health Service Act (42 U.S.C. Sec. 300gg-11) and any subsequent 
          rules or regulations issued under that section.

          This bill would codify the medical loss ratio (MLR) requirements 
          in Section 2718 of the federal Public Health Service Act (42 
          U.S.C. Sec. 300gg-11), as amended by Section 1001 of the Patient 
          Protection and Affordable Care Act (Pub. L. 111-148), as amended 
          by the federal Health Care and Education Reconciliation Act of 
          2010 (Public Law 111-152), (ACA), and would require health care 
          service plans and health insurers to comply with the provisions. 
          This bill would permit the Department of Managed Health Care 
          (DMHC) and the California Department of Insurance (CDI) to adopt 
          emergency regulations and normal regulations in accordance with 
          the federal law. 









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          Any costs to CDI to implement these provisions would be minor 
          and absorbable. On January 25, 2011, the Office of 
          Administrative Law approved emergency regulations promulgated by 
          CDI that give the Insurance Commissioner the authority to 
          enforce federal MLR requirements in the individual market; they 
          expire July 26, 2011, and CDI is in the process of promulgating 
          non-emergency regulations to meet these requirements.

          Costs to DMHC for regulations and for staff actuaries and 
          financial examiners to ensure that rebates were made annually 
          would be approximately $445,000 in FY 2011-2012, $750,000 in 
          both FY 2012-2013 and FY 2013-2014, and $900,000 annually 
          ongoing in special funds.

          Federal guidance regarding MLR implementation was adopted by the 
          federal Secretary for Health and Human Services (HHS) in 
          November 2010 as interim guidance. Since there are expected to 
          be significant changes in the insurance market in 2014, the 
          interim guidance only addresses 2011 - 2013. As such, this bill 
          and any regulations issued by CDI or DMHC would likely need to 
          be revised when HHS releases guidance for 2014 and beyond.

          This bill would require health plans and insurers to provide any 
          rebate owing to an enrollee or policyholder no later than August 
          1 of the year following the year in which the rate was in 
          effect. This deadline is not in federal law; however, federal 
          law does not specify a date by which the rebate would be paid.

          Staff recommends that this bill be amended to require health 
          plans and insurers and DMHC and CDI to implement this bill to 
          the extent required by Sections 2711 and 2718 of the federal 
          Public Health Service Act (42 U.S.C. Sec. 300gg-11 and 42 U.S.C. 
          Sec. 300gg-18), the ACA, and any federal rules and regulations 
          issued under that section.

          The author's proposed amendments would add clarifying amendments 
          related to the rebates.

          The committee's proposed amendments would amend this bill to 
          require health plans and insurers and DMHC and CDI to implement 
          this bill to the extent required by federal law and to comply 
          with, and not exceed, Section 2718 of the federal Public Health 
          Service Act (42 U.S.C. Sec. 300gg-18), the ACA, and any federal 
          rules and regulations issued under that section.








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