BILL ANALYSIS �
SB 51
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SENATE THIRD READING
SB 51 (Alquist)
As Amended July 11, 2011
Majority vote
SENATE VOTE :25-15
HEALTH 13-6 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield, |
| |Bonilla, Eng, Gordon, | |Bradford, Charles |
| |Hayashi, | |Calderon, Campos, Davis, |
| |Roger Hern�ndez, Bonnie | |Gatto, Hall, Hill, Lara, |
| |Lowenthal, Mitchell, Pan, | |Mitchell, Solorio |
| |V. Manuel P�rez, Williams | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Garrick, Mansoor, |Nays:|Harkey, Donnelly, |
| |Nestande, Silva, Smyth | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Establishes enforcement authority in California law to
implement provisions of the federal Patient Protection and
Affordable Care Act (PPACA) related to Medical Loss Ratio (MLR)
requirements on health plans and health insurers and
prohibitions on annual and lifetime benefits. Specifically,
this bill :
1)Requires, to the extent required by federal law, every health
plan and health insurer that issues, sells, renews, or offers
contracts or policies for health care coverage to comply with
the annual and lifetime benefit requirements of PPACA and any
rules or regulations issues under that section, in addition to
any state laws or regulations that do not prevent the
application of those requirements.
2)Requires every health plan and health insurer that issues,
sells, renews, or offers health plan contracts or policies for
health care coverage, including a grandfathered health plan or
insurer, but not including specialized health plan contracts
or policies, to provide an annual rebate to each enrollee
under such coverage if certain conditions exist, relating to
the following MLRs:
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a) 85% for a health plan or health insurer in the large
group market; or,
b) 80% for a health plan or health insurer in the small
group or individual market.
3)Permits the Director of the Department of Managed Health Care
(DMHC) and the Insurance Commissioner (IC) of the California
Department of Insurance (CDI) to adopt regulations in
accordance with the Administrative Procedure Act that are
necessary to implement the MLR as described in PPACA and any
federal rules or regulations issued under that section.
4)Permits the Director of the DMHC and the IC to also adopt
emergency regulations, as specified, when it is necessary to
address specific conflicts between state and federal law that
prevent implementation of federal law and guidance.
5)Requires DMHC and CDI to consult with each other in adopting
necessary regulations, and in taking any other action for the
purpose of implementing this bill.
6)Requires this bill to only be implemented to the extent
required by federal law and to comply with, and not exceed,
the scope of definitions in the federal Public Health Services
Act and the MLR requirements of PPACA, and any rules or
regulations issued under that section.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)One-time fee-supported (health plan fees) special fund costs
of $40,000 to DMHC to ensure plan compliance with the filing
requirements and to adopt regulations. CDI has already
promulgated time-limited emergency regulations and is in the
process of adopting regulations. Detailed rules implementing
federal MLR provisions have also been released by the federal
Department of Health and Human Services.
2)CDI and DMHC will experience enforcements costs to review
financial statements, expand or conduct new audits, and
enforce rebate provisions. Costs to CDI are likely to be
minor and absorbable based on the department's existing
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capacity to conduct similar reviews and audits. As this bill
will require DMHC to expand actuarial and financial review
capacity, DMHC will costs are likely to be in the range of
$200,000 to $600,000 in special fund costs annually.
3)The fiscal impact of MLR enforcement is uncertain. The actual
costs would depend upon plan compliance with the measure,
whether plans are meeting MLR requirements or must issue
rebates, and the extent to which there is disagreement between
carriers and regulators over the details of the calculations,
including actuarial assumptions and the allocation of costs to
the appropriate categories.
COMMENTS : The CDI is sponsoring this bill to further strengthen
health insurance rate regulation in California by expanding the
MLR requirements to all health insurance and by requiring
rebates in conformity to current federal law. According to CDI,
this compliance allows consumers with the benefit of federal MLR
from the outset of the rate, rather than having to wait from
eight to 20 months for a premium refund. The federal law is
measured retrospectively on an annual basis, based solely on
actual experience, aggregating all of a company's policies in a
given market segment in a single MLR figure. CDI states that
this bill implements broader protections to California consumers
by conforming California law to the minimum MLR requirements of
federal health reform. The California Teachers Association and
others support the provisions that require compliance with
prohibitions on annual and lifetime limits on the dollar value
of benefits. Proponents argue that illnesses like cancer can
easily cause individuals to reach such limits.
America's Health Insurance Plans (AHIP) believes this bill
potentially conflicts with federal law. According to AHIP, the
MLR framework in this bill fails to take into account the
evolving nature of the federal requirements, potentially
creating conflicting frameworks. AHIP states that the federal
definitions, calculations and timelines may change due to
congressional action, litigation or regulatory reporting
changes, and that this bill adds administrative costs due to
increased regulatory burden on California regulators.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0002221
SB 51
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