BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 961 (Hernandez) - Individual health care coverage
Amended: April 9, 2012 Policy Vote: Health 6-2
Urgency: No Mandate: Yes
Hearing Date: May 24, 2012 Consultant: Brendan McCarthy
SUSPENSE FILE.
Bill Summary: SB 961 would make several changes to the
individual market for health care coverage. In particular, the
bill would require the guaranteed issue of coverage and prohibit
the use of preexisting conditions as a means of setting rates.
Fiscal Impact:
One-time costs in the low hundreds of thousands to adopt
regulations and review health plan and insurance plan
filings (Insurance Fund and Managed Care Fund).
Unknown ongoing enforcement costs (Insurance Fund and
Managed Care Fund).
Background: Beginning in 2014, under the federal Patient
Protection and Affordable Care Act (Affordable Care Act), health
plans and health insurers that offer coverage in the individual
market are required to accept every employer or individual that
wishes to purchase coverage and to renew coverage at the
individual or employer's request. The Affordable Care Act
prohibits health plans or insurers from imposing any exclusion
of coverage based on a preexisting condition. Federal law also
limits the "rating factors" used to determine the price of a
health plan or insurance policy to a narrow list of factors,
including age, geographic region, family size, and tobacco use.
Federal law exempts plans in effect on March 23, 2010
("grandfathered plans") from these requirements, as long as no
changes are made to those plans.
Proposed Law: SB 961 would make several changes to state law
governing health plans and health insurance policies to conform
to federal requirements of the Affordable Care Act. The bill
would also make certain policy changes to state law governing
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health plans and health insurance, as allowed by the Affordable
Care Act.
Provisions conforming California law to federal law include:
Prohibiting health plans and insurance policies from
imposing preexisting condition exclusions.
Requiring the guaranteed issue of coverage.
Requiring health plans and insurers to offer for sale all
plans sold in the individual market to all individuals in
the health plan or insurer's service area.
Prohibiting health plans, insurers, agent or brokers from
encouraging or directing individuals to or away from certain
products due to health status or other factors.
Allowing health plans and insurers to only use age,
geographic region, and family size as rating factors when
setting rates for individual policies.
Provisions implementing policy choices available to the state
include:
Exempting grandfathered plans from the changes made in the
bill.
Excluding tobacco use as a rating factor.
Requiring health plans and insurers to use open enrollment
periods (October 15th to December 7th) that align with those
to be used in the California Health Benefit Exchange.
Initially designating the geographic regions used by
CalPERS as the rating regions for the individual market. In
future years, the California Health Benefit Exchange will
determine the rating regions.
Related Legislation:
AB 1083 (Monning) would make changes to the individual
market. That bill is on the Senate Floor.
AB 1461 (Monning) is identical to this bill. That bill is
on the Assembly Appropriations Committee's Suspense File.
SB 951 (Hernandez) would designate the Kaiser Small Group
HMO as the state's essential health benefit benchmark plan.
That bill in on the Senate Floor.
SB 1487 (Hernandez) would extend Medi-Cal eligibility to
former foster youth. The bill also states legislative intent
to enact into California law any provisions of the
Affordable Care Act that are struck down by the Supreme
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Court.
Staff Comments: As noted above, there will be direct costs to
the Department of Managed Health Care and the Department of
Insurance to adopt regulations, review filings from regulated
health plans and insurers, and enforce the provisions of the
bill.
Because these departments are already required to enforce the
state's existing laws and regulations governing health plans and
insurers and the departments are budgeted to do so, costs to
provide general enforcement of the provisions of the bill will
likely be absorbable within existing resources. However, because
the Affordable Care Act and this bill make substantial changes
to the way that the individual market works, it is possible that
the departments will receive more complaints from consumers than
under current law, driving up costs. The extent of this effect
is unknown.
In addition, there are unknown potential fiscal impacts of the
bill that will depend on the decision of the Supreme Court on
the constitutionality of the Affordable Care Act. Prior bills
implementing portions of the Affordable Care Act that were heard
in this committee included provisions directing state agencies
only to implement the bills to the extent required by federal
law. SB 961 does not include such provisions.
If the Supreme Court strikes down part or all of the Affordable
Care Act and this bill is enacted, the state's individual market
would be governed by a guaranteed issue requirement, but not an
individual mandate to purchase coverage. Concerns have been
raised that, in that scenario, only people needing health
coverage in the near term will purchase coverage, skewing the
risk pool dramatically towards expensive participants. If that
were to occur, it would put substantial financial pressure on
health plans and insurers. That would have significant impacts
on health care coverage in the state, which could spill over
into the state's public health care programs.