BILL ANALYSIS �
SB 961
Page 1
SENATE THIRD READING
SB 961 (Ed Hernandez)
As Amended August 24, 2012
Majority vote
SENATE VOTE :23-13
HEALTH 12-4 APPROPRIATIONS 12-5
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|Ayes:|Monning, Atkins, Bonilla, |Ayes:|Gatto, Blumenfield, |
| |Eng, Gordon, Hayashi, | |Bradford, |
| |Roger Hern�ndez, Bonnie | | Charles Calderon, |
| |Lowenthal, Mitchell, Pan, | |Campos, Davis, Fuentes, |
| |Silva, Williams | |Hall, Hill, Cedillo, |
| | | |Mitchell, Solorio |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Garrick, Mansoor, |Nays:|Harkey, Donnelly, |
| |Nestande | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Reforms California's health insurance market for
individual purchasers and implements provisions of the Patient
Protection and Affordable Care Act (ACA) prohibiting preexisting
condition exclusions, requiring guaranteed issuance of products,
establishing statewide open and special enrollment periods, and
limiting premium rating factors to age, geography, and family
size. Specifically, this bill :
1)Prohibits health insurers in the individual market, except
grandfathered plans, from imposing preexisting condition
requirements after January 1, 2014.
2)Requires guaranteed issuance of health insurance policies in
the individual market. Makes this provision inoperative if
the ACA requirement on guaranteed issuance is repealed.
3)Requires a health insurer to provide an initial open
enrollment period from October 1, 2013, to March 31, 2014,
inclusive, and annual enrollment periods for plan years on or
after January 1, 2015, from October 15 to December 7,
inclusive of the preceding calendar year.
4)Requires a health insurer to allow an individual to enroll in
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or change individual health benefit plans, as a result of
specified triggering events including when he or she was
receiving services from a contracting provider under another
health benefit plan for a condition which requires continuity
of coverage, under existing law.
5)Prohibits, on or after January 1, 2014, a health insurer from
conditioning the issuance or offering of an individual health
benefit plan on any of the following factors:
a) Health status;
b) Medical condition, including physical and mental
illness;
c) Claims experience;
d) Receipt of health care;
e) Medical history;
f) Genetic information;
g) Evidence of insurability, including conditions arising
out of acts of domestic violence;
h) Disability; or,
i) Any other health status-related factor as determined by
federal regulations, rules, or guidance issued pursuant to
the ACA.
6)Requires all individual health benefit plans to conform to
specified requirements in existing law, and to be renewable at
the option of the enrollee except as permitted to be canceled,
rescinded, or not renewed, as specified. Requires any health
insurer that ceases to offer for sale new individual health
benefit plans, as specified, to continue to be governed by
existing law, as specified.
7)Requires a health insurer to use only the following
characteristics of an individual, and any dependent thereof,
for purposes of establishing the rate of the individual health
benefit plan covering the individual and eligible dependents,
along with the health benefit plan selected by the individual:
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a) Age, as established by the United States Secretary of
Health and Human Services and shall not vary by more than
three to one for adults;
b) Nineteen geographic rating regions; and,
c) Whether covering an individual or family, and required
by the ACA.
8)Makes 7) above inoperative if the ACA requirement on rating
factors is repealed.
9)Establishes a health insurer rating period of January 1, to
December 31, inclusive.
10)Requires grandfathered plans to disclose to insureds that new
coverage options including potential subsidies will be
available and to direct insureds to seek more information, as
specified.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time special fund costs over the next three years
to California Department of Insurance (CDI) and the Department
of Managed Health Care (DMHC) exceeding $500,000 (Managed Care
Fund and Insurance Fund) to modify regulations, to ensure plan
licensure documentation and practices reflect compliance with
this bill's provisions, and to handle consumer inquiries.
Unknown, potentially significant annual state costs to CDI and
DMHC to enforce the provisions of this bill depending upon
insurer compliance with the new provisions and the volume of
consumer complaints. This bill has been amended to exclude
Health and Safety Code sections enforced by the DMHC.
COMMENTS : According to the author, this bill is necessary to
implement provisions of the ACA and reform California's
individual insurance market. While California has a history of
strong consumer protections in the group market, these
protections have largely been absent in the individual market.
The ACA creates new market rules that limit which factors plans
can use to determine premium rates, eliminate the use of
preexisting condition exclusions and require plans to issue and
renew policies for anyone willing to purchase. The market rules
established in this bill will affect plans operating in the
Exchange and in the outside market in order to be consistent and
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ensure an equitable mix of health risk. This bill reforms
California's individual health insurance market to include ACA
requirements and improve access and affordability to health
insurance for Californians.
Health Access California (HAC) writes in support that this bill
requires guaranteed issue of coverage, ending the practice of
denying Californians coverage based on pre-existing conditions,
prohibits basing premiums on health status, and ends lock-in so
that individuals will be able to change carriers and products.
HAC raises concern about the limitations on guaranteed issue
related to the open enrollment period but reluctantly accepts
these limits given the federal rule on exchanges which imposes
the same rule on California's Exchange. HAC also raises
concerns about not applying the bill's provisions to
grandfathered plans because it will allow the continuation of
substandard plans with increasing premiums. HAC supports the
provisions that limits rate increases to once annually.
Consumers should be able to budget and plan. The Greenlining
Institute believes this bill will establish parity in California
with federal regulations. According to the Greenlining
Institute these measures are of critical importance to
communities of color, who experience health disparities
resulting from factors such as environmental hazards, poverty,
and various forms of discrimination. The California Primary
Care Association indicates that this bill provides numerous
consumer protections. The California Pan-Ethnic Health Network
contends that this bill will ensure that Californians regardless
of health status will be able to get the coverage they need.
The California Chiropractic Association (CCA) strongly believes
that having access to cost-effective health care coverage is
essential in creating and maintaining long-term health and
wellness. CCA is pleased that this bill, in compliance with the
ACA, will prohibit discriminatory premium and denial policies
related to health status and pre-existing conditions.
The position of the California Association of Health Plans
(CAHP) described in this analysis is based upon a previous
version of this bill. It is unclear if recent amendments which
include tying guaranteed issue and rating requirements in this
bill to the ACA change CAHP's position on this bill. CAHP,
based on prior versions, believes this bill is missing key
components, such as tying some individual market and
underwriting changes of the ACA to an individual coverage
requirement that was designed to help mitigate the cost impacts
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of adverse selection. CAHP believes the ACA changes can only
work when its central provisions are working in harmony. Such
provisions are the guaranteed issuance of coverage regardless of
preexisting conditions, a community rating structure that limits
premium variance, and an individual mandate that requires broad
participation in the insurance market. According to CAHP,
states that have instituted guaranteed issue and community
rating without a mandate have experienced incredible market
disruption. CAHP would also require charging higher premium
rates based on tobacco use because they cause $96 billion in
health care expenditures per year in the United States. CAHP
also believes many laws will be obsolete under the ACA and
should be repealed.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0005623