BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2088|
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THIRD READING
Bill No: AB 2088
Author: Roger Hernández (D)
Amended: 8/21/14 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 6-2, 6/25/14
AYES: Hernandez, Beall, De León, DeSaulnier, Evans, Monning
NOES: Morrell, Nielsen
NO VOTE RECORDED: Wolk
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 50-25, 5/28/14 - See last page for vote
SUBJECT : Health insurance: minimum value: large group
market policies
SOURCE : Health Access California
DIGEST : This bill requires a health plan or insurer that
offers, amends, or renews a group plan contract or policy
providing minimum value of less than 60% to a large group to
require that the persons to be covered by the plan contract or
policy are covered by an individual or group plan contract or
policy that arranges or provides medical, hospital, and surgical
coverage not designed to supplement other private or
governmental plans and that provides at least 60% minimum value.
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Senate Floor Amendments of 8/21/14 clarify the language of this
bill requiring health plan contracts and health insurance
policies providing minimum value of less than 60% to a large
group to require that the enrollees and insureds covered are
also covered by another plan or policy that provides at least
60% minimum value.
ANALYSIS :
Existing law:
1. Provides for regulation of health plans by the Department of
Managed Health Care (DMHC) under the Knox-Keene Act and
regulation of health insurers by the Department of Insurance
(CDI) under the Insurance Code.
2. Defines a 'health benefit plan" as any group or individual
policy of health insurance, as defined. The term does not
including coverage of Medicare services or coverage that
provides excepted benefits, as described in the federal
Public Health Services Act.
3. Excludes from the definition of "health benefit plan"
policies or certificates of specified disease or hospital
confinement indemnity provided that the carrier offering
those policies or certificates complies with the following:
on or before March 1 of each year, a certification with the
Insurance Commissioner (IC) that contains specified
information.
4. Requires in the case of a policy or certificate, as described
that is offered in this state on or after January 1, 2014,
the carrier to file with the IC the information and statement
above at least 30 days prior to the date such a policy or
certificate is issued or delivered in this state.
5. Enacts, in federal law, the Affordable Care Act (ACA) to,
among other things, a penalty on employers, with at least 50
full-time employees, that do not offer qualifying coverage or
minimum value (which means the plan's share of the total
allowed costs of benefits provided under the plan is less
than 60% of such costs), and if at least one full-time
employee qualifies for premium tax credits to purchase
insurance in an exchange. The penalty is $2,000 for each of
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their full-time employees (with the first 30 employees
exempted from the calculation).
6. Requires for employers with 50 or more employees who do offer
coverage but still have at least one employee who qualifies
for a premium tax credit (due to inadequacy or
unaffordability of the employer's benefit), to pay the lesser
of $3,000 for each employee receiving the credit or $2,000
for each of all of their full-time employees (with, again,
the first 30 employees exempted).
7. Requires effective January 1, 2014, that all individuals with
access to affordable coverage purchase minimum essential
coverage or pay a penalty for 2014: $95 or 1% of income
(whichever is greater), 2015: $325 or 2% of income, 2016:
$695 or 2.5% of income (up to a cap of the premium for a
Bronze plan), and after 2016: caps adjusted by increases in
cost of living.
8. Establishes exceptions for individuals not lawfully present
in the United States, religious objectors, incarcerated
individuals, taxpayers with income below the filing
threshold, members of Indian tribes, those granted a hardship
waiver and individuals who were not covered for less than
three months of the year.
9. Establishes as minimum essential coverage, health insurance
coverage provided by an employer, health insurance purchased
through an Exchange, coverage provided under a
government-sponsored program (including Medicare, Medicaid,
and health care programs for veterans), health insurance
purchased directly from an insurance company, and other
health insurance coverage that is recognized by the
Department of Health & Human Services as minimum essential
coverage.
10.Establishes Covered California as an independent entity in
state government not affiliated with any state agency or
department, governed by a five member board. Requires the
board to establish and use a competitive process to select
participating carriers and other contractors.
This bill:
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1. Requires a health plan or health insurer, except those plans
or insurers offering a specialized contract or policy, that
offers, amends, or renews a group plan contract or health
insurance policy that does not provide a minimum value of at
least 60% to a large group to require that the persons to be
covered by the plan contract or policy are covered by an
individual or group plan contract or policy that arranges or
provides medical, hospital, and surgical coverage not
designed to supplement other private or governmental plans.
This bill also specifies that enrollees and insureds covered
are also covered by another plan or policy that provides at
least 60% minimum value.
2. Authorizes a health plan or health insurer, except those
plans or insurers offering a specialized contract or policy,
to offer, market, or sell a health plan contract in the large
group market that provides a minimum of less than 60% if the
health plan or insurer, in addition to complying with #1)
above, files on or before March 1 of each year, a
certification with the DMHC Director or the IC of CDI that
contains the statement and information described below:
A. A statement from the health plan or insurer
certifying that group plan contract or policy, as
specified, are being offered and marketed as
supplemental health insurance and not as a substitute
for coverage that provides minimum essential coverage as
defined; and
B. The following statement in the uniform benefits
summary form, as specified, prominently on the first
page:
"This is a supplement to health insurance. It is not a
substitute for essential health benefits or minimum
essential coverage as defined in federal law."
C. A summary description of each group plan contract, as
described.
3. Requires, in the case of a group plan contract or health
insurance policy that is offered for the first time in this
state with respect to plan years on or after July 1, 2015,
the health plan or insurer to file with the DMHC Director or
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the IC the information and statement required in #2) above at
least 30 days prior to the date that the plan contract or
policy is issued or delivered.
4. Establishes that a plan or policy provides a minimum value of
at least 60% if it complies with federal law, as specified,
and any adopted regulations or guidance.
5. Specifies that these provisions do not apply to an insurer
that is subject to specified disclosure requirements.
6. Defines "large group health plan contract" as a group health
plan contract other than a contract issued to a small
employer, as defined, and "Large group" as a group that is
not a small employer, as defined.
7. Defines "plan year" as having the same meaning set forth in
federal regulations.
Background
Actuarial Value Categories . The ACA establishes four benefit
categories-bronze, silver, gold, and platinum-all of which will
have the essential health benefits package. Policies cannot be
sold in the small-group and individual market or exchanges that
do not meet the actuarial standards for the benefit categories
established by law. All carriers selling in the individual and
small-group markets are at least required to offer silver and
gold plans under the federal law.
The bronze package represents minimum creditable coverage with
an actuarial value of 60% (i.e., covering 60% of enrollees'
medical costs) with out-of-pocket spending limited to that
which is defined for health savings accounts (HSAs), or $6,350
for individual policies and $12,350 for family policies in
2014;
The silver benefit package has an actuarial value of 70% and
the same out-of-pocket limits;
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The gold package has an actuarial value of 80% and the same
out-of-pocket limits, and,
The platinum package covers 90% of costs with the same
out-of-pocket limits.
A catastrophic benefit package can be made available for
adults younger than age 30, similar to HSA-eligible,
high-deductible plans, with the essential benefits package,
preventive services excluded from the deductible as under
current HSA law, three primary care visits, and cost-sharing
to HSA out-of-pocket limits. People who are unable to find a
plan with a premium that is 8% or less of their income will be
able to purchase the young adult plan as well, regardless of
age.
Comments
According to the author's office, under the ACA, large employers
with mostly low-wage workers have a financial incentive to offer
limited benefit health plans as one option for their employees.
This bill closes this federal loophole by ensuring that a
limited benefit health plan can only be sold as supplemental to
comprehensive insurance coverage. This bill protects workers
from being offered on-the-job coverage below the federal
standards. It uses the same approach that has worked for over
twenty years for small employers.
Prior legislation
SB X1 2 (Hernandez, Chapter 2, Statutes of 2013) applies the
individual insurance market reforms of the ACA to health plans
regulated by DMHC and updates the small group market laws for
health plans to be consistent with final federal regulations.
AB X1 2 (Pan, Chapter 1, Statutes of 2013) establishes health
insurance market reforms contained in the ACA specific to
individual purchasers, such as prohibiting insurers from denying
coverage based on pre-existing conditions and makes conforming
changes to small employer health insurance laws resulting from
final federal regulations.
AB 1083 (Monning, Chapter 852, Statutes of 2012) reforms
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California's small group health insurance laws to enact the ACA.
Eliminates pre-existing condition requirements and establishes
premium rating factors based only on age, family size, and
geographic regions, except for grandfathered plans. New
guaranteed issue provisions and the rating provisions are tied
to those provisions in the ACA. Should guaranteed issue and
rating factors be repealed in the ACA, California's existing
guaranteed issue and rating law pre-ACA would become operative.
SB 900 (Alquist, Chapter 659, Statutes of 2010 and AB 1602
Perez, Chapter 655, Statutes of 2010) establishes Covered
California.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Minor costs to the CDI to enforce compliance (Insurance Fund).
One-time costs of $170,000 in 2014-15 and $95,000 in 2015-16 for
development of regulations and review of health plan filings
and ongoing costs of $67,000 per year thereafter for
enforcement by the DMHC (Managed Care Fund).
SUPPORT : (Verified 8/18/14)
Health Access California (source)
American Federation of State, County and Municipal Employees,
AFL-CIO
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation
California Nurses Association
California School Employees Association
California Teachers Association
California Teamsters Public Affairs Council
Engineers and Scientists of California, IFPTE Local 20, AFL-CIO
International Longshore and Warehouse Union
National Nurses United
Professional and Technical Engineers, IFPTE Local 20 AFL-CIO
UNITE-HERE, AFL-CIO
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Utility Workers Union of America, Local 132, AFL-CIO
OPPOSITION : (Verified 8/18/14)
California Association of Health Underwriters
Guardian Life Insurance Company of America
Independent Insurance Agents and Brokers of California
ARGUMENTS IN SUPPORT : The California Labor Federation writes
that allowing insurers to sell sub-standard coverage not only
allows employers to evade their responsibilities under the ACA,
it puts workers' health and well-being at risk. This bill
addresses this problem by prohibiting health plans and insurers
from plans that do not meet the minimum value of 60% unless they
are supplemental to a full coverage plan. Employers could still
chose to offer these types of plans as long as it was in
conjunction with another plan that provides adequate coverage
for workers. Health Access California writes that this bill
closes a loophole in federal law which allows insurers to sell
large employers skinny benefit plans with minimum actuarial
value of less than 60%.
ARGUMENTS IN OPPOSITION : Guardian Life Insurance Company of
America (Guardian), writes that it is neither the role nor the
responsibility of a health plan to require an employer offer its
employees a particular type of coverage. This foisting such a
"policing" requirement onto insurers and in essence making them
a regulator would be burdensome to health plans and a disservice
to regulators. Second, specialized health plans offering
optional, supplemental coverage such as dental, vision or
disability income insurance, cannot be expected to have specific
knowledge of underlying medical coverage they had no role in
selling, including the actuarial value of such coverage.
Guardian believes specialized plans should be exempt from these
requirements and that instead a disclaimer form could be
developed.
ASSEMBLY FLOOR : 50-25, 5/28/14
AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chesbro, Cooley, Daly,
Dickinson, Fong, Fox, Garcia, Gomez, Gonzalez, Gordon, Gray,
Hall, Roger Hernández, Holden, Jones-Sawyer, Levine,
Lowenthal, Medina, Mullin, Muratsuchi, Nazarian, Pan, Perea,
John A. Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,
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Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Weber,
Wieckowski, Williams, Yamada, Atkins
NOES: Achadjian, Allen, Bigelow, Chávez, Conway, Dahle,
Donnelly, Beth Gaines, Gatto, Gorell, Grove, Hagman, Harkey,
Jones, Linder, Logue, Maienschein, Mansoor, Melendez,
Nestande, Olsen, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Bonilla, Dababneh, Eggman, Frazier, Vacancy
JL:AB:d 8/22/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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