BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 959 (Hernandez) - Health care coverage.
Amended: March 17, 2014 Policy Vote: Health 7-0
Urgency: No Mandate: Yes
Hearing Date: April 28, 2014
Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 959 would require a health plan or health
insurer to use a single risk pool that includes all enrollees,
rather than segmenting a risk pool between policies regulated by
the Department of Insurance and the Department of Managed Health
Care. The bill would also make a variety of clarifying changes
to the laws governing individual and small group health
coverage.
Fiscal Impact:
No significant costs to the Department of Managed Health
Care (Managed Care Fund).
One-time costs of about $230,000 to adopt regulations by
the Department of Insurance (Insurance Fund). See below.
Background: Under current law, health insurers are regulated by
the Department of Insurance and health plans are regulated by
the Department of Managed Health Care (collectively referred to
as "carriers).
To implement the federal Affordable Care Act, the state made a
number of changes to the laws regulating health plans and health
insurers. For example, state law now requires "guaranteed issue"
of coverage, prohibits denial of coverage due to preexisting
conditions, and limits the underwriting criteria that carriers
can use when determining rates. Current law requires health
plans and health insurers to use a single risk pool that
includes all enrollees in the carrier's non-grandfathered plans
when calculating rates.
The federal Affordable Care Act generally requires carriers to
use a single, state-wide risk pool for all enrollees in
SB 959 (Hernandez)
Page 1
non-grandfathered plans offered in a state. Because regulation
of California's health coverage market is divided between the
Department of Insurance and the Department of Managed Health
Care, concerns have been raised that carriers may seek to create
separate risk pools under each regulator. In theory, this could
allow carriers to segregate their risk pools, leading to
differing rates between the two parts of the market.
Current law requires carriers to submit information on proposed
rate increases to the appropriate regulator within specified
timelines and requires notice to enrollees at least 60 days
prior to the effective date of the change.
Proposed Law: SB 959 would make a variety of changes to the laws
governing the individual and small group markets for health
plans and health insurance.
Specific provisions of the bill would:
Clarify that a carrier use a single risk pool for rating
purposes that includes all enrollees in the small group
market, regardless of whether the specific policies are
regulated by the Department of Insurance or the Department
of Managed Health Care;
Prohibit a change in premium or coverage for an individual
market plan unless the carrier delivers written notice of
the change at least 15 days prior to the beginning of the
open enrollment period or 60 days prior to the effective
date of renewal, whichever is earlier in the year;
Make a variety of technical and clarifying changes to the
laws governing the individual and small group markets.
Related Legislation:
SB 1034 (Monning) would prohibit health plans in the group
market from imposing waiting or affiliating periods. That
bill will be heard in this committee.
SB 1182 (Leno) would require rate review in the large group
market for rate increases over 5% and would establish new
reporting requirements on carriers in the large group
market. That bill is in the Senate Health Committee.
Staff Comments: SB 1163 (Leno, Statutes of 2010) imposed
requirements on carriers relating to proposed rate increases and
notification to the regulators and consumers about those rate
increases. That bill authorized the Department of Insurance to
SB 959 (Hernandez)
Page 2
issue guidance on the bill without adopting regulations under
the Administrative Procedure Act. The Department issued guidance
within the deadline specified in SB 1163. This bill would modify
the statutes amended by SB 1163 and would therefore impact the
guidance issued by the Department. The Department indicates that
in order to implement this bill, it will need to revise the
guidance for SB 1163. Because the authority to issue guidance
without adopting regulations under the Administrative Procedure
Act included in SB 1163 has expired, the Department indicates
that it would have to adopt the existing guidance and the
changes made in this bill as regulations under the
Administrative Procedure Act.