BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 959|
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THIRD READING
Bill No: SB 959
Author: Hernandez (D)
Amended: 3/17/14
Vote: 21
SENATE HEALTH COMMITTEE : 7-0, 3/26/14
AYES: Hernandez, Anderson, Beall, DeSaulnier, Evans, Monning,
Wolk
NO VOTE RECORDED: De Le�n, Nielsen
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : Health care coverage
SOURCE : Author
DIGEST : This bill prohibits a change in premium rate or
coverage for an individual plan contract or policy unless the
plan or insurer delivers a written notice of the change at least
15 days prior to the start of the annual enrollment period
applicable to the contract or 60 days prior to the effective
date of renewal, whichever occurs earlier in the calendar year.
Makes several corrections and clarifications to provisions of
law governing individual and small group health insurance,
including clarifying that health plans and insurers have a
single risk pool for enrollees and insureds.
ANALYSIS : Existing law:
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1. Establishes a health benefits exchange pursuant to the
Affordable Care Act (ACA), referred to as Covered California,
where qualified health plans (QHPs) offer health plan
contracts or health insurance policies for individual
purchasers and small businesses (through the Small Business
Health Options Program or SHOP) categorized in the following
metal tiers: Platinum, Gold, Silver, Bronze, and
Catastrophic.
2. Requires health plans and insurers participating in Covered
California to offer, market, and sell one product within each
of the five levels of coverage, and to offer, market, and
sell the same products outside of Covered California.
3. Prohibits health plans and insurers that are not
participating in Covered California from offering, marketing,
or selling catastrophic coverage.
4. Requires health plans and health insurers to consider as a
single risk pool for rating purposes the claims experience of
all insureds and enrollees in all nongrandfathered health
benefit plans in this state, whether offered as a health plan
contract or health insurance policy, including those insureds
and enrollees who enroll in individual coverage through
Covered California and enrollees and insureds outside of
Covered California. This requirement applies separately for
individual market products and small group products.
5. Requires health plans and health insurers to establish an
index rate based on the total combined claims costs for
providing essential health benefits, as defined, within the
single risk pool, as required. Requires the index rate to be
determined at least each calendar year for both small group
and individual market, and not more frequently than each
calendar quarter for small group. Requires the index rate to
be adjusted on a market-wide basis based on the total
expected market wide payments and charges under the risk
adjustment and reinsurance programs established for the
state, as specified.
6. Requires a health plan or insurer that declines to offer
coverage to or denies enrollment for a large group applying
for coverage or that offers small group coverage at a rate
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that is higher than the standard employee risk rate, to, at
the time of the denial or offer of coverage, provide the
applicant with specific reasons for the decision in writing,
in clear, easily understandable language.
7. Requires individual and small group health plan contract and
insurance policy rate information to be filed with Department
of Managed Health Care (DMHC) or Department of Insurance
(CDI) concurrent with required notices explaining reasons for
denials, increases in premium rates, the plan's average rate
increase by plan year, segment type, and product type.
8. Requires plans for individual and small group health care
contracts and policies to file with regulators at least 60
days prior to implementing any rate change, including
disclosures such as average rate increase initially
requested, average rate increase, and effective date of rate
increase. Authorizes a plan or insurer to provide aggregated
additional data that demonstrates, or reasonably estimates,
year-to-year cost increases in specific benefit categories in
major geographic regions, defined by regulators, but not more
than nine regions.
9. Requires plan filings to include certification by an
independent actuary or actuarial firm that the rate increase
is reasonable or unreasonable and if unreasonable, that the
justification for the increase is based on accurate and sound
actuarial assumptions and methodologies.
10.Requires rate increase information to be made public 60 days
prior to implementation, including justification for any
unreasonable rate increases including all information and
supporting documentation as to why the rate change is
justified.
11.Requires the regulators to accept and post to their Internet
Web sites any public comment on a rate increase submitted to
each department during the 60-day period prior to
implementation, as specified.
12.Requires the regulators to post on their Internet Web sites
any changes submitted by the plan or insurer to the proposed
rate increase, including any documentation submitted by the
plan or insurer supporting those changes.
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13.Requires if DMHC or CDI find that an unreasonable rate
increase is not justified or that a rate filing contains
inaccurate information, DMHC or CDI to post their findings on
their Internet Web sites.
14.Requires a health plan or insurer that declines to offer
coverage or denies enrollment for an individual or his or her
dependent for individual coverage or that offers individual
coverage at a higher rate than the standard rate, to, at the
time of the denial or offer of coverage, provide the
applicant with the reason in writing in clear and
understandable language.
15.Prohibits a change in premium rate or coverage for an
individual plan from becoming effective unless a written
notice is delivered 60 days prior to the effective date of
change.
16.Requires the notice to be delivered at his or her last
address known to the plan at least 60 days prior to the
effective date of the change.
17.Requires, if an applicant or dependent is denied or charged
a higher rate than the standard rate, the plan or insurer to
inform the applicant about the Major Risk Medical Insurance
Program (MRMIP) or the federal temporary high risk pool, as
specified.
This bill:
1. Clarifies that as a condition of participation in the SHOP
carriers must offer, market, and sell at least one product
within each of four levels of coverage, as specified.
2. Clarifies that a health plan or insurer, with respect to
small employer contracts that cover hospital, medical or
surgical expenses, must sell only four levels of coverage, as
specified.
3. Clarifies that a plan consider as a single risk pool for
rating purposes in the small employer market the claims
experience of all enrollees in all non-grandfathered small
employer health plan contracts offered by the health plan and
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all insureds in all non-grandfathered health benefit plans
offered by a health insurer that is a corporate affiliate,
subsidiary, or parent of the plan, including those who enroll
through Covered California and outside Covered California.
4. Permits the index rate to be adjusted for Exchange user
fees, as described in federal regulations.
5. Deletes references to risk rating and refusals to offer
coverage in rate review requirements of existing law.
6. Deletes requirements that certain rate justification or
denial explanations notices be filed concurrent with rate
filings for individual and small group coverage.
7. Revises requirements for disclosure of rate "increase"
information to refer to rate "change" information in multiple
provisions of existing law.
8. Deletes references to nine geographic rating regions and
instead refers to existing law establishing 19 geographic
rating regions.
9. Revises a requirement about posting information on the
Internet Web sites of DMHC and CDI upon a finding by the
departments regarding unreasonable rate increases to instead
refer to decision by the directors, respectively, that an
unreasonable rate change is not justified.
10.Deletes a notice requirement when enrollment is denied or
rate is higher than the standard rate.
11.Prohibits a change in premium rate or coverage for an
individual plan contract or policy unless the plan or insurer
delivers a written notice of the change at least 15 days
prior to the start of the annual enrollment period applicable
to the contract or 60 days prior to the effective date of
renewal, whichever occurs earlier in the calendar year.
12.Deletes a requirement for notification about MRMIP and the
federal temporary high risk pool.
13.Makes other technical and clarifying changes including
correcting inaccurate code references.
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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.
SB 639 (Hernandez, Chapter 316, Statutes of 2013) codifies
provisions of the ACA relating to out-of-pocket maximums on
cost-sharing, health plan and insurer actuarial value coverage
levels and catastrophic coverage requirements, and requirements
on health insurers for coverage of out-of-network emergency
services.
SB 746 (Leno, 2013) would have established new data reporting
requirements on health plans and health insurers sold in the
large group market and established new specific data reporting
requirements related to annual medical trend factors by service
category, as specified, for a health plan or health insurer that
exclusively contracts with no more than two medical groups in
the state. SB 746 was vetoed by Governor Brown.
SB X1 3 (Hernandez, Chapter 5, Statutes of 2013) requires
Covered California, by means of selective contracting, to make a
bridge plan product available to specified eligible individuals,
as a QHP. Repeals Covered California's authority for enrollment
in a bridge plan product on the October 1 that falls five years
after the date of federal approval.
AB 1083 (Monning, Chapter 852, Statutes of 2012) reforms
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. Should
guaranteed issue and rating factors be repealed in the ACA,
California's existing guaranteed issue and rating law pre-ACA
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would become operative.
SB 951 (Hernandez, Chapter 866, Statutes of 2012) and AB 1453
(Monning, Chapter 854, Statutes of 2012) designates the Kaiser
Small Group HMO as California's benchmark plan to serve as the
essential health benefit standard, as required by the ACA.
SB 51 (Alquist, Chapter 644, Statutes of 2011) establishes
enforcement authority in California law to implement provisions
of the ACA related to medical loss ratio requirements on health
plans and health insurers and enacts prohibitions on annual and
lifetime benefits.
AB 2244 (Feuer, Chapter 656, Statutes of 2010) requires
guaranteed issue of health plan and health insurance products
for children beginning in January 1, 2011.
SB 900 (Alquist, Chapter 659, Statutes of 2010) and AB 1602
(Perez, Chapter 655, Statutes of 2010) establishes the
California Health Benefit Exchange.
SB 1163 (Leno, Chapter 661, Statutes of 2010) requires carriers
to submit detailed data and actuarial justification for small
group and individual market rate increases at least 60 days in
advance of increasing their customers' rates.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
No significant costs to DMHC (Managed Care Fund).
One-time costs of about $230,000 to adopt regulations by
CDI (Insurance Fund).
SUPPORT : (Verified 5/23/14)
American Federation of State, County and Municipal Employees,
AFL-CIO
California Optometric Association
Health Access California
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OPPOSITION : (Verified 5/23/14)
Association of California Life and Health Insurance Companies
California Association of Health Plans
HealthNet
ARGUMENTS IN SUPPORT : According to the author, this bill is
necessary to make sure there are not ambiguities or uncertainty
about California's health insurance laws. Clean-up legislation
is likely to continue to be necessary as new information becomes
available, such as through the finalization of federal
regulations and through the implementation process. This bill
also clarifies that health plans and insurers in California
spread risk across one pool only, not one pool for their DMHC
business and another for their CDI business. This clarification
is necessary because the interaction between federal regulations
and state law may be construed to require separate risk pools by
regulator rather than by company. Other provisions are
technical or conforming to federal requirements.
According to Health Access California, since the enactment of
the ACA, California has enacted numerous pieces of landmark
legislation to implement and improve on the federal law. These
laws have eliminated denials of coverage based on pre-existing
conditions, provided public scrutiny of health insurance rates,
and otherwise imposed consumer protections on a market that was
once widely known as the Wild, Wild West of health insurance.
This bill includes numerous conforming and clarifying
corrections and is clean-up to major legislation that taken
together constitutes the market changes that implement and
improve on the ACA.
ARGUMENTS IN OPPOSITION : The California Association of Health
Plans states that CAHP is opposed to the provision that requires
plans to use a single risk pool for rating purposes that
includes all enrollees in the small group market regardless of
whether the policies are regulated by DMHC or CDI. While
clarification may be needed, a better approach would be to
require that the single risk pool be maintained at the licensed
entity level as required under federal law.
This bill forces plans to blend HMO capitated products with PPO
products and to comingle DMHC data with CDT data in order to
price both lines of business. Blending two different types of
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products not only ignores federal law, which allows plans to
vary pricing by network cost variation and delivery of care
characteristics, it would require a complex rating mechanism
that would be administratively burdensome.
JL:nl 5/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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