BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1182|
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THIRD READING
Bill No: SB 1182
Author: Leno (D)
Amended: 4/10/14
Vote: 21
SENATE HEALTH COMMITTEE : 7-1, 4/24/14
AYES: Hernandez, Beall, De Le�n, DeSaulnier, Evans, Monning,
Wolk
NOES: Morrell
NO VOTE RECORDED: Nielsen
SENATE APPROPRIATIONS COMMITTEE : 5-2, 05/23/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : Health care coverage: rate review
SOURCE : California Labor Federation
UNITE HERE
DIGEST : This bill requires health plans and insurers to
submit to regulators for rate review any large group plan
contract or policy rate increases that exceed 5% of the prior
years rate. Establishes new data reporting requirements on all
health plans and insurers applicable to products sold in the
large group market and establishes new deidentified claims data
reporting requirements to be provided to purchasers, if
requested, at no cost, if the purchaser can demonstrate its
ability to comply with state and federal privacy laws, and is
either an employer with an enrollment of greater than 1,000
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covered lives or multiemployer trust.
ANALYSIS :
Existing law:
1. 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, and the plan's average
rate increase by plan year, segment type, and product type.
2. Requires plans and policies for individual and small group
health care contracts to be filed 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.
3. Requires plan filings to include certification by an
independent actuary or actuarial firm that the rate increase
is reasonable or unreasonable; if unreasonable, that the
justification for the increase is based on accurate and sound
actuarial assumptions and methodologies.
4. 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.
5. 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.
6. Requires, if DMHC or CDI find that an unreasonable rate
increase is not justified or that a rate filing contains
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inaccurate information, DMHC or CDI to post their findings on
their Internet Web sites.
7. Establishes specified provisions related to disclosure
requirements for a health plan that exclusively contracts
with no more than two medical groups in the state to provide
or arrange for professional medical services for the
enrollees of the plan.
8. For the large group market, requires health plans and health
insurers to file with the DMHC and CDI, at least 60 days
prior to implementing any rate change, all required rate
information for unreasonable rate increases. Requires all
information that is required by the Affordable Care Act
(ACA), and any other information required pursuant to state
regulations to be submitted. Requires disclosure of
specified aggregate data for all rate filings submitted.
This bill:
1. Requires health plans and insurers to submit information to
regulators to review the rates of any large group plan
contract or policy 60 days prior to implementing rate
increases that exceed 5% of the prior year's rate.
2. Requires annual disclosures of information specified in
existing law related to the number and percentage of rate
filings and adds to the categories associated with the plan's
average rate increase disclosure, benefit category and number
of covered lives affected. Changes "plan" year to "policy"
year in the Insurance Code. States that nothing in this bill
prohibits a health plan or insurer from releasing relevant
information, as described, for the purposes set forth in
existing law related to rate review.
3. Requires a health plan or health insurer, subject to #1)
above, to disclose for each rate filing that exceeds 5% of
the prior year's rate for that group specified information
including:
A. Company name and contact information;
B. Number of plan contract forms covered by the filing;
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C. Product type, such as preferred provider organization
or health maintenance organization;
D. Enrollment in each plan contract and rating form;
E. Annual rate;
F. Total incurred claims in each plan contract form;
G. Average rate increase initially requested;
H. Average rate of increase;
I. Number of subscribers or enrollees affected by each
plan contract form;
J. A comparison of claims cost and rate of changes over
time;
K. Any changes in enrollee cost-sharing over the prior
year associated with the submitted rate filing;
L. Any changes in enrollee benefits over the prior year
associated with the submitted rate filing;
M. A certification of actuarially sound filing, as
described;
N. Any changes of administrative cost; and
O. Any other information required for rate review under
the ACA.
4. Requires, except as provided in #5) below, annual disclosure
of specified aggregate data for all products sold in the
large group market.
5. Requires a health plan or insurer that is unable to provide
information on rate increases by benefit categories, as
specified, or information on trend attributable to cost and
utilization by benefit category pursuant to #4) to annually
disclose all specified aggregate data for its large group
contracts or policies.
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6. Requires a health plan or insurer annually to provide claims
data at no charge to a large group purchaser if the large
group purchaser requests the information. Requires the plan
or insurer to provide claims data that a qualified
statistician has determined are deidentified so that the
claims data do not identify or do not provide a reasonable
basis from which to identify an individual.
7. Makes the information provided under #6) through #10) not
subject to public availability, as specified.
8. Requires, if claims data are not available, at no charge to
the purchaser, all of the following:
A. Deidentified data sufficient for the large group
purchaser to calculate the cost of obtaining similar
services from other health plans or health insurers and
evaluate cost-effectiveness by service and disease
category;
B. Deindentified patient-level data of demographics,
prescribing, encounters, inpatient services, outpatient
services, and any other data as may be required of the
health plan or insurer to comply with risk adjustment,
reinsurance, or risk corridors pursuant to the ACA; and
C. Deidentified patient-level data used to experience
rate the large group, including diagnostic and procedure
coding and costs assigned to each service.
9. Requires the health plan or insurer to obtain a formal
determination from a qualified statistician that the data
provided pursuant to # 6) through #8) have been deidentified
so that the data do not identify or do not provide a
reasonable basis from which to identify an individual.
Requires the statistician to certify the formal determination
in writing and to, upon request, provide the protocol used
for deidentification to the regulators.
10.Requires data provided pursuant to #6) through #8) to only be
provided to a large group purchaser that is able to
demonstrate its ability to comply with state and federal
privacy laws, and is either an employer with enrollment of
greater than 1,000 covered lives or a multiemployer trust.
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Background
Rate review in California . SB 1163 (Leno, Chapter 551, Statutes
of 2011) 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. The carriers also must submit an analysis
performed by an independent actuary who is not employed by a
plan or insurer. For large group filings, SB 1163 requires
health plans to submit all information required by ACA and any
additional information adopted through regulation by DMHC
necessary to comply with the bill. The rate review provisions
in ACA have not been applied to the large group market and DMHC
and CDI have not adopted regulations to establish rate review
for the large group market in California. Though regulators do
not have the authority to modify or reject rate changes, rate
review has increased transparency on rate increases in the
individual and small group market.
Prior legislation
SB 746 (Leno) would have established new data reporting
requirements on all health plans applicable to products sold in
the large group market and establishes new specific data
reporting requirements related to annual medical trend factors
by service category, as well as claims data or deidentified
patient-level data, as specified, for a health care service plan
(health plan) that exclusively contracts with no more than two
medical groups in the state to provide or arrange for
professional medical services for the enrollees of the plan
(referring to Kaiser Permanente). SB 746 was vetoed by the
Governor Brown. In his veto message, the Governor stated:
This bill would require all health plans and insurers to
disclose very year broad data relating to services used by
large employer groups, including aggregate rate increases
by benefit category. The bill also requires that one
health plan additionally provide anonymous claims data or
patient level data upon request and without charge to
large purchasers. I support efforts to make health care
costs more transparent, and my administration is moving
forward to establish transparency programs that will cover
all health plans and systems. I urge all parties to work
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together in this effort. If these voluntary efforts fail,
I will seriously consider stronger actions.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Likely costs in the tens of thousands to low hundreds of
thousands per year to develop regulations, review insurance
plan rate filings, respond to complaints, and take enforcement
actions by the CDI (Insurance Fund).
One-time costs of about $715,000 in 2014-15 and $960,000 in
2015-16 and ongoing costs of about $685,000 per year,
thereafter to develop regulations, review health plan rate
filings, respond to complaints, and take enforcement actions
by the DMHC (Managed Care Fund).
SUPPORT : (Verified 5/22/14)
California Labor Federation (co-source)
UNITE HERE (co-source)
AFSCME
California Alliance of Retired Americans
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Nurses Association
California Professional Firefighters
California Retired Teachers Association
California School Employees Association
CALPIRG
California Teachers Association
California Teamsters Public Affairs Council
Congress of California Seniors
Engineers and Scientists of CA, IFPTE Local 20, AFL-CIO
Health Access
International Longshore and Warehouse Union
Professional and Technical Engineers, IFPTE Local 21, AFL-CIO
San Diego Electrical Health and Welfare Trust
SEIU California
State Building and Construction Trades Council
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Utility Workers Union of America, Local 132
OPPOSITION : (Verified 5/22/14)
America's Health Insurance Plans
Anthem
Association of California Life & Health Insurance Companies
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
Kaiser Permanente
ARGUMENTS IN SUPPORT : The California Labor Federation, a
co-sponsor, believes this bill will help the public understand
premium increases. Employers are increasingly shifting the
burden of health coverage to workers and workers are forced to
forego wage increases as health care eats up more of employers'
and workers' budgets. The ACA implements some cost containment
measures and gives states authority to implement more. SB 1163
was intended to require Kaiser Permanente to provide detail on
changes in costs by benefits. Kaiser has failed to comply,
even though it provides some of this data to selected large
purchasers and for out-of-network emergency services. The San
Diego Electrical Health and Welfare Trust indicates that the
large group provisions of SB 1163 have yet to be implemented due
to a lack of definition of "unreasonable rate increase." This
bill will afford large group purchasers with access to the same
detailed information to substantiate the basis for increased
health premiums, and it will help identify whether health plans
or HMOs may be subsidizing their individual and small group
experience by way of charging large purchasers premium rates
loaded with experience from other markets. The Teamsters writes
that some of their trust funds spend more per-hour on health
benefits than the San Francisco minimum wage. The California
School Employees Association believes this bill will help large
group purchasers understand what is driving increases and
develop strategies to address it.
ARGUMENTS IN OPPOSITION : America's Health Insurance Plans
(AHIP) writes that this bill fails to offer any solution to
address the problem of rising health care costs that threaten
the affordability of health care coverage in California. AHIP
states that the large group market is extremely competitive and
the U.S. Department of Health and Human Services determined that
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regulatory review was unnecessary at this time. AHIP adds that
the data described in this bill is not developed and would
require extensive administrative tracking. Kaiser writes that
this bill inserts the Legislature into private and voluntary
contractual discussions between two entities by mandating what
information one party must provide to the other. Kaiser
indicates that they provide robust information to their large
group purchasers during renewal and during the contract year and
are working hard to expand the amount of information provided.
Kaiser writes that this bill requires large group rate
information to be filed at DMHC without specifying the purpose
of such a filing and how that information will be used. The
California Chamber of Commerce believes this bill creates
uncertainty and delays for employers by creating an unworkable
rate review process. Anthem Blue Cross argues that this bill
creates an added substantial compliance burden for plans and
state regulators. Anthem Blue Cross already provides a
significant amount of information to its large group purchasers
and the utilization of health services and says this bill could
potentially require thousands of new filings to be done with
regulators.
JL:d 5/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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