BILL ANALYSIS �
SB 1182
Page 1
Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 1182 (Leno) - As Amended: April 10, 2014
SENATE VOTE : 21-12
SUBJECT : Health care coverage: rate review.
SUMMARY : Requires health plans and insurers in the large group
market to file rate information with state regulators when they
increase rates by more than 5% and requires health plans and
insurers to share specified data with purchasers that have 1,000
or more enrollees or that are multiemployer trusts.
Specifically, this bill :
LARGE GROUP RATE FILING
1)Requires health plans and insurers to submit information to
regulators (the Department of Managed Health Care, or DMHC,
and the Department of Insurance, or CDI) 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. This replaces a provision that required submission of
information for unreasonable rate increases.
2)Requires each rate filing to include:
a) Company name and contact information;
b) Number of plan contract forms covered by the filing;
c) Plan contract form numbers covered by the filing;
d) Product type, such as preferred provider organization or
health maintenance organization;
e) Segment type;
f) Type of plan involved, such as for profit or not for
profit;
g) Whether the products are opened or closed;
h) Enrollment in each plan contract and rating form;
i) Enrollee months in each plan contract form;
j) Annual rate;
aa) Total earned premiums in each plan contract form;
bb) Total incurred claims in each plan contract form;
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cc) Average rate increase initially requested;
dd) Review category: initial filing for new product, filing
for existing product, or resubmission;
ee) Average rate of increase;
ff) Effective date of rate increase;
gg) Number of subscribers or enrollees affected by each plan
contract form;
hh) The plan's overall annual medical trend factor
assumptions in each rate filing for all benefits and by
aggregate benefit category, as specified, with geographic
aggregation limited to nine regions, as defined by DMHC and
CDI. Requires a health plan that exclusively contracts
with no more than two medical groups to disclose the amount
of its actual trend experience for the prior contract year
by aggregate benefit category, as specified;
ii) The amount of the projected trend attributable to the
use of services, price inflation, or fees and risk for
annual plan contract by aggregate benefit category, as
specified. Requires a plan that exclusively contracts with
no more than two medical groups, as specified, to disclose
the amount of its actual trend experience for the prior
contract year by aggregate service category, as specified;
jj) A comparison of claims cost and rate of changes over
time;
aaa) Any changes in enrollee cost-sharing over the prior
year;
bbb) Any changes in enrollee benefits over the prior year;
ccc) A certification by an independent actuary about the
reasonableness of the rate increase; and,
ddd) Any other information required for rate review under the
federal Patient Protection and Affordable Care Act (ACA).
3)Requires annual disclosure of the following aggregate data for
products sold in the large group market: plan/policy year;
segment type; product type; number of subscribers; number of
covered lives affected; the plan's average rate increase by
plan/policy year; segment type; product type; benefit
category; and trend attributable to cost and trend
attributable to utilization by benefit category.
4)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
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utilization by benefit category, to annually disclose all of
the following aggregate data for its large group contracts or
policies:
a) The plan's or insurer's overall aggregate data
demonstrating or reasonably estimating year-to-year cost
increases in the aggregate for large group rates by major
service category. Requires the plan or insurer to
distinguish between the increase ascribed to the cost of
services provided for those assumptions and that include
the following categories:
i) Hospital inpatient;
ii) Outpatient visits;
iii) Outpatient surgical or other procedures;
iv) Professional medical;
v) Mental health;
vi) Substance abuse;
vii) Skilled nursing facility, if covered;
viii) Prescription drugs;
ix) Other ancillary services;
x) Laboratory; and,
xi) Radiology or imaging;
b) The amount of projected trend attributable to use of
services by service and disease category, capital
investment, and community benefit expenditures; and,
c) The amount and proportion of costs attributed to
contracting medical groups that would not have been
attributable as medical losses if incurred by the plan or
health insurer rather than the medical group.
SHARING OF CLAIMS AND OTHER PATIENT-LEVEL DATA
5)Requires a health plan or insurer annually to provide claims
data at no charge to a large group purchaser upon request, if
the purchaser 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.
6)Makes the information shared not subject to public
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availability, as specified.
7)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) Deidentified patient-level data of demographics,
prescribing, encounters, inpatient services, outpatient
services, and other data, as specified; and,
c) Deidentified patient-level data used to experience rate
the large group, including diagnostic and procedure coding
and costs assigned to each service.
8)Requires the health plan or insurer to obtain a formal
determination from a qualified statistician that the shared
data have been deidentified so that the data 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 CDI and DMHC.
EXISTING LAW :
1)Requires individual and small group health plan contract and
insurance policy rate information to be filed with DMHC or 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
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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
inaccurate information, DMHC or CDI to post their findings on
their Internet Web sites.
7)Establishes the following 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:
a) With regard to the plan's overall annual medical trend
factor to disclose the amount of its actual trend
experience for the prior contract year by aggregate benefit
category, using benefit categories that are, to the maximum
extent possible, the same or similar to those used by other
plans; and,
b) With regard to the amount of the projected trend
attributable to the use of services, price inflation, or
fees and risk for annual plan contract trends by aggregate
benefit category, such as hospital inpatient, hospital
outpatient, physician services, etc., to instead disclose
the amount of its actual trend experience for the prior
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contract year by aggregate benefit category, using benefit
categories that are, to the maximum extent possible, the
same or similar to those used by other plans.
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 the following aggregate
data for all rate filings submitted:
a) Number and percentage of rate filings reviewed by the
following:
i) Plan year;
ii) Segment type;
iii) Product type;
iv) Number of subscribers; and,
v) Number of covered lives affected.
b) The plan's average rate increase by the following
categories:
i) Plan year;
ii) Segment type; and,
iii) Product type.
9)Prohibits a health plan from releasing any information to an
employer that would directly or indirectly indicate to the
employer that an employee is receiving or has received
services from a health care provider covered by the plan
unless authorized to do so by the employee. Prohibits an
insurer that has, pursuant to an agreement, assumed the
responsibility to pay compensation, as specified, from being
considered an employer. States that nothing in this provision
prohibits a health plan from releasing relevant information
for the purposes of fraud prevention, as specified.
10)Establishes under federal law, the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), which
among various provisions, mandates industry-wide standards for
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health care information on electronic billing and other
processes; and requires the protection and confidential
handling of protected health information.
11)Establishes under state law, the Confidentiality of Medical
Information Act which governs the disclosure of medical
information by health care providers, the Knox-Keene Health
Care Service Plan Act of 1975 (Knox-Keene) regulated plans,
health care clearinghouses and employers.
FISCAL EFFECT : According to the Senate Appropriations Committee:
1)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 CDI (Insurance Fund).
2)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 DMHC (Managed Care Fund).
COMMENTS :
1)PURPOSE OF THIS BILL . The author writes the rising cost of
health care is a major concern for employers in California,
and the lack of transparency in pricing for the large group
market has contributed to uncontrolled cost increases for
large employers and union trusts. According to the 2014
California Employer Health Benefits Survey, health premiums in
California rose by 185% since 2002, more than five times the
state's overall inflation rate. In addition, one in four
California employers reported that they reduced benefits or
increased employee cost sharing in the last year because of
the rising cost of health care.
The ACA requires state regulators to collect detailed
information regarding premium increases and to make this
information publicly available. SB 1163 (Leno), Chapter 661,
Statutes of 2010, required health plans and insurers to
provide regulators and consumers with critical data and
information documenting the true drivers of premium increases.
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The author contends that, since its enactment in 2011, SB
1163 has saved California consumers in the individual and
small group markets nearly $400 million. This bill is
intended to further transparency efforts and protect large
employers and their employees and dependents from
unjustifiable rate increases through transparency.
2)BACKGROUND .
a) Health care premiums in the group market. The Medical
Expenditure Panel Survey (MEPS) insurance component is a
survey of business establishments and governments that
collects information on employer-sponsored health
insurance, such as whether insurance is offered,
enrollments, types of plans, and premiums. The survey is
conducted annually by the U.S. Census Bureau under the
sponsorship of the Agency for Healthcare Research and
Quality (AHRQ). MEPS data tables from 2012 show average
annual premiums for private sector employer coverage in
California of $5,422, compared with premiums of $2,936 in
2002, an 85% increase, or an average 6.3% yearly increase.
For family coverage, premiums increased from $8,380 in 2002
to $15,898 in 2012, a 90% increase, or an average 6.6%
yearly increase. For comparison, prices for goods and
services increased 27.6%, an average yearly rate of about
2.5%, between 2002 and 2012, according to the Bureau of
Labor Statistics' Consumer Price Index.
b) Market segments and employer-based coverage. According
to estimates by the California Health Benefits Review
Program (CHBRP), the large group health insurance market in
California includes 11.8 million enrollees, compared to the
small and individual groups, which, combined, include 6.6
million. However, there are indications that the group
market is eroding. A recent survey by the California
HealthCare Foundation indicates the proportion of
California employers offering coverage has declined
significantly over the last decade, from 69% in 2000 to 61%
in 2013. Coverage is offered to employees at a higher rate
at larger firms, firms with higher wages, and firms with
some union workers. California workers paid an average of
22% of the total premium for single coverage and 33% for
family coverage in 2013, significantly higher shares than
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in the previous year. California's HMO premiums have been
higher than the national average since 2010, a shift from
the previous decade. Nearly one-third of covered workers
in small firms had a deductible of $1,000 or more for
single coverage in 2013, up from just 7% in 2006. In large
firms, only 9% had a deductible of $1,000 or more. One in
four California firms reported that they reduced benefits
or increased cost sharing in the last year. California
employers viewed consumer directed health plans, disease
management, and changes in care delivery and payment as the
most effective at controlling health care costs.
c) Rate review in California. The ACA requires the federal
Department of Health and Human Services Secretary, in
conjunction with states, to establish a process for the
annual review of "unreasonable increases in premiums" for
health insurance coverage. Under the ACA, starting
September 1, 2011, insurance companies seeking to increase
premium rates in the individual or small group markets, as
specified are required to justify and submit for review by
experts, the need for the rate increase by providing
information on the factors contributing to the proposed
increase. Forty-four states have programs to review the
proposed increases. The ACA established the Rate Review
Grants Program, a $250 million program providing states
with funds to strengthen and improve their rate review
processes, monitor premium increases, and make health
insurance rates understandable for all consumers. On
August 16, 2010, the DMHC and the CDI were jointly awarded
$1 million to establish and enhance their premium rate
review process in California.
SB 1163 (Leno) of 2010 established rate review provisions
in state law. For large group filings, SB 1163 required
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.
Under current rate review law, and under the provisions of
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this bill, regulators do not have the authority to modify
or reject rate changes; however, rate review has increased
transparency on rate increases in the individual and small
group market.
3)SUPPORT . The California Labor Federation (Labor Fed), a
co-sponsor of this bill, writes that rising health care costs
are taking a toll on employers, workers, and union trust
funds. Premiums for employer health insurance plans have
risen 185% since 2002, more than five times the increase in
the state's overall inflation. The Labor Fed argues every
dollar that large purchasers have to put toward health
coverage is a dollar that comes out of workers' pockets. The
Labor Fed contends that, in the individual and small group
market, rate review has increased scrutiny and public
attention to rate increases and has resulted in $300 million
in savings for consumers. The Labor Fed suggests that this
bill's rate filing requirement could similarly create savings
in the large group market. Finally, the Labor Fed argues that
this bill's requirement for health plans to disclose claims
data to large purchasers will help those purchasers understand
health care cost drivers, institute cost savings programs, and
bargain effectively with health plans.
UNITE HERE, AFL-CI, also a co-sponsor, describes programs in Las
Vegas, Atlantic City, and New York City that have met the
triple aim of slowing cost increases, improving care quality,
and improving the health of members. UNITE HERE states this
goal was achieved by intense management of the care of members
and careful design of benefits to meet low wage workers'
needs. In Las Vegas, health care costs were reduced by $67
million over 18 months while outcomes were improved by
eliminating copays for diabetes care, working with casinos to
provide health meals, and intense diabetes care management.
The result, according to UNITE HERE, was a wage increase for
its members, a strike avoided, and better health for workers.
UNITE HERE argues that its attempts to implement similar
strategies in California have been stymied by Kaiser
Permanente and other HMOs, which would not provide robust and
timely patient-level data needed to design care management
programs. UNITE HERE further states it has worked with the
American Civil Liberties Union to assure the data sharing
requirements in this bill protect the privacy of workers,
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creating patient privacy protections that are stronger than
federal requirements.
Numerous unions, in support, attest that some of their trust
funds spend more per hour on health benefits than the San
Francisco minimum wage, a situation that is outrageous and
unsustainable. These supporters write this bill will help
them determine whether health plans are shifting costs from
the individual and small employer markets to large purchasers.
These supporters further state that, contrary to Governor
Brown's exhortation in his veto of SB 746 (Leno) of 2013, they
have not yet received the data necessary to analyze health
care costs.
Health Access California, which was the sponsor of SB 1163,
states that the intention of that legislation was for rate
review to apply in the large group market, but, contrary to
expectations when that law was passed, the federal government
has not yet defined unreasonable rate increases. CALPIRG, in
support, argues that by holding insurers accountable for
justifying their requested rate increases and allowing for a
public dialogue, rate review can be a powerful tool to prevent
excessive rate hikes from private insurers. CALPIRG asserts
that state regulators have reported an estimated $349 million
in savings for consumers in the individual and small group
markets due to rate review since 2011. Since large group
products serve the majority of the private insurance market in
California, CALPIRG predicts this bill will enable state
regulators to save consumers millions of dollars more.
4)OPPOSITION . America's Health Insurance Plans (AHIP), in
opposition, argue large group plans are very sophisticated in
their product designs, which are often tailored to the needs
of the large group purchaser. AHIP notes the U.S. Department
of Health and Human Services determined that regulatory review
of large groups was unnecessary under the ACA on the basis
that market forces that keep premiums from being unreasonable
in the large group market. AHIP argues that this bill, by
placing an administrative burden on large groups, this bill
will encourage the groups to move to self-insured plans, which
are outside the regulatory jurisdiction of the state and which
do not provide the state with revenue through premium taxes.
The California Association of Health Plans argues that current
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law creates an adequate framework for large group rate review,
should the federal government choose to require it. CAHP
estimates that there are over 14,000 large group products that
must be filed with DMHC if they were subject to regulatory
review, each of which would be subject to costly independent
actuarial certification. The Association of California Life
and Health Insurance Companies states it is critical to put
all resources toward implementing the ACA in a meaningful way
rather than implementing costly, unnecessary, and
time-consuming new requirements.
The California Chamber of Commerce (CalChamber) argues this
bill's rate review process could actually make large group
plans more expensive. CalChamber argues that rate review does
nothing to control the underlying cost drivers in health care,
such as prices charged by providers, utilization by enrollees,
and new medical technologies, but instead adds administrative
expenses that will be passed on to purchasers. CalChamber
concedes that the transparency created by current rate review
law has led some health plans to roll back increases in
California, but that expanding review will only increase
workload for regulators and drive up costs for employers.
5)RELATED LEGISLATION .
a) AB 1558 (Roger Hern�ndez) creates the California Health
Data Organization within the University of California to
organize data provided by health plans and insurers on a
website to allow consumers to compare the prices paid for
procedures, as specified. AB 1558 is currently in the
Senate Health Committee4.
b) SB 746 (Leno) would have established new data reporting
requirements on all health plans applicable to products
sold in the large group market and established new specific
data reporting requirements, as well as claims data or
deidentified patient-level data, as specified, 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
(referring to Kaiser Permanente). SB 746 was vetoed by the
Governor. In his veto message, the Governor stated:
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This bill would require all health plans and insurers
to disclose every 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
together in this effort. If these voluntary efforts
fail, I will seriously consider stronger actions.
c) SB 1322 (Ed Hernandez) creates the California Health
Care Cost and Quality Database to receive and report
information from all types of health care entities. SB
1322 is currently in this Committee.
d) SB 1340 (Ed Hernandez) expands provisions related to gag
clauses in contracts between health plans or insurers and
providers. SB 1340 is pending on the Assembly Floor.
6)PREVIOUS LEGISLATION . SB 1163 of 2010 requires health plans
and health insurers to file with DMHC and CDI specified rate
information for individual and small group coverage at least
60 days prior to implementing any rate change. Requires the
filings in the case of large group contracts only for
unreasonable rate increases prior to implementing any such
rate change. Makes additional changes related to notification
requirements for enrollees and insureds.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation (cosponsor)
Teamsters (cosponsor)
UNITE HERE (cosponsor)
American Federation of State, County, and Municipal Employees
California Alliance of Retired Americans
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
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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 California, IFPTE Local 20, AFL-CIO
Health Access
Health Care for All California
International Longshore and Warehouse Union
Professional and Technical Engineers, IFPTE Local 21, AFL-CIO
San Diego Electrical Health and Welfare Trust
Services Employees International Union California
State Building and Construction Trades Council
Utility Workers Union of America, Local 132
Opposition
America's Health Insurance Plans
Anthem Blue Cross
Association of California Life & Health Insurance Companies
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
Kaiser Permanente
Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097