BILL ANALYSIS �
SB 1182
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1182 (Leno) - As Amended: June 30, 2014
Policy Committee: HealthVote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes numerous requirements on health plans and
insurers to provide data to regulators and their large-group
customers about premiums rates and cost drivers, as well as
actual paid claims. Specifically, this bill:
1)Requires health plans and insurers to submit a variety of
cost-related information to state regulators on any rate
increases in the large-group market of over five percent over
the prior year.
2)Authorizes regulators to review rates and related information
provided pursuant to (1), above.
3)Modifies information required to be filed for current rate
review processes in the small-group and individual markets.
4)Requires health plans and insurers to file aggregate data on
products in their large-group markets.
5)Requires health plans and insurers, upon request, to share
specified data on individual claims with their large-group
customers at no charge.
FISCAL EFFECT
1)One-time costs to DMHC of $250,000 to issue regulations, as
well as the following ongoing costs (all costs are Managed
Care Fund):
a) Costs likely in excess of $5 million to review required
rate increase information and aggregate data filings.
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b) Enforcement costs of $350,000 for the first two years,
and $100,000 ongoing, to address complaints and staff
trials regarding alleged violations.
1)One-time costs to CDI of $250,000 to issue regulations, as
well as the following ongoing costs (all costs are Insurance
Fund):
a) Costs likely in excess of $1 million to review required
rate increase information and aggregate data filings.
b) Unknown, likely minor enforcement costs.
3)Unknown, significant cost pressure to CalPERS for the
provision of health benefits, assuming costs of compliance are
passed on to large-group customers in the form of a general
increase in administrative costs.
COMMENTS
1)Purpose . According to the author, 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. The author notes current law requires
health plans and insurers to justify premium increases for the
individual and small-group markets. This bill is intended to
improve transparency in the large-group market.
2)Rate Review . The federal Patient Protection and Affordable
Care Act (ACA) requires the federal Secretary of Health and
Human Services (HHS), in conjunction with states, to establish
a process to review premium increases to determine whether
they are unreasonable. Federal regulations require review of
rate increases in the individual and small-group markets
(currently 50 employees and under). California authorized the
DMHC and CDI to review rates pursuant to federal requirements
through SB 1163 (Leno), Chapter 661, Statutes of 2010.
Individual and small-group rate increases have been submitted
and reviewed since 2011.
Although current state law also authorizes state regulators to
review "unreasonable premium rate increases" in the
large-group market, neither the federal government nor state
regulators have defined "unreasonable" as it applies to this
market, and thus this code section is inoperative. The
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federal government does not require review of large-group
rates. Federal regulations listed a number of reasons for
exempting large-group rates, including that purchasers in this
market often have greater leverage than those in the
individual and small-group markets, and therefore may be
better able to avoid imposition of unreasonable rate
increases. This bill would strike the word "unreasonable"
and instead require review of all proposed rate increases over
5% in the large-group market.
3)Disclosure of Data to Large-Group Purchasers . Current state
law establishes some limited transparency requirements with
respect to health care pricing, such as standard charges for
hospital procedures, but does not dictate the type of
information health plans are required to provide their large
group customers. Plans indicate this market is extremely
competitive, and that they provide data to their customers
upon request. This data appears to generally be provided in a
high-level, aggregated manner. In some cases, other
information is provided to an employer, such as analysis of
specific, unusually expensive claims, or analysis of the most
costly chronic conditions. This bill would require
individual-level data on each claim paid or encounter, as well
as related cost information, to be provided upon request by a
health plan to a large employer. This detailed data would
likely require significant analytical capacity on the part of
a requesting employer in order to use the data effectively.
For example, health plans provide individual-level data on
claims and encounters paid for by CalPERS, the largest
large-group purchaser in the state, which feeds into a
sophisticated data warehouse administered by a CalPERS
contractor. Union trusts supporting this bill state they
could use, and have requested, this detailed data, but are
stymied by health plans' refusal to provide it.
4)Support . Numerous labor unions, groups representing seniors,
and the California Department of Insurance (CDI) support this
bill. The California Labor Federation (Labor Fed), a
co-sponsor of this bill, believes this bill will help address
rising health care costs. 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,
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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.
Health Access California, which sponsored SB 1163, states 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 defined
unreasonable rate increases.
5)Opposition . This bill is opposed by the Department of Finance
(DOF), health plans and insurers, agents and brokers, and the
California Chamber of Commerce (CalChamber). CalChamber,
representing employers, is concerned this bill's rate review
process could actually make large-group plans more expensive,
and 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.
The Association of California Life and Health Insurance
Companies argues 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. America's Health Insurance Plans (AHIP)
contends large group plans are very sophisticated in their
product designs, which are often tailored to the needs of the
large group purchaser. The California Association of Health
Plans (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. California Association
of Health Underwriters, representing agents and brokers,
states health plans go to great lengths to provide as much
information as possible to purchasers in highly competitive
markets, and that the bill's extraordinary data demands are
not necessary. Kaiser Permanente states while they appreciate
this bill does not target a single company as did SB 746
(Leno), they remain opposed to the unnecessary intervention in
contract negotiations between plans and large employers.
The DOF states provisions in this bill related to data
reporting and de-identified claims data are almost identical
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to the provisions in SB 746 (2013), a bill that was vetoed by
the Governor. In the veto message, the Governor indicated that
if voluntary efforts to make health care costs more
transparent failed, he would consider taking more serious
action. DOF states at this time there is no indication whether
voluntary efforts have failed to address the issue and whether
more serious action is necessary. Further, DOF contends the
bill would require health plans to annually disclose
aggregate, product, and cost data but does not provide clear
direction as to what to do with the accumulated data; that it
is unclear as to whether this bill fully addresses privacy
concerns and discrimination that may arise from the release of
de-identified claims data reporting option; and that the bill
increases costs and creates additional workload at a time when
the DMHC is undergoing major and complex changes due to the
Affordable Care Act's implementation.
6)Staff Comments . The format of the data required to be
disclosed to large-group purchasers, and a process for
resolving disputes, would likely need to be addressed through
DMHC/CDI regulation and guidance. The datasets required to be
disclosed are large and could be complex, and it could require
technical expertise to establish standards and resolve
disputes related to data adequacy.
In addition, it is unclear how the regulators could enforce
the requirement that disclosure of data be made no charge to
the large-group purchaser. Plans and insurers indicate that
developing patient-level data that comply with privacy
requirements will be costly for their systems. Options for
recouping administrative costs are finite. Any increased
administrative costs will be passed on to customers in some
manner. If it cannot be charged to the large-group purchaser,
it could lead to a general increase in administrative costs.
In that case, all purchasers would subsidize the
administrative costs of costly data requests on the part of
the requesting purchasers, even if they did not request data.
Thus, it appears reasonable that large-group purchasers making
costly data requests pay the associated costs. For example,
the costs of the infrastructure for delivering claims and
encounter data to CalPERS is included in rates paid to
CalPERS's contracted health plans.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081
SB 1182
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