BILL ANALYSIS �
SB 1182
Page 1
SENATE THIRD READING
SB 1182 (Leno)
As Amended August 18, 2014
Majority vote
SENATE VOTE :21-12
HEALTH 13-6 APPROPRIATIONS 12-5
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|Ayes:|Pan, Ammiano, Bonilla, |Ayes:|Gatto, Bocanegra, |
| |Bonta, Chesbro, Gomez, | |Bradford, |
| |Gonzalez, | |Ian Calderon, Campos, |
| |Roger Hern�ndez, | |Eggman, Gomez, Holden, |
| |Lowenthal, Nazarian, | |Pan, Quirk, |
| |Ridley-Thomas, Rodriguez, | |Ridley-Thomas, Weber |
| |Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Maienschein, Ch�vez, |Nays:|Bigelow, Donnelly, Jones, |
| |Mansoor, Waldron, | |Linder, Wagner |
| |Patterson, Wagner | | |
| | | | |
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SUMMARY : Requires health plans and insurers in the large group
market to file aggregate rate information with state regulators
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 to regulators
(the Department of Managed Health Care (DMHC), and the
Department of Insurance (CDI) specified aggregate information
for rates in the large group market, including total earned
premiums, total incurred claims, average rate of increase, and
number of enrollees affected.
2)Requires health plans and insurers to also submit the
methodology used to develop rates, including: base rates;
factors used to adjust the base rates; variations in rates due
to geography, covered benefits, or benefit design; enrollment
in products based on actuarial value; information about
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modified community rating; and year-to-year changes in the
methodology.
3)Requires health plans and insurers to submit additional
information about large group market products, both in
aggregate and categorized by actuarial value, including:
average rate changes; average rates implemented; average rates
requested; a comparison of rate changes over time to claims
costs; changes to enrollee cost sharing and benefits; and
changes in administrative costs.
4)Requires health plans and insurers to submit aggregate
information regarding trend factors used to develop the change
in rate, including trends in benefits aggregated by benefit
category, including hospital inpatient or outpatient,
physician services, prescription drugs and other ancillary
services, laboratory, and radiology. Requires a health plan
with exclusively contracts with no more than two medical
groups in the state to provide or arrange for its enrollees'
medical services (i.e. Kaiser Permanente), to use benefit
categories that are, to the maximum extent possible, the same
or similar to benefit categories used by other plans.
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, to annually disclose
specified aggregate data for its large group contracts or
policies, including: estimated year-to-year cost change by
major service category, both due to increased volume of
services and increased cost of services; the amount projected
trend attributable to use of services by service and disease
category, capital investment, and community benefit
expenditures; and costs attributed to contracting medical
groups, as specified.
6)Allows DMHC and CDI to require all health plans and insurers,
respectively, to submit all rate filing to the National
Association of Insurance Commissioners' System for Electronic
Rate and Form Filing. Deems such submission to satisfy the
rate filing requirements of this bill.
Sharing Of Claims And Other Patient-Level Data:
7)Requires a health plan or insurer annually to provide
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deidentified 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.
Requires health plans and insurers to obtain a determination
by a qualified statistician that the claims data do not
provide a reasonable basis from which to identify an
individual.
8)Makes the information shared not subject to public
availability, as specified.
9)Requires a health plan or insurer, if claims data are not
available, to provide: deidentified data sufficient for the
purchaser to compare costs of similar services from other
health plans or insurers; and deidentified patient level data
that includes demographics and encounter data, including data
used to experience rate the group, as specified. Requires the
health plan or insurer, for purposes of this requirement, to
obtain a formal determination, in writing, from a qualified
statistician that the shared data do not provide a reasonable
basis from which to identify an individual.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
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 in the range of $1 million to review aggregate
data filings.
b) Potential enforcement costs of $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 in the range of $350,000 to review required rate
increase information and aggregate data filings.
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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 : 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. This bill is intended to bring transparency
to this market in an effort to control costs.
According to the Medical Expenditure Panel Survey (MEPS), a
survey of employers conducted by the United States Census Bureau
that collects information on employer-sponsored health
insurance, premiums for employer-based coverage have increased
significantly over the past decade. MEPS data from 2012 show
the average annual premium for individual private sector
employer coverage in California is $5,422, an 85% increase since
2002. For family coverage, the average premium was $15,898, a
90% increase since 2002. For comparison, prices for goods and
services increased 27.6% during this period, according to the
Bureau of Labor Statistics' Consumer Price Index.
The federal Patient Protection and Affordable Care Act (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. However,
the rate review provisions in the 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 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.
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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. 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 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.
Health Access California, in support, states that contrary to
expectations, the federal government has not established
criteria to implement rate review in the large group market.
California Public Interest Research Group (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.
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, 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, also in opposition,
argues that current law creates an adequate framework for large
group rate review, should the federal government choose to
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require it. 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.
Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097
FN: 0004846