Assembly committee on health jim Wood, Chair sbpca bill Id: sb 908

ASSEMBLY COMMITTEE ON HEALTH

SBPCA Bill Id:SB 908

1. 
   Requires, for the small group market, the health plan or health insurer to notify the contractholder or policyholder of an unreasonable or not justified group rate determination by the Department of Managed Health Care (DMHC) or California Department of Insurance (CDI).
   
2. 
   Requires this notice to be developed by the DMHC or CDI and include the following in 14-point type:
   
   1. 
      That the DMHC or CDI has determined that the rate for this product is unreasonable or not justified after reviewing information submitted by the health plan or health insurer;
      
   2. 
      That the contractholder or policyholder has the option to obtain other coverage from the health plan or health insurer, another health plan or health insurer, or keep this coverage; and,
      
   3. 
      That the small business purchasers may want to contact Covered California at www.coveredca.com for help in understanding available options.
      
3. 
   Allows the health plan or health insurer to include in the notice to the contractholder or policyholder the Internet Website address at which the health plan’s or health insurer’s final justification for implementing an increase has been determined unreasonable. Requires the notice to also be provided to the solicitor for the contractholder or policyholder to assist the purchaser in finding other coverage.
   
4. 
   Exempts DMHC or CDI from existing administrative rulemaking process in implementing this bill.
   

5. 
   Changes existing filing date requirements for rate information from 60 days to 120 days prior to implementing any rate change in the individual and small group market.
   
6. 
   Requires a health plan and health insurer to respond to the DMHC or CDI’s request for any additional information for the DMHC or CDI to complete its review of the health plan or health insurer’s rate filing within three business days of the DMHC or CDI’s request. Requires the DMHC or CDI to determine whether a health plan or health insurer’s rate increase is unreasonable or not justified no later than 60 days following receipt of all the information the DMHC or CDI requires to make its determination.
   
7. 
   Makes other conforming changes that require the DMHC or CDI to accept and post to its Internet Website any public comment on a rate increase submitted to the DMHC or CDI during the 120 day period (previously 60 day period).
   

8. 
   Requires, for the individual market, the health plan or health insurer to notify the contractholder or policyholder of an unreasonable or not justified group rate determination by the DMHC or CDI and, if the open enrollment period has closed for the applicable rate year or there are fewer than 60 days remaining in the open enrollment period for the applicable rate year, to offer the contractholder or policyholder coverage of no less than 60 days to obtain other coverage, including coverage from another health plan or health insurer.
   
9. 
   Requires this notice, if prior to the open enrollment period for the applicable rate year, to include the following in 14-point type:
   
   1. 
      That the DMHC or CDI has determined that the rate for this product is unreasonable or unjustified after reviewing information submitted by the health plan or health insurer;
      
   2. 
      That the contractholder or policyholder has the option to obtain other coverage from the health plan or health insurer, another health plan or health insurer, or keep this coverage;
      
   3. 
      That the contractholder or policyholder may want to contact Covered California at www.coveredca.com for help in understanding available options; and,
      
   4. 
      That many Californians are eligible for financial assistance from Covered California to help pay for coverage.
      
10. 
    Provides that the health plan or health insurer may include in the notice to the contractholder or policyholder the Internet Website address at which the health plan’s or health insurer’s final justification for implementing an increase has been determined unreasonable. Requires the notice to also be provided to the solicitor for the contractholder or policyholder.
    
11. 
    Requires the notice to constitute a triggering event for purposes of special enrollment, as defined in existing law, if the open enrollment period has closed for the applicable rate year or there are fewer than 60 days remaining in the open enrollment period for the applicable rate year.
    
12. 
    Requires the notice to constitute a triggering event for purposes of special enrollment, as defined in Section 1399.849, if the open enrollment period has closed for the applicable rate year or there are fewer than 60 days remaining in the open enrollment period for the applicable rate year.
    
13. 
    Exempts the DMHC or CDI from the provisions of existing administrative rulemaking law.
    

1. 
   Establishes the DMHC to regulate health plans and the CDI to regulate health insurers.
   
   
   
2. 
   Requires health plans and health insurers, for the small group and individual markets, to file with DMHC and CDI, at least 60 days prior to implementing any rate change, specified rate information so that the DMHC and CDI can review the information for unreasonable rate increases.
   
   
   
3. 
   Requires DMHC and CDI to accept and post to their Internet Websites any public comment on a rate increase submitted to the DMHC and CDI during the 60 day period. Requires DMHC and CDI to post on their Internet Websites any changes submitted by the health plan or health insurer to the proposed rate increase, including any documentation submitted by the health plan or health insurer supporting those changes. Requires DMHC and CDI to post on their Internet Websites any decision that an unreasonable rate increase is not justified or that a rate filing contains inaccurate information.
   
   
   
4. 
   Requires DMHC and CDI to report to the Legislature at least quarterly on all unreasonable rate filings.
   

5. 
   Requires health plans, for certain contracts, to provide 60 days’ notice to contractholders prior to the effective date of the contract renewal for any change in premium rate or coverage.
   

6. 
   Establishes the federal Patient Protection and Affordable Care Act (ACA), which enacts various health care coverage market reforms. Requires each state by January 1, 2014, to establish an Exchange (Covered California in this state) that makes qualified health plans (QHPs) available to qualified individuals and qualified employers. Requires, if a state does not establish an Exchange, the federal government to administer the Exchange. Establishes requirements for the Exchange and for QHPs participating in the Exchange, and defines who is eligible to purchase coverage in the Exchange.
   

7. 
   Establishes Covered California within state government, as an independent public entity not affiliated with an agency or department, and requires it to compare and make available through selective contracting health insurance for individual and small business purchasers as authorized under the ACA. Specifies the powers and duties of the board governing the Exchange, and requires the board to facilitate the purchase of QHPs though the Exchange by qualified individuals and small employers.
   

8. 
   Requires, pursuant to federal Centers for Medicare and Medicaid Services (CMS) regulations, if a health insurance issuer implements a rate increase determined to be unreasonable, with the later of 10 business days after the implementation of such increase or the health insurance issuer’s receipt of final determination that a rate increase is an unreasonable rate increase, the health insurance issuer to submit a final justification and prominently post it on its Internet Website in a form and in a manner prescribed by the federal Secretary of the Department of Health and Human Services for at least three years. CMS will also post the issuer’s final justification on the CMS Website for at least three years.
   

1. 
   PURPOSE OF THIS BILL. According to the author, most health plans and health insurers (carriers) do not receive unreasonable rate determinations and many reduce or withdraw their rates during the rate review process. However, some carriers choose to move forward with unreasonable rates even after the rate has been determined unreasonable by DMHC or CDI. In those cases, the DMHC and CDI issue press releases to let the public know about the unreasonable rate determination. But no one tells the individual consumer or the small business owner who purchased the coverage if the rate has been found unreasonable or unjustified. This means consumers and small business owners can be unwittingly locked into an unreasonable rate because they are not aware that it is unreasonable. This bill requires a health plan or insurer whose rate has been determined unreasonable to share that information with the purchasers of that product or policy and allow those purchasers to shop around for more reasonably priced coverage. The author states that in a world where people are compelled to purchase health insurance, we must empower consumers to make informed decisions about the coverage they are choosing.
   
   
   
2. 
   BACKGROUND. As of September 1, 2011, the ACA and rate review regulation require review of rate increases of 10% or more. A non-grandfathered health plan sold in the individual or small group market that increases its rates by 10% or more is subject to review to determine whether the increase is unreasonable. Most states and territories have an effective rate review program and will review rate increases submitted by health insurance issuers in their states and territories. CMS will review rate increases in the market(s) where states do not have an effective rate review program. Additionally, effective January 1, 2014, all health plans compliant with the rate monitoring and single risk pool requirements of the ACA are required to submit all plans within the single risk pool. According to CMS, Californians were saved from rate increases totaling as high as 87% after a health insurer withdrew its proposed increase after scrutiny by CDI.
   
   
   
   1. 
      Rate Review in California. Under the ACA and SB 1163 (Leno), Chapter 661, Statutes of 2010, carriers must 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. Rates must be submitted to both the DMHC (and CDI) and their customers at least 60 days in advance of the increase. CDI has encouraged insurers to allow at least 120 days for CDI to review rates. The carriers also must submit an analysis performed by an independent actuary who is not employed by a plan or insurer. The DMHC or CDI do not have the authority to modify or reject rate changes.
      
      
      
   2. 
      Rate Development. For health plans participating in Covered California, the rate negotiation process typically begins in May of the year prior to the applicable rate year. Preliminary rates are announced near the end of the summer and final rates are published in the fall prior to the open enrollment period. Covered California’s open enrollment for 2016 begins November 1, 2015 and ends January 31, 2016. Small businesses are not subject to a uniform open enrollment period. Coverage can be issued any time during the year. In the small group market, carrier contracts with the small business purchaser typically cover a 12 month period and are guaranteed renewable but not necessarily at the prior year’s rate.
      
      
      
   3. 
      Rate Review Report. The California Public Interest Research Group (CALPIRG) has published an analysis of implementation of California’s Health Insurance Rate Review: the First Five Years. The CALPIRG analysis included posted rate filings that were scheduled to go into effect between January 1, 2011 and January 1, 2016. The CALPIRG report indicates that carriers have filed 565 proposed rate changes in the individual and small group markets within those five years. Carriers have voluntarily reduced or withdrawn 69 rate filings after beginning the rate review process (12% of the total number of filings posted). Between 2011 and 2016, DMHC and CDI estimate that Californians have saved $417 million dollars as a result of rate increases that were filed with the regulator and subsequently reduced. Carriers pushed ahead with their rate increases despite regulators declaring them unreasonable at least 26 times. Over the last five years, over one million Californians have been subject to rate hikes that were declared unreasonable but still went into effect. Many of the same companies have had multiple rate hikes declared unreasonable.
      
      
      
3. 
   SUPPORT. Health Access California, sponsor of this bill, writes that this bill informs individual consumers and small business owners if the rate for their product is unreasonable or unjustified and gives them the opportunity to shop for other coverage. The California State Council of the Service Employees International Union writes that when California’s $123 billion health insurance industry is allowed to increase rates without justification, it contributes to the problem of spiraling health care costs, which cuts into wages and benefits for California’s workers. The American Cancer Society Cancer Action Network states that currently there is no requirement to share the DMHC or CDI’s unreasonable determination with purchasers who are unknowingly locked into those unreasonable rates. With this bill’s notification requirements and allowing purchasers to shop for new coverage, the affordability that the ACA intended is maintained. AARP states that this bill provides additional protections to health care consumers by providing them more time to shop for a new policy when an insurance company raises rates.
   
4. 
   OPPOSE UNLESS AMENDED. The Association of California Life and Health Insurance Companies (ACLHIC) states that the rate notice should be clarified to include an explanation as to why the insurer decided to go forward with that rate, as they are currently allowed to do so under the federal guidelines. Additionally, ACLHIC notes that the rate notice should be provided at the time of renewal, and include a requirement that the regulator perform a timely review of the proposed rates.
   
5. 
   OPPOSITION. The California Association of Health Plans (CAHP) states that this bill will subject health plans to new administrative burdens and inadvertently disrupt the health insurance market with additional and overlapping enrollment options and rate freezes. CAHP contends that the new notice requirement is misleading because it could imply that the consumer must switch to a new product. CAHP also states that this bill will cause disruption and needless churn in the market since consumers already review a rate notice at the annual open enrollment period. Additionally, CAHP contends that this bill results in unsound rate freezes in that health plans are required to go back in time and change rates after an unreasonable determination and after new contracts have been negotiated with providers and after new benefit designs have been adopted. Finally, CAHP states that this bill’s new special enrollment option will cause disruption and is unnecessary since an individual rate cannot be changed within a 12-month period and consumers, with notice of the rate renewal can choose a new plan at the beginning of annual open enrollment. The America’s Health Insurance Plans (AHIP) states that this bill is unnecessary as consumer disclosure is already required under the ACA and on the insurer’s Website. Lastly, AHIP contends that the rate notice does not conform to statutory criteria for review in that this bill should not lead the consumer to believe that the rate is unjustified but rather instead inform the consumer that the rate was determined unreasonable. Kaiser Permanente writes that trying to create consumer protections after the plan is in “market” is confusing and could result in individuals being uninsured, or opting for a more expensive plan that does not suit their needs.
   
6. 
   PREVIOUS LEGISLATION.
   
   1. 
      SB 546 (Leno), Chapter 801, Statutes of 2015, establishes weighted average rate increase disclosure requirements for a health plan’s or insurer’s aggregated large group market products and requires DMHC and CDI to conduct a public meeting regarding large group rate changes, as specified.
      
   2. 
      SB 1182 (Leno), Chapter 577, Statutes of 2014, requires health plans and insurers to share specified data with purchasers that have 1,000 or more enrollees, insureds or that are multiemployer trusts.
      
   3. 
      SB 746 (Leno) of 2013, would have established new data reporting requirements on all health plans and insurers applicable to products sold in the large group. SB 746 was vetoed by the Governor. In his veto message, the Governor stated:
      

4. 
   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.
   
8. 
   AUTHOR’S AMENDMENTS. This bill includes a notification with specific language of an unreasonable or not justified rate determination by the DMHC or CDI in the individual and small group markets. This bill also required health plans and health insurers to offer the coverage of no less than 60 days in order for the contractholder or policyholder to obtain other coverage, including coverage from another health plan or health insurer. In the individual market, health plans and health insurers were also required to offer the prior rate during this 60 day special enrollment period.
   

1. 
   Require DMHC or CDI to develop template notification;
   
2. 
   Change the existing requirements to file rate information in the individual and small group markets from 60 days to at least 120 days prior to implementing any rate change; and,
   
3. 
   Delete the prior rate offering in the individual market.
   

Health Access California (sponsor)

AARP

American Cancer Society Cancer Action Network

Asian Law Alliance

California Labor Federation, AFL-CIO

California Medical Association

California Pan-Ethnic Health Network

California State Council of the Service Employees International Union

California Teachers Association

CALPIRG

Coalition of California Welfare Rights Organizations

Consumers Union

Los Angeles Professional Peace Officers Association

National Association of Social Workers, California Chapter

Organization of SMUD Employees

San Diego County Court Employees Association

San Luis Obispo County Employees Association

Western Center on Law and Poverty

Opposition

America’s Health Insurance Plans

Association of California Life and Health Insurance Companies

Anthem

California Association of Health Plans