BILL NUMBER: SB 546 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 2, 2015
AMENDED IN SENATE APRIL 30, 2015
INTRODUCED BY Senator Leno
FEBRUARY 26, 2015
An act to amend Sections 1374.21 and 1385.04 of, and to add
Section 1385.045 to, the Health and Safety Code, and to amend
Sections 10181.4 and 10199.1 of, and to add Section 10181.45 to, the
Insurance Code, relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
SB 546, as amended, Leno. Health care coverage: rate review.
Existing law, the federal Patient Protection and Affordable Care
Act (PPACA), requires the United States Secretary of Health and Human
Services to establish a process for the annual review of
unreasonable increases in premiums for health insurance coverage in
which health insurance issuers submit to the secretary and the
relevant state a justification for an unreasonable premium increase
prior to implementation of the increase. The PPACA imposes an
exercise excise tax on a provider of
applicable employer-sponsored health care coverage, if the aggregate
cost of that coverage provided to an employee exceeds a specified
dollar limit.
Existing state law, the Knox-Keene Health Care Service Plan Act
of 1975, provides for the licensure and regulation of health care
service plans by the Department of Managed Health Care and makes a
willful violation of the act a crime. Existing law also provides for
the regulation of health insurers by the Department of Insurance.
Existing law requires a health care service plan or health
insurer in the individual, small group, or large group markets to
file rate information with the Department of Managed Health Care or
the Department of Insurance. For large group plan contracts and
policies, existing law requires a plan or insurer to file rate
information with the respective department at least 60 days prior to
implementing an unreasonable rate increase, as defined in PPACA.
Existing law requires the plan or insurer to also disclose specified
aggregate data with that rate filing. Existing law authorizes the
respective department to review those filings, to report to the
Legislature at least quarterly on all unreasonable rate filings, and
to post on its Internet Web site a decision that an unreasonable rate
increase is not justified or that a rate filing contains inaccurate
information. Existing law requires prior notice, as specified, of
changes to premium rates or coverage in order for those changes to be
effective.
This bill would recast the rate information requirement to require
large group health care service plans and health insurers to file
with the respective department, at least 60 days prior to
implementing any rate increase, all required rate information for any
product with a rate increase if any of certain conditions apply. The
bill would require the respective department to review that
information and finalize a decision as to whether the rate is
reasonable or unreasonable within 60 days after receiving the
information. The bill would require the notice of changes to premium
rates or coverage to provide additional information regarding whether
the rate change is greater than average rate increases approved by
the California Health Benefit Exchange or by the Board of
Administration of the Public Employee's
Employees ' Retirement System, or would be subject
to the excise tax described above. The bill would require the plan or
insurer to file additional aggregate rate information with the
respective department on or before October 1, 2016, and annually
thereafter. The bill would require the respective department to
conduct a public meeting regarding large group rate changes. The bill
would require these meetings to occur annually after the respective
department has reviewed the large group rate information required to
be submitted annually by the plan or insurer.
insurer, as specified. The bill would authorize a health care
service plan or health insurer that exclusively contracts with no
more than 2 medical groups to provide or arrange for professional
medical services for enrollees or insureds to meet this requirement
by disclosing its actual trend experience for the prior year using
benefit categories that are the same or similar to those used by
other plans or health insurers.
Because a willful violation of the bill's requirements by a health
care service plan would be a crime, the bill would impose a
state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1374.21 of the Health and Safety Code is
amended to read:
1374.21. (a) (1) A change in premium rates or changes in coverage
stated in a group health care service plan contract shall not become
effective unless the plan has delivered in writing a notice
indicating the change or changes at least 60 days prior to the
contract renewal effective date.
(2) The notice delivered pursuant to paragraph (1) for large group
health plans shall also include the following information:
(A) The amount by which the rate change for the majority of months
the rate is proposed to be in effect is greater than the average
rate increase for individual market products approved by the
California Health Benefit Exchange for the calendar year.
(B) The amount by which the rate change for the majority of months
the rate is proposed to be in effect is greater than the average
rate increase approved by the California Health Benefits
Exchange Board of Administration of the Public
Employees' Retirement System for the calendar year.
(C) Whether the rate change would cause the health plan for the
large group purchaser to incur the excise tax for any part of the
period the rate increase is proposed to be in effect.
(b) A health care service plan that declines to offer coverage to
or denies enrollment for a large group applying for coverage shall,
at the time of the denial of coverage, provide the applicant with the
specific reason or reasons for the decision in writing, in clear,
easily understandable language.
SEC. 2. Section 1385.04 of the Health and Safety Code is amended
to read:
1385.04. (a) For large group health care service plan contracts,
all health plans shall file with the department all required rate
information for rate changes aggregated for the entire large group
market. This information shall be submitted on or before October 1,
2016, and on or before October 1, annually thereafter.
(b) (1) For large group rate filings, health plans shall submit
all information that is required by PPACA. A plan shall also submit
any other information required pursuant to any regulation adopted by
the department to comply with this article.
(2) For each health plan that offers coverage in the large group
market, the department shall conduct a public meeting regarding large
group rate changes. The public meeting shall occur after
the department has reviewed the information required in subdivision
(a), on or before November 1, 2016, and on or before
November 1, annually thereafter. (a). The department
shall schedule the public meeting between November 1, 2016, and March
1, 2017, and annually thereafter between November 1, and March 1, of
the subsequent year. The department shall schedule the public
meeting based on the number of covered lives for the health plan in
the large group market, with the largest health plan first, and the
smallest health plan last.
(c) A health care service plan subject to subdivision (a) shall
also disclose the following for the aggregate rate filing for the
large group market submitted under this section in the large group
health plan market:
(1) Number and percentage of rate filings reviewed by the
following:
(A) Plan year.
(B) Segment type.
(C) Product type.
(D) Number of subscribers.
(E) Number of covered lives affected.
(2) Any factors affecting the rate, and the actuarial basis for
those factors, including:
(A) Geographic region.
(B) Age, including age rating factors.
(C) Occupation.
(D) Industry.
(E) Health status, including health status factors considered.
(F) Employee, employee and dependents, including a description of
the family composition used.
(G) Enrollee share of premiums.
(H) Enrollee cost sharing.
(I) Covered benefits in addition to basic health care services, as
defined in subdivision (b) of Section 1345, and other benefits
mandated under this article.
(J) Any other factors that affect the rate that are not otherwise
specified.
(3) (A) The plan's overall annual medical trend factor assumptions
in each rate filing for all benefits and by aggregate benefit
category, including hospital inpatient, hospital outpatient,
physician services, prescription drugs and other ancillary services,
laboratory, and radiology. 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 shall instead 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.
(B) 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, prescription drugs and other
ancillary services, laboratory, and radiology. 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 shall instead 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.
(C) A comparison of claims cost and rate of changes over time.
(D) Any changes in enrollee cost sharing over the prior year
associated with the submitted rate filing.
(E) Any changes in enrollee benefits over the prior year
associated with the submitted rate filing.
(F) Any cost containment and quality improvement efforts since the
plan's last rate filing for the same category of health benefit
plan. To the extent possible, the plan shall describe any significant
new health care cost containment and quality improvement efforts and
provide an estimate of potential savings together with an estimated
cost or savings for the projection period.
(G) The average rate increase for the large group market enrollees
covered in the filing with the average rate weighted by the number
of covered lives.
(d) The department may require all health care service plans to
submit all rate filings to the National Association of Insurance
Commissioners' System for Electronic Rate and Form Filing (SERFF).
Submission of the required rate filings to SERFF shall be deemed to
be filing with the department for purposes of compliance with this
section.
SEC. 3. Section 1385.045 is added to the Health and Safety Code,
to read:
1385.045. (a) (1) For large group health care service plan
contracts, all health plans shall file with the department at least
60 days prior to implementing any rate increase all required rate
information for any product with a rate increase if either of the
following apply:
(A) The rate increase is greater than 150 percent of
the average rate increase determined under Section 1385.04.
(B) The rate increase would cause the health plan for the large
group purchaser to incur the excise tax for any part of the period
the rate increase is proposed to be in effect.
(2) This filing shall be concurrent with the written notice
described in subdivision (a) of Section 1374.21.
(b) A plan shall disclose to the department all of the following
for each large group rate filing described in subdivision (a):
(1) Company name of plan and contact information.
(2) Number of plan contract forms covered by the filing.
(3) Plan contract form numbers covered by the filing.
(4) Product type, such as a preferred provider organization or
health maintenance organization.
(5) Segment type.
(6) Type of plan involved, such as for profit or not for profit.
(7) Whether the products are opened or closed.
(8) Enrollment in each plan contract and rating form.
(9) Enrollee months in each plan contract form.
(c) Any factors affecting the rate, and the actuarial basis for
the factor, including, but not limited to:
(1) Geographic region.
(2) Age, including age rating factors.
(3) Occupation.
(4) Industry.
(5) Health status, including health status factors considered.
(6) Employee, employee and dependents, including a description of
the family composition used.
(7) Enrollee share of premiums.
(8) Enrollee cost sharing.
(9) Covered benefits in addition to basic health care services, as
defined in subdivision (b) of Section 1345, and other benefits
mandated under this article.
(10) Any other factor that affects the rate that is not otherwise
specified.
(d) The plan shall also disclose the following:
(1) Annual rate.
(2) Total earned premiums in each plan contract form.
(3) Total incurred claims in each plan contract form.
(4) Average rate increase initially requested.
(5) Review category: initial filing for new product, filing for
existing product, or resubmission.
(6) Average rate of increase.
(7) Effective date of rate increase.
(8) Number of subscribers or enrollees affected by each plan
contract form.
(9) The plan's overall annual medical trend factor assumptions in
each rate filing for all benefits and by aggregate benefit category,
including hospital inpatient, hospital outpatient, physician
services, prescription drugs and other ancillary services,
laboratory, and radiology. 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 shall instead 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.
(10) 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, prescription drugs and other
ancillary services, laboratory, and radiology. 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 shall instead 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.
(11) A comparison of claims cost and rate of changes over time.
(12) Any changes in enrollee cost sharing over the prior year
associated with the submitted rate filing.
(13) Any changes in enrollee benefits over the prior year
associated with the submitted rate filing.
(14) The certification described in subdivision (b) of Section
1385.06.
(15) Any changes in administrative costs.
(16) Any other information required for rate review under PPACA.
(17) Any cost containment and quality improvement efforts since
the plan's last rate filing for the same category of health care
service plan. To the extent possible, the plan shall describe any
significant new health care cost containment and quality improvement
efforts and provide an estimate of potential savings together with an
estimated cost or savings for the projection period.
(e) Within 60 days after receiving complete information from the
plan consistent with this section, the department shall complete its
review and finalize a decision as to whether the rate is reasonable
or unreasonable.
(f) The department may require all health care service plans to
submit all rate filings to the National Association of Insurance
Commissioners' System for Electronic Rate and Form Filing (SERFF).
Submission of the required rate filings to SERFF shall be deemed to
be filing with the department for purposes of compliance with this
section.
(g) A plan shall submit any other information required under
PPACA. A plan shall also submit any other information required
pursuant to any regulation adopted by the department to comply with
this article.
SEC. 4. Section 10181.4 of the Insurance Code is amended to read:
10181.4. (a) For large group health insurance policies, all
health insurers shall file with the department all required rate
information for rate changes aggregated for the entire large group
market. This information shall be submitted on or before October 1,
2016, and on or before October 1, annually thereafter.
(b) (1) For large group rate filings, health insurers shall submit
all information that is required by PPACA. A health insurer shall
also submit any other information required pursuant to any regulation
adopted by the department to comply with this article.
(2) For each health insurer that offers coverage in the large
group market, the department shall conduct a public meeting regarding
large group rate changes. The public meeting shall occur
after the department has reviewed the information required in
subdivision (a), on or before November 1, 2016, and on or
before November 1, annually thereafter. (a). The
department shall schedule the public meeting between November 1,
2016, and March 1, 2017, and annually thereafter between November 1,
and March 1, of the subsequent year. The department shall schedule
the public meeting based on the number of covered lives for the
health insurer in the large group market, with the largest health
insurer first, and the smallest health insurer last.
(c) A health insurer subject to subdivision (a) shall also
disclose the following for the aggregate rate filing for the large
group market submitted under this section in the large group health
insurance market:
(1) Number and percentage of rate filings reviewed by the
following:
(A) Plan year.
(B) Segment type.
(C) Product type.
(D) Number of insureds.
(E) Number of covered lives affected.
(2) Any factors affecting the rate, and the actuarial basis for
those factors, including:
(A) Geographic region.
(B) Age, including age rating factor.
(C) Occupation.
(D) Industry.
(E) Health status, including health status factors considered.
(F) Employee, employee and dependents, including a description of
the family composition used.
(G) Insured share of premiums.
(H) Insured cost sharing.
(I) Covered benefits in addition to basic health care services, as
defined in subdivision (b) of Section 1345 of the Health and Safety
Code, and other benefits mandated under this article.
(J) Any other factors that affect the rate that are not otherwise
specified.
(3) (A) The health insurer's overall annual medical trend factor
assumptions in each rate filing for all benefits and by aggregate
benefit category, including hospital inpatient, hospital outpatient,
physician services, prescription drugs and other ancillary services,
laboratory, and radiology. A health insurer that exclusively
contracts with no more than two medical groups in the state to
provide or arrange for professional medical services for the insureds
of the health insurer shall instead 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 health
insurers.
(B) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual health insurer
contract trends by aggregate benefit category, such as hospital
inpatient, hospital outpatient, physician services, prescription
drugs and other ancillary services, laboratory, and radiology. A
health insurer that exclusively contracts with no more than two
medical groups in the state to provide or arrange for professional
medical services for the insureds of the health insurer shall instead
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 health insurers.
(C) A comparison of claims cost and rate of changes over time.
(D) Any changes in insured cost sharing over the prior year
associated with the submitted rate filing.
(E) Any changes in insured benefits over the prior year associated
with the submitted rate filing.
(F) Any cost containment and quality improvement efforts since the
health insurer's last rate filing for the same category of health
insurance policy. To the extent possible, the health insurer shall
describe any significant new health care cost containment and quality
improvement efforts and provide an estimate of potential savings
together with an estimated cost or savings for the projection period.
(G) The average rate increase for the large group market insureds
covered in the filing with the average rate weighted by the number of
covered lives.
(d) The department may require all health insurers to submit all
rate filings to the National Association of Insurance Commissioners'
System for Electronic Rate and Form Filing (SERFF). Submission of the
required rate filings to SERFF shall be deemed to be filing with the
department for purposes of compliance with this section.
SEC. 5. Section 10181.45 is added to the Insurance Code, to read:
10181.45. (a) (1) For large group health insurance policies, all
health insurers shall file with the department at least 60 days prior
to implementing any rate increase all required rate information for
any product with a rate increase if either of the following apply:
(A) The rate increase is greater than 150 percent of
the average rate increase determined under Section 10181.4.
(B) The rate increase would cause the health insurer for the large
group purchaser to incur the excise tax for any part of the period
the rate increase is proposed to be in effect.
(2) This filing shall be concurrent with the written notice
described in subdivision (a) of Section 10199.1.
(b) A health insurer shall disclose to the department all of the
following for each large group rate filing described in subdivision
(a):
(1) Company name of the health insurer and contact information.
(2) Number of health insurance policies covered by the filing.
(3) Health insurance policy form numbers covered by the filing.
(4) Product type, such as a preferred provider organization or
health maintenance organization.
(5) Segment type.
(6) Type of health insurer involved, such as for profit or not for
profit.
(7) Whether the products are opened or closed.
(8) Enrollment in each health insurance policy and rating form.
(9) Insured months in each health insurance policy form.
(c) Any factors affecting the rate, and the actuarial basis for
the factor, including, but not limited to:
(1) Geographic region.
(2) Age, including age rating factors.
(3) Occupation.
(4) Industry.
(5) Health status, including health status factors considered.
(6) Employee, employee and dependents, including a description of
the family composition used.
(7) Insured share of premiums.
(8) Insured cost sharing.
(9) Covered benefits in addition to basic health care services, as
defined in subdivision (b) of Section 1345, and other benefits
mandated under this article.
(10) Any other factor that affects the rate that is not otherwise
specified.
(d) The health insurer shall also disclose the following:
(1) Annual rate.
(2) Total earned premiums in each health insurance policy form.
(3) Total incurred claims in each health insurance policy form.
(4) Average rate increase initially requested.
(5) Review category: initial filing for new product, filing for
existing product, or resubmission.
(6) Average rate of increase.
(7) Effective date of rate increase.
(8) Number of insureds affected by each health insurance policy
form.
(9) The health insurer's overall annual medical trend factor
assumptions in each rate filing for all benefits and by aggregate
benefit category, including hospital inpatient, hospital outpatient,
physician services, prescription drugs and other ancillary services,
laboratory, and radiology. A health insurer that exclusively
contracts with no more than two medical groups in the state to
provide or arrange for professional medical services for the insureds
of the health insurer shall instead 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 health
insurers.
(10) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual health
insurance policy trends by aggregate benefit category, such as
hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology. A health insurer that exclusively contracts with no more
than two medical groups in the state to provide or arrange for
professional medical services for the insureds of the health insurer
shall instead 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 health insurers.
(11) A comparison of claims cost and rate of changes over time.
(12) Any changes in insured cost sharing over the prior year
associated with the submitted rate filing.
(13) Any changes in insured benefits over the prior year
associated with the submitted rate filing.
(14) The certification described in subdivision (b) of Section
10181.6.
(15) Any changes in administrative costs.
(16) Any other information required for rate review under PPACA.
(17) Any cost containment and quality improvement efforts since
the health insurer's last rate filing for the same category of health
insurance policy. To the extent possible, the health insurer shall
describe any significant new health care cost containment and quality
improvement efforts and provide an estimate of potential savings
together with an estimated cost or savings for the projection period.
(e) Within 60 days after receiving complete information from the
insurer consistent with this section, the department shall complete
its review and finalize a decision as to whether the rate is
reasonable or unreasonable.
(f) The department may require all health insurers to submit all
rate filings to the National Association of Insurance Commissioners'
System for Electronic Rate and Form Filing (SERFF). Submission of the
required rate filings to SERFF shall be deemed to be filing with the
department for purposes of compliance with this section.
(g) A health insurer shall submit any other information required
under PPACA. A health insurer shall also submit any other information
required pursuant to any regulation adopted by the department to
comply with this article.
SEC. 6. Section 10199.1 of the Insurance Code is amended to read:
10199.1. (a) (1) An insurer or nonprofit hospital service plan or
administrator acting on its behalf shall not terminate a group
master policy or contract providing hospital, medical, or surgical
benefits, increase premiums or charges therefor, reduce or eliminate
benefits thereunder, or restrict eligibility for coverage thereunder
without providing prior notice of that action. The action shall not
become effective unless written notice of the action was delivered by
mail to the last known address of the appropriate insurance producer
and the appropriate administrator, if any, at least 45 days prior to
the effective date of the action and to the last known address of
the group policyholder or group contractholder at least 60 days prior
to the effective date of the action. If nonemployee certificate
holders or employees of more than one employer are covered under the
policy or contract, written notice shall also be delivered by mail to
the last known address of each nonemployee certificate holder or
affected employer or, if the action does not affect all employees and
dependents of one or more employers, to the last known address of
each affected employee certificate holder, at least 60 days prior to
the effective date of the action.
(2) The notice delivered pursuant to paragraph (1) for large group
health insurance policies shall also include the following
information:
(A) The amount by which the rate change for the majority of months
the rate is proposed to be in effect is greater than the average
rate increase for individual market products approved by the
California Health Benefit Exchange for the calendar year.
(B) The amount by which the rate change for the majority of months
the rate is proposed to be in effect is greater than the average
rate increase approved by the California Health Benefit
Exchange Board of Administration of the Public
Employees' Retirement System for the calendar year.
(C) Whether the rate change would cause the insurer for the large
group purchaser to incur the excise tax for any part of the period
the rate increase is proposed to be in effect.
(b) A holder of a master group policy or a master group nonprofit
hospital service plan contract or administrator acting on its behalf
shall not terminate the coverage of, increase premiums or charges
for, or reduce or eliminate benefits available to, or restrict
eligibility for coverage of a covered person, employer unit, or class
of certificate holders covered under the policy or contract for
hospital, medical, or surgical benefits without first providing prior
notice of the action. The action shall not become effective unless
written notice was delivered by mail to the last known address of
each affected nonemployee certificate holder or employer, or if the
action does not affect all employees and dependents of one or more
employers, to the last known address of each affected employee
certificate holder, at least 60 days prior to the effective date of
the action.
(c) A health insurer that declines to offer coverage to or denies
enrollment for a large group applying for coverage shall, at the time
of the denial of coverage, provide the applicant with the specific
reason or reasons for the decision
in writing, in clear, easily understandable language.
SEC. 7. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.