BILL NUMBER: SB 546 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 30, 2015
INTRODUCED BY Senator Leno
FEBRUARY 26, 2015
An act to amend Section Sections 1374.21
and 1385.04 of, and to add Section 1385.045 to, the Health and
Safety Code, and to amend Section 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. Existing
The PPACA imposes an exercise 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
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 department respective department,
at least 60 days prior to implementing any rate change
increase, all required rate information for any
product with a rate change 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 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. The bill would also require
that the plan or insurer disclose the aggregate data for all products
sold in the large group market for all rate filings submitted under
these provisions on an annual basis. 2016, and
annually thereafter. The bill would require the respective
departments 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. 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) No (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 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.
SECTION 1. 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 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.
(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. 2. 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 change
increase all required rate information for any product with a
rate change increase if any
either of the following apply:
(A) The rate change is equal to or
increase is greater than the average rate increase for
individual market products approved by the California Health
Benefits Exchange. determined under Section 1385.04.
(B) The rate change is equal to or greater than the average rate
increase approved by the CalPERS board for the subsequent calendar
year.
(C)
(B) The rate change increase
would cause the health plan for the large group
purchaser to incur the excise tax. tax for
any part of the period the rate increase is proposed to be in effect.
(D) At the request of the large group purchaser.
(2) This filing shall be concurrent with the written notice
described in subdivision (a) of Section 1374.21, except for
a filing at the request of the large group purchaser. A filing at the
request of a large group purchaser may occur at any time after
receipt of the written notice and prior to the rate taking effect.
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 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) For rate filings subject to Within 60
days after receiving complete information from the plan consistent
with this section, the director shall make a decision
to modify or deny a rate change that is unreasonable, inadequate, or
otherwise in violation of this article or federal law prior to the
implementation of the rate change by the plan.
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. 3. 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 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.
(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. 4. 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 change increase
all required rate information for any product with a rate
change increase if any
either of the following apply:
(A) The rate change is equal to or
increase is greater than the average rate increase for
individual market products approved by the California Health
Benefits Exchange. determined under Section 10181.4.
(B) The rate change is equal to or greater than the average rate
increase approved by the CalPERS board for the subsequent calendar
year.
(C)
(B) The rate change increase
would cause the health insurer for the large group
purchaser to incur the excise tax. tax for
any part of the period the rate increase is proposed to be
in effect.
(D) At the request of the large group purchaser.
(2) This filing shall be concurrent with the written notice
described in subdivision (a) of Section 10199.1, except for
a filing at the request of the large group purchaser. A filing at the
request of a large group purchaser may occur at any time after
receipt of the written notice and prior to the rate taking effect.
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 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) For rate filings subject to Within 60
days after receiving complete information from the insurer consistent
with this section, the commissioner
department shall make a decision to
modify or deny a rate change that is unreasonable, inadequate, or
otherwise in violation of this article or federal law prior to the
implementation of the rate change by the health insurer.
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) No (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. No such
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 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) No 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.
No such 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. 5. 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.