AB 1305 was presented to the Governor on September 18, 2015. He has until Sunday, October 11th to sign it and is expected to do so.
There is no reasonable way to interpret the requirement for an embedded out of pocket maximum (OOPM) described below that would square with all HSA-eligible plans. The standard effective date for new legislation such as this is January 1st following the enactment. This bill does not provide delayed effective dates for the embedded OOPM; only for embedded deductibles.
In a last-minute amendment, for large groups only, the Senate extended the effective date of AB 1305's required embedded deductible mandate out to a “plan issued, amended, or renewed on or after 1/1/17.” See the blue text below. However, the current issue is related to the embedded OOPM. Please see subsection c (3) in yellow which was not delayed until 1/1/2017.
CA AB 1305 amends Section 1367.006 of the Health and Safety Code to read:
(a) This section shall apply to nongrandfathered individual and group health care service plan contracts that provide coverage for essential health benefits, as defined in Section 1367.005, and that are issued, amended, or renewed on or after January 1, 2015.
(b) (1) For nongrandfathered health care service plan contracts in the individual or small group markets, a health care service plan contract, except a specialized health care service plan contract, that is issued, amended, or renewed on or after January 1, 2015, shall provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits in Section 1367.005, including out-of-network emergency care consistent with Section 1371.4.
(2) For nongrandfathered health care service plan contracts in the large group market, a health care service plan contract, except a specialized health care service plan contract, that is issued, amended, or renewed on or after January 1, 2015, shall provide for a limit on annual out-of-pocket expenses for covered benefits, including out-of-network emergency care consistent with Section 1371.4. This limit shall only apply to essential health benefits, as defined in Section 1367.005, that are covered under the plan to the extent that this provision does not conflict with federal law or guidance on out-of-pocket maximums for nongrandfathered health care service plan contracts in the large group market.
(c) (1) The limit described in subdivision (b) shall not exceed the limit described in Section 1302(c) of PPACA, and any subsequent rules, regulations, or guidance issued under that section.
(2) The limit described in subdivision (b) shall result in a total maximum out-of-pocket limit for all covered essential health benefits equal to the dollar amounts in effect under Section 223(c)(2)(A)(ii) of the Internal Revenue Code of 1986 with the dollar amounts adjusted as specified in Section 1302(c)(1)(B) of PPACA.
(3) For family coverage, an individual within a family shall not have a maximum out-of-pocket limit that is greater than the maximum out-of-pocket limit for individual coverage for that product.
(d) Nothing in this section shall be construed to affect the reduction in cost sharing for eligible enrollees described in Section 1402 of PPACA, and any subsequent rules, regulations, or guidance issued under that section.
(e) If an essential health benefit is offered or provided by a specialized health care service plan, the total annual out-of-pocket maximum for all covered essential benefits shall not exceed the limit in subdivision (b). This section shall not apply to a specialized health care service plan that does not offer an essential health benefit as defined in Section 1367.005.
(f) The maximum out-of-pocket limit shall apply to any copayment, coinsurance, deductible, and any other form of cost sharing for all covered benefits that meet the definition of essential health benefits in Section 1367.005.
(g) (1) (A) Except as provided in paragraph (2), if a health care service plan contract for family coverage includes a deductible, an individual within a family shall not have a deductible that is greater than the deductible limit for individual coverage for that product.
(B) Except as provided in paragraph (2), if a large group market health care service plan contract for family coverage that is issued, amended, or renewed on or after January 1, 2017, includes a deductible, an individual within a family shall not have a deductible that is more than the deductible limit for individual coverage for that product.
(2) (A) If a health care service plan contract for family coverage includes a deductible and is a high deductible health plan under the definition set forth in Section 223(c)(2) of Title 26 of the United States Code, the plan contract shall include a deductible for each individual covered by the plan that is equal to either the amount set forth in Section 223(c)(2)(A)(i)(II) of Title 26 of the United States Code or the deductible for individual coverage under the plan contract, whichever is greater.
(B) If a large group market health care service plan contract for family coverage that is issued, amended, or renewed on or after January 1, 2017, includes a deductible and is a high deductible health plan under the definition set forth in Section 223(c)(2) of Title 26 of the United States Code, the plan contract shall include a deductible for each individual covered by the plan that is equal to either the amount set forth in Section 223(c)(2)(A)(i)(II) of Title 26 of the United States Code or the deductible for individual coverage under the plan contract, whichever is greater.
Emphasis added.(g)(h) For nongrandfathered health plan contracts in the group market, “plan year” has the meaning set forth in Section 144.103 of Title 45 of the Code of Federal Regulations. For nongrandfathered health plan contracts sold in the individual market, “plan year” means the calendar year.(h)(i) “PPACA” means the federal Patient Protection and Affordable Care Act (Public Law 111-148), as amended by the federal Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), and any rules, regulations, or guidance issued thereunder.
The biggest issue with California's attempt to offer more friendly health insurance is that the above bill would make some HSA-compatible plans illegal on January 1, 2016. HSAs are required to have a family deductible of at least $2,600. However, this law would require a family HSA to have an individual OOPM of no more than the single OOPM offered.
In order to make this style of plan comply with the newly proposed California law and federal HSA rules, an employer would have to make an emergency change to its plan effective January 1, 2016 (even if they are not a calendar plan year) and increase the individual deductible and OPM up to $2,600 just so they don't run afoul of the convergence of these two rules.
Governor Brown's team has been made aware of these issues. Now we just hope that they send this bill back for a common sense adjustment before it is enacted. Stay tuned to this blog as we'll update the matter as soon as we know of the final resolution.
