A new set of California laws amended and added a slew of Health and Safety and Insurance Codes to create a byzantine process for reviewing annual increases to health plan premiums in the large group market.
The law requires health plans to let large groups know whether a proposed rate change is higher or lower than the average rate increase for individual plans available through Covered California, and is higher or lower than the average rate increase for individual plans negotiated by the California Public Employees’ Retirement System (CalPERS). This notice requirement is effective for groups renewing June 1, 2016, and after, as specified by regulatory guidance from the California Department of Managed Health Care.
On its face, especially with what I've described so far, this appears to be a great idea. Let's force insurers to tell clients if and when they are gouging them. In fact, just about every single governmental intervention is accompanied with a nobel intent. It is overwhelmingly in the execution that things break down and become meaningless or unwieldy.
At the bottom of this post, I quote much of this new set of laws so that you can see just how detailed, bureaucratic and overwhelming a good idea can become. Clearly, insurers are going to have to invest more time, energy, expertise and money into the creation of these new notices. And I can assure you, the vast majority of policyholders will push them aside or give them a cursory glance.
At the core, what are we doing here? We are undertaking more administrative cost to be baked into our premiums so that an insurer can tell us if our increase is larger than Covered California or CalPERS'. Great. I can do that with a 20 second Google search. But instead, lets waste tens of thousands, burn more paper and heap more administration onto healthplans.
The best part is that the overwhelming majority of large groups (to which this law applies) will have already had their broker negotiate their renewal and will have begun implementing that renewal long before this 60-day notice arrives. In the large group market, we are finalizing next year's renewal rates 120 to about 75 days prior to the renewal date depending on just how large that employer is.
At least now, our politicians can boast that they've done something to bolster transparency and help bring insurance costs down ... while our premiums inflate to cover their great ideas.
SB 546, 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 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 add to the existing rate information requirement to further require large group health care service plans and health insurers to file with the respective department the weighted average rate increase for all large group benefit designs during the 12-month period ending January 1 of the following calendar year. The bill would require the notice of changes to premium rates or coverage for large group health plans and insurance policies 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 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, 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.
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) Whether the rate proposed to be in effect is greater than the average rate increase for individual market products negotiated by the California Health Benefit Exchange for the most recent calendar year for which the rates are final.
(B) Whether the rate proposed to be in effect is greater than the average rate increase negotiated by the Board of Administration of the Public Employees’ Retirement System for the most recent calendar year for which the rates are final.
(C) Whether the rate change includes any portion of the excise tax paid by the health plan.
(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 1385.045 is added to the Health and Safety Code, to read:
1385.045. (a) For large group health care service plan contracts, each health plan shall file with the department the weighted average rate increase for all large group benefit designs during the 12-month period ending January 1 of the following calendar year. The average shall be weighted by the number of enrollees in each large group benefit design in the plan’s large group market and adjusted to the most commonly sold large group benefit design by enrollment during the 12-month period. For the purposes of this section, the large group benefit design includes, but is not limited to, benefits such as basic health care services and prescription drugs. The large group benefit design shall not include cost sharing, including, but not limited to, deductibles, copays, and coinsurance.
(b) (1) A plan shall also submit any other information required pursuant to any regulation adopted by the department to comply with this article.
(2) The department shall conduct an annual public meeting regarding large group rates within three months of posting the aggregate information described in this section in order to permit a public discussion of the reasons for the changes in the rates, benefits, and cost sharing in the large group market. The meeting shall be held in either the Los Angeles area or the San Francisco Bay area.
(c) A health care service plan subject to subdivision (a) shall also disclose the following for the aggregate rate information for the large group market submitted under this section:
(1) For rates effective during the 12-month period ending January 1 of the following year, number and percentage of rate changes reviewed by the following:
(A) Plan year.
(B) Segment type, including whether the rate is community rated, in whole or in part.
(C) Product type.
(D) Number of enrollees.
(E) The number of products sold that have materially different benefits, cost sharing, or other elements of benefit design.
(2) For rates effective during the 12-month period ending January 1 of the following year, any factors affecting the base rate, and the actuarial basis for those factors, including all of the following:
(A) Geographic region.
(B) Age, including age rating factors.
(C) Occupation.
(D) Industry.
(E) Health status factors, including, but not limited to, experience and utilization.
(F) Employee, and employee and dependents, including a description of the family composition used.
(G) Enrollees’ share of premiums.
(H) Enrollees’ cost sharing.
(I) Covered benefits in addition to basic health care services, as defined in Section 1345, and other benefits mandated under this article.
(J) Which market segment, if any, is fully experience rated and which market segment, if any, is in part experience rated and in part community rated.
(K) Any other factor that affects the rate that is not otherwise specified.
(3) (A) The plan’s overall annual medical trend factor assumptions for all benefits and by aggregate benefit category, including hospital inpatient, hospital outpatient, physician services, prescription drugs and other ancillary services, laboratory, and radiology for the applicable 12-month period ending January 1 of the following year. 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, to the maximum extent possible, that are the same as, or similar to, those used by other plans.
(B) The amount of the projected trend separately attributable to the use of services, price inflation, and fees and risk for annual plan contract trends 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.
(C) A comparison of the aggregate per enrollee per month costs and rate of changes over the last five years for each of the following:
(i) Premiums.
(ii) Claims costs, if any.
(iii) Administrative expenses.
(iv) Taxes and fees.
(D) Any changes in enrollee cost sharing over the prior year associated with the submitted rate information, including both of the following:
(i) Actual copays, coinsurance, deductibles, annual out of pocket maximums, and any other cost sharing by the benefit categories determined by the department.
(ii) Any aggregate changes in enrollee cost sharing over the prior years as measured by the weighted average actuarial value, weighted by the number of enrollees.
(E) Any changes in enrollee benefits over the prior year, including a description of benefits added or eliminated, as well as any aggregate changes, as measured as a percentage of the aggregate claims costs, listed by the categories determined by the department.
(F) Any cost containment and quality improvement efforts since the plan’s prior year’s information pursuant to this section 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 number of products covered by the information that incurred the excise tax paid by the health plan.
(d) The information required pursuant to this section shall be submitted to the department on or before October 1, 2016, and on or before October 1 annually thereafter. Information submitted pursuant to this section is subject to Section 1385.07. ...
SEC. 5. 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.
