Assembly Health Passes Rate Regulation and Other Key Bills, Additional Hurdles Ahead

Assembly Health Committee held a lengthy hearing over AB52 (Feuer) today which would grant regulators at the Department of Insurance and the Department of Managed Health Care to approve or deny health insurance rate increases that are determined to be excessive or unjustified based on an objective review of evidence.

Assemblyman Feuer, the bill’s author, argued on behalf of California’s families and small businesses that are struggling under “astronomical health insurance rates that skyrocket unchecked.” Along with Insurance Commissioner Dave Jones, Feuer presented evidence that insurance companies’ rates are in desperate need of the oversight that currently exists for car and homeowners insurance. Feuer and Jones pointed to the fact that while medical costs rose 3.4%, proposed insurance rate increases went up to 80%, and insurance company profits rose 17%. Both made the strong case that actions of insurers just in the past few years have demonstrated the need for independent and objective review of health insurance rates, and that regulators need the authority to step in and protect consumers in cases where proposed rates are unreasonable and are not sufficiently justified by evidence presented.

Proponents also pointed to the 35 other states that require some form of prior approval from regulators for health insurance rate increases, and presented evidence that rates are lower there than they would have been without regulation. They emphasized the experiences of California small businesses struggling to take care of their workforce while staying afloat and the millions of Californians who have dropped coverage as a result of prohibitive costs.

The opponents called rate regulation simply a “distraction” from the work of bringing down costs of health care and suggesting that low Medi-Cal reimbursement rates were forcing providers to try to make up for low public reimbursement by demanding more from private insurers. Mr. Feuer reminded the committee to measure the bill against the status quo, which is failing to make health care affordable and accessible to consumers, and to keep in mind that this bill is intended to be a substantial part of the solution, not to solve every problem of the health care system.

Insurers also argued that if regulators were granted the authority to regulate rates, and if the exercise of that authority in fact impacts the insurers’ bottom line, they are “concerned” that they might then have to make changes that would reduce access and quality for consumers. Several members expressed concern that this bill (if it reduces rates) would negatively impact physician and hospital reimbursement. Mr. Feuer referenced a LA Times editorial that points out “that insurers and healthcare providers have a shared incentive to raise premiums”.

Assemblymember Pan joined members Nestande and Mansoor in vocally opposing the bill, registering lingering concerns and dissatisfaction with the witnesses’ answers to his questions related to the experiences of other states. Assemblymember Monning encouraged members to consider this legislation from a consumer lens, and act to protect their constituents. AB52 (Feuer) passed out of Assembly Health Committee with 12 votes.

While the rate regulation bill would provide much needed relief to the millions of Californians who have private insurance, several other bills heard in committee today will expand coverage to allow the millions more uninsured Californians access to affordable coverage. The comparative brevity of discussion on these bills enjoyed were partially a result of a bipartisan interest in ending the committee meeting before nightfall.

AB43 (Monning) is the bill that would make the appropriate changes to state law to allow for the expansion of Medi-Cal, starting January 1, 2014, under the Affordable Care Act. According to federal law, adults under 133% of the federal poverty level will quality for Medi-Cal starting in 2014 regardless of whether they have dependent children. Assemblymember Monning spoke of the importance of ensuring that the state stands ready to enroll as many eligible Californians into coverage as possible on day 1. This will also allow the state to begin taking full advantage of federal dollars, which will cover 100% of costs for newly eligible Medi-Cal enrollees. AB43 passed out of Health Committee and moves on to Appropriations.

AB714 (Atkins) is what Assemblymember Atkins referred to as the “conveyor belt to the front door of the Exchange”, also known as our “pre-enrollment” bill. This bill will provide notice to the 3 million or so individuals currently enrolled in one of the state’s existing programs such as FamilyPACT, AIM, etc., that they may become eligible for the Exchange when it goes live. It also provides for early enrollment starting in 2013. AB714 passed Assembly Health on party lines.

AB792 (Bonilla) provides for more seamless transitions between coverage in certain life situations that have traditionally resulted in temporary if not extended uninsurance. Prior to 2014 the bill would require employers to provide information about the Exchange to terminated employees as they would provide COBRA notices; it requires other state agencies to provide this information when individuals file for divorce, unemployment, adoption, and other life changes. After 2014, the bill creates a culture of coverage by enrolling individuals in these situations into the Exchange (unless they decline coverage) by default rather than letting them go without insurance unless they take proactive action. AB792 also passed out of Assembly Health on party lines.

AB151 (Monning) is an important measure for protecting seniors from unintended consequences of changes in Medicare. The bill provides guaranteed issue for seniors who wish to transition from Medicare Advantage plans to Medi-Gap plans. AB151 garnered some bipartisan support and moves forward as well.

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