Special Session Takes Up Individual Market Reforms

Today both the Assembly Health Committee and the Senate Health Committee met in Special Session to consider AB X1 2 (Pan) and SB X1 2 (Hernandez), identical bills that would implement reforms to the individual health insurance market.

Both Committees first held informational hearings to give members more in-depth information about various issues in the individual market, primarily those addressed by this legislation.  Both committees heard from expert panels on the topics of Geographic Rating Regions, the Summary of Benefits and Coverage, and the “Tie Back” language.

While these issues were highlighted, there was less contention on the bulk of the bill, and the aligning with the Affordable Care Act: banning denials for pre-existing conditions, prohibiting price discrimination due to health status (including the addiction of smoking), limiting differing charges based on age, etc. As many testifies and legislators said, these are historic bills that will provide new insurer oversight and consumer protections for millions of Californians.

Geographic Regions heard the liveliest debate, on the question of the guidelines on insurer’s adjusting premiums based on region. Federal rules allow states to have up to 7 geographic regions, or geographic areas that insurers use to determine rates based on, among other factors, the cost of health care in that area.  Last year, the Governor vetoed (for other reasons) an individual market reform bill that would have created 19 regions, the same 19 regions that are currently being used by the small group market.  The Insurance Commissioner has proposed his own geographic region proposal with 18 regions, and insists his plan would minimize rate shock–the potential rate increases (and decreases) for people in specific areas.  The current legislation proposes 6 geographic regions to comply with the federal guidelines, though there is some indication that the federal government would be open to making an exception for California for a larger number of regions.

Covered California, which has already released a solicitation for health plans to bid on participating in the state’s Exchange, opposes deviating from the 19 regions, calling it foundational to their work already well in progress.  They project that making such a significant change now would set back the launch of the Exchange by 3-4 months. Even though they wanted more regions last year, insurers also favor using the 19 regions, arguing that they too have already done significant work implementing the Affordable Care Act and are preparing bids now based on these maps. The Department of Managed Health Care also testified in favor of keeping the 19 regions. In response to the Insurance Commissioner’s proposal, DMHC Director Brent Barnhart warned against looking at affordability through the singular lens of geography, calling it “a one dimensional view of a three dimensional health care market.”  Barnhart suggests that many other factors will influence how rates will change in 2014.  Health Access testified for a preference for a fewer number of larger regions, for transparency and simplicity, and getting insurers to spread risk across larger populations. Additionally, advocates expressed concern that allowing too many regions may lead to redlining, or segregation of low-income regions into separate high-cost regions, which may make access to coverage most expensive for those who can afford it the least.

Additionally, the committees heard testimony on the Summary of Benefits and Coverage, a provision of the Affordable Care Act that would help consumers make apples to apples comparisons of health insurance plans.  The federal standard format would make it easy for consumers to understand what benefits they are getting and what they will pay for it.  Our colleagues at Consumers Union, who worked with the federal government on developing this template, testified that this is among the benefits that consumers are most looking forward to in health care reform. Because California currently has related requirements, state law must be changed to adjust to federal law.

Also discussed was the Governor’s proposal to tie-back health reform implementation bills in case the federal law is changed or repealed. DMHC joined insurers in suggesting that legislative language should make the insurance reforms in California conditioned on the federal law. Beth Capell testified on behalf of Health Access that in the now-remote chance that the federal law is change, the California legislature would need to respond, but the default option should not be to erase all the new consumer protections and send California consumers back to a world where they were at the complete mercy of insurers. Senator Hernandez raised concern over the fact that the tie-back language being proposed this year is even more stringent than that which was proposed last year, even when there is no forseeable risk for the ACA on the horizon.  Hernandez expressed discomfort over the idea of repealing all of the reforms if any small change is made to federal law.

The Assembly Committee also had a brief discussion of Risk Adjustment, the process by which insurers with healthier patients make payments to those who end up with the sicker patients.  The Affordable Care Act requires that insurers no longer deny coverage to sick people, and compete to attract the healthiest clients, and instead compete based on quality and affordability.  Risk Adjustment is an assurance that if some insurance companies behave badly and avoid covering sick people, and it is in fact, the only mechanism for policing risk selection.  The state previously opted to allow the federal government to perform this function for California, but legislators and leaders seemed interested in revisiting this in the future to ensure that California specific needs are considered. In the meantime, the state will work to educate the federal government about California’s unique health marketplace, with its high use of managed care, delegated-model medical groups, and diverse population. There was also support by advocates and regulators that risk adjustment data be shared with state regulators so that they can track rates and trends.

Many of these issues will be discussed further as the bills move through to the second house.

AB 1X 2 passed out of committee on party lines, 12-6 (Assemblymember Roger Hernandez was out of the room for the vote).

SB 1X 2 passed on a party line vote, 7-2, as well.

The bills are set to go to Appropriations Committee and to floor votes in the next two weeks. This accelerated special session pace respects what David Panush of Covered California called “the fierce urgency of now,” which he noted had the acronym FUN.

Health Access California promotes quality, affordable health care for all Californians.
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