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California Moves on Health Reform in 2012 with a Host of Measures

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The California state legislature is moving forward on a collection of health insurance reform bills, some specially tailored to conform to sections of the federal Patient Protection and Affordable Care Act (PPACA).

The bills were sponsored by the California Department of Insurance (CDI).

Most of the sponsored bills were approved by committees by April 27 and are eligible for further consideration by the Legislature, according to the department, which has a good record of getting sponsored bills passed.

AB 2138 is the only bill that passed out of committee unanimously. It is authored by Assembly Member Bob Blumenfield, and passed out of the Assembly Insurance Committee on a 13 to 0 vote. The bill would double (to 20 cents from 10 cents) the current annual assessment per insured paid by health and disability insurers.

The bill would increase funding to local district attorneys so that they can investigate and prosecute health and disability insurance fraud throughout the state. Budget shortfalls have hampered the pursuit of prosecution on annuity suitability and elder abuse cases similar to the Glenn Neasham felony theft case out of Lake County, some have said, but it is unclear if these funds to be paid to DA funding coffers could only be used for health and disability prosecutions. 

“Health and disability insurance fraud is a critical problem for policyholders, providers, insurers, and California’s economy and is increasing in sophistication, complexity, and volume. This bill will provide much needed resources to fight growing insurance fraud in these areas, especially in light of federal health care reform,” stated the CDI.

AB 2152 would update disclosure requirements. It would require a health insurer to submit a transition plan to CDI at least 75 days before terminating a provider contract. That way consumers aren’t left paying big medical bills just because their insurer no longer contracts with their provider and they didn’t know it was out of network. AB 2152 passed out of the Assembly Health Committee 12-4.

AB 1846 would establish a licensing framework for Consumer Operated and Oriented Plans (or CO-OPs) to provide the CDI with what it describes as the “necessary regulatory oversight” over these new non-profit health insurers.

CO-OPs are supposed to be non-profit, member-run health insurance issuers that will be newly licensed under state law to offer competitive coverage in the individual and small group markets. 

The CO-OP rule and statute were designed to ensure that state legislation would not be needed for a state to have a private, non profit CO-OP. It must comply with state requirements for licensure, under Department of Health and Human Services (HHS) guidelines.

However, AB 1846 would further mandate that a CO-OP must adhere to the California Health Benefit Exchange’s standards and its selective contracting requirements, including rate negotiations.The bill passed out of the Assembly Health Committee on a vote of 6 to 3. 

In Washington, D.C., the HHS’s Centers for Medicare and Medicaid Services (CMS) received a request for CO-OP records on April 24 and says it plans to respond to it. 

Then, there is AB 1921, which implements part of the PPACA by establishing the state Transitional Reinsurance Program. Each state operating a health benefit exchange may establish a transitional reinsurance fund program from 2014 to 2016 used to pay health insurers and HMOs writing in the individual market that incur large claims by individual policy holders from 2014 to 2016. This California bill is designed to address the possibility that some insurers and HMOs will have higher risk policyholders than others. It passed out of the Assembly Health Committee on a vote of 6 to 3. 

SB 1431, passed out of the Senate Health Committee on a vote of 5 to 3, proposed to regulate the sale of stop-loss insurance to small businesses by insurers that are promising these slimmed-down health benefit plans without the same level of strong consumer protections given under federal healthcare reform, which prohibits the consideration of health status and medical history.

Under Jones, CDI’s  track record has been 12 CDI-sponsored bills in his first year of 2011, of which nine  passed out of the Legislature and were sent to the governor; all 9 bills were signed into law.  This equals 75% of total sponsored bills last year  passed out of the Legislature and 100% of those CDI-sponsored bills that were sent to the governor were signed.  

For 2012, there are presently 10 CDI-sponsored bills.

There are two other bills that Commissioner Dave Jones sponsored that are not moving so fast–they were and were introduced last year, which are in their second house and can be acted on later this year:

  •  AB 52, would give legal authority to the insurance commissioner to reject excessive health insurance rate increases by requiring health plans and insurers to seek approval from state regulators before raising health care premiums, copayments, or deductibles. This is the same authority that the insurance commissioner currently has for auto, property, and casualty insurance. 
  • AB 999, a bill to modify the long-term care insurance premium rate process to protect consumers from rate volatility, remains stuck in the Senate Insurance Committee.