The 12 Most Important New Health Insurance & Health Care Laws
From the 2003 California Legislative Session
Compiled by Bill Robinson, IEAHU Legislative Chair
Note: All these new laws take effect on 1-1-04, unless otherwise noted. AB-68 - Simitian Online Privacy Protection Act
CAHU Position: Watch
The intent of this bill is to provide greater online privacy protection of consumer personal and identifying financial
information, making identity theft more difficult for those inclined to commit consumer fraud. This bill requires the operator of a web site that collects personally identifiable information about individual consumers residing in California to conspicuously post a privacy policy (as defined by the bill) on the web site and comply with that policy. “Operator”refers to whomever owns a commercial web site or online service (ie: an insurance agent or agency), not any third party that hosts or maintains a website on behalf of the site’s operator/owner. Takes effect on 7-01-2004
AB-1083 - Cogdill Restrictions on Spousal Life Insurance Policy Applications CAHU Position: Watch
This bill prohibits an insurer from issuing a policy to an applicant that insures the life of the applicant’s spouse - unless the applicant’s spouse has signed the policy application or has otherwise been notified in advance of the issuance of the policy. Applies to life insurance policies greater than $50,000. Takes effect on 7-01-2004
AB 1286 – Frommer Expands ‘Continuity of Care’ Patient Rights for Terminated Providers CAHU Position: Watch (essentially the same language as SB-244)
This bill requires both PPO insurers and HMO health plans to file with the CDI or DMHC by March 31, 2004, their proposed, written continuity of care policy describing its procedures for the block transfer of enrollees from a terminated provider to a new provider, including the notice it proposes to send to affected enrollees. Then this bill will make those policy provisions, if approved by the CDI or DMHC, effective 7-1-2004. This bill will require 75 days’ notice by any insurer or HMO health plan of a provider contract termination to the CDI or DMHC, and a minimum of 60 days’ notice to the health plan’s enrollees assigned to such a provider, and require the insurer or HMO plan to provide a transition of care process, including the option of the enrollee undergoing care for: a specified acute, chronic or terminal condition; for pregnancy; care of a newborn child; surgery already authorized by the plan to occur within 180 days following the termination of the provider or the
effective date of coverage for a newly enrolled enrollee whose provider on their previous plan is not a participating provider on their new plan. In such circumstances, the enrollee may elect maintenance of care, or even completion of care, through the existing provider following the provider’s termination and for a designated period of time. Such terminated or non-participating providers who are allowed to continue treating eligible enrollees for the specified period of time must agree to the rates and methods of payment by the health plan, as well as the same contractual terms and conditions imposed on currently contracted providers.
AB 1496 – Momtanez Provides Retrospective Review & Reimbursement for Urgent Care & Emergency Services CAHU Position: Watch
This bill allows HMO enrollees (through intervention by the DMHC) to obtain retrospective reimbursement for urgent care and emergency services already obtained from non-network providers- provided that the services were a covered benefit, a subsequent IMR (Independent Medical Review) determines the services were medically necessary, and the health plan contract does not require or provide prior authorization before the related health care services were provided to the enrollee. DMHC, which authored the bill, states that health insurance plans regulated by the CDI already provide this benefit for insureds.
AB 1528 – Cohn “CA Health Care Quality Improvement and Cost Containment Commission” CAHU Position: Watch
The legislature intends to make available to the public valid performance information to encourage hospitals and physicians to provide care that is safe, medically effective, patient-centered, timely, efficient, and equitable. This bill will require the Governor to convene a commission by the name of this bill and require the commission to examine and address specified health care issues. Among the issues for the commission to address are: assessing health care needs and resources; lowering the cost of health care coverage; increasing patient choices of health care coverage options and providers; improving the quality of health care; increasing the efficiency with which health care is delivered; examining the potential for integration with workers’ comp insurance; using disease management, wellness, prevention and other innovative programs; consolidating existing state programs to achieve efficiencies where possible; and promoting the efficient utilization of prescription drugs and medical technology.
The commission will be required to issue a report on or before 1-1-2005, as part of an effort related to SB-2, for the purpose of trying to contain premium cost of coverage for the required minimum plan benefit levels of the SB-2 ‘Pay or Play’ bill’s requirements. This bill was done partly in lieu of adding rate regulation language to SB-2, and is an effort to try and make the required group health coverage of SB-2 more affordable for all affected employers and employees.
AB-1627 - Frommer Requires Hospitals to Make Their Fee Schedules Available to the Public
This bill requires all hospitals to make a written or electronic copy of their uniform schedule of charges that the hospital represents as its true gross billed charge for every service or item, regardless of payer type. Requires hospitals to post notices in various locations informing patients that this information is available upon request. Also requires all hospitals to file a copy of this uniform schedule of charges with the OSHPD (Office of Statewide Health Planning and
Development).Requires hospitals to calculate and disclose the percentage increase in their gross revenue that is due to any price increases for patient services during the prior 12 month period. The bill’s author states that this bill will discourage hospitals from altering their pricing in a way that gouges private payers and patients (as in the Tenet Hospital chain’s aggressive billing practices that have substantially overcharged the state, CalPERS, insurers and patients whenever possible, because their schedule of charges was a secret document). Takes effect on 7-01-2004
AB-1628 - Frommer Requirements for Non-Network Hospital to Contact Patient’s Health Plan After Emergency Treatment, But Before Admission to Hospital or Transfer This bill requires non-network hospitals to contact an insured patient’s health plan for medical records and authorization prior to admitting the patient for stabilization care, AND prohibits the hospital from billing the patient for post-stabilization care if they fail to do so. This bill was co-sponsored by Kaiser Permanente and the Service Employees International Union, in an effort to protect emergency room patients in a hospital not on the patient’s health plan network -from being billed for post-stabilization services that are not covered by the patient’s health plan. Supporters also contend that the health of the patient is put at risk if the non-network hospital fails to obtain medical records from the plan that may be relevant to the patient’s care, such as medications being taken, drug allergies or underlying conditions. [However, beyond Kaiser, I suggest that most other health plans, when contacted, will have no clue about the patient’s medical history, so this bill may mostly benefit Kaiser patients treated in non-Kaiser hospital emergency rooms]
SB-1 – Speier Further Restricts Financial Institutions’ Use of Non-Public Personal Information
CAHU Position: Support
The bill will require a financial institution to get permission from a customer (“Opt-In”) before sharing information, such as the customer's bank balance or spending habits, with a nonaffiliated company (GLBA only allows “Opt Out” rights). This bill will also require the bank or other financial institution to give the consumer the opportunity to bar the company from sharing information (“Opt-Out”) with an affiliate that is not in the same line of business (with a few very qualified, specific exceptions allowed). That would mean a bank, for instance, could not pass on information about a customer to an insurance company owned by the same corporation if the customer objected (GLBA provides no such Opt-Out rights). Sen. Speier has been trying to get this bill approved for the last four years, but earlier versions ran into strong opposition from business
heavyweights like Wells Fargo and Bank of America, which spent millions of dollars to kill it. It “should” take effect 7-1-2004. However- Some of the same large financial institutions, who finally agreed to the many compromises made to SB-1 to get it passed, have gone to Washington and gotten the Congressional House of Representatives to add language to pending federal legislation for the reauthorization of the federal Fair Credit Reporting Act. This added language would prohibit all states from imposing ANY more-restrictive laws that control the disclosure of an individual’s personal financial information. This bill has passed out of the House of Reps, and a similar bill is now pending in the Senate (as of early November 2003). CA’s two Senators have vowed to oppose the inclusion of such language in the Senate version of this bill, but it appears likely this bill will pass out of Congress and that President Bush will sign it. Thus CA’s SB-1 is likely to be invalidated by this new federal law about to pass Congress.
SB-2 – Burton & Speier ‘Play or Pay’ Bill
CAHU Position: Neutral (Please see detailed bill summary at end of this document)
SB-244 – Speier Expands ‘Continuity of Care’ Patient Rights for Terminated Providers CAHU Position: Watch (essentially the same language as AB-1286)
This bill will require both PPO insurers and HMO health plans to file with the CDI or DMHC by March 31, 2004, their proposed, written continuity of care policy describing its procedures for the block transfer of enrollees from a terminated provider to a new provider, including the notice it proposes to send to affected enrollees. Then this bill will make those policy provisions, if approved by the CDI or DMHC, effective 7-1-2004. This bill will require 75 days’ notice by any insurer or HMO health plan of a provider contract termination to the CDI or DMHC, and a minimum of 60 days’ notice to the health plan’s enrollees assigned to such a provider, and require the insurer or HMO plan to provide a transition of care process, including the option of the enrollee undergoing care for: a specified acute, chronic or terminal condition; for pregnancy; care of a newborn child; surgery already authorized by the plan to occur within 180 days following the termination of the provider or the effective date of coverage for a newly enrolled enrollee whose provider on their previous plan is not a participating provider on their new plan. In such circumstances, the enrollee may elect maintenance of care, or even completion of care, through the existing provider following the provider’s termination and for a designated period of time. Such terminated or non-participating providers who are allowed to continue treating eligible enrollees for the specified period of time must agree to the rates and methods of payment by the health plan, as well as the same contractual terms and conditions imposed on currently contracted providers.
SB-618 - Scott Increases Agent and Insurer Fines & Penalties for Violating Senior Insurance Laws CAHU Position: Watch
This bill increases to 30 days the right of seniors to review newly purchased life insurance policies and their right to return the contract and receive a ful refund of their initial paid policy premium. It increases agent fines for misrepresenting the terms of an insurance policy from $200 to $1,000. It increases the fines for violating Senior Insurance laws from no less than $250 to no less than $1,000 for the first offense, and no less than $5,000 (and no more than $50,000) for the second and subsequent violations Increases Insurance Commissioners ability to suspend or terminate an agent’s or broker’s license if the licensee is expected to cause significant harm to additional senior citizens if allowed to continue selling insurance. Increases insurer fins for these violations also. Same potential action applies to agents or brokers who induce a senior client to make the agent or broker, or a friend, or business acquaintance or a domestic partner...of the agent or broker a beneficiary or trustee of life insurance policy or annuity policy, or a loan, investment, or trust - all unless the client is related to the agent or broker of their domestic partner. Also increases fines for agents who violate the state’s life insurance replacement laws from no less than $250 to no less than $1,000 for the first violation, and to no less than $5,000 for the second and subsequent violations and no more than $50,000. Sen. Scott believes some unscrupulous agents have
“preyed” upon hapless seniors by selling them inappropriate insurance products, by persuading seniors to include the agent in wills, by having the seniors take out life insurance or annuities for which the agent or their family members are the named beneficiaries, and by persuading seniors to give agents a survivorship interest in bank accounts or to get seniors to loan the agents large sums of money.[Huh? Does he really believe that blarney?]
SB-620 – Scott Marketing & Sales of Life Insurance & Annuities to Seniors CAHU Position: Watch (Takes effect, in segments, beginning on 7-1-2004)
This bill provides that seniors purchasing annuities or life insurance polices (including variable products) will have a 30 day cancellation period, during which they can get back 100% of their funds paid for the annuity or life insurance product if they decide to cancel the sale. The bill provides precise language for this requirement to be printed and given to all seniors when they receive delivery of the purchased annuity or life insurance product. This paragraph takes effect on 7-01-2004.
This bill requires all licensed agents who wish to sell annuities in CA to complete 8 hours of special C.E. training by 1-1-2005, before soliciting individual consumers for the purpose of selling annuities on or after 1-1-2005. Thereafter, licensed agents will be required to complete 4 hours of C.E. training about annuities every two years in order to renew their licenses.
This bill expands the scope of existing restrictions on advertising practices that target seniors (age 65+), which currently apply to health & disability products, to life insurance and annuities. It will prohibit ads for an event where insurance products will be offered for sale, or where such sales leads will be generated, from using the terms “seminar”, “class”, “informational meeting”, etc, to describe the event- unless the words “and insurance sales presentation” are added. It will prohibit the sale of an annuity to a senior if the senior’s purpose in purchasing the annuity is to affect their Medi-Cal eligibility and either the senior’s assets are already equal to or less than the Medi-Ca eligibility level, or the senior would otherwise qualify for Medi-Cal anyway, OR if after the purchase of an annuity the senior or the senior’s spouse would still not qualify for Medi-Cal. This paragraph takes effect on 1-1-2005.
This bill requires all insurance agents setting appointments with seniors in their homes for the purpose of selling or generating leads for the sale of life insurance or annuities, to deliver a written notice to the senior no less than 24 hours prior to the agent’s meeting with the senior (unless the senior is already a client of the agent AND the senior requests the meeting, in which case the agent can deliver the written meeting notice when they arrive for the meeting at the senior’s home). This notice must include information about the senior’s right to have other persons present at the meeting, the right to end the meeting at any time, and the names of the individuals who will be coming to the senior’s home. This paragraph takes effect on 1-1-2005.
This bill also requires the agent, upon entering the senior’s home for the meeting, and prior to any conversation other than a greeting, state that the purpose of the meeting is to talk about insurance and/or annuities, and to state the names and titles of all persons arriving with the agent at the senior’s home, the name of the insurer(s) represented by the agent , and for each such person to provide written identification that includes their CA insurance license number (ie: a business card). Also requires all people accompanying the agent and attending the meeting to end all discussion and leave the home immediately upon being asked to do so by the senior or their attending relatives or friends. This paragraph takes effect on 1-1-2005.
This bill also prohibits agents from selling an annuity or life insurance, in person or by phone, by using any plan, scheme or ruse that misrepresents the true status or mission of the contact. This bill also prohibits an agent who is not also an active member of the CA State Bar Association from sharing insurance commissions with an active member of the State Bar. This paragraph takes effect on 1-1-2005.
This bill requires all agents and brokers to prominently print the word “insurance” in type size no smaller than the largest phone indicated number – on business cards, written price quotations, and print ads. This bill also reinforces existing law that requires an agent’s insurance license number to appear in type the same size as any indicated phone number, address or fax number – on business cards, written price quotations, and print ads. This paragraph takes effect on 1-1-2005.
---Understanding SB 2 - The “Pay or Play” Bill
CAHU Summary AnalysisEdited and expanded by Bill Robinson, IEAHU Legislative Chair
The bill is 40 pages in length and covers the following major areas:
A. Employer mandate to pay a fee for employee and, if applicable, dependent health coverage. B. Waiver of the fee with proof of qualifying coverage.
C. Waiver of mandate for specific employer group sizes. D. Size of employers defined.
E. Mandatory employer and employee contribution. F. Minimum covered medical services.
G. Insurance market reforms.
H. Reforms for Healthy Families and Medi-Cal coordination with employer coverage. I. Phased implementation dates.
The essence of the bill is to establish the mandate to “Pay or Play.” The implementation is then assigned to the Major Risk Medical Insurance Board (MRMIB) and the Employment Development Department (EDD), with broad authority to administer the program. MRMIB will have broad "emergency" regulatory authority (until 2010) to write its own operating rules. MRMIB in administering SB-2 will not be subject to any regulation by DOI or DMHC.
Below is a list of the critical elements in the report: 1. “Employer” is defined in three categories:
a. 200 and above are large employers; b. 20 to 199 are medium employers; c. 2 to 19 are small employers.
2. “Enrollee” is defined as any employee who works more than 100 hours in a month, with a three-month initial waiting period. It is "believed" that "employee" means only W-2 employees (based on rule stated in #12 below, but yet to be confirmed). The employer must be the principal employer. An employer is a principal employer if the employer for whom the enrollee works provides the greatest number of hours in any month. A employer may become the principal employer when another employer alters the employee's work schedule.
3. Fees for the “pay” portion are established by MRMIB and must include the cost of providing medical care, administration, and may also include enforcement by EDD. Employer “fees” and employee contributions will go into the new state purchasing pool to be operated by MRMIB, which created and ran the original HIPC program.
4. MRMIB shall establish a government run “State Purchasing Pool” to insure all who want to “pay” as opposed to “play.” The pool cannot be self-insured or partially self-insured and must offer coverage, which must be the same medical services as employers outside the pool. The carriers that MRMIB contracts with will have to abide by all state and federal laws relating to coverage, including the rating restrictions. That means carriers contracting with MRMIB will have to charge MRMIB premiums within the required rate bands, but MRMIB does not necessarily have to charge employers those same rates, though the language suggests that employer and employee fees must be sufficient to fund all costs of the new pool. Note there is no language prohibiting MRMIB from using licensed independent insurance agents to sell the new State Purchasing Pool coverage to employers (it is up to MRMIB to decide, like many details of this legislation).
5. The pool must charge fees large enough to insure the total cost of providing health care and administration. MRMIB may establish the co-pays, and/or deductibles, and/or coinsurance levels for the pool. This could well make pool rates higher than rates for the same plans bought directly from the carriers.
6. EDD which will collect employer and employee "fees", and EDD shall waive the fees for any employer who voluntarily provides proof of coverage which meets the minimum standards in the bill.
7. Large employers shall provide health coverage to employees (as defined above) and their dependents(including Domestic Partners), if not covered elsewhere. Employer must pay a minimum of 80% of the premium for employee and dependents. The employee may pay no more than 20% of the premium except where the employee makes less than 200% of the federal poverty level. In that event, the employee cannot pay more than five percent of salary ($17,960 X .05 = $898 / 12 = 74.88 monthly maximum for a single person). Employees contributing for dependent coverage who make less than 300% of the federal poverty level may pay no
more than five percent of salary ( $29,260 X .05 = $1463 / 12 = $121.90 monthly maximum for employee and dependents) . Effective January 1, 2006.
8. Medium employers shall provide health coverage to employees (as defined above). Employer must pay a minimum of 80% of the premium for employee only. The employee may pay no more than 20% of the premium except where the employee makes less than 200% of the federal poverty level. In that event, the employee cannot pay more than five percent of salary (see guideline above) for employee only coverage. Employees may contribute towards dependent coverage. No employer contribution for dependents required for medium sized employers. Effective January 1, 2007.
8a. 51-199 medium groups will have most of the protections of the AB 1672 small group reform laws, including guaranteed acceptance rules applying to all eligible groups. However, 51 - 199 groups will have a plus or minus 15% RAF. Health plans can also develop benefit designs that are fairly and affirmatively marketed only to groups of 51 to 199, instead of being required to fairly and affirmatively market all mid-size products to the small group market as well.
8b. Note that employees of Medium and Large Employers will not have any option to decline coverage for themselves, even if they do not want the coverage or have been covered on their spouse's employer's plan. Eligible "full-time" EEs will be each be covered on their own employer's plan and pay up to 20% of their share (w/low income EE exception) when SB-2 takes effect for their Medium Employer. And for EEs working for "Large Employers", such EEs must also cover their dependents and pay up to 20% of their share (w/low income exception) for dependent coverage - UNLESS their spouse is employed and thus covered at on spouse's employer plan, along with their children too.
9. Medium employers with 20 to 49 employees are exempt from the provisions of the mandate until a tax credit equal to 20% of the employers’ net cost for an employee is available. Net cost equals premiums or fees (employee share) the value of federal and state tax deductions.
10. Small employers (2-19) are exempted from the mandate.
11. Employers are subject to penalties of 200 percent of the premiums or fees they would have otherwise paid for failure to comply. 12. Employers may not reduce hours, change employees to 1099 status, or terminate and rehire in order to avoid this mandate. Same penalties as above will apply.
13. Employers that offer more than one plan can require higher employee contributions as long as they offer at least one plan that meets the maximum contribution requirements for employees and/or dependents if applicable.
14. No minimum benefit levels are to be established except that the plans provided must cover certain types of services. Qualifying HMO coverage must meet Knox-Keene requirements, plus drugs. Hospital, physician, lab and drugs for PPO insurance plans, which must meet existing Insurance Code requirements.. The bill does not specify specific deductibles, co-payments or coinsurance levels that employers must offer. It does establish a de-facto out of pocket maximum for both HMOs and PPOs, which is currently
approximately $7000 per individual. These are the out of pocket maximums for PPO plans approved by the Department of Managed Health Care.
15. Access discount plans, disease-only and other non-comprehensive benefits will not qualify, but can be offered in addition to the qualifying benefit packages. Union benefit plans will be deemed to qualify. Current MEWA benefit plans are deemed to qualify; future MEWA benefit plans will need to meet DOI or DMHC standards. University of California student plans will be deemed to qualify. PERS coverage will be deemed to qualify.
Employers may continue to offer Defined Contribution menu options (like CaliforniaChoice), provided they peg their 80% contribution minimally against a qualifying DOI or DMHC minimum benefit level.
16. MRMIB shall establish a system of maintaining Medi-Cal and Healthy Families level of benefits for persons who work for an employer mandated in this bill, and are enrolled in the employer’s plan. A “wrap-around” product will be provided to these enrollees, assuring them no loss of any benefits by moving from government to private coverage.
Finally, the good news is that we have two years ahead to draft and enact "clean-up legislation" to fix some problems and shortcomings of SB-2, as well as endure expected, multiple court challenges to be launched soon.