Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for nongrandfathered individual and group health insurance coverage.

Existing 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, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health care service plan or health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, and requires the plan contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits to the extent that the limit does not conflict with federal law or guidance, as specified. Existing law prohibits this limit from exceeding the limit described in a specified provision of federal law.

This bill would require, for family coverage, that an individual within a family shall not have a maximum out-of-pocket limit that is greater than the maximum out-of-pocket limit for individual coverage for that product. The bill would require a plan contract or policy and, commencing January 1, 2017, a large group market plan contract or policy, for family coverage that includes a deductible, except a high deductible health plan, that an individual within a family shall not have a deductible that is greater than the deductible limit for individual coverage for that product. The bill would require for a plan contract or policy and, commencing January 1, 2017, for a large group market health plan contract or policy, for family coverage that includes a deductible and is a high deductible health plan, as defined in federal law, to include a deductible for each individual covered by the plan contract or policy that is equal to either the amount set forth in a specified provision of federal law or the deductible for individual coverage under the plan contract or policy, whichever is greater. Because a willful violation of these requirements by a health care service plan would be a crime, this bill would impose a state-mandated local program.

Existing law prohibits the deductible under a small employer health care service plan contract or small employer health insurance policy that is offered, sold, or renewed on or after January 1, 2014, from exceeding specified dollar amounts. Existing law requires those dollar amounts to be indexed consistent with specified provisions of the PPACA and any federal rules or guidance pursuant to those provisions.

This bill would instead require those dollar amounts to be indexed consistent with provisions of the PPACA that specify a formula for calculating health plan premium adjustment percentages. Because a willful violation of this requirement by a health care service plan would be a crime, this 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.

Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for nongrandfathered individual and group health insurance coverage.

Existing 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, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health care service plan or health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, and requires the plan contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits to the extent that the limit does not conflict with federal law or guidance, as specified. Existing law prohibits this limit from exceeding the limit described in a specified provision of federal law.

This bill would require, for family coverage, that an individual within a family shall not have a maximum out-of-pocket limit that is greater than the maximum out-of-pocket limit for individual coverage for that product. The bill would require a plan contract or policy and, commencing January 1, 2017, a large group market plan contract or policy, for family coverage that includes a deductible, except a high deductible health plan, that an individual within a family shall not have a deductible that is greater than the deductible limit for individual coverage for that product. The bill would require for a plan contract or policy and, commencing January 1, 2017, for a large group market health plan contract or policy, for family coverage that includes a deductible and is a high deductible health plan, as defined in federal law, to include a deductible for each individual covered by the plan contract or policy that is equal to either the amount set forth in a specified provision of federal law or the deductible for individual coverage under the plan contract or policy, whichever is greater. Because a willful violation of these requirements by a health care service plan would be a crime, this bill would impose a state-mandated local program.

Existing law prohibits the deductible under a small employer health care service plan contract or small employer health insurance policy that is offered, sold, or renewed on or after January 1, 2014, from exceeding specified dollar amounts. Existing law requires those dollar amounts to be indexed consistent with specified provisions of the PPACA and any federal rules or guidance pursuant to those provisions.

This bill would instead require those dollar amounts to be indexed consistent with provisions of the PPACA that specify a formula for calculating health plan premium adjustment percentages. Because a willful violation of this requirement by a health care service plan would be a crime, this 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.

Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for nongrandfathered individual and group health insurance coverage.

Existing 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, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health care service plan or health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, and requires the plan contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits to the extent that the limit does not conflict with federal law or guidance, as specified. Existing law prohibits this limit from exceeding the limit described in a specified provision of federal law.

This bill would require, for family coverage, the above-described limit on annual out-of-pocket expenses to include a maximum out-of-pocket limit for each individual covered by the plan contract or policy that is less than or equal to the maximum out-of-pocket limit that an individual within a family shall not have a maximum out-of-pocket limit that is greater than the maximum out-of-pocket limit for individual coverage under the plan contract or policy. for that product. The bill would require a plan contract or policy and, commencing July 1, 2016, January 1, 2017, a large group market plan contract or policy, for family coverage that includes a deductible, except a high deductible health plan, to include a deductible for each individual covered under the plan contract or policy that is less than or equal to the deductible that an individual within a family shall not have a deductible that is greater than the deductible limit for individual coverage under the plan contract or policy. for that product. The bill would require a plan contract or policy and, commencing July 1, 2016, January 1, 2017, a large group market health plan contract or policy, for family coverage that includes a deductible and is a high deductible health plan, as defined in federal law, to include a deductible for each individual covered by the plan contract or policy that is equal to either the amount set forth in a specified provision of federal law or the deductible for individual coverage under the plan contract or policy, whichever is greater. Because a willful violation of these requirements by a health care service plan would be a crime, this 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.

Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for nongrandfathered individual and group health insurance coverage.

Existing 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, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health care service plan or health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, and requires the plan contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits to the extent that the limit does not conflict with federal law or guidance, as specified. Existing law prohibits this limit from exceeding the limit described in a specified provision of federal law.

This bill would require, for family coverage, the above-described limit on annual out-of-pocket expenses to include a maximum out-of-pocket limit for each individual covered by the plan contract or policy that is less than or equal to the maximum out-of-pocket limit for individual coverage under the plan contract or policy. The bill would require a plan contract or policy and, commencing July 1, 2016, a large group market plan contract or policy, for family coverage that includes a deductible, except a high deductible health plan, to include a deductible for each individual covered under the plan contract or policy that is less than or equal to the deductible for individual coverage under the plan contract or policy. The bill would require a plan contract or policy and, commencing July 1, 2016, a large group market health plan contract or policy, for family coverage that includes a deductible and is a high deductible health plan, as defined in federal law, to include a deductible for each individual covered by the plan contract or policy that is equal to either the amount set forth in a specified provision of federal law or the deductible for individual coverage under the plan contract or policy, whichever is greater. Because a willful violation of these requirements by a health care service plan would be a crime, this 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.

Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for nongrandfathered individual and group health insurance coverage.

Existing 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, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health care service plan or health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, and requires the plan contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits to the extent that the limit does not conflict with federal law or guidance, as specified. Existing law prohibits this limit from exceeding the limit described in a specified provision of federal law.

This bill would require, for family coverage, the above-described limit on annual out-of-pocket expenses to include a maximum out-of-pocket limit for each individual covered by the plan contract or policy that is less than or equal to the maximum out-of-pocket limit for individual coverage under the plan contract or policy. The bill would require a plan contract or policy for family coverage that includes a deductible, except a high deductible health plan, to include a deductible for each individual covered under the plan contract or policy that is less than or equal to the deductible for individual coverage under the plan contract or policy. The bill would require a plan contract or policy for family coverage that includes a deductible and is a high deductible health plan, as defined in federal law, to include a deductible for each individual covered by the plan contract or policy that is equal to either the amount set forth in a specified federal law or the deductible for individual coverage under the plan contract or policy, whichever is greater. Because a willful violation of these requirements by a health care service plan would be a crime, this 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.

Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for nongrandfathered individual and group health insurance coverage.

Existing 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, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, and requires the plan contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits to the extent that the limit does not conflict with federal law or guidance, as specified. Existing law prohibits this limit from exceeding the limit described in a specified provision of federal law.

This bill would require, for family coverage, the above-described limit on annual out-of-pocket expenses to include a maximum out-of-pocket limit for each individual covered by the plan contract or policy that is less than or equal to the maximum out-of-pocket limit for individual coverage under the plan contract or policy. Because a willful violation of these requirements by a health care service plan would be a crime, this 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.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1305

Author:(Bonta)

As Amended Ver:September 4, 2015

Majority vote

Original Committee Reference: HEALTH

SUMMARY: Prohibits, for family coverage, any individual within a family to have a maximum-out-of-pocket limit or deductible that is more than the maximum-out-of-pocket limit or deductible limit for individual coverage under the health plan contract.

The Senate amendments delay implementation of the bill's requirements regarding individual deductible limits in the large group market until January1, 2017; correct a cross-reference with regard to the indexing of small group health plan and policy deductible amounts; and make other clarifying changes.

FISCAL EFFECT: According to the Senate Appropriations Committee, this bill will result in:

1. One-time costs of about $440,000 for policy development and adopting regulations and ongoing costs of about $340,000 per year for the Department of Managed Health Care to update policies and respond to public information requests (Managed Care Fund).

2. One-time costs of about $40,000 in 2015-16 and $45,000 in 2016-17 to review plan filing for compliance by the Department of Insurance (Insurance Fund). Ongoing costs are expected to be minor.

3. No significant costs to the Medi-Cal program or for health care coverage provided by CalPERS are anticipated. According to the California Health Benefits Review Program, health plans and health insurance policies provided by Medi-Cal and CalPERS are already compliant with the requirements of the bill and therefore would not experience any increased costs.

COMMENTS: According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and limit on out-of-pocket costs on an individual simply because the individual is a member of a family. The author states that some family plans and policies include deductibles and out-of-pocket limits for individuals in the plan or policy, so when a family member gets sick, he or she only has to reach the individual deductible or cost-sharing limit in order for coverage to kick-in. However, other plans and insurers do not include these individual deductibles and out-of-pocket cost limits within a family plan or policy, which means that families with one member who has more expensive health care needs would have to pay thousands of dollars in out-of-pocket costs to reach the family limits before coverage kicks in. By limiting deductibles and out-of-pocket limits in family plans to what the consumer would otherwise pay under individual coverage, this bill ensures consumers are not unfairly charged for doing what is right by getting family coverage.

Under current practice, in a family plan, deductibles and maximum out-of-pocket limits may be structured in two ways. Some plans and policies impose an aggregate deductible or out-of-pocket maximum in family coverage. Under the aggregate structure, the total family deductible must be paid out-of-pocket before health insurance starts paying for health care services incurred by any family member. Take, for example, a plan or policy that has a $1,500 deductible for individual coverage, and a $3,000 deductible for a family coverage. Under this structure of aggregate deductibles, an individual in the family who falls ill would have to reach the $3,000 deductible before coverage would start, even though that same individual would have a $1,500 deductible if they had an individual plan.

In contrast, most family plans and policies, in addition to an overall family deductible and out-of-pocket limit, embed lower deductibles and out-of-pocket limits for individuals in the family plan. Under this structure, one individual in the family plan has to reach his or her own lower individual deductible or out-of-pocket limit for coverage to commence, regardless of whether the larger family deductible is met. Using the same example in the preceding paragraph, the individual in the family who falls ill would only have to meet a $1,500 deductible before his or her coverage kicks in. This bill would require plans and policies to use this structure of embedded deductibles and out-of-pocket limits.

Beginning in 2014, the federal Patient Protection and Affordable Care Act (Affordable Care Act) sets forth limits on the amount of maximum out-of-pocket cost sharing an individual or family pays for their health coverage. The federal maximum out-of-pocket cost limit for 2015 is $6,600 for an individual plan, and $13,200 for a family plan. Under federal regulations, an individual's cost-sharing may never exceed the individual maximum out-of-pocket limit, regardless of whether the individual is in a family plan. This bill is consistent with these federal regulations. Additionally, in 2015, the state's health benefits exchange, Covered California, adopted a standard benefit design for 2016 which includes similar provisions as those contained in this bill.

According to the California Health Benefit Review Program, about 98% of health care coverage in the state is already compliant with the requirements of the bill, and the only products that this bill would apply to are a small number of high-deductible health plans that have aggregated deductibles or out-of-pocket maximums for family members.

This bill is sponsored by Health Access California, and supported by consumer groups, advocacy organizations, and labor unions. Supporters state that this bill will protect individuals in family coverage who become ill or injured and who would otherwise face much higher deductibles and out-of-pocket costs than if they had individual coverage.

No opposition has been received.

Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097 FN: 0002295

 THIRD READING  

Bill No: AB 1305

Author: Bonta (D)

Amended: 9/4/15 in Senate

Vote: 21

SENATE HEALTH COMMITTEE: 8-0, 7/1/15

AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen, Pan, Roth

NO VOTE RECORDED: Wolk

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY FLOOR: 78-0, 6/1/15 - See last page for vote

SUBJECT: Limitations on cost sharing: family coverage

SOURCE: Author

DIGEST: This bill requires maximum out-of-pocket limits and deductibles for health plan or health insurance coverage for families to include maximum out-of-pocket limits and deductibles for each individual of the family to be less than or equal to the maximum out-of-pocket limit and deductibles that apply for coverage purchased for an individual. This bill implements the individual deductible requirement in the large group market on contracts and policies issued, amended, or renewed on or after July 1, 2016.

Senate Floor Amendments of 9/4/15 clarify that the provisions that place limits on the out-of-pocket maximum and deductibles for an individual member of a family cannot be greater that those limits for an individual. The amendments also revise the adjustment factor on the deductibles for small group coverage and delay the large group market implementation date to January 1, 2017.

ANALYSIS:

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance policies.
   
   

2. Establishes specified limits on annual out-of-pocket expenses for covered benefits that meet the definition of California essential health benefits (EHBs). Identifies as California EHBs, 10 federally mandated categories of coverage, state mandated benefits, and benefits covered under a state-selected benchmark plan.
   
   

3. Prohibits the limits described above from exceeding the limit on high deductible health plans (HDHPs), as defined in the federal Internal Revenue Code (IRC) adjusted annually, as described in the ACA, and any subsequent rules, regulations, or guidance issued under the ACA.
   
   
   

4. Limits the deductible for a small employer health plan contract or insurance policy offered, sold, or renewed on or after January 1, 2014, to $2,000 in the case of a plan contract covering a single individual, and $4,000 in the case of any other plan contract or policy. Indexes these amounts consistent with a specified section of the ACA and any federal rules or guidance pursuant to that section.
   
   
   

5. Requires this limitation to be applied in a manner that does not affect the actuarial value of any small employer health plan contract or insurance policy, and for small group products at the bronze level of coverage, and authorizes DMHC and CDI to permit plans to offer a higher deductible in order to meet the actuarial value requirement of the bronze level.

This bill:

1. Prohibits coverage purchased for a family that has a maximum out-of-pocket limit for each individual covered by the plan or policy from having an individual limit that is greater than the maximum out-of-pocket limit for coverage purchased for an individual.
   
   

2. Prohibits coverage purchased for a family that includes a deductible for each individual covered by the plan or policy from having an individual deductible that is greater than the deductible for coverage purchased for an individual.
   
   
   

3. Includes an exception in 2) for an HDHP.
   
   
   

4. Implements provisions above in the large group market on contracts and policies issued, amended, or renewed on or after January 1, 2017.
   
   

5. Corrects a cross reference in existing law with regard to the indexing of small employer health plan and policy deductible amounts.

Comments

Author’s statement. According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and limit on out-of-pocket costs on an individual simply because the individual is a member of a family. Health plans and insurance policies often include a deductible amount, as well as limits on the amount out-of-pocket costs a person or family may incur in a year. The author states that some family plans and policies include deductibles and out-of-pocket limits for individuals in the plan or policy, so when a family member gets sick, he or she only has to reach the individual deductible or cost-sharing limit in order for coverage to kick-in. However, other plans and insurers do not include these individual deductibles and out-of-pocket cost limits within a family plan or policy, which means that families with one member who has more expensive health care needs would have to reach the family limits before coverage kicks in. Under this structure, families with one member with high health care costs are forced to pay thousands of dollars in out-of-pocket expenses simply because they are in a family plan. This bill creates parity between what consumers pay in individual and family plans by embedding individual deductibles and out-of-pocket limits in family plans, and ensures consumers are not unfairly charged for doing what is right by getting family coverage.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee:

1. One-time costs of about $440,000 for policy development and adopting regulations and ongoing costs of about $340,000 per year for DMHC to update policies and respond to public information requests (Managed Care Fund).

2. One-time costs of about $40,000 in 2015-16 and $45,000 in 2016-17 to review plan filings for compliance by CDI (Insurance Fund). Ongoing costs are expected to be minor.

3. No significant costs to the Medi-Cal program or for health care coverage provided by CalPERS are anticipated. According to the California Health Benefits Review Program, health plans and health insurance policies provided by Medi-Cal and CalPERS are already compliant with the requirements of the bill and therefore would not experience any increased costs.

SUPPORT: (Verified 9/4/15)

Health Access California (source)

American Cancer Society Cancer Action Network

American Federation of State, County, and Municipal Employees

California Black Health Network

California Chapter of the American College of Emergency Physicians

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Labor Federation

California Pan-Ethnic Health Network

California Primary Care Association

California School Employees Association

California Teachers Association

CALPIRG

Children Now

Children’s Defense Fund California

Congress of California Seniors

Consumers Union

The Children’s Partnership

Western Center on Law and Poverty

OPPOSITION: (Verified 9/4/15)

None received

ARGUMENTS IN SUPPORT: Health Access California writes that this bill assures that no Californian has a deductible or out of pocket limit higher than the individual deductible or out of pocket limit. The California School Employees Association indicates that if one person in a family plan gets sick it is unfair for the family to be exposed to the out-of-pocket maximum of $13,300. For classified school employees who earn modest incomes, the maximum out-of-pocket costs could equal their entire salary. This bill would provide much needed relief. According to the Western Center on Law and Poverty this bill could save a family as much as $6,600 in out-of-pocket costs, which is significant for a family with someone facing a serious illness. The California Chapter of the American College of Emergency Physicians believes this bill is an important measure that will prohibit health plans and health insurers from giving an enrollee a higher deductible and out-of-pocket limit because the person has a family insurance plan. The California Labor Federation indicates that this solution will provide parity with those enrolled in individual and family health care plans.

ASSEMBLY FLOOR: 78-0, 6/1/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Beth Gaines, Hadley

Prepared by: Teri Boughton / HEALTH /

9/8/15 16:26:15

**** END ****

 THIRD READING  

Bill No: AB 1305

Author: Bonta (D)

Amended: 6/25/15 in Senate

Vote: 21

SENATE HEALTH COMMITTEE: 8-0, 7/1/15

AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen, Pan, Roth

NO VOTE RECORDED: Wolk

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY FLOOR: 78-0, 6/1/15 - See last page for vote

SUBJECT: Limitations on cost sharing: family coverage

SOURCE: Health Access California

DIGEST: This bill requires maximum out-of-pocket limits and deductibles for health plan or health insurance coverage for families to include maximum out-of-pocket limits and deductibles for each individual of the family to be less than or equal to the maximum out-of-pocket limit and deductibles that apply for coverage purchased for an individual. This bill implements the individual deductible requirement in the large group market on contracts and policies issued, amended, or renewed on or after July 1, 2016.

ANALYSIS:

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance policies.
   
   

2. Establishes specified limits on annual out-of-pocket expenses for covered benefits that meet the definition of California essential health benefits (EHBs). Identifies as California EHBs, 10 federally mandated categories of coverage, state mandated benefits, and benefits covered under a state-selected benchmark plan.
   
   

3. Prohibits the limits described above from exceeding the limit on high deductible health plans (HDHPs), as defined in the federal Internal Revenue Code (IRC) adjusted annually, as described in the ACA, and any subsequent rules, regulations, or guidance issued under the ACA.

4. Limits the deductible for a small employer health plan contract or insurance policy offered, sold, or renewed on or after January 1, 2014, to $2,000 in the case of a plan contract covering a single individual, and $4,000 in the case of any other plan contract or policy. Indexes these amounts consistent with a specified section of the ACA and any federal rules or guidance pursuant to that section.

5. Requires this limitation to be applied in a manner that does not affect the actuarial value of any small employer health plan contract or insurance policy, and for small group products at the bronze level of coverage, and authorizes DMHC and CDI to permit plans to offer a higher deductible in order to meet the actuarial value requirement of the bronze level.

This bill:

1. Requires coverage purchased for a family that has a maximum out-of-pocket limit for each individual covered by the plan or policy to have an individual limit that is less than or equal to the maximum out-of-pocket limit for coverage purchased for an individual.
   
   

2. Requires coverage purchased for a family that includes a deductible for each individual covered by the plan or policy to have an individual deductible that is less than or equal to the deductible for coverage purchased for an individual.

3. Includes an exception in 2) for an HDHP.

4. Implements provisions above in the large group market on contracts and policies issued, amended, or renewed on or after July 1, 2016.
   
   

5. Corrects a cross reference in existing law with regard to the indexing of small employer health plan and policy deductible amounts.

Comments

1. Author’s statement. According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and limit on out-of-pocket costs on an individual simply because the individual is a member of a family. Health plans and insurance policies often include a deductible amount, as well as limits on the amount out-of-pocket costs a person or family may incur in a year. The author states that some family plans and policies include deductibles and out-of-pocket limits for individuals in the plan or policy, so when a family member gets sick, he or she only has to reach the individual deductible or cost-sharing limit in order for coverage to kick-in. However, other plans and insurers do not include these individual deductibles and out-of-pocket cost limits within a family plan or policy, which means that families with one member who has more expensive health care needs would have to reach the family limits before coverage kicks in. Under this structure, families with one member with high health care costs are forced to pay thousands of dollars in out-of-pocket expenses simply because they are in a family plan. This bill creates parity between what consumers pay in individual and family plans by embedding individual deductibles and out-of-pocket limits in family plans, and ensures consumers are not unfairly charged for doing what is right by getting family coverage.
   
   

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee,

1. One-time costs of about $440,000 for policy development and adopting regulations and ongoing costs of about $340,000 per year for DMHC to update policies and respond to public information requests (Managed Care Fund).

2. One-time costs of about $40,000 in 2015-16 and $45,000 in 2016-17 to review plan filings for compliance by CDI (Insurance Fund). Ongoing costs are expected to be minor.

3. No significant costs to the Medi-Cal program or for health care coverage provided by CalPERS are anticipated. According to the California Health Benefits Review Program, health plans and health insurance policies provided by Medi-Cal and CalPERS are already compliant with the requirements of the bill and therefore would not experience any increased costs.

SUPPORT: (Verified 8/28/15)

Health Access California (source)

American Cancer Society Cancer Action Network

American Federation of State, County, and Municipal Employees

California Black Health Network

California Chapter of the American College of Emergency Physicians

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Labor Federation

California Pan-Ethnic Health Network

California Primary Care Association

California School Employees Association

California Teachers Association

CALPIRG

Children Now

Children’s Defense Fund California

Congress of California Seniors

Consumers Union

The Children’s Partnership

Western Center on Law and Poverty

OPPOSITION: (Verified 8/28/15)

None received

ARGUMENTS IN SUPPORT: Health Access California writes that this bill assures that no Californian has a deductible or out of pocket limit higher than the individual deductible or out of pocket limit. The California School Employees Association indicates that if one person in a family plan gets sick it is unfair for the family to be exposed to the out-of-pocket maximum of $13,300. For classified school employees who earn modest incomes, the maximum out-of-pocket costs could equal their entire salary. This bill would provide much needed relief. According to the Western Center on Law and Poverty this bill could save a family as much as $6,600 in out-of-pocket costs, which is significant for a family with someone facing a serious illness. The California Chapter of the American College of Emergency Physicians believes this bill is an important measure that will prohibit health plans and health insurers from giving an enrollee a higher deductible and out-of-pocket limit because the person has a family insurance plan. The California Labor Federation indicates that this solution will provide parity with those enrolled in individual and family health care plans.

ASSEMBLY FLOOR: 78-0, 6/1/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Beth Gaines, Hadley

Prepared by: Teri Boughton / HEALTH /

8/31/15 16:51:32

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1305 (Bonta) - Limitations on cost sharing: family coverage

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 1305 would require out-of-pocket expenditure limits and deductibles for family health plan or health insurance coverage to include out-of-pocket expenditure limits and deductibles for each individual member of the family that are no more than the amounts allowed for individual coverage.

Fiscal Impact:

• One-time costs of about $440,000 for policy development and adopting regulations and ongoing costs of about $340,000 per year for the Department of Managed Health Care to update policies and respond to public information requests (Managed Care Fund).

• One-time costs of about $40,000 in 2015-16 and $45,000 in 2016-17 to review plan filings for compliance by the Department of Insurance (Insurance Fund). Ongoing costs are expected to be minor.

• No significant costs to the Medi-Cal program or for health care coverage provided by CalPERS are anticipated. According to the California Health Benefits Review Program, health plans and health insurance policies provided by Medi-Cal and CalPERS are already compliant with the requirements of the bill and therefore would not experience any increased costs.

Background:

Beginning in 2014, under the federal Patient Protection and Affordable Care Act (Affordable Care Act), total annual out-of-pocket expenditures for health care coverage in the individual, small group, and health benefit exchange markets is limited to roughly $6,000 for an individual and $13,000 for a family. In addition, annual deductibles in the small group market are generally limited to $2,000 for an individual and $4,000 for a family.

Under current practice, health plans and health insurance products can include both individual out-of-pocket maximums and deductibles as well as family out-of-pocket maximums and deductibles. For example, a health plan for a family of four could have individual deductibles of $1,500 as well as an aggregated family deductible of $3,000. The family’s health plan could require both the individual deductible and the family deductible to be met before the health plan coverage begins. For example, if only one member of the family needed significant medical care, that individual could need to pay for medical services up to $3,000 (the family deductible) before coverage began. Whereas, if that member of the family purchased similar coverage as an individual, he or she may only have to pay $1,500 before coverage began.

According to the California Health Benefit Review Program, about 98% of health care coverage in the state is already compliant with the requirements of the bill. There are a small number of high-deductible health plans that have aggregated deductibles or out-of-pocket maximums for family members.

Proposed Law:

AB 1305 would require out-of-pocket expenditure limits and deductibles for family health plan or health insurance coverage to include out-of-pocket expenditure limits and deductibles for each individual member of the family that are no more than the amounts allowed for individual coverage.

Implementation of the bill’s provisions relating to deductibles in large group coverage would go into effect on July 1, 2016.

Related Legislation:

• AB 339 (Gordon) would restrict outpatient prescription drug cost-sharing, require coverage for specified drugs under certain circumstances, and standardize tiers for prescription drug coverage. That bill will be heard in this committee.

• SB 639 (Hernandez, Statutes of 2014) codified federal requirements relating to out-of-pocket maximum cost-sharing.

Staff Comments:

The only costs that may be incurred by a local agency relate to crimes and infractions. Under the California Constitution, such costs are not reimbursable by the state.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Ed Hernandez, O.D., Chair

BILL NO: AB 1305

SUBJECT: Limitations on cost sharing: family coverage.

SUMMARY:

Requires maximum out-of-pocket limits and deductibles for family health plan or health insurance coverage to include maximum out-of-pocket limits and deductibles for each individual to be less than or equal to the maximum out-of-pocket limit and deductibles for individual coverage. Implements the individual deductible requirement in the large group market on contracts and policies issued, amended, or renewed on or after July 1, 2016.

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance policies.
   
   

2. Requires non-grandfathered (established after enactment of the federal Affordable Care Act (ACA) health plan contracts or health insurance policies in the individual and small group markets, a health plan contract or health insurance policy, except a specialized health plan contract or specialized health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of California essential health benefits (EHBs), as specified, including out-of-network emergency care.
   
   

3. Identifies as California EHBs 10 federally mandated categories of coverage, state mandated benefits, and benefits covered under a state-selected benchmark plan.
   
   

4. Requires non-grandfathered health plan contracts or health insurance policies in the large group market, a health plan contract or health insurance policy, except a specialized health plan contract or health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for covered benefits, including out-of-network emergency care, as specified. Applies this limit only to EHBs, as specified, that are covered under the plan or policy to the extent that this provision does not conflict with federal law or guidance on out-of-pocket maximums for non-grandfathered health plan contracts or health insurance policies in the large group market.
   
   

5. Prohibits the limits described in 2) and 4) above from exceeding the limit on high deductible health plans (HDHPs), as defined in the federal Internal Revenue Code (IRC) adjusted annually, as described in the ACA, as specified, and any subsequent rules, regulations, or guidance issued under the ACA.

6. Requires the limit described in subdivision 2) and 4) above to result in a total maximum out-of-pocket limit for all covered EHBs equal to the dollar amounts in effect under the IRC with the dollar amounts adjusted as specified in the ACA.

7. Limits the deductible for a small employer health plan contract offered, sold, or renewed on or after January 1, 2014, to $2,000 in the case of a plan contract covering a single individual, and $4,000 in the case of any other plan contract. Indexes these amounts consistent with a specified section of the ACA and any federal rules or guidance pursuant to that section.

8. Requires the limitation to be applied in a manner that does not affect the actuarial value of any small employer health plan contract, and for small group products at the bronze level of coverage, authorizes DMHC and CDI to permit plans to offer a higher deductible in order to meet the actuarial value requirement of the bronze level.

This bill:

1. Requires, for family coverage, the limit on annual out-of-pocket expenses described in existing law to include a maximum out-of-pocket limit for each individual covered by the plan or policy that is less than or equal to the maximum out-of-pocket limit for individual coverage under the plan contract or policy.
   
   

2. Requires, except as provided in 3) below, if a health plan contract or health insurance policy for family coverage includes a deductible, the plan contract or policy to include a deductible for each individual covered by the plan or policy that is less than or equal to the deductible for individual coverage under the plan contract or policy.

3. Requires, if a health plan contract or insurance policy for family coverage includes a deductible and is a HDHP as defined under the IRC, the plan contract or policy to include a deductible for each individual covered by the plan or policy that is equal to either the amount set forth in the IRC or the deductible for individual coverage under the plan contract or policy, whichever is greater.

4. Implements provisions 2) and 3) above in the large group market on contracts and policies issued, amended, or renewed on or after July 1, 2016.
   
   

5. Corrects a cross reference in existing law with regard to the indexing of small employer health plan and policy deductible amounts.
   
   

FISCAL EFFECT:

According to the Assembly Appropriations Committee, the California Health Benefit Review Program (CHBRP) estimates:

1. No impact on publicly funded health insurance programs.

2. Reduced expenditures in the private market of tens of millions of dollars, mostly in the form of reduced premium payments for individually purchased insurance, based on individual cost-sharing amounts going up to family cost-sharing amounts for some consumers. However, CHBRP states this is likely an overestimate due to data limitations. Any impact on expenditures would depend on how product offerings and consumer behavior changed to comply with this bill's provisions.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and limit on out-of-pocket costs on an individual simply because the individual is a member of a family. Health plans and insurance policies often include a deductible amount, as well as limits on the amount out-of-pocket costs a person or family may incur in a year. The author states that some family plans and policies include deductibles and out-of-pocket limits for individuals in the plan or policy, so when a family member gets sick, he or she only has to reach the individual deductible or cost-sharing limit in order for coverage to kick-in. However, other plans and insurers do not include these individual deductibles and out-of-pocket cost limits within a family plan or policy, which means that families with one member who has more expensive health care needs would have to reach the family limits before coverage kicks in. Under this structure, families with one member with high health care costs are forced to pay thousands of dollars in out-of-pocket expenses simply because they are in a family plan. This bill creates parity between what consumers pay in individual and family plans by embedding individual deductibles and out-of-pocket limits in family plans, and ensures consumers are not unfairly charged for doing what is right by getting family coverage.
   
   

2. Deductibles and Out of Pocket Max. According to the CHBRP, deductibles are a fixed dollar amount (lump sum for one or more services) an enrollee is required to pay out-of-pocket within a given time period (e.g., a year) before the health plan or insurer begins to pay, in part or in whole, for covered health care services. A plan or policy can have more than one deductible, for example, a general deductible that applies to a specified set of covered medical benefits and another deductible that applies to prescription drugs or hospital admissions. Deductibles can range from $200 for an outpatient pharmacy benefit to $2,500 or more for a family medical benefit. Not all plans and policies have deductibles. Annual out-of-pocket maximums can include deductibles and other forms of cost sharing. Annual out-of-pocket limits are limits on the enrollee’s cost-sharing obligations (defined as copayments, coinsurance, and deductibles) in a one-year period. Health care services that are not covered by the health plan or insurer generally are not included in the maximum; and, enrollees can be responsible for the full charges associated with non-covered services.

3. ACA Limitations. The ACA limits cost-sharing incurred under a health plan with respect to self-only coverage or coverage other than self-only coverage (family coverage) for a plan year beginning in 2014 from exceeding the dollar amounts in effect under the IRC definition of a HDHP adjusted annually as described. These limits are $6,850 for an individual and $13,700 for family for 2016. They are slightly higher than the Internal Revenue Service (IRS) limits for Health Savings Account (HSA) compatible HDHPs because the methods of indexing the amounts for inflation used by each agency are different. (See below for the IRS HDHP limits.) The ACA also established limits on deductibles for small employer health plans in the amount of $2,000 for self-only and $4,000 for family coverage, adjusted annually as described. However, this provision was repealed on April 1, 2014. The ACA requires plans to be organized according actuarial values and these deductible amounts made it challenging to structure plans into required actuarial values.
   
   

4. IRS HDHP Limitations. The 2016 inflation adjusted amounts for HSA compatible HDHPs as determined under the IRC are as follows: for calendar year 2016, an HDHP is defined as a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage. However, according to IRS Publication 969, if either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. The annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage.
   
   

5. CMS Regulations. CMS has issued in the final 2016 Notice of Benefit and Payment Parameters that a family HDHP cannot require an individual in the family plan to exceed the annual limitation on cost sharing for self-only coverage. In addition, the annual limitation on cost sharing for self-only coverage applies to all individual regardless of whether the individual is covered by a self-only plan or is covered by a plan that is other than self-only, catastrophic plans, and qualified health plans that are required to comply with reduced maximum annual limitation on cost sharing. These regulations also give plans the option to count the cost sharing for out-of-network services towards the annual limitation on cost sharing. Subsequent frequently asked questions explain how this requirement interacts with HDHP deductibles. CMS indicates that as long as a plan with a family deductible of $10,000 applies a maximum annual limitation on cost-sharing of $6,850 (for 2016) to each individual in the plan, even if the family $10,000 deductible has not yet been satisfied, there would not be a conflict with IRS rules on HDHPs.
   
   

6. Covered California. The 2016 Covered California standard benefit design for qualified health plans participating in California’s exchange requires any and all cost-sharing payments for in-network covered services to apply to the out-of-pocket maximum. If a deductible applies to the service, cost sharing payments for all in-network services accumulate toward the deductible. In-network services include services provided by an out-of-network provider that are approved as in-network by the carrier. For covered out-of-network services in a PPO plan, the standard benefit designs do not determine cost sharing, deductible, or maximum out-of pocket amounts. For all plans, including HDHPs linked to HSA plans, in coverage other than self-only coverage, an individual’s payment toward a deductible, if required, is limited to the individual annual deductible amount. In coverage other than self-only, an individual’s out of pocket contribution is limited to the individual’s annual out of pocket maximum. For HDHPs linked to HSAs, in other than self-only coverage, each individual in the family must meet the individual minimum deductible amount established by the IRS for the applicable plan year.
   
   

7. CHBRP analysis. AB 1996 (Thomson, Chapter 795, Statutes of 2002) requests the University of California to assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed health plan and health insurance benefit mandate legislation. The assessments were expanded to include legislation impacting essential health benefits and health insurance benefit design, cost sharing, premiums, and other health insurance topics. CHBRP was created in response to AB 1996. According to CHBRP, the effects of the amended AB 1305 on total expenditures could play out in two opposing ways, depending on how health insurance carriers respond to the bill:

1. Total Expenditures Could Increase: If health insurers choose to offer self-only plans in which current deductibles stay the same, as allowed by this bill, then changes to per-person deductibles for family coverage would result in more generous coverage. Enrollees with family coverage would have to meet a lower deductible than previously. This would result in an increase in overall expenditures that would be spread through the entire enrollee population with higher premiums. However, enrollees with family coverage would experience a decrease in out-of-pocket costs.
   
   

2. Total Expenditures Could Decrease: Health insurers may choose to maintain the typical 1:2 ratio between the per-person deductible and the family deductible, even though AB 1305 allows HDHPs for single coverage to be different than the per-person deductible within family coverage. This result would mirror CHBRP’s original analysis, where total expenditures decreased by $37,754,000 or .028%. CHBRP indicates that 98% of enrollees subject to this bill are covered by plans regulated by the Department of Managed Health Care or California Department of Insurance policies that have no deductible or embedded deductible. CHBRP found that 506,722 (2%) enrollees had health insurance with an aggregated deductible.
   
   

8. Illustration. A June 5, 2015 article by Julia Zuckerman JD and Leslye Laderman, JD, LLM posted on the Society for Human Resource Management provides a helpful illustration of how a plan’s out-of-pocket limits apply to a family of four (mother, father, son and daughter) with a family out-of-pocket maximum of $13,000.

9. Related legislation. AB 339 (Gordon), restricts outpatient prescription drug cost-sharing amounts for a 30-day supply to one-twenty-fourth of the annual out-of-pocket limit, requires coverage for specified drugs under a variety of specified circumstances, standardizes tiers for prescription drug formularies, and restricts the ability of health plans and insurers to institute cost-sharing and place drugs on certain cost-sharing tiers, unless specified conditions are met. AB 339 has been scheduled for hearing in the Senate Health Committee on June 8, 2015.
   
   

Prior legislation. SB 639 (Hernandez, Chapter 316, Statutes of 2013), codifies provisions of the ACA relating to out-of-pocket limits on cost-sharing.

AB 1917 (Gordon, 2014), similar to AB 339, would have established limits on the copayment, coinsurance, or any other form of cost-sharing for a covered outpatient prescription drug for an individual prescription to a specified proportion of the annual maximum out-of-pocket limit with respect to an individual or group plan or policy, as specified. This bill was ordered to the Senate Inactive File at the request of the author.

AB 1453 (Monning, Chapter 854, Statutes of 2012) and SB 951 (Ed Hernandez, Chapter 854, Statutes of 2012), establish California’s EHBs.

AB 1602 (John A Pérez, Chapter 655, Statutes of 2010) and SB 900 (Alquist, Chapter 659, Statutes of 2010), establishes the Exchange and its powers and duties.

10. Support. Health Access California writes that this bill assures that no Californian has a deductible or out of pocket limit higher than the individual deductible or out of pocket limit. The California School Employees Association indicates that if one person in a family plan gets sick it is unfair for the family to be exposed to the out-of-pocket maximum of $13,300. For classified school employees who earn modest incomes, the maximum out-of-pocket costs could equal their entire salary. This bill would provide much needed relief. According to the Western Center on Law and Poverty this bill could save a family as much as $6,600 in out-of-pocket costs, which is significant for a family with someone facing a serious illness. The California Chapter of the American College of Emergency Physicians believes this bill is an important measure that will prohibit health plans and health insurers from giving an enrollee a higher deductible and out-of-pocket limit because the person has a family insurance plan. The California Labor Federation indicates that this solution will provide parity with those enrolled in individual and family health care plans.

SUPPORT AND OPPOSITION:

Support: Health Access California (sponsor)

American Cancer Society Cancer Action Network

American Federation of State, County, and Municipal Employees

California Black Health Network

California Chapter of the American College of Emergency Physicians

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Labor Federation

California Pan-Ethnic Health Network

California Primary Care Association

California School Employees Association

California Teachers Association

CALPIRG

Children Now

Children’s Defense Fund California

Congress of California Seniors

Consumers Union

The Children’s Partnership

Western Center on Law and Poverty

Oppose: None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1305

Author:(Bonta)

As Amended Ver:May 5, 2015

Majority vote

SUMMARY: Requires family health plan contracts and insurance policies to include a maximum deductible and out-of-pocket cost sharing limit for each individual covered by the plan or policy, that is no greater than the deductible or out-of-pocket limit for an individual plan or policy. Makes exceptions for family high-deductible health plans (HDHPs) by requiring them to include a per-individual deductible within the plan or policy that is equal to the minimum deductible required under federal law or the deductible for individual coverage under the plan, whichever is greater.

FISCAL EFFECT: According to the Assembly Appropriations Committee, the California Health Benefit Review Program estimates:

1. No impact on publicly funded health insurance programs.

2. Reduced expenditures in the private market of tens of millions of dollars, mostly in the form of reduced premium payments for individually purchased insurance, based on individual cost-sharing amounts going up to family cost-sharing amounts for some consumers. However, California Health Benefits Review Program (CHBRP) states this is likely an overestimate due to data limitations. Any impact on expenditures would depend on how product offerings and consumer behavior changed to comply with this bill's provisions.

COMMENTS: According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and out-of-pocket cost limit on an individual simply because the individual is a member of a family. The author states that some family plans and policies include deductibles and out-of-pocket limits for each individual in the plan or policy, so each family member only has to reach his or her individual deductible or cost-sharing limit in order for coverage to kick-in. However, the author states other plans and insurers do not embed these individual deductibles and out-of-pocket costs limits within the family plan or policy, which means that a family member who becomes ill has to meet the entire family deductible or out-of-pocket cost sharing limit before coverage kicks in. The author argues that under this structure, families with one member with high health care costs are forced to pay thousands of dollars in out-of-pocket expenses simply because they are in a family. The author states that this bill creates parity between what consumers pay in individual and family plans and protects consumers from having to pay more toward their care because they are a family member covered under a family plan. The author states that this bill aligns with regulations set by our state's health benefits exchange (Exchange), which require Exchange plans and policies to include individual deductibles and out-of-pocket limits in family plans. The author also states that this bill is consistent with federal regulations regarding limits on out-of-pocket cost sharing, and will make California a national leader in terms of individual deductibles embedded in family plans.

1. Deductibles and other consumer out-of-pocket cost sharing. In a family plan, deductibles and maximum out-of-pocket limits may be structured in two ways. Some plans and policies impose an aggregate deductible or out-of-pocket maximum in family coverage. Under the aggregate structure, the total family deductible must be paid out-of-pocket before health insurance starts paying for health care services incurred by any family member. Take, for example, a plan or policy that has a $5,000 deductible for individual coverage, and a $10,000 deductible for a family coverage. Under this structure of aggregate deductibles, an individual in the family who falls ill would have to reach the $10,000 deductible before coverage would start, even though that same individual would have a $5,000 deductible if they had an individual plan.

In contrast, most family plans and policies, in addition to an overall family deductible and out-of-pocket limit, embed lower deductibles and out-of-pocket limits for each individual in the family plan. Under this structure, one individual in the family plan has to reach his or her own lower individual deductible or out-of-pocket limit for coverage to commence, regardless of whether the larger family deductible is met. Using the same example in the preceding paragraph, the individual in the family who falls ill would only have to meet a $5,000 deductible before his or her coverage kicks in. This bill would require plans and policies to use this structure of embedded deductibles and out-of-pocket limits.

2. Federal regulations. On February 27, 2015, the United States Department of Health and Human Services (HHS) issued a notice of final regulations regarding cost sharing parameters, clarifying that the out-of-pocket limit for individual coverage applies to all individuals regardless of whether the individual is covered by an individual plan or a family plan. HHS states that in both of these cases, an individual’s cost sharing for EHBs may never exceed the individual cost sharing limits. These federal regulations do not apply to deductibles. On May 8, 2015, the federal government issued guidance on the implementation of embedded out-of-pocket limits in family plans or policies.

3. Exchange standard benefit plan design. Each year, the Exchange sets a standard benefit design that plans and insurers must use when selling products through the Exchange. On May 21, 2015, the Exchange board adopted regulations to implement its 2016 standard benefit design, which contains provisions similar to those in this bill, limiting deductibles and out-of-pocket limits in all plans and policies to the individual amount.

4. CHBRP analysis. CHBRP conducted an evidence-based assessment of the previous version of this bill which was published on April 22, 2015. According to CHBRP, approximately 98% of enrollees in plans or policies subject to this bill are covered by plans and policies that have no deductible, or already have an embedded deductible. CHBRP found that HDHPs, which can be paired with tax-advantaged HSAs or health reimbursement accounts would be the only products affected by this bill. As such, this bill would affect the insurance of approximately 2.1% (506,722) of the 24.6 million Californians who have health insurance regulated by the state that may be subject to any state health benefit mandate law.

With regard to cost-impact, CHBRP estimates a decrease total net annual expenditures of consumers by $37.7 million, with the majority of the savings coming from reduced premiums in the individual market, reduction in cost-sharing as individuals may reduce utilization due to a higher deductible, and families benefitting from having the embedded deductible in their plan.

Staff Comment. As previously stated, CHBRP's cost impact estimate is based on the previous version of this bill. Under the previous version of this bill, family HDHPs may have fallen out of compliance with federal rules regarding minimum deductibles. As such, CHBRP based its cost estimate on assumptions that plans and insurers would respond by increasing individual HDHP deductibles to avoid federal noncompliance. Recent amendments to this bill address this issue, and ensure that HDHPs would not violate federal rules.

According to CHBRP, it is unable to provide a quantitative estimate on the current version of this bill due limitations on data from plans and insurers. As such, at this time, the cost impact of the current version of this bill is unclear.

Support. Health Access California (HAC), the sponsor of this bill, states that this bill would assure that no Californian has a deductible or out-of-pocket limit higher than the individual deductible or out-of-pocket limit, respectively. HAC states that one of the most important protections of the ACA is the maximum out-of-pocket limit, which will save Americans from medical bankruptcy. HAC asserts that this bill will further protect Californians by assuring that no individual with family coverage will have higher medical costs simply because they belong to a family. Other supporters state that this bill removes the inequality between individuals and families, by limiting deductibles and out-of-pocket maximums to the individual limit when the individual is a member of a family, will make sure that individuals are not financially penalized because they get sick and are in a family plan, and will prevent financial insecurity and overwhelming debt for families when one family member has significant health needs.

Opposition. The California Chamber of Commerce (Chamber) states that this bill will drive up premium costs for employers and employees, that stricter caps on cost-sharing requirements do not address overall health care affordability. The Chamber states that this bill will have a disproportionate impact on small-group premiums because small group plans are subject to a deductible limit. The Chamber argues that, due to the limitations on cost-sharing imposed by this bill, all families would have to pay higher premiums, and it makes little sense to help families afford their out-of-pocket costs if it jeopardizes their ability to afford coverage altogether. The Chamber concludes that the fact that deductibles, cost-sharing, and premiums are prohibitively expensive for some individuals and families reflects the unsustainable costs of our health care system, and this problem cannot be addressed by simply capping out-of-pocket costs.

Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097 FN: 0000717

Date of Hearing: May 13, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 1305

Author:(Bonta) – As Amended Ver:May 5, 2015

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires, for health insurance provided on a family coverage basis, deductibles and out-of-pocket maximums for coverage of essential health benefits (EHBs), to include a maximum deductible and out-of-pocket limit for each individual covered by the plan or policy, that is less than or equal to the maximum deductible and out-of-pocket limit for an individual.

It also makes exceptions for certain high-deductible health plans and policies, to ensure they comply with federal rules.

FISCAL EFFECT:

The California Health Benefit Review Program estimates:

1. No impact on publicly funded health insurance programs.

2. Reduced expenditures in the private market of tens of millions of dollars, mostly in the form of reduced premium payments for individually purchased insurance, based on individual cost-sharing amounts going up to family cost-sharing amounts for some consumers. However, CHBRP states this is likely an overestimate due to data limitations. Any impact on expenditures would depend on how product offerings and consumer behavior changed to comply with this bill's provisions.

COMMENTS:

1. Purpose. According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and out-of-pocket cost limit on an individual simply because the individual is a member of a family. The author explains that health plans and insurance policies often include a deductible amount, as well as limits on the amount out-of-pocket costs a person or family may incur in a year. The author states that some family plans and policies include deductibles and out-of-pocket limits for an individual in the plan or policy, so when a family member gets sick, they only have to reach the individual deductible or cost-sharing limit in order for coverage to kick-in. However, the author states other plans and insurers do not include these individual deductibles and out-of-pocket costs limits within a family plan or policy, which means that families with one member who has more expensive health care needs would have to reach the higher family limits before coverage kicks in. The author contends that under this structure, families with one member with high health care costs are forced to pay thousands of dollars in out-of-pocket expenses simply because they are in a family. The author states that this bill creates parity between what consumers pay in individual and family plans by requiring individual deductibles to be embedded in family plans. The author concludes that this bill is consistent with federal regulations regarding limits on out-of-pocket cost sharing, and will make California a national leader in terms of deductibles.

2. CHBRP Analysis. CHBRP conducted an evidence-based assessment of this bill which was published on April 22, 2015. According to the analysis, this bill only impacts the private insurance market outside the Exchange. Over 97% of enrollees in plans or policies subject to this bill are covered by plans and policies that have no deductible, or already have an embedded deductible.

CHBRP found high-deductible health plans, which can be paired with tax-advantaged health savings accounts or health reimbursement accounts, would be the only products affected by this bill. As such, this bill would affect the insurance of approximately 2.1% (506,722) of the 24.6 million Californians who have health insurance regulated by the state that may be subject to any state health benefit mandate law. CHBRP assumed insurers would have to make the self-only deductible match the family coverage deductible of $2,600. This increase in deductibles for individuals who are purchasing these products for self-only coverage lead to CHBRP's estimates of reduced health care utilization and reduced spending, because higher cost-sharing levels tend to reduce utilization. However, individuals could also switch to plans with a lower deductible level, or insurer could offer different products in response to this change.

3. Support. This bill is sponsored by Health Access and supported by various labor, patient advocacy, and disease advocacy groups.

4. Opposition. The Chamber of Commerce opposes this bill, citing their position against bills that shift health care costs from one payer to another. The Chamber contends this bill would increase costs for employers for coverage of families. (In their projection of the most likely outcome of this bill, CHBRP found overall expenditures, including those by employers, would not increase but actually decrease.)

5. Previous Legislation. SB 639 (Ed Hernandez), Chapter 316, Statutes of 2013, codifies provisions of the ACA relating to out-of-pocket limits on cost-sharing.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: April 28, 2015

ASSEMBLY COMMITTEE ON HEALTH

Rob Bonta, Chair

ABPCA Bill Id:AB 1305

Author:(Bonta) – As Introduced Ver:February 27, 2015

SUBJECT: Limitations on cost sharing: family coverage.

SUMMARY: Requires family health plan contracts and insurance policies to include a per-individual deductible and out-of-pocket cost sharing limit that is no greater than the amount for an individual plan or policy. Specifically, this bill:

1. Requires, for family coverage, a limit on annual out-of-pocket expenses for coverage of essential health benefits (EHBs) to include a maximum out-of-pocket limit for each individual covered by the plan that is less than or equal to the maximum out-of-pocket limit for individual coverage.

2. Requires a health care service plan or health insurance policy for family coverage that includes a deductible to include a deductible for each individual covered by the plan that is less than or equal to the deductible for individual coverage.

3. Requires a high deductible health plan to include a deductible for each individual covered by the plan that is less than or equal to the higher of the amount set forth in federal law (Add in amount here), or the deductible for individual coverage under the plan contract.

EXISTING LAW:

1. Establishes the federal Patient Protection and Affordable Care Act (ACA), which enacts various health care coverage market reforms including annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for individual and group health insurance coverage.

2. Establishes the Knox-Keene Health Care Service Plan Act of 1975, which provides for the licensure and regulation of health care service plans by the Department of Managed Health Care.

3. Provides for the regulation of health insurers by the California Department of Insurance.

4. Establishes, in state government, the California Health Benefits Exchange (Exchange), referred to as Covered California, as an independent public entity not affiliated with an agency or department, and requires the Exchange to compare and make available through selective contracting health insurance for individual and small business purchasers as authorized under the ACA.

5. Requires, under both federal and state law, that health plans and insurers issuing health benefit plans in the individual and small group market comply with specified requirements regarding the offering, sale, and scope of coverage provided, including requirements to cover the following 10 categories of EHBs: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and, pediatric services, including oral and vision care.

6. Requires a non-grandfathered health care service plan (plan) and health insurance policy (policy) in the individual or small group market that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all EHBs, including out-of-network emergency care. Non-grandfathered plans and policies must comply with all ACA requirements.

7. Requires a non-grandfathered plan or policy in the large group market that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for essential health benefits, including out-of-network emergency care to the extent that the limit does not conflict with federal law or guidance on out-of-pocket maximums for non-grandfathered plans or policies in the large group market.

8. Limits deductibles for plans and policies in the small group market to $2,000 for an individual, and $4,000 for a family.

9. Specifies that the maximum out-of-pocket limit shall apply to any copayment, coinsurance, deductible, and any other form of cost sharing for all EHBs, shall not exceed limits set forth in federal law and regulations, and shall result in a total maximum out-of-pocket limit for all covered EHBs equal to the dollar amounts prescribed by federal law.

FISCAL EFFECT: This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, this bill prohibits a health plan or insurer from imposing a higher deductible and limit out-of-pocket costs on an individual simply because the individual is a member of a family. The author explains that health plans and insurance policies often include a deductible amount, as well as limits on the amount out-of-pocket costs a person or family may incur in a year. The author states that some family plans and policies include deductibles and out-of-pocket limits for individual in the plan or policy, so when a family member gets sick, they only have to reach the individual deductible or cost-sharing limit in order for coverage to kick-in. However, the author states other plans and insurers do not include these individual deductibles and out-of-pocket costs limits within a family plan or policy, which means that families with one member who has more expensive health care needs would have to reach the family limits before coverage kicks in. The author contends that under this structure, families with one member with high health care costs are forced to pay thousands of dollars in out-of-pocket expenses simply because they are in a family. The author states that this bill creates parity between what consumers pay in individual and family plans by requiring individual deductibles in family plans. The author asserts that this bill is critical to ensure consumers are not unfairly charged for doing what is right by getting family coverage. The author concludes that this bill is consistent with federal regulations regarding limits on out-of-pocket cost sharing, and will make California a national leader in terms of deductibles.

2. BACKGROUND.

1. Deductibles and other consumer out-of-pocket cost sharing. Most health plans and insurers require enrollees to pay a portion of the cost of care when they seek services, in addition to any premium that they must pay for the plan. Plans and insurers generally have several forms of cost sharing, including deductibles, which must be paid by patients before the plan begins paying toward some or most services, and copayments or coinsurance which must be paid by patients at the time they receive services.

The ACA sets forth limits on the amount of out-of-pocket cost sharing an individual or family pays for their health coverage. This limit applies for costs related to deductibles, coinsurance, copayments, or similar charges and any other expenditure that is a qualified medical expense for EHBs. The limit does not count premiums or out-of-network cost sharing, or spending for non-essential health benefits. The federal maximum out-of-pocket cost limit for 2015 is $6,600 for an individual plan, and $13,200 for a family plan. Additionally, federal regulations limit maximum out-of-pocket limits for high deductible health plans (HDHPs) to $6450 per person in 2015.

In a family plan, deductibles and maximum out-of-pocket limits may be structured in two ways. Some plans and policies impose an aggregate deductible or out-of-pocket maximum in family coverage. Under the aggregate structure, the total family deductible must be paid out-of-pocket before health insurance starts paying for health care services incurred by any family member. Take, for example, a plan or policy that has a $1,500 deductible for individual coverage, and a $3,000 deductible for a family coverage. Under this structure of aggregate deductibles, an individual in the family who falls ill would have to reach the $3,000 deductible before coverage would start, even though that same individual would have a $1,500 deductible if they had an individual plan.

In contrast, most family plans and policies, in addition to an overall family deductible and out-of-pocket limit, embed lower deductibles and out-of-pocket limits for each individual in the family plan. Under this structure, one individual in the family plan has to reach his or her own lower individual deductible or out-of-pocket limit for coverage to commence, regardless of whether the larger family deductible is met. Using the same example in the preceding paragraph, the individual in the family who falls ill would only have to meet a $1,500 deductible before his or her coverage kicks in. This bill would require plans and policies to use this structure of embedded deductibles and out-of-pocket limits.

2. Federal regulations. Current federal regulations set policy with regard to maximum out-of-pocket costs for individuals in a family plan. Specifically, on February 27, 2015, the U.S. Department of Health and Human Services (HHS) issued a notice of final regulations regarding cost sharing parameters, clarifying in a preamble that the annual limit on cost-sharing for individual coverage applies to all individuals regardless of whether the individual is covered by an individual plan or a group plan. HHS states that in both of these cases, an individual’s cost sharing for EHBs may never exceed the individual cost sharing limits, and it is finalizing a technical correction to existing regulations to implement it. According to HHS, the clarification is an important consumer protection considering that some consumers have been confused by the applicability of the annual limitation on cost sharing in group plans, and the annual limitation on cost-sharing applies to all individuals regardless of whether the individual is covered by an individual plan or a group plan. These federal regulations do not apply to deductibles.

3. Covered California standard benefit plan design. Each year, the Exchange sets a standard benefit design that plans and insurers must use when selling products through Covered California. With standardized benefits, consumers can more accurately compare plans and policies because the benefits are the same for all plans offered in the Exchange marketplace. Additionally, standardizing benefits ensures that the selected health insurance plans define what consumers get and limit the consumer’s out-of-pocket costs by type of service.

The Exchange’s standard benefit design for 2015, which was adopted into regulations by the Exchange board, contained provisions similar to those proposed in this bill. Specifically, it required that, in a family plan, an individual is responsible for only the individual deductible and the individual out-of-pocket maximum amount. For HDHPs linked to a health savings account (HSA), in a family plan, each individual in the family must meet a deductible of $2,600, as required by federal law, and each individual must meet individual out-of-pocket maximum that is the same for individual coverage.

In January 2015, the Exchange released its proposed standard benefit design for 2016, which included similar provisions. Specifically, the proposed standard benefit design requires that for all group plans and policies, including high deductible health plans linked to health savings accounts, an individual’s payment toward a deductible is limited to the individual annual deductible amount. Additionally, an individual’s out-of-pocket contribution is limited to the individual’s annual out-of-pocket maximum.

4. California Health Benefits Review Program (CHBRP) analysis. CHBRP conducted an evidence-based assessment of this bill which was published on April 22, 2015.

According to the analysis, over 97% of enrollees in plans or policies subject to this bill are covered by plans and policies that have no deductible, or already have an embedded deductible. According to CHBRP, all plans and insurance policies offered through Covered California have embedded deductibles and out-of-pocket limits.

CHBRP found that HDHPs, which can be paired with tax-advantaged HSAs or health reimbursement accounts would be the only products affected by this bill. As such, this bill would affect the insurance of approximately 2.1% (506,722) of the 24.6 million Californians who have health insurance regulated by the state that may be subject to any state health benefit mandate law.

Under federal rules, deductibles for individual HDHP plans may be no less than $1,300. Family HDHPs may not have deductibles less than $2,600 whether paid for a single member of the family, or by multiple members of the family. For this reason, CHBRP found that, because the bill would require a per-individual deductible of $1,300 embedded the family plan, it could put family HDHPs out of compliance with federal regulations. As a result families who have an HDHP would not be permitted to use an HSA because the plan is not HSA-compliant.

In response to this issue, CHBRP assumed that plans and insurers would either i) continue to offer HSA-compatible HDHPs for individual enrollees with deductibles of $1,300 allowing families to continue to purchase an HDHP, but without the HSA; or, ii) raise the minimum deductible for both individuals and families to $2,600, making the plans compliant with federal rules and HSA-compatible.

CHBRP based its cost-estimate of the bill on the second assumption that plans and insurers would raise the HDHP deductible to $2,600 for both individuals and families, and determined that this bill would decrease total net annual expenditures by consumers of $37.7 million. The majority of these savings (over $20 million) would come from reduced premiums in the individual market. CHBRP estimated that approximately $12 million of the savings would be due to a reduction in cost-shares as individuals may reduce utilization due to a higher deductible, and families benefitting from having the embedded individual deductible in their plan.

3. SUPPORT. Health Access California (HAC), the sponsor of this bill, states that this bill would assure that no Californian has a deductible or out-of-pocket limit higher than the individual deductible or out-of-pocket limit, respectively. HAC states that one of the most important protections of the ACA is the maximum out-of-pocket limit, which will save Americans from medical bankruptcy. HAC asserts that this bill will further protect Californians by assuring that no individual with family coverage will have higher medical costs simply because they belong to a family. Other supporters state that this bill removes the inequality between individuals and families, by limiting deductibles and out-of-pocket maximums to the individual limit when the individual is a member of a family, will make sure that individuals are not financially penalized because they get sick and are in a family plan, and will prevent financial insecurity and overwhelming debt for families when one family member has significant health needs.

4. OPPOSITION. The California Chamber of Commerce (Chamber) states that this bill will drive up premium costs for employers and employees, that stricter caps on cost-sharing requirements do not address overall health care affordability. The Chamber states that this bill will have a disproportionate impact on small-group premiums because small group plans are subject to a deductible limit. The Chamber argues that, due to the limitations on cost-sharing imposed by this bill, all families would have to pay higher premiums, and it makes little sense to help families afford their out-of-pocket costs if it jeopardizes their ability to afford coverage altogether. The Chamber concludes that the fact that deductibles, cost-sharing, and premiums are prohibitively expensive for some individuals and families reflects the unsustainable costs of our health care system, and this problem cannot be addressed by simply capping out-of-pocket costs.

5. RELEVANT LEGISLATION. AB 339 (Gordon) requires a plan or insurer to provide coverage for medically necessary prescription drugs, including those for which there is no therapeutic equivalent; establishes limits on cost-sharing for covered outpatient prescription drugs; and, prohibits plans and insurers from placing specified prescription medications on the highest cost tiers of a drug formulary.

6. PREVIOUS LEGISLATION.

   1. SB 639 (Ed Hernandez), Chapter 316, Statutes of 2013, codifies provisions of the ACA relating to out-of-pocket limits on cost-sharing.

   2. AB 1917 (Gordon) of 2014, similar to AB 339, would have established limits on the copayment, coinsurance, or any other form of cost-sharing for a covered outpatient prescription drug for an individual prescription to a specified proportion of the annual maximum out-of-pocket limit with respect to an individual or group plan or policy, as specified. This bill was ordered to the inactive file at the request of the author.

   3. AB 1453 (Monning), Chapter 854, Statutes of 2012, and SB 951 (Ed Hernandez), Chapter 854, Statutes of 2012, establish California’s EHBs.

   4. AB 1602 (John A Pérez), Chapter 655, Statutes of 2010, and SB 900 (Alquist), Chapter 659, Statutes of 2010, establishes the Exchange and its powers and duties.

7. POLICY COMMENT. Federal cost-sharing limits for HDHPs set the minimum deductibles at $1,300 for an individual and $2,600 for a family. As such, family HDHPs must meet the minimum $2,600 deductible regardless of whether that amount is met by all members of the family, or a single member of the family. This bill would require a per-individual deductible to be embedded within a family HDHP, meaning that an individual in a family HDHP would only have to meet a $1,300 deductible, rather than the federally-required $2,600, for coverage to kick in. As stated in the CHBRP analysis, this could put family HDHPs out of compliance with federal regulations, and potentially limit the ability of some to purchase an HDHP linked with an HSA.

Additionally, state law limits small group plans and policies to a $2,000 individual deductible and a $4,000 family deductible. As currently drafted, this bill would require a family HDHP to include a per-individual deductible of $2,000. If an HDHP adhered to federal rules, and kept the $2,600 minimum deductible, it would also be out of compliance with state law governing the small group market.

In order to avoid potential non-compliance with federal HDHP rules or state law regarding small group deductibles, the author may wish to amend the bill to require HDHPs to include a per-individual deductible that conforms to the federal $2,600 minimum HDHP deductible.

REGISTERED SUPPORT / OPPOSITION:

Support

Health Access California (sponsor)

American Cancer Society Cancer Action Network

American Federation of State, County, and Municipal Employees, AFL-CIO

California Black Health Network

California Chronic Care Coalition

California Labor Federation

California Pan-Ethnic Health Network

California Primary Care Association
California School Employees Association

California Teachers Association

CALPIRG

Consumers Union

National Association of Social Workers, California Chapter

Western Center on Law and Poverty

Opposition

California Chamber of Commerce

Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097