Official Summary Text
SB 1037, as amended, Weber Pierson.
Health care coverage: rate review.
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 violation of the act by a health care service plan a misdemeanor. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law defines “unreasonable rate increase,” for these purposes, to have the same meaning as in the federal Patient Protection and Affordable Care Act, which is that an unreasonable rate increase exists when the federal Centers for Medicare and Medicaid Services makes a determination that a rate increase is excessive, unjustified, or unfairly discriminatory, among other things.
This bill would instead define “unreasonable rate increase,” for the above-described purposes, to mean a rate increase
that the Director of the Department of Managed Health Care or the Insurance Commissioner, as applicable, determines is excessive, unjustified, unfairly discriminatory, or otherwise unreasonable.
Existing law requires a health care service plan or health insurer to submit rates to their regulating entity for review and to demonstrate the impact of any changes in the rate of growth of health care costs resulting from health care cost targets.
This bill would instead require a health care service plan or health insurer to demonstrate the impact of health care cost targets on rate development, including medical trends, medical inflation, and medical administrative costs. If a plan or insurer asserts that aging, high-cost drugs, or other cost drivers explain a rate increase, the bill would require the plan or insurer to explain how it reconciles this information with analysis published by the Office of Health Care Affordability.
Because a willful violation of these provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program.
Existing law requires the director or the commissioner, as applicable, in determining whether a rate is unreasonable or not justified for purposes of the above-described review, to consider the impact on changes in health care costs as a result of the health care cost targets described above.
This bill would
require the director or the commissioner, as applicable, to additionally consider any excessive tangible net equity of the plan or the insurer in the above-described determination.
require, in determining whether a rate increase is unreasonable, the director to consider whether the plan has sufficient or
excessive tangible net equity and the commissioner to consider whether the insurer has sufficient or excessive risk-based capital.
The bill would require the Department of Managed Health Care and the Department of Insurance, in collaboration with the Office of Health Care Affordability,
as part of the existing rate review process,
to each conduct an enhanced rate review to determine if health care premiums are affordable for individual and group purchasers. The bill would require the review to include the annual change in premiums and cost sharing for the prior 5 years, including deductibles, copayments, coinsurance, and any other cost sharing that impact actuarial value.
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.