Two health reform bills working their way through the state Legislature still contain question marks about some of the details, but overall they represent a major milestone for Californians who buy their own health insurance, according to consumer advocates.
"We are fundamentally changing the rules that insurers play by," said Anthony Wright, executive director of Health Access California. "This is historic, groundbreaking legislation."
The two companion bills, ABx1 2 and SBx1 2, retool the laws governing California's individual insurance market to align with new regulations in the Affordable Care Act. Similar legislation was proposed and passed by the Legislature last year but vetoed by Gov. Jerry Brown (D). The governor didn't want the state to make new laws based on a federal law that could be repealed if a Republican moved into the White House.
The bills, moving through committees now, are expected to be approved in both houses and signed by the governor.
"This is absolutely essential that we do this -- that we conform California law to federal law," said Betsy Imholz, director of special projects for Consumers Union.
"The changes in federal law will make a significant difference in the individual market, which has been the Wild West out here in California," Imholz said. "These bills will implement all that good stuff in the reform law -- that panoply of provisions to improve our health care system.
"These bills have a few extra California tweaks in them and we hope to get some more added over the next few weeks," Imholz said.
Geographic Regions in Spotlight
One of the California tweaks getting a lot of attention is the number of geographic regions the state should have for rating premiums.
Insurance premiums for individual purchasers -- like premiums in group plans -- are expected to continue to rise. Lawmakers and consumer advocates hope to keep the increases as low as possible, and one of the tools to do that is defining the number and characteristics of the state's geographic regions.
The two bills now call for six regions but that number -- as well as the shape and definition of the regions -- may change before the bills reach the governor's desk.
Insurance Commissioner Dave Jones has proposed a plan with 18 regions that he said will keep premium increases lower than other plans.
Covered California, the state's new insurance exchange, decided on 19 regions earlier this month. The federal government suggests that state exchanges use no more than seven rating regions.
Discussion about how many regions and how to define them dominated some of the legislative hearings on the bills last week.
"Geographic regions did occupy a large part of those hearings, which was a little frustrating to a lot of us," Imholz said.
Imholz and Wright both said the number and shape of geographic regions is important, but both stressed that maps can be redrawn if they aren't working well.
In general, consumer advocates favor fewer rating regions.
"Generally in this area, less is more for consumers," Imholz said. "In our experience with auto insurance, the more regions there were, the more opportunities there were for gaming. We don't want to come out with a number because honestly, we don't know what will work.
"Under all the formulations -- no matter which plans you look at -- some premiums are going to go up and some will go down," Imholz said. "Somebody's ox is going to be a little bit gored no matter what happens.
"There's so much uncertainty in this next year, so many moving parts and geographic regions are part of that," Imholz said.
"Are we going to get it perfect this first year? No. No way. It's not obvious in a lot of these situations what the right answer is. We have to choose a way forward, but we also have to remain flexible and be willing to change," Imholz said.
Insurers Support 19-Region Plan
Insurers, who are going to have millions of new customers in California no matter how the regions are drawn, favor Covered California's plan with 19 regions.
"Just last year, lawmakers passed, and the governor signed, legislation that created 19 rating regions for California's small group market -- extending that same rating region configuration to the individual market is a logical path forward," said Patrick Johnston, president and CEO of the California Association of Health Plans.
"Utilizing the same structure that is already in place for the small group market will help minimize rate increases for consumers and will help facilitate on-time implementation of the state's health benefit exchange."
In a prepared statement, Johnston warned that premiums could go up and insurers could be hampered in their attempts to meet deadlines for participating in Covered California if the Legislature sticks to the six-region plan.
"Reducing the rating regions to just six, as has been proposed, could trigger significant rate increases for millions of Californians who currently purchase health insurance. Reconfiguring rating regions for the individual market at this point in time would make it difficult, if not impossible, for health plans to meet the deadlines required by the state's health benefit exchange in order to open on time," Johnston said.
Consumer Advocates Point to Battles Won
Wright and Imholz said consumers won several battles along the way to getting these bills written.
"I think it's remarkable that the large bulk of these bills -- especially the groundbreaking changes like banning pre-existing conditions -- were not contested," Wright said.
The California bills, like the ACA, preclude insurers from denying coverage based on pre-existing conditions.
"Of course it's predicated on the federal law, but the fact that it has gone through in California without any argument is noteworthy," Wright said.
"And the tobacco ratings not being included -- that's a win for consumers," Wright added.
The bills prohibit insurers from charging smokers or former smokers higher premiums.
Imholz said Consumers Union will be working with the state Department of Managed Health Care over the next few weeks to work out details of California's uniform disclosure regulations.
"Every plan will have to put forward a four-page summary in plain language that explains what's covered, what it will cost and what's not covered," Imholz said.
"Can you imagine? For the first time, insurers will have to say what they don't cover," Imholz said.
"California for many years under the Knox-Keene Act has had strong disclosure provisions, and we want to carry that forward with these new laws and make sure California doesn't lose some of these unique state benefits," Imholz said. "Those are the sort of nuts-and-bolts things still going on."