BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 1814
Author: Speier (D)
Amended: 8/28/00
Vote: 27 - Urgency
SENATE INSURANCE COMMITTEE : 7-3, 4/5/00
AYES: Speier, Escutia, Figueroa, Hughes, Johnston, Sher,
Soto
NOES: Johnson, Leslie, Lewis
SENATE APPROPRIATIONS COMMITTEE : 8-5, 5/25/00
AYES: Johnston, Alpert, Bowen, Burton, Escutia, Karnette,
Perata, Vasconcellos
NOES: Johnson, Kelley, Leslie, McPherson, Mountjoy
SENATE FLOOR : 22-11, 5/30/00
AYES: Alarcon, Alpert, Bowen, Burton, Chesbro, Costa,
Dunn, Escutia, Figueroa, Hayden, Hughes, Johnston,
Karnette, O'Connell, Ortiz, Rainey, Schiff, Sher, Solis,
Soto, Speier, Vasconcellos
NOES: Brulte, Haynes, Johannessen, Johnson, Kelley, Lewis,
Monteith, Morrow, Mountjoy, Poochigian, Wright
ASSEMBLY FLOOR : 71-6, 8/29/00 - See last page for vote
SUBJECT : Insurance: Medicare supplement: rate guide
SOURCE : Author
DIGEST : This bill requires the State Insurance
Commissioner to annually prepare a rate guide which would
CONTINUED
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provide information on all the Medicare supplement
insurance policies and contracts which are sold in
California. The guide is to be distributed through the
Health Insurance Counseling Advocacy Program offices, upon
request by telephone and on the State Department of
Insurance's website. This bill makes several changes to
existing Medicare supplement insurance policies including
the extension of an open enrollment period to individuals
under 65 years of age who are eligible for Medicare due to
a disability. It also allows that a change in benefits
provided by an employer-sponsored Medicare supplement
insurance plan would trigger the right to a guarantee issue
of an Medicare supplement insurance policy and expands the
guarantee issue list of policies to include a plan which
would provide a prescription drug benefit.
Assembly Amendments add language relative to end-stage
renal disease, adds clarifying language, and an urgency
clause.
ANALYSIS :
Existing law
1.Provides that an individual enrolled in Medicare Part B
by reason of disability is entitled to open enrollment
for a Medicare supplement insurance policy for six months
after he or she is age 65.
2.Guarantees an individual the issuance of a MSI policy or
contract when the employee's health care service plan
(health plan) that provides health benefits that
supplement the benefits under Medicare terminates, or the
health plan ceases to provide all of those supplemental
health benefits to the individual.
3.Guarantees an individual the issuance of a MSI policy or
contract when the individual, upon first becoming
eligible for benefits under Medicare Part A at age 65
years, enrolls in a Medicare+Choice plan under Medicare
Part C, and disenrolls from the health plan by not later
than 12 months after the effective date of enrollment.
4.Guarantees to specified eligible individuals the issuance
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of a MSI policy or contract that has a benefit package
classified as plan A, B, C, or F offered by any issuer.
5.Requires every health plan and disability insurer
marketing MSI coverage in this State to follow specified
marketing practices relating to the sale of MSI.
6.Provides for the regulation of MSI contracts issued by
health plans by the State Department of Managed Care
(DMC), effective no later than July 1, 2000, or earlier
pursuant to an executive order of the Governor.
7.Provides for the regulation of MSI policies issued by
insurers by the State Department of Insurance (DOI).
This bill:
1.Requires a one-time MSI open enrollment period of 120
days for individuals eligible for Medicare by reason of
disability, except for those persons with end-stage renal
disease.
2.Requires guaranteed issuance of MSI to an individual age
65 years or older who postpones enrollment in Medicare
while eligible for employer sponsored coverage.
3.Adds federally defined MSI benefit package "H" "I" or "J"
to the policies or contracts that are guaranteed to be
issued to Medicare beneficiaries. Each of these MSI
policies include coverage for prescription drugs.
4.Expands the circumstances under which MSI is issued on a
guaranteed basis, to include when an employee is enrolled
in an employee benefit welfare plan that covers all of
the payment for the Part B 20 percent coinsurance, and
the plan terminates or ceases to provide some, all or
substantially all of those supplemental benefits to the
individual.
5.Requires DOI to annually prepare an MSI policy rate
guide, as specified, and make it available on or before
the annual Medicare open enrollment period.
6.Excludes persons who have been diagnosed with end-stage
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rental disease from the guaranteed issuance rights
provided in this bill.
Purpose of Bill . To address each of the five reform
issues, the author's office indicates the following:
1.Medicare beneficiaries younger than 65 years old cannot
get MSI to supplement their Medicare if they have a
health condition. This bill requires companies to sell
(guarantee issue) one of five MSI policy (Plans A, B, C,
F, or H) to a younger person when they are first eligible
for Medicare. Companies could not turn a younger
beneficiary down because of their health.
Currently, plans and insurers are required under federal
and state law to sell any MSI policy to a person who is
age 65 or older, regardless of their health. The bill
also allows younger Medicare beneficiaries, even if they
have a medical condition, a one time only opportunity to
buy one of the same five MSI policies regardless of their
health. It will not regulate the rates companies can
charge for any MSI policy, regardless of the age of the
insured person. Companies typically charge younger
disabled beneficiaries, whose health doesn't disqualify
them, a much higher premium for the same policy than an
older person.
The author's office also states that last year, the DOI
informed the Senate Insurance Committee staff that the
actual cost of insuring the disabled (under 65 years of
age) Medicare beneficiary is of some dispute, but that
since the monthly capitation rates paid by the Health
Care Financing Administration (HCFA) for the disabled is
less than that paid for the aged beneficiary, it would
seem reasonable the actual cost of insuring the disabled
would not increase the MSI premiums (data provided by the
Health Insurance Counseling and Advocacy Program to
committee staff). Furthermore, the author's office
points out that it appears the entire number of potential
disabled Medicare beneficiaries under 65 years of age in
California is quite small in comparison to the size of
the entire risk pool. As of 7/1/98, HCFA statistics show
the number of Medicare beneficiaries by category are as
follows:
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Total
3,782,966
Aged (age >65)
3,348,219
Disabled (age <65)
434,747
Disabled in a health plan
392,250
Disabled without MSI
42,498
The author's office thus contends that the number of
disabled to benefit by this issue is only 42,498,
representing only about one percent of the total pool.
2.When a health plan ceases to provide "some" health
benefits, an enrollee now is eligible for MSI only if
"all" benefits cease. The bill adds a person on Medicare
who loses some or all of the benefits provided by an
employer-sponsored retiree plan supplementing Medicare,
to the group entitled to guarantee issue of MSI policies
under federal law.
3.When seniors continue working after age 65 and Medicare
does not become their primary health insurance, they will
forfeit their rights to guaranteed eligibility of a MSI
policy when they do retire. The bill adds an individual
who continues to work and postpones his or her enrollment
in Medicare to the group already entitled under federal
law to guarantee issue of any MSI policy when they leave
that employment and subsequently enroll in Medicare.
4.Federal law requires companies to sell (guarantee issue)
one of four MSI policies (Plans A, B, C, or F) when a
health plan terminates its contract with the Medicare
program. Health plans and insurers cannot refuse to sell
one of these four policies because of a health condition.
None of the four required MSI policies include a benefit
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for prescription drugs, a major reason people on Medicare
join a plan. This bill adds Plan H to the four MSI
policies currently required. Plan H has a limited drug
benefit that pays 50 percent of the cost of drugs up to
the annual limit of $1,500 after a $250 deductible.
5.Medicare beneficiaries in California today can't find out
which companies sell MSI, which of the ten policies
(Plans A through J) they sell, or what premium they
charge. Agents selling this type of insurance only know
about the companies they represent, often less than ten
or twelve of the dozens of companies selling this type of
insurance. Most other states publish these guides so
seniors can review all of plans being sold and select the
one best suited to their needs. This bill will require
DOI to do what other states have been doing voluntarily
for years.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/30/00)
California Disability Alliance
California Health Advocates
California School Employees Association
California Seniors Coalition
Congress of California Seniors
Gray Panthers of California
Older Women's League of California
Union of American Physicians and Dentists
ARGUMENTS IN SUPPORT : The California Seniors Coalition
says the bill will close several loopholes in the
guaranteed protection of Medicare beneficiaries with
respect to MSI. The Congress of California Seniors
contends the benefit of the bill is especially important in
the rural areas where Medicare health plans have pulled
out, leaving the most vulnerable with inadequate coverage
and significant medical expenses.
California Health Advocates believes the bill will mitigate
insurance discrimination against younger Medicare
beneficiaries, correct underlying inequities in federal law
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by requiring insurance companies to sell a MSI policy to
everyone when first eligible for Medicare regardless of
age, and fill an information void for people buying MSI.
ASSEMBLY FLOOR
AYES: Aanestad, Ackerman, Alquist, Aroner, Ashburn, Bates,
Battin, Baugh, Bock, Brewer, Briggs, Calderon, Campbell,
Cardenas, Cardoza, Cedillo, Corbett, Correa, Cox,
Cunneen, Davis, Dickerson, Ducheny, Dutra, Firebaugh,
Florez, Gallegos, Havice, Honda, House, Jackson, Keeley,
Knox, Kuehl, Leach, Lempert, Longville, Lowenthal,
Machado, Maddox, Maldonado, Margett, Mazzoni, Migden,
Nakano, Olberg, Oller, Robert Pacheco, Rod Pacheco,
Papan, Pescetti, Reyes, Romero, Runner, Scott, Shelley,
Steinberg, Strickland, Strom-Martin, Thomson, Torlakson,
Villaraigosa, Vincent, Washington, Wayne, Wesson,
Wiggins, Wildman, Wright, Zettel, Hertzberg
NOES: Baldwin, Granlund, Kaloogian, Leonard, McClintock,
Thompson
DLW:cm 8/30/00 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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