Choice Stories

May 2, 2018

Proposed Laws Could Affect Mergers, Future Health Care Pricing


Highlights/Key Takeaways for Brokers

  • California Assembly Bill (AB) 595 would give the state the opportunity to approve or disapprove proposed mergers involved health plans and health insurers.
  • AB 3087, which would establish an independent commission to set health care pricing, which would directly affect employer-sponsored, individual, and family health plans has been put on hold.
  • The so-called Universal Health Care proposal (Senate Bill 562) has stalled in the legislature, but could be revisited in 2019 (after the fall election).
  • Sponsors of two consumer-initiatives on health care have until late June to gather signatures to get either proposal on California’s November ballot.

Two proposed bills in the California legislature that could affect health care pricing in the Golden State and future health care-related mergers are attracting a lot of industry attention. State Assembly Bill (AB) 3087, sponsored by Ash Kalra (D-San Jose) would create an independent authority, the California Health Care Cost, Quality, and Equity Commission, which would review health care pricing for hospital stays, doctor’s visits, and many other medical services covered by commercial insurers. Assembly Bill 595, authored by Jim Wood (D-Healdsburg), would require health plans wanting to merge or acquire other health plans to receive prior approval from the California Department of Managed Health Care (DMHC).


AB 595: Merger Review Legislation

The measure on health care service plan mergers and acquisitions would give authority to the state’s DMHC to consider the potential impact of any consolidation on health care costs, quality, and care for Californians. Under the proposed law, the department could approve, conditionally approve, or disapprove of any proposed purchase, acquisition, or control agreement involving a health plan or licensed health insurer. Current law requires health plans to provide the state with notice of any planned merger; however, California has limited authority to review or comment on proposed affiliations between health plans and insurers.

The chances of passage for AB 595 are not known. It was approved by the State Assembly in January and referred to the State Senate for reading. It was read the same month and referred out to the Senate committees on Health and Judiciary in March.

September 30th is the last day for Governor Jerry Brown to sign or veto any bills passed by the state legislature during the current session.


AB 3087: Pricing Legislation

Under this measure, the new California Health Care Cost, Quality, and Equity Commission would set the rates for all commercial health plans, including those offered to employees by their employer as well as individual and family health plans. Rates would be based, at least in part, on what the federal government pays for services under Medicare. Maryland adopted a similar measure in 2014. Consumer groups and some of the state largest labor unions, including the California Labor Foundation, support the proposed legislation. The California Hospital Association, California Chamber of Commerce (CalChamber), and physician groups oppose the measure.

CalChamber says the legislation interferes with an employer’s ability to negotiate health plan benefits and costs for its employees, interferes with the state’s public exchange (Covered California) to negotiate with health insurers, reduces access to care, and creates an unnecessary added layer of bureaucracy for Californians. Advocates of the measure note many residents have seen dramatic increases in their health care costs, including deductibles that have increased faster than wages, so they so a review of health care pricing is warranted.

AB 3087 was amended by the California Assembly in early May, and then referred to the Committee on Appropriations. After a hearing set for May 16 was canceled at the request of the bill’s author, a hold was put on the measure just before Memorial Day. Committee Chair Lorena Gonzalez-Fletcher said she hopes work to control costs will continue and warned that inaction could threaten the state’s economy.


SB 562: Universal Health Care Legislation

While the Healthy California Act, Senate Bill (SB) 562, generated a lot of press last year, the single payer health care measure has not progressed very far in Sacramento. The proposed legislation that would create a state-run universal health care system stalled after its introduction in February 2017. It was last amended by the State Assembly on May 25, 2017, but no action has been taken since that time. Legislators could revisit the idea in 2019, after the fall 2018 election.

The California Association of Health Underwriters (CAHU), which advocates on behalf of consumers and health insurance professionals, is monitoring two health care-related (consumer-driven) initiatives that Californians could see on the ballot in November. These include Initiative 17-0048, the California Managed Health Insurance Premiums Initiative (also known as the Accountability in Managed Health Insurance Act) and Initiative 17-0047, the California Care Act, both of which are in the “signature collection” phase that closes in late June.

Your broker can help you stay up to date on what’s happening at the state and federal levels with regard to health care reform and regulation. If you don’t already have a broker, we can help you find one who will meet with you to discuss your needs and provide you with a custom quote for your employees.


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