California bill mandating standard benefit designs for all managed care plans sold outside exchange marketplace conflicts with existing state law
Earlier this year, California’s health benefit exchange marketplace, Covered California, exercised an option under its enabling legislation to standardize benefit designs for health plans sold on the exchange, consistent with its active purchaser role.
Pending legislation, SB 639, would require plans sold off the exchange marketplace to also employ standard benefit designs. (The measure would apply solely to managed care plans and not insurance products.) SB 639 would do so by adding California Health & Safety Code Section 1367.008 mandating standardized product designs for all managed care plan products at each of the metal tier actuarial value rating levels. It does so with language barring the sale of any product at each of the metal tier levels “unless it is a standardized product consistent with [Health & Safety Code] Section 1366.6.”
But therein lay a conflict. Section 1366.6(e) requires health care service plans not participating in the exchange “offer at least one standardized product that has been designated by the Exchange,” provided the Exchange exercises its authority to require standardized benefit designs. At least one obviously does not encompass all plans offered outside the exchange marketplace. (Emphasis added)
SB 639 awaits approval on the floor of the California Senate.
Over the next 18 months, between one quarter and one half of Americans who get insurance coverage through their employers will pay more of their doctor bills themselves as companies roll out healthcare plans with higher deductibles, benefits consultants say. The result: sticker shock.
“They have huge out-of-pocket costs before they get any insurance coverage, it’s a real slap in the face,” said Ron Pollack, the executive director of Families USA, a healthcare advocacy group.
Mr. Pollack is reacting — badly — to a back to the future shift in health insurance, to a period prior to the emergence of all inclusive managed care plans in the 1970s and 1980s. We are witnessing the re-emergence of health insurance that was known in period following WWII as “major medical.” It was a true insurance product insofar as insurance by definition is designed to cover high cost, unexpected needs such as a hospital stay. Routine, out of pocket costs were just that: paid out of the patient’s pocket. And from all indications, it’s here to stay.