California bill mandating standard benefit designs for 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 individual market plans sold off the exchange marketplace to also employ standard benefit designs. SB 639 would do so by adding new law mandating standardized product designs for all individual plans 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 current law (Health & Safety Code Section 1366.6 and Insurance Code Section 10112.3).

But therein lay a conflict.  These statutes require plan issuers not participating in the exchange “offer at least one standardized product that has been designated by the Exchange in each of the four levels of coverage,” 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 a vote by the full California Senate.  Meanwhile, a Senate floor analysis of the bill shows opposition from health plans and their trade associations.  America’s Health Insurance Plans (AHIP) complains that “the standardization of health products is not only unnecessary but also impedes the ability of carriers to provide benefit packages aimed at meeting the preferences and needs of consumers,” and that benefit design flexibility “is an important element to assuring affordability and high-quality care.”

Update 5/30/13: The bill was approved by the California Senate on a 28-11 vote on May 29 and now goes to the Assembly.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

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Frederick Pilot

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