Geographic Rating Regions Amended

The Assembly and Senate last week introduced amendments to SBX1-2 by Sen. Ed Hernández (D-West Covina) and ABX1-2 by Assembly member Richard Pan (D-Sacramento), which change the geographic rating regions for the individual and small health insurance markets in California.

The amendments establish the 19-region plan, the same regions adopted by the Legislature last year for larger-market insurers.

The state’s health benefit exchange, Covered California, favored the 19-region plan in part because it mirrors last year’s large-market legislation and could avoid consumer and industry confusion.

State Insurance Commissioner Dave Jones proposed an 18-region plan that divided the regions differently from other proposals and was based on actuarial data from the Department of Insurance. That proposal, Jones said, would limit “rate shock” among individual insurers.

Geographic rating areas, when established, will change rates for some consumers, either up or down depending on whether or not those consumers live in a high-cost or low-cost area. When people in lower-cost areas are re-classified as being in higher-cost areas, premium rates rise, and when people in higher-cost areas are re-classified as being in lower-cost areas, their premium costs decline.

That fluctuation could cause premium rate hikes up to 25% for some Californians who live in areas that change from a low- to high-rate designation. Jones said his plan would limit those rate fluctuations to 8% or less.

According to Pan, the amendments put into print on Friday also include tie-back provisions that allow the measure’s individual market reforms — guarantee issue, eliminating preexisting conditions, community rating and health status factor provisions — only as long as there is a federal individual mandate. That means if the federal government withdraws from health reform and cancels the individual mandate at some point in the future, the Legislature would have one year’s grace period to try to adopt an alternative prior to the repeal of the law. 

Health insurers and the Department of Insurance had oppose-unless-amended positions on ABX1-2 and SBX1-2. Insurers now are likely to drop their opposition to the bills.

The Assembly Committee on Health and the Senate Committee on Health have hearings scheduled this week to review the amended bills.

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