Bill Increasing Health Care Costs Advances in Senate; Business Leaders Express Concerns

A California Chamber of Commerce-opposed bill that will further increase health care-related expenses for California businesses passed the Senate Health Committee last Wednesday.

AB 731 (Kalra; D-San Jose) threatens employers with higher premiums by driving up administrative costs and imposing a burdensome rate review process for health plans and insurers in the large group market.

Health care costs are rising, and employers and their employees are finding it more difficult to afford quality, accessible care. Last week, two business leaders weighed in on AB 731, stressing that the bill will increase health care costs for employers in California.

Increased Bureaucracy

In an op-ed for The Fresno Bee, Fresno Chamber of Commerce President and CEO Nathan Ahle points out that if the bill passes, potentially 17,000 large group contracts would be subject to review each year. Companies have already carefully negotiated these contracts with health care providers, balancing benefits and pricing to create a contract that best serves their employees.

“The review process created by AB 731 would inflate the role and budget of the DMHC [Department of Managed Health Care] and CDI [California Department of Insurance],” Ahle said. “To suddenly review and comment on thousands of businesses’ health plan rates would force new, massive costs on these agencies and on health plans. These new costs will be passed onto consumers, directly increasing the cost of health care.”

Duplicative Measures

Moreover, some of the protections the bill includes are duplicative and already are covered by federal and state law, writes Gabriel Valley Economic Partnership President and CEO William R. Manis in the Pasadena Independent.

“A 2015 law already requires health plans to publicly report large group rate information,” Manis said. “Why create another layer of regulatory review—which requires hiring more bureaucrats to evaluate these plans—if only to duplicate what is already publicly available data? The large group market has historically seen significantly lower premium growth than other health plan marketplaces. AB 731 is trying to address a problem that does not exist.”

Other Concerns

In addition to the redundant and burdensome measures the bill imposes, AB 731 ignores the fact that Congress purposely did not require rate review for large-group contracts when enacting the Affordable Care Act (ACA) because employers generally have significant negotiating power and choice in the marketplace, allowing them to secure better rates than individuals can. The bill also ignores the fact that large group premium increases are lower than individual and small group premium increases combined (both currently subject to rate review), even though the large group market is not subject to rate review. For reporting years 2016–2018, the average premium increase for the individual and small group market combined was 8.2%, whereas the adjusted average premium increase in the large group market during that same time was 4.8% and 4.4% unadjusted.

Key Vote

AB 731 passed the Senate Health Committee on July 3, 7-1.

Ayes: Lena Gonzalez (D-Long Beach), Hurtado (D-Sanger), Leyva (D-Chino), Mitchell (D-Los Angeles), Monning (D-Carmel), Pan (D-Sacramento), Susan Rubio (D-Baldwin Park).

Noes: Jeff Stone (R-Riverside County).

No Vote Recorded: Shannon Grove (R-Bakersfield).

The bill will be considered next by the Senate Appropriations Committee.

Staff Contact: Karen Sarkissian