California SB 639 Signed by Govenor effects Health Plans

On September 20, 2013, Governor Jerry Brown signed SB 639 into law.

The bill, introduced by Senator Ed Hernandez (D-West Covina), goes into effect January 1, 2014 and addresses annual deductible and out-of-pocket limits for all non-grandfathered health plans in the individual, small and large group markets.

Essentially, the bill states that any non-grandfathered plan in the individual or small group market that becomes effective or renews on or after January 1, 2014, must limit annual deductibles to $2,000 for individual coverage or $4,000 for families.

Any non-grandfathered plan in the individual, small group or large group market that becomes effective or renews on or after January 1, 2014, must limit annual out-of-pocket costs (for Essential Health Benefits) to $6,500 for Individual coverage, or $12,700 for family coverage.

The exception to this is pediatric care, which will have its own limits. When a non-grandfathered health care service plan or a health insurer in the individual or small group market provides a pediatric oral care benefit meeting the definition as specified in the ACA, the out-of-pocket maximum for the pediatric oral care benefits is $1,000 for one child and $2,000 for more than one child.

Carriers who are not in the Exchange, cannot offer a catastrophic (higher deductible) plan in the Individual market. However, the law allows the DMHC or the CDI higher deductibles for small group products at the bronze level of coverage in order to meet Minimum Value.

Catastrophic plans or policies are defined as “A health care service plan contract or health insurance policy that provides no benefits for any plan year until the enrollee has incurred cost-sharing expenses in an amount equal to the annual limit on out-of-pocket costs, except requires the plan provide coverage for at least three primary care visits.” Catastrophic plans can only be offered if either of the following apply:

• The individual purchasing the plan has not yet attained 30 years of age; or,
• The individual has a certificate of exemption from the federal individual mandate because the individual is not offered affordable coverage or because the individual faces hardship.