Home

Transparency and Accountability Act

California SB 1163, The Health Insurance Transparency and Accountability Act went into effect January 1, 2011 and requires insurance carriers and HMO’s to give 60 days' prior written notice to individuals and employer groups before raising rates and requires them to show that the rate hikes are "actuarially sound."

The written notice will state in italics and in 12-point type the actual dollar amount and the specific percentage of the premium rate increase. Additionally, the notice will describe in plain understandable English and highlighted in italics any changes in the plan design or change in benefits with reduction in benefits, waivers, exclusions, or conditions.

The Dept. of Insurance and the carriers must also post information and reasoning for rate increases to portfolios on their websites for 60 days prior to the implementation of the rate increase. The information shall include:
 
  • Justifications for any unreasonable rate increases, including all information and supporting documentation as to why the rate increase is justified.
  • A plan's overall annual medical trend factor assumptions in each rate filing for all benefits.
  • A health plan's actual costs, by aggregate benefit category to include hospital inpatient, hospital outpatient, physician services, prescription drugs and other ancillary services, laboratory, and radiology.
  • The amount of the projected trend attributable to the use of services, price inflation, or fees and risk for annual plan contract trends by aggregate benefit category, such as hospital inpatient, hospital outpatient, physician services, prescription drugs and other ancillary services, laboratory, and radiology. A health plan that exclusively contracts with no more than two medical groups in the state to provide or arrange for professional medical services for the enrollees of the plan shall instead disclose the amount of its actual trend experience for the prior contract year by aggregate benefit category, using benefit categories that are, to the maximum extent possible, the same or similar to those used by other plans.
A carrier that declines to offer coverage for a large group or that offers small group coverage at a rate that is higher than the standard employee risk rate, must, at the time of the denial or offer of coverage, provide the applicant with the specific reason or reasons for the decision in writing, in clear, easily understandable language.
 
Additionally, no insurer may terminate a medical policy or contract, increase premiums, reduce or eliminate benefits, or restrict eligibility for coverage without providing written prior notice, delivered by mail to the group contract holder at least 60 days prior to the effective date of the action.  If nonemployee certificate holders or employees of more than one employer are covered under the policy or contract, written notice shall also be delivered by mail to the last known address of each affected nonemployee certificate holder or affected employer  at least 60 days prior to the effective date of the action.
 

For the full text of the bill see Official CA Legislative Information - SB 1163