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March 13, 2008

Legislation Would Set Standards for Individual Health Insurance Market in California

The fight on health reform in the last year put a spotlight on many of the real issues in the health insurance market, and in response, legislators this year have introduced a slew of stand-alone bills designed to set cost and benefit standards for health insurance and otherwise increase oversight of the private insurance industry.

A list of many of these bills is available at the Health Access California website.

SB 1522 (Steinberg), sponsored by Health Access California, would set standards for cost and coverage in the individual insurance market. It would provide immediate help to consumers who have to buy insurenace coverage in the individual market, such as the self-employed and those between jobs, while providing a framework for further health reform.


SB1522 (Steinberg) organizes the individual insurance market and makes it understandable for consumers. It would allow consumers to see and understand their choices in the individual market, and be better informed about a plan's premium, benefits and cost-sharing. By setting a standard for coverage, it would also effectively weed out a lot of "junk" insurance.

Consumers in the individual market would have a better sense of their health coverage choices, since all health plans sold in the individual market would be classified into five "tiers." In this way, consumers would be able to know if a certain plan is a top-tier comprehensive plan, or a bottom-tier catastrophic plan, or something in between, and if one plan from one insurer is roughly comparable with another plan by another insurer. This provides some standardization and simplification of the marketplace, while preserving a wide range of choices for consumers.

To allow real price comparison, Insurers would be required to offer five "benchmark" plans, one in each tier. The bill would enable consumers to do cross-insurer price shopping, to make apples-to-apples comparisons, with the confidence of knowing that benchmark plans in a given tier have similar cost-sharing, benefits, and other plan features. The benchmark plan would help define the tier, by being the lowest-price plan in a given tier.

The bill would eliminate some "junk" insurance, products that are coverage in name only, that provide such limited benefits or leave consumers so financially exposed, that the product is not of value. Such plans, deceptively offer "coverage" but leave consumers facing major gaps in coverage and significant out-of-pocket costs. California health insurers would not be able to sell new plans that do not meet the minimum benefit standards.

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Posted by healthinsurance at March 13, 2008 11:18 AM