BILL ANALYSIS
SENATE HEALTH AND HUMAN SERVICES
COMMITTEE ANALYSIS
Senator Deborah V. Ortiz, Chair
BILL NO: SB 2
S
AUTHOR: Burton/Speier
B
AMENDED: March 18, 2003
HEARING DATE: May 7, 2003
2
FISCAL: Appropriations
CONSULTANT:
Hansel / ak
SUBJECT
Health care coverage
SUMMARY
The bill would require employers to provide health care
coverage to employees and dependents, as specified, by
purchasing coverage from any health plan, providing
coverage through a self-funded, employer-sponsored plan, or
by paying a fee to the State Health Purchasing Program
(SHPP), which would use a purchasing pool to provide
coverage.
ABSTRACT
Existing law:
1.Establishes the Medi-Cal program, administered by the
Department of Health Services (DHS), which provides
comprehensive health benefits to low-income children up
to age 21, their parents or caretaker relatives, pregnant
women, elderly, blind or disabled persons, nursing home
residents and refugees who meet specified eligibility
criteria.
2.Establishes Medi-Cal eligibility criteria which vary
across program categories. Medi-Cal provides health
coverage to pregnant women and children up to the age of
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one with family incomes up to 200% of the federal poverty
level (FPL), children ages 1 to 5 with family incomes at
or below 133% of FPL, children ages 6 through 19 and
parents of children up to age 18 who have family incomes
up to 100% of FPL.
3.Establishes the Healthy Families program, administered by
the Managed Risk Medical Insurance Board, which provides
affordable health, vision and dental benefits to
uninsured legal immigrant and citizen children from birth
to age 19 who do not qualify for no share-of-cost
Medi-Cal and have family incomes at or below 250% of FPL.
4.Provides for the regulation of health care service plans
by the Department of Managed Health Care and health
insurers by the Department of Insurance.
This bill:
1.Requires employers to provide coverage to each employee
who has qualifying wages under the Unemployment Insurance
Code and to any dependent of an employee who is not
receiving coverage from a different employer, but would
not require coverage for the dependent spouse or domestic
partner if eligible for coverage from another employer.
2.Requires the coverage to be equivalent to coverage
required to be provided by health care service plans plus
inclusion of basic prescription drugs.
3.Allows an employer to provide coverage by choosing to:
Select and purchase that coverage from any plan.
Provide coverage through self-funded,
employer-sponsored plans.
Pay a fee to the Employment Development Department
(EDD) for similar coverage.
1.Defines an employer as employing, for wages or salary,
____ or more persons to work in this state.
2.Does not require an employer to provide coverage if:
The employer is not the principal employer of the
employee in terms of monthly hours worked.
The employee is provided other coverage established
under any law of the United States or this state.
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The employee is covered as a dependent under a
plan, health insurance policy, or self-funded
employer-sponsored plan that has coverage benefits
meeting the requirements of the bill.
1.Allows an employer to require an employee to pay up to
20% of the cost of the coverage.
2.Creates the State Health Purchasing Program (SHPP), to be
managed by the Managed Risk Medical Insurance Board
(MRMIB), which would use a purchasing pool to provide
coverage for employees and their dependents for which the
employer pays a fee rather than purchase coverage.
3.Requires MRMIB to:
Annually determine the level of the fee to be paid
by an employer who chooses to participate in SHPP, and
to take into account the wages of the employees and
other relevant factors.
Determine the employee contribution, not to exceed
20%.
Establish the required enrollee deductibles or
copayment levels.
1.Requires MRMIB to develop and utilize appropriate cost
containment measures to maximize the cost-effectiveness
of coverage offered under SHPP which may include:
Limiting the expenditure of funds for this purpose
to the price to SHPP for the lowest cost plan
contracting with SHPP.
Creating rules that restrict the ability of an
employer or applicant to drop existing coverage in
order to qualify for SHPP.
Other measures that the board deems necessary to
ensure the affordability of coverage for employers,
employees, and their dependents.
Obtaining information sufficient to assist it in
determining whether the price paid for coverage is
appropriate to ensure access to quality care, and
whether a different price may be appropriate.
1.Requires an employer who has chosen to pay a fee to the
fund to provide information to MRMIB regarding potential
enrollees, as specified. Requires MRMIB to obtain
information from potential enrollees sufficient to
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determine whether the enrollee may be eligible for
coverage under Medi-Cal, Healthy Families, or other
programs.
2.Requires MRMIB to provide the Department of Health
Services information concerning the potential or
continuing eligibility of enrollees for Medi-Cal or
Healthy Families. Requires MRMIB to provide the state
share of financial participation for enrollees who are
determined to be eligible for Medi-Cal or Healthy
Families.
3.Provides that enrollees of the SHPP who qualify for
Medi-Cal or Healthy Families shall receive expanded
benefits and shall not be charge copayments or
deductibles that exceed those charged by Medi-Cal or the
Healthy Families program.
4.Applies provisions to the SHPP regarding payment of
providers who participate in the Child Health Disability
Prevention Program, children who are identified as being
seriously emotionally disturbed, children who are
determined to be eligible for the California Children's
Services program, and provisions for children whose
eligibility for Healthy Families program or Medi-Cal
changes after they are enrolled, similar to those in
place for the Healthy Families program.
5.Simplifies eligibility for Medi-Cal benefits for Medi-Cal
enrollees who are also enrolled in the SHPP by exempting
all resources in the determination of eligibility.
6.Establishes the State Health Purchasing Fund; authorizes
MRMIB to expend moneys from the fund that are
appropriated and deposited in the fund, including state
and federal funds, employer fees, and required employee
contributions.
7.Requires all employers, exempt those who provide proof of
health care coverage that meets the requirements of the
Act, to pay a fee to the State Health Purchasing Fund in
the amount set by MRMIB.
8.Exempts contracts entered into by MRMIB for purposes of
administering the SHPP from competitive bidding
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requirements and from review and approval by the
Department of General Services.
FISCAL IMPACT
Unknown.
BACKGROUND AND DISCUSSION
Purpose of the bill
The authors believe working Californians and their families
should have health insurance coverage and that most working
Californians obtain their coverage through their
employment. In 2001, more than 6 million Californians
lacked coverage at some time, 3.6 million had no coverage
at any time, more than 80% of these were working people or
their families, and most of these working Californians
without coverage work for employers who do not offer health
benefits. The authors note people who have coverage have
better health outcomes than those who lack coverage, are
more likely to be in poor health, more likely to have
missed needed medications and treatment, and more likely to
have chronic conditions that are not properly managed.
The authors state employers who do not provide coverage to
their workers have an unfair competitive advantage over
those employers who provide coverage, and that employers
who provide coverage to dependents often pay directly for
the failure of other employers to provide coverage for
those dependents. Employers who provide coverage also pay
directly when a previously uninsured person becomes an
employee and the accumulated health costs due to lack of
insurance burden the employer providing coverage.
The authors add that controlling health care costs can be
more readily achieved if all working people and their
families have coverage so that cost shifting is minimized.
Finally, the authors argue that the bill would provide a
means of identifying additional families and children who
qualify for the Medi-Cal and Healthy Families programs and
drawing down additional federal funds for coverage for
those persons.
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Arguments in Support
The California Labor Federation, AFL-CIO (CLF) is
sponsoring the bill because they argue that taxpayers and
those already covered pay the price for the uninsured
through emergency rooms, publicly funded health programs
and higher premiums. CLF states that our health care
system is built on a foundation of employer-provided
coverage, and that employers who do not provide coverage
create a burden on good employers.
California Medical Association believes the bill would
address the burgeoning crisis in our health care system by
providing coverage to approximately 80% of the uninsured
resulting in a healthier and more productive workforce.
California Association of Public Hospitals and Health
Systems and others believe the bill would address the crux
of the issue facing our state's health care system and
provide coverage to the uninsured.
California State Employees Association and others state
that uninsured workers must either turn to government
programs, hope for coverage under a spouse's employer or
simply go without coverage and pray that nothing serious
goes wrong.
Consumers Union notes that since California for many years
has had lower health insurance costs than other states, one
would expect significantly more employers offering
coverage. Yet this is not happening because market forces
are not working, and the bill is needed to level the
playing field for all employers.
Health Access states 80% of the millions of Californians
without coverage are working people and their families, and
that most of these workers are low-wage workers who cannot
afford to purchase coverage and often cannot afford the
worker share of coverage for employer-provided coverage,
especially for their dependents. Health Access notes the
bill takes into account the need for coverage to be
affordable by allowing MRMIB to implement needed cost
control mechanisms and to regulate out of pocket costs for
workers and their families.
The Service Employees International Union (SEIU) believes
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the bill would create a minimum health benefit standard
that is equivalent to the minimum wage and would create a
floor it can negotiate up from. SEIU states that currently
the cheapest thing for an employer to do is to fail to
offer coverage, and this unfairly disadvantages employers
who do the right thing and provide coverage.
Support if Amended
California Association of Health Underwriters (CAHU) states
it is in strong support of the goals of the bill, but
believes the coverage should be affordable for all size
employers, and that coverage similar to the State employee
or the Healthy Families program is simply not affordable
for small and medium sized businesses. CAHU also believes
there should be provisions for subsidizing small employers,
that the incentives should be significantly stacked to
encourage employers to remain in the commercial market,
that eligibility for coverage should be restricted to full
time employees (more than 30 hours per week), and that SHPP
should be phased in.
Arguments in Opposition
Blue Cross believes the bill cannot achieve its aims due to
preemption problems under the Employee Retirement Income
Security Act (ERISA) that may result in higher rates.
Under ERISA, state law cannot dictate what benefits an
employer provides if the employer is self-insured. Blue
Cross states many larger employers are self-insured which
means the mandates for coverage and benefits do not affect
them, and that the extremely rich mandates in the bill will
force even more employers into self-insurance to avoid its
mandate. As the healthier employer groups with fewer
claims increasingly self-insure, the remaining employers
will have higher rates since the pool would be sicker.
The California Chamber of Commerce and others state that
cost is the primary reason employers do not offer coverage,
and that the bill would have a disproportionate impact on
small businesses which are the ones that cannot afford
coverage. The Chamber and Californians for Affordable
Health Reform note the recent increases businesses have
incurred in workers' compensation costs, the increase in
the unemployment insurance tax contribution employers will
pay effective in 2004, and other currently proposed fee and
tax increases. They believe mandating coverage will lead
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to many businesses deciding to lay off employees, delay
expansions or cause employers to consider relocating
portions of the business to other states.
Comment
The authors state that they are working on a number of
issues including the definition of size of employer who is
subject to the bill, ERISA preemption issues, and the
interaction between the SHPP and existing public programs.
Related legislation
SB 2123 (Lee & Watson), introduced in 1998, would have
established a short, modified framework for a California
single payer system, but the bill failed in the Health
and Human Services Committee.
SB 480 (Solis-Chapter, Statutes of 1999) required the
secretary of the California Health and Human Services
Agency to report to the Legislature concerning options
for achieving universal health care coverage and to
establish a process to develop those options.
SB 1414 (Speier), introduced in 2002, would have created
Healthy California to provide universal coverage by
expanding and consolidating public health programs and
requiring employers to provide health insurance using a
"pay or play" approach, but failed in Senate
Appropriations.
SB 921(Kuehl) would create an approach to universal
health coverage by creating a single-payer system. (in
Senate Insurance).
AB 1527 (Frommer) would mandate employers with more than
50 employees to provide health insurance using a "pay or
play" approach (Assembly Health).
AB 1528 (Cohn) would mandate all employers to provide
health insurance using a "pay or play" approach, require
individuals without employer provided health insurance to
obtain health insurance, and would create the California
Essential Health Benefits Program (Assembly Health).
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POSITIONS
Organizations in Support
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California Labor Federation, AFL-CIO (sponsor)
AFGE Local 1881
Alliance of Catholic Health Care
American Federation of State, County, and
Municipal Employees (AFSCME) plus
Locals 1179, 1902
Amalgamated Transit Union Locals 1555, 1574
Art Directors Guild
Association of Flight Attendants Local 11
Being Alive Los Angeles, Inc.
Brewery Soda and Mineral Water Bottlers of
California Local 896
Butchers' Union Local 120
California Association of Health Underwriters
(if amended)
California Association of Physician Groups
California Association of Public Hospitals &
Health Systems
California Catholic Conference
California Commission on the Status of Women
California Conference Board of the
Amalgamated Transit Union
California Conference of Machinists
California Council of Community Mental Health
Agencies
California Faculty Association
California Federation of Teachers
California Independent Public Employees
Legislative Council
California Insurance Commissioner Garamendi
California Medical Association
California National Organization for Women
California Optometric Association
California Professional Firefighters
California School Employees Association
California State Council of Hotel Employees &
Restaurant Employees
California State Employees Association
California Teachers Association
California Women Lawyers
Central Labor Council of Contra Costa County
Central Labor Council of Fresno, Madera, Tulare
& Kings Counties AFL-CIO
City and County of San Francisco
Communications Workers of America
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Locals 9000, 9410, 9415, 9423, 9503, 9586,
9588, 14904
Consumers Union
Congress of California Seniors
Consumer Federation of California
East Bay Automotive Machinists Lodge 1546
Electronic-Journeyman & Production Lodge
1584
Engineers and Scientists of California, Local 20
Faculty Association of California Community
Colleges, Inc.
General Teamsters Union Locals 386, 890
General Teamsters, Warehousemen, Cannery
Workers & Helpers Union #94
Glaziers, Architectural Metal & Glass
Workers #718
Graphic Communications Union Local No. 583
Gray Panthers California
Health Access California
Health Care for All-LA
Heartbeat Family Partnership
Hotel Employees & Restaurant Employees
Local 49, 340
Hotel Employees & Restaurant Employees
International Union
IAMAW Local 1528
Insured the Uninsured Project
International Association of Bridge, Structural,
Ornamental and Reinforcing Iron Workers
Local Uion 155
International Brotherhood of Electrical Workers
Local Unions 11, 18, 45, 302, 551, 569,
595, and 684
International Federation of Professional &
Technical Engineers Local 21
IUPAT Local Union No. 2345
JERICHO
Kern County Firefighters Union, Inc.
Latino Issues Forum
League of Women Voters of California
League of Women Voters of Whittier
Lieutenant Governor Cruz Bustamante
Los Angeles County Board of Supervisors
Machinists Automotive Trades Dist. Lodge #190
Mexican American Legal Defense & Educational
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Marine Firemen's Union
Mental Health Association of California
National Association of Letter Carriers
Northern California District Council - ILWU
Office & Professional Employees International
Union Local #3
Older Women's League of California
Pacific Institute for Community Organization
California Project
Painters & Allied Trades District Council 36
Planned Parenthood Affiliates of California, Inc.
Planned Parenthood Mar Monte, Golden Gate
Plumbers, Steamfitters & Refrigeration Fitters
Local Union #467
Professional and Technical Engineers, Local 21
Sacramento Building Trades Council
San Diego-Imperial Counties Labor Council
San Francisco Labor Council, AFL-CIO
Sanitary Truck Drivers & Helpers Local No. 350
San Mateo County Building & Construction
Trades Council
Seafarers International Union
Service Employees International Union (SEIU)
plus Locals 399, 2028
Sheet Metal Workers' International Association
Local Union No. 104
St. Athanasius Church
St. Athanasius Food Pantry
Teamsters Joint Council Nos. 7, 42
Teamsters, plus Locals 350, 601, 517
Union of American Physicians & Dentists
United Farm Workers of America, AFL-CIO
United Food & Commercial Workers Union
Locals 101, 120, 135, 839, 1179, 1442
United Food & Commercial Workers Retiree's
Clubs 373R and 532
United Nurses Associations of California/Union
of Health Care Professionals
United Teachers of Los Angeles
Utility Workers Union of America Local 246
Numerous individuals
Organizations in Opposition
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Automotive Aftermarket Services
Blue Cross of California
California Assisted Living Association
California Business Properties ????
California Chamber of Commerce
California Manufacturers and Technology
Association
California Restaurant Association
California Right to Life Committee, Inc.
California State Floral Association
California Women for Agriculture
Californians for Affordable Health Reform
Chambers of Commerce of Alhambra,
Azusa, Cerritos, Chico, Clovis, Encinitas,
Greater Bakerfield, Greater Fresno, Greater
Riverside, Greater, Merced, Irvine, Modesto,
Napa, Redondo, Beach, Salinas Valley, Santa
Fe Springs, San Rafael, Temecula Valley,
Thousand Oaks-Westlake Village, Upland,
Vacaville, Victorville
Coalition of California Insurance Professionals
Employers Health Care Coalition of Los Angeles
Epler Company
International Mass Retail Association
Metal Finishing Association of Southern
California
National Federation of Independent Business
West Orange County Legislative Committee
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