BILL ANALYSIS
SB 840
Page 1
Date of Hearing: August 16, 2006
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Judy Chu, Chair
SB 840 (Kuehl) - As Amended: August 7, 2006
Policy Committee: HealthVote:9-4
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill creates the California Health Insurance System (CHIS),
a single payer health care system, administered by the
California Health Insurance Agency, to provide health insurance
coverage to all California residents. CHIS would become
operative when the Secretary of Health and Human Services
determines the Health Insurance Fund has sufficient revenues to
implement this bill. Specifically, this bill:
1)Requires the California Health Insurance Agency to be headed
by a commissioner appointed by the governor, and to be
comprised of the Health Insurance Policy Board, the Office of
Patient Advocacy, the Office of Health Planning, the Office of
Health Care Quality, the Health Insurance Fund, the Public
Advisory Committee, the Payments Board, and the Partnerships
for Health.
2)Makes all California residents eligible for CHIS, requires
residency to be based upon physical presence in the state with
the intent to reside, and requires the commissioner to
establish standards and a simplified procedure to demonstrate
proof of residency.
3)Allows any eligible individual to choose to receive services
under CHIS from any willing professional health care provider
participating in the system, allows all health care providers
licensed or accredited to practice in California to
participate in the CHIS, and establishes a broad benefit
package.
4)Prohibits health plan and health insurance contracts, except
for the CHIS plan, from being sold in California for services
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provided by the system.
5)Establishes a California Health Insurance Premium Commission
(CHIPC) to determine the aggregate costs of providing health
insurance coverage under this bill, to develop an equitable
and affordable premium structure that will generate adequate
revenue and ensure stable and actuarially sound funding for
the CHIS, requires the premium structure to meet specified
criteria, and requires the CHIPC to submit a detailed
recommendation to the governor and legislature for a premium
structure on or before January 1, 2009.
FISCAL EFFECT
1)GF costs of around $4 million for the California Health
Insurance Premium Commission.
2)The Lewin Group conducted a cost and economic impact analysis
of a bill similar to this one and estimated program
expenditures under the single-payer program would be about
$166.8 billion if fully implemented (in 2006), increasing to
$261.8 billion in 2015. This assumes existing state and
federal law would be changed to transfer spending on
government health programs to CHIS, estimated to be about
$72.2 billion in 2006, so that additional revenue required in
the first year of implementation would be approximately $94.6
billion (GF).
This bill, other than the CHIPC, is operative on the date the
Secretary of Health and Human Services notifies the Secretary
of the Senate and the Assembly's Chief Clerk that he or she
determines the Health Insurance Fund has sufficient revenues
to implement this bill. This bill prohibits any state entity
from incurring any transition or planning costs prior to that
date.
COMMENTS
1)Purpose . The author argues this bill is needed because
existing law has led to a highly fragmented health insurance
and health care delivery system that is administratively
complex, that annually diverts billions of dollars in health
care spending from direct health care services to
administrative costs, that provides care based on income and
insurance status rather than medical need, and yet still fails
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to cover millions of Californians. The author reports that
the US leads the world in health care spending per person per
year and spends on average more than twice the average of
other industrialized countries. Despite our high level of
spending, the US ranks poorly on population-based health
outcome measurements compared to other industrialized nations.
The author argues that a large portion of the current
spending is not going to health services and nearly 20% of the
population has no health insurance, and this bill would
correct both of these problems.
2)Background . Existing law does not provide a system of
universal health care coverage for California residents. Most
insured Californians receive health coverage through their
employer, but there are over six million children and
nonelderly adults in California estimated to be uninsured for
all or part of the year. Existing law establishes various
programs to provide health care services to persons who are
elderly (Medicare) or who have limited incomes and meet
various eligibility requirements, such as the Healthy Families
and Medi-Cal programs.
This bill is intended to replace the current system with a
single payer system that provides care to all Californians
that would be headed by an appointed commissioner granted
broad powers. The commissioner's powers include establishing
the budget and setting rates, implementing eligibility
standards for the system, establishing a limit on total annual
state expenditures, limiting the growth of spending according
to specified factors, developing a capital management plan to
govern all capital investments and acquisitions under the
system, using the state's purchasing power to obtain the
lowest possible prices for prescription drugs and durable and
nondurable medical equipment, seeking all necessary waivers,
exemptions, and legislation so that all current federal
payments to state for health care are paid directly to the
CHIS, and establishing formulas for equitable contributions to
the CHIS from counties and local governments.
The Lewin Group estimate assumes that total health spending for
California residents under the current system to be about
$184.2 billion in 2006, and the single payer program would
achieve universal coverage while reducing total health
spending in California by $7.9 billion, mainly through
reducing administrative costs and savings from bulk purchasing
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prescriptions drugs and durable medical equipment.
Analysis Prepared by : Scott Bain / APPR. / (916) 319-2081