BILL ANALYSIS
AB 8
Page 1
Date of Hearing: April 24, 2007
ASSEMBLY COMMITTEE ON HEALTH
Mervyn Dymally, Chair
AB 8 (Nunez) - As Amended: April 18, 2007
SUBJECT : Health care coverage.
SUMMARY : Establishes a comprehensive structure of program
changes, market reforms and financing to expand public and
private health coverage in California. Specifically, this
bill :
Coverage
1)Makes changes to expand and simplify health coverage for
children, effective July 1, 2008, as follows:
a) Establishes Medi-Cal eligibility for all children up to
their 19th birthday with family incomes up to 133% of the
federal poverty level (FPL) ($22,836 for a family of
three);
b) Expands the upper limit of eligibility in the Healthy
Families Program (HFP) from 250% to 300% FPL, making all
children with family incomes between 133% and 300% FPL
($51,510 for a family of three) eligible for HFP;
c) Sets HFP premiums for children with family incomes of
251% to 300% FPL at $22-25 per month per child with a
maximum of $66-75 per month per family; and,
d) Eliminates federal citizenship and immigration
requirements for children to enroll in Medi-Cal or HFP.
2)Makes changes to expand coverage for uninsured, low-income
parents as follows:
a) Expands Medi-Cal eligibility to parents in families at
or below 133% of FPL;
b) Expands eligibility under HFP to uninsured parents of
children enrolled in HFP (with family incomes between 133%
and 300% FPL), if federal approval is obtained and to the
extent of federal financial participation;
c) Makes parents in families with incomes of 133% to 300%
FPL eligible for a "benchmark plan," equivalent to the
benefits offered to state employees under the California
Public Employees Retirement System (CalPERS) and to that
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provided in HFP; and,
d) Simplifies Medi-Cal eligibility by removing the asset
test for children and families.
3)Requires the establishment of a premium assistance program for
all employed individuals and their dependents eligible for
Medi-Cal or HFP, as follows:
a) An individual eligible for Medi-Cal or HFP who is
offered health coverage by his or her employer will enroll
in the employer-offered health coverage on his or her own
behalf and on behalf of his or her dependents;
b) Individuals and dependents enrolling in employer-offered
health coverage will not be responsible for any premium,
deductible, or copayment requirements that are greater than
any premium, deductible, or copayment that the individual
or dependent would be required to pay under Medi-Cal or
HFP;
c) Individuals and dependents enrolling in employer-offered
health coverage pursuant to #3) a) above will be eligible
for a "wraparound benefit" that covers any gap between the
employer-offered health coverage and the benefits provided
by Medi-Cal or HFP; and,
d) An employer of an individual who is required to enroll
in employer-offered health coverage pursuant to #3) a)
above, may elect to pay the full premium cost of Medi-Cal
or HFP on behalf of the employee and his or her dependents.
An individual whose employer elects to make this payment
will not be required to enroll in the employer-offered
health coverage, and will instead enroll directly in
Medi-Cal or HFP.
4)The premium assistance benefit under #3a) through c) above
will only apply to individuals and their dependents if the
Department of Health Care Services (DHCS) (in the case of
Medi-Cal) or the Managed Risk Medical Insurance Board (MRMIB)
(in the case of HFP) determines that it is cost effective for
the state.
5)Establishes the California Cooperative Health Insurance
Purchasing Program (Cal-CHIPP) as a state purchasing pool
administered by MRMIB, to negotiate and contract with carriers
to provide health insurance for employees (and their
dependents) of employers who have elected to pay a fee to the
state in lieu of making expenditures for health care for their
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employees equal to the employer fees imposed under #22) below.
6)Requires MRMIB to negotiate favorable rates and contract with
health plans, leveraging its purchasing power, and offer
Cal-CHIPP enrollees a choice of health plans that provide
comprehensive health care coverage, including medical,
hospital, and prescription drug benefits, with the authority
to establish premiums and administer subsidies to eligible
enrollees at or below 300% FPL.
7)Requires employees of employers who have elected to pay a fee
to enroll in Cal-CHIPP, except that an employee is exempt from
this requirement if the employee is able to demonstrate that
the employee has other group coverage.
8)Requires MRMIB to develop and offer at least three uniform
benefit designs as follows:
a) Develop, in consultation with the commissioner of the
California Department of Insurance (CDI) and the director
of the Department of Managed Health Care (DMHC), at least
three benefit offerings for Cal-CHIPP that will also be
offered by all insurers to all individuals and groups in
the private health insurance market;
b) Take into consideration the levels of health care
coverage provided in the state, and appropriate medical
economic factors;
c) Include coverage and design elements reflective of
coverage provided by a representative number of large
insured employers in the state; and,
d) Include in all benefit designs coverage for primary and
preventive care and prescription drugs, combined with
cost-sharing levels that promote prevention and health
maintenance, including coverage for maintenance medications
to manage chronic diseases.
Insurance Market Reforms
9)Requires all health plans and insurers (collectively carriers)
to offer all of the uniform benefit designs developed by MRMIB
under #8) above in all individual and group markets in which
the plan or insurer sells health coverage, but stipulates that
this requirement does not preclude plans and insurers from
offering other benefit plan designs.
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10) Requires DMHC and CDI to adopt regulations no later than
July 1, 2009 defining and limiting administrative costs such
that at least 85% of revenues received by carriers must be
spent on health care services, establishing a "medical loss
ratio." Requires, in addition, carriers to disclose to all
prospective purchasers the medical loss ratio for the
plan/insurer's preceding fiscal year, for contracts or
policies with individuals and group of the same or similar
size, instead of disclosing the information only to
individuals and groups of 25 or fewer employees as required
under existing law.
11)Effective July 1, 2008, requires carriers to use a standard
form, developed by MRMIB, in screening applicants for
individual health insurance coverage, requires MRMIB to
develop a list of serious health conditions or diagnoses
making an individual applicant automatically eligible for the
state's high risk program, the Major Risk Medical Insurance
Program (MRMIP), and prohibits carriers from excluding any
applicants from individual coverage based on health status,
except for those individuals with conditions on the list
developed by MRMIB.
12) On and after January 1, 2008, extends to employers with
51-250 employees (mid-size employers) the existing rating and
underwriting requirements applicable to employers of 2-50
employees (small employers) and requires carriers to offer,
market, and sell health coverage to mid-size employer groups
without any exclusion due to medical underwriting or any other
criteria other than the employer's willingness to make the
premium payments and meet reasonable participation
requirements. This is known as "guaranteed issue."
13) Requires carriers to offer, market, and sell to all
applicant mid-size employers all of the contracts or policies
made available to mid-size employers in the areas where the
carrier offers health coverage, generally known as an "all
products" requirement.
14)Restricts initial and renewal premium rate variations for
products under #12) above to specified rating categories (age,
geographic region, family size, and health benefit plan) and
allows only a limited premium variance of plus or minus 10%
based on the medical history or claims experience of the
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group. This type of limitation on premium variance is
referred to as "rate bands." Requires carriers to publish
rates for each geographic region in which they sell coverage
(up to nine defined geographic regions), by age (one of seven
age categories, such as 30-39) and family size (one of four
categories).
15)Authorizes carriers to develop and offer different benefit
designs for small and mid-size employers.
Quality and Cost Containment
16)Requires MRMIB to assume lead agency responsibility for
professional review and development of best practice standards
in the care and treatment of persons with high cost chronic
diseases, such as asthma and diabetes, to be implemented in
every state health coverage program, including CalPERS,
Medi-Cal, HFP, and Cal-CHIPP.
17)Requires the California Health and Human Services Agency
(CHHSA) to consult with CalPERS, and affected health provider
groups, to develop performance measurement benchmarks for
health care quality measurement and reporting into a common
"pay for performance" model to be offered in every
state-administered health care program, as specified, and
advanced as a common statewide framework for quality
measurement and improvement.
18)Requires CHHSA to encourage fitness, wellness, and health
promotion programs that promote safe workplaces, healthy
employer practices, and individual efforts to improve health.
19)Expresses legislative intent that all health care providers
and health insurers participate in an Internet-based personal
health record system under which patient's have access to
their own health records, as specified.
Financing
20)Establishes the California Health Trust Fund (Fund) for the
purpose of providing health care coverage in Cal-CHIPP, and
requires MRMIB to pay the nonfederal share of cost for
employees and dependents eligible for federally supported
health coverage programs from the Fund.
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21)Requires MRMIB, and DHCS, as the state Medicaid agency, to
implement the expansions in Medi-Cal and HFP proposed under
this bill consistent with existing federal law and any
necessary federal waivers, such that the state will receive
the maximum increase in available federal funds under both
Medicaid and the State Children's Health Insurance Program
(SCHIP).
22)Effective January 1, 2009, requires employers to elect to
either: a) make health care expenditures, defined as any
amount paid by an employer to or on behalf of its employees
and dependents to provide health or health-related services or
to reimburse the costs of those services, for its full-time or
part-time employees, or both; or, b) pay an equivalent amount
to the Fund, and establishes the amount of the employer's
financial obligation as ___% of Social Security wages paid by
the employer for full-time employees working 30 or more hours
per week and ___% of Social Security wages paid by the
employer for part-time employees working less than 30 hours
per week.
23)Requires the Employment Development Department to administer
and collect employer fees remitted pursuant to #22) above, and
deposit them into the Fund, and to develop regulations
relating to part-time employees that will be subject to #22)
above, and to exempt from the above requirement businesses
with payrolls of less than $100,000 in a fiscal year, and new
businesses during the first three years of the establishment
of the business, as specified.
24)To the extent permitted in state and federal law, requires
employers to establish a cafeteria plan, as authorized under
Section 125 of the Internal Revenue Code (IRC), for the
purpose of allowing employees to pay their portion of health
insurance premiums with pre-tax funds.
Other Provisions
25)Extends to negotiations and contracts in Cal-CHIPP the
existing Public Records Act exemptions granted for activities
of MRMIB related to negotiations with contracting entities or
entities seeking to contract with MRMIB, and makes legislative
findings and declarations as to the need for the exemptions.
26)Requires CHHSA to establish an aggressive and timely
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evaluation and oversight effort to monitor progress on the
implementation of this bill, measuring specified indicators,
and requiring CHHSA to conduct a comprehensive evaluation in
five years to determine if the goals of this bill are being
met.
EXISTING LAW :
1)Establishes the Medi-Cal program, administered by DHS, which
provides comprehensive health benefits to low-income children,
their parents or caretaker relatives, pregnant women, elderly,
blind or disabled persons, nursing home residents, and
refugees who meet specified eligibility criteria. Currently,
adults may be eligible for full scope Medi-Cal under the
following categories: parents (with incomes up to 100% FPL);
medically needy/indigent (up to 75% FPL); and, aged and
disabled (up to 127% FPL). Children may be eligible for full
scope Medi-Cal under the following major categories: 0-1 year
of age (up to 200% FPL); 1-6 years of age (up to 133% FPL);
age 6-19 (up to 100% FPL).
2)Establishes HFP, administered by MRMIB, to provide low-cost,
subsidized health, vision and dental insurance to uninsured
children with family incomes up to 250% of the FPL, who are
not eligible for no-cost Medi-Cal. Establishes Access for
Infants and Mothers (AIM), administered by MRMIB, to provide
low-cost health insurance for pregnant women and their newborn
infants.
3)Authorizes the County Health Initiative (CHI) Matching Fund,
administered by MRMIB, to fund children's health coverage for
those children between 250% and 300% FPL by using local funds
as the state match to draw down federal funds. These county
programs are also known as Healthy Kids.
4)Establishes the Health Care Coverage Initiative (Initiative),
to expand health care coverage in California, as required by
California's Section 1115 Medicaid demonstration project
waiver relating to hospital financing and health coverage
expansion that became effective September 1, 2005. Makes
eligible for the Initiative low-income uninsured individuals
who are not currently eligible for Medi-Cal, HFP, or AIM. In
March 2007, DHS selected ten counties to participate in this
Initiative and share $540 million over three years, which is
expected to provide coverage to 180,000 currently uninsured
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individuals.
5)Requires all carriers offering health coverage to small
employers, to issue that coverage without any exclusion based
on medical underwriting, requires renewal of all coverage for
small employers, at the option of the small employer, as
specified, and restrains within a rate band of plus or minus
10%, the ability of carriers to base initial and renewal
premiums on the health status, occupation, or claims
experience of the employees of a small employer. Limits
rating factors for small employer coverage to specified age,
geography and family size categories.
6)Establishes the MRMIP, administered by MRMIB, to provide
health coverage for individuals unable to purchase private
individual health coverage, because they have been denied
health coverage by at least one private health plan or are
offered only limited coverage or coverage significantly above
standard average individual rates, as determined by the board.
7)Provides for the regulation of health care service plans by
DMHC and regulation of disability insurers certificated to
sell health insurance by CDI.
8)Renames DHS to DHCS and transfers certain public health
responsibilities to a newly established Department of Public
Health.
FISCAL EFFECT : Unknown
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
necessary to expand health coverage in California and reduce
the numbers of uninsured. With more than 6.5 million
uninsured in this state, or 20% of the population, the author
stipulates this means that one-fifth of California's
population lives in fear of not having access to care or
protection from financial loss when they have a major illness.
The author states that this bill is intended to accomplish
several critical and longstanding state policy goals,
including:
a) Expanding health coverage for all Californians, whether
they are working or not, in a comprehensive manner. This
bill addresses this by creating a partnership between state
government, individuals, and employers, based on the
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principles of shared responsibility, maintaining and
strengthening California's health insurance system, and
offering choice in the marketplace to both individuals and
employers;
b) Cover all children, regardless of their immigration
status, by July 1, 2008;
a) Expand and restructure public coverage programs so that
parents and children of all ages in low-income families
will receive coverage in one program to the greatest extent
possible;
b) Maximize federal financial participation in the costs of
coverage for low-income persons;
c) Improve the availability and transparency of private
health insurance coverage through health insurance market
reforms in the individual and group markets, limits on the
administrative costs and profits of health insurers and
standardization of benefits to allow purchasers to make
"apples to apples" comparisons; and,
d) Control rising health care costs by reducing the number
of uninsured and the costs of uncompensated care,
emphasizing prevention and management of chronic disease,
and increasing the number of employees who pay their share
of premiums with pretax dollars.
The author reports that the provisions of this bill, as well
as other pending health care reform proposals, including the
plan put forward by the Governor, are being subjected to
computer modeling and analysis conducted by a team of
researchers and experts working through the Institute for
Health Policy Solutions and supported by the California Health
Care Foundation.
2)BACKGROUND . According to the California HealthCare
Foundation, an average of 6.6 million Californians were
uninsured over the three year period of 2003-2005. California
has the largest number of uninsured residents in the United
States and the seventh largest proportion of uninsured in the
nation (20.8% of the population). Of those, 5.3 million were
adults and 1.3 million were children. Fifty-five percent of
Californians have employment based coverage, 16% get coverage
through Medicaid, and 8.7% purchase coverage through the
individual insurance market.
The Foundation also reports that employer based coverage in
California from 1987-2005 declined from 64.6% to 54.7%, with
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government sponsored coverage increasing from 15.7% to 18.7%,
individually purchased coverage increasing from 6.8% to 8.7%
and the percentage of uninsured increasing from 17.6% to
21.4%. The California Healthcare Foundation reports the
median employer premium contribution in California firms
offering coverage in 2005 as a percentage of payroll was 7.7%.
Thirty-eight percent of the uninsured in California have incomes
below $25,000 annually, and 54% of the uninsured have annual
incomes below 200% of the FPL. Fifty-seven percent of the
uninsured are Latino and Latinos are much more likely to be
uninsured than any other ethnic group. However, unlike
Latinos and African Americans, whose high rates of being
uninsured have either held steady or slightly declined for the
last five years, the likelihood of being uninsured is now
growing for Whites and Asians.
1)UNINSURED CHILDREN . According to the California HealthCare
Foundation, an average of 1.3 million children in California
have remained uninsured over the three year period 2003 -
2005. Children comprise 20% of the state's total uninsured
population, and 71% of California's uninsured children are in
families where the head of household works full-time, full
year. Over half of all uninsured children were eligible for
either HFP or Medi-Cal, but remained unenrolled. The balance
of uninsured children were ineligible for these programs,
largely due to income limitations or immigration status.
2)NEW FEDERAL COVERAGE OPTIONS: THE DEFICIT REDUCTION ACT . This
bill expands Medicaid coverage to parents above 133% FPL and
uses the federal Deficit Reduction Act (DRA), signed into law
in February 2006, to design a different Medicaid benefit
package for this group of new eligibles. Under DRA, states
are permitted to vary the benefit packages they offer to some
groups of Medicaid beneficiaries. Until enactment of the DRA,
states had to cover certain "mandatory" health care services
for all adult Medicaid beneficiaries. States also had the
choice of providing adults with certain "optional" services,
such as dental care, prescription drugs, and speech and
physical therapy. However, if a state provided any of these
optional services-and California provides almost all-it had to
provide them to all adult beneficiaries throughout the state.
In addition, states could not vary the availability of
medically necessary benefits for different groups based on
their age or health status. The DRA altered these rules
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significantly. In designing benefit packages, states can now
choose among several benchmark benefit packages modeled on (or
equivalent to) benefit options offered to state and federal
employees or the benefits provided by the state's largest
Health Maintenance Organization. (These benchmarks are
similar to those mandated under SCHIP, which in California is
HFP. As its benchmark, HFP currently uses the benefits
provided to state employees by CalPERS.) States can require
most children and parents to enroll in new "benchmark" benefit
packages that do not provide all the benefits covered by
regular Medicaid. However, the DRA specifically exempts
elderly persons, pregnant women, people with disabilities,
foster children, and some other beneficiaries from these new
rules.
3)HEALTH INSURANCE MARKETS . This bill makes changes to the
rules and regulations for private health insurance that are
somewhat different depending on the market segments as
discussed below:
a) Small employer coverage . AB 1672 (Margolin), Chapter
1128, Statutes of 1992, establishes requirements for
carriers providing health coverage to employers with 2-50
employees. AB 1672 establishes the right of any small
employer to buy any health insurance product (benefits plus
service delivery) from any carrier (guaranteed issue) and
prohibits a carrier from canceling such coverage just
because of the claims experience of the group members
(guaranteed renewal). AB 1672 limits a carrier's ability
to charge low rates to groups whose members are in good
health and high rates to groups with members in poor
health. Premiums cannot vary by more than 10% above or
below a standard rate developed by each carrier, based on
allowable factors established in AB 1672, such as age,
family size, and geography. AB 1672 also allows plans and
insures to charge a composite, or average rate for each
member of a group rather than different premiums for each
person based on their age. This bill continues this
structure for small employer coverage as in current law and
extends the same protections to mid-size employers.
b) Mid-size employers . The mid-size market, (51-250
employees in this bill), represents 6% of California
businesses and 17% of California employees. A June 2006
analysis of mid-size employer health coverage by the UCLA
Center for Health Policy Research found that groups of this
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size lack negotiating power and purchase insurance on their
own without the benefit of purchasing coalitions or
associations. Midsized groups lack negotiation leverage
with insurers due to their smaller size, unlike their large
employer counterparts, and because a mid-size group's
medical experience is not very credible in determining
future risk and medical usage. Health insurance rates for
these groups typically reflect some combination of the
group's prior claims experience and the plan or insurer's
risk experience associated with similar groups. Carriers
can refuse to provide a quote for coverage and refuse to
sell to mid-size firms. Because an insurer in the
mid-sized market does not have to pool the experience of
all groups in a product line (as is the requirement in the
small group market), they are allowed to have vastly
different rates for two similar employers (same number of
employees, same age, same zip code, same family size
enrollment). Non-guaranteed issue, along with no
limitation of risk adjustment factors results in a lack of
rate stability (separate from normal health care related
annual increases). The goal of AB 1672-style reforms is to
create price transparency in rates and a fairer, more
level, market place and to prohibit redlining of
industries, such as those with a high percentage of
low-income employees. Extending the small employer reforms
to mid-size employers is intended to expand the number of
persons with access to employer coverage by preventing
employers who want to provide health insurance coverage
from being declined coverage, and to provide greater
freedom for mid-size groups to shop and shift coverage at
renewal by eliminating the option carriers currently have
to decline-to-quote. The requirement for published rates
is designed to make purchasing easier and competition more
transparent.
c) Individual coverage . This bill makes changes to the
market rules affecting individual health insurance and
revises eligibility for MRMIP for medically uninsurable
persons. While the majority of those with health insurance
obtain that coverage on the job, individual coverage is the
main alternative for those who are not covered through
employment and are ineligible for publicly subsidized
health coverage. The California HealthCare Foundation
reports that, over the three year period of 2003-2005, an
estimated 2.8 million people in California, 8.7% of
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non-elderly residents, were covered in the individual
health insurance market. This compares to 17.9 million in
employment-based coverage and 6.5 million uninsured.
According to the Kaiser Family Foundation (KFF), the
individual insurance market can be a difficult place to buy
coverage, especially for people who are in
less-than-perfect health. Access to and the cost of
coverage is very much dependent on a person's health
status, age, place of residence, and other factors. Common
circumstances leading people to seek such coverage include
self-employment, early retirement, working part time,
divorce or widowhood, or "aging off" a parent's policy.
Insurance carriers in the individual market often decline
to cover people who have pre-existing medical conditions,
and even when they offer coverage, frequently impose severe
limitations on the coverage for any expenses related to the
pre-existing condition or charge more to individuals
because of their medical history. This can price insurance
out of the reach of many consumers in poor health or create
significant gaps in coverage for individuals who end up
with exclusions and limited coverage. California's program
for medically uninsurable persons, MRMIP, provides
individual coverage through private health plans for those
whose applications for private individual coverage are
rejected by health insurers because of health history or
health status. MRMIP subscribers pay relatively high
premiums, which are set in statute at 125-137.5% of private
market rates, and the coverage is limited to $75,000 per
year. MRMIP premiums vary based on the age and region of
the subscriber and the health plan they choose.
4)MEDICAL LOSS RATIOS . In health insurance, a medical loss
ratio (MLR) is the ratio of medical benefits to premiums - in
other words, the amount of premium revenues a carrier spends
on the actual costs of medical care services, versus
administration, profit and where applicable, shareholder
dividends. MLRs are presented as a percentage - the percent
of premium revenues spent on medical care. In general,
neither health plans nor health insurers are subject to
mandatory MLRs under California law. Some health insurance
products are, however, required to return a set amount of
premiums in the form of benefits and maintain a specific MLR.
For example, Medicare supplement policies, which provide
benefits for Medicare beneficiaries to cover copayments,
coinsurance and medical care services not covered by Medicare,
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are required to maintain MLRs of 75% for group policies and
65% for individual policies. Individual health insurance
policies regulated by CDI are required to return 70% of the
premium in the form of medical benefits. Health plans under
DMHC jurisdiction are limited to no more than 15% for
administrative costs, but this standard does not affect how
much must be spent on medical care in the same way as MLR.
5)SECTION 125 PLANS . Under Section 125 of the IRC, enacted by
Congress in 1978, employers can give their employees the
opportunity to pay for benefits on a pretax basis. In a 125
plan, an employee is allowed to pay for his/her group health
premiums, other qualified insurance premiums, unreimbursed
medical costs (such as prescriptions and copayments), child
and dependent care costs and more, all with tax-free dollars
through a cafeteria plan. Both employees and employers save
on taxes because 125 plans reduce taxable wages, including the
amount of wages on which employers must pay Social Security
and Medicare taxes. These plans are referred to by many
names including flexible spending accounts, choice spending
accounts, section 125 plans, and/or reimbursement accounts.
Section 125 offers several alternatives; three of the most
common are Premium Only Plans, Flexible Spending Accounts and
Cafeteria Plans.
6)Employee Retirement Income Security Act . The federal Employee
Retirement Income Security Act of 1974 (ERISA) regulates any
private-sector "plan," created when an employer or union
promises to compensate employees in the form of pension or
health benefits. The original purpose of ERISA was to make
sure that plan sponsors follow through on promises to provide
pensions and other benefits to employees, including health
coverage. ERISA has been the subject of a number of court
decisions. In several cases, the courts have interpreted
ERISA to prevent states from interfering with uniform national
administration of multi-state plans by compelling plan
administrators to structure benefits in a certain way. ERISA
presents complex legal considerations for states looking to
include employer financing in initiatives to expand access to
health care.
7)RELATED LEGISLATION .
a) AB 1 (Laird and Dymally) expands Medi-Cal and HFP
eligibility to cover all children with family incomes at or
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below 300% FPL. Establishes a HFP Buy-In Program for
children in families with incomes above 300% FPL.
Establishes various presumptive eligibility programs.
Streamlines enrollment and retention. AB 1 is scheduled to
be heard by the Assembly Health Committee on April 24,
2007.
a) AB 2 (Dymally) secures additional funding for MRMIP by
requiring all carriers in the state to share in the costs
of the program, either as a participating health plan in
MRMIP or, in lieu of participation, by paying a fee to the
state to support MRMIP program costs. Extends until June
30, 2008 the Guaranteed Issue Pilot, which provides health
insurance coverage to medically uninsurable individuals who
have exhausted their 36 months of eligibility for MRMIP,
and, effective July 1, 2008, reforms and restructures the
MRMIP. AB 2 passed the Assembly Health Committee and is
pending in the Appropriations Committee.
b) SB 48 (Perata) establishes the Health Insurance
Connector as a health insurance purchasing pool
administered by MRMIB and requires employers to spend a
designated amount on health care for employees or elect to
have that health coverage provided through the Connector.
Mandates that all employed persons have health insurance
either through their employer or purchased on their own.
The mandate covers all workers and their families. Extends
coverage to parents and children under 300% FPL through
Medi-Cal and HFP. Includes health insurance reforms in the
state purchasing program and numerous cost containment
strategies. SB 48 is pending in the Senate.
c) SB 840 (Kuehl) establishes a state-administered single
payer program that includes universal eligibility for all
California residents regardless of income or employment
status. Establishes state administrative agencies and an
elected Health Insurance Commissioner to administer the
California Health Insurance System. The system would be
funded by income, self-employment, and payroll taxes as
proposed in SB 1014 (Kuehl). SB 840 and SB 1014 are
pending in the Senate.
d) Other proposals to expand health care coverage
statewide, including to uninsured adults, have also been
announced this year. These include the following:
i) The Governor's proposal establishes a pay or play
coverage program where employers (except those with less
than 10 employees) who do not provide health coverage for
their workers can pay a fee (4% of payroll) to cover
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their workers through a state-administered purchasing
program. Requires every individual to have and show
proof of health insurance. Provides subsidies on a
sliding scale to persons with incomes 100-250% FPL
through the state purchasing program. Increases Medi-Cal
provider rates. Imposes fees on physicians (2% of
revenues) and hospitals (4% of revenues). Includes
health insurance market reforms and specified cost
containment strategies. The Governor has not designated
a legislative vehicle or provided the Legislature with
proposed bill language to implement his proposal.
ii) The Senate Republican plan relies on tax incentives,
redirection of existing health program funding and
increased availability of community and primary care
clinics to expand access to health care. Proposes to
seek voter approval to redirect existing tobacco tax
revenues away from existing programs to children's
coverage. Reduces Medi-Cal benefits to make them more
like what employed persons have in their job-based
coverage. Increases Medi-Cal provider rates over eight
years. Reduces regulation of carriers to allow greater
flexibility in the health insurance market.
i) The Assembly Republican plan includes 17 bills that
emphasize access to health savings accounts, decreased
regulation of insurers, fewer insurance mandates, a state
insurance exchange for individuals, and expanded state
tax deductions for medical expenses, and combined health
and workers compensation insurance policies.
8)SUPPORT . The 100% Campaign (Campaign), a coalition of
Children Now, Children's Defense Fund, and The Children's
Partnership, supports this bill because it extends health
coverage to all children at or below 300% FPL. The Campaign
suggests that the policies contained in AB 1 (Laird and
Dymally) can help to shape the children's coverage sections of
this bill. The San Jose-Evergreen Community College District
writes in support that affordable health care is out of reach
for many Californians, including many community college
students. The lack of affordable coverage directly impacts
the district because health premiums continue to rise to cover
the costs of the uninsured.
9)SUPPORT IF AMENDED . Numerous organizations write in support
of this bill with a wide range of suggestions for amendments
and changes to this bill. American Federation of State,
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County and Municipal Employees supports the purchasing pool in
this bill as good policy, and asks that this bill be expanded
to create a publicly-administered health insurance option
available to all Californians and their employers. Along with
AFSCME, California Labor Federation and SEIU call for
additional provisions related to affordability,
cost-containment and governance. These proposals include,
among other items: limiting any requirement that employees
sign-up for employer sponsored coverage if doing so requires
an unaffordable individual or family contribution,
establishing employer contributions indexed to inflation,
guaranteeing a minimum standard of health care coverage in all
private health insurance plans and policies, adopting modified
community rating to prevent insurers from engaging in unfair
price discrimination based on age, gender or illness and
guaranteeing that employers cannot find ways to evade their
obligations. In addition, labor groups want state regulation
of health insurance premiums, deductibles, and copayments, and
insurance broker fees, and increased reporting and data
collection related to costs and quality for both hospitals and
insurers. Health Access also points to the need for
investments in long-term cost containment strategies such as
disease management, information technology, and prevention.
Health Access also calls for fundamental reforms and
investment in increasing Medi-Cal provider rates. Supporters
call for review of MRMIB's governance structure and consumer
responsiveness in light of the proposed significant increases
in its responsibilities. Consumers Union writes that as this
bill moves it would like to also discuss many of the above
provisions as well as imposing contributions on providers.
Blue Shield of California supports this bill but is concerned
about the underwriting reforms in the individual market,
requiring health plans to cover everyone except for those with
a limited set of serious conditions. According to Blue
Shield, this requirement has the potential to raise premiums
for healthier individuals and could lead to them dropping
their health coverage.
10)OPPOSE . The National Federation of Independent Businesses
(NFIB) opposes this bill as a mandated employer health care
system because most small employers simply cannot afford
health care coverage for themselves or their employees. NFIB
continues that there are no strong cost containment or control
measures. NFIB warns that entrepreneurs will site their
business in other states rather than face the prospect of
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paying rising health care premiums or another payroll tax.
California Retailers Association (CRA) does not support what
it refers to as a pay or play mechanism without assurances
that health care costs would not continue to rise faster than
inflation and payroll. CRA supports requiring individuals to
purchase coverage, expanding HFP to cover more children, cost
containment and incentives for insurers to offer plans
recognizing healthy lifestyles. California Chamber of
Commerce is concerned that the requirements on employers in
this bill will hurt California businesses and cause the loss
of jobs. According to the Chamber, employer mandates threaten
jobs and slow economic growth. The California Manufacturers
and Technology Association (CMTA) believes that the goal of
health reform should be to empower all Californians to obtain
necessary health care at reasonable prices and that
individuals should be responsible for obtaining their own
health insurance with a state safety net for those that cannot
purchase it on their own. Even though CMTA states that most
California manufacturers currently provide high wages and
health coverage, CMTA opposes a mandate because it would raise
costs for smaller suppliers and remove flexibility in coverage
terms and conditions.
11)Technical amendment : On page 21, line 33, delete
"full-service health care service."
12)SUGGESTED AMENDMENTS :
a) There is no date for implementation of the DRA benchmark
plan (Section 23, page 41). To be consistent with the
other related provisions of this bill, the author may wish
to add Section 23 to the list of sections effective July 1,
2008, on page 44, lines 13-14.
b) The MLR for carriers proposed in this bill is not
effective until July 1, 2009. The author may wish to move
the effective date of this section to July 1, 2008.
13)POLICY ISSUES :
a) Affordability . This bill is silent on the
responsibility of employees to share in the costs of
employer-sponsored coverage and sets the fee for employers
electing to pay a fee to Cal-CHIPP at an unspecified level.
The author will need to identify expected employee cost
sharing and set the level of the employer fee.
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b) Benefits . The author requires MRMIB to establish three
uniform benefit designs to be offered in Cal-CHIPP and
which will be required to be offered in the private
insurance market to all individuals and groups. The author
may wish to specify that at least one of the benefit
designs MRMIB selects will be the DRA benchmark plan,
(equivalent to HFP, which is modeled on CalPERS), which
will be available to individuals under 300% of FPL who are
eligible for subsidies. Having the benchmark plan
available both in Cal-CHIPP and the private market enhances
the ability to price compare and may better facilitate
wraparound coverage for employed persons eligible for
premium assistance through Medi-Cal or HFP.
c) Individual market reforms . This bill limits the ability
of carriers to deny coverage to applicants for individual
health insurance so that only those who have a serious
condition on a list established by MRMIB may be denied
coverage. However, this bill does not restrict the rate
differentials that may be charged to individuals based on
health status or claims history, which could undermine the
requirement of coverage by allowing unaffordable rates to
be quoted to those with preexisting conditions. To deal
with this, the author may wish to establish some rating
limits in the private individual market.
REGISTERED SUPPORT / OPPOSITION :
Support
100% Campaign
AARP
Blue Shield of California
Children Now
Children's Defense Fund
PICO California
San Jose-Evergreen Community College District
The Children's Partnership
Support if amended
American Federation of State, County and Municipal Employees
Blue Shield of California
California Association of Public Hospitals and Health Systems
California Federation of Teachers
California Labor Federation
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California Public Interest Research Group
Congress of California Seniors
Consumers Union
Health Access California
Service Employees International Union
Opposition
California Chamber of Commerce
California Manufacturers and Technology Association
California Restaurant Association
California Retailers Association
California Right to Life Committee
Howard Jarvis Taxpayers Association
National Federation of Independent Business
Two individuals
Analysis Prepared by : Deborah Kelch and John Gilman HEALTH /
(916) 319-2097