BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Tom Torlakson, Chairman
8 (Nunez)
Hearing Date: 8/30/07 Amended: 8/20/07
Consultant: John Miller Policy Vote: Health 7 - 4
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BILL SUMMARY: AB 8 is a comprehensive health reform proposal
intended to substantially expand affordable health coverage
throughout the state. The proposal expands eligibility for
public health insurance programs for children and their parents
and seeks to improve access to private insurance through major
insurance market reforms. The bill seeks to improve access to
the individual insurance market by standardizing medical
underwriting and enhancing coverage and eligibility for high
risk individuals. AB 8 contains a number of insurance marketing
reforms and imposes cost containment measures such as required
preventive services, evidence based care and expenditure caps.
The bill creates a statewide purchasing pool, the California
Health Insurance Purchasing Program. AB 8 establishes a minimum
spending requirement for employers of at least 7.5% of Social
Security payroll.
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Specification Cal-CHIPP GENERAL FUND
TOTAL
(Total) (Increase)
Cost of Coverage: $8,075 $(1,510) $6,565
Cost of Premium Assistance: $ 1,850
$1,850
State Income Tax Revenue Loss: $
410$ 410
TOTAL COSTS: $8,075 $
750$8,825
Less Revenues:
Individual Contributions: $2,580 $ (65) $2,515
Federal Matching Funds: $ 940 $ 90 $1,030
Employer Payroll Fees: $5,700 $5,700
(Transfer*): $ (960) $
960$
TOTAL REVENUES: $8,260 $ 985 $9,245
NET STATE COST (SAVINGS) $ (185) $ (235) $ (420)
*"Transfer" = the lesser of (1) the available pool surplus or
(2) payroll fee revenue paid with respect to workers or
dependents receiving Medi-Cal for Healthy Families coverage.
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STAFF COMMENTS: SUSPENSE FILE
This bill is intended to both expand access to health care and
bring greater efficiency to the insurance market. The bill
establishes a minimum spending requirement for employers and
provides options to meet the requirement. The bill
substantially expands public health care programs for children
and adults. The measure will bring insurance
AB 8 (Nunez)
Page 2
coverage to an estimated 3.4 million currently uninsured
individuals or roughly two thirds of all uninsured Californians.
The bill extends coverage through the Healthy Families and
Medi-Cal programs, but overall participation in these public
programs are projected to decline by one million people.
Insurance market reforms such as guaranteed issue and
medical-loss ratios are expected to reduce the rate of premium
cost increases and assure coverage to high risk individuals.
The full program will expend $8.3 billion financed through a
combination of employer contributions, employee contributions,
state and federal funding. In total, the new system is expected
to save $235 million in public expenditures and a total of $420
million while providing comprehensive coverage to 2/3rds of the
state's uninsured.
Employers are required to pay 7.5% of Social Security wages for
employee health expenditures or pay an equivalent amount into a
trust fund. All employers are required to establish Section 125
plans to allow pre-tax payments for health insurance
contributions. As proposed, the bill will apply to employers of
any size (except for self-employed) and for both part and full
time employees.
AB 8 establishes a statewide purchasing pool, the California
Cooperative Health Insurance Purchasing Program, known as
"Cal-CHIPP", where eligible employees can purchase health
coverage. Cal-CHIPP is required to offer at least 5 uniform
benefit plans, one of which must be a Medi-Cal Benchmark Plan,
and one which must be a Healthy Families Benchmark Plan that are
available to enrollees meeting certain eligibility requirements.
Public programs and support for low income individuals are
expanded under this legislation. The Healthy Families program,
now principally serving children, will be expanded to cover
families up to 300% of the federal poverty level. Medi-Cal and
Healthy Families eligibility standards will be simplified, and
both programs will expand coverage of parents. The
comprehensive coverage available in the public programs would
also be provided to Cal-CHIPP participants through bench-mark
policies. The employee contributions for lower income
individuals would be limited through a number of mechanisms to
create an affordable sliding scale rate. County governments
would remain responsible for indigent care, but at reduced
levels due to the significant overall reduction of the
uninsured. Federal responsibilities would remain unchanged. The
total cost of public health programs will be reduced by $1.5
billion, from $10.9 billion to $9.4 billion.
AB 8 seeks a number of health insurance reforms intended to
improve access and reduce premium cost growth. By 2011, all
health plans will be required to guarantee issue and use
community rating in the individual market. Further, the state
would establish a high risk pool funded by assessments on
insurers for persons with unusual health risks (contained in AB
2, Dymally), would simplify medical underwriting and require
insurers to offer comparable health plans. The bill would also
require health plans to spend 85% of their premium income on
medical services.
Cost containment is addressed through a number of new policies.
Uniform benefit packages under this legislation will include
coverage for primary and preventative care.
AB 8 (Nunez)
Page 3
Plans and providers will be required to establish electronic
health records and to implement evidence-based preventive care.
The bill requires centralized assessment of new technology. The
Cal-CHIPP purchasing pool would be authorized to negotiate and
purchase group coverage rates for its members.
This fiscal assessment is based on modeling done by Jonathan
Gruber, Ph.D. of the Massachusetts Institute of Technology.