BILL ANALYSIS
AB 8
Page 1
GOVERNOR'S VETO
AB 8 (Nunez)
As Amended September 7, 2007
2/3 vote
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|ASSEMBLY: |47-32|(June 6, 2007) |SENATE: |22-17|(September 10, |
| | | | | |2007) |
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|ASSEMBLY: |46-31|(September 10, | | | |
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Original Committee Reference: HEALTH
SUMMARY : Establishes a comprehensive package of health care
reforms, including expansion of eligibility for the Medi-Cal and
Healthy Families Programs (HFP); creates a statewide health care
purchasing program (California Health Insurance Purchasing
Program, or Cal-CHIPP); modifies rules governing private
individual and group health insurance; initiates and expands
health care quality and cost measurement activities; establishes
administrative and funding mechanisms to support the reforms;
and, requires the California Health and Human Services Agency
(CHHSA) to conduct a comprehensive evaluation of the
implementation of this bill, as specified.
The Senate amendments :
1)Eliminate the requirement that health care service plans and
disability insurers selling health insurance (collectively
"carriers") offer a Medi-Cal benchmark plan and an HFP
benchmark plan to eligible individuals or transmit the
employer's contribution for eligible individuals to the
Managed Risk Medical Insurance Board (MRMIB), the state agency
that will be responsible for administering Cal-CHIPP, as
specified. Require instead, once Cal-CHIPP is operational
January 1, 2010, carriers to collect the employer's premium
contribution for Medi-Cal and HFP eligible or enrolled
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employees and transmit that amount to MRMIB toward the premium
cost of an HFP or Medi-Cal plan offered in Cal-CHIPP.
2)Specify that benefits in Cal-CHIPP HFP plans and Cal-CHIPP
Medi-Cal plans must have the same benefits as are generally
required in statute for HFP and Medi-Cal.
3)Specify that all benefit plan designs in Cal-CHIPP must meet
benefit levels mandated under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene) plus prescription drugs.
Eliminate the requirement that MRMIB offer three Cal-CHIPP
benefit designs and require "a variety of" designs, which must
include low-cost plans for Cal-CHIPP adult enrollees with
family incomes below 300% of the federal poverty level (FPL)
(at or below $51,500 for a family of three in 2007) who are
ineligible for HFP or Medi-Cal.
4)Limit the amount of the Cal-CHIPP premium paid by an employee
with a household income at or below 300% FPL, to no more than
0-5% of household income, depending on the income, after
taking into account the tax savings the employee realizes by
using the federal cafeteria plan employers are required to
make available pursuant to this bill.
5)Establish eligibility standards for enrollment in Cal-CHIPP
and the rights and remedies of enrolled persons, including
establishing that an individual, to be eligible for enrollment
in Cal-CHIPP, must be a state resident, as specified, and an
employee, or dependent of an employee, of an employer who
elects to pay into the California Health Trust Fund (Fund).
6)Exempt an employee whose employer has made an election to pay
a fee from enrolling in Cal-CHIPP if the cost for coverage in
Cal-CHIPP, with a maximum out-of-pocket cost of $1,500,
exceeds 5% of wages paid by the electing employer. Exempt an
employee earning wages equivalent to 300% of the FPL or less
from the requirement to accept health care expenditures made
on their behalf by an employer if accepting the expenditures
would result in the employee having annual health expenditures
in excess of 5% of his or her household income after taking
into account any tax savings the employee is able to realize.
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7)Require MRMIB to establish a working group to develop
recommendations to broaden access to Cal-CHIPP to all
self-employed individuals and to submit those recommendations
to the Legislature.
8)Establish the California Health Benefits Service (CHBS) within
the CHHSA to solicit and assist local initiatives and county
organized health systems which currently provide health care
under the Medi-Cal and HFP programs, to form joint ventures to
create integrated networks of public health plans that would
pool risk and share networks. Establish a 9-member board to
govern CHBS, as specified, and require CHBS to appoint an
executive director. Require CHBS to report to the committees
of jurisdiction in the Senate and Assembly by March 1, 2009,
and annually thereafter, on implementation of CHBS and to make
recommendations on resources, regulatory and legislative
changes necessary to implement the joint ventures and to build
and implement a system of health coverage throughout
California.
9)Expand and make specific the definitions and administrative
duties and responsibilities applicable to Cal-CHIPP and the
administration of Cal-CHIPP by MRMIB, including the
requirement that MRMIB only adjust premiums at a public
meeting of the board and requirements related to costs and
efficiency that MRMIB must impose on carriers contracting to
provide coverage in Cal-CHIPP.
10)Require licensure under Knox-Keene for all joint ventures
established pursuant to #8 above, prior to commencement of
enrollment. Require the Director of the Department of Managed
Health Care (DMHC) to provide regulatory and program
flexibility as may be necessary to facilitate, new, modified
or combined licenses of local initiatives, county organized
health systems or the CHBS seeking licensure for regional or
statewide networks to participate in Cal-CHIPP or to provide
coverage in the individual or group markets. Require the
Director of DMHC to ensure that any public health plans
established meet essential financial, capacity, and consumer
protection requirements of Knox-Keene.
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11) Narrow the proposed expansion of private insurance market
rules which currently apply to small employers of 2-50
employees, so that the rules also apply to firms of 51-100
rather than firms of 51-250 employees as in prior versions of
this bill, including requirements that carriers offer, market,
and sell health coverage to such employers 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."
12) Eliminate, effective January 1, 2010, the ability of
carriers to charge rates to a specific employer group that are
10% above or below average rates. The 10% "rate bands"
currently allowed in law for employers of 2-50 employees allow
carriers to establish employer-specific rates, based on
factors other than the standard variations for geography, and
age and family size of employees, which can include group
claims history or employee health status.
13) Permit carriers to adjust rates charged to employers
covered by the market rules in order that the carrier's rates
for a standard benefit plan offered to small employers is not
less than the rates for the same plan in Cal-CHIPP.
14)Require each carrier with one million or more enrollees in
California to submit a good faith bid to MRMIB in order to be
a participating plan through Cal-CHIPP.
15)Delete the requirement that carriers offer, market and sell
all of the uniform benefit plan designs made available through
Cal-CHIPP in all individual and group markets where the plan
or insurer sells coverage.
16)Make more specific the requirement that MRMIB develop a
standardized health questionnaire to be used by all carriers
in the individual market and the list of serious health
conditions or diagnoses that make applicants automatically
eligible for coverage in the Major Risk Medical Insurance
Program (MRMIP), California's coverage program for medically
uninsurable persons. Require MRMIB to develop the
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questionnaire and the list to identify the 3-5% of persons who
are the most expensive to treat in individual health coverage.
Individuals so identified would be eligible for coverage in
MRMIP.
17)Require the director of DMHC and the commissioner of the
California Department of Insurance (CDI) to jointly develop
regulations establishing five classes of individual health
benefit plans which carriers selling individual coverage must
make available. Establish the qualifying events that must be
met in order for an individual, having purchased coverage in
one of the five classes, to be able to move up to a higher
class of benefits, as specified.
18)Effective January 1, 2009, require carriers to guarantee
issue the five classes of approved benefit plans established
pursuant to #18) above, except that the guaranteed issue
requirement does not apply to the 3-5% of individuals
identified under #17) above who will be eligible for coverage
in MRMIP. Limit the rating categories carriers can use for
individual health coverage to age, family size, geographic
region and health improvement discounts, as specified.
19)Specify that DMHC and CDI, in developing regulations to
implement the requirement that carriers spend at least 85% of
premium revenue on health care services, known as the
medical-loss ratio (MLR), define "health care services" for
purposes of calculating the MLR.
20)Establish a new California Health Care Cost and Quality
Transparency Commission (Commission) for the purpose of
statewide data collection, common measurement and analysis of
health care costs, quality and outcomes. Require the
Commission to identify by July 1, 2009 the existing data
analysis, reporting and collection activities currently
administered by the Office of Statewide Health Planning and
Development (OSHPD) which are necessary to the Commission's
activities and which shall be transferred to the Commission.
Establish the Commission to consist of 13 specified members,
seven of whom would be appointed by the Governor and six by
the Legislature. Require the Commission to meet at least once
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every two months, and grant broad authority to the Commission,
including permitting the Commission to determine the data
elements to be collected, the reporting format and the use and
reporting of any data submitted. Require the Commission, by
December 1, 2009, to develop, implement, and update a health
care quality and cost containment plan that provides for
effective measurement of the safety and quality of an array of
health care services provided to Californians. Establish the
Commission's duties and authority, fees and penalties, as
specified.
21)Establish CHHSA, rather than MRMIB, as the lead agency to
conduct a 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
the Public Employees' Medical and Hospital Care Act (CalPERS),
Medi-Cal, HFP, and Cal-CHIPP.
22)Permit MRMIB to take a variety of specified actions to
provide prescription drug coverage to Cal-CHIPP enrollees,
including contracting with a pharmacy benefit manager or using
direct procurement.
23)Require MRMIB to impose specified practices related to costs
and efficiency on carriers contracting to provide coverage in
Cal-CHIPP, including, among other things, reduction of medical
errors, preventive care, and management of chronic diseases,
incentives for healthy lifestyles, standardized billing, and
rational use of technology. Require MRMIB to collect and
disseminate, as appropriate, information on the quality and
cost-effectiveness of Cal-CHIPP participating carriers.
24)Expand the number of key indicators that CHHSA must include
in its assessment of the effect of health care reform as set
forth in this bill. Establish an advisory body of nine
individuals appointed by the Governor and Legislature to guide
the assessment. Require the Secretary of CHHSA and the
advisory body to establish a timeline for reporting to the
Legislature, including at least the release of annual data to
serve as a benchmark for the assessments of the reforms in
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this bill.
25)Permit MRMIB to adjust annually the 7.5% minimum health
spending requirement for employers at a public meeting of the
board.
26)Delete the exemption from provisions of this bill for
businesses with payrolls of less than $100,000, those with
fewer than two employees or those established for less than
three years.
27)Establish the California Health Insurance Purchasing Pool
Program (CHIPPP), administered by the Employment Development
Department (EDD), incorporate related definitions and
responsibilities applicable to the administration of the
program by EDD, provide for specified notification of
employees by employers, and establish penalties for employers
who fail to file returns, make required payments, or otherwise
violate provisions of CHIPP, as specified.
28)Revise and make specific the election of employers to make
health care expenditures equivalent to 7.5% of payroll,
including expenditures otherwise subject to collective
bargaining agreements and expenditures for part-time
employees. Specify that health expenditures, which meet the
7.5% of payroll employer expenditure requirement, do not
include payments made for workers' compensation, Medicare, or
other health benefit costs that an employer is required to pay
by state or federal law.
29)Require Department of Health Care Services (DHCS), which
serves as the single state agency for federal Medicaid
purposes and administers the Medi-Cal program, in consultation
with MRMIB, to take all reasonable steps necessary to obtain
maximum federal funding in the administration of this bill.
30)Delay for six months, from January 1, 2009 to July 1, 2009,
the required employer election to either make health
expenditures or pay an equivalent amount into the Fund.
31)Establish standards to protect the confidentiality of
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Cal-CHIPP applicants, enrollees or household members.
EXISTING LAW :
1)Establishes the Medi-Cal program, administered by DHCS, 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.
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 the Access for
Infants and Mothers Program (AIM), administered by MRMIB, to
provide low-cost health insurance for pregnant women and their
newborn infants.
3)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.
4)Establishes 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 MRMIB.
5)Provides for the regulation of health care service plans by
DMHC and regulation of disability insurers certificated to
sell health insurance by CDI.
AS PASSED BY THE ASSEMBLY , this bill established a comprehensive
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package of health care reforms, including expansion of
eligibility for the Medi-Cal and HFP, created a statewide health
care purchasing program (Cal-CHIPP), and modified the rules
governing private individual and group health insurance.
FISCAL EFFECT : According to the Senate appropriations Committee
analysis, based on fiscal modeling done for a prior version of
this bill by Jonathan Gruber, Ph.D. of the Massachusetts
Institute of Technology:
(in millions)
Specification Cal-CHIPP
GENERAL FUND TOTAL
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 $ -0-
TOTAL REVENUES: $8,260 $
985 $9,245
NET STATE COST (SAVINGS) $ (185) $ (235)
$ (420)
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*"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.
COMMENTS : The Senate amendments clarify, make specific, and add
details to the health care reforms in this bill and to the
version of this bill as passed by the Assembly.
According to the author, this bill encompasses a comprehensive
approach to reforming California's broken health care system
based on the principle of shared responsibility between
government, individuals, and employers. The author points out
that this bill contains major reforms of the insurance industry,
expansion of public health care programs, cost containment,
measures to improve health care quality, and provisions to
strengthen the private health care market.
The 100% Campaign, a coalition of Children Now, Children's
Defense Fund, and The Children's Partnership, and PICO
California support this bill because it extends health coverage
to all children at or below 300% FPL. The Insure the Uninsured
Project states that this bill would increase coverage throughout
the state, including coverage for all children, implement shared
responsibility, implement health insurance market reforms that
will simplify medical underwriting, expand the high-risk pool,
require standard uniform benefit designs, and ensure guaranteed
issue.
Numerous organizations write in support of this bill with a wide
range of suggestions for amendments and changes to this bill.
Additionally, numerous groups have support if amended or oppose
unless amended positions.
Business groups oppose this bill as a mandated employer health
care system. The National Federation of Independent Businesses
argues that most small employers simply cannot afford health
care coverage for themselves or their employees. The California
Chamber of Commerce is concerned that the requirements on
employers in this bill will hurt California businesses and cause
the loss of jobs. Health insurers oppose this bill because of
the health insurance market reforms. The Association of
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California Life and Health Insurance Companies write in
opposition that the individual market reforms will price
middle-income Californians out of the market. The California
Nurses Association and the National Nurses Organizing Committee
oppose this bill because it does not achieve universal coverage
and builds on the flawed private health insurance market.
GOVERNOR'S VETO MESSAGE :
While I appreciate the Legislature's efforts to reform
our broken health care system and applaud the hard
work that has gone into AB 8, I cannot sign this bill.
AB 8 would put more pressure on an already broken
system.
AB 8 does not achieve coverage for all, a critical
step needed to reduce health care costs for everyone.
Comprehensive reform cannot leave Californians
vulnerable to loss or denial of coverage when they
need it most. Finally, to be sustainable,
comprehensive reform cannot place the majority of the
financial burden on any one segment of our economy.
Unfortunately, AB 8 falls short on all three accounts.
California needs a financially sustainable health care
reform plan that shares responsibility, covers all
Californians and keeps our emergency rooms open and
operating. I cannot support reform efforts that fall
short of these goals and threaten to weaken our
already broken system.
Analysis Prepared by: Deborah Kelch and John Gilman / HEALTH
/ (916) 319-2097
FN: 0003697