BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 1 X1
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           (Without Reference to File)
          AB 1 X1 (Nunez)
          As Amended December 17, 2007
          Majority vote 

           HEALTH              12-5        APPROPRIATIONS      12-5        
          |Ayes:|Dymally, Bass, Berg, De   |Ayes:|Leno, Caballero, Davis,   |
          |     |La Torre, De Leon,        |     |DeSaulnier, Huffman,      |
          |     |DeSaulnier, Eng, Hayashi, |     |Karnette, Krekorian,      |
          |     |Hernandez, Jones, Ma,     |     |Lieu, Ma, Nava, Solorio,  |
          |     |Salas                     |     |De Leon                   |
          |     |                          |     |                          |
          |Nays:|Nakanishi, Emmerson,      |Nays:|Walters, Emmerson, La     |
          |     |Gaines, Huff, Strickland  |     |Malfa, Nakanishi, Sharon  |
          |     |                          |     |Runner                    |
           SUMMARY  :   Enacts the Health Care Security and Cost Reduction  
          Act (Act), a comprehensive health reform proposal, which creates  
          the California Cooperative Health Insurance Purchasing Program  
          (Cal-CHIPP), a state health care purchasing program to provide  
          coverage to specified employees, individuals eligible for new  
          expanded public coverage, and individuals who are newly eligible  
          for a tax credit to defray health insurance costs.  Requires the  
          Managed Risk Medical Insurance Board (MRMIB) to administer  
          Cal-CHIPP.  Establishes various health cost containment measures  
          and private insurance market reforms.  The author has indicated  
          that financing of major elements of this bill will be subject to  
          voter approval of an initiative on the November 2008 statewide  
          ballot.  Specifically,  this bill  :  

            Coverage Expansions
          1)Expands eligibility for public coverage programs for  
            low-income persons as follows:

            a)   Effective July 1, 2009, covers all children at or below  
               300% of the federal poverty level (FPL), regardless of  
               their immigration status.  Expands eligibility in the  
               Healthy Families Program (HFP) from 251% to 300% FPL; sets  


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               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, eliminates federal  
               citizenship and immigration eligibility requirements for  
               children 18 and under in Medi-Cal or HFP;

            b)   Effective July 1, 2010, extends coverage to 19- and  
               20-year olds and to low-income parents and caretaker  
               relatives up to 250% FPL.  Coverage for adults with incomes  
               at or below 100% FPL would be covered under Medi-Cal.   
               Adults with incomes 100-250% FPL and for childless adults  
               with incomes 100-250% FPL will be provided in a benchmark  
               plan pursuant to new federal Medicaid rules under the  
               federal Deficit Reduction Act (DRA) of 2006, which allows  
               states to vary the benefit designs they offer to some  
               groups using federal Medicaid funds.  This benchmark plan  
               would be provided under Cal-CHIPP and be known as the  
               Cal-CHIPP Healthy Families Plan (CCHFP); 

            c)   Establishes cost-sharing limits for adults 19 and older  
               eligible for subsidized coverage based on income, as  
               described in #1) b) above, as a percent of FPL, as follows:  
                for persons up to 150% FPL - no premium contribution or  
               out-of-pocket costs and for persons 150-300% FPL - premiums  
               not to exceed 5% of income, net of applicable deductions;  

            d)   Requires, effective July 1, 2010, the Department of  
               Health Care Service (DHCS) to establish a new coverage  
               program for childless adults who are citizens, nationals,  
               or qualified immigrants with incomes up to 100% FPL,  
               contingent on unspecified county contributions to the state  
               required under the Act.  Requires the coverage to be  
               equivalent to subsidized coverage offered in Cal-CHIPP, but  
               also specifically excludes long-term care services, nursing  
               home care, personal care services, in-home supportive  
               services and home- and community-based services.  In  
               determining income eligibility for the new program,  
               requires DHCS to use the methodology for the federal  
               poverty programs for pregnant women and children, but  
               excludes from the determination of eligibility for this new  
               program income disregards currently available under those  
               programs.  Requires individuals eligible under this  
               provision, who live in a county where a local coverage  
               option (LCO) program is available, to be covered  


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               exclusively by that LCO for the first four years that the  
               LCO is available.  After five years of operation of an LCO  
               in a county, permits newly eligible individuals to choose  
               to enroll in the LCO, the county organized health system or  
               one of the two-plan Medi-Cal managed care contractors in  
               that county.  Permits LCOs to offer a limited network of  
               providers with approval by DHCS and the Department of  
               Managed Health Care (DMHC);

            e)   Effective July 1, 2010, eliminates the Medi-Cal assets  
               test, which currently applies to certain Medi-Cal  
               eligibility categories, to the extent that federal  
               financial participation (FFP) is available;

            f)   Eliminates, effective July 1, 2010, the requirement that  
               certain adult Medi-Cal beneficiaries file semiannual status  
               reports and instead requires them to file semiannual  
               address verification, provided FFP is not jeopardized.   
               Requires DHCS to seek federal approval to make cost sharing  
               determinations for public program beneficiaries enrolled in  
               Cal-CHIPP on an annual basis; and,

            g)   Requires DHCS to seek appropriate federal approval for  
               expansion provisions.  The coverage expansions for all  
               populations except for low-income childless adults will  
               require a Medicaid state plan amendment.  The cost-sharing  
               requirements are subject to a federal Medicaid waiver. 

          2)Continues confidentiality protections for all types of written  
            and oral information concerning an applicant, subscriber, or  
            household member made or kept by a public agency in connection  
            with the administration of HFP, except for purposes directly  
            connected with HFP or Medi-Cal, or when the individual gives  
            written consent for that disclosure.  Specifies those purposes  
            that are directly connected to the administration of HFP and  

          3)Requires MRMIB to coordinate with DHCS to seek FFP for CCHFP  
            coverage.  Makes subsidized coverage subject to the terms and  
            conditions of any waiver or state plan amendment to the extent  
            that FFP is obtained.  Requires MRMIB to apply citizenship,  
            immigration and identity documentation requirements to the  
            extent required to obtain FFP for those persons eligible for  
            federal funding.  Requires the parent or caretaker relative of  


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            a child, who is made eligible for Medi-Cal or HFP by this bill  
            despite their immigration status, to sign under penalty of  
            perjury an attestation that the child is not described in any  
            of the categories enumerated on the attestation for which  
            federal financial participation for full-scope services is  

          4)Authorizes DHCS to make statewide eligibility determinations  
            for any group or subgroup of Medi-Cal applicants, except for  
            aged, blind, or disabled persons, either directly or by  
            contract with counties or an agent or agents. 

          5)States legislative intent to establish a mechanism for the  
            state to defray the costs of an enrollee's public program  
            participation, including taking advantage of other  
            opportunities for coverage of that enrollee.  Requires the  
            DMHC, the California Department of Insurance (CDI), and DHCS  
            to evaluate options and to report recommendations to the Joint  
            Legislative Budget Committee by July 1, 2009.  Requires, 90  
            days after their report, DMHC, CDI, and DHCS to implement  
            policies, procedures, and requirements described in their  

          6)Establishes the California Health Benefits Service Program  
            (CHBS) within DHCS to expand cost-effective health coverage  
            options to purchasers governed by the Act.  Requires the  
            program to:  a) identify barriers or incentives that should be  
            addressed to facilitate geographic expansion of, or the  
            establishment and maintenance of joint ventures between health  
            plans that contract with, or are governed, owned, or operated  
            by, a county board of supervisors, a county special  
            commission, a county organized health system or a county  
            health authority, as well as the County Medical Services  
            Program; b) report findings to the Legislature by January 15,  
            2009; and, c) provide technical assistance to support  
            expansions and joint ventures.  Creates the CHBS Stakeholder  
            Committee (Committee), comprised of 10 members:  six appointed  
            by DHCS; two by the Speaker of the Assembly; and, two by the  
            Senate Rules Committee.  Requires the Committee to meet at  
            least quarterly to provide input to CHBS and assist CHBS in  
            carrying out its responsibilities.  Requires DHCS, with input  
            from the Committee, to update the Legislature on  
            implementation of CHBS.


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          7)Authorizes DHCS to enter into contracts with joint ventures,  
            described in #6) above, to provide medical services to  
            specified populations.  Requires health plans within such  
            joint ventures to seek to contract with designated public  
            hospitals, county health clinics, community health centers,  
            and other traditional safety net providers.  

          8)Requires licensure under the Knox-Keene Health Care Service  
            Plan Act of 1975 (Knox-Keene), the licensing framework for  
            health plans in California, including Health Maintenance  
            Organizations (HMOs), for all joint ventures established  
            pursuant to #6) above, prior to commencement of enrollment.   
            Permits the Director of the DMHC to provide regulatory and  
            program flexibility 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.  Requires the director of  
            DMHC to ensure that any public health plans established meet  
            essential financial, capacity, and consumer protection  
            requirements of Knox-Keene.  

          9)Modifies the Expanded Access to Primary Care (EAPC) program  
            by:  a) expanding income eligibility from 200% FPL to 250% FPL  
            for persons who do not have third party coverage and who do  
            not qualify for public health care coverage programs; b)  
            requiring beneficiaries to choose a primary care medical home;  
            and, c) requiring DHCS to issue a primary care card on  
            determination of a person's eligibility for the program.  EAPC  
            currently provides reimbursement to certain primary care  
            clinics, on a per visit basis, to defray the costs of  
            outpatient visits for uninsured persons at or below 200% FPL.

          10)States legislative intent to implement a transition plan by  
            July 1, 2010, that will allow payment of premiums and  
            cost-sharing burdens under the federal Ryan White  
            Comprehensive AIDS Resources Emergency (CARE) Act.

            Purchasing Program and Individual Mandate 

          1)Requires, commencing July 1, 2010, requires every California  
            resident to enroll in and maintain minimum health care  
            coverage (individual mandate), as determined by MRMIB, for  


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            himself or herself and his or her dependents.  Exempts an  
            individual from this requirement if MRMIB determines that the  
            cost for a minimum policy (minimum creditable coverage) is not  
            affordable for that individual or would constitute an undue  
            hardship.  Also exempts from the individual mandate any person  
            or family with family income at or below 250% FPL when the  
            person's or family's share of premium for minimum creditable  
            coverage exceeds 5% of family income, or if the individual has  
            been in California for less than six months and is not  
            eligible for guaranteed issue health coverage.  States that  
            MRMIB must consider affordability, protection from  
            catastrophic costs, and prevention in establishing standards  
            for minimum creditable coverage.  

          2)Requires MRMIB, by March 1, 2009, to set the standards for  
            minimum creditable coverage in the individual market and for  
            purposes of the individual mandate.  Requires minimum  
            creditable coverage to at least include coverage for  
            physician, hospital, and preventive services and to be, at a  
            minimum, inclusive of existing coverage requirements under  
            law.  Requires MRMIB, in defining minimum creditable coverage,  
            to consider protection of individuals and health purchasers  
            from catastrophic medical costs, the extent to which cost  
            sharing would deter an enrollee from obtaining appropriate and  
            timely care, and affordability, taking into account  
            deductibles, coinsurance, copayments, and total out-of-pocket  
            costs, and the extent to which the resulting premium cost  
            would prevent an individual from obtaining coverage at a  
            reasonable price.  Requires MRMIB to consider the extent to  
            which and under what circumstances benefits offered by a bona  
            fide church or organization whose principles include healing  
            entirely by prayer or spiritual means may be included in, or  
            qualify as, meeting the requirement to maintain minimum  
            creditable coverage.

          3)Establishes Cal-CHIPP as a state purchasing program, or health  
            insurance purchasing pool, administered by MRMIB, to provide  
            or make available health care coverage for eligible persons  
            through participating health plans, defined as health insurers  
            regulated under CDI or  health care service plans licensed by  
            DMHC, (collectively "carriers").  Establishes the duties,  
            authority and responsibility for MRMIB in the operation of  


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            Cal-CHIPP.  Makes Cal-CHIPP operational on January 1, 2009,  
            and requires MRMIB to provide health care coverage through  
            Cal-CHIPP beginning July 1, 2010. 

          4)Establishes eligibility standards for enrollment in Cal-CHIPP  
            and the rights and remedies of enrolled persons.  Establishes  
            two categories of Cal-CHIPP enrollees, CCHFP enrollees, and  
            those who are not eligible for CCHFP:

             a)   CCHFP coverage for eligible enrollees is subject to the  

               i)     To be eligible for CCHFP coverage an individual must  
                 meet all of the following criteria:

                  (1)       Be a legal resident of the state;

                  (2)       Be 19 years of age or older;

                  (3)       Have family income 101-250% FPL; and,

                  (4)       Not be offered employer-sponsored insurance or  
                    have been offered only coverage where the employer  
                    does not make any financial contribution toward the  

               ii)    Includes benefits to meet the requirements of  
                 Knox-Keene, plus prescription drugs, combined with  
                 enrollee cost-sharing levels that promote prevention and  
                 health maintenance, including appropriate cost-sharing  
                 for physician office visits, diagnostic laboratory  
                 services, and maintenance medications to manage chronic  
                 diseases. Requires MRMIB, in determining enrollee and  
                 dependent cost-sharing for CCHFP, to consider whether  
                 those costs would deter an enrollee from obtaining  
                 appropriate and timely care; and,

               iii)   Premiums and cost sharing as follows:

                  (1)       For individuals with family income less than  
                    or equal to 150% FPL, no premiums or out-of-pocket  
                    costs; and,


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                  (2)       For individuals with family income 151% to  
                    250% FPL, premiums not to exceed 5% of family income,  
                    net of applicable deductions;

             b)   Coverage for individuals authorized in this bill to  
               receive health coverage through Cal-CHIPP, but who are not  
               eligible for subsidized coverage in CCHFP, is subject to  
               the following:

               i)     Residents of the state are eligible if they satisfy  
                 at least one of the following criteria:

                  (1)       Be an employee or a dependent of an employee  
                    of an employer who elected to pay into the California  
                    Health Trust Fund (Fund);

                  (2)       Be an employee paying the full costs of  
                    coverage through an employee tax savings plan where  
                    the employer designates Cal-CHIPP in the cafeteria  
                    plan; or,

                  (3)       Be eligible for a state health coverage tax  
                    credit established in this bill;
                ii)    Benefits offered will include at least three  
                 different coverage options, a plan that offers the same  
                 benefits as the minimum coverage for the individual  
                 market, a mid-range coverage product (category three of  
                 the five coverage choice categories to be developed by  
                 DMHC and CDI for all individual coverage products sold in  
                 the state) and a high-range comprehensive benefit plan  
                 (category five).  Authorizes MRMIB to offer dental and  
                 vision coverage if specified conditions are met; and,
                iii)   Premiums will equal the full cost of the coverage  
                 choice made by the enrollee. Enrollees eligible for the  
                 state health care tax credit may reduce their premiums by  
                 the value of the credit.  Authorizes MRMIB to provide an  
                 additional contribution equal to 20% of the premium of a  
                 minimum benefit product to employees with incomes at or  
                 above 250% FPL whose employers pay into the Fund. 

          5)Makes available a tax credit from January 1, 2010 through  
            December 31, 2014, for individuals and families with incomes  


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            of 250-400% FPL ($43,000-69,000 for a family of three) who  
            receive coverage under Cal-CHIPP, if their share of costs for  
            health coverage for a mid-range coverage product (category  
            three) exceeds 5.5% of their family income.  Limits the tax  
            credit to a specified maximum amount for a family based on  
            family size and age which phases down as income increases.   
            States legislative intent to make this tax credit advanceable.  
             States legislative intent to authorize a tax credit for  
            individuals between the ages of 50 and 64 whose income exceeds  
            400% FPL and which would be limited by and contingent on an  
            appropriation of not more than $50 annually.  

          6)Permits MRMIB to take specified actions to provide  
            prescription drug coverage to Cal-CHIPP enrollees, including  
            using direct procurement (bulk purchasing).  If MRMIB develops  
            a bulk purchasing program, authorizes MRMIB to allow  
            participation in that arrangement by other state and local  
            government entities or a board or plan administrator providing  
            health care pursuant to collective bargaining with a labor  
            organization.  Specifies that health care service plans  
            licensed by DMHC must meet all related Knox-Keene requirements  
            when participating in prescription drug arrangements developed  
            by MRMIB.

          7)Requires MRMIB to collect and disseminate, as appropriate,  
            information on the quality and cost-effectiveness of Cal-CHIPP  
            participating carriers.

          8)Establishes standards to protect the confidentiality of  
            Cal-CHIPP applicants, enrollees and household members.

          9)Specifies the definitions and administrative duties and  
            responsibilities applicable to Cal-CHIPP and the  
            administration of Cal-CHIPP by MRMIB.

          10)Authorizes carriers participating in Cal-CHIPP to contract  
            with agents or brokers to provide marketing and servicing of  
            health benefits offered through the program with commissions  
            set and paid by the participating carrier and the agent or  

          11)Makes it an unfair labor practice for an employer to refer an  
            employee or dependent of an employee to Cal-CHIPP for the  
            purpose of separating that employee or dependent from group  


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            health coverage provided by the employer, or to change the  
            employer-employee share-of-cost ratio or make modifications of  
            coverage so that employees or their dependents enroll in  

          12)Requires MRMIB to work with state and local agencies, health  
            care providers, health plans, employers, consumer groups,  
            community organizations, and other appropriate stakeholders to  
            establish point-of-service methods to facilitate enrollment of  
            individuals who do not have or maintain minimum creditable  
            coverage.  Requires MRMIB to establish and maintain an active  
            statewide education and awareness program to inform all  
            California residents of their health insurance obligation and  
            their options for meeting the individual mandate.

          13)Authorizes, but does not require school districts, to provide  
            an information sheet to specified students regarding health  
            insurance requirements and information about available  
            government programs.  Requires MRMIB and the California  
            Department of Education to develop a standardized information  
            sheet for this purpose, as specified.
          14)Requires MRMIB to pay the cost of health care coverage on  
            behalf of a previously uninsured individual who has been  
            without health care coverage for a period of at least 62 days,  
            and is enrolled in minimum creditable coverage by MRMIB, and  
            to establish methods to recoup from the individual the cost of  
            that coverage.

            Health Insurance Reforms

           1)Requires carriers, on and after July 1, 2010, to spend no less  
            than 85% of after-tax revenues on health care benefits, as  
            specified, excluding administrative costs, establishing a  
            minimum "medical loss ratio (MLR)."  Requires DMHC and CDI to  
            jointly adopt regulations to implement this requirement.   
            Authorizes a carrier to average costs across all products in  
            calculating MLR, including the products of affiliated  
            companies, regardless of whether or not they are under the  
            jurisdiction of DMHC or CDI.  Authorizes DMHC and CDI to  
            exempt from the MLR requirement new products in the first two  
            years, providing the products are substantially different from  
            the carrier's previously existing products.


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          2)Requires all carriers who sell individual private coverage to  
            offer, accept and renew such coverage to all individual  
            applicants in the carrier's service area (guaranteed issue and  
            renewal).  Makes guaranteed issue contingent on implementation  
            of the individual mandate requirement.  Exempts from the  
            guaranteed issue requirement carriers that do not have  
            sufficient health care delivery resources, as specified,  
            providing that specified conditions are met, and health plans  
            that do not offer coverage to individuals in the commercial  
            market and whose membership and revenues are primarily from  
            persons eligible for Medicare or Medi-Cal, as specified.

          3)Notwithstanding #2) above, authorizes carriers to reject an  
            application for coverage from persons meeting the following  

             a)   New residents in the state for the first six months,  
               unless they are eligible for coverage under the federal  
               Health Insurance Portability and Accountability Act (HIPAA)  
               or can demonstrate at least two years of prior coverage;  

             b)   Individuals exempt from the individual mandate pursuant  
               to this bill either because of their income level, unless  
               they can demonstrate prior creditable coverage, or because  
               they have received an affordability or hardship exemption  
               from MRMIB.

          4)Prohibits any preexisting condition exclusions, waivered  
            conditions, or enrollment waiting periods once guaranteed  
            issue is implemented, except for those persons who fail to  
            comply with the individual mandate for more than 62 days, for  
            whom a carrier may impose a preexisting condition exclusion of  
            up to 12 months, as specified.  

          5)Prohibits health plans and insurers from rescinding any  
            individual plan contract or policy after it is issued.   
            Prohibits carriers from compensating individuals employed by  
            or contracted with the carrier based on the number of persons  
            for whom coverage is rescinded or the financial savings to the  
            carrier associated with the rescission of coverage.

          6)Establishes rating rules for individual guaranteed issue  
            individual coverage.  Requires individual rates to be  


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            determined based on a standard risk rate for the benefit plan  
            chosen, and authorizes separate rate differentials, for age,  
            geographic location (risk category) and perceived health risk  
            (risk adjustment factor), as determined by carriers, subject  
            to the following:

             a)   Limits geographic rating categories to nine or fewer  
               regions, and includes restrictions on how the regions are  
               designed similar to the geographic rating limits now  
               imposed on small employer guaranteed issue coverage;  

             b)   Limits age rating to 12 categories, compared to seven  
               age ranges currently permitted for small employer coverage.  
                Requires CDI and DMHC to jointly establish a maximum limit  
               on the ratio between rates for individuals in the 60-64  
               years category and those in the 30-35 years category;  

             c)   Limits "risk adjustment factors" (rate increases or  
               discounts for health status or health risk) to no more or  
               no less than 20% of standard average rates for the first  
               two years; no more or no less than 10% for the second two  
               years, and eliminates such risk adjustment factors at the  
               end of four years; 

             d)   Limits changes to risk adjustment factors at the time of  
               renewal to no more than five percentage points;

             e)   Requires premiums to be in effect for no less than 12  
               months and requires guaranteed renewal, with specified  
               limitations and exceptions, such as when an individual  
               moves out of the carrier's service area, fails to pay the  
               premium, engages in fraud or intentional misrepresentation,  
               or engages in fraud or deception in the use of the  
               carrier's services;

             f)   Requires carriers, and their agents or brokers, to make  
               specified disclosures related to individual rights,  
               guaranteed issue and renewal requirements and other  
               specified requirements in law and regulation; and, 

             g)   Requires carriers to make specified filings with DMHC  
               and CDI to demonstrate compliance with these rules.

          7)Authorizes carriers to require individuals to provide health  


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            status or health history information as necessary to apply the  
            risk adjustment factors permitted under #6) above, but  
            requires the carriers to use a standardized form and  
            evaluation process developed by DMHC.  Authorizes carriers to  
            ask individuals to voluntarily provide such information after  
            the effective date of coverage for purposes of providing care  
            management services.

          8)Requires DMHC, in consultation with the Insurance Commissioner  
            (IC) and MRMIB, to develop by March 1, 2009, a standardized  
            form and uniform evaluation to be used by all carriers in  
            determining any risk adjustment factor authorized, as in #6)  
            c) above.

          9)Requires CDI and DMHC to jointly develop and consistently  
            enforce a system to categorize all health plan contracts and  
            health insurance policies into five coverage choice  
            categories, by April 1, 2009, with the lowest level  
            incorporating the mandatory minimum creditable coverage.   
            Requires at least one standard HMO and one standard Preferred  
            Provider Organization (PPO) in each category.  Requires  
            carriers to offer coverage in all five choice categories,  
            including at least one standard product in each choice  
            category, and if the plan or insurer offers a specific type of  
            benefit plan in one category - HMO, PPO, Exclusive Provider  
            Organization (EPO) or point of service - to offer the same  
            type in all five categories.  Requires prices for a carrier's  
            products to reflect a reasonable continuum between the  
            coverage choice categories and prohibits rates from being  
            lower in one category than prices for coverage in a lower  

          10)Establishes the qualifying events that must be met in order  
            for an individual, having purchased coverage in one of the  
            five coverage choice categories, to be able to move up to a  
            higher class of benefits, as specified.  Limits the ability of  
            individuals to move up to higher coverage choice categories,  
            except at the anniversary date of the contract, and at certain  
            qualifying events, (such as the death of the subscriber,  
            marriage, divorce, birth of a child, etc.) and provides that  
            individuals not experiencing a qualifying event can only move  
            up one choice category per year. 

          11)Prohibits on and after March 1, 2009, CDI and DMHC from  


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            approving new products that do not meet the standards for  
            minimum creditable coverage, as the minimum is defined by  
            MRMIB.  Prohibits on and after March 31, 2009, carriers from  
            offering any individual plan or policy that does not meet the  
            minimum, except as provided below.  

          12)Grandfathers and allows carriers to continue coverage  
            indefinitely that does not meet the standards for minimum  
            creditable coverage, for any individual enrolled prior to  
            March 1, 2009, without increasing benefits to minimum levels,  
            but prohibits those products from being offered to new  
            enrollment.  Deems such existing coverage as meeting the  
            individual mandate requirement.  Requires rates for  
            grandfathered products to comply with the rating rules under  
            #6) above.

          13)Requires, no later than two years following implementation of  
            guaranteed issue, the Director of DMHC and the IC to make a  
            finding related to the relative risk profile in individual  
            coverage, compared to the risk profile in Cal-CHIPPP, and to  
            establish a reinsurance program, as specified, if specific  
            risk profile differentials are identified.  Provides that  
            reinsurance to compensate for adverse risk selection of more  
            than 5% and up to 10% will be paid through a broad-based  
            assessment on carriers, and risk selection differentials of  
            more than 10% will be paid by funds in the Fund established by  
            this bill, subject to appropriation. 

          14)Requires the Office of Patient Advocate (OPA) to develop and  
            maintain on its Internet Web site OSHDP reports and data to  
            assist the public in choosing health plans, hospitals, medical  
            groups, and other providers and requires carriers to make  
            available detailed specified information regarding coverage  
            and benefits for purposes of inclusion on the OPA Web site.

          15)Effective July 1, 2009, requires all carriers to offer to  
            include and communicate the availability of a "Healthy Action  
            Incentives and Reward Program" (Healthy Action plan), as  
            defined, for group and individual health coverage.  Requires  
            Healthy Action plans to provide, where appropriate, health  
            risk appraisals and enrollee access to an appropriate health  
            care provider, as necessary, to review and address the results  
            of the health risk appraisal, and to, in addition, where  
            appropriate, include follow-up through a Web-based tool or a  


                                                                  AB 1 X1
                                                                  Page  15

            nurse hotline either in combination with a referral to a  
            provider or separately.  Requires Healthy Action plans to  
            include any of a series of specified incentives or rewards for  
            enrollees and insured persons to "become more engaged in their  
            health care and to make appropriate choices that support good  
            health."  Permits employers, and requires California Public  
            Employees' Retirement System (CalPERS) and Medi-Cal, to  
            provide Healthy Action plans.  Requires any carrier that  
            offers Healthy Action plan incentives in the form of premium  
            reductions to make the premium reduction standard and uniform  
            for all groups and subscribers and to offer the incentives  
            only after the enrollee or subscriber successfully completes  
            the specified program or practice.

            Technology and Cost Containment

           1)Requires every prescriber and pharmacy in California to have  
            the ability to transmit and receive prescriptions by  
            electronic data transmission (e-prescribing) no later than  
            January 1, 2012, and requires specified state licensing boards  
            and committees that oversee the health professions to enforce  
            compliance with this provision. 

          2)Requires every e-prescribing system to comply with national  
            standards for data exchange, state and federal confidentiality  
            and data security requirements, and state record retention and  
            reporting requirements, and to allow real-time verification of  
            eligibility and covered benefits.

          3)Requires prescribers using e-prescribing to offer to patients  
            a written receipt of the information that is transmitted to  
            the pharmacy and specifies the content of the receipt.

          4)Requires carriers to make the most current prescription drug  
            formularies available electronically to prescribers and  

          5)Requires DHCS to identify best practices related to  
            e-prescribing standards and make recommendations for statewide  
            adoption of e-prescribing by January 1, 2009.  

          6)Requires DHCS to develop a Medi-Cal e-prescribing pilot  
            program, contingent on FFP.  Permits DHCS to provide  
            e-prescribing technology, including equipment and software, to  


                                                                  AB 1 X1
                                                                  Page  16

            participating Medi-Cal prescribers.

          7)Requires the CalPERS Board, by January 1, 2010, to provide or  
            arrange for electronic personal health records (PHR) for  
            CalPERS members.  Requires a PHR to provide access to  
            real-time, patient-specific information about covered benefits  
            and cost sharing, and permits CalPERS to make the PHRs  
            Internet-based.  Permits, but does not require a PHR to  
            incorporate other data, such as laboratory results,  
            prescription histories, claims histories, and personal health  
            information authorized or provided by the enrollee, at the  
            enrollee's option.  Requires the PHR to adhere to national  
            standards for interoperability, privacy, and data exchange, or  
            be certified by a nationally recognized certification body,  
            and to comply with applicable state and federal  
            confidentiality and data security requirements.  Permits MRMIB  
            to provide PHRs for HFP enrollees.

          8)Authorizes carriers to provide electronic notice to enrollees  
            and insureds in order to comply with specific statutory or  
            regulatory notice requirements that are otherwise required to  
            be provided by mail, if the notice complies with specified  
            requirements, including that the plan or insurer obtains  
            authorization from the enrollee or insured.

          9)Expands the authority of medical assistants (MAs) to  
            administer medications and perform other tasks, pursuant to  
            written instructions by a physician, when the physician is not  
            onsite, under specified conditions.

          10)Establishes a nine-member task force, including six voting  
            members (three from the Medical Board of California and three  
            from the Board of Registered Nursing), and three non-voting ex  
            officio members (the Director of the Department of Consumer  
            Affairs (DCA) and two academics) to develop a recommended  
            scope of practice for nurse practitioners (NPs) by June 30,  
            2009, and requires DCA to promulgate regulations that adopt  
            the task force recommendations by July 1, 2010.  Sunsets this  
            task force on July 1, 2011.

          11)Requires the Office of Statewide Health Planning and  
            Development (OSHPD) to collect clinical data and publish  
            risk-adjusted outcome reports for percutaneous coronary  
            interventions, including utilization of angioplasty and  


                                                                  AB 1 X1
                                                                  Page  17

            stents.  Requires OSHPD to report by hospital annually and by  
            physician biannually, and to consult with the existing  
            clinical advisory panel. 

          12)Establishes a new California Health Care Cost and Quality  
            Transparency Committee (Transparency Committee) for the  
            purpose of statewide data collection, common measurement and  
            analysis of health care costs, quality and outcomes.  States  
            that the Transparency Committee will consist of 16 specified  
            members, 10 appointed by the Governor and six by the  
            Legislature.  Requires the Transparency Committee to meet at  
            least once every two months, and to develop, update, and  
            submit to the Secretary of the California Health and Human  
            Services Committee (CHHSA) a detailed Health Care Cost and  
            Quality Transparency Plan, with specified strategies for  
            public reporting of safety, quality and cost efficiency  
            information on the health care system, to issue annual reports  
            on the plan's implementation and to conduct a full review  
            every three years.  Requires the Transparency Committee to  
            appoint at least one technical committee and one clinical  
            panel, as specified.  Once the plan is recommended to the  
            Secretary, the Secretary will have 60 days to accept the plan  
            or return it to the Transparency Committee with recommended  
            modifications.  Requires the Secretary, once he or she has  
            accepted the Plan, to implement it, as specified.  Requires  
            OSHPD to identify a fee schedule for users of collected data  
            and other financial resources to implement this provision.   
            Requires the Secretary to report to the Legislature every six  
            years after implementation, commencing January 1, 2014, on  
            whether the Transparency Committee should be continued and  
            whether changes to the Transparency Committee should be made.

          13)Adds to the current responsibilities of the OPA, which  
            currently maintains a Web site that provides public  
            information on health plan and medical group performance and  
            quality, the requirement to provide to the public reports and  
            data obtained by OSHPD, to assist the public in selecting  
            health plans, hospitals, medical groups, nursing homes, and  
            other providers.

          14)Establishes the Comprehensive Diabetes Services Program  
            (CDSP), administered by DHCS, for specified adult Medi-Cal  
            beneficiaries who have been diagnosed with prediabetes or  
            diabetes.  Requires DHCS to define CDSP services, and provides  


                                                                  AB 1 X1
                                                                  Page  18

            that they may include: diabetes screening; visits by certified  
            practitioners; culturally and linguistically appropriate  
            life-style coaching and self-management training; and, regular  
            and timely laboratory evaluations by the primary care  
            physician.  Requires DHCS to seek FFP for CDSP and to contract  
            with an independent organization for evaluation, including  
            estimating the associated short- and long-term savings.   
            Requires DHCS to develop and implement "incentives" for  
            participating beneficiaries and "financial incentives" for  
            participating Medi-Cal providers, as specified.  Makes  
            implementation contingent on an annual appropriation of state  

          15)Requires the Department of Public Health (DPH) to maintain  
            the California Diabetes Program, including but not limited to  
            providing information on diabetes prevention and management to  
            the public, including health care providers, and technical  
            assistance to the Medi-Cal CDSP established in #14) above, as  

          16)Requires DPH to identify the 10 largest providers of health  
            care coverage in the state, based on their enrollment, and to  
            publicize the smoking cessation benefits they provide.   
            Requires DPH to evaluate the effects of providing the  
            information, based on changes in beneficiary awareness and use  
            of smoking cessation benefits, other smoking related  
            indicators, such as smoking rates, and changes in coverage for  
            smoking cessation.  To the extent funds are appropriated,  
            requires DPH to increase efforts to reduce smoking through  
            increased capacity of the California Smokers' Helpline and  
            increased awareness of cessation benefits available through  
            public and private plans.

          17)Requires DPH to use scientifically appropriate methods to  
            track and evaluate obesity-related health indicators,  
            including physical activity, diet, and community environment,  
            as specified, to evaluate and compare obesity projects and  
            programs, and to study the health and economic consequences of  
            obesity.  Requires DPH to develop an Obesity Prevention  
            Campaign, to be known as "California Living," and to link the  
            campaign with community-level efforts, assist schools to  
            promote fresh foods and whole grains, and provide technical  
            assistance to help employers integrate wellness programs and  
            policies into employee benefit plans and worksites. 


                                                                  AB 1 X1
                                                                  Page  19

          18)Establishes the Community Makeover Grant program to be  
            administered by DPH, for the purpose of awarding grants to  
            local health departments (LHDs) as local lead agencies in the  
            promotion of active living and healthy eating.  Requires  
            grants to LHDs be based proportionally on population and to be  
            expended for specified purposes, including, among other  
            things, creation of a community infrastructure; coordination  
            among local partners, including schools; and, for local grants  
            to promote physical activity for children, improve access to  
            healthy foods, and better utilize community recreation  
            facilities.  Authorizes DPH to provide training, consultation  
            and technical assistance to local programs or to contract for  
            those services to another state, federal or auxiliary  

          19)Requires the CHHSA to consult with CalPERS, and affected  
            health provider groups, to develop performance benchmarks for  
            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.

            Provider Reimbursement
          1)Increases, commencing July 1, 2010, and to the extent that  
            federal funds are received, and state funds are appropriated,  
            increases Medi-Cal reimbursement rates for physicians,  
            podiatrists, and non-physician medical practitioners to an  
            unspecified percent of similar rates in the federal Medicare  
            program, not to exceed 100% of federal Medicare rates.   
            Requires DHCS to establish rates for services, which Medicare  
            does not cover, that are DHCS' best estimate of a rate that is  
            the same unspecified percent of the rate Medicare would pay  
            for such services if covered.  Establishes criteria for the  
            reimbursement of physician services in Medi-Cal subject to the  
            rate increase, including the location of the service, the  
                                                                                claims process and the records providers must maintain.
           2)Authorizes DHCS to set aside up to 25% of the Medi-Cal rate  
            increases required in #1) above for payments linked to  
            performance measures and performance improvement, and requires  


                                                                  AB 1 X1
                                                                  Page  20

            DHCS to consult with stakeholders in the development of those  
            measures.  Specifies performance measures that DHCS may  
            consider and requires DHCS to integrate the Medi-Cal measures  
            with the pay-for-performance programs required in all state  
            programs pursuant to this bill.

          3)Includes within the provisions of the Act, the Medi-Cal  
            Hospital Rate Stabilization Act which establishes a new  
            methodology for hospital payment rates in Med-Cal and  
            increases the rates of reimbursement for participating  
            hospitals as follows:
            a)   Private and District Hospitals  .  Establishes and  
               increases Medi-Cal rates for private and non-designated  
               public hospitals (primarily district hospitals) so that  
               reimbursement levels are set at the same annual aggregate  
               level that the federal Medicare program would pay for  
               inpatient and outpatient services (otherwise known in  
               federal law as the "upper payment limit" (UPL)) and  
               requires that rates be adjusted annually commensurate with  
               Medicare rate increases.  The methodology established by  
               this bill essentially establishes the base rate of total  
               funds currently received by the affected hospitals from  
               Medi-Cal, including supplemental payments, with some  
               exclusions, and adjusts the base rates by the percentage  
               necessary to bring total aggregate Medi-Cal payments to  
               hospitals up to the UPL.  Private and district hospitals  
               would also continue to receive supplemental federal  
               reimbursement, known as disproportionate share payments,  
               consistent with existing law;
            b)   Public Hospitals  .  Increases inpatient and outpatient  
               rates for designated public hospitals, defined as the  
               University of California and county public hospitals, so  
               that payment rates, paid on either a per diem or a per  
               discharge basis, are based on the hospital's allowable  
               costs, as specified, established for the 2009-10 fiscal  
               year and adjusted by the medical component of the federal  
               Consumer Price Index.  Designated public hospitals would  
               also continue to receive supplemental federal  
               reimbursement, known as disproportionate share payments,  
               consistent with existing law, as well as funds from the  
               existing Safety Net Care Pool (SNCP), pursuant to  
               California's Medicaid Hospital Financing Waiver, but SNCP  


                                                                  AB 1 X1
                                                                  Page  21

               funds would be provided at a reduced level, capped annually  
               at $100 million statewide for all eligible hospitals.   
               Establishes the system for cost reporting, reconciliation  
               and establishment of rates for designated public hospitals.  
                Makes rate increases paid to designated public hospitals  
               contingent on the payment by counties of a contribution  
               toward the costs cost of care through a county share of  
               cost; and, 

             c)   Medi-Cal Managed Care (MCMC) Plans  .  Requires DHCS to  
               increase Medi-Cal reimbursement rates for MCMC plans by the  
               actuarial equivalent of the increased rates paid to  
               hospitals and providers.  Requires the MCMC plans to expend  
               100% of the related rate increases received in the form of  
               increased provider rates to the classes of providers and  
               the hospitals receiving the rate increases established by  
               this bill, subject to the limits of federal law.  

          4)Repeals the hospital rate setting system established in this  
            bill within five years, effective January 1, 2016, unless a  
            subsequent statute extends the provisions.  Establishes  
            specific contingencies for adjustments of the rates because of  
            errors or data problems.  Requires DHCS to consult with the  
            hospital community, as defined, and other stakeholders, in the  
            development of any and all methodologies for the reimbursement  
            rates established under #3) above, requires DHCS to seek  
            federal approval for the methodology and makes payments  
            contingent on the receipt of federal funds.  
           5)Makes inoperative all other provider rates as of July 1, 2010,  
            including rates for hospital services negotiated by the  
            California Medical Assistance Commission.
           6)Makes the new hospital rates and rate methodologies  
            inoperative in the event of a final judicial determination or  
            a determination by the federal Centers for Medicare and  
            Medicaid Services that any element of the Medi-Cal Hospital  
            Rate Stabilization Act cannot be implemented.
           7)Requires DHCS, to the extent feasible, to develop a case mix  
            adjustment factor to apply to inpatient hospital rates to take  
            into account the relative costs in treating different types of  
            cases, as specified.


                                                                 AB 1 X1
                                                                  Page  22

           8)Prohibits a hospital, in the event a patient has coverage for  
            emergency health care services and post stabilizing care, and  
            the hospital does not have a contract with the patient's  
            carrier, from billing the patient for emergency and post  
            stabilizing care, except for applicable copayments and cost  
            shares.  Provides that the noncontracting hospital and the  
            health plan or health insurer retain the right to pursue all  
            current legal remedies [regarding payment or reimbursement].

          9)Requires DHCS to make periodic payments to county LCOs for  
            low-income childless adults on a per member per month basis,  
            as determined by DHCS consistent with the methodology for  
            other MCMC plans.  Requires DHCS to offer contract provisions  
            to LCOs that limit the financial risk of the LCO and provides  
            for the state to share in profits or losses above or below  
            specified risk thresholds DHCS establishes.  Requires  
            providers of out-of-network emergency services for LCO  
            enrollees to accept payments as payment in full if the rates  
            comply with federal laws related payments for those services.

          10)Makes Medi-Cal MC plans subject solely to regulation by DHCS,  
            and not subject to regulation by DMHC or another state agency,  
            in the areas of advertising and marketing, member materials,  
            evidences of coverage, disclosure forms, and product design.   
            Requires DHCS and DMHC to develop a joint filing and review  
            process for medical quality surveys.

          11)Increases state funding for health care benefits for In-Home  
            Supportive Services (IHSS) workers by 25 cents per hour (from  
            60 cents to 85 cents per hour).  Increases state funding by  
            two additional 25 cent increments contingent on estimated  
            General Fund revenues exceeding by at least 5% the prior  
            year's revenue.

           1)States legislative intent to finance the Act with  
            contributions from employers, individuals, federal, state and  
            local governments and health care providers.  [The author has  
            indicated his intention to pursue a ballot initiative  
            containing the financing elements.]

          2)Financing elements in the intent language include:  increased  
            federal Medicaid and State Children's Health Insurance Program  


                                                                  AB 1 X1
                                                                  Page  23

            (SCHIP) funds; unspecified revenue from counties based on  
            enrollment in coverage of low-income adults now served by  
            counties; a 4% fee on hospital patient revenues; employer  
            fees; premium contributions from currently offering employers  
            when employees choose to enroll in public programs; premium  
            payments by individuals in both publicly subsidized and  
            private coverage; funds obtained through increasing the tax on  
            each pack of cigarettes; and, other state savings from  
            increased numbers of covered persons.

          3)Makes HFP coverage expansions contingent on funds appropriated  
            in the state Budget or another statute.

          4)Requires DHCS to seek any necessary federal Medicaid approval  
            to obtain federal funds for coverage expansions to specified  
            low-income populations, Medi-Cal provider rate increases, and  
            other related provisions of the Act, and grants broad  
            authority and flexibility to DHCS to utilize Medicaid state  
            plan amendments, waivers, or any combination, and to make  
            modifications to the proposed requirements, standards and  
            methodologies in the Act, as necessary to obtain federal  
            approval, except that the DHCS may not make otherwise eligible  
            persons ineligible for Medi-Cal or HFP, increase cost-sharing  
            amounts above those proposed, reduce benefits proposed in the  
            Act, or otherwise "disadvantage applicants or recipients in a  
            way not contemplated" in the Act.

          5)Establishes the Fund in the State Treasury.  Specifies how  
            MRMIB may spend monies in the Fund. 

          6)Requires all employers with one or more full-time equivalent  
            employees to establish Section 125 accounts to allow employees  
            to pay premiums for health coverage with pre-tax dollars.


          1)Makes the implementation of this Act contingent on a finding  
            by the Director of Finance that the financial resources  
            necessary to implement the Act are available.  States that  
            this Act shall become operative upon the date that the  
            Director of Finance files a finding with the Secretary of  
            State (SOS) that all of the following circumstances exist:


                                                                  AB 1 X1
                                                                  Page  24

             a)   Sufficient state resources will exist in the Fund;

             b)   Required federal approvals for program changes have been  
               obtained or can reasonably be expected to be obtained by  
               the time those programs are implemented; and,

             c)   Required federal resources will be available based on  
               the anticipated schedule of review and approval of  
               applicable state plan amendments and waivers.

          2)Requires the Director of Finance to transmit the findings  
            described in #1) above to the Legislature at least 90 days  
            prior to their filing with the SOS.

          3)States that, if any operative date specified in the Act is  
            later than the date of the filing of the finding described in  
            #1) above, that later date will apply.  States that #1) above  
            does not prevent the appropriation of funds to support  
            activities necessary to prepare for the implementation of the  
            Act prior to the filing with the SOS.

          Requires the Secretary of CHHSA to complete, or contract for, a  
          detailed, comprehensive evaluation of the reforms included in  
          the Act, as specified, and to submit the first assessment to the  
          Legislature on or before March 1, 2012, and every two years  
          thereafter.  Establishes the components of the evaluation.

          Declares this Act to be a comprehensive health care reform  
          effort, that no provisions are severable, and that if any  
          provision of the Act is held invalid, the entire Act will become  

           EXISTING LAW  :


                                                                  AB 1 X1
                                                                  Page  25

          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 Major Risk Medical Insurance Program (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.

           FISCAL EFFECT  :  According to the Assembly Appropriations  

           1)Costs  . The total annual cost of this coverage expansion is an  
            estimated $14.4 billion (all funds) when enrollment reaches  
            maximum levels.  Major costs contained in this bill include: 


                                                                  AB 1 X1
                                                                  Page  26

             a)   Annual Cal-CHIPP costs of $6.4 billion to support  
               low-income workers and employees of employers who choose to  
               pay fees into the Fund;

             b)   Annual costs of $2.4 billion to expand Medi-Cal and HFP  
               to children up to 300% FPL and adults up to 250% FPL;

             c)   Annual costs of $4 billion for Medi-Cal FFS, managed  
               care, hospital, and physician rate increases;

             d)   Annual reduced tax revenues of $730 million due to a  
               reduction of state personal income tax collections  
               associated with employee use of Section 125 plans and tax  
               credits provided to specified low- and moderate-income  
               families; and,

             e)   Annual administrative and programmatic costs of  
               approximately $900 million to various state agencies to  
               support programmatic and administrative aspects of the  
               requirements of the bill.  
          1)Financing  . According to the author, the financing required to  
            support the reform package will be presented to voters in a  
            statewide ballot in November of 2008.  The author indicates  
            proposed financing will be designed to be revenue neutral with  
            respect to the state General Fund.  Several major financing  
            provisions are expressed in legislative intent in the bill and  

             a)   A requirement for employers to pay a health care fee  
               equal to 1% to 6.5% of annual Social Security wages in the  
               prior calendar year depending on size of firm payroll.   
               This spending requirement will be reduced to the extent  
               employers make health expenditures for employees and their  
               dependents during the same time period.  This requirement  
               will generate an estimated $2.6 billion in annual  
               contributions to Cal-CHIPP;

             b)   An increase in the tobacco excise tax of up to $2 per  
               pack.  This increase will generate an estimated $1.5  
               billion in special fund revenues;

             c)   A requirement for hospitals to pay an annual fee based  
               on net patient revenues.  This requirement will generate an  


                                                                  AB 1 X1
                                                                  Page  27

               estimated $2.3 billion in annual special fund revenues that  
               will be paid to support Medi-Cal rate increases to  
               hospitals and other health care providers; and,

             d)   A requirement that specified local health care funds are  
               shifted from counties to the state to support the expansion  
               of health coverage for individuals serviced by the county  
               safety net.  This requirement will generate $1 billion in  
               annual revenues.

           1)Financing Components Not Subject to Voter Approval  .  There are  
            several major sources of financing that will not appear on the  
            ballot, but are generated by requirements and provisions of  
            the bill These include: 

             a)   Annual employee contributions to Cal-CHIPP of $2.1  

             b)   Annual FFP of $4.6 billion to support public program  
               expansion of Medi-Cal and HFP and to increase provider  
               Medi-Cal rates; and,

             c)   Annual Medi-Cal and Healthy Family savings of $500  
               million from a net movement of individuals from these  
               public programs to other forms of coverage. 
          COMMENTS  :  This bill is the result of more than 14 months of  
          legislative deliberations, public hearings, and stakeholder  
          meetings.  In December 2006, legislative leaders in both houses  
          introduced legislation to reform California's health care system  
          and to reduce the number of uninsured Californians, AB 8 (Nunez)  
          and SB 48 (Perata).  In January 2007, Governor Arnold  
          Schwarzenegger announced his own plan to enact comprehensive  
          health care reform.  In February 2007, Senator Sheila Kuehl  
          reintroduced SB 840, a bill previously vetoed by the Governor,  
          to establish a single-payer style health reform program in  
          California.  SB 840 passed the Senate but was held in the  
          Assembly Appropriations Committee.  Senate and Assembly  
          Republicans subsequently announced alternative health care  
          reform strategies and introduced multiple bills in both houses  
          to enact their proposals.  AB 8 and SB 48 moved through the  
          legislative process, and were publicly heard and voted on in  
          multiple legislative hearings.  The two bills were merged into  
          AB 8 in July 2007, and AB 8 was passed by the full Senate and  


                                                                  AB 1 X1
                                                                  Page  28

          Assembly on September 7, 2007 and sent to the Governor.  On  
          September 11, 2007, the Governor signaled his intention to veto  
          AB 8, and called an extraordinary special session of the  
          Legislature to consider and act upon legislation to  
          comprehensively reform California's health care system.  On  
          October 9, 2007, the Governor released the first public draft of  
          legislative language to implement his plan, which included  
          several additions and modifications from the plan outline  
          released in January of this year.  These provisions were  
          ultimately amended into 
          AB 2 X1 with no author.  The Governor also declared his  
          intention to pursue a statewide ballot initiative to accompany  
          the legislation, primarily to seek voter approval for the  
          financing elements of his reform plan.  On October 12, 2007, the  
          Governor vetoed AB 8.  This bill (AB 1 X1) was introduced and  
          amended in Special Session and heard in public hearings by both  
          the Assembly Health Committee and the Assembly Appropriations  

          According to the author, this bill enacts major health care  
          reform in California and responds specifically to the Governor's  
          veto message on AB 8, particularly to the Governor's concerns  
          regarding universality, an individual mandate and diversity of  
          funding.  The author states that this bill makes significant  
          progress towards the goal of universal health insurance, by  
          instituting a series of broad based reforms of the insurance  
          market, expanding and simplifying public health insurance  
          programs, improving health care quality and increasing cost  
          effectiveness and value, emphasizing prevention and wellness,  
          preserving choice, building and improving upon the existing  
          public and private health systems, and creating a system of  
          shared responsibility with employers, employees and government.   
          The author emphasizes that this bill would expand health  
          coverage to more than 70% of Californians 5.1 million uninsured,  
          including all low-income children regardless of immigration  

          According to the California HealthCare Foundation (CHCF), 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  


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          employment based coverage, 16% get coverage through Medicaid,  
          and 8.7% purchase coverage through the individual insurance  
          market.  CHCF also reports that employer based coverage in  
          California from 1987-2005 declined from 64.6% to 54.7%, with  
          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%.   
          CHCF 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 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  

          According to CHCF, health care spending in California reached  
          $169 billion in 2004, or 11% of the state's economy.  Current  
          projections indicate that health care spending could exceed 20%  
          of the gross domestic product by 2025.  According to a recent  
          survey by the Kaiser Family Foundation, one in four Americans  
          say their family had a problem paying for health care sometime  
          during the past year, and 28% say someone in their family has  
          delayed health care in the past year due to lack of insurance.
          CHCF reports that approximately 40% of uninsured workers are  
          employed by small businesses, and the number of uninsured  
          workers in mid-size firms continues to rise.  From 1999 to 2005,  
          premiums for employer-provided health insurance in California  
          increased by 112%, while the general cost-of-living increased by  
          29%.  Average premium increases in California in 2006 were 8.7%,  
          more than twice the California inflation rate of 4.2%, and  
          higher than the national rate of increase of 7.7%.  At the same  
          time, over one-third of employers offering any kind of health  
          insurance coverage, and nearly half of employers with less than  
          200 employees, experienced premium increases of over 10%.  

          This bill makes changes to the market rules affecting individual  
          health insurance and revises eligibility for MRMIP for medically  


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          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.  In today's individual market, health insurers  
          typically deny coverage or charge higher rates to individuals  
          with pre-existing serious health conditions, such as cancer or  
          heart disease.  In addition, individuals with any previous  
          health service use, even for conditions that no longer exist or  
          with chronic conditions that are successfully being treated  
          (such as mental illness, diabetes, or asthma), are also  
          generally denied coverage.  A September 2006 Commonwealth Fund  
          national survey found that 89% of working-age adults who sought  
          coverage in the individual market during the past three years  
          ended up never buying a plan.  A majority (58%) found it very  
          difficult or impossible to find affordable coverage.  One-fifth  
          (21%) of those who sought to buy coverage were turned down, were  
          charged a higher price because of a pre-existing condition, or  
          had a health problem excluded from coverage.  This bill requires  
          all carriers to guaranteed issue and eliminates their ability to  
          deny coverage for most persons, except for those who are not  
          subject to the individual mandate.  In addition, this bill  
          establishes strict rating limits related to premium rate ups for  
          health status and eventually phases out the ability of carriers  
          to charge more for persons because of their health status or  
          claims experience.  

          An August 2007 Field Poll found that 69% of California voters  
          are dissatisfied with the state's health care system.  Moreover,  
          the percentage of voters who say they are "very dissatisfied"  
          with the system has more than doubled since December 2006 when  
          Field Poll last surveyed voters on health care reform.  The poll  
          found that 50% of Democratic voters are "very dissatisfied" with  
          the health care system, along with 34% of Republicans and 37% of  

          The author has stated his intent to pursue financing elements of  
          this plan in a ballot initiative for November 2008 that would  
          include an employer fee, hospital tax, county share of cost, and  
          tobacco tax, which would be subject to voter approval.  More  
          specifically, the author indicates that the ballot initiative  
          would include:

          1)A fee on employers equal to a specified percentage of payroll  


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            payable to the Fund, which may be reduced by the amount the  
            employer expends on health care for workers.  Employers would  
            pay on a sliding scale basis based on their payroll.   
            Employers with payrolls of up to $250,000 would pay a fee  
            equivalent to 1% of Social Security wages (capped at $97,500  
            in 2007), employers with payrolls between $250,000 and $1  
            million would pay a fee equal to 4% of Social Security wages,  
            employers with payrolls between $1 million and $15 million  
            would pay a fee equal to 6% of Social Security wages, and  
            employers with payrolls above $15 million would pay a fee  
            equal to 6.5% of Social Security wages;

          2)A tobacco tax increase, likely between $1.50 and $2.00 for a  
            package of cigarettes, and an equivalent increase on other  
            tobacco products.  The current state excise tax on tobacco  
            products is 87 cents: with 10 cents going to the General Fund;  
            2 cents to breast cancer research and early detection  
            services; 25 cents to health education, research, health care,  
            and environmental programs through voter-approved Proposition  
            99; and, 50 cents for early childhood education through  
            voter-approved Proposition 10;

          3)A hospital fee of 4% of aggregate net patient revenue of  
            hospitals.  This is estimated to generate $2.3 billion in  
            revenue, which would be matched by federal funds and returned  
            to hospitals through Medi-Cal rate increases provided through  
            FFS Medi-Cal payments to hospitals and MCMC plan payments to  
            hospitals totaling $3.4 billion.  Hospitals would receive an  
            additional $1.2 billion (total funds) that would pay for the  
            hospital portion of public program expansions to low-income  
            individuals; and,

          4)County payments to the state representing a county's share of  
            cost for previously uninsured persons that were the county's  
            responsibility but under this bill will be enrolled in public  

          The Service Employees International Union State Council (SEIU)  
          supports this bill, arguing that it will make health care more  
          secure for everyone by controlling costs, improving quality and  
          providing health coverage to almost four million uninsured  
          Californians.  SEIU states that, unlike today, where insurers  
          and HMOs can and do deny coverage for any reason, under this  
          bill they would be required to sell health insurance to anyone  


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          who wants to buy it, regardless of pre-existing conditions.   
          SEIU also argues that this bill covers three quarters of the  
          uninsured, sets a standard for health benefits similar to the  
          minimum wage, gives small businesses not just a break but an  
          affordable alternative for coverage, subsidizes coverage for  
          low- and moderate-income families, and provides cost containment  
          through bulk purchasing of prescription drugs, a public insurer,  
          public disclosure of cost and quality data regarding doctors,  
          hospitals and insurers and places limits on insurer profits and  
          overhead.  In addition, SEIU argues that this bill moves  
          California from dead last in Medi-Cal funding for doctors and  
          hospitals, by increasing Medi-Cal rates for doctors, hospitals,  
          and HMOs that serve Medi-Cal beneficiaries.  SEIU notes that it  
          has previously opposed individual mandate proposals that  
          required Californians to have insurance whether they could  
          afford it or not.  However, this bill provides subsidies for  
          those below 400% FPL ($40,840 for an individual, $82,600 for a  
          family of four) and affordability and hardship exemptions for  
          those with higher incomes.

          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, except that they would  
          like to see the coverage for children take effect in January  
          2009 rather than July 2009.  

          Support and opposition received for a  prior version  of this bill  
          include the following: 

          The California Public Interest Research Group (CalPIRG) writes  
          in support of this bill, arguing that this bill gives California  
          consumers effective tools to get a fair price for health  
          insurance, gives all consumers access to health insurance,  
          regardless of whether they are sick or healthy, increases the  
          number of Californians who have useful health insurance, and  
          contains the rising cost of health care.  At the same time,  
          CalPIRG urges certain changes to this bill related to  
          eligibility and affordability.  The American Cancer Society  
          (ACS) writes that the ideal system would establish health  
          insurance that is affordable, available, adequate, and  
          administratively simple and that this bill most effectively  
          meets ACS' criteria.  The Children's Health Initiative of  
          Greater Los Angeles supports this bill because it represents a  


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          unique opportunity to provide health coverage to thousands of  
          uninsured children and their families, but also would like to  
          see an interim financing solution for the existing local  
          children's health initiatives.

          Those with support-if amended positions on this bill, including  
          the American Federation of State, County and Municipal  
          Employees, Health Access, Consumers Union, the California  
          Medical Association, the California Hospital Association, the  
          Congress of California Seniors, Planned Parenthood Affiliates of  
          California, the California Academy of Family Physicians, and the  
          Latino Issues Forum, raise various concerns, including defining  
          the minimum set of benefits, making coverage affordable,  
          assuring long-term stability and predictability in financing  
          hospitals, avoiding relaxed licensing standards and expanded  
          provider staffing ratios, adequacy of Medi-Cal reimbursement  
          rates, and specifying the language of the proposed initiative.

          Opponents of this bill include the California Nurses Association  
          (CNA), the League of Women Voters (LWV), the Foundation for  
          Taxpayer and Consumer Rights (FTCR), the California School  
          Employees Association (CSEA), Blue Cross, Health Net, the  
          Association of California Life and Health Insurance Companies,  
          the Chamber of Commerce, the California Manufacturers and  
          Technology Association, and the National Federation of  
          Independent Businesses.  CNA, LWV, CSEA and FTCR argue that the  
          health insurance provided will not be universal, affordable, or  
          high quality, and that bare bones coverage plans will be forced  
          on Californians and employers who will have absolutely no  
          control over the price.  Insurers who are opposed argue that  
          guaranteed issue and modified community rating will destabilize  
          the insurance market, placing those currently insured in the  
          individual market at risk of significant premium increases, and  
          that the individual mandate will not work because of the lack of  
          enforcement and the large number of people who will be exempt  
          from the mandate.  Business groups who are opposed argue that  
          the proposal would violate the Employee Retirement Income  
          Security Act (ERISA) by imposing a tax on employers, a tax that  
          employers, especially small employers cannot afford.    

          Those with oppose-unless-amended positions include Kaiser  
          Permanente (Kaiser), the California Association of Health  
          Underwriters (CAHU), the Pharmaceutical Research and  
          Manufacturers of America (PhRMA), the California State  


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          Conference of the NAACP, and the Union of American Physicians  
          and Dentists.  Kaiser argues that guaranteed issue without a  
          full individual mandate will not work, Cal-CHIPP needs more  
          specificity, and best clinical practice standards should not be  
          subject to bureaucratic rulemaking.  CAHU opposes this bill  
          unless it is amended to do the following: eliminate Cal-CHIPP or  
          assure that it is voluntary; define minimum coverage; enforce  
          the individual mandate; limit the individual mandate exemption  
          to the cost of coverage; remove the 85% MLR; and enroll those  
          uninsured Californians who are currently eligible for Medi-Cal  
          and HFP before expanding these programs.  PhRMA opposes this  
          bill unless it is amended to remove MRMIB's prescription drug  
          bulk purchasing and aggregate negotiating authority, arguing it  
          will limit access to needed drugs.  The NAACP also argues this  
          bill will limit access to needed drugs.

          Analysis Prepared by  :    John Gilman and Deborah Kelch / AHEAX1  
          / (916) 319-2097 

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