BILL ANALYSIS
AB 1 X1
Page 1
(Without Reference to File)
ASSEMBLY THIRD READING
AB 1 X1 (Nunez)
As Amended December 17, 2007
Majority vote
HEALTH 12-5 APPROPRIATIONS 12-5
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|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 |
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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
Medi-Cal.
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
available.
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
report.
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
following:
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
premium;
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
broker.
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
Cal-CHIPP.
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
criteria:
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;
and,
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
category.
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
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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
pharmacies.
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
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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
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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
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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
funds.
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
specified.
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.
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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
organization.
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
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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
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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.
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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.
Financing
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
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(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.
Implementation
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
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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.
Evaluation
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.
Other
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
inoperative.
EXISTING LAW :
AB 1 X1
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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
Committee:
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
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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
include:
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
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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
billion;
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
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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
Committee.
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
status.
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
AB 1 X1
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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
Asians.
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
AB 1 X1
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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
Independents.
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
AB 1 X1
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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
coverage.
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
FN: 0003756