BILL ANALYSIS                                                                                                                                                                                                    






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                         Senator Sheila J. Kuehl, Chair


          BILL NO:       AB 1X  1                                     
          A
          AUTHOR:        Nunez                                        
          B
          AMENDED:       January 16, 2008                             
          X
          HEARING DATE:  January 28, 2008                             
          1
          FISCAL:        Appropriations                              
                                                                      
          1
          CONSULTANT:  Hansel/Dunstan/Patterson/Moreno/Park          

                                        
                                  FOR VOTE ONLY
                                         

                                     SUBJECT
                                         
                            Health insurance reform


                                     SUMMARY  

          Requires all California residents to carry a minimum level  
          of health insurance coverage for themselves as well as for  
          their dependents.  Establishes a state purchasing pool  
          through which qualifying individuals would be allowed to  
          obtain subsidized or unsubsidized health care coverage.   
          Expands eligibility for the Medi-Cal and Healthy Families  
          programs, and increases Medi-Cal provider rates for  
          hospitals and physician services.  Requires health plans  
          and insurers to offer and renew, on a guaranteed basis,  
          individual coverage in five designated coverage categories,  
          regardless of the age, health status, or claims experience  
          of applicants, and establishes new modified community  
          rating rules for the pricing of individual coverage.   
          Contains provisions intended to reduce or offset a portion  



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          of the costs of health coverage as well as several new  
          programs and initiatives related to prevention and  
          promotion of health and wellness.  Expresses intent that  
          financing for the bill's provisions shall come from a  
          variety of sources, including federal funds related to  
          Medi-Cal and Healthy Families program expansions, fees from  
          employers, revenues from counties, fees paid by acute care  
          hospitals, premium payments from individuals, and funds  
          from a new tobacco tax.  Some of these financing measures  
          would be contained in a proposed ballot initiative.  Makes  
          implementation of its provisions contingent upon a finding  
          by the Director of Finance that sufficient state resources  
          are available to implement the provisions.  































                                                           
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                               TABLE OF CONTENTS

                                                                      
          Page
          CHANGES IN EXISTING  
          LAW......................................................... 
          ....................                                   3

            I.  Mandate to maintain minimum creditable  
          coverage........................................... 3
                A.  Requirement to enroll in and maintain minimum  
          creditable coverage.......... 3
                B.   
          Exemptions.................................................. 
          ................................................... 4
                C.   
          Enforcement................................................. 
          .................................................. 4
                
          II.  Purchasing pool, coverage expansions, and proposed tax  
          credits........................ 8
               A.  Medi-Cal and Healthy Families eligibility  
          changes........................................ 8
               B.  Enrollment streamlining  
          provisions.................................................. 
          ............... 9
               C.  State purchasing  
          pool........................................................ 
          ............................. 11
               D.   What people would receive, by income  
          level...............................................16
               E.  Clinic funding  
          provisions.................................................. 
          ............................. 19
               F.  Ryan White premium and cost sharing  
          provisions.........................................20
               
          III. Provisions affecting coverage outside of the  
          purchasing pool...........................20
               A.  Employer provided  
          coverage.................................................... 


                                                           
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          .....................                                  20
               B.  Individual insurance  
          market...................................................... 
          .....................                                  21
               C.   
          Uninsured................................................... 
          ....................................................21

          IV. Health insurance market and regulatory  
          reform.................................................21
               A.  Guaranteed issue  
          requirements................................................ 
          ......................                                 21
               B.  Coverage tiers and rating  
          restrictions................................................ 
          ............                                      22
               C.  Reinsurance  
          provisions.................................................. 
          ................................23
               D.  Medical loss  
          ratios...................................................... 
          ................................... 23
               E.  Other health insurance regulation  
          provisions................................................   
          24

           V. Financing  
          provisions.................................................. 
          .......................................    26
               A.  Employer health care  
          contributions............................................... 
          ...............                                        27
               B.  Other employer  
          revenues.................................................... 
          ..........................   29
               C.  Redirection of county  
          funds....................................................... 
          ...................                                    30
               D.  Tobacco  
          tax......................................................... 
          ..........................................  31
               E.  Federal  


                                                           
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          funds....................................................... 
          ..........................................  32
               F.  Hospital  
          assessments................................................. 
          .................................... 33
               G.  Individual  
          contributions............................................... 
          ................................. 34
               H.  Contingencies in event of funding  
          shortfall..................................................  
                                                       34

          VI. Scope of practice  
          change...................................................... 
          ............................    35
              A. Supervision of medical  
          assistants.................................................. 
          ................                                       35

          VII.  Data transparency and pay for performance  
          provisions................................  36
               A.  Data collection and  
          transparency................................................ 
          ..................                                     36
               B.  Pay for performance  
          provisions.................................................. 
          ..................                                     37

          VIII.  Other  
          provisions.................................................. 
          ..........................................37
               A.  Hospital and physician  
          rates....................................................... 
          ..................                                     37
               B.  IHSS worker  
          provisions.................................................. 
          ..............................38
               C.  Electronic  
          prescribing................................................. 
          ..................................39
               D.  Electronic health  
          records..................................................... 


                                                           
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          ........................ 40
               E.  Healthy Actions and incentive  
          rewards..................................................... 
          ...                                          41
               F.  Diabetes, obesity and smoking  
          provisions.................................................. 
          ..                                           42
               G.  Community makeover  
          grants...................................................... 
          ................                                       43
               H.  Prohibition on hospital balance  
          billing..................................................... 
          ...                                          44
               I.   Public  
          insurer..................................................... 
          ..........................................44
               J.   Workforce  
          development................................................. 
          ............................. 45
               K.   
          Evaluation.................................................. 
          .................................................45
               L.   
          Non-severability............................................ 
          ..............................................46

          BACKGROUND AND  
          DISCUSSION.................................................. 
          ........ 48
               A.  Author's  
          Purpose..................................................... 
          .....................................48
               B.   
          Background.................................................. 
          .................................................48
               C.  Proposal Incorporates Elements of "Massachusetts  
          Plan" (Act)................... 49
               D.  Related  
          legislation................................................. 
          ........................................52
               E.  Arguments in  
          support..................................................... 


                                                           
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          ...............................55
               F.  Arguments in  
          opposition.................................................. 
          ............................. 61
                    

                             CHANGES TO EXISTING LAW  

          I.  Mandate to maintain minimum creditable coverage -  
          sections of bill: 11, 12, 54

          A.  Requirement to enroll in and maintain minimum  
          creditable coverage
          Existing law does not require residents to maintain a  
          minimum level of health insurance coverage. This bill  
          would, beginning on July 1, 2010, require all residents and  
          their dependents to enroll in and maintain minimum  
          creditable coverage.  The bill would direct  the Managed  
          Risk Medical Insurance Board (MRMIB) to establish, by  
          regulation, the definition of minimum creditable coverage  
          on or before March 1, 2009, as well as standards for  
          minimum creditable coverage that, at a minimum, apply to  
          the individual insurance market. The bill would require  
          minimum creditable coverage to include physician, hospital,  
          and preventive services as well as any coverage  
          requirements under existing law.  In determining the  
          standards for minimum creditable coverage, including the  
          scope of services, deductibles, co-payment requirements,  
          and coverage of services outside of the deductible, the  
          MRMIB would be required to consider the degree to which  
          minimum creditable coverage protects residents from  
          catastrophic medical costs, the extent to which any cost  
          sharing requirements would deter appropriate and timely  
          care, including whether preventive services should be  
          required to be provided without any deductible, the  
          affordability of coverage, the importance of periodic  
          health evaluations and preventive care, and other factors.
          
          Compliance with the mandate would not be required until  
          several provisions of the bill were implemented, including  
          establishment by regulation of a definition by MRMIB of  
          minimum creditable coverage and a process for ensuring that  


                                                           
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          residents obtain minimum coverage, and implementation of  
          the bill's coverage expansions, purchasing pool provisions,  
          and tax credit provisions.  In addition, implementation of  
          the requirement to enroll in and maintain minimum  
          creditable coverage, as well as all other provisions of the  
          bill, would be contingent on a finding being made by the  
          Director of Finance that sufficient financial resources  
          necessary to implement the bill's provisions are, or will  
          be, available, as specified.
          
          B.  Exemptions
          The bill would exempt individuals with income at or below  
          250 percent of the federal poverty level (FPL) from the  
          requirement to maintain minimum creditable coverage if  
          premium costs exceed five percent of that individual's  
          family income.  Residents who have been in California for  
          six months or less and who are, on that basis, not eligible  
          for guaranteed issue of health insurance coverage under  
          other provisions of the bill would also be exempted.

          Additionally, by January 1, 2010, MRMIB would be required  
          to adopt regulations to establish and review affordability  
          and hardship standards, by which individuals could apply  
          for a temporary or continuing exemption from the mandate.   
          In establishing the affordability and hardship standards,  
          MRMIB would be required to consider a number of factors,  
          including the total out-of-pocket costs for minimum  
          coverage, the cost-sharing levels as a percentage of an  
          individual's income, as specified, the impact of premium  
          costs on the ability of an individual to afford other basic  
          life necessities, and the effect of the exemption criteria  
          on premium levels for all health care coverage enrollees.   
          MRMIB would be required to report to the Legislature and  
          the Department of Managed Health Care (DMHC) on the number  
          of individuals who are exempted from the coverage mandate.
          
          C.  Enforcement  
          This bill would require MRMIB to establish by regulation  
          methods to ensure that uninsured individuals obtain the  
          minimum health care coverage. This bill would require MRMIB  
          to pay the cost of health care coverage on behalf of an  
          individual who has been uninsured for at least 62 days, and  


                                                           
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          to establish methods by which funds advanced for coverage  
          may be recouped by the state from individuals for whom  
          coverage is purchased.

          This bill would authorize MRMIB to enter into an agreement  
          with the Franchise Tax Board (FTB) to use its civil  
          authority and procedures, in compliance with notice and  
          other due process requirements imposed by law, to collect  
          funds owed to the state that were advanced on behalf of  
          uninsured individuals.  According to the Senate Revenue and  
          Taxation Committee, all existing practices utilized by the  
          FTB to collect funds owed to the state could be used to  
          recoup funds advanced to pay for coverage for uninsured  
          individuals, including the ability to assess interest and  
          monetary penalties, offset taxpayer refunds, garnish wages,  
          file judgments, and impose tax liens.

          The bill would require that, to the extent possible,  
          existing reporting processes employed throughout the state  
          to report on the employment and tax status of individuals  
          and other existing mechanisms are to be used to implement  
          the enforcement of the individual mandate.  Relevant state  
          agencies would be required to cooperate with MRMIB and  
          other responsible entities in undertaking these activities  
          and implementing these provisions of this bill.  Before  
          entering into any agreements with other agencies or  
          departments, MRMIB would be required to report to the  
          Legislature on the methods it would use to identify  
          individuals with and without coverage, how individuals  
          would be notified of the availability of coverage and  
          timeframe to enroll, actions to enroll the uninsured, and  
          actions to be taken if individuals do not enroll.   
          Implementation of these enforcement provisions would also  
          be contingent on a budget appropriation.

          Plans and insurers could also impose a preexisting  
          condition exclusion period of up to 12 months on coverage  
          they offer to any person who fails to comply with the  
          mandate for more than 62 days.  Additionally, upon their  
          enrollment into coverage, they could only enroll in the  
          lowest coverage choice category.



                                                           
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          MRMIB would also be required to establish and maintain a  
          statewide education and awareness program to inform  
          California residents of their obligation under the  
          individual mandate, identify and implement methods and  
          strategies to establish multiple entry points and  
          opportunities for enrollment in public or private coverage,  
          and establish methods by which individuals who have not  
          obtained health care coverage are informed of the methods  
          available to obtain affordable coverage through public  
          programs, the statewide purchasing pool established under  
          this bill to be administered by MRMIB, and commercial  
          coverage.  Additionally, the bill would permit school  
          districts, on or after January 1, 2010, to provide an  
          information sheet regarding health insurance requirements  
          to specified parents and guardians based on a template that  
          is developed by the California Department of Education, the  
          Department of Health Care Services (DHCS), and MRMIB.  
          
          Comments and issues

          1.  Mandate not contingent on enactment of proposed  
          initiative.  While implementation of the requirement to  
          enroll in and maintain minimum creditable coverage is  
          contingent on a finding being made by the Director of  
          Finance that financial resources necessary to implement the  
          bill's provisions are available, it is not contingent on  
          enactment of the proposed financing initiative per se  
          (discussed below).  A recommended amendment would be to  
          make it clear in the bill that implementation of the  
          mandate and its enforcement is contingent on passage of the  
          initiative.

          Suggested language:
          On page 19 of the bill, lines 18 - 39, amend as follows:

          8899.50.  (a) On and after July 1, 2010, every California  
          resident shall be enrolled in and maintain at least minimum  
          creditable coverage, as defined by the Managed Risk Medical  
          Insurance Board pursuant to Section 12739.50 of the  
          Insurance Code, unless otherwise
          exempt pursuant to subdivision (d).
             (b) On and after July 1, 2010, a subscriber shall obtain  


                                                           
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          and maintain at least minimum creditable coverage, as  
          defined by the Managed Risk Medical Insurance Board, for  
          any person who qualifies as his or her dependent. For  
          purposes of this chapter, the term
          "dependent" means the spouse, registered domestic partner,  
          minor child of the subscriber, or a child 18 years of age  
          and over who is dependent on the subscriber, as defined by  
          the Managed Risk Medical Insurance Board.
             (c) Notwithstanding subdivisions (a) and (b), compliance  
          with those subdivisions shall not be required until  
          Sections 12739.50, 12739.51, and 12699.211.01 of the  
          Insurance Code, Section 17052.30 of the Revenue and  
          Taxation Code, and Sections 14005.301 and 14005.305 of the  
          Welfare and Institutions Code are implemented, and only so  
          long as these sections remain operative, and the Managed  
          Risk Medical Insurance Board has defined by regulation the  
          minimum creditable coverage that will satisfy the  
          requirements of this section.
             (d) Compliance with subdivisions (a) and (b) shall not  
          be required if an initiative measure containing funding for  
          the Act is not approved by the voters.  
          
          2.  Scope of minimum creditable coverage unclear.  Under  
          the language of the bill, it is unclear whether benefits  
          such as prescription drug coverage and maternity coverage  
          would be included in the definition of minimum creditable  
          coverage, or that preventive services would be required to  
          be provided outside of any deductible that otherwise  
          applies, or that preventive services would include all  
          preventive services, including detection and management of  
          chronic conditions.  It is also not clear what maximum  
          level of deductibles and other cost sharing would be  
          permitted, or whether the definition would include a limit  
          on out-of-pocket costs.  As drafted, these determinations  
          would be made by MRMIB.

          3.  Application of minimum creditable coverage to group  
          market unclear.  It is not clear how the definition of  
          minimum creditable coverage that MRMIB develops would apply  
          to group coverage or how MRMIB would determine what types  
          of group coverage satisfy the mandate.  The bill states  
          only that the definition of minimum creditable coverage  


                                                           
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          that MRMIB develops is intended to apply, at a minimum, to  
          individual coverage.  Without action by MRMIB to define  
          what types of group coverage satisfy the mandate, most  
          residents would not be able to certify, if asked, that  
          their coverage satisfies the minimum requirements.  If  
          MRMIB were to deem categories of coverage as meeting the  
          minimum creditable coverage standard, such as all group  
          coverage or multiple employer welfare arrangements, it  
          could have the effect of undermining the standard for large  
          numbers of residents.

          4.  Deductibles and other cost sharing not counted in  
               affordability exemption.  The affordability exemption in  
          the bill for residents with incomes below 250 percent of  
          the FPL does not take into consideration the costs of  
          deductibles or other cost sharing.  For many residents,  
          even many with incomes below 250 percent of the FPL, the  
          premium costs associated with minimum coverage, if it is  
          high deductible coverage, could meet the requirements of  
          costing below five percent of their incomes, which would  
          make those residents subject to the mandate, even where  
          total cost of coverage, including the high deductibles,  
          exceed five percent of income.

          5.  Process to determine affordability exemptions unclear.   
          It is unclear in the bill how MRMIB would determine  
          additional affordability exemptions, beyond those provided  
          in the bill.  It is not clear if MRMIB would grant  
          additional blanket exemptions based on a broader  
          consideration of out-of-pocket costs, or limit the  
          additional exemptions to case- by-case exemptions.   
          Considering and hearing individual requests for hardship  
          exemptions is likely to require significant resources and  
          administrative expenses for MRMIB.  

          6.  Enforcing mandate could be difficult.  Based on the  
          experience in Massachusetts, which has a mandate to  
          maintain minimum coverage similar to that proposed in ABX1  
          1, enforcing this type of mandate could be difficult.   
          According to the information provided by the Commonwealth  
          Connector, which is charged with implementing many  
          provisions of Massachusetts' law, only 50 - 75 percent of  


                                                           
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          the uninsured population has enrolled in some form of  
          coverage as of January, 2008.  It appears, based on early  
          analysis, that compliance among persons who are not  
          eligible for subsidies has been weakest.  The penalties for  
          noncompliance in the first year are relatively weak in  
          Massachusetts (loss of a personal tax exemption equal to  
          $219), and will increase in the second year of  
          implementation to half of the cost of the lowest cost plan  
          providing minimum coverage, which program administrators  
          hope will encourage greater compliance.  The author and  
          administration believe the system proposed by ABX1 1 will  
          produce greater compliance by automatically enrolling  
          persons who are identified as not having minimum coverage  
          into such coverage and recouping the costs from them.
          
          7.  Identifying persons not complying, accurately enrolling  
          them into coverage, and recouping costs could also be  
          difficult.  It is not clear how MRMIB would determine who  
          is not complying with the mandate to maintain minimum  
          creditable coverage.  The author indicates that persons  
          lacking minimum coverage would be identified at the point  
          they seek medical services or request state services, but  
          determining whether they are, in fact, subject to the  
          mandate, would be a difficult undertaking, given that they  
          may be exempt based on income, have sub-minimum coverage  
          that qualifies under the grandfathering provisions for such  
          coverage, or have other coverage that they don't know about  
          at the time they seek services.  Under the bill, MRMIB  
          would describe this process in a report to the Legislature  
          by March, 2010.
          
          8.  Scope of FTB enforcement authority.  According to the  
          Senate Revenue and Taxation Committee staff, the bill would  
          allow FTB to use all of its enforcement powers to recoup  
          amounts owed to the state by persons who are determined not  
          to have minimum coverage and are automatically enrolled in  
          it, including the ability to place liens on property and  
          garnish wages.  The author has indicated that the  
          Legislature can curtail this practice, if necessary, in the  
          future.  Regardless, recouping costs of coverage from  
          people who are identified as lacking minimum coverage and  
          automatically enrolled in it could be very difficult,  


                                                           
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          reducing the amount the state is actually able to recover  
          and adding costs to the plan.

          





          II.  Purchasing pool, coverage expansions, and proposed tax  
          credits - sections of bill: 31.1-31.6, 43, 48-51, 53,  
          55-56, 57.1-57.7, 58.5-59, 61-70, 73, 84
          
          A.  Medi-Cal and Healthy Families eligibility changes
           
          California provides health coverage, for certain  
          individuals and families who qualify, through Medi-Cal and  
          Healthy Families.  Medi-Cal is administered by the DHCS.   
          Healthy Families provides low-cost health, dental, and  
          vision coverage to children who are uninsured and do not  
          qualify for full scope Medi-Cal without a share of cost.   
          Current law extends Medi-Cal eligibility to children in  
          families with incomes up to 100 or 133 percent of the FPL,  
          depending on their age, and working families with incomes  
          up to approximately 100 percent of the FPL under the  
          Medi-Cal program.  Some very low income 19- and  
          20-year-olds may be eligible for Medi-Cal under the  
          medically indigent program.  Parents and other caretaker  
          relatives are eligible for Medi-Cal under several different  
          eligibility categories with varying income ceilings.   
          Generally, persons do not pay premiums to be enrolled in  
          Medi-Cal and may pay nominal co-payments for services.

          MRMIB administers Healthy Families and the majority of  
          funding comes from the federal State Children's Health  
          Insurance Program (SCHIP).  Healthy Families eligibility is  
          for those children in families with income that is greater  
          than the eligibility requirement for Medi-Cal but not more  
          than 250 percent of the FPL.  Healthy Families requires  
          families to pay monthly premiums and larger co-payments.  

          In addition, under federal law, SCHIP and Medicaid programs  


                                                           
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          are limited to U.S. citizens and "qualified aliens," a  
          selected group of legal immigrants.  Another important  
          provision of federal law is the federal Deficit Reduction  
          Act (DRA) which authorizes states to use benchmark plans,  
          which allow the state more flexibility in determining  
          benefits and cost sharing.  

          ABX1 1 would make a number of changes in eligibility for  
          the Medi-Cal and Healthy Families programs:

           Effective July 1, 2009, increase the income limit for  
            Healthy Families eligibility for children in families  
            with incomes between 250 and 300 percent of the FPL  
            ($51,500 for a family of three).  This start date is  
            earlier than all other provisions of the act.  ABX1 1  
            would require these newly eligible families to pay higher  
            monthly premiums for covering their children, $25 per  
            child with a maximum of $75 per family.  The bill would  
            also expand eligibility for the Healthy Families and  
            Medi-Cal programs to children without regard to their  
            immigration status who otherwise meet program  
            requirements.  

           Expand Medi-Cal eligibility for 19- and 20-year-olds and  
            parents and caretakers with incomes up to 250 percent or  
            less of the FPL.  For these expansions to occur, DHCS  
            must obtain federal approval.  Coverage would be from the  
            pool by a Cal-CHIPP Healthy Families plan, which would be  
            a benchmark plan.   

           Make low-income childless adults eligible for public  
            programs.  Those in families with incomes of 100 percent  
            or less of the FPL would receive their benefits through a  
            Medi-Cal plan designed by DHCS that is equivalent to the  
            Cal-CHIPP Healthy Families plan but would face  
            limitations that don't apply to other Medi-Cal  
            recipients, including no use of income disregards, loss  
            of certain procedural rights, and no right to retroactive  
            coverage.  Those with family incomes between 100 and 250  
            percent of the FPL would receive coverage through a  
            Cal-CHIPP Healthy Families benchmark plan through the  
            purchasing pool.  Eligibility would be limited to those  


                                                           
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            who are not offered employer-sponsored health care  
            coverage or are not enrolled in or eligible for health  
            care programs or services which the employer claims for  
            purposes of the pay or play requirement.  The bill would  
            make this expansion contingent on counties providing a  
            share of the costs.  

           Coverage for the childless adult in families with incomes  
            of 100 percent or less of the FPL could be offered  
            through a "local coverage option" (LCO) in those counties  
            with public hospitals and only at the county's choice.   
            The LCO would have to be a Knox-Keene licensed health  
            plan and would be designed to support the county's public  
            hospital.  

            The county could administer the LCO itself or choose the  
            local initiative (LI) or county organized health system  
            (COHS), which are health plans that work with the county  
            to provide Medi-Cal managed care.  The LCO would be  
            required to provide services through the designated  
            public hospital, its affiliated public providers and  
            primary care clinics, and could be required to use other  
            providers to meet Knox-Keene requirements.  The entity  
            which administers the LCO would enter into a contract and  
            negotiate a capitated rate with DHCS and could share risk  
            with the state.  Implementation would be contingent on  
            counties paying a share of cost for expanded Medi-Cal  
            eligibility.  To assist the LCO in gaining viability, it  
            would be the exclusive provider for four years and, after  
            that, it would be the default plan.  DHCS would evaluate  
            the LCOs after three years, and if the LCO is not meeting  
            performance standards, it could lose its exclusivity.

           These expansions would be effective on the later of July  
            1, 2010, or on the date that MRMIB implements the  
            provisions of the Insurance Code regarding, among other  
            provisions, taking steps to ease enrollment into  
            insurance, including the public programs, to help prepare  
            people for the mandate.  For the public program,  
            educational portion, MRMIB is required to consult with  
            DHCS and identify multiple entry points for enrollment in  
            public coverage.  MRMIB is also directed to work with the  


                                                           
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            large number of interested parties, including consumer  
            groups, health plans, government agencies, and other  
            stakeholders.  The bill requires MRMIB to identify point  
            of service enrollment for public and private insurance  
            and for the public programs to maintain best practices  
            for streamlined eligibility.

          B.  Enrollment streamlining provisions  

          ABX1 1 contains provisions to ease enrollment in Medi-Cal  
          and Healthy Families that would take effect July 1, 2010.   
          Under existing law, certain Medi-Cal beneficiaries must  
          undergo a semi-annual reporting process to remain eligible  
          for Medi-Cal.  In lieu of this requirement, the proposal  
          would require a semi-annual address verification report, to  
          verify that enrollees can be contacted and to ensure  
          accurate payments to Medi-Cal managed care plans.  Medi-Cal  
          eligibility would be terminated if letters and phone  
          contact do not yield the necessary information from the  
          beneficiary.  Children, pregnant women, seniors, and  
          persons with disabilities would be exempt from this  
          provision.

          ABX1 1 would streamline the "deprivation test," which  
          requires, as a condition of eligibility, that a child be  
          deprived of parental support, due to the fact that a parent  
          is absent, working, deceased, or unemployed.  The proposal  
          would also eliminate the requirement that working families  
          document their assets as a condition of becoming eligible  
          for Medi-Cal, and also provides that an asset test is not  
          required for eligibility for the program expansions in this  
          proposal.  These changes would facilitate the enrollment of  
          beneficiaries at the place they receive services.

          The proposal also includes language extending to enrollees  
          in programs administered by MRMIB the same confidentiality  
          protections which now apply to the Medi-Cal program.
          
          Comments on coverage expansion and streamlining provisions

          1.  Childless adults who have access to employer coverage  
          excluded. The bill excludes childless adults with incomes  


                                                           
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          below 250 percent of FPL, who have access to employer  
          coverage of any kind for which the employer makes a  
          contribution, from eligibility under the coverage expansion  
          for childless adults.  This could exclude employees whose  
          employers make even nominal contributions towards their  
          coverage from eligibility.
          
          2.  Children's health advocates are concerned that given  
          the timetable in the bill, many children will lose their  
          current coverage.  These children are enrolled in  
          children's health initiatives (CHIs), local programs that  
          provide coverage to children currently ineligible under  
          state law.  CHIs have insured 84,000 children through a  
          patchwork of funding.  Advocates argue the local CHIs  
          cannot be sustained in the time before ABX1 1 is  
          implemented and that $50 million is needed in FY 08-09 to  
          prevent these children from losing their coverage.  The  
          funding initiative submitted to the Attorney General to  
          fund ABX1 1 would allow MRMIB, on or before January 1, 2009  
          to be advanced an amount no greater than $25 million, which  
          in turn would be granted to the CHIs.

          3.  Proposed budget cuts affecting eligibility  
          determinations conflict with bill.  The Governor's budget  
          proposes to reimpose quarterly status reporting, under  
          which Medi-Cal beneficiaries would be required to report  
          quarterly on their eligibility status or lose their  
          eligibility.  This is expected to both increase  
          administrative requirements and reduce enrollment,  
          resulting in $200 million in combined state and federal  
          savings in the budget year.  In contrast, ABX1 1 contains  
          provisions that ease administrative requirements to make  
          enrolling in, and staying enrolled in, Medi-Cal easier.  If  
          the proposed cuts were implemented, additional funds would  
          be needed to restore them in order to implement the  
          provisions of ABX1 1, or these provisions of the bill would  
          need to be revised.
          
          4.  The Governor's proposed budget would likely increase  
          the costs for counties.  The previously discussed increase  
          in administrative requirements and the accompanying  
          reduction in Medi-Cal enrollment, if enacted, are likely to  


                                                           
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          lead to more of the medically indigent seeking care from  
          counties.  In addition, the proposed budget includes  
          reductions in Medi-Cal's dental program which could  
          increase the county's costs for providing services to the  
          medically indigent.  The Medi-Cal provider rate cuts may  
          lead to more health care providers exiting the program,  
          which could increase demand for services at safety net  
          providers, including the public hospitals.  It is not clear  
          that potential impacts to counties have been taken into  
          account in determining the amount of funds counties must  
          provide for the state under the proposed initiative.
          
          C.  State purchasing pool

          Establishment and operation of purchasing pool.  The bill  
          would establish the California Cooperative Health Insurance  
          Program (Cal-CHIPP), a statewide purchasing pool  
          administered by MRMIB, which would offer, by July 1, 2010,  
          subsidized and unsubsidized coverage to eligible  
          individuals and their dependents.  MRMIB would have broad  
          authority to administer Cal-CHIPP, including authority to  
          determine eligibility and enrollment and disenrollment  
          criteria, premium schedules, participating plan  
          requirements and rates, benefit designs, and co-payments.   

          Eligibility to enroll in Cal-CHIPP would be extended to  
          residents who meet one of the following criteria:  are  
          employees or dependents of an employer who has elected to  
          pay his or her full contribution into the Fund, are  
          eligible for one of the coverage expansions pertaining to  
          parent and caretaker relatives or childless adults, are  
          employees or dependents who pay the full cost of health  
          coverage through a Section 125 plan in which the employer  
          designates Cal-CHIPP in the cafeteria plan, or who have  
          incomes between 250 and 400 percent of the FPL and are not  
          eligible to receive coverage through an employer or  
          eligible for other health care programs or services an  
          employer pays for that qualify as health care expenditures  
          for purposes of the pay or play election.

          The pool would offer both subsidized and unsubsidized plans  
          to enrollees.  Individuals age 19 or older who meet federal  


                                                           
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          citizenship or legal residency requirements, are ineligible  
          for standard Medi-Cal, but are eligible under one of the  
          coverage expansions described previously, and have an  
          annual income greater than 100 percent of the FPL, but less  
          than 250 percent of the FPL, would be eligible to enroll in  
          a Cal-CHIPP Healthy Families Plan.  These plans would be  
          required to meet Knox-Keene Act requirements and also  
          include prescription drug benefits, which at a minimum  
          would include coverage for generic drugs, and brand name  
          drugs when a generic is unavailable or the patient requires  
          brand name drugs, and include enrollee cost-sharing levels  
          that promote prevention and health maintenance, including  
          physician visits, diagnostic laboratory services, and  
          medications to manage chronic diseases.   Enrollees who are  
          childless adults would additionally be required not to have  
          access to employer-sponsored health coverage or be eligible  
          for health care programs or services an employer pays for  
          that count as health care expenditures for purposes of the  
          pay or play election.
            
          Individuals eligible for a Cal-CHIPP plan with annual  
          family incomes equal to or below 150 percent of the FPL  
          ($15,300 for an individual) would not pay any premiums or  
          out-of-pocket costs for the coverage.  Premium costs for  
          individuals with family incomes between 150 percent and 250  
          percent of the FPL could not exceed five percent of family  
          income, net of allowable income deductions.  Deductibles  
          and co-payments are not included in this calculus.

          When determining deductibles and co-payments for subsidized  
          coverage for Cal-CHIPP plans, MRMIB would be required to  
          determine whether related costs would deter an enrollee  
          from obtaining appropriate affordable and timely care, and  
          to consider the impact of these costs on an enrollee's  
          ability to afford health care services.

          For individuals who are not eligible for a Cal-CHIPP plan,  
          i.e. with incomes greater than 250 percent of the FPL,  
          MRMIB would be required to offer at least one product that  
          meets minimum creditable coverage, and one product each  
          from coverage choice category three and five.  MRMIB would  
          be required to establish premiums for unsubsidized coverage  


                                                           
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          at a level commensurate with the full premium cost of the  
          coverage chosen by the employee.  For qualified  
          individuals, these premium costs could be partially or  
          wholly offset by the value of a proposed health care tax  
          credit, which is discussed below.  Additionally, MRMIB  
          would be required to provide a contribution equal to 20  
          percent of the premium of a tier 1 product in the pool  
          towards the cost of coverage for employees with incomes  
          above 250 percent of the FPL whose employers have elected  
          to pay into the Fund, if the employee is not enrolled in or  
          eligible for any coverage or services for which the  
          employer is making health care contributions for purposes  
          of the pay or play requirement (described under Financing  
          section below).  
          
          Proposed tax credit.  The bill would establish an income  
          tax credit, beginning January 1, 2010, and expiring January  
          1, 2015, that would equal the amount of qualified health  
          coverage premiums (not including co-payments and  
          deductibles) paid by pool enrollees in excess of 5.5  
          percent of their adjusted gross income (AGI). The credit  
          could not exceed specified maximums based on age and family  
          size.  To be eligible, an enrollee would have to have a  
          California AGI between 250 percent and 400 percent of the  
          FPL, and not have access to employer coverage through their  
          own employer or their spouse's employer, or be enrolled in  
          or eligible for any coverage or services that the employer  
          pays for and counts as health expenditures for purposes of  
          the pay or play requirement.  However, a taxpayer could  
          still gain a credit for premiums paid to cover dependents  
          if the employer plan excludes dependents.  The credit would  
          be gradually phased out as the taxpayer's AGI increases  
          from 300 to 400 percent of the federal poverty level (FPL).  
           The amount of credit in excess of a taxpayer's personal  
          income tax liability would be refundable if the Legislature  
          appropriates funds for it.  

          For purposes of the tax credit, "qualified health care plan  
          premium costs" would be defined as amounts equal to 75  
          percent of the lesser of the total premiums paid by the  
          enrollee or the premium for a plan from coverage choice  
          category 3.  The bill would further direct that a coverage  


                                                           
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          choice category 3 plan be one that covers prescription  
          drugs, physician visits, and preventive services, including  
          services to manage chronic conditions, outside of any  
          deductible.
    
          The bill would state the intent of the Legislature to  
          authorize this credit to be advanceable, meaning it is  
          available to be used prior to the taxpayer filing their  
          income tax return.  If advances are authorized, MRMIB would  
          apply such advances to pay health coverage premiums on  
          behalf of an individual, spouse, and dependents.

          The bill authorizes MRMIB to provide a report to FTB that  
          would include taxpayer and health care premium information  
          to help FTB administer the credit.  The bill would also  
          authorize FTB to provide tax return information to MRMIB to  
          administer advancing of the credit, if authorized by the  
          Legislature.

          According to information provided by the author, the credit  
          is estimated to cost the state approximately $400 million  
          annually.

          In addition, the bill would state the intent of the  
          Legislature to authorize a health care coverage credit for  
          taxpayers who are 50 to 64 years of age who do not qualify  
          for the credit described above.  This credit would be  
          allowed only to the extent money is available and subject  
          to an appropriation.  The fiscal analysis assumes $50  
          million annually would be budgeted for this credit.

          Other provisions.  MRMIB would be authorized to adjust  
          premiums, subject to specified public notice requirements.   
          The bill would authorize MRMIB to make unsubsidized dental  
          and vision coverage available through the pool, as  
          specified, for optional enrollment by all pool enrollees.   
          Additionally, MRMIB would be authorized to allow Cal-CHIPP  
          enrollees who become ineligible for Cal-CHIPP to continue  
          coverage through Cal-CHIPP for, at most, 18 months from the  
          date of ineligibility, if the enrollee pays the entire cost  
          of the coverage.   



                                                           
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          To provide prescription drug coverage for Cal-CHIPP  
          enrollees, the bill would authorize MRMIB to contract  
          directly with health care service plans or health insurers  
          for prescription drug coverage as a component of a health  
          care service plan contract or a health insurance policy,  
          and/or procure products directly through the state's  
          existing prescription drug bulk purchasing program.   
          Specified public entities, and boards or administrators  
          providing health coverage pursuant to specified labor  
          agreements would be able to participate in prescription  
          drug purchasing arrangements made by MRMIB through the  
          state's prescription drug bulk purchasing program.

          The bill would provide a process by which individuals could  
          appeal decisions made by MRMIB regarding Cal-CHIPP  
          eligibility, enrollment, and coverage effective dates.   
          MRMIB would be required to consult with DHCS to seek  
          federal financial support for subsidized coverage, and to  
          apply federal citizenship, immigration and identity  
          documentation standards, to the extent required, to obtain  
          federal financial support.     

          The bill would require employers to establish cafeteria  
          plans to allow employees to pay health care coverage  
          premiums on a pre-tax basis, or be subject to specified  
          penalties, and would require MRMIB to establish procedures  
          by which employee premium dollars withheld under a  
          cafeteria plan would be credited against the employee's  
          premium obligations.  The bill would authorize employers to  
          pay all, or a portion of, premiums for Cal-CHIPP coverage  
          for their employees, and would also define as an unfair  
          labor practice by employers, the referral of employees and  
          their dependents to the pool in order to separate them from  
          employer-sponsored group coverage, or any modification of  
          employee cost-sharing or coverage levels with the intent to  
          shift them to the pool.  The bill would also state the  
          intent of the Legislature that health care expenditures  
          made by employers, as part of the pay or play provisions,  
          not discriminate on the basis of wage level or have the  
          effect of making lower income employees eligible for  
          coverage through the purchasing pool. 



                                                           
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          Comments and issues

          1.  Affordability protections limited to premium costs.   
          Affordability protections for persons with incomes between  
          150 percent of the FPL and 250 percent of the FPL who  
          qualify for the benchmark plans are limited to premium  
          costs only.  While additional cost sharing requirements for  
          this population are assumed to be modest, with these  
          additional costs, these persons would be required to spend  
          more than five percent of their incomes for health  
          coverage.  Some of these persons would be subject to the  
          mandate to have minimum coverage; for them, benchmark plans  
          available through the pool would be their best means of  
          satisfying the mandate.

          2.  Benefits and cost sharing levels for plans in pool  
          depend on revenues.  While the bill provides general  
          direction to MRMIB on how to design the benefit packages  
          and cost sharing levels for pool enrollees, the specific  
          design of the plans will depend greatly on the availability  
          of revenues.  The fiscal analysis assumes that the average  
          cost of a Cal-CHIPP plan, which is supposed to cover  
          Knox-Keene Act required benefits plus prescription drugs  
          and have cost sharing that promotes prevention and health  
          maintenance, would be $250 per person per month.  A  
          preliminary actuarial analysis that examined benefit  
          packages and cost sharing levels that could be provided for  
          that cost, suggests that meeting that cost target would  
          likely require some restrictions on benefits, for example  
          providing brand name drugs only where a generic is not  
          available or is therapeutically required, or reductions in  
          payments to providers below commercial rates, or both.   
          Similarly, the fiscal analysis assumes the maximum tax  
          credits will allow enrollees to purchase a benchmark PPO  
          plan, similar to those in the individual market, without  
          spending more than 5.5 percent of their income, after  
          adjustment for tax savings from using a Section 125 plan.   
          Such a benchmark plan would likely entail individual  
          deductibles on the order of $2,500 per individual or $5,000  
          per family, with preventive services available outside of  
          the deductible, out of pocket maximums of up to $7,500 per  
          individual or $15,000 per family, coinsurance requirements  


                                                           
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          for use of most services and a separate deductible for  
          brand name drugs.  In determining the maximum tax credit  
          levels, the analysis assumed MRMIB would obtain prices for  
          this type of plan, based on age level, equal to those  
          currently offered in the individual market for a popular  
          Blue Cross PPO plan, for the Sacramento region.  For most  
          of the enrollees MRMIB would be procuring coverage for,  
          these rates would be high, since Northern California is a  
          higher cost region in general than Southern California; at  
          the same time, the assumed rates reflect the exclusion of  
          the persons with pre-existing conditions, which MRMIB would  
          not apply in accepting enrollees, which, all other things  
          being equal, make the assumed rates lower than the rates  
          MRMIB would be able to get.  If these estimates are too  
          low, it would mean that pool enrollees who receive the tax  
          credit would be required to spend more than 5.5 percent of  
          their income for premiums, and additional amounts for  
          deductibles and cost sharing, or else choose plans with  
          even higher deductibles and out-of-pocket limits in order  
          to hold their premiums to that percentage of their income.

          3.  Potential exclusion of part-time and low wage workers  
          from pool and tax credit eligibility.  As drafted,  
          significant numbers of part-time and lower wage employees  
          who receive limited health care benefits from employers,  
          either directly or through a spouse, could be excluded from  
          eligibility for the purchasing pool and the tax credit, but  
          would still be subject to the mandate.  Some persons, as  
          well as their dependents, could be eligible for coverage  
          under other parts of the bill, for example the Medi-Cal  
          eligibility expansions, but many would need to purchase  
          individual coverage in order to satisfy the mandate.  An  
          employer could choose to drop the coverage that applies to  
          these employees, making them eligible for the purchasing  
          pool and credit; however, sections of the bill make it  
          clear that doing so constitutes a Labor Code violation.

          4.  Premium subsidies for higher income employees limited.   
          Premium subsidies for employees with incomes above 400  
          percent of the FPL are more limited than those under AB 8  
          (Nunez), as passed by the Legislature and vetoed by the  
          Governor.  AB 8 would have made any employee of an employer  


                                                           
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          who elects to pay an assessment rather than make health  
          care expenditures directly eligible for a subsidy of up to  
          half of the costs of their coverage.  ABX1 1 limits the  
          subsidy for these employees to 20 percent of the cost of  
          minimum coverage, which would require many to spend  
          considerably more than five percent of their incomes on  
          coverage if they were to elect more comprehensive coverage.

          5.  Cost sharing in pool could increase over time.  Absent  
          very effective cost containment, it is likely that the  
          costs of coverage provided through the purchasing pool will  
          increase faster over time than the revenue sources  
          supporting the pool, including employer assessments,  
          federal funds, premium contributions (which are capped for  
          lower income employees), and redirected county funds.  If  
          the Legislature and Governor did not address this by  
          augmenting funding for the pool, MRMIB's choice would  
          likely be to increase other cost sharing requirements.
          
          6.  Stakeholder input on benchmark plan eligibility.  The  
          bill does not establish a process for stakeholder input to  
          assist MRMIB in developing its process for determining  
          eligibility for plans, enrolling and disenrolling persons,  
          and handling grievances.  In particular, the bill would  
          allow MRMIB to limit enrollment in the pool, develop an  
          eligibility screening and enrollment process, and determine  
          scope of benefits for several coverage packages.  In some  
          instances, MRMIB would be making these decisions about  
          Medi-Cal enrollees who are in the Healthy Families or  
          Cal-CHIPP plan.  In contrast, Medi-Cal has well-defined  
          procedures for enrollment, termination, notice, appeal, and  
          hearing rights.  The Western Center on Law and Poverty  
          argues that these decisions are better made by the  
          Legislature, taking into consideration input from  
          stakeholders and other interested parties.

          7.  Tax credit versus direct subsidy.  Tax credits are  
          generally a cumbersome way of providing subsidies.  As  
          drafted, taxpayers would be required to pay the costs of  
          their coverage throughout the year and recover the credit  
          when they file their taxes, although the bill expresses  
          intent to make the credits advanceable.  Given that the tax  


                                                           
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          credit is only provided for coverage in the pool, and that  
          the intent is to make them advanceable, it is not clear why  
          the bill relies on this mechanism to provide subsidies,  
          rather than providing them directly, as is done for pool  
          enrollees with incomes below 250 percent of the FPL.
          
          8.  Early retiree tax credit.  Establishment of the  
          separate tax credit for persons between the ages of 50 and  
          64, who do not qualify for the tax credit administered by  
          MRMIB is dependent on enactment of separate legislation and  
          appropriation.

          9.  Making the tax credit advanceable is complicated.   
          According to the author, one of the key aspects of the  
          credit is that it is intended to be "advanceable," which  
          means those eligible could use the credit during the year  
          rather than waiting to file their taxes.  However, the  
          author has told the committee that because of the  
          complexity of structuring the advanceable provisions, there  
          is merely intent language in ABX1 1.  The complication  
          occurs because advancing a credit would require a screening  
          for eligibility which could only be done on a preliminary  
          basis, it would have to interact smoothly with the Section  
          125 plans employers establish, and would have to be  
          adjusted to changes in eligibility during the tax year  
          based on income and changes in family size.  Regardless,  
          there will be taxpayers who receive the advance and will  
          subsequently find that they were not eligible at the end of  
          the tax year and will have to pay the state back.   
          Conversely, some will find out their eligibility too late  
          to enjoy the advanceable aspect.  These administrative  
          challenges could make also make advancing the credit  
          expensive to administer.
          
          D.  What people would receive, by income level

          The table on the following page summarizes the benefits and  
          cost-sharing requirements that would apply to persons who  
          receive coverage through the purchasing pool and tax credit  
          and indicates which persons would be excluded from the  
          pool.
          


                                                           
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                        Benefits and Cost-Sharing Requirements 
                    For Coverage in Purchasing pool, by Income Level


          -------------------------------------------------------------------------------------------------- 
         | Income  | Benefits Inside  |  Premiums and    |        Comments        |   Who's Excluded From   |
         |         |       Pool       |   Cost-Sharing   |                        |        Benefits         |
         |         |                  |   Inside Pool    |                        |                         |
         |---------+------------------+------------------+------------------------+-------------------------|
         |100-150  |Cal-CHIPP Healthy |Enrollees would   |Premium costs to MRMIB  |Childless adults who     |
         |percent  |Families Plan     |pay no premiums   |would be the highest    |have access to employer  |
         |of the   |that meets        |or other          |for this category of    |coverage and persons who |
         |FPL      |Knox-Keene        |out-of-pocket     |enrollees because       |are not citizens or      |
         |($10,210 |requirements, and |costs.            |enrollees would pay no  |legal residents would be |
         |to       |prescription drug |                  |part of the premiums    |excluded from these      |
         |$15,315  |benefits, which,  |                  |and also would not pay  |benefits.  If their      |
         |for a    |at minimum, cover |                  |for any deductibles,    |employer elects to       |
         |single   |generic drugs,    |                  |co-payments, or         |contribute to the pool,  |
         |person;  |and brand name    |                  |coinsurance for use of  |childless adults would   |
         |$20,650  |drugs when        |                  |services.  Premium      |be eligible for these    |
         |to       |generic is        |                  |costs to MRMIB would    |benefits.  Persons       |
         |$30,975  |unavailable or    |                  |not be capped and would |excluded from these      |
         |for a    |patient requires  |                  |depend on MRMIBs        |benefits would likely be |
         |family   |brand name drug.  |                  |ability to negotiate    |exempt from the mandate  |
         |of four) |                  |                  |below commercial market |to maintain minimum      |
         |         |                  |                  |rates with plans.       |coverage, and would not  |
         |         |                  |                  |                        |be eligible to purchase  |
         |         |                  |                  |                        |individual insurance on  |
         |         |                  |                  |                        |a guaranteed issue       |
         |         |                  |                  |                        |basis, but could         |
         |         |                  |                  |                        |voluntarily accept       |
         |         |                  |                  |                        |employer coverage, if    |
         |         |                  |                  |                        |available.  Minimum      |
         |         |                  |                  |                        |benefits and cost        |
         |         |                  |                  |                        |sharing requirements for |
         |         |                  |                  |                        |employer coverage are    |
         |         |                  |                  |                        |not specified in bill.   |
         |         |                  |                  |                        |Those without access to  |
         |         |                  |                  |                        |employer coverage could  |
         |         |                  |                  |                        |receive primary care     |
         |         |                  |                  |                        |services through clinics |
         |         |                  |                  |                        |under the clinic funding |
         |         |                  |                  |                        |expansion in the bill.   |



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         |---------+------------------+------------------+------------------------+-------------------------|
         |150-250  |Cal-CHIPP Healthy |Premium costs     |Premium costs to MRMIB  |Childless adults who     |
         |percent  |Families Plan     |limited to 5      |for this category of    |have access to employer  |
         |of the   |that meets        |percent of family |enrollees would be      |coverage and persons who |
         |FPL      |Knox-Keene        |income.           |somewhat lower than     |are not citizens or      |
         |($15,315 |requirements, and |                  |those for enrollees     |legal residents would be |
         |to       |prescription drug |MRMIB would be    |with incomes between    |excluded from these      |
         |$25,525  |benefits, which,  |required to       |100 and 150 percent of  |benefits.  If their      |
         |for a    |at minimum, cover |establish         |the FPL because         |employer elects to       |
         |single   |generic drugs,    |enrollee          |enrollees in this       |contribute to the pool,  |
         |person;  |and brand name    |cost-sharing      |income range would pay  |childless adults would   |
         |$30,975  |drugs when        |levels that       |a portion of the        |be eligible for these    |
         |to       |generic is        |promote           |premiums, capped at 5   |benefits.  Most, but not |
         |$51,625  |unavailable or    |prevention and    |percent of income, and  |all, persons excluded    |
         |for a    |patient requires  |health            |could also be required  |from these benefits      |
         |family   |brand name drug.  |maintenance,      |to pay deductibles,     |would likely be exempt   |
         |of four) |                  |including office  |co-payments, and/or     |from the mandate to      |
         |         |                  |visits, lab       |coinsurance for use of  |maintain minimum         |
         |         |                  |services, and     |services.  These cost   |coverage, and would not  |
         |         |                  |medications to    |sharing are not         |be eligible to purchase  |
         |         |                  |manage chronic    |specified, but are      |individual insurance on  |
         |         |                  |disease.          |required to be at       |a guaranteed issue       |
         |         |                  |                  |levels that "promote    |basis, but could         |
         |         |                  |                  |prevention and health   |voluntarily accept       |
         |         |                  |                  |maintenance."  MRMIB    |employer coverage, if    |
         |         |                  |                  |would determine the     |available.  Minimum      |
         |         |                  |                  |actual cost sharing     |benefits and cost        |
         |         |                  |                  |levels enrollees would  |sharing requirements for |
         |         |                  |                  |be subject to.  Premium |employer coverage are    |
         |         |                  |                  |costs to MRMIB would    |not specified in bill.   |
         |         |                  |                  |not be capped and would |Those without access to  |
         |         |                  |                  |depend on MRMIBs        |employer coverage could  |
         |         |                  |                  |ability to negotiate    |receive primary care     |
         |         |                  |                  |below commercial market |services through clinics |
         |         |                  |                  |rates with plans.       |under the clinic funding |
         |         |                  |                  |                        |expansion in the bill.   |
         |---------+------------------+------------------+------------------------+-------------------------|
         | Income  | Benefits Inside  |  Premiums and    |        Comments        |   Who's Excluded From   |
         |         |       Pool       |   Cost-Sharing   |                        |Benefits                 |


                                                           
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         |         |                  |   Inside Pool    |                        |                         |
         |---------+------------------+------------------+------------------------+-------------------------|
         |250      |MRMIB would be    |Enrollees with    |Premium costs to MRMIB  |Persons in this income   |
         |percent  |required to make  |incomes between   |for plans would vary    |range who have access to |
         |of the   |available, at     |250 and 400       |depending on the level  |employer coverage would  |
         |FPL and  |minimum, one plan |percent of the    |of benefits.  Premiums  |not be eligible to       |
         |above    |from coverage     |FPL would be      |to MRMIB would not be   |purchase coverage        |
         |($25,525 |choice categories |eligible for a    |capped and would depend |through the pool and     |
         |and up   |1, 3, or 5.       |tax credit equal  |on MRMIBs ability to    |would be excluded from   |
         |for a    |                  |to premium costs  |negotiate below         |the tax credit and 20    |
         |single   |Plans in coverage |in excess of 5.5  |commercial market rates |percent discount.  If    |
         |person;  |choice category 3 |percent of        |with plans.  The        |their employer elects to |
                                                     |$51,625  |would be required |income, reduced   |maximum tax credit      |contribute to the pool,  |
         |and up   |to cover          |for persons with  |would be tied to the    |they would be eligible   |
         |for a    |prescription      |incomes above 300 |cost of a coverage      |for the tax credit       |
         |family   |drugs, physician  |percent of the    |choice category 3 plan; |and/or 20 percent        |
         |of four) |visits, and       |FPL, and capped.  |if enrollees were to    |discount, depending on   |
         |         |preventive        |                  |choose this type of     |their income.  Persons   |
         |         |services outside  |Enrollees with    |plan, their share of    |excluded from these      |
         |         |of any            |incomes in excess |the premiums would be   |benefits could elect to  |
         |         |deductible.       |of 250 percent of |limited to 5.5 percent  |accept the employer      |
         |         |                  |the FPL would be  |of income.  MRMIB would |coverage, but would be   |
         |         |                  |eligible for a    |determine the actual    |ineligible for primary   |
         |         |                  |contribution from |level of deductibles,   |care services under the  |
         |         |                  |MRMIB in an       |co-payments,            |clinic funding expansion |
         |         |                  |amount equal to   |coinsurance, and        |in the bill.  Most       |
         |         |                  |20 percent of the |out-of-pocket maximums  |persons in this income   |
         |         |                  |premium cost of a |for the plans that      |range would likely be    |
         |         |                  |tier 1 plan       |these enrollees would   |subject to the mandate   |
         |         |                  |(minimum health   |have access to.  For    |to maintain minimum      |
         |         |                  |care coverage) to |purposes of the         |coverage, and would be   |
         |         |                  |any plan enrolled |modeling and fiscal     |eligible to purchase     |
         |         |                  |in by the         |estimates that were     |individual insurance on  |
         |         |                  |employee.         |prepared by Dr.         |a guaranteed issue       |
         |         |                  |                  |Jonathan Gruber, a tier |basis.                   |
         |         |                  |                  |3 plan was assumed to   |                         |
         |         |                  |                  |be a plan with a $2,500 |                         |
         |         |                  |                  |deductible per person,  |                         |
         |         |                  |                  |or $5,000 per family;   |                         |


                                                           
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         |         |                  |                  |30 percent coinsurance  |                         |
         |         |                  |                  |rate for use of         |                         |
         |         |                  |                  |services;  maximum      |                         |
         |         |                  |                  |out-of-pocket limits of |                         |
         |         |                  |                  |$7,500 per individual   |                         |
         |         |                  |                  |or $15,000 per family;  |                         |
         |         |                  |                  |and a separate $500     |                         |
         |         |                  |                  |deductible for brand    |                         |
         |         |                  |                  |name drugs.             |                         |
          -------------------------------------------------------------------------------------------------- 































                                                           
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          STAFF ANALYSIS OF ASSEMBLY BILL X1 1                  Page  
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          E.  Clinic funding provisions - sections of the bill 3  
          1.1-3 1.5

          Existing law establishes the Expanded Access to Primary  
          Care (EAPC) program which reimburses licensed primary care  
          clinics for uncompensated care provided to program  
          beneficiaries, defined as any person with an income at or  
          below 200 percent of the FPL.  In order to be eligible for  
          EAPC reimbursement, a clinic must be located in a  
          designated health professional shortage area or medically  
          underserved area, have at least 50 percent of its patients  
          at income levels at or below 200 percent of the FPL, and  
          provide specified health care services to program  
          beneficiaries, including diagnosis and treatment, health  
          education and prevention services, and services to patients  
          with chronic illnesses.  

          The law prohibits EAPC program beneficiaries from having to  
          make co-payments for services, but does allow clinics to  
          charge beneficiaries on a sliding fee scale.  No  
          beneficiary may be denied services because of an inability  
          to pay.

          This bill would increase income eligibility requirements  
          for EAPC program beneficiaries from the current 200 percent  
          of the FPL to 250 percent of the FPL.  It would also limit  
          eligibility to persons who either do not have private or  
          employer-based health care coverage, or who are not  
          currently enrolled in, or eligible for, public coverage  
          programs, including the purchasing pool established by the  
          bill.  Program beneficiaries would be required to select a  
          clinic as a primary care medical home, and would be issued  
          a primary care card upon determination of eligibility to be  
          used at the designated medical home.  A clinic would be  
          required to serve as a designated primary care medical home  
          for its program beneficiaries in order to remain eligible  
          for EAPC reimbursement.  

          The bill would require DHCS, on or before July 1, 2010, to  
          develop an electronic system to provide an eligibility  
          application for program beneficiaries, verify annual income  
          of applicants, and issue the primary care clinic card.  It  
          would also authorize DHCS to contract with other entities,  



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          or use existing provider enrollment and payment mechanisms  
          to implement the bill's provisions.

          Comments and issues

          1.  Proposed budget cuts to program.  The Governor proposes  
          a 15 percent ($4.5 million) reduction to the EAPC program  
          for the fiscal year 2008-09.  According to the California  
          Primary Care Association, based on these proposed  
          reductions, the EAPC program would be unable to reimburse  
          clinics for approximately 63,000 uncompensated patient  
          visits.  The fiscal summary of ABX1 1 assumes the program  
          would be augmented by $140 million in the first full year  
          of implementation.  If the proposed budget cut were  
          approved, to provide the same service level as provided by  
          ABX1 1, the Legislature and Governor would have to backfill  
          it using ABX1 1 revenues, or other revenues.

          2.  Expanded clinic coverage may not satisfy mandate.   
          While the bill expands eligibility for the EAPC program in  
          order to provide greater access to primary and preventive  
          care to persons who don't qualify for the other public  
          program expansions, purchasing pool, and tax credit,  
          enrollment in the program is not likely to satisfy the  
          mandate.  The author has indicated that MRMIB would have  
          the authority to exempt EAPC enrollees from the mandate,  
          but the bill does not explicitly require that.  Even though  
          enrollees would be limited to those with incomes below 250  
          percent of the FPL, some, particularly those who are  
          younger and/or live in areas where health insurance rates  
          are lowest, could otherwise find themselves subject to the  
          mandate.
          
          F.  Ryan White premium and cost sharing provisions

          This bill would state legislative intent that the state  
          develop and implement a transition plan, by July 1, 2010,  
          to permit the state to use funding from the federal Ryan  
          White Comprehensive AIDS Resources Emergency (CARE) Act of  
          1990 and other funding to pay for premiums and cost-sharing  
          burdens associated with insurance coverage.  According to  
          the administration and the author, the intent of this  


                                                           
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          provision is to permit federal money available under Title  
          II of the Ryan White CARE Act or other funds (i.e., State  
          funds) to be used towards any cost sharing requirements for  
          individuals with HIV/AIDS who transition from the AIDS Drug  
          Assistance Program (ADAP) to Cal-CHIPP or private coverage.

          III.  Provisions affecting coverage outside of the  
          purchasing pool.  

          The net result of the changes in ABX1 1 is that most people  
          are likely to continue to receive their health coverage  
          from an employer, and some will have no other recourse but  
          to purchase it in the individual market in order to satisfy  
          the mandate, while roughly 1.5 million of the 5.1 million  
          residents who are currently uninsured would likely remain  
          uninsured.  Together these three groups will receive  
          coverage and/or services outside of the purchasing pool and  
          outside of public programs.  The following is an analysis  
          of how the bill impacts the extent and cost of coverage or  
          services for these groups.

          A.  Employer provided coverage 

          As drafted, employer coverage that is provided through  
          licensed HMOs and health insurance plans would still be  
          subject to state mandated benefit laws.  In addition,  
          depending on how MRMIB defined the mandate to maintain  
          minimum coverage, and how they applied the mandate to group  
          plans or enrollees in group plans, some current employer  
          plans may have to be expanded to include additional  
          benefits, for example outpatient services, maternity  
          coverage or prescription drug coverage.  Other than this,  
          employer plans would not be subject to any particular  
          standards in terms of their scope of benefits.  There are  
          virtually no limits where an employer offers coverage  
          instead of paying in to the pool, on how much of the total  
          cost an employer can require an employee to pay. The bill  
          effectively simply allows MRMIB to establish limits as part  
          of the definition of minimum creditable coverage, for  
          example, a requirement that preventive services be provided  
          outside of any deductible, and maximum limits on total  
          out-of-pocket costs.  No specific subsidies would be  


                                                           
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          provided for employees who receive employer sponsored  
          coverage other than an across the board requirement that  
          all employers establish Section 125 accounts to allow their  
          employees to pay for health coverage costs with pre-tax  
          dollars.  However, because of the employer health  
          contribution thresholds, some employees may experience an  
          increase in the percentage of the coverage that is borne by  
          the employer.  According to modeling estimates from MIT  
          economist Jonathan Gruber, close to 19 million of the  
          state's 32 million nonelderly residents would be covered in  
          group insurance arrangements after the enactment of ABX1 1,  
          a slight increase from the number currently in such  
          coverage arrangements.  Some of the net changes would be  
          accounted for by people moving from individual coverage,  
          which is generally more expensive for individuals, provides  
          fewer benefits, and requires higher cost sharing than group  
          coverage.

          B.  Individual insurance market  

          Coverage in the individual market would be subject to new  
          minimum benefit standards resulting from the definition of  
          minimum creditable coverage adopted by MRMIB.  These  
          standards are likely to be more expansive than those that  
          currently apply to the individual insurance market and may  
          include cost sharing limits that are more generous than  
          some plans currently provide.  In addition, with the  
          addition of guaranteed issue and rating restrictions,  
          individuals purchasing in the individual market would be  
          able to obtain coverage regardless of medical condition and  
          would eventually pay rates based solely on their age,  
          family size, and place of residence.  These reforms could  
          have the effect of making health insurance more expensive  
          than it currently is for many policy- holders, if plans and  
          insurers price individual insurance with the assumption  
          that enforcement of the minimum coverage mandate will be  
          weak and that people will wait until they have medical  
          needs before seeing it.  Persons purchasing in the  
          individual market who are employed would receive the  
          benefit of using a Section 125 plan to pay their premiums,  
          if they don't currently have one.  Other than this, no  
          subsidies or affordability protections would be available  


                                                           
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          to persons who enroll in these plans.  According to Dr.  
          Gruber's estimates, the non-group market would decline by  
          about 300,000 persons after the enactment of ABX1 1 to  
          about 1.7 million individuals.

          C.  Uninsured  

          Persons who remain uninsured after enactment of ABX1 1  
          would include persons who are exempt from the mandate, do  
          not qualify for the coverage expansions, purchasing pool,  
          or tax credits, or choose not to comply with the mandate.   
          According to Dr. Gruber's estimates, approximately 1.5  
          million persons would fall in this category.  These persons  
          would continue to rely on county and private safety net  
          providers for care.  The bill's expansion of the EAPC  
          program would enable uninsured residents to receive  
          regularly scheduled medical care, with referral to public  
          and private hospitals for hospital care.
          
          IV.  Health insurance market and regulatory reforms -  
          sections of bill: 19, 21-28.5, 34.3-36, 38-42

          A.  Guaranteed issue requirements
          
          Existing law requires full-service health plans and health  
          insurance policies in the individual market to have written  
          policies, procedures, or underwriting guidelines  
          establishing the criteria and process under which the plan  
          makes decisions to provide or to deny coverage to  
          individuals applying for coverage, and sets the rate for  
          that coverage.  Existing law requires all individual  
          benefit plans to be renewable by all eligible individuals  
          or dependents except for nonpayment of premiums, as well as  
          fraud or intentional misrepresentation, among other  
          reasons.  

          Existing law does not generally require health plans and  
          insurers to offer coverage to individuals without regard to  
          medical factors.  One exception is that federal and state  
          laws require health plans and health insurers in the  
          individual market to issue coverage to "federally eligible  
          defined individuals," defined as persons who have had 18  


                                                           
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          months of prior group coverage and are not eligible for  
          other group or public coverage.  Existing federal and state  
          laws also allow individuals to retain group health coverage  
          for a period of time when experiencing a qualifying event,  
          as defined.  Existing law also requires health care service  
          plans and health insurers to allow employees or members  
          whose group coverage was terminated by the employer to  
          convert to non-group coverage without consideration of  
          health status.

          This bill would, beginning July 1, 2010, require health  
          plans and insurers to offer, market, and sell, on a  
          guaranteed issue basis, all of their contracts or policies  
          sold to individuals, and would prohibit them from rejecting  
          applicants or canceling or refusing to renew policies, with  
          exceptions.  The exceptions would include persons who are  
          exempt from the mandate to enroll in and maintain minimum  
          creditable coverage.  These requirements would become  
          effective once MRMIB has established methods to inform  
          individuals of health care coverage options and to ensure  
          that they obtain the minimum required coverage.  Health  
          plans and insurers would also be prohibited from imposing  
          preexisting condition exclusions, waivered conditions, or  
          waiting periods for coverage.  The exception to this would  
          be that health plans and insurers would be allowed to  
          impose a preexisting condition exclusion period for a  
          person who fails to maintain minimum creditable coverage  
          for a period of more than 62 days, equal to the length of  
          time the person failed to comply with the mandate.  The  
          bill would also, effective July 1, 2010, prohibit plans and  
          insurers from rescinding individual health plan contracts  
          and policies.

          On or before April 1, 2009, DMHC and DOI would be required  
          to develop, by regulation, a system to categorize health  
          plan contracts and insurance policies into five coverage  
          categories, reflecting a reasonable continuum of benefits  
          and prices.  Health plans and insurers that offer  
          individual coverage would be required to offer at least one  
          plan in each coverage choice category.  The coverage  
          category with the lowest level of benefits would be  
          required to provide the minimum coverage as established by  


                                                           
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          MRMIB.  Individuals would only be able to change from one  
          coverage category to another on the anniversary of the date  
          they signed up for the coverage, or upon a qualifying  
          event, as defined, and would only be permitted to move up  
          one coverage category at a time.  Health plans and insurers  
          would be required to submit filings by October 1, 2009 for  
          plan contracts and policies to be offered or sold after  
          July 1, 2010.

          B.  Coverage tiers and rating restrictions 
          
          Effective July 1, 2010, health plans and insurers would be  
          required to charge premiums for individual health plan  
          contracts and policies that reflect standard risk rates  
          based on established age, family size, and geographic  
          region rating categories.  However, for the first four  
          years following implementation, health plans and insurers  
          would be allowed to apply a risk adjustment factor based on  
          the health status of the individual, using a standard form  
          and evaluation process that would be developed by the DMHC  
          Director and Commissioner.  For the first two years  
          following implementation, the initial risk adjustment would  
          be up to 20 percent above or below the standard risk rate;  
          for the second two years, the risk adjustment would be  
          limited to plus or minus five percent of the standard risk  
          rate.  During both periods, upon the renewal of any  
          contract or policy, the change in the risk adjustment  
          factor for an individual would be limited to 10 percent.   
          After the first four years following implementation, rates  
          would have to be based on the standard risk rate with no  
          risk adjustment factor.  The DMHC Director and Commissioner  
          would also be required to jointly establish a maximum limit  
          on the difference between standard risk rates for  
          individuals in the 60 to 64 age category and those in the  
          30 to 35 age category.  Prior to making any changes in the  
          standard risk rates, plans would be required to certify  
          that they are in compliance with these requirements.  

          Notwithstanding these requirements, the bill would allow  
          health plans and insurers to renew, indefinitely, contracts  
          and policies that provide less than minimum creditable  
          coverage for persons who are enrolled in them on March 1,  


                                                           
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          2009, and would deem individuals enrolled in them to be in  
          compliance with the mandate to maintain minimum creditable  
          coverage.  These plans and policies would not be available  
          to new enrollees after that date.

          The proposal would require health plans and insurers to  
          make standard disclosures in their solicitation and sales  
          materials concerning their plans and rates.  Health plans  
          and insurers that cease to write new individual health  
          coverage would be prohibited from offering individual  
          coverage in the state for a period of five years.  The  
          proposal would state that it is not to be construed as  
          providing the DMHC Director or Insurance Commissioner with  
          rate regulation authority.

          C.  Reinsurance provisions
          
          The DMHC Director, in consultation with the Commissioner  
          and others, would be required, no later than July 1, 2010  
          to develop mechanisms to ensure the equitable spreading of  
          risks in the individual market, including, if necessary,  
          through a risk adjustment mechanism and an interim and a  
          permanent reinsurance mechanism.  The latter would be  
          developed if the relative risk profile of persons enrolled  
          in individual coverage is higher than that of persons  
          enrolled in the purchasing pool.  Costs of reinsurance to  
          compensate for a risk profile differential of up to 10  
          percent would be borne by plans and insurers themselves;  
          costs of reinsurance for a differential in excess of that  
          would be paid for from revenues in the Health Care Trust  
          Fund.

          D.  Medical loss ratios

          Existing law prohibits health care service plans (health  
          plans) from expending excessive amounts of the payments  
          received for providing services on administrative costs, as  
          defined.  Existing regulations further provide that the  
          definition of administrative costs shall take into  
          consideration such factors as the plan's stage of  
          development.  If administrative costs exceed 15 percent for  
          an established plan, or 25 percent for a plan in a  


                                                           
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          development phase, the plan may be required to justify its  
          administrative costs and/or show that it is taking  
          effective action to reduce administrative costs.  

          Existing law requires the Insurance Commissioner to  
          withdraw approval of an individual or mass-marketed policy  
          of disability insurance if the Commissioner finds that the  
          benefits provided under the policy are unreasonable in  
          relation to the premium charged.  Existing regulations  
          define a standard of "reasonableness" for the ratio of  
          medical benefits to the premium charged for individual  
          health insurance, and sets this ratio at 70 percent, as of  
                                    July 1, 2007.

          This bill would, on and after July 1, 2010, require  
          full-service health plans and health insurers to expend no  
          less than 85 percent of the after tax revenues they receive  
          from dues, fees, premiums, or other periodic payments, on  
          health care benefits.  The bill would allow plans and  
          insurers to average their administrative costs across all  
          of the plans and insurance policies they offer, with the  
          exception of Medicare supplement plans and policies and  
          certain other limited benefit policies, and would allow  
          DMHC and the Department of Insurance (DOI) to exclude any  
          new contracts or policies from this limit for the first two  
          years they are offered in California.  "Health care  
          benefits" would be broadly defined to include the costs of  
          programs or activities which improve the provision of  
          health care services and improve health care outcomes, as  
          well as disease management services, medical advice, and  
          pay-for-performance payments.
          
          E.  Other health insurance regulation provisions

           Existing law prohibits plans and insurers from basing  
            compensation of claims reviewers on the number or amount  
            by which claims are reduced or denied.  This bill,  
            effective December 1, 2008, would additionally prohibit  
            plans and insurers from basing compensation of persons  
            who review eligibility determinations on these factors.

           Existing law establishes within DMHC the Office of  


                                                           
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            Patient Advocate, to develop educational and  
            informational guides for consumers, to publish an annual  
            health plan report card, and to provide assistance to  
            enrollees regarding their rights and responsibilities  
            under their health plans.  Under the bill, the Office of  
            the Patient Advocate would additionally be required to  
            develop and maintain a website providing standard  
            information on all individual health plan contracts and  
            policies.  

           The bill would allow health plans and health insurers to  
            provide certain notices by electronic transmission if  
            they obtain written authorization from the applicant,  
            enrollee, or subscriber and meet other requirements.  

           Existing law subjects Medi-Cal managed care plans to  
            regulation by both DMHC and the DHCS.  This bill would  
            provide that Medi-Cal managed care plans shall be subject  
            solely to health plan filing, reporting, monitoring, and  
            survey requirements as established by DHCS, and would  
            require DMHC and DHCS to develop a joint process for  
            carrying out medical quality surveys.

           Existing law requires health plans that provide  
            prescription drug benefits and maintain one or more drug  
            formularies to provide, upon request, a copy of the most  
            current list of prescription drugs on the formulary.   
            This bill would require a health plan, commencing January  
            1, 2010, to make the most current formularies available  
            electronically.

          Comments and issues

          1.  Impact of reforms on rates.  Health plans and insurers  
          express concerns that requiring plans and insurers to  
          provide coverage to all who seek it will likely increase  
          costs in the individual market by forcing insurers to issue  
          policies to individuals who have no incentive to seek  
          coverage until they become sick or have health problems.   
          Plans are concerned that it will be difficult to  
          effectively enforce the bill's mandate to enroll in and  
          maintain minimum creditable coverage and that MRMIB will  


                                                           
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          have authority, and be under pressure, to create additional  
          exemptions from the mandate.  Together, these outcomes  
          could create an environment where people tend to wait until  
          they have medical needs before seeking coverage in the  
          individual market.  Plans are further concerned that the  
          modified community rating provisions in the bill will  
          result in higher rates for younger and healthier persons,  
          both those who have existing coverage and those who seek it  
          after the provisions of the bill take effect.  The author  
          and administration maintain that these concerns are  
          mitigated by several provisions of the bill including the  
          process to automatically enroll persons who lack minimum  
          coverage into such coverage, the expectation that MRMIB  
          will be judicious in its consideration of additional  
          exemptions, provisions allowing healthier persons to remain  
          in sub-minimum plans if they enroll in such plans by March,  
          2009, and the risk adjustment and reinsurance mechanisms  
          provided by the bill.

          2.  Potential for healthier risks to go into sub-minimum  
          coverage.  Under the bill, health plans and insurers could  
          market sub-minimum coverage in the individual market until  
          March, 2009, including offering new contracts and policies  
          and renewing existing ones.  At that point, plans and  
          insurers would not be able to market new contracts and  
          policies that don't meet standards for minimum creditable  
          coverage issued by MRMIB.  This could give plans and  
          insurers an incentive to enroll additional healthy lives  
          before the guaranteed issue and rating reforms take effect  
          in 2010, which in turn would make the pool of persons whom  
          carriers have to guarantee issue to, and reduce use of  
          medical underwriting for, older and sicker than it would  
          otherwise be.  These incentives would be mitigated, but not  
          eliminated, by the fact that plans and insurers would not  
          know until November, 2008 whether the reforms were going to  
          be taking effect, and by the fact that plans and new  
          insureds wouldn't know until March, 2009 what the  
          definition of minimum creditable coverage was going to be.   
          Although people could accept coverage that ended up not  
          meeting the minimum standard, and could remain in it  
          indefinitely, some would be deterred from accepting it  
          because their ability to move up to more comprehensive  


                                                           
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          coverage in the future would be limited under the bill.

          3.  Not clear how plans and insurers would determine who is  
          exempt from the mandate.  
           The bill would allow plans and insurers to decline to issue  
          coverage to persons who are exempt from the mandate to have  
          insurance, which is a different and more restrictive policy  
          than is in place in Massachusetts.  Plans and insurers have  
          argued that people who are exempt from the mandate are more  
          likely to seek insurance when they are sick or have medical  
          needs, and that they need the flexibility to underwrite and  
          price accordingly.  However, it is not clear under the bill  
          how plans would know who falls into this category, unless  
          they have access to accurate income information or unless  
          MRMIB issues some form of certification to that effect,  
          which they would likely only do for the limited number of  
          hardship or affordability exemptions they have granted  
          individually.

          4.  Ability to contain health coverage rate increases  
          unclear.  Despite the various cost containment provisions  
          in ABX1 1, including new proposed medical loss ratio  
          requirements, and the new bargaining power that MRMIB would  
          have in administering the proposed purchasing pool, the  
          bill's lack of provisions for review or approval of health  
          insurance rates raises questions whether the proposal would  
          be successful in stemming the rate of increase in health  
          insurance rates. 

          5.  Bill lacks requirements to disclose medical loss ratios  
          for individual policies and contracts.  The bill would  
          allow plans and insurers to average administrative costs  
          across all policies and contracts, which would allow them  
          to keep loss ratios low on commercial plans and offset them  
          with higher loss ratios on Medi-Cal managed care plans,  
          instead of establishing separate loss ratios on each type  
          of policy or contract.  The bill also does not require  
          plans and insurers to routinely disclose their loss ratios  
          on their different policies and contracts.  
          
          V.  Financing provisions - sections of bill: 78-83;  
          sections of initiative: 4-19


                                                           
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          The bill expresses intent that the provisions of the bill  
          be financed through federal Medicaid and SCHIP matching  
          funds, revenues from counties to support the cost of  
          enrolling persons who would otherwise be entitled to  
          county-funded care, fees paid by acute care hospitals at a  
          rate of four percent of patient revenues, fees paid by  
          employers, premium contributions from employers who offer  
          coverage to employees who are eligible for public programs,  
          premium payments from individuals enrolled in publicly  
          subsidized coverage and in the individual market, funds  
          from a new tobacco tax, and through savings in reduced  
          demand for existing health care programs.

          Many of the actual financing provisions for ABX1 1 are  
          contained in a proposed initiative entitled, "The Secure  
          and Affordable Health Care Act of 2008," which was  
          submitted to the Attorney General for title and summary on  
          December 28, 2008.  The proposed initiative contains four  
          major financing elements, a proposed $1.75 per pack tobacco  
          tax; a requirement that employers pay a health care  
          contribution equal to a specified percentage of wages, with  
          a credit equal to the amount they spend on health  
          expenditures, as defined; a requirement that counties make  
          payments to the state for health care costs incurred by the  
          state in providing health care coverage to low-income  
          adults, as specified; and an assessment on the net patient  
          revenues of acute care hospitals, as specified.  The  
          initiative would establish a California Health Trust Fund  
          for receipt of revenues from these sources, and would deem  
          them to be revenues that are not subject to Proposition 98,  
          the school funding initiative, and the Gann limit. 

          Other sources of financing that are not in the proposed  
          initiative and do not require voter approval include funds  
          received from employers for employees who are eligible for  
          employer provided coverage and who are also eligible for  
          public health coverage programs; these funds would either  
          be collected from the employer or the state and would "wrap  
          around" employees by supplementing the employer's plan.   
          Non-initiative funding would also include premium  
          contributions from employees seeking coverage through the  


                                                           
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          purchasing pool, federal Medicaid and Title XXI SCHIP  
          matching funds for the eligibility expansions and Medi-Cal  
          rate increases proposed in the bill, and projected savings  
          from reduced utilization of programs offering limited  
          health care services that overlap with the new programs  
          created by the bill. 

          The initiative additionally contains language stating that  
          it is being enacted with the expectation that the  
          Legislature passes and the Governor signs a bill that is  
          "essentially the same" as ABX1 1 as amended December 17,  
          2007.  The initiative also provides that its provisions may  
          be amended by the Legislature with whatever vote  
          requirement would otherwise apply, but specifically  
          requires that provisions pertaining to the Director of  
          Finance's responsibilities and the hospital assessments  
          must be amended with a 2/3 vote.  

          The initiative also contains a severability clause,  
          providing that if any provision is found to be invalid or  
          unconstitutional, the remaining provisions shall not be  
          affected and provides that it shall not limit the ability  
          of the Legislature to amend ABX1 1 after the initiative is  
          passed by voters. 
           
          A.  Employer health care contributions - section of the  
          initiative: 8

          The proposed initiative would, on and after January 1,  
          2010, require employers to pay health care contributions,  
          at a rate ranging from 1 to 6.5 percent of total Social  
          Security wages paid to employees.  The contributions would  
          equal 1 percent of prior year wages for employers with an  
          annual payroll of $250,000 or less, 4 percent for employers  
          with an annual payroll between $250,000 and $1 million, 6  
          percent for employers with an annual payroll between $1  
          million and $15 million, and 6.5 percent for employers with  
          an annual payroll in excess of $15 million.  Every employer  
          would be eligible for a credit to offset the required  
          health care contribution in the same amount the employer  
          spends on health expenditures for employees and their  
          dependents.


                                                           
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          The proposed initiative would define employer health care  
          expenditures as any amount paid by an employer to, or on  
          behalf of, its employees and their dependents, if  
          applicable, to provide health care or health-related  
          services or to reimburse the costs of those services,  
          including, but not limited to, contributions to Health  
          Savings Accounts (HSAs), specified unreimbursed employee  
          health care costs, healthy lifestyle programs, on-site  
          health fairs and clinics, contributions for health  
          expenditures made under collective bargaining agreements,  
          disease management programs, pharmacy benefit manager  
          programs, purchasing health care coverage, and care  
          provided by health care providers employed by, or under  
          contract to, the employer.
          The proposed initiative would require employers to remit  
          any health care contributions to the Employment Development  
          Department (EDD) by the 15th day of each month.  
          Health expenditures made by employers as required by a  
          collective bargaining agreement would satisfy the employer  
          health care contribution requirement.  Employers would be  
          required to pay separate contributions for each bargaining  
          unit within an employee organization, as specified.  EDD  
          would be prohibited from accepting contributions made by  
          employers on behalf of bargaining unit employees without  
          the consent of the representing labor organization.  

          Under the initiative, employer contributions for IHSS  
          providers would be the responsibility of the state and  
          county.  IHSS consumers would not be defined as an employer  
          for the purposes of employer contribution requirements.   
          Additionally, the proposed initiative would provide that  
          self-employed individuals who conduct business through a  
          loan out corporation, under which they receive income,  
          would not be held liable for health care contributions in  
          excess of the percentage of payroll required based on the  
          total wages of the corporation.   

          The proposed initiative would require EDD to establish  
          methods to collect employer contributions, and would  
          authorize EDD to use its existing authority and procedures  
          to collect employer health care contributions owed to the  


                                                           
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          state.  The initiative would impose specified  
          confidentiality requirements on information obtained in the  
          administration of the employer contribution requirements,  
          but would authorize EDD to release specified information to  
          MRMIB and DHCS as needed for the administration of the  
          requirements.  EDD would be required, by January 1, 2010,  
          to adopt regulations to implement the employer health care  
          contribution requirements.

          The provisions of the initiative related to employer  
          assessments could be amended by the Legislature in  
          accordance with vote requirements that apply under current  
          law.  For example, any provision that would raise a tax  
          would require a 2/3 vote of each house; other provisions  
          would require a simple majority vote of each house.

          Comments and issues

          1.  No part-time test for employer contributions.  The  
          proposed initiative requires employers to make health care  
          contributions that meet a percentage of their aggregate  
          payroll, rather than contributions based on separate  
          payrolls for full-time and part-time workers.  Many  
          employers could meet their payroll spending threshold while  
          making very limited or no qualified health care  
          expenditures for part-time or low-wage workers.  In that  
          case, they would not be required to provide any funding for  
          the purchasing pool, even though many of these employees  
          might be eligible for coverage through the pool.

          2.  Potential for "crowd-out" of existing employer  
          spending.  Existing data suggests that what most employers  
          currently spend on health care benefits is considerably in  
          excess of the required contribution levels established by  
          the initiative.  The median among all employers is  
          currently approximately 8 percent; among employers of  
          low-wage workers, it's closer to 20 percent.  Employers  
          would find themselves spending more than the required  
          contribution levels for several reasons, including that  
          they employ mostly lower wage employees, for whom the cost  
          of health coverage, as a percent of payroll, is higher,  
          that they have older and sicker employees on average and  


                                                           
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          pay rates higher than average, or that they have chosen to  
          provide relatively generous coverage to attract and  
          maintain employees.  Under the bill, many of these  
          employers would be allowed to pay contributions that are  
          significantly less than the actual cost of covering their  
          employees, which could create issues for the financial  
          viability of the pool.  
          
          3.  Not clear EDD could penalize employers who fail to make  
          health care contributions.  The proposed initiative does  
          not clearly authorize EDD to levy penalties on employers  
          who fail to pay or underpay health care contributions they  
          are obligated to pay.   The initiative does allow EDD to  
          use its existing authority to "collect" contributions owed  
          to the state, but it's not clear from the language that  
          that would extend to levying penalties for noncompliance.
          
          4.  No specific penalties for misclassification of  
          employees.  As drafted, it is also not clear if EDD could  
          assess penalties against employers who willfully classify  
          employees as independent contractors for the purposes of  
          reducing the health care contributions for which they would  
          otherwise be liable.  
          
          5.  No provision for start-up costs.  The bill and  
          initiative make no provision for start-up costs that EDD is  
          likely to incur in implementing the payroll reporting and  
          employer fee collection processes that would be required by  
          the bill.

          6.  Self-employed excluded from employer contribution  
          provisions and from coverage through pool.  As drafted,  
          self-employed individuals would not be subject to the  
          employer contribution requirements but would also not be  
          eligible for coverage through the purchasing pool unless  
          their income is low enough to qualify for one of the  
          coverage expansions.

          7.  Initiative may be subject to ERISA challenge.  A number  
          of groups have indicated that they believe the initiative  
          is preempted by the Employee Retirement Income Security Act  
          (ERISA), which regulates employer sponsored employee  


                                                           
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          benefit plans, and have indicated that they intend to file  
          legal challenges to the initiative.

          B.  Other employer revenues - section of the bill: 20.5
          
          Under existing law, the Medi-Cal program is authorized to  
          carry out premium assistance. Premium assistance occurs  
          where another source of funds, typically employer funds,  
          are used to help defray the cost of coverage for those  
          enrolled in public programs.  ABX1 1 would establish that  
          the intent of the Legislature is to establish mechanisms by  
          which the state may defray the costs of an enrollee's  
          public program participation.  The bill would require DHCS  
          to consult with DMHC and DOI to determine exactly how to  
          implement enhanced premium assistance programs and report  
          their findings to the Joint Legislative Budget Committee by  
          July 1, 2009.



























                                                           
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          Comments and issues
          
          1.  Utilizing dollars from employers likely to be  
          difficult.  In practice, states have had difficulty  
          capturing employer contributions towards health coverage to  
          employees who qualify for public health coverage programs.   
          Designing public coverage to "wrap around" existing  
          employer coverage is administratively cumbersome because  
          employers' plans vary greatly.  Redirecting employer  
          contributions to the state, to help pay for coverage  
          through public programs for the employees, is difficult to  
          do without imposing a mandate on employers.  In practice,  
          it may be difficult to achieve the nearly $1 billion in  
          funding the fiscal analysis assumes would come from these  
          payments.
          
          C.  Redirection of county funds -section of the initiative:  
          9, 10, 11

          Under the initiative, counties would share in the costs of  
          program expansions under the premise that they would  
          receive savings, as counties are currently responsible for  
          providing health care to indigent persons who have no other  
          means of paying for necessary medical care as required by  
          Section 17000 of the Welfare and Institutions Code.   
          Counties use a variety of funding sources for this mandate,  
          including realignment funds (consisting of a portion of  
          state sales taxes and vehicle license fees (VLF),)  
          Proposition 99 tobacco tax funds, county funds, and fees  
          paid by patients.  

          Counties use a variety of mechanisms to provide this care.   
          Some operate public hospitals and clinics, while others  
          contract for these services.  Thirty-four smaller counties  
          participate in the County Medical Services Program (CMSP),  
                                      established in 1983, which contracts for services and  
          arranges for care for indigent patients in those counties.   
          Data on county expenditures for indigent care is  
          inadequate.  However, recent estimates suggest that  
          counties may spend only $250-$750 annually per person on  
          care for the medically indigent, well below the estimated  


                                                           
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          cost of providing health coverage, which has been estimated  
          to be $3,000 to $4,000 annually per enrollee.
          
          The initiative would require counties to pay 40 percent of  
          the cost of the coverage expansions for three groups: 1)  
          Medi-Cal eligibility for medically indigent adults with  
          incomes below 100 percent of the FPL, 2) Medi-Cal expansion  
          for parents and caretaker relatives and 19- and  
          20-years-old with an income of 150 percent of the FPL or  
          less, and 3) those receiving subsidized coverage through  
          the purchasing pool whose incomes are below 150 percent of  
          the FPL.  The initiative would cap these payments at $1  
          billion annually.  ABX1 1 would require that expanding  
          coverage to low income adults would be contingent upon the  
          counties paying a share of the costs.  

          The initiative would provide that the specific amount each  
          county must pay will be determined by subsequent statute.   
          The initiative directs the Department of Finance, in  
          consultation with counties, to recommend to the Legislature  
          a methodology or formula which would have to be enacted by  
          statute.  The initiative also provides that a county can  
          ask the state for temporary modification of the formula if  
          it is suffering from fiscal distress from unexpected high  
          costs or expected savings do not materialize.

          All of the provisions related to the county share of cost  
          may be amended by the Legislature with a majority vote.
          
          Comments and issues

          1.  Some counties may not benefit as much as assumed.   
          While counties would enjoy some savings from the program  
          expansions, counties and public hospitals express concerns  
          that the proposal would redirect realignment funds from  
          counties without taking into account whether their cost of  
          serving indigent patients has actually decreased.  Another  
          factor affecting county costs is that they will still have  
          Section 17000 obligations for this population for some  
          mental health, substance abuse and dental care programs.   
          Small- and medium-sized counties that do not have a public  
          hospital may face more risks as they will not benefit as  


                                                           
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          much from the hospital rate increase.

          2.  The proposed budget contains provisions that could lead  
          to higher county costs for indigent care.  The Governor's  
          budget contains proposals to cap dental care for adults in  
          Medi-Cal.  In addition, the Governor's proposed budget  
          contains provisions that increase the administrative  
          requirements associated with Medi-Cal.  These actions could  
          also increase the cost of the counties' Section 17000  
          obligations.
          
          D.  Tobacco tax  - section of the initiative: 7

          Existing state law imposes a tax on distributors of  
          cigarettes and tobacco products at specified rates.  The  
          existing taxes imposed by law are equal to 87 cents per  
          pack of 20 cigarettes and are allocated in the following  
          manner:

           10 cents to the General Fund;
           25 cents to the Cigarette and Tobacco Products Surtax  
            Fund (created by Proposition 99 in 1988);
           2 cents to the Breast Cancer Fund (created by AB 478 in  
            1993); and
           50 cents to the California Children and Families Trust  
            Fund (created by Proposition 10 in 1998).

          For other tobacco products (including cigars, smoking  
          tobacco, chewing tobacco, snuff, and products containing at  
          least 50 percent tobacco), Proposition 99 imposes a tax on  
          the wholesale cost of the tobacco products distributed at a  
          rate which is equivalent to the   combined rate of tax  
          imposed on cigarettes.  In addition, Proposition 10 imposes  
          an additional tax on tobacco products which is equivalent  
          to a 50-cent per pack tax on cigarettes.  

          The initiative that accompanies ABX1 1 would impose an  
          additional $1.75 per pack tax on cigarettes, beginning in  
          May, 2009.  Existing law enacted in Proposition 99 would  
          require that the tax on tobacco products be raised by an  
          equivalent amount as determined by the Board of  
          Equalization (BOE).  The initiative would require the BOE  


                                                           
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          to administer the tobacco tax provisions, including  
          collecting the tax, which is consistent with existing law. 
          
          Comments and issues

          1.  Tobacco tax revenues may not keep up with forecasted  
          increases in program costs.  The proportion of Californians  
          who smoke has consistently declined.  Tobacco tax revenues  
          have not grown with the overall economy and income growth.   
          Tobacco revenues have been declining except when there have  
          been rate increases or increased efforts against tax  
          evasion.  Although an increase in tobacco tax revenues is  
          expected with a rate hike, the overall proportion of  
          smokers will decline even more rapidly in the face of  
          higher prices.  The failure of tobacco taxes to grow could  
          provide a revenue shortfall for the ABX1 1 proposal, a  
          problem exacerbated by the rapid growth of medical costs  
          beyond the rate of overall inflation.

          2.  The tobacco tax in the initiative will affect the  
          revenues from the other state tobacco taxes.  The higher  
          price of cigarettes and tobacco products will mean higher  
          revenues, but will also have the effect of reducing  
          consumption, which in turn will reduce revenues for the  
          current tobacco taxes and the purposes that they serve.  As  
          a result, the initiative would backfill, that is hold  
          harmless, the other programs and funds to the extent they  
          are affected by this tax.  There are exceptions.  The  
          California Children and Families Trust Fund will not be  
          backfilled for the amount of funds that were spent on  
          health insurance for children in the 2007-2008 fiscal year.  
           The Hospital, Physician Services, and Resources accounts  
          in the Cigarette and Tobacco Products Surtax Fund would not  
          be backfilled.

          3.  Higher taxes could mean greater tax evasion.  Purchase  
          of cigarettes through avenues that escape taxation has been  
          a continuing problem for both the state and federal  
          government.  The state has instituted measures to reduce  
          this evasion, with some success.  The higher the tax, the  
          greater the incentive to market and/or purchase untaxed  
          cigarettes.  A number of law enforcement groups have  


                                                           
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          expressed concern that the tax increase in the bill could  
          lead to an increase in illegal trafficking of cigarettes.
          
          E.  Federal funds - sections of bill- 48,53,  
          62-65,67,71,72,77; sections of the initiative: 12

          Many components of ABX1 1 rely on federal funding, at least  
          in part.  The coverage expansions, except for undocumented  
          children, rely on federal Medicaid funds.  The Medi-Cal  
          hospital rate increase relies on federal matching of the  
          assessment to provide the increased payments for public and  
          private hospitals.

          ABX1 1 would also require changes in existing use of  
          federal funds that would require federal approval.  The  
          proposal would reduce from $540 million to $100 million the  
          amount of funds available annually to the public hospitals  
          from the Safety Net Care Pool (SNCP) and would also  
          redirect $180 million in funds that certain counties are  
          receiving for implementation of the current hospital waiver  
          coverage initiative program.  Disproportionate share  
          hospital (DSH) funds, which are payments to hospitals that  
          serve a large number of Medicaid and uninsured, would be  
          redirected to coverage.  The coverage expansions, insurance  
          mandate and higher Medi-Cal rates are expected to reduce  
          uncompensated costs that hospitals incur.  With the decline  
          in uncompensated costs, the state would not be able to  
          claim DSH funds.  To maintain the use of these funds, the  
          state would request federal approval to use DSH funds for  
          other purposes, such as coverage expansions.  

          ABX1 1 would alter Medi-Cal and other payments to 20  
          designated public hospitals under the state's hospital  
          demonstration waiver, which was approved in 2005.  Under  
          the waiver, these hospitals receive Medi-Cal payments for  
          services to Medi-Cal patients, up to established limits,  
          but must use their own documented expenditures (referred to  
          as "certified public expenditures") as the state match.   
          ABX1 1 would set up a different system which would require  
          federal approval.
          
          Comments and issues


                                                           
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          1.  Host of federal approvals required.  Some elements of  
          ABX1 1 are very likely to receive federal approvals; for  
          others gaining the necessary approvals may be more  
          difficult.  Many of the major components have been approved  
          in other states, although not as a complete package.  By  
          the time, federal approvals are sought there will be a new  
          administration and, perhaps, different policies.  Given  
          these uncertainties, there is some risk to the proposal  
          until the federal government has approved these options.  

          2.  State is unlikely to obtain adequate SCHIP funding for  
          children's expansion.  Congress and the President have come  
          to an agreement on SCHIP funding, which was reauthorized in  
          late 2007.  The proposed funding levels will not support  
          the size of the expansion envisioned in ABX1 1.  However,  
          the state can use Medicaid funds, although the matching  
          rate, 50 percent, is less advantageous than the rate for  
          SCHIP.  The funding levels for SCHIP could change as  
          Congress must reauthorize the program in March of 2009.
          
          F.  Hospital assessments - section of initiative: 12

          The initiative provides for a new hospital fee of 4 percent  
          of aggregate net patient revenue of hospitals.  Private and  
          small public hospitals would pay the state approximately  
          $1.7 billion in fees in the first year of implementation,  
          an amount which would be almost doubled by obtaining  
          federal matching funds.  The total amount of $3.3 billion  
          would then be paid to hospitals based on a formula  
          contained in the bill.  The hospitals would receive a rate  
          increase of approximately $1.5 billion for both inpatient  
          and outpatient services.  Six hundred million would be paid  
          to Medi-Cal managed care plans, which they, in turn, would  
          be required to pay to hospitals, with the specific amounts  
          for individual hospitals being subject to negotiations  
          between the plans and hospitals.  Another $600 million  
          would be used for the hospital services paid for in the  
          Medi-Cal and Healthy Families program expansions.

          Similarly, public hospitals would pay a new hospital fee,  
          which would generate $600 million in the first year of  


                                                           
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          implementation.   The rate increase for public hospitals  
          would be different than for private hospitals as the state  
          already provides the maximum funding allowed under state  
          law.  The funds raised by the fee on public hospitals would  
          be used as general funding for ABX1 1.  The state would  
          provide a Medi-Cal rate increase for public hospitals with  
          state funds, using state funds in lieu of local funds as  
          the state match.   These funds would be matched with  
          federal funds and then paid back to the hospitals, either  
          directly or indirectly through increased payments from  
          managed care plans and from payments for hospital services  
          provided under the coverage expansions.  

          Comments and issues
          
          1.  Governor's budget contains provisions that could impact  
          these proposals.  The proposed budget would divert hospital  
          funds, including DSH funds, to other purposes, thereby  
          reducing hospital reimbursements.  If these are adopted,  
          these would reduce funds for coverage expansions or  
          hospitals.  The budget does contain a proposed Medi-Cal  
          rate decrease, but hospital inpatient rates are exempt.  

          G.  Individual contributions - section of the bill: 53 

          The fiscal analysis assumes that under ABX1 1 about $2.5  
          billion of the purchasing pool's $7.1 billion in costs at  
          full implementation would come from employees and  
          dependents who obtain coverage through the pool in the form  
          of premium contributions.  These contributions would vary  
          as a function of income and with the choice of plan, and  
          would represent a small percentage of the full cost of the  
          coverage for lower income enrollees and a higher percentage  
          of the cost for higher income enrollees.  

          H.  Contingencies in event of funding shortfall - section  
          of initiative: 5

          Under the proposed initiative, twice annually the Director  
          of Finance would be required to review the funds available,  
          and projected to be available, to support the provisions of  
          ABX1 1 and other information, as specified, and to  


                                                           
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          determine whether the revenues are sufficient to fund the  
          programs and provider rates established and expanded by  
          ABX1 1 in the current fiscal year and in either of the two  
          following fiscal years.  If the Director determines that  
          the funds are not sufficient, he or she would be required  
          to so notify the Governor and the Legislature, including  
          the Joint Legislative Budget Committee.  If the Legislature  
          does not pass legislation to address the fiscal imbalance  
          within 180 days, several provisions contained in ABX1 1  
          would become inoperative, including the mandate to enroll  
          in and maintain minimum creditable coverage, the  
          requirements that health plans and insurers offer coverage  
          without regard to medical status, the health insurance risk  
          adjustment and reinsurance provisions that MRMIB and the  
          Commissioner are required to develop to assist plans and  
          insurers in managing risk in the individual insurance  
          market, the tax credit administered by MRMIB, and the  
          Medi-Cal eligibility expansions for adults.  In addition,  
          beginning on the January 1st which falls at least 270 days  
          after the Director's notification, Medi-Cal rates for  
          hospital services would revert to the rates that were in  
          effect on June 30, 2010.  

          If the Legislature and Governor took no further steps to  
          address the imbalance and these provisions were triggered,  
          several provisions of the bill would remain in effect,  
          including the purchasing pool, all of the assessments and  
          taxes with the exception of the hospital fees, requirements  
          pertaining to coverage tiers and rating restrictions in the  
          individual insurance market, the children's coverage  
          expansions, the Medi-Cal eligibility streamlining  
          provisions, data collection and transparency provisions,  
          and other health insurance regulatory reforms such as the  
          medical loss ratio and prohibitions on rescission of health  
          insurance contracts and policies.

          Comments and issues

          1.  Some reductions could be done administratively or  
          through the budget, others would require follow-up  
          legislation.  A number of elements of ABX1 1, including  
          funding for community clinics and the diabetes, obesity,  


                                                           
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          tobacco, and community makeover grant program provisions,  
          provisions dealing with Medi-Cal rates for physician  
          services, and the proposed specific tax credit for older  
          residents, are subject to appropriation by the Legislature  
          by the terms of ABX1 1 and could be reduced or eliminated  
          through the budget process without triggering the process  
          whereby major elements of the bill would be made  
          inoperative.  Together these elements may comprise some  
          $800 million of the $14 billion in total expenditures for  
          programs associated with the bill.  In addition, MRMIB is  
          given significant authority to alter the benefits and cost  
          sharing requirements associated with the coverage provided  
          through the purchasing pool in order to ensure the fiscal  
          solvency of the pool and its changes could be implemented  
          administratively, although it is not known how much in  
          savings it could achieve using its administrative  
          discretion.  However, fundamental changes in the revenues  
          and costs of the program over time (for example, if one or  
          more financing elements in the proposed initiative were  
          invalidated, or if revenues and costs grow  
          disproportionately over time,) would likely require  
          enactment of further legislation or would result in  
          initiation of the process to make major provisions  
          inoperative.
          
          VI. Scope of Practice Changes - sections of bill: 3, 5

          A.  Supervision of medical assistants.  Existing law  
          authorizes medical assistants (MAs) to administer  
          medication by intradermal, subcutaneous, or intramuscular  
          methods, and to perform injections and perform skin tests  
          and additional technical supportive services, upon the  
          specific authorization and under the supervision of a  
          licensed physician and surgeon or a licensed podiatrist. In  
          the case of primary care clinics and specialty clinics, MAs  
          may perform these duties upon the specific authorization of  
          a physician assistant (PA), a nurse practitioner (NP), or a  
          nurse-midwife.  Existing law authorizes a supervising  
          physician and surgeon at a primary care clinic to directly  
          provide written instructions to be followed by an MA in the  
          performance of such tasks or supportive services.  Existing  
          law also permits the written instructions from the  


                                                           
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          supervising physician and surgeon, to allow supervision of  
          an MA to be delegated to an NP, nurse-midwife, or PA, and  
          allows the tasks to be performed by the MA when the  
          supervising physician and surgeon is not at the primary  
          care clinic or specialty clinic, under specified  
          circumstances.  
          
          This bill would authorize an MA to perform these treatment  
          activities under the authorization of an NP, a  
          nurse-midwife, or a PA in any setting.

          The bill would also establish a nine-member Task Force on  
          Nurse Practitioner Scope of Practice, with specified  
          membership, to develop a recommended scope of practice for  
          NPs by June 30, 2009, and would require the Director of  
          Consumer Affairs (DCA) to promulgate regulations,  
          consistent with existing law, that adopt the Task Force's  
          recommended scope of practice by July 1, 2012.

          Comments and issues

          1.  Medical assistant supervision provisions are very  
          broad.  While current law allows medical assistants to work  
          under the specific authorization of a physician assistant,  
          nurse practitioner, or nurse-midwife in a primary care and  
          specialty clinic, and allows the instructions of a  
          physician, in a primary care clinic, to a medical assistant  
          to provide for supervision of the assistant to be delegated  
          to a nurse practitioner, physician assistant, or  
          nurse-midwife, this bill would allow supervision of medical  
          assistants by nurse practitioners, physician assistants,  
          and nurse-midwives to occur in any facility or setting.   
          This would allow such supervision to occur in medical  
          offices, retail clinics such as those at local drug stores,  
          and other unlicensed settings, where there would be no  
          licensing oversight.  By contrast, AB 859 (Bass, 2006)  
          which was sponsored by the California Academy of Physician  
          Assistants (CAPA), proposed that this extension be limited  
          to licensed settings.  AB 859 failed passage in Assembly  
          Business and Professions Committee.  
          
          2.  Nurse practitioner scope of practice provisions  


                                                           
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          conflict with existing law.  Under current law, the Board  
          of Registered Nursing defines and interprets the practice  
          of registered nursing, including practice by nurse  
          practitioners.  The task force created under this bill  
          appears to conflict with the Nursing Practice Act, which  
          reads, in part, "No state agency other than the board may  
          define or interpret the practice of nursing for those  
          licensed pursuant to the provisions of this chapter, or  
          develop standardized procedures or protocols pursuant to  
          this chapter, unless so authorized by this chapter, or  
          specifically required under state or federal statute."  A  
          Senate Business Professions and Economic Development (BPED)  
          committee analysis of provisions similar to those contained  
          in the bill states that it is the Legislature's prerogative  
          to determine scope of practice for licensees under the  
          Business and Professions Code.  This provision should be  
          amended to instead require Department of Consumer Affairs  
          to recommend a legislative proposal for any changes to the  
          scope of practice for nurse practitioners. 
          
          VII. Data Transparency and Pay-For-Performance Provisions -  
          sections of bill 13, 32-33
          The bill contains several provisions designed to expand  
          reporting and public disclosure of health care cost,  
          quality, and outcome data (Section A, below) and to link  
          payments to providers to their performance on established  
          quality indicators (Section B, below).
          
          A.  Data collection and transparency  

          The bill would establish a sixteen-member Health Care Cost  
          and Quality Transparency Committee to develop and recommend  
          to the Secretary a health care cost and quality  
          transparency plan designed to provide public reporting of  
          health care safety, quality, and cost information, and to  
          monitor the implementation of the plan.  The committee  
                                                                                would be required to make its recommendations within one  
          year of its first meeting and to review the plan at least  
          once every three years.  The bill would direct that the  
          plan provide for collection of data from health plans and  
          insurers, medical groups, health facilities, licensed  
          physicians, and other health care professionals, and that  


                                                           
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          it include a process for assessment of compliance with data  
          collection requirements and a recommended fee schedule to  
          fund its implementation.  Within 60 days of receipt of the  
          plan, the Secretary would be required to either accept the  
          plan and develop regulations to implement it, or refer the  
          plan back to the committee for further modifications.  The  
          Secretary would be directed to assure timely implementation  
          of the plan, including determining the specific data to be  
          collected, collecting the data, and providing an  
          opportunity for providers who report data to review,  
          comment on, and appeal any outcome report before it is  
          released.  The bill would require the Office of Statewide  
          Health Planning and Development (OSHPD) to provide the  
          Secretary with a proposed fee schedule to be paid by  
          providers to establish and support implementation of the  
          plan.  Proposed fees would be subject to approval by the  
          Legislature and Governor in the annual budget.  Fees  
          imposed on hospitals specifically would be capped at 0.006  
          percent of their operating costs, as specified.  The bill  
          would establish a special fund for fees and other  
          contributions.  The Secretary would be required to report  
          to the Legislature every six years after implementation of  
          the plan, and to include recommendations concerning  
          continuation of the committee.  

          The bill would also require the Office of the Patient  
          Advocate to provide public access to reports and data  
          obtained by the lead agency. 

          The proposal would additionally require OSHPD, beginning  
          January 1, 2010, to publish risk-adjusted outcome reports  
          for percutaneous coronary interventions conducted in  
          hospitals and to compare risk-adjusted outcomes by hospital  
          and physician, and would establish a process for the  
          appointment of physician panels to review and approve  
          models used to prepare outcome reports on individual  
          physicians.

          Comments and issues
          
          1.  The bill caps fees to be paid by hospitals.  Because  
          fees supporting the committee as well as the expanded data  


                                                           
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          collection and reporting called for in the bill are capped  
          for hospitals, but not for other providers who would be  
          subject to reporting requirements, other providers could be  
          disproportionately assessed as a percent of the overall  
          funding required to implement these provisions of the bill.  


          B.Pay-for-performance provisions. 
          
          ABX1 1 requires the California Health and Human Services  
          Agency (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.  The bill further  
          would require that the benchmarks developed by CHHSA be  
          advanced as a common statewide framework for quality  
          measurement and improvement.  The bill would also require  
          DHCS to use pay for performance measures for awarding up to  
          25 percent of the Medi-Cal physician rate increase.
          Comments and issues
          
          1.  Does the process envisioned in ABX1 1 promote better  
          outcomes for patients?
          Opponents to this provision have raised the issue that  
          granting CHHSA and CalPERS, one of the largest purchasers  
          of health coverage in the country, broad discretion to  
          adopt a pay for performance program could have the  
          unintended consequence of creating a disincentive to treat  
          those who are hardest to care for.

          2.  There are concerns that pay for performance will harm  
          those physicians who treat patients with lower  
          socioeconomic status.  Although the bill requires DHCS to  
          consult with various stake holders in developing guidelines  
          for pay for performance measures, there is no indication  
          that they should attempt to recognize pay for performance  
          difficulties based on larger clinical and socioeconomic  
          factors such as poverty, English as a second language and  
          mental health. Opponents remain concerned that there may  
          not be such an adjustment mechanism and, if there is that  
          it may not adequately take into account the actual  


                                                           
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          difficulties and costs of treating these patients. In other  
          pay for performance programs, physicians who treat those  
          more difficult to care for are often penalized because they  
          may be less likely to meet designated goals.
          
          VIII. Other provisions
          
          A.  Hospital and physician rates - sections of bill: 72,  
          76, 77
          
          The bill would require Medi-Cal to pay private and special  
          district hospitals the maximum allowed under federal law.   
          The payments would be adjusted annually by a cost  
          escalator.  As noted earlier, the increased funds for the  
          Medi-Cal rate increase would be generated by a fee on  
          hospitals.  The collected fee would be matched with federal  
          funds and paid back to hospitals in the form of a Medi-Cal  
          rate increase.  The hospitals would get a direct increase  
          in rates for inpatient and outpatient fee-for-service  
          Medi-Cal.  In addition, Medi-Cal managed care plans would  
          be paid more for the hospital services of those they cover,  
          but the entire amount must be passed through to hospitals  
          with the specific amounts subject to negotiation between  
          the plans and the hospitals.  Hospitals will also see  
          increased revenues through the hospital component of the  
          coverage expansion programs.  

          For physicians, the amount of the rate increase is not  
          specified. Instead, the bill's provisions would allow  
          reimbursement to be established at a percentage of the  
          amount paid by Medicare for the same services.  The bill  
          would also prohibit any reduction in Medi-Cal rates for  
          physician services that are currently paid at or above the  
          Medicare reimbursement rate.  The amount of the increase in  
          physician rates would be subject to appropriation in the  
          annual state budget and would require obtaining federal  
          matching funds. As indicated in the previous section of the  
          analysis, the bill would allow DHCS to set aside as much as  
          25 percent of the rate increase to be paid based on pay for  
          performance measures.  A recent study by the Urban  
          Institute showed that California's Medi-Cal payments to  
          physicians average only 59 percent of Medicare rates for  


                                                           
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          similar services, which is below the national Medicaid  
          average of 69 percent.  Other studies have found that low  
          payment rates contribute to low rates of physician  
          participation in Medi-Cal.  

          Comments and issues

          1.  The Governors' proposed 2008-2009 budget contains rate  
          cuts for Medi-Cal providers.  Hospital inpatient services  
          were exempted from rate cuts in the Governor's proposed  
          budget, but supplemental funds used to pay for the  
          uncompensated costs of treating Medi-Cal patients and the  
          uninsured were proposed to be cut, as well as outpatient  
          payments.  If these cuts were to be adopted, the gap  
          between what hospitals are paid now and what they are  
          required to be paid by ABX1 1 would increase.  Because the  
          modeling assumes that, under ABX1 1, physicians' rates  
          would be increased to 70 percent of Medicare, there would  
          be a gap that would need to be made up if that goal is to  
          be achieved.  In the near term, the reduction in rates  
          contained in the proposed budget would exacerbate the  
          continuing problem of physician participation in the  
          Medi-Cal program which would also apply to the coverage  
          expansions proposed in ABX1 1.  Adjusting for this problem  
          would require an additional cost for the program proposed  
          in ABX1 1.

          2.  Physician rate increases are left up to future  
          legislation.  ABX1 1 would require that any increase in  
          payments to physicians would occur only if an appropriation  
          was made in the annual budget act.  

          B.  IHSS worker provisions - section of bill: 60
          
          Existing law establishes the In-Home Supportive Services  
          (IHSS) program under which counties arrange and provide for  
          specified services for approximately 400,000 aged, blind,  
          and disabled persons who are otherwise at risk of being  
          placed in a nursing home or other institution if they did  
          not receive IHSS services.  Federal (Medicaid), state and  
          county funds are used to finance the current system which  
          is projected to cost approximately $4 billion next fiscal  


                                                           
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          year or, on average, a cost of $10,000 per recipient. 

          The current IHSS program provides: (1) domestic services,  
          such as housework, shopping for groceries and meal  
          preparation; (2) non-medical personal care services, such  
          as toileting, dressing, transportation; (3) paramedical  
          services, such as giving medications and changing a  
          colostomy bag; and, (4) protective supervision for those  
          who, due to cognitive decline or dementia, cannot be left  
          alone for extended periods.. The federal government  
          finances approximately half of these costs and the state  
          and counties share in the remaining half of the cost using  
          a formula of 65 percent state and 35 percent county  
          funding.  The federal government has approved these  
          programs because of the savings accruing both to the state  
          and to the federal government by keeping these patients out  
          of institutions.

          ABX1 1 increases the state funds that can be used to pay  
          for IHSS workers' health benefits by the county or public  
          authority, which are entities established to administer  
          portions of the IHSS program in some counties.  Currently,  
          the state provides its share of funding, 65 percent, of the  
          statutorily allowed $12.10 per hour in wages and $.60 in  
          benefits. The increases would be sequential, with two of  
          the three proposed increases conditioned upon a specified  
          increase in the state's general fund.  The first increase  
          would raise the benefits that the state would share in  
          paying to $.85, the second increase would increase benefits  
          to $1.10 and the third to $1.35. ABX1 1 also provides that,  
          if the employee representative chooses, health care  
          benefits can be provided through a trust fund and the  
          county or public authority must abide by that decision.  
          
          Comments and issues

          1.  IHSS provisions affect counties and safety net  
          hospitals.  Increasing funding for benefits for IHSS  
          workers would increase both state and county costs,  
          assuming most counties make the benefit adjustments.  The  
          fiscal impact assessment for ABX1 1 assumes the cost to the  
          state in the first full year of implementation would be $21  


                                                           
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          million, and that these costs would likely increase in the  
          second and third stage increases provided by the bill.   
          County costs are unknown.  Currently some counties provide  
          benefits to IHSS workers with a plan that is centered on  
          the county hospital.  To the extent that health benefits  
          are increased for IHSS workers, this could be a benefit to  
          the county by increasing the coverage in the plan and  
          reducing uncompensated costs at the hospital.  However, to  
          the extent that trusts contract with providers other than  
          the county, this could have a negative impact.

          2.  Language regarding trusts is unclear.  ABX1 1 does not  
          provide any reference or requirements as to the type and  
          structure of trust fund that would be used for providing  
          benefits.  Proponents state that it would be a Taft-Hartley  
          trust which is created in federal law so that private  
          sector unionized employees can get health and other  
          benefits.  Most Taft-Hartley trusts are structured in a way  
          that makes them subject to ERISA regulation.  A basic  
          characteristic of a Taft-Hartley trust is that the fund and  
          its assets are managed by a joint board of trustees equally  
          representative of management and labor.  Such a board is  
          not specifically provided for in ABX1 1.  In addition,  
          these trusts are not subject to regulation as health plans  
          or insurers in California.
          
          C.  Electronic prescribing - sections of bill: 7-10, 23, 34

          Existing law makes it a crime for healing arts  
          practitioners to engage in or receive consideration for  
          activities associated with the referral of patients.   
          Existing law exempts from this restriction the provision,  
          in certain cases, of non-monetary remuneration in the form  
          of hardware, software, information technology and training  
          services used solely to receive and transmit electronic  
          prescription information, as specified.  The bill would  
          permit Medi-Cal managed care organizations to provide  
          hardware, software, or information technology, as well as  
          the training necessary to receive and transmit 
          e-prescription information, to pharmacists and in-network  
          pharmacies.     



                                                           
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          Existing pharmacy law defines "prescription" as an oral,  
          written, or electronic transmission order, meeting  
          specified requirements.  This bill would define  
          "e-prescribing" as a prescription , or prescription-related  
          information, transmitted between the point of care and the  
          pharmacy, using electronic media.

          The bill would require every licensed prescriber or  
          pharmacy to have the ability to transmit and receive  
          e-prescriptions by January 1, 2012, and would give the  
          State Board of Pharmacy and other specified licensing  
          boards authority to ensure compliance.  The bill would  
          prohibit e-prescribing from interfering with a patient's  
          existing freedom to choose a pharmacy or with a prescribing  
          decision at the point of care, and would additionally  
          require prescribers to offer patients a written receipt  
          that includes specified information.  

          E-prescription systems would be required either to comply  
          with national standards for data exchange or be accredited;  
          to allow real-time verification of an individual's  
          eligibility for benefits; to comply with state and federal  
          confidentiality and data security requirements; and to  
          comply with state record retention and reporting  
          requirements. 

          The bill would require DHCS to identify best practices  
          related to e-prescribing, to make recommendations for  
          statewide adoption of e-prescribing by January 1, 2009, and  
          to develop a pilot program to foster the adoption and use  
          of e-prescribing by health care providers who contract with  
          Medi-Cal, contingent upon the availability of federal  
          funding.  The bill would also permit DHCS to provide  
          e-prescribing technology to participating Medi-Cal  
          providers, and require health plans and insurers to make  
          the most current prescription drug formularies available  
          electronically to prescribers and pharmacies.
          
          Comments and issues

          1.  Potential impacts on providers and pharmacies.  A  
          Senate Business Professions and Economic Development  


                                                           
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          Committee analysis of similar provisions in an earlier  
          proposal notes that requiring real time verification of  
          benefits and coverage will likely increase providers'  
          hardware, software, and information technology maintenance  
          costs.  

          D.  Electronic health records - sections of bill: 15, 44

          Existing law, under the federal Health Insurance  
          Portability and Accountability Act (HIPAA), sets forth  
          national standards and requirements for the transmission,  
          storage, and handling of certain electronic health care  
          data.  This bill would require, by January 1, 2010, CalPERS  
          to provide an electronic personal health record (PHR) for  
          enrollees.  Electronic PHRs would be required to provide,  
          at a minimum, access to real-time, patient-specific  
          information regarding benefit eligibility and cost sharing  
          requirements, but would permit records to incorporate  
          additional data at the option of the enrollee.

          The bill would also permit MRMIB to provide or arrange for  
          the provision of electronic PHRs for Healthy Families  
          enrollees, to the extent that funds are appropriated for  
          this purpose.  The bill would permit access to be provided  
          through a web-based system and would specify additional  
          information that MRMIB may require to be included in the  
          electronic record, at the option of the enrollee.  

          The systems developed by CalPERS and MRMIB would be  
          required to adhere to national standards for  
          interoperability, privacy, and data exchange, or to be  
          certified by a nationally recognized certification body and  
          to comply with applicable state and federal confidentiality  
          and data security requirements.

          E.  Healthy Actions and incentive rewards - sections of  
          bill: 16, 28.5, 37, 42, 57, 74

          Existing law requires, by regulation, health plans to cover  
          basic health care services and medically necessary  
          services, as defined.  The bill would, effective January 1,  
          2009, require every health care service plan and every  


                                                           
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          policy of health insurance, except for a Medicare  
          supplement plan, that covers hospital, medical, or surgical  
          expenses on a group or individual basis to offer to include  
          a Healthy Action Incentives and Rewards Program (Healthy  
          Actions program), as defined, in connection with a health  
          care service plan or insurance policy, in the case of a  
          group policy, under the terms and conditions agreed upon  
          between the group and the health plan or insurer. The bill  
          would require health plans and insurers to communicate the  
          availability of the program to all prospective groups with  
          whom they are negotiating and to existing groups upon  
          renewal.  
          The bill would require all Healthy Actions programs  
          approved by the DMHC director and the Insurance  
          Commissioner to be offered and priced consistently across  
          all groups, potential groups, and individuals and to be  
          offered and priced without regard to the health status,  
          prior claims experience, or risk profile of the members of  
          a group or individual.   The bill would prohibit a plan or  
          insurer from conditioning the offer, delivery, or renewal  
          of a contract that covers hospital, medical, or surgical  
          expenses, on the group's purchase, acceptance, or  
          enrollment in a Healthy Actions program.  The bill would  
          also prohibit rewards and incentives from being designed,  
          provided, or withheld based on the actual health service  
          utilization or health care claims experience of the group,  
          members of the group, or the individual. 

          The bill would require health plans to file the program  
          description and design as an amendment to its application  
          for licensure and would require insurers to file the same  
          information with the Insurance Commissioner in order to  
          demonstrate compliance with these requirements.  The bill  
          would also require the DMHC director or Insurance  
          Commissioner to disapprove, suspend, or withdraw any  
          product or program developed if it is determined that the  
          product or product design has the effect of allowing health  
          care service plans to market, sell, or price health  
          coverage for healthier lower risk profile groups in a  
          preferential manner that is inconsistent with current law. 

          The bill would require CalPERS to provide a Healthy Actions  


                                                           
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          program to its enrollees by January 1, 2010, and would  
          require DHCS to establish a Healthy Actions program as a  
          covered benefit under Medi-Cal only to the extent that  
          federal financial participation is obtained.  The bill  
          would require DHCS to secure federal financial  
          participation and all federal approvals necessary to  
          implement and fund Medi-Cal Healthy Actions program  
          services.

          The bill would require that any Healthy Actions program  
          include health risk appraisals, access to an appropriate  
          health care provider to review the results of the  
          appraisals, and incentives or rewards for enrollees to  
          become more engaged in their health care and to make  
          appropriate choices that support good health.  The bill  
          would permit incentives and rewards to include, but not be  
          limited to, health premium reductions, differential  
          co-payment or coinsurance amounts, cash payments,  
          nonprescription pharmacy products or services, exercise  
          classes, gym memberships, and weight management programs.   
          The bill would also prohibit Healthy Actions program  
          requirements from replacing any other requirements that  
          plans or insurers provide health care screening services,  
          childhood or adult immunizations, and preventive health  
          care services.  

          Employers would be permitted to provide health coverage  
          that includes a Healthy Actions program that meets the  
          above requirements and permit an employer-offered program  
          to include monetary incentives and premium cost reductions  
          for nonsmokers and for smoking cessation activities.  

          Comments and issues

          1.  No CHBRP analysis of benefit mandates in program.  AB  
          1996 (Thomson - Chapter 795, Statutes of 2002) and SB 1704  
          (Kuehl - Chapter 684, Statutes of 2006) require that the  
          California Health Benefits Review Program (CHBRP),  
          together, provide an independent analysis of the medical,  
          financial, and public health impacts of legislation  
                                            proposing to mandate or repeal a health plan or insurance  
          benefit or service.  This bill seems to mandate a number of  


                                                           
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          benefits by requiring an offer to include a Healthy Actions  
          program in health plan and insurance products.  However,  
          there has not been a CHBRP analysis conducted consistent  
          with current law.  
          
          F.  Diabetes, obesity and smoking provisions - sections of  
          bill:  29, 30, 75

          1.  California Diabetes Program and Diabetes Services  
               Program 
          Existing law gives DPH broad authority to protect,  
          preserve, and advance public health.  Under these  
          provisions, DPH established the California Diabetes Program  
          (CDP) in 1981, which receives grants from the federal  
          Centers for Disease Control and Prevention.  For the  
          current federal fiscal year, the grant is $1.199 million.   
          The state currently provides no funding for this program.
          
          The bill would require DPH to maintain the CDP, only to the  
          extent that state funds are appropriated, to provide  
          information on diabetes prevention and management to the  
          public, as well as technical assistance to the Medi-Cal  
          program regarding the scope of benefits under a new  
          Comprehensive Diabetes Services Program (CDSP), which would  
          be established under the bill.  The CDSP would provide  
          diabetes prevention and management services to  
          fee-for-service Medi-Cal enrollees who have pre-diabetes or  
          diabetes, are between 18 and 64 years of age and who are  
          not dually enrolled in Medi-Cal and Medicare.  The bill  
          would require DHCS to develop and implement incentives for  
          Medi-Cal fee-for-service eligible beneficiaries and  
          providers.  

          The bill would require DHCS to collect specified data to  
          monitor the health outcomes of participating Medi-Cal  
          beneficiaries.  The bill would also require DHCS, in  
          consultation with CDP, to contract with an independent  
          organization to report on health outcomes and cost savings,  
          and estimate the short- and long-term cost savings of  
          expanding CDSP to private or commercial insurance markets.

          The bill would require DHCS to secure all federal approvals  


                                                           
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          to implement and fund CDSP services and would permit the  
          program to be implemented only to the extent that federal  
          financial participation has been obtained.

          2.  Smoking cessation 
          Existing law imposes various responsibilities and duties on  
          the DPH relating to tobacco use and prevention programs,  
          including administering funding for programs relating to  
          smoking cessation, such as the California Smokers'  
          Helpline. Each year, about $67 million of cigarette surtax  
          revenue is transferred to the Health Education Account  
          (HEA) to support tobacco use control programs at DPH and  
          the California Department of Education.

          This bill would require DPH, in consultation with DMHC,  
          DHCS, MRMIB, and DOI, to annually identify smoking  
          cessation benefits provided by the ten largest public and  
          private providers of health care coverage and to make this  
          information available on its website.  This bill would also  
          require DPH to include smoking cessation benefit  
          information as part of its educational efforts to prevent  
          tobacco use.

          The bill would require DPH, to the extent funds are made  
          available, to increase the capacity of the California  
          Smokers' Helpline and to expand public awareness about the  
          helpline and other existing cessation benefits.  DPH would  
          be required to evaluate changes in awareness concerning the  
          availability of cessation benefits by beneficiaries and  
          health care providers, changes in utilization rates of  
          these benefits, smoking-related indicators, changes to  
          smoking cessation benefit coverage, and the impact on  
          smoking rates resulting from the expansion of the helpline.

          Comments and issues

          1.  Previous smoking cessation legislation.  The bill's  
          provisions related to the collection of information on  
          smoking cessation benefits offered by plans and insurers do  
          not go as far as other bills that have been considered by  
          the Legislature, which have required plans to offer  
          benefits.  SB 576 (Ortiz) of 2006 would have required  


                                                           
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          health plans and health insurers to provide coverage for  
          two courses of tobacco cessation treatments per year,  
          including counseling and prescription and over-the-counter  
          medications, and would have prohibited plans and insurers  
          from applying deductibles but allow specified co-payments  
          for those benefits, an approach that research has shown to  
          be more effective.  This bill was vetoed by Governor  
          Schwarzenegger.  
           
          G.  Community makeover grants - section of bill: 31

          The bill would, contingent upon an appropriation, create  
          the Community Makeover Grant program, under which grants  
          would be awarded by DPH to local health departments.   
          According to the author and the administration, base  
          funding for each local health department would be $200,000  
          ($12 million total).  An additional $12 million would be  
          distributed on a per capita basis, to be expended for  
          specified purposes related to active living and healthy  
          eating.  DPH would be required to issue guidelines for  
          local health departments on how to prepare a local plan to  
          promote active living and healthy eating in order to  
          prevent obesity and other related chronic diseases.  
          
          Existing law requires the DPH to develop a comprehensive  
          strategic plan that assesses California's current programs  
          and efforts in obesity prevention, identifies core gaps or  
          concerns, identifies best practices, and makes  
          recommendations for improvement, called the California  
          Obesity Prevention Plan.  Under this bill, DPH would be  
          required to track and evaluate obesity-related measures, as  
          specified, to direct the most efficient allocation of  
          resources for obesity prevention, and to measure the extent  
          to which funded programs promote the goals identified in  
          the California Obesity Prevention Plan.  

          The bill would also require DPH, to the extent funds are  
          appropriated, to develop a public education campaign  
          regarding the importance of obesity prevention that frames  
          active living and healthy eating as "California living," in  
          accessible and culturally and linguistically appropriate  
          formats.  DPH would be required to provide assistance and  


                                                           
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          support for schools to promote the availability and  
          consumption of fresh fruits and vegetables and foods with  
          whole grains, and also to provide technical assistance to  
          help employers integrate wellness policies and programs  
          into employee benefit plans and worksites.  
          
          H.  Prohibition on hospital balance billing - section of  
          bill: 18 

          Existing law requires health plans to reimburse providers  
          for emergency services and care provided to its enrollees,  
          until the care results in stabilization of the enrollee,  
          and provides that health plans are liable for the  
          reasonable charges by non-contracting hospitals, as well as  
          treating physicians, for emergency services provided to  
          health plan enrollees.  Existing law prohibits contracting  
          providers from billing enrollees for the portion of their  
          customary charge that is not paid by health plans, other  
          than any applicable co-payments, coinsurance, or  
          deductibles, but contains no similar prohibition for  
          non-contracting providers.  

          This bill would prohibit a non-contracting hospital, as  
          defined, from billing a covered patient for non-emergency  
          health care services and post-stabilization care, except  
          for applicable co-payments and cost shares.  The bill does  
          not change the law relating to non-contracting treating  
          physicians, who may continue to bill patients for the  
          difference.
          
          I.  Public insurer - sections of bill: 17, 20

          The bill would establish the California Health Benefits  
          Service (CHBS) for the purpose of expanding public coverage  
          options.  The CHBS would be required, by January 1, 2009,  
          to identify and report to the Legislature on barriers  
          relating to the establishment and maintenance of joint  
          ventures between health plans that contract with, or are  
          governed, owned, or operated by, a county, county special  
          commission, county organized health system, or a county  
          health authority.  The report would also be required to  
          identify barriers that may inhibit the expansion of  


                                                           
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          services by existing local health plans or by the County  
          Medical Services Program (CMSP) into counties where there  
          is not a local health initiative or county organized health  
          plan, or that would inhibit the CMSP from participating in  
          joint ventures.

          The bill would require the CHBS to provide technical  
          assistance to local health care delivery entities, such as  
          local health initiatives or county organized health  
          systems, to support joint ventures and other efforts to  
          expand services to other geographic areas and populations.   
          The CHBS would also provide local health care delivery  
          entities technical assistance to contract with providers to  
          provide health care services in counties where there is not  
          a local initiative or county organized health plan that  
          contracts with the state or that opts to participate in  
          such joint ventures.  The bill would authorize the DHCS to  
          enter into contracts with joint ventures to provide medical  
          services to specified populations.

          The bill would authorize local health plans to form joint  
          ventures to create integrated networks of public health  
          plans that pool risk and share networks, and in doing so,  
          would require participating health plans to seek contracts  
          with public hospitals, county health clinics, and community  
          clinics.  All joint ventures and health care networks would  
          be required to seek licensure as a health care service plan  
          pursuant to the Knox-Keene Act.  

          The bill would establish a Program Stakeholder Committee,  
          within the CHBS, comprised of ten members appointed by the  
          DHCS director, the Senate Rules Committee, and the Speaker,  
          who represent specified stakeholders including local health  
          initiatives, county organized health systems, organized  
          labor, and health care purchasers, consumers and providers,  
          to provide input and assistance with the implementation of  
          CHBS responsibilities.  DHCS would be required, by November  
          1, 2009, to report and make recommendations to the Senate  
          and the Assembly on the implementation and progress of the  
          CHBS.
          
          J.  Workforce development - section of bill: 76


                                                           
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          ABX1 1 would require a portion of the payments for public  
          hospitals to be set aside in a special fund for workforce  
          development.  Monies in the fund would be subject to  
          legislative appropriation and used for retraining the  
          health care workers in county hospital and clinic systems.   
          The Office of Statewide Health Planning and Development  
          (OSHPD) would administer the fund and make allocations from  
          the fund to counties.  Proponents argue that, with the  
          Medi-Cal rate increase, public hospitals will face stronger  
          competitive pressures and this training will help them  
          retain their viability in a more competitive market.
          
          K.  Evaluation - section of bill: 14

          The proposal would require the Secretary, in collaboration  
          with other relevant state agencies and an advisory body, as  
          specified, to track and assess the effects of health care  
          reform, including assessments of the sustainability and  
          solvency of the pool, the cost, access, availability, and  
          affordability of health care, the health care coverage  
          market, the effect on employers and employment, the county  
          health care safety net system, and the capacity of various  
          health care professions.  The Secretary would be required  
          to submit the assessment to the Legislature by March 1,  
          2012, and update it, biennially, thereafter.
          
          L.  Non-severability - section of bill: 84.5

          The bill provides that its provisions are non-severable,  
          meaning that if any provision of the bill is held to be  
          invalid, all provisions of the bill would become  
          inoperative.
          

                                  FISCAL IMPACT

           According to a fiscal analysis prepared by the  
          administration, total costs of the various coverage  
          provisions, rate increases, public health initiatives, and  
          administrative requirements associated with ABX1 1 would be  
          approximately $14.9 billion in total funds in the first  


                                                           
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          full year of implementation, in 2007 dollars.  These costs  
          would increase at varying rates between the effective date  
          of the bill and the date of full implementation.  Among the  
          more significant costs of the proposal would be $7.1  
          billion for the coverage provided by the purchasing pool,  
          $2.4 billion for the proposed Medi-Cal and Healthy Families  
          eligibility expansions, $3.8 billion for the proposed  
          Medi-Cal rate increases for hospitals and physicians, $465  
          million for the proposed tax credits for employees and  
          early retirees, about $300 million for the various public  
          health initiatives, and about $540 million for  
          administration, including net payments associated with the  
          automatic enrollment provisions for persons who do not  
          comply with the mandate to maintain minimum creditable  
          coverage.  These costs are summarized in the chart below.

          According to the fiscal analysis, these costs would be  
          offset by approximately $15.1 billion in revenues and cost  
          savings in the first full year of implementation.  The  
          analysis assumes payments by employers choosing to pay  
          health care contributions would total $1.6 billion; another  
          $940 million would come from employer contributions towards  
          the costs of public programs for employees who are eligible  
          for public programs.  Individual contributions in the form  
          of premium payments for coverage through the purchasing  
          pool would produce another $2.5 billion.  Other revenue  
          sources would include federal funds ($4.4 billion),  
          redirected county funds ($1 billion), hospital assessments  
          ($2.5 billion), tobacco tax revenues ($1.5 billion), and  
          savings from reduced utilization of other health programs  
          ($727 million).  
           












                                                           
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                          ABX1 1 Fiscal Impact Summary
                             (Dollars in Millions)

          
           ------------------------------------------------------------- 
          |Costs                         |Full Implementation           |
          |------------------------------+------------------------------|
          |Purchasing Pool               |$7,130                        |
          |------------------------------+------------------------------|
          |Medi-Cal and Healthy Families |$2,434                        |
          |Expansion                     |                              |
          |------------------------------+------------------------------|
          |Tax Credit 250-400%           |$415                          |
          |------------------------------+------------------------------|
          |Additional Tax Credit for     |$50                           |
          |Early Retirees                |                              |
          |------------------------------+------------------------------|
          |Expanded Access to Primary    |$140                          |
          |Care Funding Increase         |                              |
          |------------------------------+------------------------------|
          |Diabetes/Healthy Actions      |$100                          |
          |------------------------------+------------------------------|
          |Obesity/Tobacco               |$63                           |
          |------------------------------+------------------------------|
          |Section 125 Tax Treatment     |$235                          |
          |------------------------------+------------------------------|
          |Seamless Enrollment           |$114                          |
          |------------------------------+------------------------------|
          |Medi-Cal Rate Increases       |$3,793                        |
          |------------------------------+------------------------------|
          |In-Home Supportive Services   |$21                           |
          |Health Benefits               |                              |
          |------------------------------+------------------------------|
          |State Administration Costs    |$427                          |
          |------------------------------+------------------------------|
          |                              |                              |
          |Total Costs                   |$14,922                       |
           ------------------------------------------------------------- 
          
          
           ------------------------------------------------------------- 


                                                           
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          |Revenues and Other Funding    |Full Implementation           |
          |------------------------------+------------------------------|
          |Employer Fee                  |$1,630                        |
          |------------------------------+------------------------------|
          |Employer - Horizontal Equity  |$940                          |
          |------------------------------+------------------------------|
          |Hospital Fee                  |$2,504                        |
          |------------------------------+------------------------------|
          |Individual Contributions      |$2,460                        |
          |------------------------------+------------------------------|
          |Federal Funds                 |$4,368                        |
          |------------------------------+------------------------------|
          |County Funds and Program      |$1,727                        |
          |Savings                       |                              |
          |------------------------------+------------------------------|
          |Tobacco Tax Increase          |$1,463                        |
          |------------------------------+------------------------------|
          |Total Revenue                 |$15,092                       |
          |                              |                              |
           ------------------------------------------------------------- 
          

           ------------------------------------------------------------- 
          |                              |                              |
          |Difference                    |$170                          |
          |                              |                              |
           ------------------------------------------------------------- 

          These costs are approximately $500 million higher than  
          those estimated in the Assembly Appropriations Committee  
          analysis, most of which, according to administration  
          representatives, is accounted for by adjustments to the  
          assumed costs of coverage in the purchasing pool and higher  
          assumed costs for Medi-Cal managed care payment rates.










                                                           
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                            BACKGROUND AND DISCUSSION  

          A.  Author's Purpose
          
          According to the author, ABX1 1, and a companion statewide  
          ballot initiative anticipated for the November 2008 ballot,  
          represent comprehensive and sweeping reforms to  
          California's ailing health care system.  The author states  
          that the bill would significantly reduce the numbers of the  
          uninsured through public program expansions and increased  
          employer participation in the health care of workers;  
          organize and improve the health insurance market for  
          individuals; advance innovative strategies to reduce health  
          care costs and improve quality; and protect California's  
          budget through dedicated revenues that make the proposal  
          self-financing.  The author states that, once the bill is  
          fully implemented, approximately 70 percent of California's  
          5.1 million uninsured, most of who are low-income working  
          individuals and their families, including 800,000 children,  
          will no longer be uninsured for health care.

          The author states that, by covering many of the uninsured,  
          this bill would reduce the existing cost shift to the  
          insured of uncompensated health care costs, which raises  
          health care costs, health insurance premiums and the costs  
          of government health care programs.  The author asserts  
          that the bill would bring in $4.6 billion in new federal  
          funds that would help pay for the public program  
          expansions, Medi-Cal physician rate increases, and,  
          combined, with the over $2.3 billion in additional revenues  
          generated by the proposed hospital fee, Medi-Cal hospital  
          rate increases.  The author states that raising Medi-Cal  
          rates is another strategy to improve access to health care  
          and to reduce cost shifting to private purchasers,  
          individual consumers, and employers.

          B.  Background 

          The health care system has been engaged in a downward  
          spiral caused by rising costs and declining coverage.   
          According to data compiled by the California Healthcare  


                                                           
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          Foundation, health care spending in California reached a  
          new high of $169 billion in 2004, or 11 percent of the  
          state's economy.  Health care spending has increased at an  
          average of 8 percent between 1980 and 2004, over twice the  
          rate of economic growth during that same time period.   
          Current projections indicate that health care spending  
          could exceed 20 percent of the gross national product by  
          2025. 

          Between 1999 and 2005, premiums for employer provided  
          health insurance in California increased by 97 percent,  
          while the general cost of living increased by "only" 24  
                  percent.  Average premium increases in California in 2006  
          (8.7 percent) were more than twice the California inflation  
          rate of 4.2 percent, and higher than the national increase  
          rate of 7.7 percent.  At the same time, of employers  
          offering any kind of health insurance coverage, over  
          one-third of employers overall, and nearly half of  
          employers with less than 200 employees, experienced premium  
          increases of over 10 percent.  

          According to the UCLA Center for Health Policy Research,  
          over 20 percent (20.2) of the non-elderly population,  
          roughly 6.5 million residents, lacked health insurance  
          coverage in 2005.  The percentage of the non-elderly  
          population with employer sponsored coverage declined from  
          56.4 percent to 54.3 percent between 2001 and 2005, while  
          the percentage with Medi-Cal or Healthy Families coverage  
          increased from 13.7 percent to 15.8 percent during the same  
          time period.  

          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 percent say someone in their family has  
          delayed seeking health care in the past year. Studies show  
          that, compared to persons with health insurance, people  
          without health insurance are more apt to postpone seeking  
          care because of cost, more apt to fail to fill  
          prescriptions due to cost, more apt not to receive  
          preventive care, and more apt to have trouble paying  
          medical bills.  Because they are uninsured, reports show  


                                                           
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          that individuals are often billed for hospital care at the  
          hospital's full charges, which are typically three to four  
          times higher than the costs paid by insurance plans.  A  
          recent study by Harvard researchers found that nearly half  
          of all personal bankruptcies in the U.S. are due to medical  
          expenses and three-fourths of those patients had health  
          insurance.  

          According to a study by the New America Foundation, cost  
          shifting by health care providers, related to treating the  
          uninsured, accounted for 10 percent of the cost of health  
          insurance premiums in California, roughly $455 annually for  
          an individual policy and $1,186 for a family coverage  
          policy.

          C.Proposal Incorporates Elements of "Massachusetts Plan"  
            (Act)

          In 2006, Massachusetts enacted legislation requiring all  
          residents to be covered by some sort of health insurance.   
          The Act requires all residents who are 18 years of age or  
          older to have health insurance, if coverage is  
          "affordable," a term not defined in the statute.  The Act  
          requires employers with more than 10 employees to make a  
          "fair and reasonable" contribution towards employee health  
          coverage or pay an assessment to the state of up to $295  
          per worker, per year.  The Act implemented a number of  
          Medicaid reforms, including expanding eligibility for  
          children in the state's Medicaid program from 200 to 300  
          percent of the federal poverty level and increasing payment  
          rates for Medicaid providers.  Funding sources for the Act  
          include state funds, federal funds, a previously existing  
          assessment on hospitals and payers for the uncompensated  
          care pool, as well as the $295 per worker, per year,  
          assessment on employers who do not contribute to employee  
          coverage.

          In addition, the Act establishes a state purchasing pool  
          known as the "Connector" to provide coverage options for  
          persons without access to employer-provided coverage and  
          employers with 50 or fewer workers, including low-cost  
          products specifically for 19 - 26 year olds.  The Connector  


                                                           
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          is also charged with determining if coverage is affordable  
          for
          families with various levels of income and defining the  
          minimum level of coverage required to meet the mandate.  In  
          order to facilitate the purchase of affordable health  
          insurance products, the Connector operates two programs:  
          Commonwealth Care, for uninsured individual adults with  
          incomes below 300 percent of the FPL who do not otherwise  
          qualify for MassHealth (the state's version of Medicaid and  
          the State Children's Health Insurance Program), other  
          public assistance programs, or have employer sponsored  
          coverage; and Commonwealth Choice, for individuals and  
          families who are not eligible for subsidized coverage.

          Finally, the law merges the individual and small group  
          insurance markets and applies modified community rating  
          requirements for the combined market.

          A key part of this reform is the definition of affordable  
          coverage, which is revised annually by the Connector's  
          board to determine who is subject to the mandate.  The  
          affordability schedule is designed to allow people to  
          purchase coverage that meets the minimum creditable  
          coverage, without spending more than between 5 and 10  
          percent of their income, or otherwise be exempted from the  
          individual mandate.  Minimum creditable coverage is defined  
          in all plans but young adult plans as prescription drug  
          coverage; visits to the doctor for preventative care before  
          a deductible; deductibles that are capped at $2,000 for an  
          individual or $4,000 for a family each year; an annual cap  
          on out-of-pocket spending at $5,000 for an individual or  
          $10,000 for a family for plans with up-front-deductibles or  
          co-insurance; no cap on total benefits for a particular  
          sickness or for a single year; and no cap on payment toward  
          a day in the hospital.  The affordability schedule  
          currently ranges between 5 percent of income for  
          individuals and families earning around 300 percent of the  
          FPL, and 10 percent of income for individuals earning up to  
          $50,000, and families earning up to $110,000. The  
          affordability schedule refers to premium costs only and  
          does not include out-of-pocket expenses, such as  
          deductibles or co-payments.  


                                                           
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          For 2007, under the Massachusetts ACT, individuals earning  
          above $50,000, couples earning above $80,000, and families  
          earning above $110,000 (which correlates to between 500-600  
          percent of the FPL) are deemed able to purchase insurance,  
          no matter the cost. For people earning between 300% and the  
          upper income limits noted above, affordable coverage is  
          based on a sliding scale of $150 to $300 per month for  
          individuals, $270 to $500 per month for couples, and $320  
          to $720 per month for families. For people earning between  
          150% and 300% of the FPL, affordable coverage is based on a  
          sliding scale of $35 to $105 per month for individuals, and  
          $70 to $210 per month for couples and families. For people  
          earning below 150% of the FPL, no premium is paid,  
          according to the affordability scale.

          Individuals who cannot find a health insurance product at  
          or below the maximum affordable cost for their income  
          bracket, or who face hardship, as defined in regulation,  
          may file an exemption to the individual mandate through  
          Schedule HC, which is required with the 2007 tax return.   
          Individuals filing for a hardship exemption may also file a  
          request for certificate of exemption to the Connector prior  
          to the deadline for filing taxes. The Connector indicates  
          that very few certificates of exemption have been processed  
          and will not have an estimate for exempt or noncompliant  
          individuals until after the 2007 tax filing deadline.   
          Previously, the Connector had estimated roughly 60,000  
          people might be exempted under the current affordability  
          standard. None of these exemptions will include individuals  
          who qualify for subsidized coverage through Commonwealth  
          Care or MassHealth, as health care coverage is provided at  
          a rate corresponding to the affordability schedule.

          The Massachusetts Department of Revenue is responsible for  
          imposing penalties for noncompliance with the individual  
          mandate. For 2007, the penalty is the loss of the personal  
          exemption worth $219 on an individual's state tax return.  
          The Department of Revenue recently issued draft guidelines  
          on 2008 penalties, which will be based on one-half of the  
          lowest cost plans available through the Connector as of  
          January 1, 2008, or from zero to $912 for an entire year  


                                                           
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          without coverage.  
          
          Implementation Issues
          The Massachusetts plan's individual mandate took effect on  
          July 1, 2007, with a six-month extension for residents to  
          obtain coverage without facing penalties. The state  
          estimates that, in 2007, at least 300,000 people enrolled  
          in health insurance, either through MassHealth (70,000);  
          Commonwealth Care (160,000); Commonwealth Choice (16,000);  
          or private carriers (75,000). The state estimates that  
          somewhere between 50 percent and 75 percent of the  
          uninsured have gained health insurance in the 18-month  
          period between July 1, 2006 and December 31, 2007.  

          As the Act continues its second year of implementation,  
          questions remain as to the sustainability of its funding  
          and its enforcement of the individual mandate. While the  
          state has seen better than expected enrollment numbers in  
          its Commonwealth Care program, far exceeding its estimate  
          of 136,000 enrollees by the end of the fiscal year (June  
          30, 2008), the result has been a $147 million funding gap  
          for the state. 

          Additionally, while costs per enrollee have been largely  
          within budget per enrollee this year, with just a four  
          percent increase since the program began in October 2006,  
          increases in proposed rates for Connector plans for the  
          fiscal year beginning July, 2008 average 14 percent.  The  
          Connector believes a number of factors contribute to this,  
          including competitive pressures on plans to underbid in the  
          first year and the fact that relatively older and sicker  
          residents sought coverage first, before the mandate took  
          effect, while those who are younger and healthier chose to  
          delay.  In order to mitigate this increase, the Connector  
          is currently considering additional cost-sharing, such as  
          increasing the co-pay to $15, specialist co-pay to $25, and  
          emergency visit co-pay to $75, for plan types serving upper  
          income individuals.

          Additionally, in order to constrain premium growth in the  
          next fiscal year for the Commonwealth Choice market which  
          has seen reductions of eight percent to increases of 13  


                                                           
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          percent, the Connector has asked carriers to voluntarily  
          focus on a target of no more than five percent for premium  
          increases, and has asked plans to submit both plan options  
          that maintain benefits, but at a higher increase, and those  
          that meet the target of five percent growth through tighter  
          care management, lower provider reimbursements, use of  
          limited networks, and increased cost sharing. 

          These increases come amidst the backdrop of the group  
          market, which forecasters predict will see another rate  
          hike averaging 10 percent. However, in the nongroup market,  
          which now includes small group and individuals, the  
          Connector states that prices for the non-group have fallen  
          by 50 percent, while benefits have doubled.  Additionally,  
          the state has constrained the cost variance between the  
          oldest and youngest individuals to a ratio of 

          two to one, which makes coverage in the individual market  
          relatively affordable for older persons.

          Employer compliance also remains unknown.  Initial  
          estimates based on information submitted by the 50 percent  
          of employers who met a 2007 reporting requirement suggest  
          that of the 19,056 employers subject to the Fair Share  
          Contribution requirement, 18,538 met the requirement while  
          the remaining 518 firms owed the state $5.01 million in  
          alternative assessments.  In total, the state assumed it  
          would receive $24 million in alternative assessments.  In  
          addition, because of the lack of reporting by many  
          employers, it is not known how many are complying with the  
          Fair Share requirement, or planning to pay assessments.

          D.  Related legislation

          AB 8 (N??ez) would have required employers to spend 7.5  
          percent of Social Security wages on health care  
          expenditures for full-time and part-time workers and their  
          dependents, or pay an equivalent fee to a newly created  
          California Health Care Trust Fund.  The bill would have  
          created a state purchasing pool to provide health coverage  
          to employees of employers who opt to pay into the Fund. The  
          bill would have required employees whose employers opt to  


                                                           
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          pay into the Fund to enroll in Cal-CHIPP, unless they  
          demonstrate coverage through other means, or meet financial  
          criteria, as specified, and would also have required  
          employees whose employers elect to make health expenditures  
          to accept the services or coverage offered to them, unless  
          they meet financial criteria, as specified.  The bill would  
          have expanded eligibility for Medi-Cal and Healthy Families  
          coverage for low-income children and parents, and  
          established various health cost containment measures and  
          insurance market reforms.  This bill was vetoed by the  
          governor.  In his veto message, the governor stated that AB  
          8 does not achieve coverage for all, which is necessary to  
          reduce health care costs for everyone, and that  
          comprehensive reform cannot place the majority of the  
          financial burden on any one segment of the economy or leave  
          individuals vulnerable to loss or denial of coverage.  
          
          ABX1 2 (No Author) contains the language from Governor  
          Schwarzenegger's health care reform proposal.  The bill  
          would require all California residents to carry a minimum  
          level of health insurance coverage for themselves as well  
          as for their dependents, and would establish a state  
          purchasing pool through which qualifying individuals would  
          be allowed to obtain subsidized or unsubsidized health care  
          coverage.  The bill would expand eligibility for the  
          Medi-Cal and Healthy Families programs, and increase  
          Medi-Cal provider rates for hospitals and physician  
          services.  The bill would require health plans and insurers  
          to offer and renew, on a guaranteed basis, individual  
          coverage in five designated coverage categories, regardless  
          of the age, health status, or claims experience of  
          applicants, and establish new, modified community rating  
          rules for the pricing of individual coverage.  The bill  
          contains provisions intended to reduce or offset a portion  
          of the costs of health insurance coverage, as well as  
          several new programs and initiatives related to prevention  
          and promotion of health and wellness, and expresses intent  
          that financing for the bill's provisions shall come from a  
          variety of sources, including federal funds related to  
          Medi-Cal and Healthy Families program expansions, fees from  
          employers who do not offer health insurance coverage to  
          their employees, revenues from counties, fees paid by acute  


                                                           
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          care hospitals, premium payments from individuals, and  
          funds from the lease of the State Lottery.  The bill would  
          make implementation of its provisions contingent upon a  
          finding by the Director of Finance that sufficient state  
          resources are available to implement the provisions. This  
          bill is currently in the Assembly Health Committee.
          
          SB 48 (Perata - as amended May 16, 2007) contained  
          provisions similar to AB 8, but also contained a mandate  
          for taxpayers with incomes above 400 percent of the FPL to  
          maintain a minimum level of coverage.  These provisions  
          were subsequently amended out of the bill.  
                   
          SB 840 (Kuehl) would establish a single-payer universal  
          health care system that provides all California residents  
          with comprehensive health insurance including a choice of  
          doctors and hospitals.  The bill would consolidate federal,  
          state, and local monies currently being spent on health  
          care services into a health care trust fund, and would  
          require employers to contribute a percentage of payroll  
          toward employee health care costs and individuals to  
          contribute a percentage of income into the health care  
          trust fund; these contributions would replace premiums now  
          paid to insurance companies.  The bill would contain  
          long-term growth in health care spending through savings on  
          administrative overhead, increased emphasis on preventive,  
          primary, and chronic care, and using statewide purchasing  
          power to negotiate discounts on drugs and durable medical  
          equipment.  This bill is currently in the Assembly  
          Appropriations Committee.
                   
          SB 32 (Steinberg) and AB 1 (Laird) would expand eligibility  
          for Healthy Families to children with family incomes at or  
          below 300 percent of the FPL and would delete the specified  
          citizenship and immigration status requirements for  
          children to be eligible for Medi-Cal and Healthy Families.   
          The bill would also allow applicants to self-certify their  
          income and assets for the purposes of establishing  
          eligibility for Healthy Families, and would establish a  
          Medi-Cal presumptive eligibility program, as specified.    
          Both bills are currently on the Assembly inactive file.



                                                           
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          SB 365 (McClintock) and SBX1 16 (McClintock) would have  
          allowed a health care service plan or health insurance  
          carrier domiciled in another state to offer, sell, or renew  
          a health care service plan or a health insurance policy in  
          this state without holding a license issued by the  
          Department of Managed Health Care (DMHC), or a certificate  
          of authority issued by the Insurance Commissioner, and  
          without meeting specified requirements for a license or  
          certificate, provided the carrier is authorized to issue a  
          plan or policy in the domiciliary state and complies with  
          that state's requirements.  Failed passage in Senate Health  
          Committee.

          SBX1 5 (Cox) would have eliminated existing allocations of  
          tobacco tax revenue under Proposition 10 to state and local  
          county children and families commission accounts and,  
          instead, requires those funds to be used to provide health  
          care services and health care initiatives, including, but  
          not limited to, the Healthy Families Program.  Failed  
          passage in Senate Health Committee.

          SBX1 9 (Runner) would have directed the Department of  
          Health Care Services (DHCS) to develop a plan for  
          redirecting federal disproportionate share hospital program  
          (DSH) funds, which currently are paid to public hospitals,  
          to pay for primary care at clinics and prevents the plan's  
          implementation until the Legislature grants specific  
          authorization.  Failed passage in Senate Health Committee.

          SBX1 10 (Maldonado) would have conformed state law with  
          federal law by granting a personal income tax deduction for  
          the establishment of a health savings account (HSA).  Also  
          would conform state law to other related provisions of  
          federal law regarding rollovers, creation of tax exempt  
          trusts, and penalties for paying non-medical expenses.   
          Failed passage in Senate Health Committee.

          SBX1 21 (Cogdill) would have authorized a 25 percent credit  
          against the net personal income tax of a medical care  
          professional who provides medical services in a rural area  
          for each taxable year beginning January 1, 2008.  Failed  
          passage in Senate Health Committee.


                                                           
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          SBX1 23 (Ashburn) would provide an income tax credit taken  
          against personal and corporate income taxes, equal to 15  
          percent of the costs related to establishing or  
          administrating cafeteria plans, authorized under the  
          Internal Revenue Code, that provide for the payment of  
          health insurance premiums to employees.  Currently in  
          Senate Revenue and Taxation Committee.

          ABX1 8 (Villines) would propose multiple strategies to  
          address health care costs and access, including: tax  
          incentives and government programs to promote and  
          facilitate consumer-directed health care and  
          employer-sponsored insurance; allowing the sale of  
          out-of-state health insurance policies not subject to any  
          California law or regulation; increasing Medi-Cal provider  
          reimbursement rates and creating an income tax credit for  
          physicians who provide unreimbursed care for the uninsured;  
          establishing a mechanism for financial aid for training  
          physician assistants; and, requiring benefits and assets  
          from foundation conversions to support direct medical care.  
          This bill  is in the Assembly Health Committee.

          AB 2 (Dymally) and ABX1 3 (Dymally) would restructure the  
          MRMIP, including eligibility, benefits, and premium rates  
          for the program, and would require all health care service  
          plans and disability insurers selling health insurance in  
          the state to share in the costs of MRMIP, by either paying  
          a fee to the state to support MRMIP costs, or by offering  
          coverage in the individual market on a guaranteed issue  
          basis with community rating of premiums and prior rate  
          approval requirements. The bill requires health care  
          service plans and health insurers in the individual  
          insurance market to provide coverage on a guaranteed issue  
          basis to individuals not eligible for MRMIP starting  
          January 1, 2009.   AB 2 is currently on the Senate Inactive  
          File.  ABX1 3 is currently in Assembly Health Committee.
          
          AB 1554 (Jones) would require health care services plans  
          and health insurers to receive approval from the DMHC or  
          DOI to increase premiums, co-payments, co-insurance  
          obligations, and deductibles.  The bill would require both  


                                                           
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          departments to notify the public of, and hold hearings on,  
          applications from plans or insurers to increase rates.   
          This bill failed passage in the Senate Health Committee and  
          was granted reconsideration.

          San Francisco Health Care Security Ordinance (2006)  
          requires employers with 20 or more employees to spend a  
          minimum amount per hour, per employee, on health care  
          services, with certain exceptions. Employers could spend  
          this amount on various health care services for its  
          employees, including, but not limited to, health insurance,  
          contributions to public programs for the uninsured, health  
          savings accounts, or direct reimbursements to employees for  
          health expenses. The Ordinance also establishes a new  
          Health Access Program, focused on prevention services, to  
          replace the city's current system for providing health care  
          to the uninsured. This ordinance was adopted by San  
          Francisco in 2006.  In December 2007, in response to a  
          legal challenge filed by an employer group, a federal  
          district court ruled that the ordinance's employer spending  
          requirements violate federal ERISA law.  In January 2008, a  
          federal appellate court ruled in favor of San Francisco's  
          request for an emergency stay, granting the City the right  
          to implement the employer mandate while the City appeals  
          the district court decision.  

          SB 2 (Burton and Speier, Chapter 673, Statutes of 2003)  
          would have required California employers with 50 or more  
          employees to pay a fee to the state to provide health  
          coverage for employees or to directly provide the health  
          coverage to employees (and dependents for larger  
          employers). The bill would have defined minimum required  
          coverage, and required employers to contribute at least 80  
          percent of the costs of coverage and employees up to 20  
          percent of the costs, with a cap for low-wage earners. The  
          bill established a purchasing pool to provide coverage for  
          employees, expanded small group market reforms to cover  
          employers with 51-199 employees, and included a premium  
          assistance program for individuals eligible for Medi-Cal or  
          Healthy Families. SB 2 was overturned in a November 2004  
          referendum.



                                                           
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          E.  Arguments in support

          The American Federation of State, County, and Municipal  
          Employees (AFSCME) states that this bill would provide the  
          largest public program expansion since the inception of  
          Medi-Cal and Healthy Families, provide affordable, secure  
          public insurance plans as an alternative to private  
          insurance plans, and cover three to four million  
          Californians through Cal-CHIPP.  AFSCME also states that  
          the bill would establish an employer minimum wage for  
          health benefits, contain costs for the insured, protect  
          counties and public hospitals, and provide over $1 billion  
          in new funding for public hospitals and doctors, provide  
          significant market reforms, including guaranteed issue, and  
          provide affordability protections and exemptions for  
          individuals required to buy insurance.  

          The California Association of Public Hospitals and Health  
          Systems (CAPH) states that under the bill, public hospitals  
          will receive a significant Medi-Cal rate increase which  
          will help public hospitals maintain and improve access to  
          care.  CAPH states that it supports the expansion of  
          coverage to childless adults, and the proposed Local  
          Coverage Option draws upon the experience and expertise of  
          public hospitals and community clinics.  CAPH also states  
          that the details of how the county share of cost would be  
          implemented is addressed in the accompanying ballot  
          initiative, and CAPH is prepared to accept a workable share  
          of cost as a part of comprehensive reform.

          The California Hospital Association (CHA) states that it  
          supports comprehensive health care reform that has  
          protections for hospitals in an accompanying initiative.   
          CHA states that Medi-Cal is severely underfunded, with  
          hospitals incurring over $2 billion in uncompensated care  
          costs.  CHA states that it has worked with the  
          administration and legislative leadership to help craft a  
          proposal that will result in more than $2 billion of new  
          funds to hospitals annually.  

          The Latino Coalition for a Healthy California (LCHC) states  
          that this bill brings meaningful health access to millions  


                                                           
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          of uninsured Californians, particularly uninsured Latinos.   
          The LCHC states that Latinos represent approximately half  
          of the state's uninsured population, largely due to the low  
          rate of health insurance provided by their employers.  LCHC  
          supports the bill's public coverage expansions, proposed  
          tax credit for those without job-based coverage, and the  
          creation of a statewide purchasing pool as a new coverage  
          option for the uninsured.

          Support if amended or with amendments
          The California Public Interest Research Group (CalPIRG)  
          states that this bill would give consumers effective tools  
          to get a fair rate for health insurance, give all consumers  
          access to health insurance, regardless of whether they are  
          sick or healthy, increase the number of Californians who  
          have useful health insurance, and contain costs.  CalPIRG  
          states that the bill's funding mechanism opens up new  
          funding sources that would otherwise go untapped.  CalPIRG  
          proposes amendments that would clarify that all plans  
          offered in the Cal-CHIPP pool package must meet Knox-Keene  
          requirements, as well as providing prescription drug  
          coverage and promoting prevention, that MRMIB has the  
          authority to review the minimum coverage package after it  
          is initially set, and that the tier 3 product will include  
          first-dollar coverage for preventive care, doctor visits,  
          and prescription drugs.

          Health Access California states that it would support the  
          bill with amendments to base premium costs on a product  
          that provides coverage for doctor visits and prescription  
          drugs outside of deductibles, clarify that MRMIB can review  
          and reset minimum creditable coverage annually to take into  
          account affordability and hardship exemptions from the  
          previous year, clarify that the individual mandate is  
          contingent upon employer contributions, clarify that  
          unsubsidized benefits provided in the purchasing pool  
          provide the same covered services as those required under  
          Knox-Keene, as well as prescription drug coverage, and  
          clarify that wage garnishment and liens on primary  
          residences would require further action by the Legislature  
          before use for enforcement of the individual mandate.



                                                           
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          Consumers Union states that it would support the bill with  
          amendments to clarify that enforcement of the individual  
          mandate would not include wage garnishment and certain  
          other features, that the unsubsidized benefits provided in  
          the purchasing pool meet Knox-Keene requirements plus  
          prescription drug coverage, and that the premium on which  
          the tax credit will be based is for a product that provides  
          coverage for physician visits, and prescription drugs with  
          no deductible.  

          The California Labor Federation (CLF) states that it would  
          support this bill if amended to outline the benefit  
          standard for plans offered by the pool, including  
          requirements to meet Knox-Keene plus prescription drugs,  
          predicate the individual mandate upon guaranteed  
          affordability, and the availability of quality health care  
          coverage, clarify that the health plan to which the tax  
          credit will be linked includes doctor visits, prescription  
          drugs, chronic disease management, and other basic  
          preventive services on a pre-deductible basis, clarify  
          MRMIB's authority to grant categorical exemptions to the  
          individual mandate in the event that granting exemptions on  
          a case-by-case basis is not practicable, and to provide  
          that only employer offers of coverage with employee  
          cost-sharing arrangements at least as favorable as those in  
          the plan to which the tax credit is benchmarked constitute  
          an offer of coverage.  CLF also proposes amendments to the  
          proposed initiative to address concerns that the employer  
          payroll assessment does not include a separate test for  
          full-time and part-time employees, add penalties to enforce  
          the employer assessment, including penalties for employers  
          that misclassify employees as independent contractors, and  
          make the employer assessment adjustable by a simple  
          majority vote of the Legislature.

          The Service Employees International Union (SEIU) proposes  
          amendments to this bill that would require an annual review  
          of the definition and standards for minimum health care  
          coverage, as well as for affordability and hardship  
          standards.  SEIU proposes additional amendments that would  
          clarify that the Cal-CHIPP Healthy Families plan provides  
          the same services and benefits required by the Knox-Keene  


                                                           
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          Act, plus prescription drug benefits, that prevention  
          services include detection and management of chronic  
          conditions, and to require all products sold in the  
          individual market to include limits on out-of-pocket costs.  
           SEIU also proposes amendments to the proposed initiative  
          that would provide better information on whether employees  
          in public programs and the purchasing pool have an  
          accompanying employer contribution, to ensure mechanisms  
          are in place to determine whether persons enrolled in the  
          purchasing pool are employed, but with no employer  
          contribution being made on their behalf, and to impose a  
          surcharge on employers that create an unfair share of  
          uncompensated coverage through the purchasing pool if the  
          proportion of pool enrollees who are employed increases  
          while employer contributions do not.  Lastly, SEIU proposes  
          amendments to require legislative action to impose wage  
          garnishments or liens to enforce the individual mandate,  
          make the individual mandate contingent upon employer  
          contributions, add provisions to minimize the  
          misclassification of employees as independent contractors,  
          and provisions to address potential conflict of interest  
          among members and staff of MRMIB.

          The Western Center on Law and Poverty (WCLP) proposes a  
          number of amendments to this bill, and states that the bill  
          limits pool coverage options for low-income, childless  
          adults by imposing an employer firewall standard that  
          requires they not be offered employer-sponsored health care  
          coverage.  WCLP states that under this requirement,  
          childless adults with incomes at or below 100 percent of  
          the FPL who could not afford their employer-based coverage,  
          or who have a meager employer contribution toward health  
          care coverage, would be barred from obtaining coverage  
          under this bill.  WCLP asserts that this bill would allow  
          MRMIB to determine processes and benefits for Medi-Cal  
          enrollees, such as those in the Cal-CHIPP Healthy Families  
          plan, and recommends stakeholder input and legislative  
          oversight so that MRMIB does not have unfettered authority  
          to make decisions affecting this population that would be  
          better made by the Legislature or other entities.  WCLP  
          also states that while the bill would require pool  
          enrollees to appeal decisions regarding eligibility,  


                                                           
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          enrollment, and coverage to MRMIB, certain enrollees, such  
          as those in the Medi-Cal population, would have due process  
          rights under existing law.  WCLP proposes that DHCS, in  
          consultation with MRMIB and a stakeholder group, work  
          through the issues that overlap, and implement appeals  
          processes through subsequent legislation.

          Kaiser Permanente (KP) states that, if broad categories of  
          exemptions to the individual mandate are implemented,  
          premiums for those who are among the most vulnerable,  
          namely those in the individual market, will dramatically  
          increase.  KP states that those who are less healthy will  
          seek coverage, while those who are healthy will be free to  
          seek exemptions from the mandate.  KP states that, while  
          the bill attempts to prevent adverse selection through  
          state subsidies to normalize the market, the funding for  
          these subsidies is not mandatory.  KP argues that the  
          funding should be automatic in order to protect access to  
          coverage.  KP also seeks an amendment regarding the  
          proposed health plan assessment to fund a reinsurance  
          mechanism for plans in the individual market.  KP states  
          that the bill does not specify that any assessment must  
          include all covered lives in order to be equitable, and if  
          self-funded arrangements are excluded from the assessment,  
          their purchasers would disproportionately shoulder the  
          burden of the reinsurance mechanism.  

          The California Federation of Teachers (CFT) states that it  
          would support the bill if amended to define minimum  
          creditable coverage, make clear that county hospitals will  
          maintain current services to those who need it, and address  
          how the affordability threshold would apply to individuals  
          who might lose a job, or find themselves unemployed for  
          over a year.  The CFT proposes amendments that would impose  
          rate regulation that will not allow insurers to  
          exorbitantly raise rates without justification, create a  
          mechanism to increase employer contributions and require  
          that they be calculated separately for low-income and  
          middle- to upper-income employee units, provide for an  
          adjustment of the affordability threshold downward if  
          employer contributions decrease, and define "affordable"  
          coverage based on total out-of-pocket costs, not just  


                                                           
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          premiums.  The CFT also states that it cannot  
          wholeheartedly support the bill, because it is uncertain if  
          the financing provisions will be adopted by the voters.

          The Having Our Say (HOS) coalition supports the bill's  
          proposed public coverage expansions, community makeover  
          grants, and clinic reimbursement provisions.  HOS states  
          that it continues to oppose an individual mandate, as there  
          is no guarantee affordable coverage will be available.  HOS  
          states that minimum creditable coverage remains undefined  
          in the bill, and expresses concerns that communities of  
          color may be required to purchase coverage that does not  
          provide needed health care services.  HOS asserts that  
          minimum creditable coverage should meet Knox-Keene  
          requirements plus prescription drugs.  HOS also states that  
          it is unclear how various working and immigrant communities  
          will have access to the purchasing pool, and how all  
          workers, including seasonal, part-time and temporary  
          workers will be treated equally.  HOS proposes that the 5  
          percent premium cap for pool enrollees with an income at or  
          below 250 percent of the FPL be inclusive of all  
          out-of-pocket expenses, not just premiums.

          Concerns
          The County of San Diego (County) states that it is unclear  
          how the proposed fiscal benefits to the counties will be  
          accomplished, and that the diversion of funds from existing  
          programs would have a negative impact on its ability to  
          provide existing services.  The County states that the  
          mandate for counties and public authorities to contribute  
          towards benefits for all IHSS providers and dependents is  
          cost prohibitive, and the bill's requirements that counties  
          provide benefits through a mandated union trust would  
          remove local government flexibility, accountability, and  
          control over how taxpayer dollars are managed and spent.   
          The County asserts that the definition of "employer  
          provided" in the proposed initiative would require the  
          County to provide health care contributions for a  
          significantly larger population, including election workers  
          and temporary professionals, thereby imposing substantially  
          greater fiscal obligations.  Additionally, the County  
          argues that under the proposed initiative's severability  


                                                           
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          provisions, if any provision is found to be invalid or  
          unconstitutional, the remaining provisions would be  
          unaffected.  The County argues that under this type of  
          structure, the employer contribution could be deemed  
          unconstitutional, whereas, the county share-of-cost  
          provisions could remain, and be increased to make up for  
          financing shortfalls. 

          The California Medical Association (CMA) states that, it is  
          concerned the proposed financing for the bill will not  
          fully fund all of its provisions, particularly those that  
          would ensure access to affordable coverage through the  
          pool.  CMA states that the bill proposes to expand Medi-Cal  
          eligibility, but does not make important changes to improve  
          the program, such as increasing Medi-Cal rates which,  
          although provided for in the bill, is contingent upon a  
          budget appropriation.  CMA asserts that the bill contains  
          several provisions that appear to erode oversight of  
          insurers, including those that allow a Medi-Cal managed  
          care HMO to be "deemed" compliant with state filing and  
          reporting requirements, and that eliminate HMO reporting on  
          enrollee grievances and making arbitration decisions  
          unavailable to consumers.  CMA states that under the bill,  
          health plans would have flexibility in establishing  
          provider networks that could be inadequate and limit access  
          to care, and that medical loss ratio provisions are not  
          strong enough in that they allow an aggregate calculation  
          by averaging all of their licensed products, and  
          potentially categorize business costs as the provision of  
          health care benefits.  CMA states that the bill's scope of  
          practice language is vague as to whether the allied health  
          care professionals may supervise medical assistants  
          independent of physician supervision, and that they are  
          concerned about HHS and PERS having broad discretion over a  
          pay-for-performance program, which encourages providers to  
          shift focus from treating the particular needs of the  
          patient, to meeting inflexible performance measures.  CMA  
          argues that the provider outcome measures providers should  
          be developed by clinicians and experts rather than a  
          committee of political appointees with no legislative  
          oversight, and that creating a new bureaucracy and  
          requiring new data reporting will increase system costs,  


                                                           
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          especially in light of the fact that an abundant amount of  
          data currently is available.  Lastly, CMA states that the  
          bill would require electronic prescribing to comply with  
          national standards, but does not define those standards,  
          and that the provisions to require prescribers to offer a  
          written receipt undermines the purpose of an e-prescribing  
          system.

          The California Association of Health Underwriters (CAHU)  
          and the National Association of Insurance and Financial  
          Advisors - California (NAIFA-California) proposes  
          amendments to address concerns relating to medical loss  
          ratios and adverse risk selection in the individual market.  
           The organizations state that individuals receiving premium  
          assistance in the form of tax credits should not be  
          segregated into the state purchasing pool, with limited  
          benefit choices and higher premiums, and should be afforded  
          flexibility to obtain coverage inside or outside of the  
          pool.  The organizations state that minimum creditable  
          coverage should be defined in the bill, and that it is  
          impossible to assess the cost impact of the bill without  
          such a definition.  The organizations argue that the bill  
          fails to provide meaningful criteria for MRMIB to use when  
          determining exemptions to the individual mandate, which  
          could result in adverse selection in the individual market.  
           Lastly, they state that funding for the bill is  
          precarious, as medical costs have risen at twice the rate  
          of wage growth for the past 20 years.
            
          Blue Shield of California states that it supports the  
          bill's general framework, but has concerns with the bill's  
          exemptions from the individual mandate which could result  
          in a significant number of people waiting until they need  
          expensive medical care before they can purchase health  
          coverage.  Blue Shield states that this would raise  
          premiums for those who buy coverage in the individual  
          market.  Blue Shield also states that the bill contains  
          provisions that create a reinsurance safety valve if the  
          risk in the individual market exceeds the risk of a  
          normalized market, but that the proposed initiative does  
          not adequately describe the scope of the proposed insurer  
          fee or assure funding of the reinsurance safety valve.


                                                           
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          Project Inform and the San Francisco AIDS Foundation (SFAF)  
          state that, under the bill, many people with HIV/AIDS who  
          currently have access to free, quality health care would be  
          required to pay premiums and other cost-sharing burdens,  
          and asserts that the bill's intent language to use federal  
          Ryan White funds to offset cost-sharing burdens will not  
          sufficiently protect people with HIV/AIDS from a disruption  
          of care and/or treatment as they transition from their  
          current coverage to a new system.  The organizations also  
          propose provisions that would delay the inclusion of people  
          with HIV/AIDS from the individual mandate for up to one  
          year in order to allow this vulnerable population a  
          transition period to minimize negative health impacts.
          
          F.  Arguments in opposition

          Blue Cross of California (BCC) states that the bill's  
          provisions for guaranteed issue and modified community  
          rating would destabilize the individual market, as it  
                                               requires members of the individual market to subsidize the  
          cost of insuring those that do not currently qualify for  
          coverage.  BCC asserts that modified community rating  
          eliminates an insurer's ability to provide discounts to  
          healthier individuals, resulting in younger and healthier  
          enrollees dropping individual coverage, which would  
          increase costs for other enrollees.  Blue Cross states that  
          the five coverage choice categories proposed by the bill  
          would likely require maternity benefits and a name-brand  
          drug benefit, which would significantly increase premiums,  
          and impact hundreds of thousands of Blue Cross enrollees  
          who pay for affordable products which do not offer such  
          benefits.  BCC argues that consumers should drive decisions  
          to define what insurance products are acceptable in order  
          to decrease consumer costs, increase consumer satisfaction,  
          and decrease the number of the uninsured.  BCC asserts that  
          the proposed individual mandate lacks enforceability,  
          provides no penalties for failure to comply, and provides  
          exemptions that would result in adverse selection.  BCC  
          argues that medical loss ratio requirements, such as the  
          one proposed by this bill, increase premiums, reduce  
          consumer choice, increase the number of uninsured, and  


                                                           
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          reduce quality, because they discourage insurers from  
          spending on administration, many components of which  
          benefit consumers and control costs, from developing  
          low-cost products, and from participating in high cost  
          markets.  BCC contends that the projected fiscal  
          assumptions based on $224 per-member, per-month (PMPM)  
          premium cost for products offered through the pool are  
          understated as average group premiums for single adult  
          coverage are much higher ($379 PMPM in 2006), and continue  
          to rise.  

          The California Nurses Association (CNA) states that, under  
          this bill, health insurance will not be universal,  
          affordable, or of high quality, and bare bones plans with  
          high out-of-pocket costs will be forced upon Californians  
          and employers who will have no control over the price.  CNA  
          states that this bill implements a punitive individual  
          mandate, that the FTB will use its civil power to collect  
          funds through wage garnishments and mortgage liens, and  
          that because of its severability provisions, the individual  
          mandate could continue to be implemented without any  
          requirements on employers.  CNA argues that the bill does  
          not guarantee affordable, quality health care for all  
          Californians, and that, without cost limits for premiums  
          and other out-of-pocket costs, it does not control health  
          care costs without further eroding necessary health care.   
          CNA contends that the bill does not fairly distribute  
          responsibility, risk, and benefits among employees,  
          employers, and individuals, as health care costs are  
          further shifted to workers, individuals, and government,  
          while insurance companies and employers have the lion's  
          share of benefits from the bill.  CNA states that the bill  
          does not guarantee patient choice of provider or hospital,  
          does not protect the doctor-patient relationship, does not  
          improve quality of care and patient outcomes, and does not  
          protect the public hospital safety net.  CNA states that  
          the bill's scope of practice provisions will create  
          conditions for an increase in medical errors, healthcare  
          acquired infections, malpractice law suits, and adverse  
          events, rather than protecting the public.  CNA writes that  
          MAs should only work under close supervision and only in  
          organized health care systems or licensed facilities and  


                                                           
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          that the employment of medical assistants elsewhere poses  
          risks to the public's health and safety.  CNA also argues  
          that the bill's provisions establishing a NP taskforce  
          should be deleted as it sets up a bureaucratic and  
          duplicative system that is costly to the state, and not  
          authorized by existing statute.  

          Various labor organizations, including the California  
          Teamsters, the United Food and Commercial Workers Union,  
          the Engineers and Scientists of California, Local 20, and  
          the California Conference of Machinists, state that this  
          bill fails to obligate employers to pay a percentage of  
          health care costs for both high- and low-wage workers.  As  
          a result, an employer could meet statutory obligations  
          without paying anything toward low-wage workers, and  
          instead, place the low-wage workers into the state  
          purchasing pool, requiring taxpayers to subsidize the cost.  
           The organizations state that the bill requires individuals  
          to purchase health care without any guarantee of  
          affordability, and does not contain an employer definition  
          or associated penalties which would serve as a disincentive  
          for employers to misclassify their employees as independent  
          contractors.  The organizations also state that it would be  
          imprudent to expand costs to the state by implementing  
          health care reform until such time as the state had  
          addressed the budget deficit.

          The Foundation for Taxpayer and Consumer Rights (FTCR)  
          opposes the bill's individual mandate to maintain minimum  
          coverage, and states that the solution to the state's  
          health care crisis is not to require Californians to buy  
          private insurance policies they cannot afford and that  
          provide no guarantee of coverage.  FTCR argues that the  
          bill does not provide caps on premiums, maximums on  
          deductibles, or floors on benefits to protect consumers  
          from being forced to buy bare-bones insurance they cannot  
          afford to use when they fall ill.  FTCR states that, under  
          the mandate exemption provided for in the bill, many  
          patients will be left uninsured, and that the process by  
          which the state would make individual exemption  
          determinations would be lengthy and costly.  FTCR argues  
          that the medical loss ratio provisions, absent regulation  


                                                           
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          of premiums and out-of-pocket costs, would increase rates  
          as insurers would have incentives to increase provider  
          payments, and charge more in order to keep more.  FTCR  
          states that the maximum 6.5 percent employer contribution  
          is approximately half of what many employers spend today,  
          and that employees who are currently covered through their  
          employer may end up with pool coverage that offers fewer  
          benefits at a higher cost.  FTCR also asserts that the  
          proposed tax credit is insufficient to help individuals  
          cover the cost of purchasing their own insurance, and the  
          insufficiency would worsen each year as the tax credit  
          would adjust only to the overall rate of inflation, while  
          insurance premiums rise two to three times faster than  
          inflation.  

          The California School Employees Association (CSEA) states  
          that under the current proposal, employers would not be  
          required to cover part-time workers, and could provide  
          benefits only to management or full-time employees as long  
          as total spending meets the minimum employer contribution.   
          CSEA argues that under this type of structure, many  
          low-wage workers will receive little or no employer  
          contribution toward health care.  CSEA also states that if  
          employers make nominal health care contributions, employees  
          who would be otherwise eligible for access to the pool and  
          subsidies would be denied both.  CSEA states that the bill  
          does not specify the minimum level of coverage, nor the  
          cost of the benefit, thereby offering no assurance that it  
          will be affordable or provide adequate coverage.  CSEA  
          argues that the bill does not adequately address the rising  
          cost of insurance, which is the most pressing issue for  
          classified employees and other working people.

          Various business organizations, including CalChamber, the  
          California Restaurant Association, National Federation of  
          Independent Business, and the California Manufacturing and  
          Technology Association, state that the bill's provisions  
          anticipate revenue that will likely be inadequate for the  
          programs proposed, and if a determination is made that  
          funding is inadequate, some of the programs, most notably  
          the purchasing pool, would be suspended, leaving many  
          without coverage.  The organizations also state that many  


                                                           
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          Californians, including the self-employed, rely on  
          affordable individual policies for their health coverage,  
          and that this bill would impose substantial premium  
          increases on these individuals by providing for guaranteed  
          issue and community rating without enforcement of the  
          individual mandate.  The organizations also argue that the  
          bill undermines the intent and spirit of ERISA.  

          The Howard Jarvis Taxpayer Association (HJTA) states that  
          placing a four percent fee against aggregate hospital  
          revenue will decrease access to care, and questions the  
          logic of a tobacco tax increase given that a similar  
          measure failed on last year's ballot.  The HJTA opposes the  
          inclusion of an individual mandate, as decisions to receive  
          health care should rest on individuals, not the government.  
           The HJTA asserts that many aspects of the bill violate  
          state and federal law, including the imposition of a tax  
          increase on employers without a two-thirds vote, as well as  
          employer contribution requirements which would violate  
          ERISA.  Lastly, the HJTA opposes provisions to provide  
          coverage for all children, including those of illegal  
          immigrants, to receive health care given the state's budget  
          deficit.
          
          Oppose unless amended
          Protection and Advocacy, Inc. (PAI) proposes amendments to  
          the bill that would address concerns regarding access to  
          care, and affordability, including recognition of the  
          additional financial health care burdens carried by people  
          with disabilities which limit their ability to afford the  
          premiums required by this legislation.  PAI also states  
          that the scope of benefits should include essential items  
          such as durable medical equipment.  PAI notes that a lack  
          of coverage of items and equipment used only by people with  
          disabilities increases the cost of care solely for people  
          with disabilities.

          The California Association of Public Authorities for IHSS  
          (CAPA) states that this bill would hamper county and public  
          authority's ability to ensure the provision of timely,  
          appropriate and cost-effective IHSS services to those most  
          in need.  CAPA states that the bill contradicts the  


                                                           
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          language and the intent of the legislation that created  
          public authorities, and that it would eliminate the power  
          of public authorities to act as the employer of IHSS  
          providers in negotiating benefits as a term and condition  
          of employment.  CAPA also objects to the bills provisions  
          mandating the use of a union health care trust to provide  
          benefits, as they will drive up costs and inhibit the  
          public authorities' ability to ensure quality.
          


                                    POSITIONS 

          Support:  100% Campaign
                    AARP 
                    Alzheimer's Association (with amendments)
                    American Federation of State, County, and  
               Municipal Employees
                    American Cancer Society, California Division
                    Blue Shield of California
                    California Academy of Family Physicians (if  
               amended)
                    California Association for Nurse Practitioners
                    California Association of Physician Groups
                    California Association of Public Hospitals and  
                    Health Systems 
                    California Catholic Conference
                    California Children's Hospital Association
                    California Chronic Care Coalition
                    California Conference of Carpenters
                    California Congress of Seniors
                    California Federation of Teachers (if amended)
                    California Hospital Association
                    California Immigrant Policy Center ( if amended)
                    California Labor Federation (if amended)
                    California Pan-Ethnic Health Network (if amended)
                    California Primary Care Association
                    California Public Interest Research Group
                    California State Conference of the NAACP
                    California State Council of Laborers
                    California State Pipe Trades Council 
                    Catholic Healthcare West


                                                           
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                    Children's Health Initiative of Greater Los  
          Angeles
                    Children's Health Initiative of Napa County
                    Coalition to Advance Healthcare Reform
                    Community Health Councils
                    Congress of California Seniors
                    Consumers Union (with amendments)
                    County of Los Angeles
                    County of Santa Cruz Health Services Agency
                    Having Our Say (if amended)
                    Health Access California (with amendments)
                    Insure the Uninsured Project
                    JERICHO (if amended)
                    Kaiser Permanente (if amended)
                    LA Health Action (with amendments)
                    Latino Coalition for a Healthy California
                    Latino Issues Forum
                    Los Angeles County Department of Health Services  
               (with amendments)
                    Marin Institute (if amended)
                    Molina Healthcare (if amended)     
                    National Association of Women Business Owners -  
               Los Angeles Chapter
                    Northeast Valley Health Corporation
                    Osteopathic Physicians and Surgeons of California  
               (if amended) 
                    PICO California
                    Planned Parenthood Affiliates of California
                    Santa Clara Family Health Plan
                    Service Employees International Union (with  
               amendments)
                    Service Employees International Union United Long  
                    Term Care Workers'    Union
                    Silicon Valley Leadership Group
                    Small Business Majority
                    State Association of Electrical Workers
                    Union of American Physicians & Dentists
                    United Domestic Workers of America
                    United Farm Workers
                    United Way of Santa Cruz County
                    Unitarian Universalist Legislative Ministry  
                    Action Network (with amendments)


                                                           
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                    Valley Community Clinic
                    Western Center on Law and Poverty (if amended)
                    Approximately 700 individuals

          Oppose:Applied Research Center
                    Blue Cross of California
                    CalChamber          
                    Cal-Tax
                    California Alliance for Retired Americans
                    California Association of Public Authorities  
               (unless amended)
                    California Business Properties Associations
                    California Business Roundtable
                    California Church IMPACT
                    California Conference of Machinists
                    California Hotel and Lodging Association
                    California Manufacturers and Technology  
               Association
                    California Motor Car Dealers Association
                    California Nurses Association 
                    California Physicians Alliance 
                    California Retailers Association   
                    California Restaurant Association
                    California School Employees Association
                    California Teamsters Public Affairs Council
                    Consulting Engineers and Land Surveyors of  
               California
                    Democratic Club of Coarsegold
                    Democratic Party of Lake County
                    Engineers and Scientists of California, IFPTE  
               Local 20
                    Foundation for Taxpayer and Consumer Rights
                    Friends Committee on Legislation of California
                    Gray Panthers
                    Howard Jarvis Taxpayers Association
                    IBA West 
                    International Longshore and Warehouse Union
                    Joint Council of Teamsters, No. 38
                    Lambda Letters Project
                    League of Women Voters
                    National Federation of Independent Business
                    Philip Morris USA


                                                           
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                    Protection and Advocacy Inc. (unless amended)
                    Siebens Patient Care Communications
                    United Food and Commercial Workers Union
                    Approximately 350 individuals
          

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