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
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
20
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
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
21
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
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
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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.
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
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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.
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
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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
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
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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
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
26
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
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
27
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.
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
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Continued---
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. |
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
30
|---------+------------------+------------------+------------------------+-------------------------|
|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 |
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
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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; | |
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
32
| | | |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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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,
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
34
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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STAFF ANALYSIS OF ASSEMBLY BILL X1 1 Page
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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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