BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Sheila J. Kuehl, Chair
BILL NO: SB 48
S
AUTHOR: Perata
B
AMENDED: April 18, 2007
HEARING DATE: April 25, 2007
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FISCAL: Appropriations
8
DOUBLE
REFERRAL: Health and Rules Committees
CONSULTANT: Hansel/Park/Dunstan/Patterson/cjt
SUBJECT
Health care coverage: employers and employees.
SUMMARY
This bill requires all taxpayers with a specified income to
have a minimum health coverage policy, and requires
employers to spend a certain percentage of payroll on
employee health care or pay an equivalent amount into a
newly created Health Insurance Trust Fund (Fund). The bill
would create the Connector, a state purchasing pool.
Employees whose employers opt to pay into the trust fund
could receive health coverage through the Connector. The
bill would also expand eligibility for Medi-Cal and Healthy
Families coverage for low-income children and parents. The
bill would also establish various insurance market reforms.
CHANGES TO EXISTING LAW
Public health insurance programs
Existing federal law establishes the Medicaid program,
which provides comprehensive health coverage to low-income
eligible individuals and families, including children;
aged, blind, and disabled persons; and pregnant women.
Continued---
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Existing federal law establishes the State Children's
Insurance Fund (SCHIP) which provides matching funds for
state health insurance programs, and provides that federal
assistance programs, including Medicaid and SCHIP, are
limited to U.S. citizens and certain qualified immigrants.
Existing federal law provides specific guidance for
determining eligibility for Medicaid and SCHIP while
preserving flexibility for states to administer these
programs according to the needs of the state.
Existing federal law, the Deficit Reduction Act, permits
states to vary the benefit packages they offer to some
groups of Medicaid beneficiaries. Existing federal law
allows states to require most children and parents to
enroll in "benchmark" benefit packages that do not provide
all the benefits covered by states' Medicaid programs.
Existing federal law requires that these benchmark benefit
packages receive federal approval.
Existing state law establishes the Medi-Cal program,
administered by the Department of Health Services (DHS),
which provides comprehensive health benefits to low-income
children; their parents or caretaker relatives; pregnant
women; elderly, blind or disabled persons; nursing home
residents; and refugees who meet specified eligibility
criteria.
Existing state law establishes the Healthy Families
program, which is administered by the Managed Risk Medical
Insurance Board (MRMIB) to provide low cost insurance,
including health, dental, and vision coverage, to children
who do not have such coverage and do not qualify for free
Medi-Cal.
Existing state law requires MRMIB to expand Healthy
Families eligibility to uninsured parents and responsible
adults under an SCHIP waiver provided that federal
financial participation is available and state funds have
been appropriated specifically for this purpose. Existing
state law also provides for state-only Medi-Cal and Healthy
Families programs which are funded solely by the state and
serve immigrants who are not eligible for federal
assistance programs. Existing law renames DHS the
Department of Health Care Services (DHCS) effective July 1,
2007.
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Existing state law sets income eligibility for children in
Medi-Cal at 200 percent of the federal poverty level (FPL)
for infants to age one, 133 percent FPL for children ages
one through five, and at 100 percent FPL for children ages
six through nineteen.
Existing state law authorizes the County Health Initiative
Matching Fund, administered by MRMIB, to fund children's
health coverage for children with incomes between 250 and
300 percent of FPL by using local funds as the state match
to draw down SCHIP dollars.
Health insurance plans
Existing law provides for the regulation of private health
care service plans by the Department of Managed Health Care
(DMHC), and health insurance policies by the California
Department of Insurance (DOI).
Existing law requires health care service plans and health
insurers to fairly and affirmatively offer, market and sell
all of the plan's or insurer's health care plans that are
sold to small employers, as defined, with certain
exceptions. Existing law requires participation
requirements to be uniformly applied among all small
employer groups, but allows plans and insurers to vary
minimum employee participation requirements by size of the
employer and other factors. Existing law requires all
health care service plan contracts and health insurance
plans offered to a small employer to be renewable by all
eligible employees or dependents except for specified
reasons.
Existing law restricts permissible risk categories for
small employer plans to age, geographic region and family
size, as specified. Existing law requires an eligible
employee's premium to be determined based on the rate
applicable to the employee's risk category, plus an
adjustment factor of not more than and not less than 10
percent.
Existing law requires all health care service plans
licensed by the DMHC to provide basic health care services.
Existing law requires DMHC-licensed health care service
plan contracts offered to small employers to include, at a
minimum, basic health care services, as defined, as well as
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other services required by law of all health care service
plans.
Existing law authorizes the California Small Group
Reinsurance Fund to allow small employer carriers and small
employer health care service plans to share in financing
the cost of covering high-risk, small employer groups and
cede a portion of risk to the fund that the fund has agreed
to accept.
Medical loss ratios
Existing law prohibits health care service plans from
expending excessive amounts of the payments they receive
for providing services on administrative costs, as defined.
Existing regulations further provides that administrative
costs shall take into consideration such factors as the
plan's stage of development, and provides that if
administrative costs exceed a certain percentage, as
specified, 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 provides that the Insurance Commissioner
(Commissioner) shall not approve any disability policy,
including a health insurance policy, if any benefit of the
policy is not of real economic value to the insured.
Existing law requires the 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 further define a
standard of "reasonableness" for the ratio of medical
benefits to the premium charged for individual disability
insurance, and sets this ratio at 50 percent. As of July
1, 2007, this increases to 70 percent.
Medical underwriting
Existing law requires all applications for individual
health coverage issued by health care service plans and
insurers that include health-related questions to base
those questions on medical information that is reasonable
and necessary for medical underwriting purposes. Existing
law requires all full service health care service plans and
health insurance policies in the individual market to have
written policies, procedures, or underwriting guidelines
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establishing the criteria and process under which the plan
makes its decision to provide or to deny coverage to
individuals applying for coverage and sets the rate for
that coverage. Existing law requires health care service
plans and health insurers to file with the appropriate
regulatory authority a general description of those
criteria, policies, procedures, or guidelines.
Preexisting condition exclusions
Existing law requires health care service plans and health
insurers that offer coverage to individuals to limit
preexisting condition exclusions (where coverage for a
certain medical condition is excluded) to no longer than 12
months. Existing law requires health care service plans
and health insurers to credit the time during which a
person had individual coverage from another plan or insurer
towards that preexisting condition exclusion, provided that
no more than 62 days elapse between the time of termination
of prior coverage and the time when eligibility for new
coverage begins. Existing law allows health care service
plans and health insurers that do not invoke preexisting
condition exclusions to impose a waiting period of up to 60
days. Existing law prohibits the application of
preexisting condition exclusions to certain individuals and
conditions.
Existing law prohibits exclusion of eligible employees from
the plans offered to small employers, but allows, for
certain individuals, preexisting conditions, as defined, to
be excluded for six months, or, in lieu of a preexisting
condition provision exclusion, allows plans to impose a
waiting period of up to 60 days.
Guaranteed issue in the individual market
Existing federal and state laws require health care service
plans and health insurers in the individual market to issue
coverage to "federally eligible defined individuals,"
defined as a person who has had 18 months of prior group
coverage, is not eligible for coverage under a group health
plan, Medicare, or Medi-Cal, was not terminated from his or
her most recent coverage for nonpayment of premiums or
fraud, and who has exhausted any COBRA or Cal-COBRA
benefits. Existing law requires health care service plans
and health insurers in the individual market to issue to
these individuals coverage under the health care service
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plan's or health insurer's two most popular products or
their two most representative products, with specified
premium rate caps. Existing federal and state laws allow
individuals to retain group health coverage for a period of
time when experiencing a qualifying event, as defined.
Existing law requires health care service plans and health
insurers providing coverage in the individual health
insurance market on or after January 1, 2007 to allow
individuals covered under an individual policy for at least
18 months to transfer at least once per year, without
medical underwriting, to another of the health care service
plan's or health insurer's individual policies that
provides equal or lesser benefits as determined by the
health care service plan or health insurer.
Guaranteed renewability in the individual market
Existing law requires all individual benefit plans, with
certain exceptions, to be renewable by all eligible
individuals or dependents except for nonpayment of the
premiums, and fraud or intentional misrepresentation, among
other reasons.
This bill:
Individual mandate
This bill would require all taxpayers with incomes of 400
percent of the FPL or greater, except for those whose sole
source of income is retirement income, to maintain a
minimum policy of health care coverage, as determined by
MRMIB, for themselves and their dependents.
The bill would authorize the Franchise Tax Board (FTB) to
utilize tax information to facilitate the administration of
the health care coverage mandate, and would require the
modification of personal income tax return forms to allow
taxpayers to indicate whether or not the taxpayer or
dependent had health coverage during the calendar year for
which the return is filed. The bill would provide that a
personal exemption credit shall only be allowed for
individuals for whom there was health care coverage. The
personal exemption credit would be reduced by one-half for
joint returns where only one spouse has health care
coverage. The bill would require the FTB to annually
estimate the gained revenues from the withheld credits, and
increase the amounts of personal exemption credits for all
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taxpayers who demonstrate compliance with the individual
mandate.
Employer pay-or-play option
The bill would require each employer to spend an
unspecified percentage of social security wages on health
care expenditures for full-time and part-time employees, as
defined by EDD, and their dependents, or pay a fee in an
equivalent amount to the Fund. Employees and their
dependents whose employers elect to pay the fees would be
eligible for coverage in health plans offered by the
Connector.
The bill would define employer health care expenditures as
any amount paid by an employer to or on behalf of its
employees and their dependents to provide health care or
health-related services or to reimburse costs of those
services including specified unreimbursed employee health
care costs, healthy lifestyle programs, on-site health
fairs and clinics, financial incentives to participate in
health screens or other wellness activities, disease
management programs, and care provided by health care
providers employed by or under contract with the employer.
The bill would require employees of employers electing to
pay fees to the Fund to pay health coverage premiums,
determined by MRMIB, and adjusted based on the type of plan
the employee selects, as well as the number of dependents
that would be covered. The bill would require MRMIB to
determine employee health coverage premiums on a sliding
scale basis for employees with incomes of 300 percent of
the FPL or less. The bill would also authorize MRMIB to
adjust the employer spending threshold or fee, and the
employee premium amounts, to ensure that revenues in the
Fund would be sufficient to pay the cost of health care
coverage.
The bill would require employers to notify the Employment
Development Department (EDD), within specified timelines,
of their election to provide or terminate employee health
care through the Connector. Participating employers would
be required to remain in the Connector for at least two
calendar years. Employers who terminate coverage through
the pool would not be able to rejoin the pool for a minimum
of two years. The bill would require participating
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employers to report all employee hires and terminations to
EDD within specified timelines, or be subject to penalties.
Employers would be required to advise all employees of the
requirement to participate in a health plan offered by the
Connector, and to give employees the choice of declining
coverage offered through the Connector if the employee
certifies health coverage through his or her spouse's or
domestic partner's employer. The employer would also be
required to advise employees of the right to apply to the
board to determine eligibility for a subsidy if the
employee's family income is less than 300 percent of the
FPL.
The bill would require employers who provide coverage
through the pool to maintain a cafeteria plan to provide
accident or health plan coverage to employees. The
cafeteria plan would, at a minimum, be required to include
premium-only products for health insurance purposes.
The Connector
The bill would require MRMIB to develop standards for
coverage, and negotiate rates for coverage provided through
the Connector, and would require that participating
employers have a choice of three tiers of health plans that
provide comprehensive health care coverage that meet
Knox-Keene standards and also provide prescription drug
benefits. First tier plans would be able to impose
co-payments consistent with utilization management
practices that improve health outcomes and encourage
cost-effective use of services. Higher tiers would provide
more benefits or greater provider choices with additional
costs borne by the employee.
The bill would require the board to provide information on
plan quality and cost effectiveness to Connector enrollees
and require the board to negotiate with Medi-Cal managed
care plans to obtain affordable coverage. Additionally,
the board would be required to establish a working group to
develop recommendations to the Legislature, by January 1,
2009, on broadening access to the Connector by
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self-employed individuals.
Insurance market reforms
Mid-market reforms
This bill would, after January 1, 2010, apply existing
requirements relating to the offering, marketing, and
selling of health care service plan contracts and insurer
health benefit plans to small employers (those employing
2-50 eligible employees) including guaranteed renewal, use
of risk adjustment factors, and other requirements, to all
plan contracts and benefit plans offered to employers with
199 or fewer employees. The bill would allow a health care
service plan or health insurer to develop health care
coverage benefit plan designs to fairly and affirmatively
market only to medium employer groups of 51-199 eligible
employees. The bill would prohibit the use of a risk
adjustment factor on and after January 1, 2011.
Medical loss ratios
This bill would require health care service plans and
health insurers to expend no less than 85 percent of
revenues obtained from subscribers and enrollees on patient
care and would require DMHC and the Commissioner to adopt
regulations to implement this section and submit
regulations to the Office of Administrative Law no later
than January 15, 2008.
Guaranteed issue - initial implementation
This bill would require, beginning January 1, 2011, every
health care service plan and health insurer that issues an
individual health benefit plan to fairly and affirmatively
offer, market and sell at least one approved baseline plan
on a guaranteed issue basis, beginning 180 days after the
director and the Commissioner jointly adopt regulations
defining a baseline HMO and a baseline PPO benefit plan.
The baseline plan shall be the minimum policy of health
care coverage determined by MRMIB. The bill would require
health care service plans and health insurers who offer
more than one individual market product to offer a baseline
plan for each product.
The bill would allow health care service plans and health
insurers to develop, submit for approval, and offer other
health benefit plans in the individual market not subject
to guaranteed issue only until the director and the
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Commissioner approve five classes of individual health
benefit plans, as prescribed below. Until this time, the
bill would require a health care service plan's or health
insurer's lowest class baseline plan for each provider
network to be its lowest priced plan for that network and
offered on a guaranteed issue basis.
Guaranteed issue - full implementation
This bill would make operative several provisions relating
to the classes of individual health benefit plans that
health care service plans and health insurers would be
required to offer, upon a finding by MRMIB that a certain
percentage (as yet unspecified) of California residents
have qualifying health coverage.
The bill would require the DMHC director and Commissioner,
within 90 days of MRMIB's finding, to jointly adopt
regulations governing five classes of individual health
benefit plans that each health care service plan and health
insurer participating in the individual market would be
required to offer. The bill would require the director and
Commissioner to jointly approve five classes of individual
health benefit plans for each health care service plan and
health insurer participating in the individual market.
Each class shall have an increased level of benefits
beginning with the lowest class, which shall provide
exclusively those benefits specified by MRMIB. Within each
class, the director and Commissioner shall jointly approve
one baseline HMO and one baseline PPO product. The bill
would require the director and Commissioner, in approving
the five classes of plans, jointly to: 1) determine that
the plans provide reasonable benefit variation and allow a
diverse market; and 2) require that benefits within each
class are standard and uniform across all health care
service plans and health insurers, or are actuarially
equivalent across all health care service plans and health
insurers.
This bill would require individuals who are required to
purchase qualifying health coverage in the individual
market to purchase a plan from one of the five classes of
approved plans. The bill would allow an individual or
subscriber, on behalf of himself, herself or for all
dependents, to change plans or classes according to
specified criteria. The criteria would allow individuals
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to change plans within the same class of benefits or move
up one class of benefits annually in the month of the
subscriber's birth; allow a subscriber to move up to a
higher class of benefits at significant life events, as
specified, or move to a lower class of benefits at any
time.
The bill would require individuals applying for coverage in
the individual market to provide health information, as
required by the standardized health status questionnaire,
adopted by the director and Commissioner, to assist health
care service plans and health insurers in identifying those
in need of disease management, or high-risk applicants.
The bill would prohibit health care service plans and
health insurers from using the information to decline
coverage or to limit an individual's choice of plans.
This bill would require all health benefit plans to be
renewable to all individuals and dependents unless the
subscriber does not make the premium payments, or the plan
or insurer withdraws from the individual market, as allowed
by rules and requirements jointly approved by the director
and Commissioner.
This bill would allow a health care service plan or health
insurer to rate its entire portfolio according to expected
costs or other market considerations, but would require the
rate to be set in relation to the balance of the portfolio
as certified by an actuary. The bill would require each
benefit plan to be priced to reflect the difference in
benefit variation or effectiveness of a provider network,
as determined by the health care service plan or health
insurer, but prohibit rate adjustment based on risk
selection. The bill would require health care service
plans and health insurers to use the same rating factors
for age, family size and geographic location for each plan,
and would allow rates to vary only by age of the
subscriber, family size, and geographic rate regions, as
determined by the director and Commissioner, and health
improvement discounts, as specified.
This bill would create the California Individual Market
Reinsurance Fund and allow health care service plans and
health insurers in the individual market to cede the
financial risk of covering high-risk individuals to this
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fund in order to share more equitably in the cost of
covering them.
The bill would exempt individual health plan contracts for
Medicare, Medi-Cal contracts, Healthy Family contracts,
high risk pool contracts, Medicare supplement policies,
long-term care policies, specialized health plan contracts,
or contracts issued through the Connector from the
guaranteed issue and rating requirement.
Public program eligibility
The bill would make all children who are residents of
California eligible for the Healthy Families and Medi-Cal
programs, even if the children do not meet the federal
citizenship and immigration status requirements for
eligibility
This bill would raise income eligibility for the Healthy
Families program from 250 percent to 300 percent of the
FPL. This bill provides that the increase in income
eligibility must be implemented after June 30, 2008 and
only to the extent funds are appropriated for those
purposes. This bill would authorize MRMIB, by July 1,
2008, to expand Healthy Families eligibility to uninsured
parents and responsible adults under the terms of the
federal Deficit Reduction Act.
The bill would require DHCS to increase the income
eligibility for families of children aged 6 to 19 enrolling
in Medi-Cal to 133 percent of the FPL, thereby establishing
a uniform eligibility requirement to all Medi-Cal eligible
children over age one. This bill also requires DHCS to
simplify Medi-Cal eligibility by eliminating the asset test
for children and families, and requires DHCS to allow
different categories of Medi-Cal applicants to take greater
advantage of income disregards in establishing income
eligibility for Medi-Cal.
This bill would require DHCS to develop a benchmark plan as
permitted under the federal DRA for low-income families,
provided that federal financial participation is available.
This bill would also require DHCS to establish an income
eligibility of 300 percent of the FPL for families and
individuals eligible for the benchmark plan. The bill
requires that the benchmark plan be equivalent to the
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Healthy Families coverage. The bill requires that DHCS
eliminate the asset test for these individuals provided
that federal financial participation is available.
This bill would streamline the "deprivation test" under
federal law which requires, as a condition of eligibility,
that a child be deprived of parental support, which means a
parent is absent, working, deceased, or unemployed.
(Absent deprivation, a family may still be ineligible if
both parents are present and working, even if the family is
otherwise eligible by their income under certain
circumstances.)
Assessment
The bill would require the Secretary of the California
Health and Human Services Agency (CHHS), along with an
advisory body comprised of members appointed by the
Governor, Senate President Pro Tempore, and Speaker of the
Assembly, to assess and report to the Legislature on
various items provided for in the bill, including
compliance with the individual mandate, the sustainability
and solvency of the Connector, utilization of the
Connector, public coverage programs, the insurance market,
the health care delivery infrastructure, the impact on the
county safety net, individual out-of-pocket expenditures
and personal bankruptcy related to health care.
FISCAL IMPACT
Unknown.
BACKGROUND AND DISCUSSION
Purpose
The author states that California's health care system is
facing a crisis of access, quality, and cost that worsens
each year. The author states that over 6.5 million
Californians, most from working families, were uninsured at
some point during last year. The cost shift or hidden tax
needed to pay for the uninsured is an added cost that must
be borne by those who buy insurance now, and is estimated
to have increased annual health care premium costs by an
additional $455 for individuals and $1,186 for families.
The author also states that the cost of health insurance
premiums nearly doubled between 2001 and 2006; and that,
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although worker earnings increased about 12 percent, worker
premium contributions for single coverage increased
cumulatively by 128 percent.
The author states that when the sick cannot access the
medical care they need, they often get sicker and are
forced to use overcrowded emergency rooms, which too often
become the provider of last resort. Additionally, those
with pre-existing medical conditions - who often need
coverage the most - find it difficult to buy it at any
price. The author argues that the state must begin to
enact comprehensive reforms that address the fundamental
flaws in the current system. To expand coverage, control
costs and improve quality, new ground rules are needed.
The author asserts that SB 48 establishes a basic standard
for on-the-job health benefits just as the minimum wage
sets standards for wages, and based on the principle of
shared responsibility and would significantly expand health
coverage to workers and their dependents who are now
uninsured. Through this bill, affordability would be
maximized through the Connector, which would leverage
market power to control costs. The author also contends
that accessing new federal funds would help reduce
contribution levels for employers and employees, and that
all children up to 300 percent of the FPL would be eligible
for coverage - regardless of immigration status. Lastly,
the author states that through this bill, guaranteed issue
requirements would be phased in to eliminate the use of
medical underwriting practices that now allow health
insurers to deny coverage to individuals with preexisting
health conditions.
Uninsured Californians
According to the California Health Care Foundation (CHCF),
approximately 6.6 million people are uninsured in
California, and the number of uninsured continues to rise
as employer-sponsored health insurance declines. Although
families with incomes below the poverty level are most
likely to be uninsured, more than 30 percent of the
uninsured have family incomes of more than $50,000. Nearly
75 percent of uninsured children are in families where the
head of the household has a full-time job. CHCF also
reports that Latinos represent more than half of
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California's uninsured population and are more likely to be
uninsured than any other ethnic group. Of the total number
of uninsured, 20 percent are Asian, 18 percent are African
American, and 13 percent are Caucasian.
The cost of health care
According to the California Healthcare Foundation (CHCF),
health spending in California reached $169 billion in 2004,
or 11 percent of the state's economy. Current projections
indicate that health care spending could exceed 20 percent
of the gross national product by 2025. According to a
recent survey by the Kaiser Family Foundation, one in four
Americans say their family had a problem paying for health
care sometime during the past year, and 28 percent say
someone in their family has delayed 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
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.
Employer-sponsored and individual health coverage
The CHCF reports that approximately 40 percent of uninsured
workers are employed by small businesses, and the number of
uninsured workers in mid-size firms continues to rise.
From 1999 to 2005, premiums for employer-provided health
insurance in California increased by 112 percent, while the
general cost of living increased by 29 percent. Average
premium increases in California in 2006 were 8.7 percent,
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, and nearly
half of employers with less than 200 employees, experienced
premium increases of over 10 percent.
Nearly 90 percent of working age adults who lacked employer
coverage and attempted to obtain it in the individual
market over the past three years were rejected either for
health reasons or for past prescription drug use, or found
it too expensive to obtain coverage, according to a recent
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study. Other studies indicate that individual insurers
reject 12 - 18 percent of the applications they receive.
While persons who have been rejected in California can
qualify for coverage through the Major Risk Medical
Insurance Program (MRMIP), the program currently has a long
waiting list for coverage.
Related legislation and proposals
Various health care reform bills and proposals have been
introduced this year with the intent of significantly
expanding health care coverage in the state. Governor
Schwarzenegger's health care coverage proposal and AB 8
(N??ez) each have several elements in common with SB 48,
including proposals to create a state purchasing pool,
individual mandates to maintain minimum health insurance
coverage, employer pay-or-play requirements, public program
expansions, and insurance market reforms. However,
variances among them exist.
Governor Schwarzenegger's health care coverage proposal
would require all individuals to have a minimum level of
health insurance coverage for themselves and their
dependents. Under the proposal, employers with 10 or
more employees would be required to spend 4 percent of
social security wages on health care expenditures for
their employees or pay an equivalent amount to the state
to fund coverage provided through the pool. All
employers would be required to provide cafeteria plans.
The governor's proposal would require health plans and
insurers to maintain an 85 percent medical loss ratio,
guarantee issue of plans in the individual market, and
use modified community ratings to determine rates.
Under the proposal, eligibility for the Medi-Cal and
Healthy Families programs would be expanded, and federal
citizenship and immigration status requirements relating
to program eligibility for children would be eliminated.
However, the proposal would also establish a bright line
of eligibility for public coverage programs that would
shift adults with incomes higher than 100 percent of the
FPL from Medi-Cal to the purchasing pool, and children to
Healthy Families. It also would eliminate the Access for
Infants and Mothers (AIM) program, shifting infants to
Healthy Families and mothers to the purchasing pool, as
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well as the Managed Risk Medical Insurance Program
(MRMIP), thereby shifting medically uninsurable
individuals to the purchasing pool.
The proposal would also increase Medi-Cal provider rates,
impose an assessment on health care providers and
hospitals, and redirect county and other health safety
net funds to finance the proposed provisions. The
proposal would enact a number of provisions to reduce or
offset a portion of the costs of health coverage and
implement several new programs and initiatives related to
health prevention, promotion, and wellness.
AB 8 (N??ez) would also create a state purchasing pool, and
require employers to spend an unspecified percentage of
social security wages on health care for full-time and
part-time workers and their dependents or pay an equivalent
fee to a state purchasing pool. Employers with fewer than
two employees, or less than a $100,000 annual payroll would
be exempt from this requirement. The bill would also
require employees who are eligible for public coverage, but
who are offered employer-sponsored coverage, to accept
employer-sponsored coverage. Some of these employees would
be eligible for premium assistance payments as well as
Medi-Cal wrap-around benefits.
The bill would also expand public coverage for low-income
children and parents, and eventually childless adults, and
federal citizenship and immigration status requirements
relating to program eligibility for children would be
eliminated. The bill would establish uniform benefit
designs to be offered in the pool and by all health plans
and insurers, and include various health cost containment
measures. This bill is set for hearing in the Assembly
Health Committee on April 24, 2007.
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
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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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 was passed by the Senate Health Committee on
April 18, 2007.
SB 32 (Steinberg) would expand eligibility for the Medi-Cal
and Healthy Families program by allowing children with
family incomes at or below 300 percent of the FPL to
qualify for the program and would delete the specified
citizenship and immigration status requirements. The bill
would allow applicants to self-certify income and asset
values for the purposes of establishing eligibility for
Healthy Families, and would create the Healthy Families
Buy-In Program to make coverage available to children whose
household income exceeds 300 percent of the FPL. This bill
would also establish the Medi-Cal Presumptive Eligibility
Program, which would provide a child who meets specified
eligibility requirements with benefits identical to
full-scope benefits under the Medi-Cal program with no
share of cost until the child's eligibility is determined
for the Medi-Cal or Healthy Families programs. This bill
is set for hearing in the Senate Health Committee on April
25, 2007.
SB 236 (Runner) would declare legislative intent to create
the Cal CARE program designed to make health care more
affordable and accessible in the state through incentives
for hospitals and the private sector to increase the number
of primary care clinics as a means to increase access to
health care services in rural and medically underserved
areas, and to provide lower cost alternatives to receiving
care in emergency rooms. The bill would also declare
intent to provide incentives to employers who offer health
care to their employees, as well as tax benefits to
individuals who purchase health care coverage. The bill
would also declare legislative intent to redirect
Proposition 10 funds to children's health care initiatives,
and would shift costs for health care provided to
undocumented immigrants to the federal government. This
bill is in Senate Rules awaiting referral to a policy
committee.
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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AB 1554 (Jones) would require health care services plans
and health insurers to receive approval from the DHMC or
DOI to increase premiums, co-payments, coinsurance
obligations, and deductibles. The bill would require both
departments to notify the public of, and hold hearings on,
applications from plans or insurers to increase rates.
This bill was passed by the Assembly Health Committee on
April 17, 2007.
Prior legislation and proposals
SB 840 (Kuehl, 2006) contained provisions substantially
similar to those provided in SB 840 of the current session.
This bill was vetoed.
SB 1414 (Migden, 2006) would have required employers with
10,000 or more employees to spend a specified percentage of
their payroll on employee health insurance benefits or make
specified payments to the state. This bill was vetoed.
AB 772 (Chan, 2006) would have created the California
Healthy Kids Insurance Program to expand Medi-Cal and
Healthy Families eligibility by allowing children in
families with incomes up to 300 percent of the FPL to
qualify, streamlining children's enrollment into Medi-Cal
and Healthy Families by relying on income determinations
made by other public assistance programs, and by
simplifying annual renewals by allowing self-certification
of eligibility. The bill would also have provided grants
to local children's health initiatives. This bill was
vetoed.
Massachusetts Health Care Reform Act (Chapter 58 of the
Commonwealth Acts of 2006) requires all residents who are
18 or older to have health insurance, if coverage is
"affordable," a term not defined in the statute. 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. 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.
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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The Act also requires employers with more than 10 employees
to establish Section 125 plans, or, under specified
circumstances, be assessed a "free rider surcharge." The
plan enacted 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, expanding enrollment caps for Medicaid coverage for
specified persons, and increasing payment rates for
Medicaid providers and subsidies for public coverage. The
Act also merges the individual and small group insurance
markets and applies modified community rating requirements
for the combined market.
The Massachusetts plan has yet to be fully implemented, and
continues to face challenges with implementing the
individual mandate due to high premium cost projections,
even for high deductible coverage plans. The Connector's
board, which is charged with defining "affordable" coverage
vis-?-vis the individual mandate, recently approved a
proposal to exempt 20 percent of the state's uninsured from
the individual mandate for whom coverage was not deemed
affordable.
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. 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.
SB 921 (Kuehl, 2004) also contained provisions
substantially similar to those provide in SB 840 of the
current session. This bill was held in the Assembly.
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
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
21
coverage to employees (and dependents for larger
employers). The bill defined minimum required coverage, and
required employers to contribute at least 80 percent of the
costs of coverage and employees to contribute 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 initiative.
Arguments in support
The American Association of Retired Persons (AARP) bases
its support for this bill on the premise that everyone
should have access to affordable, quality health care when
they need it, including persons who are denied coverage in
the individual market because of their health history.
AARP also asserts that maintaining employer-based coverage
is a concern as many of its members rely on
employer-sponsored health care plans. The California
Association of Public Hospitals and Health Systems (CAPH)
supports the expansion of health coverage and access to
quality health services for all Californians. CAPH
suggests that the bill include Medi-Cal rate increases, as
well as investments in the capacity of the health care
delivery system, to ensure that Californians that are newly
enrolled in health coverage will have proper access to
care.
Arguments in opposition
Opponents state that the bill's employer mandate will
threaten jobs and slow economic growth in the state by
imposing financial hardships on businesses. Opponents
argue that that employer mandate will disproportionately
affect small employers who have difficulties affording
health coverage for themselves or their employees. The
California Manufacturers and Technology Association argues
that employers should continue to voluntarily offer health
care coverage, and that costs of coverage for the safety
net population should be fairly imposed on a broad basis,
and not targeted at employers. The National Federation of
Independent Business states that the bill does not propose
strong cost containment measures, thereby forcing small
businesses to find ways to cut business costs to pay for
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
22
health care. The California Restaurant Association states
that out-of-control health insurance premiums are the
primary reason for the decline in employer-sponsored
coverage, and that health care reform should center on
affordability, not mandating small employers to provide
coverage or pay fees that they may not be able to afford
now or in coming years.
Concerns
While supporting many elements of the proposal, Health
Access California opposes the bill's individual mandate,
stating that the bill does not require coverage sold by
insurers and HMOs to be affordable for the employer or
worker, that it would impose unaffordable premiums and
out-of-pocket costs on moderate income Californians, and
would apply to individuals even if they are unemployed or
temporarily without benefits due to employer waiting
periods. Health Access California proposes that the bill
should limit the share of cost that employees must pay
based on their wages, and regulate health coverage so it
does not require out-of-pocket costs and premium shares
that exceed an affordable percentage of wages. The
organization also suggests that the bill should define a
basic benefit package for health insurance, regulate rates
in the individual market, and provide access to preventive
care through affordable cost-sharing with low- and
moderate-income Californians who do not qualify for public
programs. Lastly, the organization contends that the bill
should contain more short- and long-term cost containment
provisions such as public oversight and transparency of
rate-setting and costs, increases in Medi-Cal rates,
disease management and prevention programs, and investments
in health information technology.
COMMENTS AND QUESTIONS
1. Many positive elements of proposal. SB 48 contains a
number of positive elements that have the potential to
expand coverage significantly, help reduce health care
costs, and improve the health status of Californians.
Those include expanding eligibility for Medi-Cal and the
Healthy Families programs, requiring insurers to offer
coverage in the individual market on a guaranteed issue
basis with rating bands, imposing insurance market reforms
and rating bands in the mid-size employer market (51 - 200
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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employees), imposing insurer minimum loss ratios, and
expanding coverage through an employer pay-or-play
requirement. SB 48 would also establish a uniform Medi-Cal
income eligibility standard for children, in lieu of
current standards, which vary by the age of the child,
which would simplify eligibility and enrollment for
families. The coverage expansion provisions of SB 48 would
reduce the number of uninsured, which would help reduce
uncompensated care and cost shifting.
2. Several details of proposal still under development.
While the bill establishes an overall framework for
expanding health insurance coverage, many important
provisions are either not detailed in the proposal, or
implementation is left to administrative entities. For
example, implementation of some of the bill's individual
insurance market reforms, pertaining to guaranteed issue
and rating bands, are contingent on a finding being made
that the percentage of the state's residents who have
qualifying health coverage meets an established threshold,
but the bill does not specify what the threshold is. Also,
while the bill requires employers to pay funds equal to a
percent of social security wages into the Health Insurance
Trust Fund, if they choose not to provide health care
benefits or coverage to full-time and part-time employees,
the bill does not specify the percentage, and also excludes
wages beyond an unspecified level from the assessment.
Additionally, the bill requires employees of employers who
elect to pay the fees in lieu of providing health coverage
or benefits to pay premium contributions and to enroll in
one of the health plans offered by the Connector, and
provides for the contributions to be based on a sliding
scale for employees with family incomes of less than 300
percent of the FPL. However, the bill does not specify the
specific level or range of premiums for employees, for both
those under and over 300 percent of the FPL. The author
intends to further clarify these provisions as the bill
moves through the process, based on modeling work that is
being done on all of the major health insurance reform
proposals by Jon Gruber, an economist and professor at MIT.
3. Application of individual coverage mandate broader than
for employees. Although the bill's digest states that the
bill would, on and after January 1, 2011, require
individuals who are employed or self-employed to maintain a
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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minimum policy of health care coverage for themselves and
their dependents, the bill's definition of taxpayers who
would be subject to the mandate to maintain coverage is
actually broader than that, and would include all persons
who receive income subject to the personal income tax,
excluding retirement income, which would include wages,
self-employment earnings, certain types of business income,
estate and trust fund earnings, income from dividends, and
other types of income.
4. Impact of assessments on employers. Although the
majority of employers in California offer health insurance
coverage to their employees (70 percent overall and 80
percent for employers with 10 - 49 employees), significant
numbers do not. In addition many larger employers do not
provide coverage, or provide limited coverage, to part-time
workers and/or require employees to work for some period of
time before they are eligible for coverage. Further,
according to data compiled by RAND researchers for the
California Healthcare Foundation in 2006, 25 percent of
employers who do offer coverage spend less than 4 percent
of their payroll as their contribution towards the
coverage. According to surveys, the high cost of providing
coverage is the most frequently cited reason that employers
do not provide coverage. Employer groups argue that, for
many employers, imposing even a small payroll cost is
likely to lead to wage reductions and less employment over
time.
5. Individual mandate may be difficult to enforce. Under
the bill, the penalty for not complying with the individual
mandate to have qualifying coverage is the loss of some or
all of the state personal exemption credit. Given that the
amount of the exemption credit is small ($91 for a single
person and $182 for a married couple) relative to the cost
of health insurance, many people may opt to forego the
exemptions instead of purchasing insurance. In addition,
identifying persons who are subject to the mandate but do
not have, or purchase but then drop, the coverage could be
administratively difficult.
6. Potential fiscal and legal issues. SB 48 relies on
many of the same fiscal and legal assumptions as the
Governor's health insurance proposal, including that the
pay or play provisions of the proposal will withstand legal
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
25
challenge under Employee Retirement Income and Security Act
(ERISA), that federal funds will be available for the costs
of many of the employees who receive coverage through the
Connector, and those related to proposed expansion of
eligibility for the Healthy Families program, that the
assumed costs of providing coverage through the Connector
are accurate and that with cost containment practices,
future cost growth can be moderated, and that the
pay-or-play structure proposed by the bill will not
encourage employers with employees who have higher medical
costs to shift coverage to the purchasing pool. To the
extent that any of these assumptions is not borne out,
implementation of several sections of the bill could be
held up or become more costly than that projected.
7. MRMIB governing structure may need to be revised.
MRMIB was initially created in 1990 with a broad mandate to
advise the Governor and the Legislature on strategies for
reducing the number of uninsured persons in the state. The
responsibilities of MRMIB have grown over the years, most
notably in 1997 with the creation of the Healthy Families
program. MRMIB is comprised of seven members. Three are
appointed by the Governor and confirmed by the Senate and
one each by the Assembly and Senate, with each serving four
year terms. The Secretary of Business, Transportation, and
Housing and the Secretary of Health and Human Services
serve, but do not vote. Given that SB 48 would greatly
expand MRMIB's role in terms of administering health
coverage programs and establishing policy affecting the
private health insurance market, it may be appropriate to
consider expanding and altering the MRMIB governing
structure to make it more broadly representative of the
range of groups that will be impacted by its decisions.
8. Affordability protections for residents and employees.
The bill requires individuals with incomes over 400
percent of the FPL to demonstrate at the time they file
taxes that they have qualifying coverage, and provides that
they may lose certain personal and dependent tax exemptions
if they cannot so demonstrate. For many individuals,
particularly those who must purchase qualifying coverage in
the individual market, this requirement may require them to
spend a significant portion of their income in order to
meet the mandate, although in most cases the loss of the
tax exemptions may be a cheaper alternative for them. In
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
26
addition, the bill requires employees whose employers elect
to pay funds to the state to pay unspecified premium
contributions and enroll in coverage provided by the
Connector, with no penalty spelled out in the bill for not
doing so. Under Massachusetts' comprehensive health
insurance plan, individuals for whom minimum qualifying
health insurance is unaffordable are exempted from the
mandate to have the coverage. Suggested amendments would
be to provide that persons with incomes over 400 percent of
the FPL are exempt from the requirement to have minimum
qualifying health coverage if doing so would require them
to spend 5 percent or more of their incomes, and to provide
that the maximum amount that an employee would be required
to pay in premiums would be limited to a threshold ranging
from 0 to 5 percent of family income, depending on family
income level.
Suggested amendments:
a. On page 36, between lines 5 and 6, insert:
(d) An individual shall not be subject to the requirement
in (a) if the cost of the minimum policy of health care
coverage exceeds 5 percent of his or her family income.
b. On page 36, lines 9 - 26:
17054.2. (a) Notwithstanding Section 17054 or any other
provision of law, a taxpayer who fails to comply with
Section 2203 of the Labor Code shall not be allowed an
adjusted personal exemption credit pursuant to subdivision
(a) or (d) of Section 17054 for the taxpayer or the
dependents of the taxpayer for any tax year in which the
taxpayer is not in compliance, and in the case of a husband
and wife making a joint return, the adjusted personal
exemption credit pursuant to subdivision (b) of Section
17054 shall be reduced by one-half in the case where one
spouse is in compliance and the other
spouse is not in compliance . (1) Personal income tax
return forms for individuals filed for taxable years
beginning on or after January 1, 2011, shall be revised to
require taxpayers to indicate on the form, in a manner
prescribed by the Franchise Tax Board, whether, for the
period of time during the calendar year ending with or
within the taxable year for which the return is filed,
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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every individual identified as a taxpayer or dependent on
that return had health care coverage as required by Section
2203 of the Labor Code, or was exempt pursuant to Section
2203 (d) of the Labor Code.
c. On page 35, lines 21 - 26:
(d) The board may adjust the schedule to ensure that the
revenues in the Health Insurance Trust Fund derived from
employee health coverage premium contributions are
sufficient to pay for the cost of health coverage provided
through the Connector when combined with the resources
available pursuant to subdivision (b) of Section 2200. The
maximum amount that an employee shall be required to pay in
premiums shall be limited to a threshold that shall range
from 0 to 5 percent of family income, depending on family
income level.
9. Minimum coverage standards are not specified. The bill
does not establish minimum standards for the health
coverage that would be required to meet the individual
mandate, and instead directs MRMIB to develop the
standards. Similarly, the bill does not establish
standards for coverage or benefits employers would provide
to employees, for those employers who elect to provide
benefits instead of paying funds to the state. The latter
may largely be in order to avoid potential federal
preemption problems under ERISA. Suggested amendments
would be to establish standards for the minimum qualifying
coverage for the individual mandate, and also for health
care service plans and health insurance plan contracts
offered to employers, to ensure that basic health benefits
are provided, that deductibles, coinsurance, and
co-payments are not excessive, that coverage for primary
and preventive services is included and is not subject to
any deductible.
Suggested amendment:
On page 36, between lines 5 and 6, insert:
(e) The minimum policy of health coverage, and all group
health care service plan contracts and group health
insurance plan contracts offered in California, shall meet
all of the following:
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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(1) Provide basic health benefits as defined in Health and
Safety Code, Section 1345 plus prescription drugs;
(2) Limit deductibles to no more than $2,500 per individual
or $5,000 per family;
(3) Provide preventive care services, which shall not be
subject to a deductible, consisting of, but not limited to:
(A) Periodic health evaluations, such as annual physicals.
(B) Routine prenatal and well-child care.
(C) Child and adult immunizations.
(D) Tobacco cessation programs.
(E) Obesity weight-loss programs.
(F) Screening services, including screening services for
cancer, heart and vascular diseases, mental health
conditions, substance abuse, obstetrical and gynecological
conditions, and vision and hearing disorders.
(4) Limit the amount paid by an enrollee or subscriber for
co-payments and coinsurance to not more than 30 percent of
the rate negotiated or charged for the service furnished to
the enrollee or subscriber by a participating plan
provider.
10. Mid-size employer health insurance market reforms.
The bill would apply rules governing the small employer
health insurance market, such as the guaranteed offering
and renewal of specified health plans and use of risk
categories to determine premium rates, to mid-size
employers beginning January 1, 2010. Given that this
extension of market reforms is not contingent upon any
other actions contained in the bill, a suggested amendment
would be to move the effective date of this extension to
January 1, 2008.
a. Page 9, lines 26 - 40 and page 10, lines 1-4:
1357.20. Notwithstanding any other provision of law, on
and after January 1, 2008 2010 , all requirements in Article
3.1 (commencing with Section 1357) applicable to offering,
marketing, and selling health care service plan contracts
to small employers, as defined in that article, including,
but not limited to, the obligation to fairly and
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
29
affirmatively offer, market, and sell all of the plan's
contracts to all of those employers, guaranteed renewal of
all health care service plan contracts, use of the risk
adjustment factor, and the
restriction of risk categories to age, geographic region,
and family composition as described in that article, shall
be applicable to all health care service plan contracts
offered to all employers with 199 or fewer employees,
except that for employers with 51 to 199 eligible
employees, the health care service plan may develop health
care coverage benefit plan designs to fairly and
affirmatively market only to medium employer groups of 51
to 199 eligible employees, and apply a risk adjustment
factor of no more than 110 percent and no less than 90
percent of the standard employee risk rate. However, on and
after January 1, 2011, no risk adjustment factor will be
permitted for contracts offered to employers with 2 - 199
employees.
b. Page 22, lines 23 - 40 and page 23, lines 1 - 2:
10760. Notwithstanding any other provision of law, on and
after January 1, 2008 2010 , all requirements in Chapter 8
(commencing with Section 10700) applicable to offering,
marketing, and selling health benefit plans to small
employers as defined in that chapter,
including, but not limited to, the obligation to fairly and
affirmatively offer, market, and sell all of the insurer's
health benefit plans to all of those employers, guaranteed
renewal of all health benefit plans, use of the risk
adjustment factor, and the restriction of risk categories
to age, geographic region, and family composition as
described in that chapter, shall be applicable to all
health benefit plans offered to all employers with 199 or
fewer
employees providing coverage to employees pursuant to Part
8.8 (commencing with Section 2200) of Division 2 of the
Labor Code, except that for employers with 51 to 199
eligible employees, health insurers may develop health care
coverage benefit plan designs to fairly and affirmatively
market only to employer groups of 51 to 199 eligible
employees, and apply a risk adjustment factor of no more
than 110 percent and no less than 90 percent of the
standard employee risk rate. However, on and after January
1, 2011, no risk adjustment factor shall be permitted for
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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contracts offered to employers with 2 - 199 employees.
11. Additional purchasing pool provisions. Staff suggest
several amendments to the bill's provisions establishing
the purchasing pool, to clarify the cost sharing
requirements in the plans offered to employees and
dependents, prohibit employers from changing employee job
classifications or hours worked to avoid their payment
obligations, hold employees harmless if their employers do
not pay fees that they are otherwise required to pay, and
clarify that employers may, but are not required to, pay
some or all of the employee contribution.
a. On page 30, between lines 23 and 24, insert:
(c) In determining the required enrollee and dependent
deductibles, coinsurance, and copayments, the board shall
consider whether the proposed copayments, coinsurance, and
deductibles deter enrollees and dependents from receiving
appropriate and timely care, including those enrollees with
low or moderate family incomes. The board shall also
consider the impact of out-of-pocket costs on the ability
of employers to pay the fee.
b. On page 34, between lines 6 and 7, insert:
(d) It shall be unlawful for an employer to designate an
employee as an independent contractor or temporary
employee, reduce an employee's hours of work, or terminate
and rehire an employee if a purpose for the action is to
avoid the employer's obligations under this part.
c. On page 41, lines 22 - 27:
4820. (a) Notwithstanding any other provision of this
code, an employer who fails to file or remit any
contributions required of him or her or of his or her
workers under this division, within the time required shall
become liable for a penalty of ____ dollars ($____) and
interest on those contributions at ____ annual rate from
and after the date of delinquency until paid.
(b) Coverage of an enrollee or, if applicable, dependents
shall not be contingent upon payment of the fee required
pursuant to this part by the employer of that enrollee or,
if applicable, dependents.
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
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(c) Nothing shall preclude an employer from paying some
or all of the employee contribution that is otherwise
required by Section 2201 of the Labor Code.
12. Guaranteed issue requirements. While the bill's
guaranteed issue and rating reforms for the individual
insurance market provide that rates for health care
benefits may vary from applicant to applicant only by age,
family size, and geographic region of the applicant or
subscriber, it provides that the manner in which these
factors are applied shall be determined by the DMHC
Director and the Insurance Commissioner. This could allow
for substantial variation among individuals seeking
insurance. A suggested amendment, contained in the
proposed mock-up below, would be to require the director
and Commissioner to take into consideration the categories
permitted for each rating factor currently required for
health coverage that is offered to small employers with 2 -
50 employees. In addition, the bill provides that the
director and Commissioner shall have no authority to impose
artificial constraints on differences in rates by age,
family composition, or geographic region, or use of health
improvement discounts. This would limit the authority of
the director and Commissioner to limit the amount of rate
variation for subscribers and applicants and could produce
unaffordable rates for those who are the oldest, have the
largest family sizes, and/or live in the most expensive
regions of the state. A suggested amendment would be to
delete this provision.
Suggested amendments:
a. Page 14, lines 31 - 40 and page 15, lines 1 - 9:
1366.114. (a) A health care service plan or health insurer
may rate its entire portfolio of health benefit plans in
accord with expected costs or other market considerations,
but the rate for each plan or insurer shall be set in
relation to the balance of the portfolio as certified by an
actuary. Each benefit plan shall be priced as determined by
each health care service plan or health insurer to reflect
the difference in benefit variation, or the
effectiveness of a provider network, but may not adjust the
rate for a specific plan for risk selection. A health care
service plan's or health insurer's rates shall use the same
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
32
rating factors for age, family size, and geographic
location for each individual health care
benefit plan it issues. Rates for health care benefits may
vary from applicant to applicant only by:
(1) Age of the subscriber, as determined by the director
and the Insurance Commissioner.
(2) Family size in categories determined by the director
and the Insurance Commissioner.
(3) Geographic rate regions as determined by the
director and the Insurance Commissioner.
(4) Health improvement discounts. A health care service
plan or health insurer may reduce copayments or offer
premium discounts for nonsmokers, individuals demonstrating
weight loss through a measurable health improvement
program, or individuals actively participating in a disease
management program, provided discounts are approved by the
director and the Insurance Commissioner.
(b) The director and Insurance Commissioner shall have
no authority to impose artificial constraints on
differences in rates by age, family composition, or
geographic region or health improvement discounts. The
director and Insurance Commissioner shall take into
consideration the age, family size, and geographic region
rating categories applicable to small group coverage
contracts pursuant to Health and Safety Code, Section 1357
and Insurance Code, Section 10700 in implementing this
section.
b.Page 21, lines 18 - 40 and page 1 - 7:
10199.114. (a) A health care service plan or health
insurer may rate its entire portfolio of health benefit
plans in accord with expected costs or other market
considerations, but the rate for each plan or insurer shall
be set in relation to the balance of the portfolio as
certified by an actuary. Each benefit plan shall be priced
as determined by each health care service plan or health
insurer to reflect the difference in benefit variation, or
the
effectiveness of a provider network, but may not adjust the
rate for a specific plan for risk selection. A health care
service plan's or health insurer's rates shall use the same
rating factors for age, family size, and geographic
location for each individual health care
benefit plan it issues. Rates for health care benefits may
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
33
vary from applicant to applicant only by:
(1) Age of the subscriber, as determined by the
commissioner and the Director of the Department of Managed
Health Care.
(2) Family size in categories determined by the
commissioner and the Director of the Department of Managed
Health Care.
(3) Geographic rate regions as determined by the
commissioner and the Director of the Department of Managed
Health Care.
(4) Health improvement discounts. A health care service
plan or health insurer may reduce copayments or offer
premium discounts for nonsmokers, individuals demonstrating
weight loss through a measurable health improvement
program, or individuals actively participating in a disease
management program, provided discounts are approved by the
commissioner and the Director of the Department of Managed
Health Care.
(b) The commissioner and the Director of the Department
of Managed Health Care shall have no authority to impose
artificial constraints on differences in rates by age,
family composition or geographic region or health
improvement discounts. The director and Insurance
Commissioner shall take into consideration the age, family
size, and geographic region rating categories applicable to
small group coverage contracts pursuant to Health and
Safety Code, Section 1357 and Insurance Code, Section
10700 in implementing this section.
13. Movement between classes of benefits and carriers.
The bill's provision to allow an individual or subscriber
to either move up a class of benefits or switch carriers
and retain the same class of benefits appears to discourage
switching carriers. An amendment is recommended to allow
more competitive movement between carriers.
Suggested amendment:
a. Page 12, lines 24-38:
1366.106. Individuals who are required to purchase
qualifying health coverage from health care service plans
or health insurers participating in the individual market
shall may purchase a health benefit plan from one of the
five classes of approved plans. After selecting and
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
34
purchasing a health benefit plan within a class of
benefits, an individual may change plans only as set forth
in this section. For individuals enrolled as a family, the
subscriber may change classes for himself or herself, or
for all dependents:
(a) Annually in the month of the subscriber's birth, an
individual may select a different individual plan from
another health care service plan or insurer, but only
within the same class of benefits or the next higher class
of benefits.
(b) Annually in the month of the subscriber's birth, an
individual may move up one class of benefits offered by the
same health care service plan or insurer.
(c) At any time a subscriber may move to a lower class of
benefits.
b. Page 19, lines 10 - 24:
10199.106. Individuals who are required to purchase
qualifying health coverage from health care service plans
or health insurers participating in the individual market
shall may purchase a health benefit plan from one of the
five classes of approved plans. After selecting and
purchasing a health benefit plan within a class of
benefits, an individual may change plans only as set forth
in this section.
(a) Annually in the month of the subscriber's birth, an
individual may select a different individual plan from
another health care service plan or insurer, but only
within the same class of benefits or the next higher class
of benefits.
(b) Annually in the month of the subscriber's birth, an
individual may move up one class of benefits offered by the
same health care service plan or insurer.
(c) At any time a subscriber may move to a lower class of
benefits.
14. Suggested technical amendments
a. Page 8, lines 31 - 34:
(10) An assessment of health insurance coverage as compiled
in the California Health Interview Survey, or other
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
35
applicable surveys.
(11) An assessment of the wellness and health status of
Californians as compiled in the California Health Interview
Survey, or other applicable surveys.
b. Page 10, lines 23 - 31:
1366.101. (a) On and after January 1, 2011, every health
care service plan and health insurer issuing individual
health benefit plans in this state shall be required to
guarantee issue at least one baseline plan. The baseline
plan shall be the minimum policy of
health care coverage determined by the Managed Risk Medical
Insurance Board pursuant to Section 2203 of the Labor Code.
(b) Consistent with (a), The the director and the Insurance
Commissioner shall jointly adopt regulations defining a
baseline HMO benefit plan and a baseline PPO benefit plan.
c. Page 11, lines 23 - 28:
1366.104. (a) Within 90 days of the finding in Section
1366.103, the director and the Insurance Commissioner shall
jointly adopt regulations governing five classes of
individual health benefit plans that health care service
plans and health insurers shall make available upon full
implementation of the individual mandate in Section 2203 of
the Labor Code .
d. Page 13, lines 9 - 15:
(f) If a subscriber becomes eligible for group benefits,
Medicare, or other benefits that meet the minimum
requirements of the individual mandate, and selects those
benefits in lieu of his or her individual coverage, the
dependent spouse or domestic partner shall may become the
subscriber. If there is no dependent spouse or domestic
partner enrolled in the plan, the oldest child shall may
become the subscriber.
e. Page 17, lines 5 - 11:
10199.101. (a) On and after January 1, 2011, every health
care service plan and health insurer issuing individual
health benefit plans in this state shall be required to
guarantee issue at least one baseline plan. The baseline
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
36
plan shall be the minimum policy of
health care coverage determined by the Managed Risk Medical
Insurance Board pursuant to Section 2203 of the Labor Code.
(b) Consistent with (a), The the commissioner and the
Director of the Department of Managed Health Care shall
jointly adopt regulations defining a baseline HMO benefit
plan and a baseline PPO benefit plan.
f. Page 18, lines 4 - 10:
10199.104. (a) Within 90 days of the finding in Section
10199.103, the commissioner and the Director of the
Department of Managed Health Care shall jointly adopt
regulations governing five classes of individual health
benefit plans that health care service plans and health
insurers shall make available upon full implementation of
the individual mandate in Section 2203 of the Labor Code .
g. Page 19, lines 35 - 39 and page 20, lines 1 - 2:
(f) If a subscriber becomes eligible for group benefits,
Medicare, or other benefits that meet the minimum
requirements of the individual mandate, and selects those
benefits in lieu of his or her individual coverage, the
dependent spouse or domestic partner shall
may become the subscriber. If there is no dependent spouse
or domestic partner enrolled in the plan, the oldest child
shall may become the subscriber.
h. Page 24, lines 34 - 40 and page 25, lines 1 - 4:
f) Notwithstanding subparagraphs (A) and (B) of paragraph
(2) of subdivision (a), the amounts in those subparagraphs
may be adjusted by the board to ensure that the revenues in
the Health Care Trust Fund derived from employer health
care contribution fees are
sufficient to pay for the cost of health coverage provided
through the Connector when combined with the resources
available pursuant to Section 2201 and federal funds
received pursuant to Welfare and Institutions Code, Section
1499.10. On or before October 31 of each year, the board
shall prepare a statement, which shall be a public record,
containing the applicable fee amounts for the coming
calendar year and shall promptly notify the Employment
Development Department in that regard.
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
37
i. Page 34, between lines 29 and 30, insert:
(6) Purchasing health care coverage from a health care
service plan or health insurer.
j. Page 40, lines 21 - 22:
(d) Advise all employees of the requirement to that they
participate in a health plan offered by the board and that
they have the option to cover their spouses, domestic
partners, and dependents.
k. Page 41, lines 10 - 15:
4808. The employer shall do both of the following:
(a) Provide the employee the choice of declining coverage
for themselves offered by the board if the employee
certifies that he or she has health care coverage through
his or her spouse or domestic partner, or that he or she
has health care coverage as a dependent of another person.
l. Page 45, line 8
14005.34. Notwithstanding any other provision of law, all
children under 19 years of age who meet the state residency
requirements of the Medi-Cal program shall be eligible for
full scope benefits under this chapter if they either (a)
live in families with countable household income at or
below 133 percent of the federal poverty level, (b) are
infants less than one year of age living in families at or
below 200 percent of the federal poverty level or (b) (c)
meet the income and resource requirements of Section
14005.7 or 14005.30, including those children for whom
federal financial participation is not available under
Title XXI of the federal Social Security Act (42 U.S.C.
Sec. 1396 et seq.), or under Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1397aa et seq.).
m. Page 44, line 22
14005.33 14005.33.5 (a) (1) Notwithstanding Section
14005.30, to the extent that federal financial
participation is available, Medi-Cal benefits under a
benchmark plan as permitted under Section 6044 of the
federal Deficit Reduction Act of 2005 (42 U.S.C. Sec.
STAFF ANALYSIS OF SENATE BILL 48 (Perata) Page
38
1396u-7) shall be provided to individuals eligible for
services under Section 1396u-1 of Title 42 of the United
States Code, including any options under Section
1396u-1(b)(2)(C) of Title 42 of the United State Code made
available to and exercised by the state.
POSITIONS
Support: American Association of Retired Persons
California Association of Public Hospitals and
Health Systems
California Public Interest Research Group (if
amended)
Oppose:California Chamber of Commerce
California Manufacturers and Technology
Association
California Restaurant Association
National Federation of Independent Business
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