BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Tom Torlakson, Chairman
48 (Perata)
Hearing Date: 5/21/07 Amended: 5/16/07
Consultant: John Miller Policy Vote: Health 7 - 4
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BILL SUMMARY: SB 48 proposes a major restructuring of the
health financing system, establishing a minimum standard for
employer spending on employee health care. The bill
incorporates shared responsibility, expands coverage to the
uninsured and reforms the health insurance market. The bill
requires individuals over 400% of the federal poverty level to
have health insurance, with specified exemptions. The bill also
expands eligibility for public health insurance programs.
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Fiscal Impact (in millions)
Major Provisions 2009-10 2010-11 2011-12 Fund
Pool
State costs $ 2,640 $ 5,280 SF
Federal costs $ 325 $ 650
FF
Individual premiums $(1,815) $(3,630)
SF
Public insurance
State costs $ 480 $ 580 $
580 GF
Federal spending $ 480
$ 580 $ 580 FF
Payroll Fee revenue (new) $(3,320) $(6,640)
SF
State income tax loss $ 80 $ 160
GF
SB 48 generates sufficient funding to cover its projected costs
and produce a $610 million dollar reserve when fully
implemented.
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STAFF COMMENTS: This measure meets the criteria for referral to
Suspense.
The author intends that SB 48 establish a minimum employer
spending level for worker health care, and, based on the
principal of shared responsibility for health costs, would
significantly expand health coverage to uninsured workers and
their dependents. The bill is expected to reduce the cost of
coverage for workers by organizing and leveraging the purchasing
power of the purchasing pool, and will access additional federal
funding. The bill would insure all children up to 300 percent of
federal poverty level - regardless of immigration status. SB 48
would require health plans to offer standardized coverage to
individuals now denied insurance because of pre-existing
conditions.
Estimates by MIT health economist Dr. Jon Gruber indicate that
SB 48 will provide health insurance to 3.4 million currently
uninsured individuals or 69% of the states' uninsured
population, including 2.8 million adults and 520,000 children.
Coverage for all children under 300% FPL would take effect July
1, 2008. With the exception of mid-market underwriting reforms
which take effect in January 2008, the
SB 48 (Perata)
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employer health care spending requirement and remaining elements
of the bill would take effect in January, 2011.
SB 48 also would impose an individual mandate requiring all
working taxpayers with incomes of 400 percent of the FPL to have
a minimum insurance policy, as determined by MRMIB. The bill
also would establish a minimum standard for employer spending on
health care for their employees. The standard would be equal to
7.5 percent of social security wages (capped at $97,500) and
could be met in a variety of ways including: reimbursing
employees for health care expenses, establishing programs to
assist employees attain and maintain healthy lifestyles,
contributing to a health savings account, offering disease
management programs or buying health care coverage. In
addition, employers could pay a fee to a State Health Trust
Fund. This trust fund would help provide financing for the
"Connector," a tiered "pool" to purchase insurance for the
employees of companies opting to contribute to the pool. The
bill expands eligibility for all children up to 300 percent of
the FPL and would increase eligibility for children under
Medi-Cal and Healthy Families. SB 48 imposes a number of
insurance market reforms including limits on medical loss
ratios, guaranteed issue and renewal, and prohibitions on the
use of risk adjustment factors.
Projections by Dr. Gruber indicate that the expansion of Healthy
Families and Medi-Cal would cover 270,000 children and 450,000
adults who are currently uninsured. Modeling shows that 3.6
million uninsured adults and 500,000 children would be covered
by the purchasing pool. The model estimates that SB 48 would
generate sufficient funding through premiums, employer and
employee contributions and federal funds to pay the costs the
program and maintain a $610 million reserve. By using employee
pre-tax dollars for health coverage, individuals and employers
will save $1.4 billion in federal income and FICA taxes, and
$160 million in state taxes.