BILL ANALYSIS
AB 1422
Page 1
Date of Hearing: September 3, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1422 (Bass) - As Amended: August 25, 2009
Policy Committee: Health Vote:12-0
Revenue & Taxation 6-2
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill addresses funding in the Healthy Families Program
(HFP) and the Medi-Cal Program. Specifically, this bill:
1)Adds Medi-Cal managed care plans (MCMC), until January 2011,
to the insurers subject to gross premium taxes (GPT) of 2.35%
of total operating revenue under current law. Includes in the
definition of total operating revenue for MCMC from January
2009 forward. Under current law, MCMC pay a Quality
Improvement Fee (QIF) of 5.5%. The QIF expires in October of
2009.
2)Authorizes a series of transfers by the California Children
and Families Commission (CCFC) from state-level accounts to an
Unallocated Account to be used upon approval by the state
CCFC. This authorization will allow the state CCFC to continue
to support an array of programs for children up to age five,
including HFP.
3)Establishes a continuous appropriation of revenues derived
from the MCMC gross premium tax. This bill requires the
funding to be allocated as follows: 61.59% of total revenues
to the Managed Risk Medical Insurance Board (MRMIB) for HFP
and 38.41 % of total revenues to the Department of Health Care
Services (DHCS) for the Medi-Cal Program.
4)Requires HFP monthly premiums to be increased for basic and
more costly plans, effective November 1, 2009. The increases
for basic plans include the following: a) no increase for
families below 150% of the federal poverty level (FPL), b) for
families with income of 150% to 200% FPL, an increase from $9
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to $13 per child with an increase from $27 to $39 maximum paid
per family and, c) for families with income of 200% to 250%
FPL, an increase from $14 to $21 per child with an increase
from $42 to $63 maximum paid per family.
FISCAL EFFECT
1)The table below displays the funding allocations from the GPT
to HFP and Medi-Cal and related federal matching funds. For
2009-10, the 2.35% GPT on MCMC revenues of $6.7 billion
generates $157 million GF. In 2010-11, when the GPT is in
place for only half the year, the GPT collected is $79 million
GF. The estimate for 2009-10 assumes implementation of the GPT
within the current budget year. HFP has a 35%/65%
(state/federal) match and Medi-Cal has a 38.41%/61.59%
(state/federal) match until January 2011.
------------------------------------
| Healthy Families Funding (in |
| millions) |
------------------------------------
|----------+--------+-------+--------|
|Year |GF |Federal|Total |
| |allocate| Match |Funding |
| |d from | | |
| |GPT | | |
| |(61.59%)| | |
| | | | |
|----------+--------+-------+--------|
|2009-10 | 97| 180| 277|
|----------+--------+-------+--------|
|2010-11 | 49| 91| 140|
------------------------------------
------------------------------------
| Medi-Cal Funding paid to MCMC (in |
| millions) |
------------------------------------
------------------------------------
|Year |GF |Federal|Total |
| |allocate| Match |Funding |
| |d from | | |
| |GPT | | |
| |(38.41%)| | |
| | | | |
------------------------------------
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|2009-10 | 60| 97| 157|
|----------+--------+-------+--------|
|2010-11 | 30| 49|79 |
------------------------------------
2)GF savings associated with increased HFP premiums of $5
million to $6 million in 2009-10. Premium collections in
2010-11 will depend on caseload, subsequent policy changes,
and demand for the program.
COMMENTS
1)Rationale . This urgency bill addresses a funding shortfall of
almost $200 million in California's children's health
insurance program, HFP. This bill is supported by numerous
provider, children's advocacy, and health industry groups. HFP
was established by AB 1126 (Villaraigosa), Chapter 623,
Statutes of 1997 to provide medical, dental, and vision
services for children under the federal Children's Health
Insurance Program (CHIP).
Due to recent budget reductions, MRMIB estimates that more than
500,000 of the 1 million children currently enrolled will be
dropped from coverage in the coming year. Funding recently
committed by the California Children and Families Commission
has reduced earlier estimates of the number of children facing
loss of coverage. Disenrollments of children will begin
November 1, 2009 due to insufficient funding. In addition, the
Board adopted emergency regulations to raise co-payments for
non-preventive services, prescription drugs, and outpatient
emergency room visits. This bill, by providing several sources
of funding and increased authority and flexibility in HFP
administration, prevents the loss of health coverage for
hundreds of thousands of children.
2)Background . Under current law, property, life, and casualty
insurers are required to pay a tax of 2.35% of annual gross
premiums. The GPT on these insurers is established in the
state Section 28, Article XII of the California Constitution.
The primary advantage of the GPT is administrative simplicity.
Under current law, MCMC that operate under the jurisdiction of
the Department of Managed Health Care (DMHC) are not subject
to the GPT, but currently pay a provider Quality Improvement
Fee (QIF) of 5.5% of revenues that is matched with federal
funds. This provider fee will end in October 2009. The GPT
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established for MCMC in this bill is a little less than half
of what MCMC currently pay. In addition, both under current
law and under the requirements of this bill, plans recover the
funding paid through the GPT.
3)Children's Health Coverage Programs . There are more than 6
million Californians who are uninsured. Of the uninsured,
about 800,000 are children. The majority of these children are
in families with one or two working parents without
employer-based health coverage. The Medi-Cal program and HFP
each provide health benefits to low-income children. Family
income eligibility for children in Medi-Cal is at or below
200% FPL for infants to age 1, 133% FPL for children ages 1
through 5, and 100% FPL for children ages 6 through 18.
Children in families with incomes above these amounts but
below 250% FPL may be eligible for HFP.
4)The California Children and Families Commission (CCFC) was
established by voters in November 1998 to expand early
development programs for children up to age five. The state
CCFC and individual county CCFC are funded by revenues from a
state excise tax on cigarettes (50 cents per pack) and other
tobacco products. Revenues in 2009-10 are expected to be $500
million. Last week the state CCFC made a funding pledge of
$81.4 million to help prevent the disenrollment of children up
to age five from HFP. This funding, paired with funding
established by this bill, will prevent the loss of health
coverage for more than a half a million children.
5)Support . This bill is supported by a wide array of children's
advocacy groups, provider organizations, and health plans and
insurers. Supporters include the California Medical
Association, the California Children's Hospital Association,
the California Association of Health Plans, the Association of
California Life & Health Insurance Companies, PICO California,
Community Health Councils, and the United Way of California.
Supporters indicate this bill will preserve health coverage for
hundreds of thousands of children, stabilize HFP for the near
term, ensure continuity of coverage, and ensure California
continues to receive hundreds of millions of dollars of
federal funding.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081
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