BILL ANALYSIS
AB 1422
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1422 (Bass)
As Amended August 25, 2009
2/3 vote. Urgency
-----------------------------------------------------------------
|ASSEMBLY: | |(May 28, 2009) |SENATE: |27-8 |(September 2, |
| | | | | |2009) |
-----------------------------------------------------------------
(vote not relevant)
Original Committee Reference: H. & C.D.
SUMMARY : Provides, on an urgency basis, funding for, and makes
program changes to, the Healthy Families Program (HFP),
administered by the Managed Risk Medical Insurance Board
(MRMIB), which provides health care coverage for eligible low-
and moderate income children; extends the gross premium tax of
2.35% to Medi-Cal managed care (MCMC) plans; and, authorizes the
California Children and Families Commission (CCFC) to make
specified transfers of program revenues.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Grant CCFC the authority to transfer funds that are allocated
to CCFC, but are not needed for the purposes specified in
existing law, from specified accounts to the Unallocated
Account. Specifically, the amendments allow CCFC to transfer
funds from the Mass Media Communications Account, the
Education Account, Child Care Account, and Research and
Development Account to the Unallocated Account. Declare
legislative intent that the changes proposed in this bill are
in furtherance of the California Children and Families Act of
1998, an initiative statute.
2)Increase, effective November 1, 2009, the monthly premiums
paid by certain families for children enrolled in HFP. As an
example, for families enrolled in the community provider plan,
the cheapest plan available for HFP subscribers, premiums will
increase as follows:
a) No changes for families at or below 150% of the federal
poverty level (FPL). (In 2009, the FPL for a family of
AB 1422
Page 2
three is $18,310 per year);
b) For families whose income is above 150% of the FPL and
up to 200%, from $9 to $13 per child, with the family
maximum increasing from $27 to $39; and,
c) For families whose income is above 200% of the FPL and
up to 250% of the FPL, from $14 to $21 per child, with the
family maximum increasing from $42 to $63.
3)Require MRMIB to notify families of the increase in premiums
and provide them an opportunity to demonstrate that the
family's income has decreased making them eligible for a lower
premium.
4)Grant MRMIB the authority to use emergency regulations to
modify health, dental, and vision benefits or other HFP
requirements for fiscal years (FYs) 2009-10 and 2010-11.
5)Extend to MCMC plans the gross premium tax of 2.35% which is
imposed on insurers certificated by the California Department
of Insurance (CDI) pursuant to Section 28 of Article XIII of
the California Constitution, and define as the basis of the
tax the MCMC plans' total operating revenue for the period
January 1, 2009, to December 31, 2009, including but not
limited to, Medi-Cal revenues. Extend to MCMC plans existing
provisions related to the gross premiums tax including, among
other things, prepayment requirements, penalties and under-
and overpayment provisions.
6)Appropriate, on a continuous basis, revenues raised by the
gross premiums tax as follows: 38.41% to Department of Health
Care Services (DHCS) for purposes of the Medi-Cal program and
61.59% to MRMIB for HFP. Exempt dental MCMC plans from the
gross premiums tax imposed by this bill.
7)Sunset the provisions of this bill related to the gross
premium tax for MCMC plans January 1, 2011.
8)Make inoperable specific provisions of this bill if certain
conditions occur, including lack of federal approval and
matching funds, diversion of the revenues raised by the
premiums tax to purposes not contained in this bill, or a
judicial determination that this tax is found to be in lieu of
all other taxes that insurers must ordinarily pay.
AB 1422
Page 3
9)Direct DHCS to use the funds attributable to the tax on MCMC
plans established in this bill for the purposes of ensuring
that MCMC plans receive contracted rates of payment for
services that are actuarially sound, and allow MCMC plans to
delay in paying the tax due if DHCS has not met specified
statutory obligations related to calculating rates and making
payments. Authorize DHCS to retroactively increase rates and
make payments to plans.
10) Authorize the Director of Finance (DOF) to make necessary
budget adjustments to allow the expenditure of funds allocated
by CCFC and require DOF to notify specified appropriate
committees of the Legislature within 30 days of any budgetary
adjustments, and to include in the report a description of the
revenues and expenditures.
EXISTING LAW :
1)Establishes HFP, administered by MRMIB, to provide low-cost
insurance, including health, dental, and vision coverage, to
children who do not have health insurance, do not qualify for
free Medi-Cal, and are in families at or below 250% of the
FPL, and establishes monthly premium amounts that families
must pay for HFP coverage.
2)Establishes the state's Medicaid program, known as Medi-Cal,
administered by the DHCS, which provides comprehensive health
benefits to low-income children, their parents or caretaker
relatives, pregnant women, seniors, persons with disabilities,
nursing home residents, and refugees who meet specified
eligibility criteria.
3)Authorizes DHCS to contract, on a bid or nonbid basis, with
any qualified individual, organization, or entity to provide
services to, arrange for, or case manage, the care of Medi-Cal
beneficiaries. Defines a MCMC plan as any entity that enters
into one of several types of contracts with DHCS including
county organized health systems, geographic managed care
plans, and local initiatives. Requires DHCS to use actuarial
methods in calculating rates for MCMC plans.
4)Imposes a quality improvement fee (QIF) on MCMC plans and a
quality assurance fee on skilled nursing facilities and
intermediate care facilities for the developmentally disabled.
AB 1422
Page 4
5)Establishes the California Children and Families Program
(CCFP), also known as First Five California, which was created
by the enactment of Proposition 10 in November 1998, and is
funded by a tax on tobacco products equivalent to $.50 per
pack of cigarettes. Creates the California Children and
Families Trust Fund to receive revenue from the tax on tobacco
products, and requires the revenues to be appropriated for the
purposes of promoting, supporting, and improving the
development of children from birth to five years of age and to
offset certain revenue losses to Proposition 99, the Tobacco
Tax and Health Protection Act of 1988 programs. Allocates
funds for specified purposes and places those allocated funds
in specified accounts.
6)Creates CCFC, with members appointed by the Governor, the
Speaker of the Assembly, and the Senate Rules Committee, to
administer CCFP, formulate statewide program guidelines,
distribute educational materials, provide technical assistance
to counties, and conduct research and evaluation of early
childhood development programs.
7)Requires insurers certificated by CDI (insurers selling
property insurance, life insurance, casualty insurance, and
specific types of disability insurance, including health
insurance) to pay a tax based upon gross premiums received.
Establishes in Section 28 of Article XIII of the California
Constitution the gross premiums tax at 2.35% of annual gross
premiums as a tax that is in lieu of all other taxes and
licenses upon insurers and their property, with certain
specified exceptions (including taxes upon real estate and
Department of Motor Vehicles license fees).
AS PASSED BY THE ASSEMBLY , this bill allowed a redevelopment
agency to use tax increment funds, not held in the Low and
Moderate Income Housing Fund, to acquire, assume or refinance
loans to eligible homeowners with subprime or nontraditional
mortgages in default or at risk of default.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the table below displays the funding allocations from
the gross premiums tax, Medi-Cal and related federal matching
funds. For 2009-10, the 2.35% gross premiums tax on the
AB 1422
Page 5
existing MCMC plan revenues of $6.7 billion generates $157
million General Fund (GF). In 2010-11, when the gross premiums
tax is in place for only half the year, the gross premiums tax
collected is $79 million GF. The estimate for 2009-10 assumes
implementation of the gross premiums tax within the current
budget year. HFP has a 35%/65% (state/federal) match and, until
January 2011, Medi-Cal has a 38.41%/61.59% (state/federal)
match.
AB 1422
Page 6
------------------------------------
| Fiscal Impact of AB 1422 |
| |
| Healthy Families Funding |
| (dollars in millions) |
| |
------------------------------------
|--------+----------+-------+--------|
|Year |GF |Federal|Total |
| |allocated | Match |Funding |
| |from | | |
| |gross | | |
| |premiums | | |
| |tax | | |
| |(61.59%) | | |
|--------+----------+-------+--------|
|2009-10 | 97| 180| 277|
|--------+----------+-------+--------|
|2010-11 | 49| 91| 140|
| | | | |
------------------------------------
------------------------------------
| Medi-Cal Funding paid to MCMC (in |
| millions) |
------------------------------------
------------------------------------
| |GF |Federal|Total |
|Year |allocated | Match |Funding |
| |from | | |
| |gross | | |
| |premiums | | |
| |tax | | |
| |(38.41%) | | |
| | | | |
------------------------------------
|2009-10 | 60| 97| 157|
|--------+----------+-------+--------|
|2010-11 | 30| 49|79 |
| | | | |
------------------------------------
In addition, this bill results in GF savings associated with
AB 1422
Page 7
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 : According to the author, this bill establishes a
funding mechanism that will avoid the disenrollment of 670,000
low-income children from HFP and will remove the current HFP
waiting list through 2010. The author identifies the three part
funding in this bill as a shared solution to the $194 million
HFP funding shortfall resulting from GF cuts made to the program
this year. The three-part funding solution is as follows:
$81.4 million in funds pledged by First Five California to
support HFP coverage for children ages 0-5; $157 million in
gross premiums taxes which yield $97 million in additional
federal funds for HFP; and, savings from program changes to HFP,
including the increased family premiums proposed in this bill
and other program changes being adopted by MRMIB. The author
points out that this bill is supported by a broad coalition
including the health plans that will pay the tax, DHCS, and
consumer and children's health advocates.
Health plans, health care consumer groups, children's advocates,
and counties support this bill to ensure that children currently
enrolled in HFP do not lose their health care coverage.
Supporters point to this bill as a shared approach to addressing
the funding shortfall in HFP, including First Five funding, the
health plan tax to secure additional federal funds, and HFP
program changes, such as the increase in the monthly HFP
premiums. Supporters point out that without HFP coverage
children will lack access to preventive services which will
likely drive up overall health care costs in the remainder of
the system when children must seek treatment after health
conditions have worsened and become more costly to treat.
Health plans that will pay the tax support this bill and point
out that the tax will provide revenues to draw down critical
federal funding for HFP but will not have any impact on
consumers in commercial coverage products.
The Howard Jarvis Taxpayers Association opposes this bill
stating that it is a tax and not a fee and should be subject to
a two-thirds vote of the Legislature.
This bill was substantially amended in the Senate and the
Assembly-approved provisions of this bill were deleted. This
AB 1422
Page 8
bill is inconsistent with Assembly action and the provisions of
this bill have not been heard in an Assembly policy committee
this legislative session.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097
FN: 0002930