BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 1602
                                                                  Page  1

          (  Without Reference to File  )  
          AB 1602 (John A. Perez)
          As Amended  August 20, 2010
          Majority vote
          |ASSEMBLY:  |49-26|(June 1, 2010)  |SENATE: |21-13|(August 24,    |
          |           |     |                |        |     |2010)          |
           Original Committee Reference:    HEALTH  
          SUMMARY  :  Enacts the California Patient Protection and  
          Affordable Care Act (PPACA) to implement the federal PPACA in  
          California.  Clarifies the powers and duties of the board  
          governing the California Health Benefit Exchange (Exchange)  
          relative to the administration of the Exchange, determining  
          eligibility and enrollment in the Exchange, and arranging for  
          coverage under qualified carriers.  Makes this bill's provisions  
          contingent upon the enactment of SB 900 (Alquist), which creates  
          the Exchange and establishes its governance.  

           The Senate amendments  :

          1)Delete provisions in the Assembly version of this bill that  
            would have:

             a)   Prohibited group or individual health care service plans  
               or health insurers (collectively carriers) from  
               establishing lifetime or unreasonable annual limits on the  
               dollar value of benefits; 

             b)   Required carriers to provide minimum coverage for  
               specified preventive services;  

             c)   Prohibited carriers from imposing preexisting condition  
               exclusions for enrollees or insureds under 19 years of age;  

             d)   Prohibited the limiting age for dependent health care  
               coverage to be less than 26 years of age.  

          2)Conform California law to provisions the federal PPACA related  


                                                                  AB 1602
                                                                  Page  2

            to state Exchanges.

          3)Further clarify the powers and duties of the board governing  
            the Exchange relative to the administration of the Exchange,  
            determining eligibility and enrollment in the Exchange, and  
            arranging for coverage under qualified carriers, including  
            requiring the board to: 

             a)   Establish the Small Business Health Options Program,  
               separate from the activities of the board related to the  
               individual market, to assist qualified small employers in  
               facilitating the enrollment of their employees in coverage  
               offered through the Exchange in the small employer market  
               in a manner consistent with PPACA;

             b)   Determine criteria and process for eligibility,  
               enrollment, and disenrollment of enrollees and potential  
               enrollees in the Exchange and coordinate that process with  
               the state and local government entities administering other  
               health care coverage programs, including the State  
               Department of Health Care Services, the Managed Risk  
               Medical Insurance Board, and California counties, in order  
               to ensure consistent eligibility and enrollment processes  
               and seamless transitions between coverage;
             c)   Require, as a condition of participation in the  
               Exchange, carriers to fairly and affirmatively offer,  
               market, and sell in the Exchange at least one product  
               within each of the five levels of coverage contained PPACA.  
                Permit the board to require carriers to offer additional  
               products within each of those five levels of coverage;

             d)   Conduct an annual audit and to prepare a written report  
               on the implementation and performance of the Exchange  
               during the preceding fiscal year, which is to be  
               transmitted to the Legislature and Governor, and to be  
               posted on its Web site; and, 

             e)   Ensure that the establishment, operation, and  
               administrative functions of the Exchange do not exceed the  
               combination of federal funds, private donations, and other  
               non-General Fund moneys available for this purpose.  

          4)Authorize the California Health Facilities Financing Authority  
            (CHFFA) to provide a working capital loan of up to $5 million  
            to assist in the establishment and operation of the Exchange,  


                                                                  AB 1602
                                                                  Page  3

            but specifies that CHFFA is not required to provide a loan to  
            the Exchange under any circumstances.  Require, prior to CHFFA  
            providing a loan to the Exchange, that a majority of the board  
            of the Exchange be appointed and demonstrate that federal  
            planning and establishment grants are insufficient or will not  
            be released in a timely manner to allow the Exchange to meet  
            necessary federal requirements.  Require repayment of any such  
            loan by June 30, 2016.  

          5)Require coordination between the Exchange, the county human  
            services departments that administer Medi-Cal eligibility, and  
            the Managed Risk Medical Insurance Board, including  
            development of case transfer and referral procedures between  
            the Exchange and those entities and the development of  
            procedures for enrollment into the Exchange by the human  
            services departments and the board of individuals who apply  
            for eligibility to those entities, to the extent allowed or  
            required by federal law.

          6)Exempt from the California Public Records Act records of the  
            Exchange that reveal:

             a)   The deliberative processes, discussions, communications,  
               or any other portion of the negotiations with entities  
               contracting or seeking to contract with the Exchange,  
               entities with which the Exchange is considering a contract,  
               or entities with which the Exchange is considering or  
               enters into any other arrangement under which the Exchange  
               provides, receives, or arranges services or reimbursement;  

             b)   The impressions, opinions, recommendations, meeting  
               minutes, research, work product, theories, or strategy of  
               the board or its staff, or records that provide  
               instructions, advice, or training to employees.

          7)Require Exchange contracts, except for the portion that  
            contains the rates of payment, to be open to inspection one  
            year after their effective dates.  Requires amended contracts  
            to be open to inspection one year after the effective date of  
            the amendment.

          8)Require the board, effective January 1, 2016, and if there are  
            unencumbered funds in the California Health Trust Fund that  
            are equal or are more than the operating budget, to reduce the  


                                                                  AB 1602
                                                                  Page  4

            charges imposed on participating carriers during the following  
            fiscal year, as specified.

          9)Require carriers that do not participate in the Exchange,  
            commencing January 1, 2014, and with respect to plan contracts  
            that cover hospital, medical surgical benefits, to offer at  
            least one standardized product that has been designated by the  
            Exchange in each of the four levels of coverage contained in  
            PPACA.  Prohibit anything in this bill from requiring a  
            carrier that does not participate in the Exchange to offer  
            standardized products in the small employer or individual  
            market if it does not sell products in that market.

          10)Make the provisions of this bill contingent upon the  
            enactment of SB 900 (Alquist), which creates the Exchange and  
            establishes its governance.

           AS PASSED BY THE ASSEMBLY  , this bill enacted the California Act  
          to implement reforms under the PPACA in California.  Prohibited  
          carriers from establishing lifetime or unreasonable annual  
          limits on the dollar value of benefits.  Required carriers to  
          provide minimum coverage for specified preventive services.   
          Prohibited carriers from imposing preexisting condition  
          exclusions for enrollees or insureds under 19 years of age.   
          Prohibited the limiting age for dependent health care coverage  
          to be less than 26 years of age.  Created the Exchange for the  
          purchase of health care coverage, and specified the duties and  
          responsibilities of the Exchange.  Required the board of the  
          Exchange to facilitate the purchase of qualified health plans  
          through the Exchange by qualified individuals and qualified  
          small employers by January 1, 2014.  Created the California  
          Health Trust Fund as a continuously appropriated fund.

           FISCAL EFFECT  :  According to the Senate Appropriations  

                            Fiscal Impact (in thousands)
           Major Provisions         2010-11      2011-12       2012-13     Fund
          Exchange initial start-up costs likely in the millions of  
          dollars       General/*
                                   annually through January 1, 2014    

          Ongoing Exchange                likely to start January 1, 2014,  


                                                                  AB 1602
                                                                  Page  5

          in the        Special**
          administration           tens of millions of dollars annually

          *Unspecified amount of federal funds available likely in 2011;  
          General Fund pressure if total expenses not met by federal funds  

          **California Health Trust Fund-fully supported with consumer  

           COMMENTS  :  On March 23, 2010, President Obama signed the PPACA  
          (Public Law 111-148), as amended by the Health Care and  
          Education Reconciliation Act of 2010 (Public Law 111-152).   
          Among other provisions, the new law makes statutory changes  
          affecting the regulation of and payment for certain types of  
          private health insurance.  Each state is required to establish  
          an American Health Benefit Exchange and a Small Business Health  
          Options Program Exchange by 2014 for individuals and small  
          employers with 50 to 100 employees; after 2017, states have the  
          option of opening the small business exchange to employers with  
          more than 100 employees.  States can opt to provide a single  
          exchange for individuals and small employers.  Groups of states  
          can form regional exchanges or states can form more than one  
          in-state exchange, but the exchanges must serve a geographically  
          distinct area.  While the individual and small-group markets  
          will not be replaced by the exchanges, the same market rules  
          will apply inside and outside the exchanges.  Premium subsidies  
          can be used only for plans purchased through the exchanges.  If  
          the federal HHS determines in 2013 that a state will not have an  
          exchange operational by 2014, HHS is required to establish and  
          operate an exchange in the state.  In 2017, states will have the  
          opportunity to opt out of the federal requirements to establish  
          insurance exchanges through a five-year waiver; if they are able  
          to demonstrate that they can offer all residents coverage at  
          least as comprehensive and affordable as that required by this  

          Federal responsibilities.  HHS' responsibilities with respect to  
          the exchanges include: establishing certification criteria for  
          "qualified health plans" that will be sold through the  
          exchanges; requiring such plans to provide the essential  
          benefits package; requiring that the licensed insurance carriers  
          issuing plans offer at least one qualified health plan at the  
          silver and gold levels and meet marketing requirements; ensuring  
          a sufficient choice of providers; and, ensuring that essential  


                                                                  AB 1602
                                                                  Page  6

          community providers are included in networks, are accredited on  
          quality, implement a quality improvement strategy, use a uniform  
          enrollment form, present plan information in a standard format,  
          and provide data on quality measures.  The HHS Secretary will  
          develop a rating system for qualified health plans and a model  
          template for an exchange's Internet portal, and determine an  
          initial and open enrollment period as well as special enrollment  
          periods for people under varying circumstances.  The HHS  
          Secretary is also required to establish procedures under which  
          states may allow brokers to enroll individuals in qualified  
          health plans and assist them in applying for subsidies.  Such  
          procedures may include the establishment of rate schedules for  
          broker commissions paid by health plans offered through the  

          State responsibilities.  The state exchanges will be required to  
          certify qualified health plans, operate a toll-free hotline and  
          Web site, rate qualified health plans, present plan options in a  
          standard format, inform individuals of the eligibility  
          requirements for Medicaid (Medi-Cal in California) and the  
          Children's Health Insurance Program (Healthy Families in  
          California), provide an electronic calculator to calculate plan  
          costs, and grant certifications of exemption from the individual  
          requirement to have health insurance.  Exchanges will be  
          required to be self-sustaining by 2015 and will be allowed to  
          charge assessments or user fees to participating health  
          insurance issuers or otherwise generate funding to support their  
          operations.  The exchanges also will award grants to  
          "navigators" who will educate the public about qualified health  
          plans, distribute information on enrollment and subsidies,  
          facilitate enrollment, and provide referrals on grievances.  
          Navigators may include trade and professional organizations,  
          farming and commercial fishing organizations, community and  
          consumer-focused nonprofit groups, chambers of commerce, unions,  
          or licensed insurance agents or brokers. 

          Qualified employers purchasing through the exchange.  Employers  
          that are qualified to offer coverage to employees through the  
          Exchange may provide premium support for a level of coverage  
          (bronze, silver, gold, platinum) and employees may choose a plan  
          within those levels. 

           Analysis Prepared by  :    Melanie Moreno / HEALTH / (916)  


                                                                  AB 1602
                                                                  Page  7

                                                                FN: 0006697