BILL ANALYSIS AB 1602 Page 1 ( Without Reference to File ) CONCURRENCE IN SENATE AMENDMENTS 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; and, 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; and, 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 Committee: 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 Federal 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 grant **California Health Trust Fund-fully supported with consumer premiums 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 bill. 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 exchange. 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) 319-2097 AB 1602 Page 7 FN: 0006697