BILL ANALYSIS AB 1887 Page 1 Date of Hearing: May 19, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 1887 (Villines) - As Amended: April 28, 2010 Policy Committee: Health Vote:17-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill establishes the framework for the operation of California's temporary high risk pool related to requirements of federal health reform, the Patient Protection and Affordable Care Act (PL-111-148). State-run high risk pools are to be operational by June 23, 2010, six months after the enactment of the federal law. Specifically, this bill: 1)Requires the Managed Risk Medical Insurance Board (MRMIB) to establish a temporary high risk pool to provide health coverage to individuals who are uninsured because of pre-existing health conditions. Requires MRMIB to apply for federal funding to support the operation of the pool. 2)Specifies eligibility requirements for individuals accessing coverage in the high risk pool including legal status, lack access to coverage, and the existence of a pre-existing health condition. 3)Requires health coverage in the pool to have an actuarial value of at least 65% which means at least 65 cents of each premium dollar is spent on health benefits. Specifies parameters for premium pricing in the pool. FISCAL EFFECT 1)According to preliminary information provided by the federal government, California will receive $761 million (100% federal) to administer a state-run high risk pool until January 1, 2014 when broader insurance market reforms and AB 1887 Page 2 coverage expansions occur. 2)Funding will be used to support MRMIB workload as the pool administrator and to provide premium support to enrollees whose premium costs exceed a specified level. The eligibility for the risk pool as well as the product design of the coverage offered will determine how quickly the fixed allocation of federal funding is spent. 3)The federal government proposes to allocate state funds based on a formula used for the Children's Health Insurance Program, which relies on a combination of factors including nonelderly population, proportion of uninsured, and geographic cost variation. 4)Under current law, California's high risk pool has only 7,000 enrollees, due to funding limitations. According to estimates, several hundred thousand Californians may lack access to health coverage due to pre-existing conditions. The risk pool established pursuant to this bill may be able to support an additional 20,000 to 25,000 enrollees. 5)Per federal requirements, premium pricing in the high risk pool must be similar to the rates found in the individual insurance market and cannot vary by a person's age by more than a four to one ratio. COMMENTS 1) Rationale . This bill establishes the framework for the state option to establish a temporary high risk pool until broader provisions of federal health reform are implemented in 2014. 2) High Risk Pools . California, along with 34 other states, has a high risk insurance pool to accommodate individuals who have been unable to obtain health coverage in the individual market. The Major Risk Medical Insurance Program (MRMIP) was established in 1991 and provides health insurance to individuals unable to obtain coverage due to medical reasons. Enrollee premium costs above a certain level are subsidized with a blend of public funding sources. Under current law, AB 1887 Page 3 MRMIP faces insufficient and unstable funding sources to meet the demand for the program. Only 7,000 individuals are currently served in the program while several hundred thousand individuals may need such coverage. In contrast, other states have many more individuals in their high risk pools. For example, Minnesota has 31,000; Texas has 28,000; Oregon has 15,000; and Wisconsin has 19,000 enrollees. Under current law four large insurers participate in MRMIP and monthly premium costs range from $435 to $1,120 for an individual 50 to 54 years old. 3) Related Legislation . SB 227 (Alquist), pending on the Suspense File of this committee, makes significant changes to the funding and operation of California's current law high risk pool, MRMIP. Several bills in the current session address features and requirements of federal health reform. a) AB 1595 (Jones), pending on the Suspense File of this committee, requires the California Department of Health Care Services (DHCS) to expand Medi-Cal eligibility to individuals with family income up to 133% of the federal poverty level (FPL) without regard to family status. b) AB 1602 (J. Perez), pending on the Suspense File of this committee, establishes California's health insurance exchange and enacts a series of insurance market reforms. c) AB 2244 (Feuer), also being heard in this committee today, enacts health insurance underwriting reforms for children effective January 1, 2011 and adults effective January 1, 2014. d) AB 2477 (Jones), pending on the Suspense File of this committee, eliminates mid-year status reports for children on Medi-Cal. e) SB 900 (Alquist), pending in the Senate, establishes the California Health Benefits Exchange within the California Health and Human Services Agency. f) SB 1088 (Price), pending in the Senate, increases the AB 1887 Page 4 limiting age of dependent health coverage until the dependent's 26th birthday. g) SB 1163 (Leno), pending in the Senate, requires detailed health plan and insurer data and actuarial justification for premium increases and non-standard premium charges. Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081