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  









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            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,  









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             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  









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               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