BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
227 (Alquist)
Hearing Date: 5/4/2009 Amended: 4/13/2009
Consultant: Katie Johnson Policy Vote: Health 10-1
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BILL SUMMARY: SB 227 would restructure the Major Risk Medical
Insurance Program (MRMIP), which provides health care coverage
for otherwise uninsurable Californians. The bill would require
all health care service plans and health insurers to accept
MRMIP enrollees for coverage or to pay a fee to the Managed Risk
Medical Insurance Board (MRMIB), the state entity that
administers the MRMIP, to provide health coverage for the MRMIP
enrollees.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
MRMIB increased staff $184 $475 $475 Special*
MRMIB administrative costs, $395 $500
$500Special*
consultants, actuaries
Fee revenue beginning in FY 2010 -2011,
revenuesSpecial*
of up to about $25 million
Increase in Prop.99 $5,000
$10,000$10,000Special**
funding for MRMIP
*Major Risk Medical Insurance Fund
** Hospital Services Account and Physician Services Account in
the Cigarette and Tobacco Products Surtax Fund
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STAFF COMMENTS: This bill meets the criteria for referral to
the Suspense File.
MRMIB estimates that at least 4.5 positions would be needed to
implement this bill's provisions at costs of $184,000 in FY
2009-2010 and $475,000 annually thereafter. Additionally, MRMIB
estimates that it would require $395,000 in FY 2009-2010 and
$500,000 annually thereafter to fund increased administrative
costs.
Existing law establishes the MRMIP to provide health care
coverage for otherwise uninsurable individuals, meaning people
who are unable to purchase health coverage on the individual
market. Existing law requires the MRMIB to provide health
coverage to MRMIP enrollees through participating private health
plans that are licensed and regulated by the Department of
Managed Health Care (DMHC) and the California Department of
Insurance (CDI). There are currently five plans and insurers
that participate in MRMIP.
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SB 227 (Alquist)
Existing law requires a health plan and insurer to continue to
provide coverage to certain individuals who participated in the
Guaranteed Issue Pilot (GIP) program that ended on December 31,
2007. GIP provided subscribers with 36 months of MRMIP coverage
and subsequently disenrolled them. Upon disenrollment,
subscribers could apply for guaranteed coverage with a
participating health plan and premiums could not exceed 110
percent of MRMIP's premiums. On or before January 1, 2010, and
at least annually thereafter, this bill would require health
plans and insurers to report to MRMIB the number of covered
lives receiving GIP continuation coverage. This bill would
require MRMIB to promulgate regulations that would provide a
method for reenrollment of GIP participants, as specified.
Existing law requires that $30 million of Proposition 99 of 1998
(Prop. 99) tobacco tax revenue be continuously appropriated to
MRMIP. Since 1996, the Legislature has provided an additional
$10 million of Prop. 99 revenues to MRMIB in the annual Budget
Act. This bill would increase the continuous appropriation from
$30 million to $40 million Prop. 99 funds.
Existing law also requires MRMIB to set subscriber premiums at
125 to 137.5 percent of the participating plan's average premium
for its standard individual health coverage plan. For example,
if the average premium for a plan's individual health coverage
plan was $100 per month, a MRMIP enrollee would pay a premium to
MRMIB of $125 to $137.50 each month. This bill would revise the
existing subscriber contribution provisions and would provide
that subscribers would pay between 110 and 150 percent of the
standard average individual rate for comparable coverage. This
bill would require that MRMIB establish a sliding scale with
lower contribution requirements for subscribers with incomes at
or below 300 percent of the federal poverty level (FPL). MRMIB
estimates that it is unlikely that a sufficient amount of fee
revenue would be available to implement the sliding scale
provision.
Existing regulation provides that there is an annual cap on
benefits of $75,000 and a lifetime maximum of $750,000. This
bill would require MRMIP benefits to have no annual cap and
would increase the lifetime limit to $1 million. This bill would
require MRMIB to apply for any available federal funding and
permit MRMIB to negotiate with the federal Centers for Medicare
and Medicaid Services (CMS) to secure the federal funding.
This bill would state Legislative intent that by January 1,
2010, there would be sufficient funding from public and private
sources to allow MRMIP to provide coverage to eligible
individuals and without the need for waiting lists. MRMIP
currently covers and is capped at 7,100 individuals and has a
waitlist of 289 people due to closed enrollment.
On and after January 1, 2010, this bill would require all health
care service plans and health insurers to elect either to accept
individuals enrolled in MRMIP according to assignment by and at
premium rates set by MRMIB. This bill would permit a health plan
or insurer to instead of elect to pay a fee based on its market
share of covered lives. The DMHC and the CDI would collect the
fees and transfer them to the Major Risk Medical Insurance Fund
(fund) for purposes of subsidizing premiums for MRMIP
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SB 227 (Alquist)
enrollees. This bill would require MRMIB to publish a fee
schedule each May 1 and would then require health plans and
insurers to pay the appropriate fee by June 1 each year to its
respective regulatory agency. This bill would provide that if
collected fee revenues were to exceed the cost of MRMIP, excess
moneys would be used to reduce the fee paid by health plans and
insurers. The DMHC administrative costs associated with
collecting this new fee would be minor and absorbable. The CDI
administrative costs are unknown, but are estimated to be minor.
Commencing March 1, 2010, and each March annually thereafter,
this bill would require health plans and insurers to report
their total number of covered lives to MRMIB. This bill would
require that a health plan or insurer providing, indemnifying,
or administering group health care coverage would count every 10
named enrollees in a group as one covered life. This bill would
further require that, in a group purchasing arrangement where
more than 25 percent of the covered individuals are retirees and
more than 25 percent of the covered individuals who are
non-retirees may be considered high-risk, a health plan or
insurer to exclude all of the covered lives in the group for
purposes of reporting the total number of covered lives. This
bill would exclude individuals covered by specified plans,
including Medi-Cal, the Healthy Families Program, and Medicare,
from the definition of covered lives.
This bill would provide that MRMIB would establish fees and
would require that the fee not exceed $1 per covered life per
month. MRMIB estimates that there would be approximately 1.8
million covered lives in the individual market. There would be
additional covered lives depending on the number of group plans
electing to pay a fee. If the fee were 50 cents per covered
life, and no insurer chose to accept any MRMIP enrollee for
coverage, the revenues would be approximately $10.8 million
annually. If the fee were $1, revenues would total approximately
$21.6. Staff notes that this estimate does not account for the
provisions in this bill that count 10 enrollees as one covered
life for group plans or insurers or that discount the lives
covered by group plans with more than 25 percent of a plan or
insurer's subscribers being high risk and 25 percent being
retirees. Revenues could be substantially lower or higher
depending on the rates that MRMIB sets.
This bill would provide that any money in the fund that was
collected as a result monetary penalties imposed pursuant to
these provisions would not be continuously appropriated, but
would instead be subject to appropriation by the Legislature.
This bill would also authorize MRMIB to obtain General Fund
loans for expenses related to administration of the fund.
This bill would revise the benefits available to the MRMIP
subscribers by eliminating the existing copayment requirements
and annual household deductible of $500. Additionally, effective
January 1, 2011, benefits would provide comprehensive coverage
including lower subscriber cost sharing for primary and
preventive care and the medications necessary to treat chronic
health conditions. This bill would further require that benefits
provided under these provisions must not be less than the
minimum benefits required to be offered by health plans licensed
under the Knox-Keene Health Care Services Plan Act of 1975, plus
the coverage of prescription drugs.
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SB 227 (Alquist)
This bill would require MRMIB to appoint an 11 member panel, as
specified, to advise the board in regards to and to make
recommendations on MRMIP prior to February 1, 2010.
This bill would require MRMIB to report and make recommendations
to the Legislature by September 1, 2010, on the status of
benefits and premiums provided to federally eligible
individuals.
This bill would require MRMIB to report to the Legislature on or
before July 1, 2012, on the implementation of this bill, as
specified. The report would include a transition plan and an
alternate approach to providing health care coverage to high
risk and high cost individuals.
This bill would allow MRMIB, the DHCS, and the CDI to promulgate
emergency regulations pertaining to these provisions until
January 1, 2012.
This bill is substantially similar to AB 2 (Dymally) of 2008,
which the Governor vetoed, saying, "?California has subsidized
this coverage for thousands of individuals since the inception
of the program. Unfortunately, creating a mandate and assessing
a fee based on covered lives in the individual market is not the
answer. Mandates such as this only serve to make health care
more expensive for those who can least afford it. Most
uninsured Californians cannot obtain coverage because they
cannot afford the premiums, no matter whether they are high-risk
or not. This bill would allow health insurance companies to
pass the fee onto their enrollees, making it more expensive?
Comprehensive health care reform that guarantees issuance of
coverage to all individuals, along with an individual mandate,
cost-containment, prevention and shared responsibility is the
only solution for our health care crisis?." Since this bill
similarly would mandate the coverage of high-risk individuals
and would assess a fee on health plans and insurers who choose
to not provide coverage to MRMIP subscribers, this bill does not
address the Governor's veto message.
SB 57 (Aanestad, 2009) would also set forth provisions to
restructure MRMIP. This bill failed passage in the Senate Health
Committee on April 29, 2009.