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 _________________________________________________________________ ____ 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. _________________________________________________________________ ____ 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 _________________________________________________________________ ____ 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. Page 2 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 Page 3 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. Page 4 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.