BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           227 (Alquist)
          
          Hearing Date:  5/28/2009        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

          *Major Risk Medical Insurance Fund
          _________________________________________________________________ 
          ____

          STAFF COMMENTS:  SUSPENSE FILE. AS PROPOSED TO BE AMENDED.

          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.

          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 
          Page 2
          SB 227 (Alquist)

          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 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 
          Page 3
          SB 227 (Alquist)

          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.











          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.

          Page 4
          SB 227 (Alquist)

          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.











          The proposed amendments would exempt CalPERS from the definition  
          of covered lives, thereby eliminating any potential state cost  
          associated with CalPERS paying a fee to MRMIB. The proposed  
          amendments would also delete the $10 million increase in the  
          continuous appropriation of revenues from Proposition 99 to  
          MRMIB. Depending on where the fee provided for in this bill is  
          set, it is likely that revenues would support the ongoing costs  
          of this program and would allow for increased enrollment in  
          MRMIP.