BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 227| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 227 Author: Alquist (D) Amended: 5/28/09 Vote: 21 SENATE HEALTH COMMITTEE : 10-1, 4/22/09 AYES: Alquist, Aanestad, Cedillo, Cox, DeSaulnier, Leno, Maldonado, Negrete McLeod, Pavley, Wolk NOES: Strickland SENATE APPROPRIATIONS COMMITTEE : 8-3, 5/28/09 AYES: Kehoe, Cox, Corbett, DeSaulnier, Hancock, Leno, Oropeza, Yee NOES: Denham, Runner, Walters NO VOTE RECORDED: Wolk, Wyland SUBJECT : Health care coverage SOURCE : Author DIGEST : This bill restructures the Major Risk Medical Insurance Program (MRMIP), which provides health care coverage for otherwise uninsurable Californians. The bill requires all health care service plans and health insurers to accept the MRMIP enrollees for coverage or to pay a fee to the Managed Risk Medical Insurance Board, the state entity that administers the MRMIP, to provide health coverage for the MRMIP enrollees. ANALYSIS : Existing law establishes the California Major CONTINUED SB 227 Page 2 Risk Medical Insurance Program (MRMIP) that is administered by the Managed Risk Medical Insurance Board (MRMIB) to provide major risk medical coverage to persons who, among other matters, have been rejected for coverage by at least one private health plan. Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan and a health insurer to continue to provide coverage to certain individuals who were members of a pilot program that ended on December 31, 2007, and requires MRMIB to make payments from the Major Risk Medical Insurance Fund, a continuously appropriated fund, to health care service plans and insurers for the provision of health services to those individuals. This bill: 1.Beginning January 1, 2010, requires health plans and health insurers (collectively "carriers") to accept for coverage all persons eligible for MRMIP, as they are assigned to the carrier by MRMIB, or elect instead to pay a fee for support of MRMIP, as specified. 2.Requires MRMIB to determine how many MRMIP-eligible persons will be assigned to carriers, taking into account certain issues, including the costs of providing coverage in MRMIP and the fees paid by carriers who elect to pay the fee rather than accept assignment. The bill requires MRMIB, in assigning individuals to carriers, to take into account the carrier's geographic service area and the geographic area where MRMIP eligible persons reside, and also requires MRMIB, to the greatest extent possible, to provide eligible persons with a choice of carrier. The bill requires carriers who accept persons eligible for MRMIP to provide MRMIP benefits, as determined by the board, and charge a rate to be determined by MRMIB. 3.Requires MRMIB to establish fees based on the plan or insurer's relative number of covered lives for carriers SB 227 Page 3 who elect to be payers, and establish that the fee charged by the MRMIB shall not exceed one dollar per covered life per month for plans and insurers. The bill provides that the fee established under this bill will not be considered administrative costs for regulatory purposes or for purposes of calculation of any medical loss ratio imposed on carriers by statute or regulation. 4.Defines "covered lives" to include individuals who receive health care coverage provided, indemnified, or administered by a health care service plan or health insurer, and individuals who receive health care services pursuant to an agreement by which the health care service plan or health insurer rents or leases a contracted network of providers. 5.Requires that each enrollee, insured, or covered person be counted as one covered life, except in the following instances: A. For every 10 enrollees, insureds, or covered persons in a group, the health plan or health insurer providing, indemnifying, administering health care coverage shall count the 10 as one covered life. B. A health care service plan or health insurer subject to this chapter that rents or leases a contracted network of providers to a group shall count every 10 individuals of the group as one covered life. 6.Specifies that covered lives include individuals covered by individual coverage, conversion coverage, guaranteed issue coverage pursuant to the federal Health Insurance Portability and Accountability Act of 1996, small group coverage, other group coverage, government employee coverage, other government coverage, association coverage, services provided by an administrator of health benefits coverage, and other coverage. The bill specifies that covered lives continue to exclude Medi-Cal, Medicare, CalPERS Healthy Families, MRMIP, Guaranteed Issue Pilot, AIM, Proposition 10, persons who have specified insurance products that are not SB 227 Page 4 considered health insurance, or persons served by a local, nonprofit program or county serving children in families below 400 percent of the federal poverty level (FPL). 7.Defines "administrator of health benefits coverage" to mean a licensed health insurer or health care service plan, or any person or entity affiliated with, or a subsidiary of, a health insurer or health care service plan, that collects any charge or premium from, or who adjusts or settles claims on behalf of, residents of the state or who leases contracted provider networks to purchasers. 8.Requires MRMIP program benefits to have no annual benefit cap and limit any lifetime benefit maximum to $1 million or more. The bill requires benefits in the program to provide comprehensive coverage, and, effective January 1, 2011, include lower subscriber cost sharing for primary and preventive health care services and medications for the treatment of chronic health conditions. The bill requires MRMIB to establish benefits that, at a minimum, meet Knox-Keene licensure, plus prescription drugs. The bill authorizes MRMIB to offer more than one benefit design option with different subscriber cost sharing. The bill repeals the requirement that copayments not exceed 25 percent and deductibles do not exceed $500. 9.Repeals the existing subscriber program contribution formula and establishes a subscriber contribution ceiling of no more than 150 percent and a floor of no less than 110 percent of the standard average individual rate for comparable coverage, as determined by MRMIB. The bill also requires MRMIB to set a sliding scale for subscriber contributions between these levels, with lower requirements for subscribers at or below 300 percent of the federal poverty level. The bill removes the 110 percent floor, in the event federal funds are received, and require MRMIB to lower subscriber contributions for those at or below 300 percent of the federal poverty level first, to no less than six percent of income, and authorize MRMIB to additionally lower contributions for those between 300 and 400 percent of SB 227 Page 5 the federal poverty level. 10.Requires MRMIB to eliminate any waiting list on MRMIP with federal funds, prior to applying these premium subsidies, if federal fund use allowed, and would also requires any excess of federal funds after premium subsidies to be factored into the following year's assessment. 11.Excludes from the subscriber contribution portion of the standard average individual rate attributable to elimination of annual benefit maximum and increase in lifetime benefit maximum. 12.Requires MRMIB to establish a process for eligibility and re-enrollment of persons enrolled in the Guaranteed Insured Pilot (GIP) program, and provides that GIP enrollees may only be re-enrolled in MRMIP if there is no waiting list for MRMIP, and will be re-enrolled on a first-come, first-serve basis, with those first disenrolled into GIP being made eligible first. 13.Requires MRMIB to determine the maximum number of GIP-enrolled individuals who can be re-enrolled from each health plan participating in GIP based on the proportion of enrollees enrolled in each plan, and requires MRMIB to develop a notice to be provided by carriers to GIP enrollees notifying them of their potential eligibility. The bill would require carriers to provide to MRMIB the number of lives covered through continuation coverage under the GIP program in order to implement the re-enrollment of GIP enrollees. 14.Requires MRMIB to report to the Legislature by September 1, 2010, regarding the status of benefits and premiums for persons eligible for guaranteed coverage under the Health Insurance Portability and Accountability Act (HIPAA), and the impact of changes in MRMIP benefits and premiums on HIPAA benefits and premiums. The bill would require carriers selling individual coverage to report to DMHC or Department of Insurance (DOI) information related to HIPAA rates and products to inform the study by MRMIB. SB 227 Page 6 15.Requires MRMIB to establish the types of covered lives that shall be reported by plans and insurers; apply for federal funding that the board determines to be cost effective; negotiate with the Center for Medicare and Medicaid Services to secure federal funding; contract with a reinsurer to obtain reinsurance or stop-loss coverage for the program; establish reasonable participation requirements for subscribers; assign persons eligible for the program to plans and insurers that have elected to take the assignment of eligible persons; establish guidelines for disease management, case management, care management, or other cost management strategies to be offered by the program; implement strategies to ensure program integrity; administer the program to maximize the program's eligibility for federal funds and seek and apply for any available federal funds; and utilize more generalized criteria in contracting with carriers. The bill allows MRMIB more discretion in determining who may reapply for coverage in MRMIP after disenrollment, and use of waiting or affiliation periods by carriers. 16.Requires MRMIB to report to the Legislature on implementation of MRMIP, as specified, by July 1, 2012, and include a transition plan for an alternative approach to insuring high-risk individuals by January 1, 2014. 17.Requires MRMIB to establish an 11-member advisory panel, with staggered terms, to advise MRMIB on MRMIP by February 1, 2010. The panel will consist of: four health plans and insurers in the individual market, at least three of which must be participating in MRMIP; two program subscribers; two health care providers with expertise in the care and treatment of chronic diseases, at least one of which must be a physician and surgeon; and, three representatives of organizations representing the interests of health care consumers and medically uninsurable persons. Additional provisions: SB 227 Page 7 18.Allows emergency rules and regulations to be adopted by MRMIB, DMHC, or DOI to implement this act, and exempt these from review by the Office of Administrative Law. 19.Excludes from the provisions of the bill: specialized health care service plans, Medicare-only, and Medicare-supplement-only health care service plans licensed by DMHC; and Medicare supplement, specialized health, Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) supplement insurance, hospital indemnity, hospital-only, accident-only, specified disease insurance that does not pay benefits on a fixed benefit cash payment only basis, and short-term limited duration health insurance that is issued certificates of authority under DOI. 20.Provides that the fee established under this bill will not be considered administrative costs for regulatory purposes or for purposes of calculation of any medical loss ratio imposed on carriers by statute or regulation. 21.Makes specified findings and declarations with respect to MRMIP, and revise and add certain definitions governing the operation of MRMIP. 22.Imposes duties on DMHC, DOI, health plans, and health insurers related to the execution of and compliance with the provisions above. 23.Authorizes MRMIB, subject to the approval of the Department of Finance, to obtain loans from the General Fund for all necessary and reasonable expenses related to the administration of the fund, and requires MRMIB to repay principal and interest, using the pooled money investment account rate of interest, to the General Fund no later than January 1, 2017. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: Yes According to the latest Senate Appropriations Committee: Fiscal Impact (in thousands) SB 227 Page 8 Major Provisions 2009-10 2010-2011 2011-12 Fund MRMIB increased staff $184 $475 $475 Special* MRMIB administrative costs, $395 $500 $500 Special* consultants, actuaries Fee revenue beginning in FY 2010-11, Special Revenues of up to about $25 million Increase in Prop. 99 $5,000 $10,000$10,000 Special** Funding for MRMIP *Major Risk Medical Insurance Fund **Hospital Services Account and Physician services Account in the Cigarette and Tobacco Products Surtax Fund. SUPPORT : (Verified 5/29/09) California Association of Health Underwriters (if amended) California Communities United Institute California Medical Association Congress of California Seniors Health Access California OPPOSITION : (Verified 5/29/09) California Labor Federation, AFL-CIO California State Employees Association CIGNA and UnitedHealthcare ARGUMENTS IN SUPPORT : Health Access California writes that the lack of access to health coverage for persons with pre-existing conditions is a major issue for consumers. Health Access notes that people who buy health insurance on SB 227 Page 9 their own are not wealthy and make substantial sacrifices to buy coverage, which is all too often unavailable. Health Access states that it supports individual market reforms that would assure that all persons are able to obtain affordable coverage, but that absent such reforms, this bill is a critical measure, and that the availability of coverage for the medically uninsurable needs to be protected and expanded. The California Medical Association writes that this measure will ensure that Californians unable to obtain health insurance on their own will have access to relatively affordable coverage, which is especially important for the health and wellness of people with higher health care needs or preexisting conditions. ARGUMENTS IN OPPOSITION : The California Labor Federation (CLF) writes, in reference to a prior version of the bill, that while it strongly supports efforts to expand health care coverage to those without it, it cannot support the specific funding mechanism included in the bill. CLF writes that health plans and insurers operating in the individual market are free to pick and choose the healthiest individuals for coverage and profit richly from them. CLF writes that, group coverage plans, like those administered by its union trust funds, are not allowed to discriminate between the healthy and the sick. CLF points out that its plans cover a wide range of workers, including those with chronic and expensive health care needs, and they have already socialized the cost of unhealthy individuals across their group costs. CLF believes that asking the workers and their families who pay for coverage to take on the additional cost of coverage for those in the individual market is unfair. CLF believes that this measure does not ask those who profit from the system or fail to provide coverage to their own workers to contribute, and that absent new revenues or comprehensive reform, it must oppose this bill in its current form. CTW:do 5/29/09 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE SB 227 Page 10 **** END ****