BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   SB 227|
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                                 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  
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          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  







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             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  







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             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  







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             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.








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          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:








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          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)








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           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

          *Major Risk Medical Insurance Fund

           SUPPORT  :   (Verified  6/1/09)

          American Federation of State, County and Municipal  
          Employees
          California Association of Health Underwriters (if amended)
          California Communities United Institute
          California Medical Association
          Congress of California Seniors
          Health Access California

           OPPOSITION  :    (Verified  6/1/09)

          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  
          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,  







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          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  6/1/09   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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