BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 227
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          Date of Hearing:   August 19, 2009 

                                Kevin De Leon, Chair

                   SB 227 (Alquist) - As Amended:  July 13, 2009  

          Policy Committee:                              Health Vote:13-6

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No


          This bill makes significant changes to the funding and  
          administration of California's high risk insurance pool, the  
          Major Risk Medical Insurance Program (MRMIP) for medically  
          uninsurable individuals. Specifically, this bill:

          1)Requires all health plans and health insurers by January 1,  
            2010 to either accept MRMIP enrollees for coverage or pay a  
            fee to support MRMIP program costs.

          2)Requires the fees to be based on "covered lives", as defined.  
            The term covered lives refers to the number of enrollees for  
            which a particular insurer provides coverage. For enrollees in  
            group health coverage, this bill requires every 10 enrolled  
            individuals to count as one covered life for purpose of the  
            fee. This bill establishes a maximum fee of $1 per covered  
            life per month. This bill exempts Medi-Cal, Medicare, the  
            Healthy Families Program, and other publicly administered  
            coverage from the fee provisions.

          3)Revises MRMIP benefits to prohibit an annual benefit limit and  
            increases the lifetime benefit limit from $750,000 to $1  
            million. Requires health plans and insurers to guarantee  
            renewal of health coverage. 

          4)Revises the enrollee payment rate to a rate set by the Managed  
            Risk Medical Insurance Board (MRMIB) of 110% to 125% of market  

          5)Requires MRMIB to complete various requirements with respect  
            to modifying and reforming MRMIP coverage and administration.  
            Requires the establishment of a new advisory board. 

           FISCAL EFFECT  


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          1)Annual increased special fund revenues of approximately $40  
            million resulting from the fee paid by insurers on the number  
            of individuals they insure according to the requirements of  
            this bill. These funds will be used to subsidize premiums paid  
            by MRMIP enrollees. 

          2)Unknown one-time costs likely in the range of $200,000 to  
            MRMIB to administer provisions of this bill. Unknown on-going  
            costs to maintain oversight of MRMIP. This bill authorizes  
            MRMIB to seek GF loans for administration and requires MRMIB  
            to repay any loans, with interest, by January 1, 2017. 


          1)Rationale  . This bill reforms and restructures California's  
            high risk pool, MRMIP, which is administered by MRMIB.  
            California, along with 34 other states, has a high risk  
            insurance pool to accommodate individuals who have been unable  
            to obtain health coverage in the individual market. Under  
            current law, the program faces insufficient and unstable  
            funding sources to meet the demand for the program. Only  
            several thousand individuals are currently served in the  
            program while several hundred thousand individuals may need  
            such coverage.  Under current law four large insurers  
            participate in MRMIP and monthly premium costs range from $435  
            to $1,120 for an individual 50 to 54 years old. This bill  
            requires participation by or financial support of health plans  
            and insurers to increase the stability and funding levels of  
            the program. In addition, this bill makes programmatic reforms  
            including prohibiting an annual benefit limit and lifting the  
            lifetime limit from $750,000 to $1 million. 

           2)California's Uninsured  . According to estimates, more than 6  
            million Californians lack health coverage in the form of  
            private or public health insurance. Many are employed but work  
            for companies that do not offer insurance. Others work for  
            firms offering insurance but are not eligible for coverage for  
            a variety of reasons. For individuals lacking coverage, they  
            may be able to purchase coverage in the individual market  
            instead of the employment-based market. There is a wide range  
            of choice of plans in the individual health insurance market  
            in California and a wide array of pricing. However, many  
            individuals who seek coverage in the individual insurance  
            market find coverage is either unaffordable or unavailable.  
            This is especially true for individuals with pre-existing  
            health conditions and for older adults with health problems.  
            These individuals may be eligible for MRMIP coverage. 


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           3)MRMIP  was established in 1991 and provides health insurance to  
            California residents unable to obtain coverage due to medical  
            reasons. Under current law enrollee costs above a certain  
            level are subsidized by the state with a blend of state  
            funding and tobacco taxes. However, the program has been  
            limited by funding levels and the instability of funding  
            sources. Currently there are almost 7,000 individuals with  
            MRMIP coverage. In contrast, other states have many more  
            individuals in their high risk pools. For example, Minnesota  
            has 31,000; Texas has 28,000; Oregon has 15,000; and Wisconsin  
            has 19,000 enrollees.  

           4)Concerns  . Several large business and health insurance industry  
            groups oppose this bill because of its focus on one industry,  
            the imposition of the fee, a concern such fees will eventually  
            be extended to employers, and a concern that costs should be  
            supported by a broader group than just insurers. The  
            California Labor Federation opposes this bill unless it is  
            amended to exempt collectively bargained health coverage from  
            the bill. The Labor Federation indicates employer coverage  
            continues to erode and the fee established on group coverage  
            in this bill will exert additional cost pressures. 
          5)Related Legislation  . AB 2 (Dymally) in 2008 and AB 1971 (Chan)  
            in 2006 each addressed MRMIP reforms. AB 1971 failed passage  
            on concurrence in the Senate. AB 2 was vetoed due to concerns  
            about increasing the costs of health care and an assertion  
            that comprehensive health reform is the only solution to  
            escalating costs. 

          SB 1379 (Ducheny), Chapter 607, Statutes of 2008 requires fines  
            and penalties paid by health plans to the Department of  
            Managed Health Care (DMHC) to be transferred to MRMIB support  
            MRMIP.  Requires a one-time transfer of $10 million and then  
            annual transfers of up to $1 million.  
          Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081