BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 227
                                                                  Page  1

          Date of Hearing:   June 17, 2010 

                                Felipe Fuentes, Chair

                    SB 227 (Alquist) - As Amended:  June 3, 2010 

          Policy Committee:                              HealthVote:18-0

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


          This bill establishes the California Federal Temporary Health  
          High Risk pool (pool or high risk pool) to meet requirements of  
          federal health reform, the Patient Protection and Affordable  
          Care Act (PL-111-148). State-run high risk pools are to be  
          operational by June 23, 2010, three months after the enactment  
          of the federal law. Specifically, this bill: 

          1)Establishes the high risk pool within the California Health  
            and Human Services Agency and requires the pool to be managed  
            by the Managed Risk Medical Insurance Board (MRMIB). MRMIB  
            administers the current law state high risk pool, the Major  
            Risk Medical Insurance Program. 

          2)Provides authority to, and establishes requirements for, MRMIB  
            related to the federal high risk pool, including subscriber  
            eligibility and enrollment, health plan participation, scope  
            of health benefits, and contracts with health plans. 

          3)Requires MRMIB to maintain enrollment and expenditures to  
            ensure program costs do not exceed the federal funds  
            allocated. Authorizes MRMIB to make expenditures from the  
            Federal Temporary High Risk Health Insurance Fund (Fund) for  
            costs in excess of a subscriber's share of cost. The Fund is  
            established by AB 1887 (Villines), pending in the Senate.  
            Authorizes MRMIB to seek GF loans, subject to approval by the  
            Department of Finance. Requires GF loans to be repaid by  
            January 1, 2014.

          4)Becomes operative contingent upon enactment of AB 1887  
            (Villines), pending in the Senate. 

           FISCAL EFFECT  


                                                                  SB 227
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          1)According to information provided by the federal government,  
            California will receive $761 million (100% federal) to  
            administer the high risk pool until January 1, 2014 when  
            broader insurance market reforms and coverage expansions  
            occur. This allocation results in about $218 million (federal)  
            on an annualized basis. This funding will be used to provide  
            premium support to previously uninsured individuals. Depending  
            on the average monthly premium charged for coverage, between  
            25,000 and 35,000 individuals will benefit from this funding  

          2)The federal government proposes to allocate state funds based  
            on a formula used for the Children's Health Insurance Program,  
            which relies on a combination of factors including nonelderly  
            population, proportion of uninsured, and geographic cost  
            variation. The federal government will reassess state high  
            risk pool allocations within two years. States, like  
            California, that have high rates of medically uninsured  
            individuals may pursue aggressive enrollment strategies to  
            ensure continued optimal funding when expenditures are  
            reassessed by the federal government. 

          3)This bill authorizes MRMIB to pursue GF loans only to the  
            extent needed to ensure continuity of operation. The pool will  
            be a new federally-funded, state-administered program, and  
            full guidance on the timing of federal reimbursement  
            mechanisms is not yet available. Providing GF loan authority  
            to MRMIB will ensure continuity of funding support and program  
            administration. Other provisions of the bill require MRMIB to  
            maintain enrollment and expenditures in line with federal  
            funding, ensure subsidies do not exceed the amount of federal  
            funding available, and ensure no state funds are spent in  
            support of the high risk pool. 


            1) Rationale  . This bill enacts California's option to establish  
             a temporary high risk pool until broader provisions of  
             federal health reform are implemented in 2014. According to  
             estimates, more than 400,000 Californians are uninsured due  
             to pre-existing medical conditions. The new federal high risk  
             pool will be available to individuals who have been uninsured  
             for at least six months. Individual premium payments, not yet  
             determined, will not exceed 35% of total premium costs and  
             several federal requirements of the pool established by this  


                                                                  SB 227
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             bill translate to more robust coverage than the current law  
             high risk pool. 

            2) Proposed author's amendments  , to be adopted in committee,  
             appropriate $761 million (federal) from the Federal Trust  
             Fund to MRMIB, add an urgency clause, and change the high  
             risk pool name established by the bill from the "California  
             Federal Temporary Health High Risk Pool" to the "Federal  
             Temporary High Risk Pool".
           3) Current Law High Risk Pool  . 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. The Major Risk Medical Insurance  
             Program (MRMIP) was established in 1991 and provides health  
             insurance to individuals unable to obtain coverage due to  
             medical reasons. Only 7,000 individuals are currently served  
             MRMIP while several hundred thousand individuals may need  
             such coverage. Under current law, MRMIP faces insufficient  
             and unstable funding sources to meet the demand for the  
             program. As a requirement of federal law, MRMIP will continue  
             to operate while the risk pool established in this bill  

           MRMIP premium costs are 125% to 137.5% of pricing in the  
             private market for similar coverage. Enrollees pay about 60%  
             of premium costs and public subsidies pay the remaining  
             costs. Premiums vary based on age, location, and health plan.  
             For example, in Sacramento County, the 2010 premiums for a  
             person 50 to 54 years of age are $551 per month for the  
             Kaiser Permanente health maintenance organization (HMO) plan  
             and $878 for the Blue Cross preferred provider organization  
             (PPO) plan. MRMIP coverage is limited to $75,000 per year and  
             includes a lifetime maximum of $750,000.

            4) Related Legislation  . AB 1887 (Villines), pending in the  
             Senate, establishes the Federal Temporary High Risk Health  
             Insurance Fund and provides MRMIB authority to ensure  
             confidentiality of contract negotiations and high risk pool  
          Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081