BILL ANALYSIS SB 227 Page 1 ( Without Reference to File ) SENATE THIRD READING SB 227 (Alquist) As Amended June 21, 2010 2/3 vote. Urgency SENATE VOTE :Vote not relevant HEALTH 18-0 APPROPRIATIONS 14-0 ----------------------------------------------------------------- |Ayes:|Monning, Fletcher, |Ayes:|Fuentes, Conway, Ammiano, | | |Ammiano, Carter, Conway, | |Bradford, Charles | | |De La Torre, De Leon, | |Calderon, Coto, De | | |Eng, Gaines, Hayashi, | |Leon, Hall, Harkey, | | |Hernandez, Jones, Bonnie | |Miller, Nielsen, Skinner, | | |Lowenthal, V. Manuel | |Solorio, Torlakson | | |Perez, Salas, Smyth, | | | | |Audra Strickland, | | | | |Nestande | | | | | | | | ----------------------------------------------------------------- SUMMARY : Requires the Managed Risk Medical Insurance Board (MRMIB) to enter into an agreement with the federal Department of Health and Human Services (DHHS) to administer a qualified high risk pool to provide health coverage, until January 1, 2014 to individuals who have pre-existing conditions, consistent with the Patient Protection and Affordable Care Act, Public Law 111-148 (PPACA). Specifically, this bill : 1)Authorizes MRMIB to administer the federal temporary high risk pool consistent with PPACA, including eligibility, enrollment, participation requirements, determine high risk medical coverage, including scope of benefits and subscriber cost sharing and establish subscriber premiums and plan rates. 2)Authorizes MRMIB to provide coverage by contracting with licensed health plans or by contracting with third party administrators to provide or administer the coverage. 3)Authorizes expenditures from the Federal Temporary High Risk Health Insurance Fund for covered, medically necessary services that exceed the subscriber's contribution, SB 227 Page 2 administration of the program, and marketing and outreach. 4)Requires MRMIB to do the following: a) Establish the scope and content of high risk medical coverage, and adopt benefit and eligibility standards as specified; b) Maintain enrollment and expenditures to ensure that the program costs do not exceed the federal funds as allocated; c) Implement a plan for marketing and outreach; and, d) Implement a procedure for transition of subscribers into qualified health plans through the exchange established under PPACA. 5)Prohibits plan rates from being excessive, inadequate, or unfairly discriminatory and requires rates to be adequate to pay claims and services. 6)Provides for appeals of program decisions concerning eligibility and coverage decisions through a procedure to be established by MRMIB, as specified. Allows for appeals of coverage decisions that are within the jurisdiction of the Department of Managed Health Care (DMHC) to be exempted. 7)Allows subscribers to change plans as prescribed. 8)Adds information about the federal temporary high risk pool to existing notice requirements health plans and insurers provide to applicants who are denied individual coverage or are offered coverage at a rate higher than the standard rate and requires it to be placed on the DMHC and Department of Insurance Web sites. 9)Terminates coverage through the federal high risk pool on January 1, 2014, requires all claims to be submitted within 18 months following the delivery of service and sunsets this bill January 1, 2020. 10)Appropriates $ 761 million in federal funds. 11)Makes enactment contingent on the enactment of AB 1887 SB 227 Page 3 (Villines). FISCAL EFFECT : According to the Assembly Appropriations Committee: 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 re 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 support. 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 General Fund (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 funds, ensure that subsidies do not exceed the amount of federal funding available, and ensure no state funds are spent in support of the high risk pool. COMMENTS : According to the author, this bill is needed to establish a high-risk pool that meets federal requirements because Major Risk Medical Insurance Program (MRMIP) and the federal high-risk pool program established by PPACA differ in their eligibility criteria, benefits, coverage, and premiums in ways that would prevent MRMIP, as it is currently structured, SB 227 Page 4 from being used as the federal high-risk pool. The author argues that although most Californians obtain health insurance through their employer, many Californians do not have access to employer-sponsored health coverage and cannot buy private health insurance at any price because they have a pre-existing medical condition. The author further points out that having a pool run at the state level by a public board allows for better public participation, on-going monitoring, and transparency. MRMIB could provide a single point of application for people applying for either high risk pool, and the federal government has not directly administered a program similar to this before. Additionally, having similar programs run by different levels of government is confusing for the public and makes coordination of enrollment and outreach more difficult. On March 23, 2010, President Obama signed into law the PPACA to provide coverage for over 90% of the presently uninsured population, adopt broad-reaching reforms in insurance practices, and make major new investments in public health. PPACA requires states to create health insurance exchanges by 2014 that will serve as competitive market places for individuals and small businesses to be able to purchase health insurance products. Insurers participating in the exchange will be barred from discriminating based on pre-existing conditions, health status, and gender. Until the implementation of state exchanges in 2014, certain individuals with pre-existing conditions, who have not had coverage for the prior six months and will be eligible for the temporary high risk pool program. PPACA specifically gave the DHHS the authority to run the temporary high risk health insurance pool program or to contract with states or non-profits to provide coverage for high risk individuals. In response to an April 2010 letter from Kathleen Sebelius, Secretary of DHHS, Governor Arnold Schwarzenegger sent a letter indicating California's intent to contract with the federal government to operate a temporary high risk health insurance pool program. The Governor's letter indicated that MRMIB would operate the temporary high risk health insurance pool program alongside MRMIP. On May 10, 2010, DHHS released the solicitation for states proposing to establish the temporary federal high risk pool. A total of $5 billion in federal funds has been SB 227 Page 5 appropriated to support the program. California has been allocated $761 million over the life of the program. To date, 29 states plus Washington, D.C. have elected to operate their own, 18 have elected to have DHHS run it, two have deferred the decision and one has not indicated. MRMIB has consulted PricewaterhouseCoopers, who has provided preliminary estimates of premiums compared to the existing MRMIP premiums. According to a report to the MRMIB on June16, 2010, plan premium rates in the new federal high risk pool could range from a high of $585 to a low of $545 depending on various factors including deductibles, as compared to existing MRMIP products that range up to $900 and have annual limits of $75,000. Analysis Prepared by : Marjorie Swartz / HEALTH / (916) 319-2097 FN: 0004917