BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 900
S
AUTHOR: Alquist
B
AMENDED: April 8, 2010
HEARING DATE: April 21, 2010
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CONSULTANT:
0
Bain/cjt
0
SUBJECT
California Health Benefits Exchange
SUMMARY
Establishes in the California Health and Human Services
Agency (Agency) the California Health Benefits Exchange
(Exchange). Specifies the duties and authority of the
Exchange. Requires the Exchange be governed by a board
with four-year terms whose members are appointed by the
Governor and the Legislature. Requires the Exchange to
negotiate and enter into contracts with health plans.
Requires the Exchange to offer a choice of health plans in
each region of the state, including a choice in each region
of the state between the five levels of coverage contained
in federal law (a platinum, gold, silver, bronze and
catastrophic level benefit plan).
CHANGES TO EXISTING LAW
Existing state law:
Establishes the Managed Risk Medical Insurance Board
(MRMIB), which administers the Healthy Families Program,
the Major Risk Medical Insurance Program, and the Access
for Infants and Mothers Program. MRMIB is a seven-member
board in the Agency with three gubernatorial appointments,
two legislative appointments and two ex officio non-voting
members. MRMIB administers three programs (the Healthy
Families Program, the Access for Infants and Mothers
Continued---
STAFF ANALYSIS OF SENATE BILL 900 (Alquist) Page 2
Program and the Major Risk Medical Insurance Program),
under which it has authority to contract with health plans.
Existing federal law:
Existing law, the federal Patient Protection and Affordable
Care Act (the federal Act), (Public Law 111-148), requires
each state, by January 1, 2014, to establish an American
Health Benefit Exchange that makes qualified health plans
available to qualified individuals and qualified employers.
Federal law establishes requirements for the Exchange, for
health plans participating in the Exchange, and defines who
is eligible to receive coverage in the Exchange.
Effective January 1, 2014, the federal Act allows
individual taxpayers whose household income equals or
exceeds 100 percent, but does not exceed 400 percent of the
federal poverty level, a refundable tax credit for a
percentage of the cost of premiums for coverage under a
qualified health plan. The federal Act also requires
reductions in the maximum limits for out-of-pocket expenses
for individuals enrolled in qualified health plans whose
incomes are between 100 percent and 400 percent of the
federal poverty level.
The federal Act also allows "qualified small employers" to
elect, beginning in 2010, a tax credit worth up to 35
percent of a small business' health insurance premium costs
in 2010. On January 1, 2014, this rate increases to 50
percent (35 percent for tax-exempt employers). A
qualifying employer must cover at least 50 percent of the
cost of health care coverage for some of its workers based
on the single rate. A qualifying employer must have less
than the equivalent of 25 full-time workers (for example,
an employer with fewer than 50 half-time workers may be
eligible). A qualifying employer must pay average annual
wages below $50,000. Both taxable (for-profit) and
tax-exempt firms (nonprofits) qualify. The credit phases
out gradually for firms with average wages between $25,000
and $50,000 and for firms with the equivalent of between 10
and 25 full-time workers. After January 1, 2014, the tax
credit is only available for coverage purchased through the
Exchange, and only for two consecutive years.
This bill:
Establishes in the Agency the Exchange, and makes the
STAFF ANALYSIS OF SENATE BILL 900 (Alquist) Page 3
purpose of this bill to implement the provisions of the
federal Act requiring the establishment of an American
Health Benefit Exchange. Requires the Exchange be governed
by a board with four-year terms whose members are appointed
by the Governor and the Legislature.
Requires the Exchange board to hold public meetings on a
bimonthly basis, or more frequently as necessary.
States legislative intent that the Exchange provide a
consumer-friendly process that facilitates the seamless
enrollment of individuals in health care coverage.
Requires the Exchange to meet various requirements,
including:
Negotiating and entering into contracts, including
selective provider contracts, with health plans seeking
to offer coverage in the Exchange;
Providing a choice of health plans in each region of the
state, including a choice in each region of the state
between the five levels of coverage contained in federal
law (a platinum, gold, silver, bronze and catastrophic
benefit plan);
Requiring the Exchange to employ necessary staff,
including actuarial staff;
Requiring the Exchange to receive federal funds for
purposes of establishing and administering the Exchange,
including funds made available by the federal Act.
Requires the Exchange to meet the requirements of the
federal Act for establishing an Exchange, and requires the
Exchange to perform the following federal requirements in a
consumer-friendly manner:
Provide for the operation of a toll-free telephone
hotline to respond to requests for assistance.
Maintain an Internet website through which enrollees and
prospective enrollees of qualified health plans can
obtain standardized comparative information on those
plans.
Assign a rating to each qualified health plan offered
through the Exchange in accordance with federal criteria
developed under the Act.
Utilize a standardized format for presenting health
benefits plan options in the Exchange, including the use
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of the uniform outline of coverage established under
federal law.
Inform individuals of eligibility requirements for the
Medi-Cal Program, the Healthy Families Program, or any
applicable state or local public health care coverage
program and, if eligible, enroll the individual in that
program.
Establish and make available by electronic means a
calculator to determine the actual cost of coverage after
the application of any premium tax credit and any
cost-sharing reduction under the federal Act.
Grant a certification, subject to the federal Act and any
implementing regulations, attesting that an individual is
exempt from the individual responsibility requirement
(known as the individual mandate) or from the penalty
imposed because of either of the following:
o There is no affordable qualified health plan
available through the Exchange, or the individual's
employer, covering the individual.
o The individual meets the requirements for any
other exemption from the individual responsibility
requirement or penalty.
Establish quality incentives and rewards consistent with
specified provisions of the Act, including, but not
limited to, incentives that encourage the use of delivery
systems that deliver cost-effective, high-quality care.
Permits the Exchange to do the following:
Issue rules and regulations, as necessary, and until
January 1, 2014, emergency regulations.
Apply for and receive funds from private foundations.
Exercise the federal option to provide a single exchange
for providing services to both qualified individuals and
qualified small employers, if the Exchange makes all of
the following determinations:
o Providing coverage through a single exchange
will provide a significant benefit for the health
coverage marketplace in the state.
o Providing coverage through a single exchange
will be cost effective for both qualified
individuals and qualified small employers.
o The Exchange can make coverage available
through a single exchange on a guarantee issue basis
without undue risk of adverse selection.
Enter into other contracts as are necessary or proper to
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carry out the duties of the Exchange, including, but not
limited to, contracts for enrollment processing.
Determine the health benefits coverage for small
employers that the Exchange will contract to purchase
from participating carriers.
Appoint committees, as necessary, to provide technical
assistance in the operation of the Exchange.
Undertake activities necessary to administer the
Exchange, including marketing and publicizing the
Exchange and establishing rules, conditions, and
procedures for ensuring carrier, employer, and enrollee
compliance with Exchange requirements, consistent with
federal law and regulations.
Consistent with federal procedures established by the
Act, establish procedures to allow agents or brokers to
do both of the following:
o Enroll individuals in any qualified health
plan in the individual or small group market as
soon as the plan is offered through the Exchange.
o Assist individuals in applying for premium
tax credits and cost-sharing reductions for health
plans sold through the Exchange.
Prohibits the Exchange from being subject to licensure or
regulation by the California Department of Insurance or the
Department of Managed Health Care.
Requires carriers that contract with the Exchange to be in
good standing with their respective regulatory agencies.
Allows individuals and employers the right to appeal to the
board if they are dissatisfied with any action or failure
to act that has occurred in connection with eligibility
for, or enrollment in, the Exchange. Requires the
individual/employer be accorded an opportunity for a fair
hearing, and requires hearings to be conducted pursuant to
the provisions of the Administrative Procedure Act.
Prohibits this bill from being construed to compel an
individual to enroll in a qualified health plan or to
participate in the Exchange.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
This bill establishes the California Health Benefits
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Exchange Fund (Fund) in the State Treasury as a special
fund consisting of revenue necessary for the purposes of
this bill. Permits any moneys in the Fund that are
unexpended or unencumbered at the end of a fiscal year to
be carried forward to the next succeeding fiscal year, and
requires all interest earned on money in the fund to be
retained in the Fund. This bill requires the board to
establish a prudent reserve in the Fund, requires moneys in
the Fund, upon appropriation by the Legislature, to be used
by the board for the purposes of this bill.
BACKGROUND AND DISCUSSION
According to the author, one of the critical pieces of the
federal health reform legislation is the establishment of
an American Health Benefit Exchange. Each state is
required to establish such an Exchange by January 1, 2014,
and this bill would require the establishment of a
California Health Benefit Exchange as a government entity
within the California Health and Human Services Agency.
The author argues the Exchange should be a public entity
with legislative and gubernatorial appointments that holds
public meetings to ensure accountability and transparent
decision-making.
According to the author, the Exchange would be an "active
purchaser" on behalf of people receiving coverage in the
Exchange. It would negotiate and enter into contracts with
health plans seeking to participate in the Exchange, and
would establish quality incentives for health plans that
encourage the use of cost-effective, high-quality delivery
systems. Additionally, the author argues a broad choice of
health plans should be available in the Exchange beyond
what is required under federal law. This bill requires the
Exchange to offer a choice of health plans in each region
of the state of the five levels of coverage (platinum,
gold, silver, bronze and catastrophic) contained in federal
law, rather than the two levels of coverage (gold and
silver) required in the federal Act.
The author points out that California is familiar with the
Exchange model as the state currently administers a
purchasing pool for approximately 1.3 million public
employees (through CalPERS) and three smaller purchasing
pools, one for pregnant women, one for low-income children,
and one for medically uninsurable individuals, that are
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administered by the Managed Risk Medical Insurance Board
and that have a combined enrollment of over 900,000
individuals. MRMIB also previously administered a
purchasing pool for small employers known as the Health
Insurance Plan of California or "HIPC."
While there are many policy decisions to make regarding
state implementation of an Exchange, the author believes
the statutory framework must be built early so that the
state can begin establishing the administrative
infrastructure (hiring staff, contracting with health plans
and vendors, and establishing enrollment processes) for an
entity that will ultimately facilitate the enrollment of
millions of Californians in health coverage.
Background on the Exchange
The federal Act requires each state, by not later than
January 1, 2014, to establish an American Health Benefit
Exchange that:
Facilitates the purchase of qualified health plans, and,
Provides for the establishment of a Small Business Health
Options Program or "SHOP Exchange" that is designed to
assist small employers in facilitating the enrollment of
their employees in qualified health plans offered in the
small group market in the state.
The Secretary of the federal Department of Health and Human
Services is required (through regulation) to establish
criteria for the certification of health plans qualified to
participate in the Exchange. Those requirements include
meeting marketing requirements; ensuring a sufficient
choice of providers; and requiring plans to consider all
enrollees in the individual market (except for
grandfathered plans), both in and outside the Exchange, to
be considered members of a single risk pool, and all
enrollees in the small group market (except for
grandfathered plans), both in and outside the Exchange to
be members of a single risk pool.
The Act also sets forth the requirements for an Exchange,
including that an Exchange must be a governmental agency or
nonprofit entity that is established by a state. The
Exchange is also charged with several duties, including
screening and enrolling individuals in other public
programs, establishing a toll-free hotline and website,
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assigning a quality and price rating to each health plan,
granting exemptions from the federal requirement to have
health insurance, providing an online calculator to
determine the actual cost of coverage after federal tax
subsidies are considered, and awarding grants to
"navigators" to conduct public education and facilitate in
qualified health plans.
Enrollment in the Exchange is open to any "qualified
individual" who seeks to enroll in a qualified health plan
in the individual market offered through the Exchange and
who resides in the state that established the Exchange.
Individuals who are incarcerated (except for incarceration
pending the disposition of charges) are ineligible for the
Exchange, as are undocumented immigrants.
The Exchange is also open to a "qualified employer," which
is defined as a small employer that elects to make all
full-time employees of such an employer eligible for one or
more qualified health plans offered in the small group
market through an Exchange.
Federal health care reform establishes, for qualified small
employers , a tax credit for up to 50 percent of their
employee health care coverage expenses beginning in 2010.
In 2014, federal health care reform allows individual
taxpayers whose household income equals or exceeds 100
percent but does not exceed 400 percent, of the federal
poverty level (FPL) a refundable tax credit for a
percentage of the cost of premiums for coverage under a
qualified health plan. The Act also requires reductions in
the maximum limits for out-of-pocket expenses for
individuals enrolled in qualified health plans whose
incomes are between 100 percent and 400 percent of FPL.
The Exchange is the only place where tax credits for health
coverage are available to individuals. Beginning in 2014,
the tax credits for small employers are also only available
through the Exchange, and small employers can claim the
credit only for two consecutive taxable years.
Because the tax credits are only being available through
the Exchange, the Exchange is projected to have a sizable
number of individuals, and a significant impact on the
health insurance marketplace. A UC Berkeley estimate
following the enactment of federal health care reform
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estimates 8.4 million Californians will be eligible for the
Exchange, with 2.9 million (35 percent) of those
individuals eligible for the Exchange with a subsidy. Of
the 2.9 million individuals eligible for a subsidy in the
Exchange, the UC Berkeley estimate is that 2,450,000 (84
percent) are individuals and 545,000 are employees of small
employers.
Related bills
AB 1602 (Perez) would establish the California Health
Benefit Exchange in state government to be governed by an
executive board appointed, in an unspecified manner, by the
Governor and the Legislature. The bill would specify the
powers and duties of the board relative to determining
eligibility for enrollment in the Exchange and arranging
for coverage with participating health, dental, and vision
plans. AB 1602 would create the California Health Trust
Fund as a continuously appropriated fund, and would enact
other related provisions. AB 1602 is set for hearing in
the Assembly Health Committee on April 20, 2010.
SB 890 (Alquist) would allow people to switch to a
different individual health plan or insurer on the
anniversary date of their current policy, on a guarantee
issue basis, to a policy of equal or lesser value.
Requires health plans and health insurers in the individual
market to offer standardized products (five preferred
provider organization [PPO] products and five health
maintenance organization [HMO] products), and prohibits
plans and insurers from offering other products. Specifies
the cost-sharing requirements for each product in each
coverage choice category. Requires health insurers to
cover medically necessary basic health care services.
Prohibits health insurers from having an annual or lifetime
benefit limit. Requires health plans to change premium
rates for adults based on one-year changes in a person's
age, and establishes standard rating factors and limits on
premium variation. Requires a minimum health plan medical
loss ratio of 85 percent for large group and 80 percent for
individual and small group.
Prior legislation
AB1X 1 (Nunez) of 2007, among its many provisions, would
have established the California Cooperative Health
Insurance Purchasing Program (Cal-CHIPP) as a state
purchasing program, or health insurance purchasing pool,
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administered by MRMIB, to negotiate and contract with
carriers to offer health coverage to eligible persons. AB
1X 1 would have established the duties, authority and
responsibility for MRMIB in the operation of Cal-CHIPP.
Cal-CHIPP would have been operational on January 1, 2009
and would have been required to provide health care
coverage beginning July 1, 2010. Failed passage in Senate
Health.
AB 8 (Nunez) of 2007 was similar to AB1X 1, including that
it would have established a purchasing pool. Vetoed by
the Governor.
Arguments in support
CALPIRG writes that creating a strong consumer-friendly
Exchange has the potential to leverage significant
improvements in almost every aspect of how consumers shop
for, purchase and receive coverage. CALPIRG writes in
support that this bill makes key policy decisions that will
help to lower costs for consumers, such as creating a
single exchange for both small businesses and individuals,
and by offering incentives and rewards to encourage health
plans to adopt cost-saving quality-enhancing delivery
system reforms. CALPIRG writes this bill will spur the
development of an innovative approach to care that can
truly bend the curve of rising health care costs. The
Congress of California Seniors writes in support that the
Exchange established by this bill is a key piece of the
reformed health insurance system required by federal law,
and this bill would allow California to begin preparing for
these reforms in a timely fashion.
Health Access California (HAC) writes that it strongly
supports this bill as the enactment of federal health
reform shifts the debate over health care back to the
states. One of the first steps that must occur is to
create an exchange that will offer affordable coverage to
individuals and small businesses. HAC states California
has a long experience with Exchanges as CalPERS operates an
exchange or purchasing pool to provide health benefits for
state and local government employees, as does MRMIB. HAC
states MRMIB once operated an exchange for small
businesses, but it was privatized and later failed. HAC
states the relative success of the publicly operated
exchanges, with their governing boards that meet in public
and that are subject to legislative oversight, along with
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the failure of the privatized small business exchange,
argue for a public governance structure like that proposed
in this measure.
HAC states CalPERS has led the way nationally in purchasing
health insurance based on both cost and quality, and that
MRMIB has done an effective job of purchasing based on
cost, but because it has had a relatively small market
share, it has not had the capacity to drive quality
improvements. HAC states an Exchange should build on this
experience to reduce the cost of coverage for individuals
and small businesses while driving an agenda of improving
quality and making prevention a key priority. In addition,
HAC writes that the newly created Exchange should use its
market power to drive delivery system improvements similar
to changes for Medicare and Medi-Cal, and prevention should
be among the objectives of the Exchange. HAC states it
looks forward to working with the author to strengthen this
language as this measure progresses.
HAC writes that, while the Exchange is a major market
player, it should not be housed with the regulator, and the
exchange is first and foremost a purchaser of coverage,
with the objective of getting the best deal in buying that
coverage. HAC concludes that it is essential that the
Exchange be consumer friendly both for individual consumers
and for small businesses who will be the customers for the
exchange. HAC concludes that, like others involved in the
policy process, it is continuing to refine and improve its
thinking on the Exchange as the discussion progresses, and
it looks forward to working with the author as well as
others in this effort.
Arguments in opposition
Anthem Blue Cross (ABC) writes in opposition that the
Exchange established by this bill is inconsistent with the
concept of consumer choice because it requires the Exchange
to determine the health benefits coverage for small
employers. ABC argues having the Exchange determine the
health benefits coverage is duplicative of federal
requirements, will limit the choice of plans for those
purchasing coverage with a tax credit in the Exchange, and
having the Exchange perform this function adds an added
layer of expense because DMHC and CDI already will be
approving products consistent with the new federal Act.
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ABC also objects to allowing Medi-Cal County Organized
Health Systems (COHS) to provide coverage in the private
market through the Exchange. ABC argues COHS are
government-run plans, and the idea of allowing the
government to sell coverage in the private market was
rejected during the federal legislative process. ABC
argues the COHS would not meet federal requirements to
qualify as a qualifying plan in the Exchange.
Concerns
The California Association of Health Plans (CAHP) writes
that this bill in its current form includes a number of
duties for the Exchange beyond the mandatory and optional
powers outlined in federal health care reform, including
granting the Exchange the power to contract with plans and
providers, set benefit designs in the small group market,
and purchase coverage. CAHP states that, while it is still
formulating its opinions on these aspects of the bill, it
believes it is important to note its concerns to the
committee as this bill moves forward. The Association of
California Life and Health Insurance Companies (ACLHIC)
writes with similar concerns, arguing the bill goes beyond
federal law in giving the Exchange the authority to decide
which health insurers and health plans would be allowed to
participate. ACLHIC also expresses concern that the bill
appears to give the board premium setting authority, which
ACLHIC argues exceeds the provisions of federal law.
Health Net also has concerns with this measure as its
preliminary review of this bill found that there are
provisions relating to the creation of the Exchange that
are consistent with the duties of the exchange outlined in
the federal act; in some cases wording is identical, but in
others that is not the case. Health Net states that there
are some provisions that do not follow the authority as set
forth in federal health care reform, and there are some
provisions found in the federal act that are not yet
reflected in the language of this bill. Health Net
indicates it will work collaboratively with the Legislature
and our California regulators to implement federal health
care reform, including the creation of an Exchange.
COMMENTS
Federal law places a number of specific requirements on the
Exchange and on health plans that participate in the
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Exchange, but leaves several policy decisions up to states
for implementation. Those policy choices include what type
of entity administers the Exchange, whether to combine the
individual and small employer SHOP Exchange into one
Exchange, whether to have a regional exchange with another
state or allow multiple exchanges within a state, whether
to allow large employers to participate in the Exchange,
how to provide ongoing funding for the Exchange, the scope
of benefits in the Exchange, and the number of products and
health plans offered through the Exchange. Policy
questions for the Legislature to consider in establishing
an Exchange include the following:
1. What entity should be the Exchange? Federal law
requires the Exchange to be a governmental agency or
nonprofit entity that is established by a state. If a
state fails to establish an Exchange, the Secretary of
HHS must (either directly or through agreement with a
not-for-profit entity) establish and operate the Exchange
within the state, and the Secretary must take actions
necessary to implement these other requirements. This
bill establishes the Exchange in the Agency, and requires
the Exchange be governed by an unspecified board with
four-year terms whose members are appointed by the
Governor and the Legislature.
2. The Exchange as active purchaser, passive clearinghouse
or hybrid market
organizer? This bill authorizes the Exchange to
negotiate and enter into contracts with carriers seeking
to offer coverage in the Exchange. According to a
California HealthCare Foundation issue brief entitled,
"Building a National Insurance Exchange: Lessons from
California" released in July 2009, the basic concept of
an insurance exchange is not new, but there are several
variations on the idea:
a. Active purchaser. The model for this approach is
large employers who negotiate and selectively contract
with insurers that offer a high-value product in
exchange for a large volume of enrollees. Where this
exchange model has operated in the past, there has been
a market both within and outside the exchange seeking
to attract the same customers. The Health Insurance
Plan of California (HIPC) and its successor
PacAdvantage are examples of this model.
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b. Passive clearinghouse. An exchange built on this
model is merely a "price taker" willing to accept all
health plans, a place where employers and individuals
can go to find a range of coverage offerings and
compare price, quality, and service levels.
Participating plans compete for exchange enrollees on
the basis of cost and quality. The Federal Employees
Health Benefit Program is an approximate example of
this model.
c. Hybrid market organizer. An entity built on this
model does not directly negotiate prices or selectively
contract; however, it may define standard benefit
packages, provide some degree of endorsement, and
otherwise indirectly encourage health plans to offer
high-value coverage. The Massachusetts Connector is an
example.
Among the findings of the issue brief are: (a) that
any exchange that actively enters the market for health
insurance will have a very difficult time achieving its
objectives if it is not the exclusive source of
coverage for some populations, such as small employers
or individual purchasers; (b) if there is competition
for the same customers inside and outside the exchange,
the exchange will be unable to offer lower prices on a
sustained basis; and (c) without sufficient numbers of
health plans, the exchange cannot offer meaningful
choice or enhance the portability of coverage.
3. Should the state operate one exchange for both
qualified individuals and small employers? Should the
state have more than one exchange within the state, or
form a regional exchange with another state? Federal law
requires states to establish an Exchange that facilitates
the purchase of qualified health plans and provides for
the establishment of a SHOP. Federal law allows states
to elect to provide only one Exchange for providing both
Exchange and SHOP Exchange services to both qualified
individuals and qualified small employers, but only if
the Exchange has adequate resources to assist such
individuals and employers.
This bill is silent on forming more than one Exchange in
the state and authorizing a regional Exchange. This bill
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authorizes the Exchange to provide a single exchange for
providing services to both qualified individuals and
qualified small employers (SHOP), if the Exchange makes
all of the following determinations:
a) Providing coverage through a single
exchange will provide a significant benefit for
the health coverage marketplace in the state;
b) Providing coverage through a single
exchange will be cost effective for both
qualified individuals and qualified small
employers; and,
c) The Exchange can make coverage available
through a single exchange on a guarantee issue
basis without undue risk of adverse selection.
4. How should the Exchange be funded on an ongoing basis?
Federal health care reform requires there be appropriated
an amount necessary to enable the Secretary to make
awards to states not later than one year after the date
of enactment of the federal Act. States are required to
use the amounts awarded for activities (including
planning activities) related to establishing an Exchange.
The Secretary can renew a grant, but federal law
prohibits a grant from being awarded after January 1,
2015.
In establishing an Exchange, federal law requires states to
ensure that the Exchange is self-sustaining beginning on
January 1, 2015. Federal law permits allowing the
Exchange to charge assessments or user fees to
participating health insurance issuers, or to otherwise
generate funding, to support its operations. This bill
is silent on ongoing funding for the Exchange.
5. Should the Exchange include large employers? Beginning
in 2017, each State can allow health insurers offering
coverage in the large group market to offer such health
plans in the Exchange. In determining whether to offer
health plans in the large group market through an
Exchange, states must take into account any excess
premium growth outside of the Exchange as compared to the
rate of such growth inside the
Exchange. Plans are also not required to offer such
products in the Exchange. This bill is silent on
including large employers in the Exchange after 2017.
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6. Health plan benefits beyond required federally required
"essential health benefits." Federal law requires health
plans and health insurers, effective January 1, 2014, to
ensure health plans provide coverage for "essential
health benefits," as defined by the Secretary of HHS.
The statutory list of essential health benefits in the
federal Act is generally broader than state law
requirements (two exceptions are the requirement that
DMHC plans cover home health services and hospice care),
although the scope of essential health benefits will
depend upon the federal regulations.
Exchanges can require that a qualified health plan offer
benefits in addition to the federal essential health
benefits. However, a state must assume the cost of doing
so by making payments to an individual eligible for the
premium tax credit and any cost-sharing reduction under
the Act to defray the cost to the individual of any
additional benefits which are not eligible for such
credit or reduction. Following the regulatory
publication of what is and what is not included in the
federal definition of "essential health benefits," the
Legislature may need to determine whether to continue
existing benefit mandates that exceed federal minimums,
or determine how to fund the cost to the individual for
benefits that are not eligible for the federal credit or
cost-sharing reduction.
7. What health plans should be eligible to participate in
the Exchange? This bill requires health plans in the
Exchange to be licensed and in good standing with their
regulator, and specifically includes local initiative
plans (LIs), a county organized health systems (COHS), or
a joint venture of local initiative plans and county
organized health systems, as entities eligible to provide
coverage in the Exchange. LIs and COHS plans are
Medi-Cal plans in nearly all of the major population
counties. Anthem Blue Cross objects to including COHS in
the Exchange, arguing that including government plans in
the Exchange was rejected during the federal legislative
process, and that COHS would not meet the federal
requirements to qualify as a qualifying health plan in
the Exchange. The COHS dispute this interpretation, and
seek to be eligible to determine if they want to
participate in the Exchange.
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The policy rationale for making LIs and COHS eligible to
participate in the Exchange is to offer a broader choice
of plans, and to ensure continuity of care for
individuals who lose Medi-Cal eligibility. Some of the
individuals in the Exchange may be moving from Medi-Cal
coverage to Exchange coverage due to increases in income.
In 2014, Medi-Cal eligibility will be expanded up to 133
percent of the federal poverty level, and the Exchange
will offer subsidies to individuals with incomes between
100 and 400 percent of the federal poverty level. As
individuals lose eligibility for Medi-Cal because of a
growth in income, having the COHS and LIs be part of the
Exchange will enable individuals to keep their current
coverage, and maintain their continuity of care and
patient-provider relationship.
POSITIONS
Support: CALPIRG
Congress of California Seniors
Consumers Union
Health Access California
Oppose: Anthem Blue Cross
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