BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 900| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 900 Author: Alquist (D), et al Amended: 5/20/10 Vote: 21 SENATE HEALTH COMMITTEE : 5-0, 4/21/10 AYES: Alquist, Leno, Negrete McLeod, Pavley, Romero NO VOTE RECORDED: Strickland, Aanestad, Cedillo, Cox SENATE APPROPRIATIONS COMMITTEE : 7-2, 5/27/10 AYES: Alquist, Corbett, Kehoe, Leno, Price, Wolk, Yee NOES: Denham, Walters NO VOTE RECOREDE: Cox, Wyland SUBJECT : California Health Benefits Exchange SOURCE : Author DIGEST : This bill (1) establishes in the California Health and Human Services Agency (Agency) the California Health Benefits Exchange (Exchange), (2) specifies the duties and authority of the Exchange, (3) requires the Exchange be governed by a board composed of eight members appointed by the Governor and the Legislature, (4) requires the Exchange to negotiate and enter into contracts with health plans, (5) 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), and CONTINUED SB 900 Page 2 (6) requires the Agency to apply for and receive federal funds for purposes of establishing the Exchange and makes those funds available to the agency and the board for those purposes upon appropriation by the Legislature. ANALYSIS : 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 Program and the Major Risk Medical Insurance Program), under which it has authority to contract with health plans. Existing federal 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 SB 900 Page 3 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: 1. Establishes in the Agency the Exchange, and makes the 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 governed by a board consisting of eight members with four-year terms. Of the eight members, four shall be appointed by the Governor, two shall be appointed by the senate Committee on Rules, and two shall be appointed by the Speaker of the Assembly. Each of the appointed members shall have demonstrated knowledge and experience in health care and issues relevant to the board's responsibilities.. 2. Requires the Exchange board to hold public meetings on a bimonthly basis, or more frequently as necessary. States legislative intent that the Exchange provides a consumer-friendly process that facilitates the seamless enrollment of individuals in health care coverage. 3. Requires the Exchange to meet various requirements, including: A. Negotiating and entering into contracts, including selective provider contracts, with health plans seeking to offer coverage in the Exchange. B. Providing a choice of health plans in each region of the state, including a choice in each SB 900 Page 4 region of the state between the five levels of coverage contained in federal law (a platinum, gold, silver, bronze and catastrophic benefit plan). C. Requiring the Exchange to employ necessary staff, including actuarial staff. D. Requiring the Exchange to receive federal funds for purposes of establishing and administering the Exchange, including funds made available by the federal Act. 4. 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: A. Provide for the operation of a toll-free telephone hotline to respond to requests for assistance. B. Maintain an Internet website through which enrollees and prospective enrollees of qualified health plans can obtain standardized comparative information on those plans. C. Assign a rating to each qualified health plan offered through the Exchange in accordance with federal criteria developed under the Act. D. Utilize a standardized format for presenting health benefits plan options in the Exchange, including the use of the uniform outline of coverage established under federal law. E. 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. F. Establish and make available by electronic means a calculator to determine the actual cost of SB 900 Page 5 coverage after the application of any premium tax credit and any cost-sharing reduction under the federal Act. G. 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: (1) There is no affordable qualified health plan available through the Exchange, or the individual's employer, covering the individual. (2) The individual meets the requirements for any other exemption from the individual responsibility requirement or penalty. H. 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. 5. Permits the Exchange to do the following: A. Issue rules and regulations, as necessary, and until January 1, 2014, emergency regulations. B. Apply for and receive funds from private foundations. C. 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: (1) Providing coverage through a single exchange will provide a significant benefit for the health coverage marketplace in the state. (2) Providing coverage through a single SB 900 Page 6 exchange will be cost effective for both qualified individuals and qualified small employers. (3) The Exchange can make coverage available through a single exchange on a guarantee issue basis without undue risk of adverse selection. D. Enter into other contracts as are necessary or proper to carry out the duties of the Exchange, including, but not limited to, contracts for enrollment processing. E. Determine the health benefits coverage for small employers that the Exchange will contract to purchase from participating carriers. F. Appoint committees, as necessary, to provide technical assistance in the operation of the Exchange. G. 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. H. Consistent with federal procedures established by the Act, establish procedures to allow agents or brokers to do both of the following: (1) Enroll individuals in any qualified health plan in the individual or small group market as soon as the plan is offered through the Exchange. (2) Assist individuals in applying for premium tax credits and cost-sharing reductions for health plans sold through the Exchange. (3) Include within the premiums charged to enrollees or employers purchasing coverage through the Exchange an amount sufficient to pay SB 900 Page 7 the actual, reasonable, and necessary administrative costs of the Exchange. 6. Prohibits the Exchange from being subject to licensure or regulation by the California Department of Insurance or the Department of Managed Health Care. 7. Requires carriers that contract with the Exchange to be in good standing with their respective regulatory agencies. 8. 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. 9. Prohibits this bill from being construed to compel an individual to enroll in a qualified health plan or to participate in the Exchange. 10.Requires the California Health and Human Services Agency shall apply for and receive federal funds for purposes of establishing the Exchange. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee analysis: Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Initial start-up costs unknown, likely in the millions General/* of dollars annually throughFederal January 1, 2014 Ongoing CHBE unknown, SB 900 Page 8 likely to start January 1, Special** administration 1014, in the tens of millions of dollars annually CDI oversight, filing approximately $160 ongoing once Special*** CHBE is operational *Unspecified amount of federal funds available likely in 2011; General Fund pressure if total expenses not met by federal funds grant **California Health Benefits Exchange Fund-likely be fully supported by an assessment on consumer premiums ***Insurance Fund SUPPORT : (Verified 5/27/10) CALPIRG Congress of California Seniors Consumers Union Health Access California OPPOSITION : (Verified 5/27/10) Anthem Blue Cross ARGUMENTS IN SUPPORT : According to the author's office, 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's office 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. SB 900 Page 9 The author's office 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 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's office 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. 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. 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. SB 900 Page 10 CTW:do 5/27/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****