BILL ANALYSIS SB 900 Page 1 SENATE THIRD READING SB 900 (Alquist and Steinberg) As Amended August 19, 2010 Majority vote SENATE VOTE :21-12 HEALTH 13-6 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Monning, Ammiano, Carter, |Ayes:|Fuentes, Bradford, | | | | |Huffman, Coto, Davis, De | | |De La Torre, De Leon, | |Leon, Gatto, Hall, | | |Eng, Hayashi, Hernandez, | |Skinner, Solorio, | | |Jones, Bonnie Lowenthal, | |Torlakson, Torrico | | |Nava, V. Manuel Perez, | | | | |Salas | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Fletcher, Conway, Gaines, |Nays:|Conway, Harkey, Miller, | | |Smyth, Audra Strickland, | |Nielsen, Norby | | |Silva | | | | | | | | ----------------------------------------------------------------- SUMMARY : Establishes the California Health Benefits Exchange (Exchange), and states that it is the intent of the Legislature to implement the provisions of the federal Patient and Protection and Affordable Care Act (PPACA) that require the establishment of an American Health Benefit Exchange. Specifically, this bill : Executive Board 1)Establishes the Exchange as an independent public entity not affiliated with an agency or department. Requires the Exchange to be governed by a five-member board, with the Secretary of the California Health and Human Services Agency (CHHSA) serving as a voting, ex officio member and other members appointed by the Governor, the Senate Rules Committee, and the Assembly Speaker, as specified. Requires board members to have demonstrated and acknowledged expertise in at least two of six specified areas related to health care coverage and benefits, health care finance, health care delivery system administration, and health plan purchasing. Requires appointing authorities to consider the expertise of SB 900 Page 2 board members and attempt to make appointments so that the composition reflects a diversity of experience. Requires appointing authorities to also take into consideration the cultural, ethnic, and geographical diversity of California so that the composition reflects the state's communities. 2)Requires board members to have the responsibility and duty to meet the requirements of this bill, PPACA, and all applicable state and federal laws and regulations, to serve the public interest of the individuals and small businesses seeking health care coverage through the Exchange, and to ensure the operational well-being and fiscal solvency of the Exchange. 3)Prohibits Exchange board members and staff from being a member, a board member, or an employee of a trade association of carriers, health facilities, health clinics or health care providers. Prohibits board or staff members from being a health care provider unless he or she receives no compensation for rendering services as a provider and does not have an ownership interest in a professional health care practice. 4)Prohibits board members from receiving compensation for service on the board, but permits the receipt of per diem and reimbursement for travel and other necessary expenses, as specified. 5)Prohibits board members from making, participate in making, or in any way attempting to use his or her official position to influence the decision making that he or she knows or has reason to know will have a reasonable foreseeable material or financial effect on him or her or a member of his or her immediate family, on any source of income, as specified, or on any business entity in which the member is a director officer, partner, trustee, employee, or holds any management position. 6)Prohibits any liability in a private capacity on the part of the board or any board member or employee for or on account of any act performed or obligation entered into in an official capacity, when done in good faith and without intent to defraud, and in connection with the administration, management, or conduct under this bill. 7)Requires the board to hire an executive director, who is exempt from civil service and serves at the pleasure of the board, to organize, administer, and manage the operations of SB 900 Page 3 the Exchange. 8)Requires the board to be subject to the Bagley-Keene Opening Meeting Act, except that closed sessions may be held when considering matters related to litigation, personnel, contracting, and rates. 9)Requires the board to apply for available federal planning and establishment grants, as specified. Requires the CHHSA, upon the request of the board, to apply for those grants if an executive director of the Exchange has not been hired by the time the federal grants are made available. Requires CHHSA, if a majority of the board has not been appointed when the federal grants are made available, to submit the initial application. Requires any subsequent applications to be made once a majority of board members have been appointed. Requires the board to be responsible for using federal grant funds for the planning and establishment of the Exchange consistent with PPACA. Internet Portal 10) Requires Commissioner of the California Department of Insurance (CDI) and the Department of Managed Health Care (DMHC) Director, in coordination with each other, to review the Internet portal developed by the United States Secretary of Health and Human Services (HHS), and any enhancements to that portal expected to be implemented on or before January 1, 2015. 11) Requires the review to examine whether the Internet portal provides sufficient information regarding all health benefit products offered by health plans and insurers in the individual and small employer markets in California to facilitate fair and affirmative marketing of all individual and small employer plans, particularly outside the Exchange. 12) Requires the CDI Commissioner and DMHC Director, if it is determined that the Internet portal does not adequately achieve those purposes, to jointly develop and maintain an electronic clearinghouse to achieve those purposes. Requires the CDI Commissioner and DMHC Director, in performing this function, to routinely monitor individual and small employer benefit filings with, and complaints submitted by individuals and small employers to, their respective departments, and to SB 900 Page 4 use any other available means to maintain the clearinghouse. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)This bill establishes the Exchange. Together with a companion bill, AB 1602 (J. Perez), this bill will generate annual costs in 2011 through 2014 of $1 million (100% federal) to $2 million (100% federal) to provide support in establishing the Exchange. 2)Federal funding to establish the Exchange will be available from 2011 until January 1, 2015, at which time the Exchange must be self-sustaining. The federal government recently announced the availability of an initial allocation of $1 million per state to help states begin to establish exchanges. Applications for state funding are due September 1, 2010. AB 1602 (J. Perez) contains authority to establish self-funding mechanisms. 3)A key function of the Exchange will be to administer federally funded premium subsidies for low-income individuals. According to estimates, by 2016, between three million and eight million individuals and employees of small firms will be purchasing coverage through the Exchange. COMMENTS : 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, or the federal government will establish operate the Exchange. This bill would require the establishment of the Exchange as an independent public entity that would be governed by a five member board that holds public meetings to ensure accountability and transparent decision-making. The appointed board members are required to have demonstrated expertise in two of six health-related areas, and would be charged with serving the interest of individuals and small businesses seeking coverage in the Exchange and ensuring the operational well-being and fiscal solvency of the Exchange. To ensure conflict-free decision making in the interest of individuals receiving coverage in the Exchange, Exchange board members and staff are prohibited from being employed by, or a consultant to, a health plan, health insurer, health care provider or health care facility during their term of service on the Exchange, and for one year immediately SB 900 Page 5 following his or her term of service (with an exception for a health care provider who receives no compensation from rendering services as a health care provider). SB 900 is a companion bill and joined to AB 1602 (Perez), which would place specific requirements on the Exchange, such as offering products in the five benefit levels and selectively contracting with health plans. On March 23, 2010, President Obama signed the PPACA (Public Law 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Public Law 111-152). Among other provisions, the new law makes statutory changes affecting the regulation of and payment for certain types of private health insurance. Each state is required to establish an American Health Benefit Exchange and a Small Business Health Options Program Exchange by 2014 for individuals and small employers with 50 to 100 employees; after 2017, states have the option of opening the small business exchange to employers with more than 100 employees. States can opt to provide a single exchange for individuals and small employers. Groups of states can form regional exchanges or states can form more than one in-state exchange, but the exchanges must serve a geographically distinct area. While the individual and small-group markets will not be replaced by the exchanges, the same market rules will apply inside and outside the exchanges. Premium subsidies can be used only for plans purchased through the exchanges. If the federal HHS determines in 2013 that a state will not have an exchange operational by 2014, HHS is required to establish and operate an exchange in the state. In 2017, states will have the opportunity to opt out of the federal requirements to establish insurance exchanges through a five-year waiver; if they are able to demonstrate that they can offer all residents coverage at least as comprehensive and affordable as that required by this bill. Federal responsibilities. HHS' responsibilities with respect to the exchanges include: establishing certification criteria for "qualified health plans" that will be sold through the exchanges; requiring such plans to provide the essential benefits package; requiring that the licensed insurance carriers issuing plans offer at least one qualified health plan at the silver and gold levels and meet marketing requirements; ensuring a sufficient choice of providers; and, ensuring that essential SB 900 Page 6 community providers are included in networks, are accredited on quality, implement a quality improvement strategy, use a uniform enrollment form, present plan information in a standard format, and provide data on quality measures. In addition, the HHS Secretary will develop a rating system for qualified health plans and a model template for an exchange's Internet portal, and determine an initial and open enrollment period as well as special enrollment periods for people under varying circumstances. The HHS Secretary is also required to establish procedures under which states may allow agents or brokers to enroll individuals in qualified health plans and assist them in applying for subsidies. Such procedures may include the establishment of rate schedules for broker commissions paid by health plans offered through the exchange. State responsibilities. The state exchanges will be required to certify qualified health plans, operate a toll-free hotline and Web site, rate qualified health plans, present plan options in a standard format, inform individuals of the eligibility requirements for Medicaid (Medi-Cal in California) and the Children's Health Insurance Program (Healthy Families in California), provide an electronic calculator to calculate plan costs, and grant certifications of exemption from the individual requirement to have health insurance. Exchanges will be required to be self-sustaining by 2015 and will be allowed to charge assessments or user fees to participating health insurance issuers or otherwise generate funding to support their operations. The exchanges also will award grants to "navigators" who will educate the public about qualified health plans, distribute information on enrollment and subsidies, facilitate enrollment, and provide referrals on grievances. Navigators may include trade and professional organizations, farming and commercial fishing organizations, community and consumer-focused nonprofit groups, chambers of commerce, unions, or licensed insurance agents or brokers. Qualified employers purchasing through the exchange. Employers that are qualified to offer coverage to their employees through the Exchange may provide premium support for a level of coverage (bronze, silver, gold, platinum) and employees may choose a plan within the designated level. Analysis Prepared by : Melanie Moreno / HEALTH / (916) 319-2097 FN: 0006371 SB 900 Page 7