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