BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 900|
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UNFINISHED BUSINESS
Bill No: SB 900
Author: Alquist (D), et al
Amended: 8/19/10
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
SENATE FLOOR : 21-12, 6/01/10
AYES: Alquist, Cedillo, Corbett, DeSaulnier, Ducheny,
Florez, Hancock, Kehoe, Leno, Liu, Lowenthal, Negrete
McLeod, Padilla, Pavley, Price, Romero, Simitian,
Steinberg, Wolk, Wright, Yee
NOES: Aanestad, Ashburn, Cogdill, Cox, Denham, Dutton,
Harman, Hollingsworth, Huff, Runner, Strickland, Wyland
NO VOTE RECORDED: Calderon, Correa, Oropeza, Walters,
Wiggins, Vacancy, Vacancy
ASSEMBLY FLOOR : 49-25, 8/20/10 - See last page for vote
SUBJECT : California Health Benefits Exchange
SOURCE : Author
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DIGEST : This bill establishes the California Health
Benefits Exchange, and states that it is the intent of the
Legislature to implement the provision of the federal
Patient and Protection and Affordable Care Act that
requires the establishment of an American Health Benefit
Exchange.
Assembly Amendments (1) establish qualifications for
membership on the Exchange Board, (2) require Senate
confirmation for any appointments made after January 2,
2011, (3) require the 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; (4) require 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, and (5) require 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. Require 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 use any other
available means to maintain the clearinghouse, and (6)
delete specified definitions.
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
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Insurance Program), under which it has authority to
contract with health plans.
Existing federal law, the federal Patient Protection and
Affordable Care Act (PPACA) (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:
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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.
2. Requires appointing authorities to consider the
expertise of 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.
3. 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.
4. 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.
5. 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.
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6. 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.
7. 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.
8. 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 the Exchange.
9. 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.
10.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.
11.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
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with PPACA.
Background
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 community
providers are included in networks, are accredited on
quality, implement a quality improvement strategy, use a
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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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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
percent federal) to $2 million (100 percent 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, and (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.
SUPPORT : (Verified 8/20/10)
100% Campaign
AARP
California Chiropractic Association
California Medical Association (support if amended)
California Primary Care Association
CALPIRG
Children Now
Children's Defense Fund-California
Congress of California Seniors
Consumers Union
Health Access
International Brotherhood Electrical Workers
Local Health Plans of California
PICO California
Planned Parenthood Advocacy Project Los Angeles County
Planned Parenthood Affiliates of California
The Children's Partnership
United Ways of California
Western Center on Law & Poverty
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OPPOSITION : (Verified 8/20/10)
Anthem Blue Cross
Association of California Life and Health Insurance
Companies
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.
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.
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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.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De
Leon, Eng, Evans, Feuer, Fong, Fuentes, Galgiani, Gatto,
Hall, Hayashi, Hernandez, Hill, Huffman, Jones, Lieu,
Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, V. Manuel
Perez, Portantino, Ruskin, Salas, Saldana, Skinner,
Solorio, Swanson, Torlakson, Torres, Torrico, Yamada,
John A. Perez
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Fletcher, Fuller,
Garrick, Gilmore, Hagman, Harkey, Huber, Jeffries,
Knight, Logue, Miller, Nestande, Niello, Nielsen, Norby,
Silva, Tran
NO VOTE RECORDED: Furutani, Gaines, Smyth, Audra
Strickland, Villines, Vacancy
CTW:do 8/22/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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