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


                                                           CONTINUED





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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,  
          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 requires  
          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 (with an exception for a  
          health care provider who receives no compensation from  
          rendering services as a health care provider).  This bill  
          is a companion bill and joined to AB 1602 (Perez), which  
          places specific  requirements on the Exchange, such as  
          offering products in the five benefit levels and  
          selectively contracting with health  plans.

           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  







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          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  8/24/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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