BILL ANALYSIS Ó AB 1526 Page 1 Date of Hearing: March 27, 2012 ASSEMBLY COMMITTEE ON HEALTH William W. Monning, Chair AB 1526 (Monning) - As Amended: March 20, 2012 SUBJECT : California Major Risk Medical Insurance Program. SUMMARY : Eliminates limits on benefits and revises eligibility documentation in the Major Risk Medical Insurance Program (MRMIP) which is administered by the Managed Risk Medical Insurance Board (MRMIB). Specifically, this bill : 1)Adds documentation, satisfactory to MRMIB from a specified licensed health care professional, which verifies an applicant's pre-existing medical condition to those circumstances that fulfill the eligibility requirement that an applicant demonstrate an inability to obtain private health insurance. 2)Prohibits MRMIB from imposing annual or lifetime benefit limits on coverage provided through MRMIP and requires any associated costs from the calculation of the subscriber's contribution to be excluded from the premium. 3)Authorizes MRMIB to implement these provisions by means of emergency regulations. EXISTING LAW : 1)Establishes MRMIP, to provide state subsidized health insurance for individuals who, because of health history or health status have been denied health coverage by at least one private health plan, or are offered only limited coverage or coverage significantly above standard average individual rates, as determined by MRMIB. 2)Establishes under state law and regulation, the MRMIP program elements, including eligibility, benefits, and subscriber contributions. 3)Establishes by January 1, 2014, under the federal Patient Protection and Affordable Care Act (known as the Affordable Care Act or ACA), health benefits insurance exchanges in each state for individuals and small businesses to purchase health AB 1526 Page 2 insurance products. Grants authority to states to operate an exchange and prohibits insurers participating in the exchange from discriminating based on pre-existing conditions, health status, and gender. 4)Establishes, under the ACA, the Pre-existing Condition Insurance Program (PCIP), a federally subsidized temporary high risk health insurance pool program to provide coverage to currently uninsured individuals with pre-existing conditions and provides an option for states to administer the program. 5)Requires, under state law, MRMIB to contract with the federal Department of Health and Human Services (HHS) to administer the PCIP in California. FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. COMMENTS : 1)PURPOSE OF THIS BILL . California has established the temporary PCIP for individuals with pre-existing conditions, who have not had coverage for the prior six months and who meet certain citizen or residency requirements. The author points out that the law prohibits the state from reducing the annual amount appropriated for the operation of its existing high-risk pool, MRMIP. Without changes in the program, the state risks being in violation of these federal Maintenance of Effort (MOE) requirements. In addition, PCIP eligibility requires a person be a U.S. citizen, national, or lawful resident as well as not have had health coverage for the prior six months. For those not eligible for PCIP or other coverage, MRMIP is the only available option. The author states that for these reasons California must continue to maintain MRMIP side by side with the PCIP. However, the author would like to more closely align the two programs as much as possible within the existing resources and thereby improve the appeal of MRMIP. The author points out aspects of the PCIP that make it more attractive to an applicant than MRMIP. Because of the disparities, according to the author, there has been a slight decline in enrollment. The author argues that reducing out-of-pocket costs to a subscriber by eliminating the annual and lifetime limits is a small step that can be accomplished AB 1526 Page 3 without any cost to the General Fund. The author points out that although there is nothing in law to prevent the MRMIB from eliminating this cap, existing law requires premiums to be set at a minimum of 125% of the standard rate in the private market for a similar level of benefits. As a result, without this bill, if the MRMIB were to eliminate the benefit cap, the premiums would have to be even greater. The author has provided an estimate based on claim and premium data prepared in consultation with MRMIB showing that the maximum cost of implementing this bill would be between $15.6 and $16 million and argues that the existing allocation of tobacco tax funds that is required to be provided would cover this potential additional cost. The author is also proposing the adoption of an eligibility simplification for MRMIB that was adopted by HHS for the PCIP in July of 2011. HHS proposed allowing persons applying for coverage to simply provide a letter from a doctor, physician assistant, or nurse practitioner dated within the past 12 months stating that they have or, at any time in the past, had a medical condition, disability, or illness. The author states that this bill will authorize MRMIB to promulgate emergency regulations to implement this requirement in a fashion that is consistent with the PCIP requirements. 2)BACKGROUND . Since 1991, MRMIB has operated a California high-risk pool, MRMIP to provide individual and dependent coverage to the medically uninsurable. Premiums paid by individuals receiving coverage are supplemented with state tobacco tax revenues to fund coverage through MRMIP. Presently, subscribers pay approximately 60% of the program costs, paying premiums that are 125-137.5% of what they would pay in the private market for the same coverage. There are two major private health plans that voluntarily participate in MRMIP, Blue Cross and Kaiser and one local health plan, Contra Costa Health Plan. Premiums vary based on the age and region of the subscriber and the health plan they choose. For example, in Sacramento County, the 2012 premiums for a person age 50-54 are $594 per month for the Kaiser Permanente HMO plan, and $1,112 per month for the Blue Cross PPO. By comparison, the PCIP premium is $406 per month. MRMIP is funded through annual appropriations, which in recent years have been set at $40 million in state Proposition 99 Cigarette and Tobacco Products Surtax Funds ($30 million in AB 1526 Page 4 the MRMIP statute and $10 million through annual or one-time appropriations) to pay for the costs exceeding subscriber premiums. MRMIP can only enroll the number of people that MRMIB's contracted actuaries, PricewaterhouseCoopers, estimate can be served with the funds available. The current enrollment cap is 8,000 individuals. As of December 2011 there were 6,334 subscribers, well below the cap and down from 6900 in the first quarter of 2011. As of January 31, 2012 enrollment had fallen to 6,200. The assumption is that now subscribers who are eligible are choosing the much more affordable PCIP. In the past the capped funding had required MRMIB to limit enrollment with approximately 500 people on the waiting list. In 2002 a pilot project, (also referred to as the incubator, the graduate program, or GIP), was established for individuals covered through MRMIP for 36 months. After 36 months, they were disenrolled with the option to seek private individual coverage from any health plan selling individual health insurance. Under the GIP rules, health plans were required to offer GIP-eligible individuals coverage on a "guaranteed issue" basis (accepting an applicant regardless of their age, health status, health condition, or prior health service utilization). The medical care costs for GIP subscribers that exceed the premiums paid (losses) were covered in a 50/50 share by the state and the health plans covering GIP subscribers. Although the GIP project has ended, individuals enrolled while the project was in effect are able to remain with GIP health plans until they get other coverage, such as becoming eligible for Medicare, or voluntarily disenroll. The premium levels are tied to the MRMIB premiums. 3)PCIP . The PCIP is the national, temporary high-risk pool created by the ACA to make health insurance coverage available to uninsured individuals with pre-existing conditions until 2014 when insurers will no longer be allowed to deny coverage on the basis of health conditions. A state may choose not to operate its own program in which case the residents may participate in the federal program offered by HHS (23 states plus District of Columbia). The 27 states that choose to operate their own, including California, do so by means of a contract with HHS and under specifications regarding cost-sharing, premium structures, and benefit options set by the ACA and HHS. This includes flexibility to offer one or more benefit plans as long as they meet the requirement that AB 1526 Page 5 the issuer's share of the cost is not less than 65% of the total costs of the benefit. The ACA mandated that the PCIP be implemented within 90 days. According to a June 2011 Report by the Commonwealth Fund, "Realizing Health Reform's Potential, Early Implementation of Pre-Existing Condition Insurance Plans: Providing an Interim Safety Net of the Uninsurable," HHS gave states broad latitude because of the tight timeline and because coverage and premium structures had to be developed quickly. On May 31, 2011, HHS announced programmatic revisions to reduce premiums and make it easier to enroll. Included in this was the creation of a lower-cost child-only premium and an option to use a letter from a provider as proof of eligibility. According to the Commonwealth Fund Report, the initial requirement that individuals produce proof of denial of coverage or proof of being offered coverage with exclusion was creating difficulties. Based on reports of individuals having difficulty obtaining these letters, the option to allow a letter from a medical provider, previously available to children under 19, was applied to all applicants. The letter must be dated within the past 12 months and certify that a condition is present or has been present any time in the past. MRMIB implemented this provision in August of 2011. At the same time, MRMIB used the revised guidelines to lower premiums by an average of 17.9% which had already been lowered for some age groups earlier in 2011. For example, the monthly premium for a 40-year old Los Angeles resident decreased from $339 to $269. A national total of $5 billion in federal funds has been appropriated to support the program. California was originally allocated $761 million over the life of the program and was one of the last states to open enrollment. Although enrollment was low at first, currently California is the largest PCIP in the nation. In December of 2011, MRMIB announced that based on this growth in enrollment, an additional $118 million would be allocated to California by HHS. MRMIB estimated that without this additional funding, the PCIP would be capped at 6,800 through 2013. As of January 31, 2012, enrollment was 7,305. Services are provided through a Preferred Provider Organization (PPO). The cost-sharing is 15% for in-network providers and 50% for out-of-network providers with an annual deductible limit of $1500 for in-network providers and $3,000 for out-of-network providers. AB 1526 Page 6 4)MRMIP COMPARED TO PCIP. -------------------------------------------------------------- | FEDERAL | MRMIP | -------------------------------------------------------------- --------------------------------------------------------------- | ELIGIBLITY | --------------------------------------------------------------- |------------------------------+-------------------------------| |ü Citizen or national of the | ü California resident | | | | | United States or lawfully | | | | | | present in the United | | | | | | States | | | | | -------------------------------------------------------------- |ü Have no creditable coverage | ü Unable to secure adequate | | | | | for the previous six months | coverage in the individual | | | | | before applying for | market within the last 12 | | | | | coverage | months, ineligible for | | | | | | Medicare, COBRA or | | | | | | Cal-COBRA | | | | |------------------------------+-------------------------------| |ü Have a pre-existing | ü No pre-existing condition | | | | | condition, such as denial | requirement, but denial or | | | | | of coverage, coverage only | termination of insurance | | | | | available with exclusion or | for other than nonpayment | | | | | letter from a doctor, | is one pathway to | | | | | physician assistant, or | eligibility | | | | AB 1526 Page 7 | nurse practitioner dated | ü PPO products, three month | | | | | within past 12 months | waiting period for services | | | | | stating the person has or | for pre-existing conditions | | | | | had at any time in the past | ü HMO product, three month | | | | | a medical condition, | post-enrollment waiting | | | | | disability, or illness | period | | | | -------------------------------------------------------------- --------------------------------------------------------------- | BENEFITS/COVERAGE | | | --------------------------------------------------------------- --------------------------------------------------------------- |ü Average share of total | ü Comprehensive benefits with | | | | | costs of required benefits | annual $500 household | | | | | must be at least 65% of | deductible | | | | | costs | | | | | --------------------------------------------------------------- |ü No pre-existing condition | ü Allows a 3 month waiting | | | | | exclusion allowed | period or pre-existing | | | | | | condition exclusion | | | | --------------------------------------------------------------- |ü Limits out-of-pocket | ü Limits out-of-pocket | | | | | maximum per year to $2,500 | maximum per year to $2,500 | | | | | for individual (no | for individuals and $4,000 | | | | | dependent coverage) | for an entire household | | | | |ü Limits annual medical | covered by the MRMIP (Must | | | | | deductible to $1,500 | be in network provider, | AB 1526 Page 8 | | | |ü Limits brand name drug | out-of-plan charges allowed) | | | | | deductible to $500 | ü No brand name drug | | | | | |deductible | |------------------------------+--------------------------------| |ü No limit on lifetime or | ü Benefit limits of $75,000 | | | | | annual benefits | per calendar year and | | | | | | $750,000 in a lifetime | | | | --------------------------------------------------------------- --------------------------------------------------------------- | PREMIUMS | | | --------------------------------------------------------------- --------------------------------------------------------------- |ü No more than 100% of the | ü 125% to 137% of the | | | | | standard rate for the | standard rate that a carrier | | | | | benefits in the commercial | would charge for MRMIP | | | | | market | benefits in the commercial | | | | | | market | | | | |------------------------------+--------------------------------| |ü Limits rate variation by | ü 12 age variations with no | | | | | age to a maximum of 4 to 1 | limit on differences | | | | |ü Rate variations allowed | ü 3 possible family sizes | | | | | based on regions and for | ü Six geographic regional | | | | | tobacco use but limited to |variations | | | | | 1.5 to 1 | | | | | --------------------------------------------------------------- 1)FUTURE OF MRMIB . In addition to PCIP and MRMIP, MRMIB administers; the Healthy Families Program (HFP) which is AB 1526 Page 9 California's State Children's Health Insurance Program; Access for Infants & Mothers (AIM), a comprehensive perinatal care program for pregnant women with family incomes between 200% and 300% of the Federal Poverty Level; and the County Children's Health Initiative Matching Program (CHIM). The 2012-13 Budget proposes to transition HFP children to Medi-Cal beginning October 2012. The proposal also includes transferring CHIM, AIM, MRMIP and PCIP to the Department of Health Care Services (DHCS) by July 2013. This is essentially the same proposal as was in the Governor's May revision to the 2011-12 budget and was not adopted by the Legislature. If the current proposal is adopted, the elimination of MRMIB would require the duties of this bill to be transferred to DHCS. 2)SUPPORT . The American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO writes in support that this bill seeks to eradicate limitations that have proven to be detrimental to providing health care for all by eliminating annual and lifetime limits on benefits and by allowing documentation from a provider verifying the applicant's pre-existing condition. AARP writes in support that the federal PCIP program is more generous than MRMIP in terms of premiums, but not everyone may qualify. According to AARP, these dynamics may result in a state-funded program that may not spend enough to meet the federal MOE requirements. AARP supports this bill because it wisely allows the benefit to more closely reflect those provided under the PCIP. MRMIB writes in support that this bill would eliminate two significant inequities in MRMIP that do not exist in PCIP; one is the limit on benefits and the other is documentation required for proof of a pre-existing condition. With regard to the benefit limit, MRMIB states that although less than 1% of MRMIP subscribers reach the annual or lifetime limits each year, those who do are by definition, very sick and in immediate need of medical services. According to MRMIP, they risk either being unable to access medical care or incurring debt as a result of receiving needed health care. In addition, MRMIB states, in order to maintain coverage for the following benefit year, individuals must continue paying subscriber contributions in addition to all their other health care bills, when they can afford it least. MRMIB also supports this bill because it would permit administrative efficiencies by further aligning benefits and eligibility between PCIP and MRMIP. AB 1526 Page 10 3)PREVIOUS LEGISLATION . a) SB 227 (Alquist), Chapter 31, Statutes of 2010, requires MRMIB to enter into an agreement with HHS to administer a qualified high-risk pool to provide health coverage, until January 1, 2014, to individuals who have pre-existing conditions, consistent with the ACA. SB 227 establishes the authority and requirements for MRMIB in administering the federal pool, consistent with federal law. SB 227 was operative contingent upon enactment of AB 1887 (Villines), and both bills sunset on January 1, 2020. b) AB 1887 (Villines), Chapter 32, Statutes of 2010, establishes the Federal Temporary High Risk Health Insurance Fund (Fund). Requires money in the Fund to be continuously appropriated to MRMIB for the purpose of establishing a federal temporary high-risk pool (federal pool) established under SB 227 (Alquist) for individuals with a pre-existing medical condition. c) SB 57 (Aanestad) of 2009 would have revised and restructured MRMIP, including securing additional funding by requiring each health plan and health insurer to add a surcharge on each individual policy. SB 57 would also have enacted specified program changes related to eligibility, plan choices, benefits limits, and benefit exclusions, and related changes. SB 57 failed passage in Senate Health Committee. REGISTERED SUPPORT / OPPOSITION : Support AARP American Federation of State, County and Municipal Employees, AFL-CIO California Managed Risk Medical Insurance Board Health Access California Kaiser Permanente Western Center on Law & Poverty Opposition None on file. AB 1526 Page 11 Analysis Prepared by : Marjorie Swartz / HEALTH / (916) 319-2097