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
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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
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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
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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
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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.
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4)MRMIP COMPARED TO PCIP.
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| FEDERAL | MRMIP |
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| ELIGIBLITY |
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|------------------------------+-------------------------------|
|ü Citizen or national of the | ü California resident |
| | |
| United States or lawfully | |
| | |
| present in the United | |
| | |
| States | |
| | |
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|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 |
| | |
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| 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 |
| | |
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| BENEFITS/COVERAGE |
| |
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|ü Average share of total | ü Comprehensive benefits with |
| | |
| costs of required benefits | annual $500 household |
| | |
| must be at least 65% of | deductible |
| | |
| costs | |
| | |
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|ü No pre-existing condition | ü Allows a 3 month waiting |
| | |
| exclusion allowed | period or pre-existing |
| | |
| | condition exclusion |
| | |
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|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, |
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| | |
|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 |
| | |
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| PREMIUMS |
| |
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|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 | |
| | |
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1)FUTURE OF MRMIB . In addition to PCIP and MRMIP, MRMIB
administers; the Healthy Families Program (HFP) which is
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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.
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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.
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Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097