BILL ANALYSIS Ó
AB 1526
Page 1
Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1526 (Monning) - As Amended: March 20, 2012
Policy Committee: HealthVote:18-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill streamlines eligibility and expands benefits for the
Major Risk Medical Insurance Program (MRMIP). Specifically, this
bill:
1)Prohibits annual or lifetime limits on the benefits offered
through health plans participating in MRMIP.
2)Allows the Managed Risk Medical Insurance Board (MRMIB), for
purposes of calculating required subscriber contributions, to
exclude any additional cost attributable to the changes
enacted by this bill.
3)Adds verification of a preexisting medical condition to the
list of documentation an applicant can use to establish
eligibility for MRMIP.
4)Allows MRMIP emergency regulatory authority to implement
changes made to MRMIP authorizing statute enacted in 2012.
FISCAL EFFECT
1)Although this bill expands benefits and streamlines
eligibility, the overall state budget impact of this bill is
likely to be minimal. MRMIP is not an entitlement program and
is required to adjust program expenditures to stay within
appropriated amounts. MRMIB has historically met this
statutory obligation by limiting benefits and using a waiting
list. MRMIB monitors expenditures and enrollment throughout
the year and receives a recommended enrollment cap based on
remaining funds.
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In recent years, MRMIP has received base funding of about $32
million in Proposition 99 tobacco tax funds. By federal law,
MRMIP is subject to a maintenance-of-effort (MOE) requirement
in this amount, as further explained below.
2)The removal of lifetime/annual benefits has been estimated by
MRMIB's actuary to cost the state $2,400 per enrollee
annually. Based on an enrollment target of 6,600, this would
lead to increased cost pressure on the MRMIP program in the
range of $15 million in calendar year 2013. MRMIB projects
that an increase associated with this change can be absorbed
without requiring an additional appropriation beyond the $31.8
million MOE. Resources available through projected carry-over
and settle-up payments from previous years will be available
in the continuously appropriated fund to fund the increased
per-enrollee cost.
3)The simplified documentation rule to establish eligibility may
also increase cost pressure on MRMIP (a person will no longer
need to prove rejection from health care coverage if a
preexisting condition is documented). This increased cost
pressure is not likely to exceed $1 million in calendar year
2013. By itself, the simplified rule does not open up MRMIP
to a large number of individuals who could not establish
eligibility under current standards. In fact, due to financial
incentives that make private coverage more desirable to
obtain, anyone who would enroll in MRMIP by choice would
generally not be offered private insurance at a reasonable
price and thus would already be eligible under the current
standards (proof of insurance rejection or an offer of
insurance at extremely high cost).
However, this simplification may increase cost pressure on
MRMIP for other reasons. The new rule could make it easier
for applicants to obtain the document needed to establish
eligibility, speed up an enrollee's coverage start date, or
make enrollment in MRMIP quicker and easier for individuals
who apply for but do not qualify for the Preexisting Condition
Insurance Plan (PCIP), a related program discussed below. If
this occurred, MRMIP would incur costs associated with earlier
enrollment or greater demand than would otherwise be the case
under current law and practice. Due to a number of factors,
it is difficult to assess the precise impact of this rule
change. However, state costs would increase by $40,000
annually for every 10 new individuals who enrolled in MRMIP as
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a result of this simplification, or for every 100 individuals
who gained an extra month of MRMIP coverage. As indicated
above, MRMIB would continually monitor and adjust enrollment
in order to stay within the MOE amount.
4)The impact of this bill on state costs in 2014 and beyond is
likely negligible. Under federal law, beginning January 1,
2014, health plans and insurers will be required to offer
coverage to every individual who applies. Thus, because no
one will be turned away for a preexisting condition and
coverage will be available more cheaply in the private market,
demand for MRMIP is expected to decrease dramatically
beginning in 2014, even in the absence of any planned
transition of MRMIP enrollees to alternative sources of
coverage.
COMMENTS
1)Rationale . The author states that this bill will streamline
eligibility determination, remove benefit caps, and prevent
increased costs from being passed on to subscribers. These
changes would more closely align MRMIP with the Preexisting
Condition Insurance Plan (PCIP) program, a federally financed
high-risk pool program administered jointly with MRMIP that
offers richer benefits and lower premiums to eligible
subscribers. The author indicates that these changes will
make MRMIP more attractive to applicants and help reverse the
decline in MRMIP enrollment due to the introduction of PCIP.
Furthermore, the author indicates statutory changes are
necessary to ensure that MRMIP can attract enough subscribers
to maintain enrollment at a level that allows the state to
meet a federal maintenance of effort requirement.
2)High-risk Pool Programs Operating in California . California
currently does not require health plans and insurers to issue
coverage to anyone who applies; health plans are free to
reject applicants under state law. In most states that lack
"guaranteed-issue" requirements, high risk pools offer health
insurance to individuals denied health care coverage due to
preexisting conditions, or for whom coverage is only offered
at unreasonably high rates. High-risk pools are generally
publicly operated and funded through tax revenue or through
fees on health plans and insurers.
California's high-risk pool, MRMIP, has been operated by MRMIB
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since 1991. In recent years, the state has funded MRMIP
largely through Proposition 99 tobacco tax revenue, with a
smaller amount of funding from administrative fines and
penalties on managed care plans.
In addition to MRMIP, the MRMIB operates the PCIP program.
Establishment of this federally funded high-risk pool program
was one of the major early implementation items in the federal
health reform law, the Patient Protection and Affordable Care
Act (ACA). The PCIP is intended to serve as a stopgap measure
to provide coverage to uninsured individuals until major
insurance market reforms take place. Beginning in 2014,
guaranteed issuance of health care coverage, regardless of
preexisting conditions, will be required under federal law.
3)Maintenance of Effort Requirements . Pursuant to ACA, the
state currently has a maintenance-of-effort requirement in
place for MRMIP, the state high risk pool program. As a
condition of participation in the PCIP program, Section
1101(b)(3) of the ACA requires that the state "not reduce the
annual amount the state expended for the operation of one or
more high risk pools." The potential penalty for violating
the MRMIP MOE is the loss of federal funding for PCIP ($345
million projected for 2012-13).
MRMIB's approved application to the federal Department of
Health and Human Services for the PCIP program indicates that
the state intends to maintain funding for MRMIP at $31.8
million in state funds annually through January 2014 in order
to comply with the federal MOE requirement. There has been no
explicit federal guidance requiring states to modify their
high-risk pool programs in order to ensure they meet the MOE
requirements; however, without these changes, the state is not
likely to spend the appropriated amount on MRMIP. Annual and
lifetime benefit limitations that were previously put into
place in order to manage demand could be seen by the federal
government as artificially constraining demand for MRMIP to
reduce state costs below the MOE level, potentially
jeopardizing federal PCIP funds.
4)Enrollment and Recent Program Trends . Comparisons of premiums
and benefits in MRMIP and PCIP reveal that PCIP generally
offers a more generous benefit package at a lower cost.
Therefore, individuals eligible for PCIP will generally choose
it over MRMIP. However, many applicants are ineligible for
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PCIP due to the following provisions, which are not required
for coverage through MRMIP:
(1) PCIP requires an individual to have gone without
coverage for 6 months.
(2) PCIP requires citizenship documentation.
In recent years, enrollment in MRMIP has been limited by an
enrollment cap, which is currently around 8,000 enrollees.
Since the implementation of the PCIP program, enrollment in
MRMIP has declined to 6,200, well below the enrollment cap.
Despite this increase in capacity, enrollment in MRMIP
continues to decline as potential subscribers increasingly
select the more affordable and comprehensive PCIP program.
1)MRMIP Benefit Expansion . For years, MRMIP has contained costs
and risk borne by the program by enforcing annual benefit
limits of $75,000 and lifetime limits of $750,000. These
limits keep premiums for the program lower than they otherwise
would be. The board currently has authority to remove the
limits, but current law would require subscribers to bear much
of the cost of this change. This bill would remove the
benefit limits, as well as prevent the costs from being passed
on to the subscribers. This change would benefit the few
individuals who are so catastrophically ill that they reach
the annual or lifetime limits.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081