BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 1526
AUTHOR: Monning
AMENDED: June 20, 2012
HEARING DATE: June 27, 2012
CONSULTANT: Bain
SUBJECT : California Major Risk Medical Insurance Program
(MRMIP).
SUMMARY : Permits the Managed Risk Medical Insurance Board
(MRMIB) to remove the annual and lifetime limits on benefits in
MRMIP, and requires MRMIB to exclude the cost attributable to
the removal of the annual and lifetime limits from the
subscriber's MRMIP premium contribution. Allows MRMIB to accept
documentation from specified health care providers of an
individual's pre-existing condition for the purpose of
establishing eligibility for MRMIP.
Existing law:
1.Establishes MRMIP, administered by MRMIB, to provide major
risk medical coverage to residents who have been rejected for
coverage by at least one private health plan, or if the only
private health coverage that the applicant can secure would:
a. Impose substantial waivers or provide limited coverage
that MRMIB determines would leave a subscriber without
adequate coverage for medically necessary services; or
b. Offer coverage only at an excessive price, which MRMIB
determines is significantly above standard average
individual coverage rates.
2.Sets the premium subscribers in MRMIP pay at 125 to 137.5
percent of the standard average individual rate the enrollee
would pay for comparable coverage.
3.Establishes, through MRMIP regulation, an annual benefit limit
of $75,000 and a lifetime benefit limit of $750,000 (the
annual and lifetime benefit limits exclude coverage above the
dollar thresholds).
This bill:
1.Permits MRMIB to remove annual and lifetime limits on MRMP
benefits.
Continued---
AB 1526 | Page 2
2.Requires MRMIB to exclude the cost attributable to the removal
of the annual and lifetime limits from the subscriber's MRMIP
premium contribution.
3.Permits MRMIB, in determining eligibility for MRMIP, to accept
documentation satisfactory to MRMIB from a licensed physician,
physician assistant, or nurse practitioner, or, if designated
by MRMIB, other health care professional, to verify the
applicant's preexisting medical condition.
4.Establishes in the State Treasury the Major Risk Medical
Insurance Reconciliation Fund.
5.Requires remittances received by MRMIP on or after January 1,
2013, from participating health plans as a result of
reconciliation based on the actual claim costs of subscribers
for prior fiscal years to be deposited in the fund.
6.Requires moneys in the fund to be available for any authorized
purpose upon appropriation by the Legislature.
7.Deems the adoption and re-adoption of regulations by MRMIB to
implement the changes made by this bill as urgent and
necessary to avoid serious harm to the public peace, health,
safety, or general welfare, and exempts MRMIB from the
requirement that it describe facts showing the need for
immediate action and from review by the Office of
Administrative Law.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
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. By federal law, MRMIP is subject to a
maintenance-of-effort (MOE) requirement of $31.8 million.
2.Based on an enrollment target of 6,600, this bill would lead
to increased cost pressure on MRMIP in the range of $15
million in calendar year 2013. Actual costs will depend on
actual enrollment and the number of individuals who exceed the
limit.
3.The simplified documentation rule to establish eligibility may
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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.
4.This bill requires reconciliation payments owed to MRMIB based
on past-year claims to be deposited in a newly created Major
Risk Medical Insurance Reconciliation Fund. This will require
MRMIB to rely on appropriated funds, as well as carry-over
funds remaining in the Major Risk Medical Insurance Fund, in
order to fund the increased costs associated with this bill.
MRMIB will need to manage enrollment as required by current
law based on the funding available for the program.
5.The impact of this bill on state costs in 2014 and beyond is
likely negligible.
PRIOR VOTES :
Assembly Health: 18- 0
Assembly Appropriations:16- 1
Assembly Floor: 75- 0
COMMENTS :
1.Author's statement. This bill is needed to more closely align
the MRMIP and the federally subsidized Pre-Existing Condition
Insurance Program (PCIP). Certain aspects of the PCIP make it
more attractive to an applicant than the MRMIP. For instance,
MRMIP has an annual maximum benefit of $75,000 whereas there
is no cap in the PCIP. The premiums in the PCIP program are
approximately 1/2 to 1/3 of those in the MRMIP. However, for
states to be eligible to run a PCIP, the state must agree to
not reduce the annual amount the state expended for the
operation of its high-risk pool. In addition, a person must
have been without health coverage for 6 months to be eligible
for the PCIP. Although there is nothing in law to prevent the
Board from eliminating the benefit cap, the law requires
premiums to be set based on at least 125 percent of the
standard rate in the private market for a similar level of
benefits. As a result, if MRMIB were to eliminate the benefit
cap without the protection of this bill, the premiums would
have to be even greater. This bill also 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
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eligibility requirement that an applicant demonstrate an
inability to obtain private health insurance.
2.MRMIP. Although most Californians obtain health insurance
through their employer, many Californians do not have access
to employer-sponsored health coverage and cannot buy private
health insurance because they have a pre-existing medical
condition. Since 1991, California has operated a high-risk
pool known as MRMIP to provide the medically uninsurable with
health coverage. Premiums paid by individuals receiving
coverage are supplemented with state Proposition 99 tobacco
tax revenues to fund coverage through the program. 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. MRMIP 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. MRMIP can
only enroll the number of people that MRMIB's contracted
actuaries, Pricewaterhouse-Coopers, estimate can be served
with the funds available. The current enrollment cap is 8,000
individuals. As of March 2012, MRMIP had 6,051 individuals
receiving coverage in the program. In January 2011, MRMIP
surveyed 395 subscribers who disenrolled from MRMIP. Of the
115 individuals who responded to the survey, 52 individuals
(45 percent) indicated the reason for disenrollment was that
they could not afford the MRMIP program costs. The Governor's
January proposed 2012-13 budget for MRMIP is $43 million.
3.PCIP. In March 2010, President Obama signed into law the
Patient Protection and Affordable Care Act (ACA) (Public Law
111-148), as amended by the Health Care and Education
Reconciliation Act of 2010 (Public Law 111-152), to provide
coverage for over 90 percent of the presently uninsured
population. Until the implementation of the health insurance
exchanges in 2014, individuals with pre-existing conditions,
who have not had coverage for the prior six months and who
meet certain citizen or residency requirements will be
eligible for the temporary high-risk pool program created by
the ACA. The ACA appropriated $5 billion in federal funds to
support the high-risk pool program. To be eligible to enter
into a contract with the federal Department of Health and
Human Services (HHS) Secretary, a state must agree to not
reduce the annual amount the state expended for the operation
of its high-risk pool (known as a MOE). California's MOE
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requires the state to maintain funding for MRMIP at $31.8
million during the time PCIP is in operation. As of March 20,
2012, there were 9,682 subscribers enrolled in PCIP. This bill
conforms MRMIP coverage to two features of PCIP coverage: (a)
coverage in PCIP does not have an annual or lifetime limit;
and (b) PCIP applicants can use a note from a health care
provider to establish eligibility for the program.
4.MRMIB pilot program. Through AB 1401 (Thomson), Chapter 794,
Statutes of 2001, the Legislature limited, on a pilot program
basis, the duration an individual could be enrolled in
coverage through MRMIP to 36 months. After 36 months,
individuals were disenrolled with the ability to seek private
individual coverage from any health plan selling individual
health insurance on a "guaranteed issue" basis. These
individuals pay 10 percent more than MRMIP coverage and have a
higher annual limit ($200,000) than MRMIP coverage. The health
care costs of these individuals that exceed the amounts paid
in premiums were split on a 50/50 basis by the state and the
health plan they are enrolled in. Although the pilot program
has ended, individuals enrolled while the project was in
effect are able to remain in health plans with the 50/50 plan
and state subsidy above their health care costs. That program
has slightly more than 3,000 individuals still enrolled. The
changes made by this bill do not apply to these individuals.
5.Prior legislation. SB 227 (Alquist), Chapter 31, Statutes of
2010, requires MRMIB to enter into an agreement with DHHS to
administer a qualified high-risk pool to provide health
coverage (known as PCIP), until January 1, 2014, to
individuals who have pre-existing conditions, consistent with
the ACA. SB 227 established the authority and requirements for
MRMIB in administering the federal pool, consistent with
federal law, and appropriated $761 million from the Federal
Trust Fund to MRMIB.
AB 1887 (Villines), Chapter 32, Statutes of 2010, established
the Federal Temporary High Risk Health Insurance Fund (Fund)
for PCIP, requires money in the Fund to be continuously
appropriated to the MRMIB for the purpose of establishing a
federal temporary high-risk pool established under SB 227 for
individuals with a pre-existing medical condition.
6.Support. MRMIB writes this bill will substantially improve
access to comprehensive health coverage for individuals with
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pre-existing conditions by eliminating two significant
inequities in MRMIP that do not exist in the federally funded
PCIP with which it shares a target population. MRMIB writes
that, although less than 1 percent of MRMIP subscribers reach
the annual or lifetime benefit limits, each year, those who do
are very sick and in immediate need of medical services. They
risk either being unable to access medical care or incurring
debt as a result of receiving needed health care. In addition,
in order to maintain coverage for the following benefit year,
individuals who reach the annual benefit limit must continue
paying subscriber contributions in addition to all of their
other health care bills, when they can afford it least. By
requiring MRMIB to calculate the subscriber contribution
amount without including any increased costs attributable to
removing the lifetime and annual benefit limits, this bill
would significantly improve MRMIP benefits without decreasing
affordability. MRMIB states allowing it to accept licensed
health care provider letters as proof of a pre-existing
medical condition will avoid unnecessary delays in obtaining
coverage. Additionally, MRMIB states this bill would also
significantly increase administrative efficiencies by further
aligning MRMIP's benefits and eligibility requirements with
those of PCIP, with which it shares an application. Finally,
MRMIB states this bill would be cost-neutral to the state as
MRMIB is required by law to administer MRMIP within the funds
appropriated by the state budget and the ACA's MOE requirement
for receipt of federal funds for PCIP requires California to
maintain at least a $31.8 MRMIP appropriation. MRMIB indicates
its staff currently estimates that the benefit improvements
can be achieved within the current appropriation.
7.Opposition. The Department of Finance (DOF) is opposed to this
bill, writing this bill will have a limited benefit relating
to the removal of the annual and lifetime benefit caps, as
this bill would take effect January 1, 2013 and MRMIP
enrollees will become eligible for commercial coverage through
the California Health Benefit Exchange effective January 1,
2014. In addition, DOF state actual cost reconciliation
remittances from plans may be insufficient to cover costs. DOF
states MRMIB has not released sufficient information regarding
the projection of the amount of remittances available to fund
the increased annual and lifetime limits, making a detailed
analysis of the ability of such funds to cover the costs of
this proposal impossible. DOF states that if plan remittances
are insufficient to cover the increased costs associated with
this bill, additional pressures on limited state resources
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could be created since this bill prohibits premium increases
to fund the elimination of the annual and lifetime benefit
caps, requiring them to be funded almost solely by the
Proposition 99 tobacco tax, a declining source of revenue.
SUPPORT AND OPPOSITION :
Support: AARP
American Cancer Society
American Federation of State, County and Municipal
Employees, AFL-CIO
California Academy of Physician Assistants
California Managed Risk Medical Insurance Board
California Podiatric Medical Association
Health Access California
Kaiser Permanente
Western Center on Law and Poverty
Oppose: Department of Finance
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