BILL ANALYSIS Ó
AB 1846
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Date of Hearing: May 25, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1846 (Gordon) - As Amended: May 17, 2012
Policy Committee: HealthVote:13-6
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill creates a licensing framework for consumer operated
and oriented health (CO-OP) plans that can offer health coverage
through the new California Health Benefit Exchange (Exchange).
Specifically, this bill:
1)States the intent of the Legislature that CO-OPs are to be
subject to all state requirements applicable to health
insurers, to comply with all rules of the Exchange, and to be
subject to the Exchange's selective contracting requirements,
including rate negotiations.
2)Authorizes the California Department of Insurance (CDI) to
issue a certificate of authority, and the Department of
Managed Health Care (DMHC) to issue a health care service plan
license, to a CO-OP that meets certain requirements.
3)Generally applies existing requirements on health plans and
insurers, including financial, reporting, and fee remittance
requirements, to CO-OPs. Specifies how solvency and start-up
loans are to be treated for purposes of financial solvency
assessments.
4)Requires CO-OPs to be governed by rules outlined in the
federal Patient Protection and Affordable Care Act, including
requirements related to non-profit status and governance.
Establishes additional governance and conflict-of-interest
provisions.
5)Authorizes CDI and DMHC to adopt regulations to implement this
bill.
AB 1846
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6)Impose the same requirements on CO-OPs as other carriers that
contract with the Exchange. Allows the Exchange to impose on
the CO-OP the same price, requirements, terms, conditions, and
any other element of the contract imposed on other
participating carriers, to the extent permitted by federal
law. Allows the Exchange to limit enrollment in CO-OP plans
if a carrier fails to comply with Exchange specifications, to
the extent permitted by federal law.
FISCAL EFFECT
1)CDI and DMHC will incur one-time administrative costs, likely
in the range of $100,000 (special fund) to promulgate
regulations, review federal requirements, and establish
policies and procedures specific to CO-OP licensure. CDI and
DMHC will also experience ongoing oversight costs to the
extent more CO-OPs become licensed.
Most of this workload would be required in absence of this
bill if either department received an application for
licensure from a CO-OP. By clarifying CO-OP licensure rules,
this bill may streamline the licensure process and avoid
administrative costs related to legal questions that may
otherwise arise.
COMMENTS
1)Rationale . According to the author, this bill establishes a
licensing framework for CO-OPs, allowing California to
participate in the CO-OP program and receive federal funding.
The author believes this requires enabling legislation, as
there are certain factors specific to licensure of CO-OPs that
must be specified in state law. The bill would provide CDI
and DMHC with the authority to license and regulate CO-OPs.
2)Background . According to the federal Center for Consumer
Information & Insurance Oversight, a CO-OP is a new type of
nonprofit health insurer that is directed by its customers,
uses profits for customers' benefit, and is designed to offer
individuals and small businesses affordable,
customer-friendly, and high-quality health insurance options.
CO-OPs may operate locally, statewide, or in multiple states.
CO-OPs must be licensed as issuers in each state in which they
operate and are subject to state laws and regulations that
apply to all similarly situated issuers.
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The CO-OP loan program has a one-time $3.8 billion
appropriation to support low-interest start-up and solvency
loans which must be repaid over 5 and 15 years, respectively.
Applicants can include small business coalitions, physician
and hospital providers and associations, agricultural
organizations, unions, and community-based sponsors. Nearly
$1 billion has been awarded in loans so far to CO-OPs in 10
states. Existing insurers and government entities are barred
from applying. To apply for a loan under the CO-OP program,
a group must first form a nonprofit, not-for-profit, or public
benefit member organization that is organized under State law
and intends to become a CO-OP.
3)Concerns . A number of recent amendments, addressing
governance, conflict-of-interest, and Knox-Keene licensure,
were taken to address the concerns of Health Access, who had
voiced an oppose-unless-amended position.
4)Previous Legislation .
a) AB 1602 (John a. Pérez), Chapter 655, Statutes of 2010,
establishes the powers and duties of the Exchange with
respect to eligibility, enrollment, administration, and
arranging for coverage under qualified carriers.
b) SB 900 (Alquist), Chapter 659, Statues of 2010,
establishes the Exchange as an independent public entity
and requires the Exchange to be governed by a five-member
board.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081