BILL ANALYSIS Ó SB 36 Page 1 Date of Hearing: June 21, 2011 ASSEMBLY COMMITTEE ON HEALTH William W. Monning, Chair SB 36 (Simitian) - As Amended: March 29, 2011 SENATE VOTE : 26-13 SUBJECT : County Health Initiative Matching Fund. SUMMARY : Expands eligibility for children to enroll in the County Health Initiative Matching (CHIM) Fund Program which uses local funds to match federal Children's Health Insurance Program (CHIP) funds. Specifically, this bill : 1)Expands eligibility to the CHIM Fund to children in families whose income is at or below 400% of the federal poverty level (FPL), from 300% of FPL. 2)Authorizes eligibility for children who meet the requirements for the Healthy Families Program (HFP) but are unable to enroll as a result of restricted enrollment by the Managed Risk Medical Insurance Board (MRMIB) due to budget limitations. 3)Requires the entity that will be providing the local funds to specify the income level for which the coverage will be provided and whether individuals who meet the criteria for HFP, but are unable to enroll due to restricted enrollment will be covered. 4)Conditions implementation on obtaining federal approval. EXISTING LAW : 1)Establishes HFP, administered by MRMIB, to provide low-cost insurance, including health, dental, and vision coverage, to children who do not have health insurance, do not qualify for free Medi-Cal, and are in families at or below 250% of the FPL. 2)Authorizes the CHIM Fund, administered by MRMIB, to fund children's health coverage using local funds as the state match for children in families with income at or below 300% of FPL and who don't qualify for HFP or no share of cost SB 36 Page 2 Medi-Cal. 3)Establishes a sharing ratio for Medi-Cal at 50% federal, 50% state, but under the American Reinvestment and Recovery Act provides a temporary enhanced sharing ratio of 62% federal, 38% state retroactively from October 1, 2008 through December 31, 2010. FISCAL EFFECT : According to the Senate Appropriations Committee, the applicant counties pay a $17,000 application fee, which covers the application process and the necessary submission of the State Plan Amendment (SPA). Assuming that the per member per month cost of a child enrolled in the County Children's Health Initiative Program (C-CHIP) is approximately $101 total funds and that a county that chooses to enroll children with family incomes between 300 and 400% FPL, as permitted by this bill, would enroll between 300 and 400 children annually, the costs would be approximately $181,800 - $242,400 federal funds and $181,800 - $242,400 in local funds each year. If more counties chose to do this, the costs would be higher. If no counties choose to enroll children above 300% FPL, then there would be no cost to this bill. Costs associated with this bill would be unknown beyond January 1, 2014, when federal health reform becomes effective. There could be decreased enrollment in the program because families with incomes at or under 400% FPL will have the opportunity to purchase subsidized insurance through the health insurance exchange. COMMENTS : 1)PURPOSE OF THIS BILL . According to the author, this bill is intended to allow counties that participate in the CHIM Fund to draw federal matching funds by providing health care coverage to qualified children with family income at or below 400% of FPL. The author states that increasing the income level from 300% of FPL allows these participating counties to take full advantage of the increase in available federal matching funds through the federal Children's Health Insurance Program Reauthorization Act (CHIPRA) of 2009 (Public Law 111-3). This bill is also intended to allow counties to provide health care coverage to children who would otherwise have been eligible or covered by HFP through MRMIB but for limitations on enrollment or eligibility restrictions that may SB 36 Page 3 be imposed due to budget shortfalls. 2)BACKGROUND . C-CHIP and CHIM Fund were created by AB 495 (Diaz), Chapter 648, Statutes of 2001. The purpose was to allow local entities, by means of intergovernmental transfer of local funds, to draw down federal financial participation (FFP) matching funds for low cost health coverage, with benefits similar to HFP, to children through age 19 not eligible for HFP or the no-cost Medi-Cal Program, and whose household income falls within 251% and 300% FPL. Usually federal funds require a State General Fund match. The C-CHIP Program allows counties to use county funds as a match for available federal funds which are allocated to California, but for which there had been no state General Funds allocated. There are currently three counties, San Francisco, San Mateo, and Santa Clara that were approved to draw down FFP under an SPA that was approved in 2004. According to MRMIB, these counties use the funds to provide health insurance coverage to uninsured children through the County Organized Health System or Local Initiative. The MRMIB 2011 May Revision estimates 1,258 children enrolled in the current year at a cost of $449,000 local funds and $449,000 federal funds. Similar enrollment is expected in fiscal year (FY) 2011-12. 3)CHILDREN'S HEALTH INSURANCE PROGRAM . CHIP was enacted as part of the Balanced Budget Act of 1997 and has allocated about $20 billion over 10 years to help states insure low-income children who are ineligible for Medicaid but cannot afford private insurance. HFP is California's version of the federal CHIP and provides health, dental, and vision coverage to children in families with incomes between 100% and 250% of the FPL who are not eligible for Medi-Cal and do not have private insurance. The sharing ratio in HFP is 65% federal, 35% state. As of June 2011, there were 883,596 children enrolled. In 2007, after President Bush and Congress could not agree on CHIP reauthorization details, the program was extended through March 2009. In February 2009, CHIPRA was approved by Congress and signed by President Obama extending CHIP for four and a half years. In concert with the signing, President Obama sent a memorandum to the Centers for Medicare and Medicaid Services requesting that they immediately withdraw an August 2007 Directive sent to state health officials which imposed SB 36 Page 4 conditions on states and limited their options to provide coverage to uninsured children. He requested that they implement CHIP from this time forward without these requirements. Among other provisions, this clarified that only children with family incomes up to 300% of FPL will be eligible for the enhanced CHIP match, but states are not limited from increasing eligibility above that level and drawing down the match at the state's Medicaid rate. Each state is allocated a specific amount of federal CHIP funds. In federal FY 2010, California's allotment was $1.63 billion. The state used $1.19 billion leaving approximately $440 million in unused funds. Future allotments are expected to be the similar. If a state does not use its entire allotment, the funds revert to other state CHIPs around the country. The Patient Protection and Affordable Care Act (Public Laws 111-148) (PPACA) extends the authorization of federal CHIP for an additional two years, through September 30, 2015. PPACA requires states to maintain current income eligibility levels for CHIP through September 30, 2019. States are prohibited from implementing eligibility standards, methodologies or procedures that are more restrictive than those in place as of March 23, 2010, with the exception of waiting lists for enrolling children. California would put over $25 billion Medicaid and CHIP federal matching funds annually in jeopardy if it were to not fulfill this Maintenance of Effort (MOE) requirement. Thus, it is unlikely that counties would need to use the authority in this bill to enroll children that are eligible for HFP, but who are unable to obtain coverage due to a budget deficit-related administrative action by MRMIB that limits eligibility because such an action would violate the MOE. In 2009, HFP had a $194 million General Fund shortfall resulting from budget-related cutbacks and was closed to all new enrollments. In August of 2009, there were 70,788 children on the HFP waiting list. Additionally, MRMIB projected that over 600,000 children would need to be disenrolled. A three-part funding solution was devised. The California Children and Families Commission voted to grant $81 million to MRMIB to cover children age zero to five; $157 million in gross premiums taxes on Medi-Cal managed care plans was enacted which yields $97 million in additional federal funds for HFP; and, savings from program changes to HFP, including increased SB 36 Page 5 family premiums and other program changes being adopted by MRMIB. The Governor's May Revision proposed to shift all HFP eligible children to the Medi-Cal Program over a six-month transition period beginning January 1, 2012. 4)PRIOR LEGISLATION. a) SB 1431 (Simitian) of 2010, a nearly identical bill was vetoed by the Governor. In his veto message, the Governor wrote, "the practical impacts of this bill will be short-lived, given that families with eligible children will have the opportunity to purchase subsidized insurance through the health insurance exchange in 2014." b) AB 1130 (Diaz), Chapter 687, Statutes of 2003, renames the Children's Health Initiative Matching Fund to be the CHIM Fund and is the implementing legislation for AB 495. c) AB 1524 (Richman), Chapter 866, Statutes of 2003, expands the scope of the CHIM Fund to include health insurance coverage for adults. d) AB 495 establishes the Children's Health Initiative Matching Fund to allow local funds from counties with children's health initiatives to draw down federal dollars from California's CHIP allotment. 5)SUPPORT . According to the sponsor, San Mateo County, this bill would align and conform current state law to allow counties to take full advantage of the eligibility expansion extended under federal funding should the state once gain limit enrollment in HFP. The California CHIMs write in support that this bill would allow communities to draw down federal finding made available through CHIP which is not currently claimed. The City and County of San Francisco, in support states that in the even the Governor's budget and "trigger" cuts to HFP are implemented and the City decides to backfill those cuts, this bill would endure $2.74 million to $15.47 million to San Francisco in federal matching funds. REGISTERED SUPPORT / OPPOSITION: Support SB 36 Page 6 County of San Mateo (sponsor) American Academy of Pediatrics California Association of Health Insuring Organizations California Chapter of the American College of Emergency Physicians California Children's Health Initiatives California Children's Hospital Association California Chiropractic Association California Communities United Institute California Medical Association California Optometric Association California Psychiatric Association California School Employees Association California State Association of Counties California State PTA City and County of San Francisco County of Alameda Health Improvement Partnership of Santa Cruz County Junior Leagues of California Local Health Plans of California Lucille Packard Children's Hospital Peninsula Interfaith Action Santa Clara County Urban Counties Caucus Opposition None on file. Analysis Prepared by: Marjorie Swartz / HEALTH / (916) 319-2097