BILL ANALYSIS                                                                                                                                                                                                    Ó






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                       Senator Ed Hernandez, O.D., Chair


          BILL NO:       SB 222                                      
          S
          AUTHOR:        Alquist                                     
          B
          AMENDED:       As Introduced                               
          HEARING DATE:  April 27, 2011                              
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          CONSULTANT:                                                
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          Chan-Sawin/jl/mn                                           
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                                     SUBJECT
                                         
                          Health plans: joint ventures


                                     SUMMARY  

          Permits a health plan that is governed, owned, or operated 
          by a county board of supervisors, a county special 
          commission, a county-organized health system, a county 
          health authority, or the County Medical Services Program, 
          to form joint ventures for the joint or coordinated 
          offering of health plans to individuals and groups.


                             CHANGES TO EXISTING LAW  

          Existing law:
          Provides for the regulation of health care services plans 
          (health plans) by the Department of Managed Health Care 
          (DMHC), and for the regulation of health insurers by the 
          California Department of Insurance (CDI).  

          Establishes the Knox-Keene Health Care Service Plan Act of 
          1975 (Knox-Keene Act) which, among other things, imposes 
          requirements on health plans pertaining to the provision of 
          mandatory basic services, financial stability, availability 
          and accessibility of providers, review of provider 
          contracts, cost sharing, and consumer disclosure and 
          grievance requirements.
                                                         Continued---



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          Establishes various public health benefits programs 
          administered by the Department of Health Care Services 
          (DHCS), the Managed Risk Medical Insurance Board (MRMIB), 
          and various local entities.

          Establishes the Medi-Cal program, administered by DHCS, 
          which provides comprehensive health benefits to low-income 
          children up to age 21, their parents or caretaker 
          relatives, pregnant women, elderly, blind or disabled 
          persons, nursing home residents, and refugees who meet 
          specified eligibility criteria.  
          Authorizes DHCS to contract, on a bid or non-bid basis, 
          with any qualified individual, organization, or entity to 
          provide services to, arrange for, or case-manage the care 
          of Medi-Cal beneficiaries.  Permits the contract to be 
          exclusive or nonexclusive, statewide or on a more limited 
          geographic basis, and requires that the contracts include 
          specified provisions.

          Provides, through regulations, for the delivery of Medi-Cal 
          services in designated counties through two prepaid health 
          plans, one of which is referred to as a "local initiative 
          or "LI", which is organized by one or more county 
          government(s), or stakeholders, in a region designated by 
          the DHCS director.

          Authorizes a county or counties to establish a special 
          commission or authority for the delivery of Medi-Cal 
          services, and to negotiate an exclusive contract with the 
          California Medical Assistance Commission to provide or 
          arrange for health care services under the Medi-Cal 
          program.  These programs are referred to as 
          county-organized health systems (COHS).

          Provides for the County Medical Services Program (CMSP), 
          under which counties with a population below 300,000, or as 
          specified, may contract with DHCS to provide health care 
          services to medically indigent adults, as specified.

          Establishes the Joint Exercise of Powers Act, which permits 
          two or more public agencies to enter into agreements to 
          jointly exercise any power common to the contracting 
          parties.   





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          This bill:
          Permits a health plan that is governed, owned, or operated 
          by a county board of supervisors, a county special 
          commission, a COHS, or a county health authority to form 
          joint ventures for the joint or coordinated offering of 
          health plans to individuals and groups.  Also permits a 
          CMSP governing board to develop and participate in joint 
          ventures, provided that the joint venture is funded 
          separately from the program and does not impair its 
          financial stability.

          Permits the joint ventures to consist of either:
             1.   Contractual relationships entered into in order to 
               pool risk or share networks, or both; or,
             2.   Contractual relationships entered into in order to 
               provide for the joint offering or marketing of health 
               plans to individuals and groups.

          Requires participating health plans, in forming joint 
          ventures, contracts with designated public hospitals, 
          county health clinics, community health centers, and other 
          traditional safety net providers.

          Permits a CMSP governing board, if it elects to participate 
          in a joint venture, to contract with a third-party 
          administrator to provide coverage under the joint venture.

          Requires joint ventures to meet all of the requirements of 
          the Knox-Keene Act.

          Makes various legislative findings and declarations.

                                  FISCAL IMPACT  

          According to the Assembly Appropriations Committee analysis 
          of SB 56 (Alquist) of 2010, which contained provisions 
          identical to those in SB 222, such provisions may incur a 
          one-time fee-supported special fund cost to DMHC of 
          $200,000 to $500,000 to license two to five joint ventures 
          created pursuant to this bill.


                            BACKGROUND AND DISCUSSION  

          According to the author, due to the economic downturn, 




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          hundreds of thousands of Californians are joining the ranks 
          of the uninsured, or are looking to publicly financed 
          programs for their health coverage.  Compared to persons 
          with health coverage, the uninsured are less likely to have 
          a regular source of care, are likely to delay seeing a 
          doctor, and are less likely to receive preventive health 
          care services.  Based on recent data collected by the 
          Kaiser Family Foundation and other entities, health care 
          costs continue to rise at a faster rate than general 
          inflation and average wage growth.  

          The author believes that this bill takes a step toward 
          making cost-effective health coverage more readily 
          available by facilitating the creation of regional public 
          health insurance plans to provide a cost-saving alternative 
          to private health insurance plans.  Because of the 
          cost-effective provider networks these plans use, and their 
          very low levels of overhead, the local health plans have 
          the potential to be a viable coverage alternative for the 
          uninsured, a population they don't currently serve.  By 
          clarifying their ability to form joint ventures to serve 
          the uninsured, the author asserts that this bill will tap 
          into the potential these plans offer for providing 
          cost-effective coverage.

          Local coverage plan models under Medi-Cal managed care
          According to DHCS, as of February 2011, Medi-Cal managed 
          care served about 4.2 million Medi-Cal beneficiaries in 27 
          counties (representing 58 percent of the total Medi-Cal 
          population).  To provide coverage to this population, 
          California uses three managed care delivery models:  COHS, 
          the Two-Plan model, and Geographic Managed Care. 

             a)   COHS are managed care plans, organized and operated 
               by a governing board (appointed by a county board of 
               supervisors), that contract with DHCS to provide 
               services to Medi-Cal beneficiaries.  In creating these 
               locally-run plans, input can be provided by local 
               government, health care providers, community groups 
               and Medi-Cal beneficiaries.  In a COHS county, 
               everyone is in the same managed care plan, including 
               seniors and people with disabilities.  Under a COHS 
               model, there is no Medi-Cal fee-for-service option.  
               There are currently five COHS providing services to 
               864,000 Medi-Cal beneficiaries in 11 counties: Merced, 




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               Monterey, Napa, Orange, Santa Barbara, Santa Cruz, San 
               Luis Obispo, San Mateo, Solano, Sonoma, and Yolo.  
               Ventura's program is in formation.

             b)   Under the Two-Plan model, a public, non-profit LI 
               created by the county competes with a commercial plan, 
               selected through a competitive bidding process.  Local 
               government, community groups and health care providers 
               all can give input in creating the LI, which is 
               designed to meet the needs and concerns of the 
               community.  California has eight LIs providing health 
               care coverage for California's Medi-Cal and Healthy 
               Families populations.  These LIs provide services 
               through networks comprised of county health system 
               providers, safety net providers, and county hospitals. 
                Currently, LIs serve 2.9 million Medi-Cal 
               beneficiaries in 14 counties: Alameda, Contra Costa, 
               Fresno, Kern, Kings, Los Angeles, Madera, Riverside, 
               San Bernardino, San Francisco, San Joaquin, Santa 
               Clara, Stanislaus, and Tulare.  Several of the LIs 
               have expanded to offer coverage to In-Home Supportive 
               Services (IHSS) workers, children who are not eligible 
               for other state-sponsored health care coverage, and 
               Medicare beneficiaries.  

             c)   Geographic Managed Care (GMC), found only in 
               Sacramento and San Diego counties, allows Medi-Cal 
               beneficiaries to choose among multiple competing 
               commercial health plans.  There are 433,000 Medi-Cal 
               patients receiving care through GMC.  

          In addition to the three delivery models for Medi-Cal 
          described above, CMSP is a county-administered coverage 
          program for medically indigent adults in primarily smaller 
          rural counties.  CMSP provides medical care services in 34 
          counties to indigent adults, ages 21 to 64 with incomes at 
          or below 200 percent FPL who are not eligible for Medi-Cal, 
          and who are U.S. citizens or legal residents.  Individuals 
          above 200 percent of the federal poverty level (FPL) may be 
          eligible for the program with a share of cost.  County 
          welfare departments determine eligibility.  Most 
          individuals on CMSP are on the program for only three to 
          seven months and the average monthly enrollment is 40,000.

          Prior legislation




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          SB 56 (Alquist) of 2010 was substantively similar to SB 
          222.  Vetoed by the Governor, who raised concerns that the 
          bill is unnecessary as there is nothing in existing law 
          that prohibits a COHS, local initiative or other public 
          entity from entering into a joint venture, and that the 
          bill does not solve the underlying problem for why these 
          entities have been unsuccessful expanding their business in 
          the past.
          
          SB 973 (Simitian) and SB 1622 (Simitian) of 2007-2008, 
          contained provisions that were substantially similar to 
          this bill.  SB 973 was vetoed by the Governor, who stated 
          that although he agreed with the bill's concept, he could 
          not support the bill as a piecemeal approach to health care 
          reform.  SB 1622 was held in the Senate Appropriations 
          Committee.

          ABX1 1 (Nunez) of 2007-2008, as part of its comprehensive 
          health care reforms, contained provisions that were 
          substantially similar to this bill.  Died in the Senate 
          Health Committee.

          AB 2918 (Wolk), Chapter 905, Statutes of 2006, authorizes 
          COHS to provide health care services to individuals or 
          groups in the service area, other than Medi-Cal and 
          Medicare beneficiaries, including, but not limited to, 
          public agencies, private businesses, and uninsured or 
          indigent persons.

          AB 2755 (Lee), Chapter 642, Statutes of 2004, provides that 
          a county health authority established to provide services 
          to Medi-Cal beneficiaries may provide services to Medicare 
          patients and to private businesses if it is in compliance 
          with the requirements of the Knox-Keene Act.
          Arguments in support
          Writing in support, the California Labor Federation states 
          that California's health care purchasers need an 
          alternative to the state's private health insurers and that 
          publicly administered plans can and do lower costs by 
          eliminating profit and minimizing administrative costs. 

          The American Federation of State, County and Municipal 
          Employees points out that many Californians live in one 
          county and work in another, while the existing public 
          system is tied to county boundaries.  By building on 




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          existing LIs and COHS, SB 222 allows the existing Medi-Cal 
          managed care plans to provide regional networks, thus 
          providing more viable coverage options for those who 
          commute.  

          Health Access concurs and points out that by knitting 
          together local LIs and county-based health plans, SB 222 
          has the potential to create a cost-effective alternative 
          for individuals and employers.

          The California Pan-Ethnic Health Network also writes in 
          support, stating that local health plans have proven that 
          they can deliver cost-effective care to Medi-Cal and 
          Healthy Families beneficiaries.  By removing barriers in 
          current law that limit their ability to form joint 
          ventures, SB 222 allows these plans to integrate their 
          operations and offer coverage on broader geographic basis.

          Arguments in opposition
          The Orange County Board of Supervisors write in opposition, 
          stating that allowing public agencies to sell health 
          insurance in competition with private health plans and 
          insurers would introduce the "public option" rejected by 
          the public and Congress in relation to federal health 
          reform.

          
                                    POSITIONS  

          Support:  American Federation of State, County and 
          Municipal Employees
                    California Labor Federation
                    United Nurses Association of California/Union of 
                         Health Care Professionals
                    California Pan-Ethnic Health Network
                    California School Employees Association
                    Center for Policy Analysis/EQUAL Health Care
                    Consumers Union
                    Having Our Say
                    Health Access California
                    Planned Parenthood Affiliates of California

          Oppose:   Orange County Board of Supervisors






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