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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