BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 222 (Alquist)
Hearing Date: 5/9/2011 Amended: As Introduced
Consultant: Katie Johnson Policy Vote: Health 7-2
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BILL SUMMARY: SB 222 would authorize the creation of joint
ventures among publicly owned and operated health coverage
programs, such as County Organized Health Systems and local
initiatives, to provide health care coverage to uninsured
individuals and purchasers of health insurance.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
DMHC licensing $100 per joint venture Special*
joint ventures
DMHC licensing fee (up to $25 per license
application)Special*
revenue
*Managed Care Fund
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STAFF COMMENTS: This bill may meet the criteria for referral to
the Suspense File.
This bill would permit health care service plans that are
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 to create integrated networks of public
health plans that pool risks, share networks, or jointly offer
health plans to individuals and groups. Many of these entities
currently exist and have contracts with the state to serve
Medi-Cal beneficiaries and Healthy Families Program enrollees.
This bill would require the participating health plans, in
forming a joint venture, to seek contracts with designated
public hospitals and other local safety net providers.
This bill would require joint ventures created pursuant to the
authority in this bill to meet the requirements of the
Knox-Keene Act, a body of law that requires the licensure of
health care service plans and that is regulated by the
Department of Managed Health Care (DMHC). Since a joint venture
would need to meet all requirements of the Knox-Keene Act, it
SB 222 (Alquist)
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would likely necessitate licensure by DMHC. DMHC would need
resources of approximately $100,000 in special funds to license
a joint venture. DMHC would incur costs only if these local
plans decide to enter into joint ventures. If 2 - 5 joint
ventures formed and needed to be licensed, costs would range
from $200,000 to $500,000 in total. If two joint ventures sought
to be licensed in the same year, costs could be around $150,000
net, because per existing law, DMHC may request reimbursement
from license applicants of up to $25,000. However, that amount
would be insufficient to defray the department's licensing
costs. If 2 - 5 joint ventures were licensed, fee revenue would
be up to $50,000 to $125,000 in total.
To the extent local entities exercise the authority under this
bill, there would be an increase in the number of individuals
with health care coverage. It is unclear whether or not a joint
venture created pursuant to this bill would be able to be
approved as a qualified health plan by the California Health
Benefit Exchange (Exchange) and be able to sell health care
coverage products to individuals in the Exchange commencing
January 1, 2014. There will be federal subsidies available to
individuals purchasing insurance from plans within the Exchange.
The potential to take advantage of these new federal monies
could provide an incentive to local entities to form these joint
ventures.
California Health Benefit Exchange
California's Exchange was established by SB 900 (Alquist),
Chapter 659, and AB 1602 (J. Perez), Chapter 655, Statutes of
2010. It is estimated that approximately 4 million Californians
will purchase health insurance within the Exchange commencing
January 1, 2014. Federal law requires the Exchange to be
financially self-sustaining by January 1, 2015. AB 1602
established the continuously appropriated California Health
Trust Fund and provided that no General Fund monies could be
used to pay for eligible individuals' health care coverage or
for the Exchange unless a subsequent appropriation was approved
by the Legislature. AB 1602 permits the Exchange to assess a fee
on carriers with which to fund its development and operation.
Previous Legislation
This bill is identical to SB 56 (Alquist) of 2009. Governor
Schwarzenegger vetoed SB 56 saying, "This bill is unnecessary,
as there is nothing in existing law that prohibits a county
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Page 4
organized health plan, local initiative or other public entity
from entering into a joint venture and seeking licensure with
the Department of Managed Health Care. Furthermore, this 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 similar to this bill. SB 973 was vetoed by the
Governor, who said that he agreed with the concept of the bill,
but could not support such a piecemeal approach to health care
reform. SB 1622 was held in the Senate Appropriations Committee.
AB X1 1 (Nunez) of 2008 also contained similar provisions. It
died in the Senate Health Committee. This bill retains
provisions that relate to the creation of joint ventures by
county organized health systems or local initiatives, but does
not require the formation of a stakeholder committee or a
program within DHCS to facilitate their creation. It also does
not specifically require the joint ventures to be licensed as
health care service plans by DMHC, as the previous bills did.