BILL ANALYSIS Ó
SB 222
Page 1
Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 222 (Aquist) - As Introduced: February 9, 2011
SENATE VOTE : 26-13
SUBJECT : Health Plans: joint ventures.
SUMMARY : Authorizes public Medi-Cal managed care (MCMC) plans
and the County Medical Care Services Program (CMSP) to form
joint ventures for the joint or coordinated offering of health
plans to individuals and groups. Specifically, this bill :
1)Authorizes a health plan that is governed, owned or operated
by a county board of supervisors, a county special commission,
a county-organized health system (COHS) or a county health
authority (public MCMC plans) to form joint ventures for the
joint or coordinated offering of health plans to individuals
and groups.
2)Authorizes, for the purposes of 1) above that joint ventures
consist of either of the following:
a) Contractual relationships entered into in order to pool
risk or share networks, or both; or,
b) Contractual relationships entered into in order to
provide for the joint offering or marketing of health plans
to individuals and groups.
3)Requires, in forming joint ventures, participating health
plans to seek to contract with designated public hospitals,
county health clinics, primary care clinics, and other
traditional safety net providers.
4)Authorizes the board of the CMSP to contract with a
third-party administrator to provide health coverage under the
joint venture if the CMSP governing board elects to
participate in a joint venture.
5)Provides, in existing law that establishes authority for CMSP,
the CMSP governing board the power to develop and participate
in joint ventures with public MCMC plans as described in 1)
above and requires the joint ventures to be funded separately
from the CMSP and not impair the financial stability of the
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CMSP Program.
6)Requires all joint ventures established pursuant to this
section to meet all the requirements of the Knox-Keene Health
Care Service Plan Act of 1975 (Knox-Keene).
EXISTING LAW :
1)Provides for regulation of health plans by the Department of
Managed Health Care (DMHC) under the Knox-Keene Act and sets
requirements for 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.
2)Establishes the Medi-Cal Program, administered by the
Department of Health Care Services (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.
3)Authorizes DHCS to contract, on a bid or nonbid 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.
4)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 (CMAC) to provide or
arrange for health care services under the Medi-Cal Program.
These programs are referred to as COHS.
5)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,"
which is organized by a county government or by county
governments, or stakeholders, in a region designated by the
DHCS Director.
6)Establishes the CMSP, under which counties with population
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fewer than 300,000, and other counties, as specified, may
contract with DHCS to provide health care services to
medically indigent adults, as specified.
7)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.
FISCAL EFFECT : According to the Senate Appropriations
Committee, 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 two to five 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
DMHC's licensing costs. If two to five joint ventures were
licensed, fee revenue would be up to $50,000 to $125,000 in
total.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, health
insurance is expensive for most individuals and families.
Many currently spend 10% or more of their income on health
coverage. Based on 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. Federal health care reform will require most
Californians to obtain health insurance beginning in 2014 and
will establish a state health insurance exchange through which
people will be able to select from among competing health
plans and receive subsidies if their incomes are below 400% of
the federal poverty level.
The author states that public MCMC plans, such as the Medi-Cal
local initiatives and COHS plans have proven that they can
deliver cost-effective care to Medi-Cal beneficiaries and
children enrolled in the Healthy Families Program. Because of
the cost-effective provider networks these plans use, and
their low levels of overhead, the local health plans have the
potential to be a viable coverage alternative for the general
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commercial market, a market they do not currently serve. To
do so, however, they need to be able to integrate their
operations and offer coverage on a broader geographic basis.
This bill would remove barriers in current law that limits
their ability to do that.
2)LOCAL COVERAGE PLANS AND PROGRAMS . California currently
utilizes three managed care delivery models to provide health
care to specified Medi-Cal beneficiaries in 27 counties,
representing approximately half of the total Medi-Cal
enrollees statewide. For the purposes of this bill public
MCMC plans refer to the public or local initiative plans
operated in COHS and Two-Plan counties.
a) COHS are managed care plans that are operated by a
governing board appointed by a county board of supervisors
that contract to provide services to approximately 860,000
Med-Cal beneficiaries in 11 designated counties. Currently
five COHS provide services to Medi-Cal beneficiaries in
nine California counties: Monterey, Napa, Orange, San Luis
Obispo, San Mateo, Santa Barbara, Santa Cruz, Solano, and
Yolo.
b) In 14 designated "Two-Plan" counties, services to
approximately 2.8 million Medi-Cal beneficiaries are
provided through contracts with a commercial plan selected
through competitive bidding and a local initiative plan
which provides services through networks that include
county hospitals, community clinics, and other safety net
providers. Current local initiative plans are the Alameda
Alliance for Health, Contra Costa Health Plan, Health Plan
of San Joaquin, Inland Empire Health Plan, Kern Family
Health Care, L.A. Care Health Plan, San Francisco Health
Plan, and Santa Clara Family Health Plan.
c) In Geographic Managed Care counties, currently limited
to Sacramento and San Diego counties, services to
approximately 460,000 Medi-Cal beneficiaries are provided
by competing commercial health plans.
The CMSP provides medical care services in 34 smaller counties
including Imperial in the south, San Benito, Inyo, Mono, and
several other eastern counties and all counties except Yolo,
north of the Bay Area, Sacramento and Placer. CMSP serves
indigent adults 18-64 years of age with incomes at or below
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200% of the federal poverty level (FPL) who are not eligible
for Medi-Cal and who are U.S. citizens or legal residents.
Individuals with incomes above 200% of the FPL may be eligible
with a share of cost.
3)SUPPORT . Proponents support this bill because it builds on
the existing local initiatives and COHS and creates a public
health insurer by knitting these entities together.
Proponents point out that Californians often live in one
county and work in another, yet the existing system of public
local initiatives is tied to county boundaries. Health Access
California indicates that this bill allows for the creation of
regional or statewide networks that allow reciprocity among
the local initiatives and has the potential to create a
cost-effective alternative for individuals and employers. The
California Labor Federation believes that health care
purchasers need an alternative to the state's private health
insurance, where premiums have increase at more than the rate
of inflation each year since 1999. This has outpaced
workers' wages and the cost of medical inflation, at the same
time private health plans have taken in record profits.
4)PRIOR LEGISLATION .
a) SB 56 (Alquist) of 2009 would have permitted 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, or the CMSP, to form joint
ventures for the joint or coordinated offering of health
plans to individuals and groups. SB 56 was vetoed by
Governor Schwarzenegger. In his veto message the Governor
states:
"This 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 seeking licensure with
the DMHC. Furthermore, this bill does not solve
the underlying problem for why these entities
have been unsuccessful expanding their business
in the past."
b) SB 973 (Simitian) of 2007 and SB 1622 (Simitian) of 2008
would have created the California Health Benefits Service
Program, within DHCS, to facilitate the creation of joint
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ventures between public health coverage plans for the
purpose of expanding public health coverage options, and
authorizes locally run public health plans to enter into
joint ventures in order to pool risk and share provider
networks. SB 973 was vetoed by the Governor, who stated
that he agreed with the concept, but that he could not
support the bill as a piecemeal approach to health care
reform. SB 1622 was held in the Senate Appropriations
Committee.
c) AB 1 X1 (Nunez) of the 2007-08 Special Session, as part
of its comprehensive health care reforms, contained
provisions that were substantially similar to this bill.
AB 1 X1 died in the Senate Health Committee.
d) AB 417 (Blakeslee), Chapter 266, Statutes of 2007,
expands the service area of the Santa Barbara Regional
Health Authority, a COHS, to include areas contiguous to
the county, contingent on approval by the other county
boards of supervisors.
e) 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.
f) 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 Knox-Keene.
5)DOUBLE REFERRAL . This bill has been double referred. Should
this bill pass of this committee it will be referred to the
Assembly Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
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AFL-CIO
California Labor Federation
California Pan-Ethnic Health Network
California School Employees Association, AFL-CIO
Consumers Union
Having Our Say
Health Access California
Opposition
None on file.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097