BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 222
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          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