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 SB 222 Page 2 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 SB 222 Page 3 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 SB 222 Page 4 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 SB 222 Page 5 200% 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 SB 222 Page 6 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, SB 222 Page 7 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