BILL ANALYSIS Ó
SB 615
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SENATE THIRD READING
SB 615 (Ron Calderon)
As Amended August 6, 2012
Majority vote
SENATE VOTE :40-0
HEALTH 15-0
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|Ayes:|Monning, Logue, Atkins, |
| |Bonilla, Eng, Garrick, |
| |Gordon, Hayashi, Roger |
| |Hernández, Bonnie |
| |Lowenthal, Mansoor, |
| |Mitchell, Nestande, Pan, |
| |Williams |
| | |
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SUMMARY : Prohibits multiple employer welfare arrangements
(MEWAs) from offering, marketing, representing, or selling any
product, contract, or discount arrangement as a minimum
essential coverage (MEC) or as compliant with Essential Health
Benefits (EHB) as defined by the federal Patient Protection and
Affordable Care Act (ACA), unless it meets the applicable
requirements under the ACA.
EXISTING LAW :
1)Provides for the regulation of health insurers by the
California Department of Insurance (CDI), and confers limited
authority to regulate MEWAs on CDI, under provisions of the
Insurance Code.
2)Requires, under the ACA, a health insurance issuer that offers
health insurance coverage in the individual or small group
market to ensure that such coverage includes the EHB package,
as specified, and that it include 10 categories of services
including ambulatory patient services and emergency services.
FISCAL EFFECT : None
COMMENTS : The author writes that current state law does not
address whether MEWAs must offer health plans that cover EHBs.
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In fact, the ACA exempted self-funded or partially self-funded
Employee Retirement Income Security Act of 1974 (ERISA) plans
such as MEWA trusts. As such, unless there is an obligation to
disclose whether the health plans offered by MEWAs cover MEC,
employers who are members of the MEWAs and who purchase health
care benefits from the MEWA will not be aware of whether the
health plan meets the MEC pursuant to the ACA. This bill seeks
to establish disclosure requirements on California regulated
MEWAs associated with MEC and EHBs.
According to the CDI, MEWAs, compared to other insurers, have
lower required surplus; no Risked Based Capital requirements; no
guaranty fund coverage; and no premium tax. However, MEWAs must
have stop loss insurance and are statutorily presumed to be
subject to all insurance statutes, but that is a rebuttable
presumption for laws that are applicable and not inconsistent
with ERISA or the code. In addition, pursuant to current law,
MEWA rates are filed with the CDI for informational purposes.
According to the California Association of Small Employer Health
Plans (CASEHP), there are only four MEWAs operating in
California: Printing Industry Association of Southern
California Trust; Western Growers of California Trust;
California Society of Certified Public Accountants Trust; and,
United Agribusiness League Trust. The California HealthCare
Foundation (CHCF) report indicates that all three of the four
MEWAs are both self and fully insured in some geographic areas,
depending on the needs of their membership and the availability
of policies from insurers. Coverage offered through
self-insured MEWAs is priced to compete with carriers when
options are available.
The ACA requires an individual and his or her dependents to have
MEC or pay a penalty unless certain exemptions apply. The ACA
requires employers with over 50 employees to provide MEC and may
assess penalties if an employee obtains a tax credit through a
health benefit exchange. The ACA also establishes minimum EHBs,
which are health care benefits that are required to be covered
by small group and individual (not grandfathered) plans both
inside and outside a health benefit exchange. According to the
sponsor a fully insured MEWA is not subject to ACA market
reforms (no pre-existing condition exclusions, no annual or
lifetime limits, dependent coverage, preventive services, etc.,)
but the coverage purchased from the health insurance issuer is
subject to the market reforms of the ACA including the
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requirement to cover EHBs in the individual and small group
markets. The sponsor indicates that self-funded or partially
self-funded MEWAs that are also employee welfare benefit plans
are subject to the ACA market reforms as a group health plan but
are not required to cover EHBs. Additionally, self-funded or
partially funded MEWAs that are not employee welfare benefit
plans are subject to the ACA market reforms as a health
insurance issuer and must provide EHBs in the individual and
small group markets. The CDI agrees. According to CDI, the EHB
statute at 42 United States Code (USC) 300gg-6 states: "A
health insurance issuer that offers health insurance coverage in
the individual or small group market shall ensure that such
coverage includes the essential health benefits package required
under section 1302(a) of the Patient Protection and Affordable
Care Act Ý42 USC Subsection 18022(a)]." MEWAs are not "health
insurance issuers." Section 2791(b)(1)-(2) of the Public Health
Service Act (PHSA) defines insurance coverage as coverage
"offered by a health insurance issuer" and that same section
states that a health insurance issuer "does not include a group
health plan." Under 2791(a) a group health plan is an employee
welfare benefit plan as defined under ERISA. Under ERISA, MEWAs
are a form of employee welfare benefit plan (29 USC 1002(40).)
In addition, the Insurance Code states that "A multiple employer
welfare arrangement shall comply with the criteria set forth for
an employee welfare benefit plan in order to qualify for a
certificate of compliance." Therefore, since MEWAs are a form
of employee welfare benefit plan, which are a group health plan,
they cannot be insurance issuers subject to the EHB requirements
under federal law. MEWAs are not subject to the small group
requirement of covering the EHBs only.
This bill is sponsored by CASEHP, which is an association of
California MEWAs. According to CASEHP, together those ERISA
trust plans provide health care benefits to over 100,000
employees and their dependents. Members of the CASEHP have
provided health care benefits to their employer members for
several decades. As such, it is important to their continued
operation to be transparent by providing full disclosure of
whether health care benefits provided by these trusts meet the
coverage requirement of the ACA.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
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