BILL ANALYSIS                                                                                                                                                                                                    Ó






                             SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:       SB 615
          AUTHOR:        Calderon
          AMENDED:       August 6, 2012
          HEARING DATE:  August 15, 2012
          CONSULTANT:    Trueworthy

          PURSUANT TO SENATE RULE 29.10

           SUBJECT  :  Multiple employer welfare arrangements: benefits.
           
          SUMMARY  :  Prohibits a multiple employer welfare arrangement 
          (MEWA) from offering, marketing, representing, or selling any 
          product, contract, or discount arrangement as minimum essential 
          coverage or as compliant with the essential health benefits 
          (EHBs) unless it meets the applicable requirements of minimum 
          essential coverage or EHBs. 

          Existing law:
          1.Establishes the Patient Protection Affordability Care Act 
            (ACA), which imposes various requirements, some of which take 
            effect on January 1, 2014, on states, carriers, employers, and 
            individuals regarding health care coverage.
          
          2.Requires, under the ACA, carriers that offer coverage in the 
            small group or individual market to ensure coverage includes 
            EHBs, as defined. Provides that the EHB package will be 
            determined by the federal Department of Health and Human 
            Services Secretary and must include, at a minimum, ambulatory 
            patient services, emergency services, hospitalizations, and 
            prescription drugs, among other things. 

          3.Provides for regulation of health insurers by the California 
            Department of Insurance (CDI) and designates limited authority 
            to regulate MEWA to CDI, under the Insurance Code.

          4.Prohibits a self-funded or partially self-funded MEWA from 
            providing any benefits for any resident of this state without 
            obtaining a certificate of compliance from the Insurance 
            Commissioner.

          5.Establishes various eligibility requirements on MEWAs in order 
            to obtain a certificate of compliance, including that it be a 
            nonprofit corporation, that it be established and maintained 
                                                         Continued---



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            by a specified association with at least 200 paid members, and 
            that benefits be offered only to association members.

          6.Limits self-funded MEWAs to provide certain benefits which 
            include medical, dental, and surgical benefits. 

          7.Requires a MEWA to offer health care coverage benefits to any 
            newly eligible person and his or her dependents under terms 
            and conditions no less favorable than those offered to the 
            MEWA employers' existing employees and their dependents under 
            specified circumstances.
          
          This bill:  Prohibits a MEWA from offering, marketing, 
          representing, or selling any product, contract, or discount 
          arrangement as minimum essential coverage or as compliant with 
          the EHBs unless it meets the applicable requirements of minimum 
          essential coverage or EHBs. 
          
           FISCAL EFFECT  :  This bill is keyed non-fiscal.

           PRIOR VOTES  :  Assembly Floor: 76- 1. Other votes not relevant.

           COMMENTS  :  
           1.Author's statement.  Self-funded or partially self-funded 
            MEWAs may lawfully offer health plans that do not meet ACA 
            standards for essential health benefits and minimum essential 
            coverage. SB 615 ensures that the information provided about 
            those plans accurately reflects whether they comply or do not 
            comply with those standards. SB 615 is designed to avoid 
            confusion that might arise as to whether health benefits 
            offered through a MEWA meet federal health care reform 
            standards. Self-funded or partially self-funded MEWAs, 
            established under ERISA, are not required to provide EHBs or 
            qualify as meeting minimum essential coverage as defined under 
            the ACA. Some plans will likely meet those standards 
            voluntarily while others might not. SB 615 sets minimum 
            labeling and marketing standards related to whether MEWA plans 
            offer EHB or qualify as minimum essential coverage.

          2.MEWAs.  A MEWA is a type of group purchasing arrangement for 
            small businesses, self-employed individuals, and people with 
            seasonal jobs, such as agricultural workers. The law allows 
            only MEWAs that filed an application by November 1995 to be 
            eligible for licensing, which means no new MEWAs can be 
            licensed in California. MEWAs provide an alternative to 
            traditional coverage by allowing employers to band together in 




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            order to purchase health insurance or self-insure health 
            benefits. Some MEWAs provide coverage to people who might 
            otherwise not have access to health insurance. For example, in 
            the agriculture industry, workers tend to be seasonal and 
            part-time and work in rural areas where managed care plans are 
            less dominant. Plan coverage in the traditional employer 
            market is typically available for full-time employees, not 
            seasonal workers.  

          Some MEWAs that self-insure collect premiums from enrollees for 
            a special trust account established to pay medical claims. 
            Fully insured MEWAs contract with insurance companies or 
            health plans to provide benefits. Self-insured MEWAs avoid 
            premium taxes paid by commercial insurers and are subject to 
            less stringent solvency requirements. Self-insured MEWAs 
            provide a range of benefit packages. Employers can choose to 
            offer more comprehensive coverage to management and more basic 
            plans to low-wage workers. MEWAs are subject to California's 
            small group laws such as guaranteed access, renewability, and 
            rate standards.  

            According to CDI, MEWAs, compared to other insurers, have 
            lower required surplus; no risk-based capital requirements; no 
            guaranty fund coverage; and no premium tax. MEWA rates are 
            filed with CDI for informational purposes. There are 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.  
                
           3.ACA.  The ACA requires an individual and his or her dependents 
            to have minimum essential coverage or pay a penalty, unless 
            certain specified exemptions apply. The ACA requires employers 
            with over 50 employees to provide minimum essential coverage 
            and may assess penalties if an employee obtains a tax credit 
            through a health benefit exchange. The ACA also establishes 
            minimum EHBs to be covered by small group and individual plans 
            both inside and outside a health benefit exchange. Because 
            MEWAs are a form of an employee welfare benefit plan, which 
            are a group health plan, they cannot be insurance issuers 
            subject to the EHB requirements under federal law and MEWAs 
            are not subject to the small group requirement of covering the 
            EHBs.  

          4.Related legislation.  SB 951 (Hernandez) and AB 1453 (Monning) 




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            would designate the Kaiser Small Group HMO as California's 
            benchmark plan to serve as the EHB benchmark standard. SB 951 
            is now pending before the Assembly Appropriations Committee, 
            and AB 1453 is pending before the Senate Appropriations 
            Committee.

            SB 961 (Hernandez) and AB 1461 (Monning) reform California's 
            individual market.  B 961 is pending before the Assembly 
            Appropriations Committee, and AB 1461 is pending before the 
            Senate Appropriations Committee.
            
          5.Prior legislation.  AB 1188 (Coto), Chapter 428, Statutes of 
            2008, authorizes a self-funded or partially self-funded MEWA 
            to use the excess assets of the MEWA to purchase an office 
            building or buildings that are used for its principal 
            operations and business, as specified.

            AB 493 (Frommer), Chapter 218, Statutes of 2005, allows for 
            limited investment by MEWAs, using specified limited 
            proportions of MEWA assets, in bond mutual funds subject to 
            strict criteria.

            SB 212 (Machado), Chapter 320, Statutes of 2003, authorizes 
            MEWAs to utilize mutual funds to invest excess funds. The 
            intent of SB 212 was to allow MEWAs to earn a higher return on 
            investments but to limit mutual fund investing to excess 
            funds.

            SB 1880 (Machado), Chapter 357, Statutes of 2002, makes 
            permanent the original MEWA regulatory program in 2002.
            
            SB 1465 (Machado), Chapter 317, Statutes of 1999, extends the 
            sunset date to December 31, 2004, and requires CDI to evaluate 
            and report on MEWAs.  

            SB 1430 (Johnston), Chapter 1082, Statutes of 1994, requires 
            MEWAs to obtain a certificate of compliance from CDI by 
            December 1, 1995, authorizes CDI to set fiscal solvency 
            standards, and imposes upon MEWAs the same mandated benefits 
            imposed upon health insurers. SB 1430 also limits MEWAs to 
            covering only employers in a similar trade, profession, or 
            industrial association.  
            
          6.Support.  The California Association of Small Employer Health 
            Plans supports SB 615 writing that MEWAs are exempt from the 
            essential health provisions of the ACA and because there may 




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            be tax consequences and/or subsidies available for these 
            individuals and entities, it is important that employer 
            members of MEWAs be notified whether health plans offered by 
            these trusts meet the federal minimum EHBs. The Printing 
            Industries of California write in support that SB 615 will 
            insure the ability of MEWAs in the state to continue to serve 
            workers in the printing industry as they believe they will 
            meet the requirements set forth in the ACA.
           SUPPORT AND OPPOSITION  :
          Support:  California Association of Small Employer Health Plans
                    Printing Industries of California

          Oppose:   None received.

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