BILL ANALYSIS Ó
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 703
S
AUTHOR: Hernandez
B
AMENDED: March 30, 2011
HEARING DATE: April 6, 2011
7
CONSULTANT:
0
Bain
3
SUBJECT
Health care coverage: Basic Health Program
SUMMARY
This bill implements an option in federal health care
reform to establish a Basic Health Program (BHP) to provide
health plan coverage to individuals under age 65 with
family incomes between 133 percent and 200 percent of the
federal poverty level (FPL), and legal immigrants with
family incomes at or below 133 percent of the FPL who are
not eligible for Medicaid, rather than providing these two
groups of individuals with federal premium tax credits and
cost-sharing subsidies through the California Health
Benefits Exchange. The BHP would be administered by the
Managed Risk Medical Insurance Board (MRMIB).
CHANGES TO EXISTING LAW
Existing federal law:
Requires, under the federal Patient Protection and
Affordable Care Act (PPACA), (Public Law 111-148), as
amended by the Health Care Education and Reconciliation Act
of 2010 (Public Law 111-152), each state, by January 1,
2014, to establish an American Health Benefit Exchange
Continued---
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(Exchange) that makes qualified health plans available to
qualified individuals and qualified employers. If a state
does not establish an Exchange, the federal government
administers the Exchange. Federal law establishes
requirements for the Exchange, for health plans
participating in the Exchange, and defines who is eligible
to receive coverage in the Exchange.
Effective January 1, 2014, PPACA will allow eligible
individual taxpayers whose household income equals or
exceeds 100 percent, but does not exceed 400 percent of the
federal poverty level (FPL), an advanceable and refundable
tax credit for a percentage of the cost of premiums for
coverage under a qualified health plan offered in the
Exchange. PPACA also requires a reduction in cost-sharing
for individuals with incomes below 250 percent of the FPL,
and a lower maximum limit on out-of-pocket expenses for
individuals whose incomes are between 100 percent and 400
percent of the FPL. Legal immigrants with household
incomes less than 100 percent of the FPL who are ineligible
for Medicaid because of their immigration status are also
eligible for the premium tax credit and the cost-sharing
reductions.
Requires health plans sold to individuals and small
employers, and products sold in the Exchange and BHP, to
provide the federally required "essential health benefits,"
effective January 1, 2014.
Requires the federal Secretary of the Department of Health
and Human Services (DHHS) to establish a BHP under which a
state is authorized to enter into contracts to offer one or
more standard health plans providing at least the essential
health benefits to eligible individuals, in lieu of
offering such individuals coverage through an Exchange.
Defines an individual eligible ("eligible individuals") to
enroll in the BHP as an individual under age 65 at the
beginning of the plan year who is not eligible for minimum
essential coverage, or who is eligible for an
employer-sponsored plan that is not affordable and who
meets either of the following requirements:
§ Has household income that exceeds 133 percent but
does not exceed 200 percent of the federal poverty
STAFF ANALYSIS OF SENATE BILL 703 (Hernandez) Page
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level (FPL); or,
§ Is an immigrant lawfully present in the United
States whose income is not greater than 133 percent of
the FPL but who is ineligible for federal Medicaid
because of his or her immigration status.
Prohibits, in a state that has a BHP, an eligible
individual from being eligible for enrollment in a
qualified health plan offered through the Exchange.
Date Nov 24 2008 18:12 Apr
Requires the federal DHHS Secretary, for a state that meets
the requirements of a BHP, to transfer to the state in each
fiscal year the amount the Secretary determines is equal to
95 percent of the premium tax credits and the cost-sharing
reductions that would have been provided to eligible
individuals in the state if such eligible individuals were
allowed to enroll in qualified health plans through the
Exchange.
Existing state law:
Establishes MRMIB, which administers the Healthy Families
Program (HFP), the Major Risk Medical Insurance Program,
and the Access for Infants and Mothers Program. MRMIB is a
seven-member board in the Health and Human Services Agency
(Agency) with three gubernatorial appointments, two
legislative appointments and two ex officio non-voting
members. MRMIB has broad authority to administer these
three programs, including the authority to contract with
health plans.
Establishes the California Health Benefits Exchange
(Exchange) in state government, and specifies the duties
and authority of the Exchange. Requires the Exchange be
governed by a board that includes the Secretary of the
Agency and four members with specified expertise who are
appointed by the Governor and the Legislature. Requires
the Exchange to determine the minimum requirements health
plans must meet for participation in the Exchange and the
standards and criteria for selecting health plans to be
offered in the Exchange. Requires the Exchange to provide,
in each region of the state, a choice of qualified health
plans, at each of the five levels of coverage contained in
federal law (a platinum, gold, silver, bronze and
catastrophic-level benefit plan).
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This bill:
Establishes the BHP, requires it be administered by MRMIB,
and requires MRMIB to enter into a contract with the
federal Secretary of the Department of Health and Human
Services to implement a BHP to provide coverage to eligible
individuals. Requires coverage in BHP to begin January 1,
2014.
Requires MRMIB to administer the BHP in conjunction with
the HFP, and to provide an eligibility and enrollment
process that allows individuals to enroll in the BHP at the
same time an individual applies for HFP enrollment.
Authorizes MRMIB, consistent with the requirements of the
federal BHP statute, to take various actions in
implementing BHP, including the following:
§ Determine eligibility criteria for BHP, the participation
requirements of eligible individuals applying for
coverage in the BHP and the participation requirements of
participating health plans.
§ Determine when the coverage of eligible individuals
begins and the extent
and scope of coverage.
§ Determine, through negotiation with health plans, premium
and cost-sharing
amounts.
§ Collect premiums.
§ Provide or make available subsidized coverage through
participating health
plans.
§ Provide for the processing of applications and the
enrollment of eligible
individuals.
§ Determine and approve the benefit designs and co-payments
required by health plans participating in the BHP.
§ Enter into contracts.
§ Employ necessary staff.
§ Authorize expenditures from the Basic Health Program
Trust Fund (Fund) to pay program expenses that exceed
eligible individual premium contributions and to
administer the BHP, as necessary.
§ Maintain enrollment and expenditures to ensure that
expenditures do not
exceed amounts available in the Fund, and, if sufficient
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funds are not available to cover the estimated cost of
program expenditures, MRMIB is required to institute
appropriate measures to reduce costs.
§ Issue rules and regulations, as necessary, including
emergency regulations until January 1, 2016.
§ Make application assistance payments to individuals who
have successfully
completed the requirements of a Certified Application
Assistant in the HFP and who successfully enroll eligible
individuals in BHP coverage.
§ Exercise all powers reasonably necessary to carry out the
powers and
responsibilities expressly granted or imposed by this bill
and the BHP provision of federal law.
Authorizes MRMIB to amend existing HFP contracts to allow
the parents of children enrolled in HFP to enroll in the
same plan as their child or children through the BHP.
Authorizes MRMIB to require, as a condition of
participation in BHP, health plans to participate in HFP.
Requires eligibility for coverage, benefits, premiums, and
cost-sharing in, the BHP to meet the requirements of
federal BHP law. Permits MRMIB to determine the benefits,
if any, to offer BHP participants that are in addition to
the essential health benefits package required by federal
law.
Requires MRMIB to notify eligible individuals of the
availability of BHP coverage, and requires written
enrollment information and telephone services to the meet
language requirements of the Dymally-Alatorre Bilingual
Services Act.
Requires MRMIB to use appropriate and efficient means to
notify eligible individuals of the availability of BHP
health coverage, and to conduct a community outreach and
education campaign.
Requires a participating health plan that contracts with
the BHP, and is regulated by the Insurance Commissioner or
the Department of Managed Health Care, to be licensed and
in good standing with its respective licensing agency.
Requires MRMIB to contract with a broad range of health
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plans in an area, if available, to ensure that subscribers
have a choice of health plans from among a reasonable
number and different types of competing health plans.
Requires MRMIB to designate a community provider plan that
is the participating health plan that has the highest
percentage of traditional and public and private safety-net
providers in its network, and requires subscribers
selecting such a health plan to be given a premium discount
in an amount determined by MRMIB.
Establishes requirements for disenrollment for non-payment
of premiums, and authorizes BHP to place a lien on
compensation or benefits, recovered or recoverable by a
subscriber or applicant, or from any party or parties
responsible for the compensation or benefits for which
benefits have been provided under a plan contract or policy
issued under this bill.
Requires MRMIB to establish and use a competitive process
to select participating health plans and any other
contractors under this bill, but exempts those contracts
from the provisions of the Public Contract Code and from
the review or approval of the Department of General
Services.
Prohibits health care providers from "balance billing" BHP
enrollees for covered services by prohibiting a health care
provider that is provided documentation of an individual's
enrollment in BHP from seeking reimbursement or attempting
to obtain payment for any covered services provided to that
individual other than from the individual's participating
health plan, except for any required cost-sharing.
Requires, to the extent permitted by federal law, an
eligible individual enrolled
in the BHP to continue to be eligible for BHP for a period
of 12 months from the month eligibility is established.
Requires MRMIB to make use of a simple and easy to
understand mail-in and internet application process,
provide for operation of a toll-free telephone hotline,
maintain an internet web site that allows individuals to
learn the cost-sharing requirements of their health plan,
and to establish a standard format for presenting health
plan options.
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Establishes the Fund, requires it be continuously
appropriated, permits money in Fund that is unexpended at
the end of a fiscal year to be carried forward to the next
fiscal year, prohibits moneys deposited in the Fund from
being loaned to or borrowed by any other fund, requires
MRMIB to maintain a prudent reserve in the Fund, requires
all interest to be retained in the Fund, and permits a
General Fund (GF) loan for reasonable start-up and initial
expenses, subject to Department of Finance approval and
notification to the Legislature. Prohibits the use of GF
for any purpose in implementing this bill, except for the
GF start-up loan.
Requires MRMIB to ensure that the establishment, operation,
and administrative functions of the BHP do not exceed the
combination of federal funds, private donations, premiums
paid by eligible individuals, and other non-GF moneys
available for this purpose.
Requires MRMIB, in the event that it reasonably expects
that the cost of BHP to exceed the available funds, to
allow coverage for eligible individuals in BHP to continue
until the annual redetermination of each eligible
individual, after which time MRMIB is required to
immediately transfer the eligible individual to coverage in
the Exchange. Requires MRMIB, to the extent allowed by
federal law, to contract with the federal government to
allow federal funds made available to BHP to be used for
the costs of MRMIB in implementing and administering this
bill.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, electing the federal option to
establish a BHP may provide low-income Californians
enrolled in the BHP with less expensive health plan
premiums and cost-sharing and richer benefits than are
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provided in the Exchange. In addition, the author states,
the BHP presents an opportunity to provide BHP participants
with a product with a higher medical loss ratio than in the
Exchange, which allows consumers to get more value out of
their premium dollar.
Because federal BHP financing is based on the amount spent
on premium tax credit and cost-sharing subsidies for
commercial Exchange products, the BHP also provides an
opportunity to increase funding to health plans and rates
paid to providers at amounts that, while lower than
commercial rates, would exceed rates paid to health plans
and health care providers through Medi-Cal.
The author continues that establishing a BHP could also
reduce state GF Medi-Cal costs by making it more likely
that individuals who qualify for share-of-cost Medi-Cal,
because they incur medical costs significant enough to
enable them to "spend down" to Medi-Cal eligibility, will
shift to the federally-funded BHP. Finally, establishing a
BHP administered by MRMIB will enable parents of children
enrolled in HFP with incomes between 133 and 200 percent of
the FPL to enroll in the same health plan as their
children. The author states that a California HealthCare
Foundation-funded actuarial analysis of the BHP option will
be provided in May 2011 to determine if this federal option
presents a viable option for California to provide to
low-income individuals a health plan product with lower
premiums, cost-sharing and richer benefits than could be
provided in the Exchange.
Who is eligible for the Basic Health Program?
If a state elects to establish a BHP, federal law makes the
following two groups of individuals eligible ("eligible
individuals") to enroll in BHP who would otherwise be
eligible for the Exchange:
§ Individuals whose household income exceeds 133 percent
but does not exceed 200 percent of the federal poverty
level (FPL); or,
§ Immigrants lawfully present in the United States whose
income is not greater than 133 percent of the FPL but who
are ineligible for federal Medicaid because of his or her
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immigration status.
An "eligible individual" must be under age 65 at the
beginning of the plan year. Finally, an eligible
individual cannot be an individual who is eligible for
minimum essential coverage (e.g., through public or
employment-based coverage meeting minimum standards).
Federal law prohibits an eligible individual from being
eligible for enrollment in a qualified health plan offered
through the Exchange if the person is eligible for BHP.
The UCLA Center for Health Policy Research estimates there
are 829,000 individuals eligible for the BHP. Of these
829,000 individuals, 783,000 individuals will be eligible
for the BHP because they have family incomes between 138
and 200 percent of the FPL (Medi-Cal will effectively be up
to 138 percent of the FPL because of a 5 percent income
disregard that increases income eligibility from 133
percent to 138 percent). An additional 46,000 individuals
who are immigrants lawfully present in the United States,
whose income is less than 133 percent of the FPL but who
are ineligible for federal Medicaid because of immigration
status, will also be eligible for BHP.
What are the premium, cost-sharing and out-of-pocket
reductions in the Exchange and the Basic Health Program?
Individuals receiving coverage through the Exchange,
depending upon their income, may be eligible for premium
tax credits, lower cost-sharing and lower maximum
out-of-pocket limits, depending upon their income. The BHP
would cover two groups of individuals, both of whom are
eligible for premium and cost-sharing subsidies in the
Exchange. The premium credit is to make coverage more
affordable and is based on a percentage of an individual's
income related to the FPL. PPACA provides refundable and
advanceable tax credits that reduce premium costs for
individuals with incomes up to 400 percent of the FPL
(maximum BHP income eligibility is 200 percent of the FPL).
Premiums and cost-sharing in the BHP cannot exceed the
premiums and cost-sharing in the Exchange. In addition,
the benefits provided in the BHP must cover at least the
federal essential health benefits. These premium tax
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credits, cost-sharing assistance and essential health
benefit requirements begin in 2014.
A. Premiums
The amount of the tax credit that a person can receive is
based on the premium for the second lowest cost silver plan
in the Exchange in the area where the person is eligible to
purchase coverage. A silver plan is a plan that provides
the federally-required essential benefits, and has an
actuarial value (AV) of 70 percent (a 70 percent actuarial
value means that, on average, the plan pays 70 percent of
the cost of covered benefits for a standard population of
enrollees). The amount of the tax credit varies with
income such that the premium a person would have to pay for
the second lowest cost silver plan would not exceed a
specified percentage of their income (adjusted for family
size), as follows:
------------------------------------
|Income Level |Maximum Premium as a |
| |Percentage of Income |
| |for 2nd Lowest Cost |
| |Silver Plan |
| | |
|-------------+----------------------|
| Up to 133% |2% of income |
| FPL | |
|-------------+----------------------|
|133-150% FPL |3 - 4% of income |
|-------------+----------------------|
|150-200% FPL |4 - 6.3% of income |
|-------------+----------------------|
|200-250% FPL |6.3 - 8.05% of income |
|-------------+----------------------|
|250-300% FPL |8.05 - 9.5% of income |
|-------------+----------------------|
|300-400% FPL |9.5% of income |
------------------------------------
The example below shows how the premium tax credits would
work today, if they were in effect. Assume:
§ Joe is 45 years old and has an income in 2014 that is 150
percent of poverty (about $16,335 in 2011).
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§ The cost of the second lowest cost silver plan in the
Exchange in Joe's area is $4,000.
§ Under PPACA, Joe would not be required to pay more than 4
percent of income, or $653, to enroll in the second
lowest cost silver plan.
§ The tax credit available to Joe would be $3,347 ($4,000
premium minus the $653 limit on what Joe must pay).
PPACA requires that any advance payments received in a year
be reconciled against the tax credits for which individuals
and families are eligible based on their annual income
reported on their tax return. If the advance payments
exceed the amount of the credit for which individuals are
ultimately eligible, a portion of the overpayment must be
repaid. While PPACA originally limited the amount that had
to be repaid to $250 for an individual and $400 for a
family, a provision in the Medicare and Medicaid Extenders
Act of 2010 raised the minimum repayment amounts to $300
for an individual and $600 for a family below 200 percent
of the poverty level ($44,700 for a family of four in 2011)
and created a scaled repayment structure for those with
incomes up to 500 percent of the poverty level.
A. Cost-Sharing
PPACA provides cost-sharing subsidies for lower-income
people with health insurance to reduce the out-of-pocket
costs (co-payments and deductibles) the person pays when
receiving health care services. People with incomes up to
250 percent of the FPL purchasing coverage in the silver
tier through the Exchange and legal immigrants below 100
percent of FPL who are ineligible for Medicaid are eligible
for reduced cost-sharing (e.g., coverage with lower
deductibles and co-payments). Instead of having a silver
product with 70 percent AV, they receive a silver product
with a higher AV, depending on their income. This means
that the health plan on average pays a greater share of
covered benefits. The chart below shows the higher AV by
income group for individuals with incomes below 250 percent
of the FPL:
---------------------------------------
| Federal Poverty Level | Actuarial |
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| | Value (AV) |
| | |
|-----------------------+---------------|
| 100-150%* | 94% |
|-----------------------+---------------|
| 150-200% | 87% |
|-----------------------+---------------|
| 200-250% |73% |
| | |
---------------------------------------
*Legal immigrants ineligible for Medicaid with incomes
below 100 percent of the FPL are eligible for plans that
have an AV of 94 percent also.
B. Out-of-Pocket Limits
In addition to the cost-sharing limits at the point of
service, PPACA limits the maximum amount that people
(individuals and employees of small employers) must pay
out-of-pocket for cost-sharing for essential health
benefits. An out-of-pocket limit is a dollar amount that,
after an individual has paid for covered health care
expenses reaching that dollar amount, the individual no
longer pays any cost-sharing at the time they receive
covered health care services. Generally, the limits in
PPACA are based on the maximum out-of-pocket limits for
Health Savings Account-qualified health plans ($5,950 for
single coverage and $11,900 for family coverage in 2011),
which will be indexed to the change in the Consumer Price
Index until 2014 when the provision takes effect. After
2014, the limits will be indexed to the change in the cost
of health insurance. People with incomes at or below 400
percent of poverty (including individuals in BHP) have
their out-of-pocket liability capped at lower levels, as
shown below:
--------------------------------
| Federal | Reduction in |
|Poverty Level | Out-of-Pocket |
| | Maximum |
| | |
| | |
|--------------+-----------------|
| 100-200% |Two-thirds of |
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| |Maximum |
|--------------+-----------------|
| 200-300% |One-half of |
| |Maximum |
|--------------+-----------------|
| 300-400% |One-Third of |
| |Maximum |
| | |
--------------------------------
Medical loss ratio in Exchange compared to Basic Health
Program
The amount of money that a health plan or health insurer
spends on medical care, versus administrative expenses and
profit, is referred to in the health care industry as a
medical loss ratio (MLR).
Federal health care reform requires health insurers
offering coverage in the large group market to have a MLR
of 85 percent, or a higher percentage that a state may, by
regulation determine. With respect to a health insurance
issuer offering coverage in the small group market or in
the individual market, the MLR must be 80 percent, or such
higher percentage as a state may by regulation determine,
except that the Secretary may adjust such percentage with
respect to a state if the federal DHHS Secretary determines
that the application of the 80 percent MLR may destabilize
the individual market in such a state. The federal law
requires annual rebates to enrollees on a pro rata basis if
the plan does not meet the minimum ratio. For coverage in
the BHP, PPACA requires the MLR to be 85 percent, instead
of 80 percent in the individual and small group market.
How is the Basic Health Program funded?
If a state elects the BHP option, PPACA requires the
federal government to transfer to a state with a qualified
BHP the amount the federal Secretary of DHHS determines is
equal to 95 percent of the premium tax credits and the
cost-sharing reductions that would have been provided to
eligible individuals in the state if such eligible
individuals were allowed to enroll in qualified health
plans through the Exchange. In addition, individuals
enrolled in the BHP will pay premiums and have cost-sharing
that do not exceed the premiums and cost-sharing and
benefits in the Exchange.
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Federal law requires the Secretary to make the 95 percent
determination on a per enrollee basis and to take into
account all relevant factors necessary to determine the
value of the premium tax credits and cost-sharing
reductions that would have been provided to eligible
individuals. Federal law is silent on whether the 95
percent funding can be used to pay for BHP administrative
costs in administering the program.
For states, implementing the BHP presents a fiscal risk to
their GF if 95 percent of federal funding is insufficient
to provide BHP benefits and administer the program within
the federal allotment. Because of the state's on-going
fiscal condition, this bill has been drafted to prohibit
the use of GF funding, except for an initial start-up loan
that must be repaid with interest. This bill requires
MRMIB, in the event that it reasonably expects that the
cost of BHP to exceed the available funds, coverage for
eligible individuals in BHP to continue until the annual
redetermination of each eligible individual. After that
time period ends, MRMIB is required to immediately transfer
the eligible individual to coverage in the Exchange. This
provision is intended to protect the state GF and to ensure
the enrollee has continued coverage until his or her annual
redetermination of eligibility.
California HealthCare Foundation funded modeling
The California HealthCare Foundation (CHCF) is funding
actuarial modeling of the BHP option to determine if the
federal financing available would be adequate if California
were to pursue a BHP. CHCF is contracting with the
actuarial firm Mercer to do the modeling, which will
estimate the adequacy of federal funding for eligible
populations under selected scenarios consistent with
federal law. This modeling will include selected premium
and cost-sharing scenarios and several provider
reimbursement scenarios. However, the modeling will not
examine take-up rates in BHP as compared to the Exchange.
The CHCF modeling results are anticipated to be available
in early May 2011.
Prior legislation
SB 900 (Alquist), Chapter 659, Statutes of 2010,
established the California Health Benefit Exchange (the
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Exchange) as an independent public entity within state
government, required the Exchange to be governed by a board
composed of the Secretary of California Health and Human
Services, or his or her designee, and four other members
appointed by the Governor and the Legislature who meet
specified criteria.
AB 1602 (J. Perez), Chapter 655, Statutes of 2010,
specified the powers and duties of the Exchange relative to
determining eligibility for enrollment in the Exchange and
arranging for coverage under qualified health plans,
required the Exchange to provide health plan products in
all five of the federal benefit levels (platinum, gold,
silver, bronze and catastrophic), required health plans
participating in the Exchange to sell at least one product
in all five benefit levels in the Exchange, required health
plans participating in the Exchange to sell their Exchange
products outside of the Exchange, and required health plans
that do not participate in the Exchange to sell at least
one standardized product designated by the Exchange in each
of the four levels of coverage, if the Exchange elects to
standardize products.
Arguments in support
This bill is sponsored by the Local Health Plans of
California (LHPC), an association of community-based
non-profit health plans in California that serves over 2.5
million primarily low-income Californians. LHPC believes
that California should exercise the option offered in the
PPACA to establish a BHP as an extension of the HPF because
a BHP would benefit low-income working families who will
find it difficult to sustain the premium and cost-sharing
requirements of Exchange coverage. LHPC states the BHP
will offer these low-income working families a better
benefit at lower cost than will be available to them in the
Exchange. LHPC also argues the BHP will provide for
continuity and the convenience of unified care for
low-income California families whose children are
participating in the HFP, as parents and children will be
able to have the same providers in the same health plan
networks. Additionally, LHPC argues BHP, as an extension
of the HFP, will allow HFP health plans and their
safety-net providers who deliver health care to low-income
Californians to preserve their patient base and revenue
streams. LHPC states California will continue to need
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safety-net providers after national health care reform is
fully implemented, and the preservation of safety-net
providers and the health plans that have organized networks
for care of the low-income is important for California's
future health care needs. Finally, LHPC argues BHP has the
potential to raise the level of compensation for HFP
providers by providing them with a more sustainable funding
base through the BHP.
The Congress of California Seniors (CCS) writes in support
of providing more affordable coverage to low-income
individuals by taking advantage of options created by
federal health care reform. CCS writes that the BHP would
be administered by MRMIB and would therefore not incur any
additional cost to the state, and this bill would retain
the existing incentive to for individuals to choose plans
with safety net providers.
Amendments
The Western Center on Law and Poverty (WCLP) supports the
creation of a BHP in California if it is achieves the
requirement of being cheaper than the Exchange for the
low-income individuals it would serve, and if it is
coordinated as seamlessly as possible with Medi-Cal and the
Exchange. WCLP writes that it would urge that the BHP not
be administered by MRMIB, but rather by the Department of
Health Care Services (DHCS) or the Exchange. WCLP states
an estimated 900,000 Californians would qualify for BHP,
and people in this income level have high rates of income
volatility, so significant numbers of people would move
from Medi-Cal to BHP and vice-versa. Because of these
frequent transitions, it makes sense to have the program
administered by DHCS, since it already administers
Medi-Cal.
Health Access California (HAC) writes seeking amendments to
this bill. HAC states that it supports the concept of a
BHP if the financing provides lower cost-sharing and more
comprehensive benefits, and better reimbursement for
providers, but the BHP should be lodged in the Exchange
instead of MRMIB if the BHP option proves financially
viable. HAC writes that housing BHP in MRMIB reduces the
bargaining power of the Exchange, worsens risk selection
problems by taking the population most likely to enroll in
the Exchange and sending them to MRMIB, leaves the
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higher-income parents of HFP-eligible children in the
Exchange, and complicates seamless coverage.
Arguments in opposition
The American Federation of State, County and Municipal
Employees (AFSCME), AFL-CIO writes in opposition that it
seeks additional amendments to SB 703. AFSCME writes that
it is not opposed to exploring the concept of the BHP,
which has the potential to provide lower cost-sharing and
better benefits for adults making 133-200 percent FPL and
to improve provider reimbursement for safety-net hospitals
by reimbursing at 95 percent of the Exchange tax credit
level, which should be above Medi-Cal. AFSCME seeks
amendments to ensure that it is the Exchange, not MRMIB
which operates the BHP. AFSCME argues that slicing off
roughly a quarter of the enrollment of the Exchange will
undermine its bargaining power with carriers and providers,
and AFSCME does not support this. Additionally, AFSCME
argues that, while the argument that this bill covers the
parents of HFP children, this is not entirely true as some
as parents with incomes 200-250 percent of the FPL would be
in the Exchange, and AFSCME notes that HFP does not cover
adults without children who have incomes 133-200 percent of
the FPL. AFSCME writes that creating another narrow slice
of eligibility further complicates a situation already
complicated by a separate HFP. Finally, AFSCME writes that
MRMIB has privatized 80-90 percent of the work to its
enrollment vendor (Maximus), which AFSCME believes provides
poor service to the enrollees with limited phone
accessibility and literally no way to see an agency
representative in person.
COMMENTS
1)Which state entity should administer the Basic Health
Program?
This bill has the BHP administered by MRMIB, which
currently administers HFP, MRMIP and AIM. Federal law
requires a state implementing a BHP to establish a
competitive process for entering into contracts with
health plans, including negotiation of premiums,
cost-sharing and benefits, in addition to the federally
required essential health benefits. Additionally,
federal law requires a state to seek to coordinate the
administration of, and provision of benefits under its
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BHP program with the state Medicaid program (Medi-Cal in
CA, which is administered by DHCS), the state child
health plan (CHIP, which is known as the HFP, which is
administered by MRMIB), and other state-administered
health programs, to maximize the efficiency of such
programs and to improve the continuity of care. Because
Medi-Cal does not provide Medi-Cal managed care in each
region of the state, or competitive contracting in each
region of the state where Medi-Cal managed care
enrollment is required, including BHP in DHCS may not
meet the federal competitive process requirement. The
newly created California Health Benefits Exchange is
another option for administering the BHP as the
individuals eligible for BHP are a subset of the
individuals eligible for the Exchange. Four of the five
board members of the Exchange have been appointed but the
Exchange has not held a board meeting to date.
2)How will the Basic Health Program affect the Exchange?
Estimates of Exchange enrollment vary. A January 2011
article in Health Affairs estimates 4 million people in
California are expected to enroll in the state's Exchange
when it is fully implemented in 2016. The UC Berkeley
Labor Center estimates, using 2007 data advanced to 2016
levels, that nearly 4.4 million individuals will receive
coverage through the Exchange, including 925,000
individuals with incomes between 133 and 200 percent of
the FPL. The UCLA Center for Health Policy Research
(UCLA) estimates a total of 2.9 million individuals will
be enrolled in the Exchange. Of this number, 1.7 million
uninsured adults and children, comprising one-fourth of
the population that was uninsured for all or part of 2009
(24.6 percent), will be eligible for federal subsidies to
purchase their own health insurance through the Exchange,
and an additional 1.2 million uninsured persons who do
not qualify for subsidized premiums because they either
have household incomes above 400 percent of the FPL or
who could get coverage through their work, will be
eligible. UCLA estimates there are 829,000 people who
would be eligible for the BHP, representing 28 percent of
the potential Exchange enrollment.
One of the concerns expressed in establishing a BHP is how
removing this many individuals will affect the purchasing
clout of the Exchange, particularly if the individuals in
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BHP are younger, healthier, and more likely to sign up
for coverage because the subsidies are greater at lower
incomes. Of the 783,000 individuals with incomes between
133-200 percent of the FPL, UCLA indicates 40.2 percent
indicated their health status was excellent or good, 31.4
percent indicated their health status was good, 28.4
percent indicated their health status was fair or poor.
Of the legal immigrants ineligible for Medicaid with
incomes below 133 percent of the FPL, 18.6 percent
indicated their health was excellent or very good, 57.9
percent indicated their health was good, and 23.7 percent
indicated their health was fair or poor.
3)Will the BHP be able to provide lower premiums and
reduced cost-sharing?
BHP could make coverage more affordable for low-income
residents without spending state funds because federal
BHP payments could enable the state to directly provide a
benefit package to BHP enrollees that has lower premiums
and cost-sharing than these individuals could obtain
through the Exchange. The 95 percent allotment provided
to states is going to be based on premium tax credits and
cost-sharing subsidies for private commercial coverage
provided in the Exchange. The state could provide a BHP
benefit package using federal BHP payments so that health
plan and provider rates are above Medi-Cal levels but
less than commercial rates. According to the Urban
Institute's modeling of PPACA, average federal BHP
payments, based on the cost of subsidies for private
insurance in the Exchange, will exceed by 29 percent what
it would cost Medicaid to cover BHP-eligible individuals.
The Urban Institute states this is because the tax
credits and cost-sharing subsidies are based on
commercial Exchange products, the lower rates paid to
Medicaid providers, and its estimate that BHP enrollees
are more likely to be younger than Exchange enrollees.
4)Which entities should be eligible to contract with BHP
for providing health services?
The entities eligible under the federal BHP statute to
offer standard health plans under the BHP include a
licensed health maintenance organization, a licensed
health insurance insurer, or a network of health care
providers established to offer services under the
program. Because MRMIB will likely be entering into full
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risk contracts with entities providing BHP services, this
bill only authorizes MRMIB to contract with health plans
licensed by the DMHC and health insurers regulated by
CDI.
5)Could Medi-Cal state General Fund costs be reduced by
BHP?
The federal BHP statute prohibits individuals who are
eligible for Medicaid from being eligible to enroll in
the BHP. However, people can become eligible for
Medi-Cal who have incomes too high to qualify for
Medi-Cal when these individuals "spend down" to Medi-Cal
eligibility when an individual's health care costs reach
a pre-determined amount. "Share of cost" is a term that
refers to the amount of health care expenses a recipient
must accumulate and pay out-of pocket each month before
Medi-Cal coverage begins. Once a recipient's health care
expenses reach the predetermined amount, Medi-Cal will
pay for any additional covered expenses for that month.
Share of cost is an amount that is owed to the provider
of health care services, not to the state. Share of cost
Medi-Cal will likely be reduced by the existence of tax
subsidized coverage in the Exchange. However, if the BHP
offers lower premiums than would otherwise be available
in the Exchange, and this results in more people
purchasing health coverage, the BHP could reduce, by some
additional amount, state GF expenditures in share of cost
Medi-Cal if fewer individuals spend down to Medi-Cal
eligibility than would be the case without a BHP in
place. In addition, there may be other groups of
individuals with incomes above 133 percent of the FPL who
are currently eligible for Medi-Cal whose coverage could
be shifted to the entirely federally funded BHP.
POSITIONS
Support: Local Health Plans of California (sponsor)
Congress of California Seniors
Oppose: American Federation of State, County and
Municipal Employees
-- END --
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