BILL ANALYSIS �
AB 710
Page 1
Date of Hearing: April 30, 2013
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 710 (Pan) - As Amended: March 11, 2013
SUBJECT : California Health Benefit Exchange: multiemployer
plans.
SUMMARY : Adds multiemployer plans to the entities permitted to
facilitate purchase of qualified health plans (QHPs) in the
California Health Benefit Exchange (Exchange), now called
Covered California, no later than July 1, 2014, to the extent
permitted by federal law.
EXISTING LAW :
1)Establishes the Department of Managed Health Care to regulate
health plans under the Knox-Keene Health Care Services Plan
Act of 1975 in the Health and Safety Code; the California
Department of Insurance to regulate health insurers under the
Insurance Code; and, Covered California to compare and make
available through selective contracting QHPs for individual
and small business purchasers as authorized under the Patient
Protection and Affordable Care Act (ACA).
2)Requires Covered California, at a minimum, to do a variety of
activities to implement Section 1311 of the ACA, which
establishes affordable health benefit plans through Exchanges,
including: establish the Small Business Health Options Program
(SHOP), separate from the activities of the Board related to
the individual market, to assist qualified small employers in
facilitating the enrollment of their employees in QHPs offered
through Covered California in the small employer market in a
manner consistent with Section 1312(a)(2) of the ACA (allows
qualified individuals to enroll in exchanges and small
employers to offer coverage there to employees).
3)Requires with respect to the SHOP, Covered California to
collect premiums and administer all other necessary and
related tasks, including, but not limited to, enrollment and
plan payment, in order to make the offering of employee plan
choice as simple as possible for qualified small employers.
4)Under Section 1312 of the ACA, beginning in 2017, permits each
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state to allow issuers of health insurance in the large group
market to offer QHPs through an Exchange. If a state allows
issuers to offer QHPs in the large group market through an
Exchange, a qualified employer must make all full-time
employees eligible for one or more QHPs offered in the large
group market through an Exchange.
5)Under the ACA, defines a QHP as a health plan that has in
effect a certification (which may include a seal or other
indication of approval) that such plan meets the criteria for
certification issued or recognized by each Exchange through
which such plan is offered; provides the EHB package; and is
offered by a health insurance issuer that is licensed and in
good standing to offer health insurance coverage in each state
in which such issuer offers health insurance coverage under
this title; agrees to offer at least one QHP in the silver
level and at least one plan in the gold level in each
Exchange; agrees to charge the same premium rate for each QHP
of the issuer without regard to whether the plan is offered
through an Exchange or whether the plan is offered directly
from the issuer or through an agent; and complies with federal
regulations, as described, and such other requirements as an
applicable Exchange may establish.
6)If a state permits health insurance issuers that offer
coverage in the large group market in the state to offer such
coverage through the state Exchange, the prohibition on
discriminatory premium rates shall apply to all coverage
offered in such market (other than self-insured group health
plans offered in such market) in the state. Discriminatory
premium rates refers to the requirement that plans can only
rate premiums based on age, geography, family size and tobacco
rating.
7)Under the ACA, defines "employment based plan" for purposes of
the early retirement reinsurance reimbursement program, as a
group benefits plan offered by specified public employee
organizations, or, a multiemployer plan, as defined.
8)Under the ACA, multiemployer plan coverage is included as
applicable employer coverage, with limitations, for
consideration of the excise tax on high cost
employer-sponsored health coverage. In the case of
applicable employer-sponsored coverage made available to
employees through a multiemployer plan, the plan sponsor is
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required to make the calculations of the amount of the excess
benefit subject to the tax, and notify the federal Secretary
of Health and Human Services (HHS) and each coverage provider
of that amount.
9)Establishes, under federal regulations, that a plan is a
multiemployer plan for a plan year if certain requirements are
satisfied such as: a) more than one employer is required by
the plan instrument or other agreement to contribute (or to
have contributions made on its behalf) to the plan for the
plan year; b) the plan is maintained for the plan year
pursuant to one or more collective bargaining agreements
between employee representatives and more than one employer;
c) there are specified rules related to employer
contributions; d) the plan provides that the amount of
benefits payable with respect to each employee participating
in the plan is determined without regard to whether or not his
employer continues as a member of the plan; and, e) the plan
satisfies such other requirements as required the Secretary of
Labor by regulations.
10)Under the ACA, requires an Exchange to establish a navigator
program to carry out grants to entities which have
relationships with employers and employees, consumers
(including uninsured and underinsured consumers), or
self-employed individuals likely to be qualified to enroll in
a QHP. Navigators may provide outreach and education and
facilitate enrollment in QHPs.
11)Under the Multiemployer Pension Plan Amendments Act of 1990
requires employers to pay their fair share of the plan's
unfunded vested benefit liabilities including a withdrawal
liability to protect the financial stability of the plans
should an employer wish to withdraw from the plan.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to this bill's sponsors, the
California State Association of Electrical Workers and the
California State Pipe Trades Council, this bill will allow
multiemployer plans to purchase policies from Covered
California as would qualifying businesses (generally those
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under 50 employees), and allow multiemployer plans to
facilitate purchases by individual plan participants, using
plan assets (acting as both a "navigator" and "payor").
Current law does not specifically authorize multiemployer
plans to participate in the California Exchange, resulting in
the plan participants being denied access to Covered
California through their current health plans. Additional
information provided by this bill's sponsors is as follows:
Before the enactment of the ACA, the success of multiemployer
health plans meant that they attracted scant attention beyond
participating employers and employees. The plans are "group
health plans" under federal law. Unlike single employer
plans, the multiemployer plan's sponsor is not the
participant's employer, but rather a plan's Board of Trustees.
Employers contribute to such plans on behalf of their
employees pursuant to the applicable collective bargaining
agreement; at which point the employer's direct involvement
ends.
Multiemployer plans can contain both fully insured and
self-insured options for members. Plan trustees determine the
plan structure and design, oversee plan administration and
plan professionals, and decide whether and to what extent
benefits are paid. Small plans and plans for lower wage work
forces are more likely to be fully insured. These plans will
be especially at risk from competition if excluded from an
Exchange. Excluding them from the Exchange will endanger the
entire multiemployer plan structure. The National
Coordinating Committee for Multiemployer Plans, or NCCMP, has
proposed that multiemployer plans be certified as QHPs by HHS,
by means of HHS's regulatory powers. The NCCMP has presented
three theories to HHS in order to justify the certification:
a) The plan satisfies specified requirements relating to
the definition of a QHP as defined under ACA section
1301(a), as well as certain requirements applicable to
health insurance issuers;
b) The plan is the equivalent of a multi-state plan under
section 1334 of ACA; and,
c) The plan is the equivalent of a CO-OP plan. The CO-OP
grant program is designed to foster the adoption of CO-OPs;
multiemployer plans are already a CO-OP model, and so would
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not need development grants if the plan may be deemed to be
a CO-OP and therefore a QHP.
If a multiemployer plan were certified as a QHP under any of
these theories, the plan could fully participate in all
federal and state exchanges, and could also receive or pass
through significant tax benefits. Absent such action or
further legislative changes, multiemployer plans remain in a
federal regulatory limbo. The vast majority of employers in
multiemployer plans are small businesses that would otherwise
qualify for small business programs. Excluding these
employers from the exchanges will put them at a competitive
disadvantage to similarly sized, non-union competitors who do
not have to provide the same level of benefits and can buy
insurance from the exchange. This disadvantage will encourage
employers to leave the multiemployer plans, weaken the plan's
contribution base, and force the affected plans to reduce
benefits and to drop subsidies for the unemployed and
retirees. This unintended result will lead to inferior
coverage and social protections for the remaining plan
participants.
2)BACKGROUND . On March 23, 2010, the federal ACA (Public Law
111-148), as amended by the Health Care and Education
Reconciliation Act of 2010 (Public Law 111-152) became law.
Among many other provisions, the new law makes statutory
changes affecting the regulation of and payment for certain
types of private health insurance. The ACA, among other
provisions, imposes new requirements on individuals,
employers, and health plans; restructures the private health
insurance market; sets minimum standards for health coverage;
limits the rating factors which can be used to determine
health insurance rates to age, geography, family size, and
tobacco-use; and, provides financial assistance to certain
individuals and small employers. The ACA requires by 2014 a
state to either establish a separate exchange to offer
individual and small-group coverage or the federal government
will establish one. Exchanges will not be insurers but will
provide eligible individuals and small businesses with access
to private plans in a comparable way. In 2014 some
individuals with income below 400% of the federal poverty
level will qualify for credits toward their premium costs and
subsidies toward their cost-sharing for insurance purchased
through an exchange. California has established Covered
California, as a state-based exchange that is operating as an
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independent government entity with a five-member Board of
Directors.
3)MULTIEMPLOYER PLANS . According to a 2005 document published
by the NCCMP, called "A Basic Guide to Multiemployer Plans," a
multiemployer plan is an employee pension, health or welfare
benefit plan to which more than one employer is required to
contribute, and which is maintained pursuant to one or more
collective bargaining agreements between one or more labor
organizations and more than one employer. The structure of
multiemployer plans was affected by the passage of the Labor
Management Relations Act of 1947 (also known as Taft-Hartley).
Plan assets are placed in a trust fund, legally distinct from
the union and the employers, for the sole, and exclusive
benefit of the employees and their dependents.
Multiemployer health benefit plans are especially important in
the construction, trucking, entertainment, and commercial
grocer industries, and they can also cover retirement,
vacation, and supplemental unemployment benefits. The average
number of employees of a contributing employer in many such
industries including construction, is fewer than twenty. The
Department of Labor indicates there are more than 2200
collectively bargained, multiemployer health benefit plans,
with as many as 26 million workers, retirees and their
dependents receiving health coverage under these plans.
Multiemployer health and welfare plans are subject to the same
Employee Retirement Income Security Act provisions as all
other employee welfare benefit plans, including the
Consolidated Omnibus Reconciliation Act health coverage
continuation requirements, with some exceptions.
Multiemployer plans have two sources of funding: collectively
bargained employer contributions and income from investment of
the plan's assets. The employers' contributions are generally
the product of two factors: the contribution rate (e.g.,
dollars and cents per covered hour worked) set in the
collective bargaining agreements, and the amount of covered
work performed. The contribution income of the plan
fluctuates according to how much covered work is being
performed by the covered workers. Portability is a
fundamental feature, in that all contributing employers are
treated as a single employer for purposes of crediting a
covered worker's employment. The worker can change employment
from one contributing employer to another within an industry
without losing his or her accumulated benefit credit.
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4)PREVIOUS LEGISLATION .
a) AB 1602 (John A. P�rez), Chapter 655, Statutes of 2010,
establishes the Exchange as an independent public entity to
purchase health insurance on behalf of Californians,
including those with incomes of between 100% and 400% of
the FPL and small businesses. Clarifies the powers and
duties of the board governing the Exchange relative to the
administration of the Exchange, determining eligibility and
enrollment in the Exchange, and arranging for coverage
under qualified insurers.
b) SB 900 (Alquist), Chapter 659, Statues of 2010,
establishes the Exchange and requires the Exchange to be
governed by a five-member board, as specified.
5)POLICY COMMENT . This bill's sponsors seem to want a ruling
from the federal government on the extent to which
multiemployers will be permitted to participate in exchanges.
As written, this bill only allows participation of
multiemployer plans in Covered California to the extent
permitted under federal law. A small employer, independent of
its multiemployer plan, would not be prevented from
participating in Covered California under the ACA but it would
face financial consequences under Taft Hartley law for
withdrawing from the multiemployer plan. This bill raises
several questions about the role multiemployer plans could
play with regard to exchanges. If it is the intent that
multiemployer plans obtain approval to purchase QHPs on behalf
of its small employer or individual members it raises
questions about the interaction between small group and
individual market product rules, in particular premium rating
provisions, and a large group purchaser? This latter question
will be addressed in 2017 when/if the state chooses to permit
large groups to purchase in Covered California.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Association of Electrical Workers
California State Pipe Trades Council
Opposition
AB 710
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None on file.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097