BILL ANALYSIS Ó
AB 880
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Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 880 (Gomez) - As Amended: April 24, 2013
Policy Committee: HealthVote:13-5
Urgency: No State Mandated Local
Program:YesReimbursable: No
SUMMARY
This bill establishes the Employer Responsibility for Medi-Cal
Cost of Employees Act of 2013 to impose a penalty on large
employers of employees who work more than eight hours a week and
are enrolled in Medi-Cal. Specifically, this bill:
1)Makes it unlawful for a large employer to designate an
employee as an independent contractor, temporary employee,
reduce an employee's hours, or terminate an employee in order
to avoid the employer's health coverage obligations.
2)Defines a covered employee as one who a) works for a large
employer (those with 500 or more employees except specified
governmental employers); b) enrolls in Medi-Cal based on the
Modified Adjusted Gross Income (MAGI) standard; c) works more
than eight hours per week; and d) includes leased employees or
others under the direction and control of the employer.
3)Requires every large employer to pay a large employer
responsibility penalty of 110% of the average cost of health
care coverage, as specified, for every covered employee
defined in # 2 above.
4)Includes numerous provisions for implementation, including a
requirement that the Department of Health Care Services (DHCS)
match Social Security Numbers of individuals enrolled in
Medi-Cal with information provided by the Employment
Development Department (EDD) to determine whether individuals
are covered employees and for EDD to be responsible for
collection activities.
5)Establishes the Employer Responsibility for Medi-Cal Trust
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Fund into which penalties generated by this bill will be
deposited and then continuously appropriated to DHCS. This
bill requires a two-thirds vote because of the appropriation.
FISCAL EFFECT
1)One-time costs to EDD of approximately $1 million to develop
collection capabilities, including mailing information to
employers, computer programming changes, development of a new
interface with DHCS for data transmission. Ongoing costs of
$420,000.
2)One-time and ongoing costs of more than $200,000 to DHCS for
its part of the EDD interface.
3)Costs are likely to be more than offset by revenues generated
by the penalties in this bill. Revenues are difficult to
predict because this bill could lead employers to change their
behavior in order to avoid the penalty. For example, if
250,000 people meet this bill's definition of covered
employees, the penalties would be in the tens of millions of
dollars. If some of the affected employers provide
appropriate health coverage, the penalty revenue to the state
would be lower, but state costs for Medi-Cal would also be
lower.
COMMENTS
1)Rationale . This bill seeks to extend the Affordable Care
Act's (ACA's) employer responsibility requirement to employers
with employees who enroll in Medi-Cal, in order to discourage
these employers from shifting the cost of providing health
coverage for their employees onto the state. This bill closes
a loophole in the ACA's employer penalty provisions.
Specifically, the ACA requires individuals, employers, and
government to share responsibility for health coverage.
Individuals must have health coverage or pay a penalty.
Employers with an average of at least 50 full time employees
must either provide affordable health coverage or pay a
penalty for each employee who accesses subsidized coverage in
the state health benefits exchange.
An employer whose employees become eligible for Medi-Cal
because wages and hours cause the family income to fall below
the MAGI standard avoid paying for the employee's health
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insurance if Medi-Cal covers the employee. The author states
the penalty proposed in this bill is intended to help offset
that cost of the public subsidy. The federal government
provides subsidies for premiums and cost-sharing through state
exchanges and allows states to expand their Medicaid programs
with 100% federal funding for the first three years.
The California Labor Federation and United Food & Commercial
Workers Western States Council are co-sponsors of this
measure. Supporters include numerous stakeholder groups
representing labor and consumers, including Health Access, the
Congress of California Seniors, and SEIU California.
Supporters argue large employers are reducing worker hours to
avoid providing insurance, shifting the cost to the state.
2)Background . The ACA was enacted in 2010, with most provisions
taking effect January 1, 2014. One of its main objectives is
to dramatically increase the number of individuals with health
insurance coverage in this country. With an insurance mandate
on individuals and employers and an expansion of the Medi-Cal
program, combined with tax credits and subsidies to assist in
paying for coverage, the ACA should lead to the largest
expansion of healthcare coverage since the creation of
Medicare and Medicaid in the 1960s.
3)Opposition . This bill is opposed mostly by large retailers
and restaurant chains. The California Retailers Association
and California Business Properties Association argue the
penalty of 110% of the average cost of health insurance
provided by large employers is based on individual or family
coverage, yet it is estimated to run between $6,000 and
$15,745. Citing a Kaiser Family Foundation study, this
opposition states the national average cost for individual
healthcare coverage in 2012 was $5,615.
The opposition states that this bill does not even provide
employers enough information to comply with the law. The
opposition further states this bill goes beyond the scope of
the ACA by taxing employers that do not provide their
employees quality jobs with a host of benefits and will
discourage large employers from hiring at a time when
California's unemployment rate is one of the highest in the
country. The California Chamber of Commerce is also opposed.
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Analysis Prepared by : Debra Roth / APPR. / (916) 319-2081