BILL ANALYSIS Ó
AB 880
Page 1
ASSEMBLY THIRD READING
AB 880 (Gomez)
As Amended May 28, 2013
2/3 vote. Urgency
HEALTH 13-5 APPROPRIATIONS 12-5
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|Ayes:|Pan, Ammiano, Atkins, |Ayes:|Gatto, Bocanegra, |
| |Bonilla, Bonta, Chesbro, | |Bradford, |
| |Gomez, | |Ian Calderon, Campos, |
| |Roger Hernández, | |Eggman, Gomez, Hall, |
| |Lowenthal, Mitchell, | |Ammiano, Pan, Quirk, |
| |Nazarian, V. Manuel | |Weber |
| |Pérez, Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Maienschein, Mansoor, |Nays:|Harkey, Bigelow, |
| |Nestande, Wagner, Wilk | |Donnelly, Linder, Wagner |
| | | | |
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SUMMARY : Creates the Employer Responsibility for Medi-Cal Cost
of Employees Act of 2013 (Act). Contains an urgency clause in
order to become effective immediately. Specifically, this bill :
1)Requires large employers, employing 500 or more employees, to
pay a penalty, as specified if their employees, who work more
than eight hours per week, are enrolled in Medi-Cal based on
the Modified Adjusted Gross Income (MAGI) eligibility
standard.
2)Specifies a formula for calculating the penalty based on the
average cost of employee health care coverage provided to
employees of large employers.
3)Requires the Department of Health Care Services (DHCS) to
determine the penalty, based on the calculation and requires
the Employment Development Department (EDD) to provide notice
to employers of the amount and to collect the penalty.
4)Defines employer as an employing unit, as defined in current
law regarding unemployment insurance, including all members of
a controlled group of corporations, as defined in the Internal
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Revenue Code, except that "more than 50%" is substituted for
"at least 80%" in regard to combined voting power and the
total value of shares.
5)Establishes the basis of the penalty as 110% of the average
cost of health care coverage provided by large employers to
their employees, provides that the specific amount of the
employer responsibility penalty is to be determined by
multiplying the employer's total annual wage payments to all
covered employees by a fraction to arrive at an amount that is
intended to represent the amount of time the share of time the
employee covered by Medi-Cal works, as specified.
6)Requires DHCS and EDD to obtain specified information and data
and to share wage, enrollment and other data as specified in
order to make the required calculations and identify
low-income individuals covered by the Medi-Cal program.
7)Provides for the confidentiality of all documents and records
that result from DHCS and EDD matching records and that
nothing in this bill is to be construed to supersede
requirements and protections in the California Right to
Financial Privacy Act.
8)Requires DHCS to provide notice to EDD of the amount of the
employer responsibility penalty in a time and manner that
permits EDD to provide notice to all large employers of the
estimated penalty for the budget year, as specified, and
requires EDD to notify the employer annually. Provides for
10% interest if a penalty is more than 60 days overdue.
9)Requires a large employer to pay into the Employer
Responsibility for Medi-Cal Trust Fund, any employer
responsibility penalties imposed, in the same manner as
employer contributions for unemployment compensation
insurance.
10)Requires employers to provide information to all newly hired
and existing employees of the availability of Medi-Cal
coverage for individuals or families under the MAGI threshold
established for the Medi-Cal program pursuant to the Patent
Protection and Affordable Care Act (ACA). Requires EDD, in
consultation with DHCS, to develop a simple, uniform notice
containing the information.
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11)Prohibits an employer from requiring, as a condition of
employment, an employee to not enroll in or disenroll from a
public health benefit program, including, but not limited to,
the Medi-Cal program, or Advance Premium Tax Credit (APTC)
through the California Health Benefit Exchange (Exchange).
Prohibits a large employer from encouraging or discouraging
enrollment in a public health benefit program for which an
employee is otherwise eligible, but may provide information on
the programs as otherwise provided by state or federal law.
12)Creates the Employer Responsibility for Medi-Cal Trust Fund
(Fund) and requires monies collected from the penalties to be
deposited in the Fund and used in the Medi-Cal program.
Provides that the Fund is continuously appropriated to DHCS
for the following purposes:
a) To provide payment for the nonfederal share of Medi-Cal
costs for covered employees;
b) To increase reimbursement of providers;
c) To provide reimbursement to county health systems,
community clinics, and other entities that provide care,
without expectation of compensation, to those Californians
who do not have minimum essential coverage as defined by
the ACA; and,
d) Costs of implementation, including costs to EDD,
Franchise Tax Board (FTB), and any other governmental
agency.
13)Provides that it is unlawful for a large employer, as defined
by this bill, to designate an employee as an independent
contractor or temporary employee, reduce an employee's hours
of work, or terminate an employee if the purpose of the action
is to avoid the employer's obligation under the Act.
14)Prohibits a large employer from requesting or otherwise
seeking to obtain information concerning income, family
income, or other eligibility requirements for public health
benefit programs about an employee, other than that
information about the employee's employment status otherwise
known to the employer consistent with state and federal law
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and regulation.
15)Prohibits a large employer from discharging or in any manner
discriminating or retaliating against an employee who enrolls
in a public health benefit program, including, but not limited
to, the Medi-Cal program, or the APTC.
16)Provides that any employee who is discharged, threatened with
discharge, demoted, suspended, or in any other manner
discriminated, or retaliated, against in the terms and
conditions of employment by his or her employer because the
employee has enrolled in a public health benefit program or
the APTC through the Exchange to be entitled to reinstatement
and reimbursement for lost wages and work benefits caused by
the acts of the employer.
17)Provides that a large employer, who willfully refuses to
rehire, promote, or otherwise restore an employee or former
employee described in this section who has been determined to
be eligible for rehiring or promotion by a grievance procedure
or hearing authorized by law, is guilty of a misdemeanor.
18)Provides that an employer who violates the provisions related
to protections of employees who enroll in a public health
benefit program or the APTC through the Exchange may be
charged a penalty of 200% of the amount of any penalty that
would have otherwise been paid by the employer for the period
for covered employees, and authorizes the employee to file a
complaint with the Department of Industrial Relations.
19)Requires employers to report information regarding wages,
payroll taxes, personal income tax (PIT) deposits, and state
disability insurance (SDI), to EDD and provides for the
deposits of payroll taxes, SDI, PIT, and Unemployment
Insurance.
20)Permits the EDD and the FTB to share information and develop
data interfaces with the Exchange for purposes of enabling the
Exchange to make eligibility determinations and comply with
certain federal requirements.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
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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 : According to the author, the purpose of this bill is
to extend the employer responsibility requirement in the federal
Patient Protection and Affordable Care Act (ACA) to employers
with employees who enroll in Medi-Cal to discourage these
employers from shifting the cost of providing health coverage
for their employees onto the state. The author states that this
bill closes a loophole in the employer penalty provisions of the
ACA. 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
Exchange. However, an employer whose employees become eligible
for Medi-Cal because their wages and hours cause the family
income to fall below the MAGI standard will be eligible for
Medi-Cal with no cost to the employer. The author states that
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 author
points out that legislation pending in the First Extraordinary
Session proposes to expand the Medi-Cal program to provide
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coverage to childless adults up to 138% of the federal poverty
level (FPL) (currently set at $15,415 annually for an
individual), bases on the individual or family MAGI and will
streamline eligibility and enrollment for anyone who is eligible
under the MAGI standard, including families and children.
The author further states that the ACA does not extend the
employer responsibility penalty to employers who have workers
enrolled in Medi-Cal, even though it is a public subsidy for
their employees' health coverage. Citing a forthcoming study
from the University of California, Berkeley Center for Labor
Research and Education (UC Berkeley Labor Center), the author
estimates that 250,000 parents working for firms with 500 or
more employees are currently enrolled in Medi-Cal, and the study
estimates that an additional 290,000 non-disabled adults, ages
19-64 working for firms with 500 or more employees will be
enrolled in Medi-Cal. Furthermore, the author argues, the ACA
penalty does not apply to part-time workers, defined as working
fewer than, on average, 30 hours a week. The author asserts
that this creates an incentive for some employers to cut hours
and eliminate benefits for part-timers in order to evade the ACA
penalty. In addition, this creates downward pressure on wages
and strips workers of employer-sponsored coverage. According to
the author, several large employers have announced that they are
already starting to cut hours and benefits in preparation for
the implementation.
The ACA requires U.S. citizens and legal residents to have
qualifying health coverage. In 2016 and beyond, those without
coverage pay a tax penalty up to a maximum of $2,085 per family
or 2.5% of household income. The penalty will be phased-in
according to the following schedule: $95 per adult in 2014, $325
per adult in 2015, and $695 per adult in 2016 or the flat fee or
1% of taxable income in 2014, 2% of taxable income in 2015, and
2.5% of taxable income in 2016. Beginning after 2016, the
penalty will be increased annually by the cost-of-living
adjustment. Exemptions will be granted for financial hardship,
religious objections, American Indians, those without coverage
for less than three months, undocumented immigrants,
incarcerated individuals, those for whom the lowest cost plan
option exceeds 8% of their income, and those with incomes below
the tax filing threshold (in 2009 the threshold for taxpayers
under age 65 was $9,350 for singles and $18,700 for couples).
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The ACA assesses employers with an average of 50 or more
full-time employees who do not offer coverage and have at least
one full-time employee who receives an APTC through the
Exchange, a fee of $2,000 per full-time employee, excluding the
first 30 employees from the assessment. Employers with 50 or
more full-time employees that offer coverage but have at least
one full-time employee receiving an APTC, will pay the lesser of
$3,000 for each employee receiving a premium credit or $2,000
for each full-time employee, excluding the first 30 employees
from the assessment, effective January 1, 2014. Employers with
up to 50 full-time employees are exempt from the penalties. The
ACA requires employers with more than 200 employees to
automatically enroll employees into health insurance plans
offered by the employer. Employees may opt out of coverage.
This bill includes employee protections that are intended to
prevent employers from retaliating against an employee who
enrolls in Medi-Cal and to prevent employers from asking for
information regarding whether the employee has enrolled in
Medi-Cal. This is to ensure that this bill is not in conflict
with a primary goal of the ACA, which is to reduce the numbers
of uninsured by expanding Medi-Cal coverage. The anti-
retaliation and other protections are modeled after existing law
that prohibits an employer from discharging, discriminating, or
retaliating against an employee who is a victim of domestic
violence or sexual assault for taking time off from work to
attend judicial proceedings or to attend specified medical,
domestic violence prevention, or counseling services. That law
also states that an employee who is discharged, threatened with
discharge, suspended, or in any other manner discriminated
against for taking time off for these purposes is entitled to
reinstatement and reimbursement for lost wages and work benefits
and may file a complaint with the Division of Labor Standards
Enforcement. Additionally, an employer that willfully refuses
to rehire, promote, or otherwise restore an employee who has
been determined to be eligible for rehiring or promotion is
guilty of a misdemeanor. The anti-retaliation protections, by
not constituting a "serious violations" allow employers to
remedy any violation.
The California Chamber of Commerce (Chamber) writes in
opposition that this bill would impose a number of significant
new penalties on private employers with 500 or more employees in
California and would dramatically increase the amount of
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frivolous litigation under the Labor Code. According to the
Chamber this bill goes well beyond the requirements of the ACA
in two ways. First, under the ACA, the formula for assessing a
penalty on employers who do not offer affordable health care
coverage when their employee receives subsidized care is $2,000
annually times the number of full-time employees minus 30. In
contrast, the Chamber points out, the formula for assessing a
penalty under this bill is based on the cost of health insurance
premiums for the employee and the employer which far exceeds
$2,000. The Chamber also states that it is unclear whether this
bill sets the penalty level at the individual or family level of
healthcare coverage. Second, according to this opposition, this
bill applies its provisions to part-time as well as full-time
employees. The opposition states that it can understand the
goals of supporting employer coverage for full-time employees,
since this has been a common and expected practice for decades;
the "employer responsibility" provisions of the ACA reflected
that. However, this bill would go far beyond common practice
and the ACA by applying the penalty to employers whose part-time
employees receive Medi-Cal benefits. The Chamber further
opposes this bill because it creates a broad protected class of
employees and will significantly hamper an employer's ability to
manage its workforce.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0001054