BILL ANALYSIS Ó
AB 880
Page 1
ASSEMBLY THIRD READING
AB 880 (Gomez)
As Amended June 24, 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 an employer responsibility penalty, if their employees who
work more than 12 hours per week and more than 45 days in a
calendar year are enrolled in Medi-Cal based on the Modified
Adjusted Gross Income (MAGI) eligibility standard. Excludes
clients of a regional center who are persons with disabilities
from being counted in the calculation of 500 employees.
2)Establishes the basis of the penalty as 90% of the average
cost of employee-only 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 the
share of time the employee covered by Medi-Cal works, as
specified.
3)Requires the Department of Health Care Services (DHCS) to
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determine the penalty, based on the formula in 2) above.
4)Creates the Employer Responsibility for Medi-Cal Trust Fund
(Trust Fund) and requires monies collected from the penalties
to be deposited in the Trust Fund and used in the Medi-Cal
program, effective January 1, 2015.
5)Requires employers to pay the penalty to the Employment
Development Department (EDD) for deposit into the Trust Fund.
6)Requires EDD to annually send notice to employers of the
amount and the date on which the payment is due and provides
for 10% interest if a penalty is more than 60 days overdue.
7)Authorizes EDD to waive all or part of the penalty if EDD
determines that it would result in a financial hardship to the
employer, as defined in regulations promulgated by EDD.
8)Provides for an effective date of January 1, 2015, for the
provisions relating to the collection of the employer
responsibility penalty and further provides that the costs to
EDD to administer the program are to be paid from the Trust
Fund.
9)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
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.
10)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 and to
enable DHCS to obtain employer information and employee wage
information on individuals enrolled in Medi-Cal in order to
determine the employer responsibility penalty.
11)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.
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12)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.
13)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.
14)Provides that the Trust Fund, upon appropriation to DHCS is
to be used 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 by providing
supplemental Medi-Cal payments for benefits provided
pursuant to the alternative benefits package option that
will be provided to newly eligible Medi-Cal enrollees
pursuant to the Medi-Cal expansion authorized under the
ACA, in order to improve access to medically underserved
areas designated as health profession shortage areas or
medically underserved areas. Requires the payments to be
for both fee-for-service and Medi-Cal managed care and
requires additional supplemental payments for providers in
practice settings in which 30% or more of the patients are
Medi-Cal enrollees or uninsured;
c) To provide reimbursement to county health systems,
community clinics, safety net providers, 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;
d) To fund medical residency programs consistent with the
criteria developed by the Office of Statewide Health
Planning and Development (OSHPD).
e) Costs of implementation, including costs to EDD,
Franchise Tax Board (FTB), and any other governmental
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agency.
15)Requires, in developing the criteria, in 14) d) above, OSHPD
give priority to programs that meet the following
specifications:
a) Located in medically underserved areas and have a proven
record of placing graduates in these areas;
b) Place an emphasis on training primary care providers and
physician specialties that are most needed in the community
the program is located;
c) Place graduates in settings which at least 30% of the
patients are Medi-Cal beneficiaries; and,
d) Are accredited by the Accreditation Council for Graduate
Medical Education or the American Osteopathic Association.
16)Provides, when applicable, OSHPD is to utilize Trust Funds to
provide a match for federal funds for graduate medical
education.
17)Provides the provisions related to OSHPD are effective
January 1, 2015, and to the extent Trust Funds are
appropriated for these purposes.
18)Defines safety net provider as any provider of comprehensive
primary care or acute hospital inpatient services that
provides these services to a significant total number of
Medi-Cal and charity and/or medically indigent patients in
relation to the total number of patients served by the
provider.
19)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, effective January 1,
2015.
20)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
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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, effective January 1, 2015.
21)Provides that an employee who is discharged, threatened with
discharge, or otherwise discriminated against as an employee
due to enrollment in a subsidized insurance program or health
benefit program, may file a complaint with the Department of
Industrial Relations, effective January 1, 2015.
22)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.
23)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:
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
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to extend the employer responsibility requirement in the 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 coverage to childless adults up to 138% of
the federal poverty level (currently set at $15,415 annually for
an individual), based 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, 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
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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).
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 limited 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
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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. 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
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
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FN: 0001263