BILL ANALYSIS Ó AB 1428 Page 1 Date of Hearing: June 4, 2013 ASSEMBLY COMMITTEE ON HEALTH Richard Pan, Chair AB 1428 (Conway) - As Introduced: April 30, 2013 SUBJECT : California Health Benefit Exchange: employees and contractors. SUMMARY : Requires the California Health Benefit Exchange (Exchange), known as Covered California, Board (Board) to require all employees, prospective employees, contractors, subcontractors, and vendors who facilitate enrollment in the Exchange and have access to the financial or medical information of enrollees or potential enrollees of the Exchange to be fingerprinted for the purpose of obtaining criminal history information. Provides that a person convicted of crimes, as specified, cannot be hired by or contracted with the Exchange for the purpose of facilitating enrollment. Contains an urgency clause in order to become effective immediately upon enactment. Specifically, this bill : 1)Requires the Board to require all employees, prospective employees, contractors, subcontractors, and vendors who facilitate enrollment of persons in a qualified health plan (QHP) in the Exchange and who, in the course of their employment, have access to the financial or medical information of enrollees or potential enrollees of the Exchange, to be fingerprinted for the purpose of obtaining criminal history information. 2)Prohibits the Exchange from the hiring of, or contracting with, any person who has been convicted of: a) Any felony crimes of dishonesty or breach of trust in a state or federal jurisdiction; b) Any violation of the federal crime prohibiting conduct involving dishonesty, fraud, embezzlement, breach of trust, corruptly influencing insurance activity, or false and deceptive practices regarding the value of property, land, or the financial condition of insurance businesses; c) Any felony; AB 1428 Page 2 d) A misdemeanor which evidences present or potential unfitness to perform the functions authorized by the license in the manner consistent with the public health, safety, and welfare, including but not limited to, soliciting, attempting, or committing crimes involving the following: i) Dishonesty or fraud; ii) Any conviction arising out of acts performed in the business of insurance or any other licensed business or profession; iii) Theft; iv) Sexually related conduct affecting a person who is an observer or non-consenting participant in the conduct or convictions, or which requires registration under the Penal Code; v) Resisting, delaying, or obstructing a public officer; vi) Any act or offense wherein the person willfully causes injury to the person or property of another; vii) Violation of a relation of trust or confidence, or a breach of fiduciary duty; or, viii) Multiple convictions which demonstrate a pattern of repeated and willful disregard for the law. 3)Requires any person who has applied for employment in a position in which he or she will have access to the financial or medical information of enrollees of the Exchange to notify the Exchange of any misdemeanor or felony conviction, any filing of felony charges, any administrative actions regarding professional or occupational license, or any convictions listed in 2) above. 4)States legislative findings and declarations relating to the target populations of the Assister's Program, outreach, education, and marketing of the Exchange, that the Assister's Program is expected to promote maximum enrollment and that assisters will have access to Personal Identifying Information (PII), Social Security Numbers (SSN), and other personal information, that agents and brokers, health insurers, and other entities who currently handle an applicant's sensitive information are required to be licensed by the California Department of Insurance (CDI), which is authorized to require applicants for licensure to pass background checks, and that it is in the public's interest that individuals purchasing AB 1428 Page 3 insurance through the services of assisters have the same reasonable expectations of privacy. EXISTING LAW : 1)Requires, effective January 1, 2014, under federal law, an individual to have the option to apply for state subsidy programs, which includes the state Medicaid program (Medi-Cal in California), the state Children's Health Insurance Program (CHIP), enrollment in a QHP and a Basic Health Plan, if there is one, through a state exchange either in person, by mail, online, by telephone, or other commonly available electronic means. 2)Permits Covered California to adopt rules and regulations, as necessary, and permits Covered California to adopt any necessary rules and regulations as emergency regulations in accordance with the Administrative Procedure Act until January 1, 2016. 3)Requires, under federal law, any person who receives information provided by an applicant for coverage or receives information from a federal agency, to use the information only for the purposes of ensuring the efficient operation of the Exchange, including verifying the eligibility of an individual to enroll in the Exchange or to claim a premium tax credit or cost-sharing reduction, and to not disclose the information to any other person except as provided. 4)Makes any person authorized by law to receive state summary criminal history information records or information obtained from a record who knowingly furnishes the record or information to a person who is not authorized by law to receive the record or information guilty of a misdemeanor. 5)Requires the Department of Justice (DOJ) to furnish summary criminal history information to specified agencies or employers to be used for the purpose of employment, licensing, or certification purposes. FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. COMMENTS : AB 1428 Page 4 1)PURPOSE OF THIS BILL . According to the author, starting with an open enrollment period in October 2013, people who do not have access to affordable insurance through an employer and who do not qualify for Medicaid or CHIP will be able to purchase QHPs through the Exchange. The author states that the Exchange will hire over 20,000 individuals to promote the Exchange and enroll the public, known as Individual Assisters, In-Person Assisters, or Navigators. The author also states that it is estimated that the Assisters and Navigators will guide over four million Californians to enroll in the new state Exchange. According to the author, the target populations in California's vast, geographically diverse mix of rural and urban communities estimated at four million eligible individuals include: 100,000 in Northern California and Sierra Counties; 130,000 in the Sacramento Area; 390,000 in the Greater Bay Area; 250,000 in the San Joaquin Valley; 140,000 in the Central Coast; 780,000 in Los Angeles; and, another 750,000 in Southern California. Citing Covered California, the author points out that the Assisters Program is designed to target populations within the estimated four million eligible individuals that are ethnically diverse: 1,880,000 estimated to be Hispanic; 1,340,000 White; 470,000 Asian; and, 210,000 African-American. The author further states that these Assisters and Navigators will have access to millions of enrollees' most sensitive personal information including: home addresses; SSNs; state and federal tax information; and, personal health information (PHI). According to the author, federal privacy and security guidelines require state Exchanges to perform fingerprint-based criminal background checks (background checks) prior to hiring any person whose position will have access to personal information for applicants and enrollees. The author points out that the guidance also requires periodic rescreening of employees with access to this information. Background checks and security screening are required by the Centers for Medicare and Medicaid Services (CMS) and the Internal Revenue Service (IRS) for any employee who is authorized to have access to PII or Federal Tax Information (FTI), respectively. According to the author, many state agencies in health, education, and financial areas also require background checks. For example, the departments that conduct background checks on some or all of their employees: Franchise Tax Board, Department of Motor Vehicles, California State Teachers' Retirement System, California State Lottery, and the Department of Managed Health AB 1428 Page 5 Care. The author argues that in order to protect enrollees' personal and financial information and prevent identify theft, it is crucial to put into state law the list of crimes that would automatically disqualify a person who works at Covered California or who is an Assister from handling the enrollee's personal and financial information. According to the author, this bill simply requires Covered California to obtain and submit to DOJ fingerprint images and related information of employees, prospective employees, contractors, subcontractors, volunteers, or vendors for the purpose of obtaining criminal offender record information and would prohibit a person who has been convicted of felony crimes of dishonesty or breach of trust in a state or federal jurisdiction or other specified crimes from being hired by or contracting with Covered California. 2)BACKGROUND . On March 23, 2010, the Patient Protection and Affordable Care Act (ACA) was passed and signed into law. A key component is the establishment of exchanges to serve as a marketplace that allows consumer to apply for Medicaid (Medi-Cal in California), CHIP, or advanced premium tax credits (APTC), and cost sharing reductions to be used to purchase QHP coverage for persons in a household with income up to 400% of the federal poverty level (FPL). Beginning in 2014, the ACA expands Medicaid eligibility to a new "adult group" and collapses most existing eligibility categories into three broad groups: parents; pregnant women; and, children under age 19. The "adult group" includes all non-pregnant individuals ages 19 to 65 with household incomes at or below 133% FPL. The ACA provides for a coordinated, streamlined enrollment process for these programs to promote maximum enrollment and facilitate a smooth process beginning with the use of a single, streamlined application and seamless renewal. As required by the ACA, financial eligibility for most groups will be based on modified adjusted gross income (MAGI), as defined in the Internal Revenue Code. The rule generally adopts MAGI household income counting methods, eliminating various income disregards currently used by states to determine Medicaid eligibility. The Medicaid eligibility determination process will begin with a MAGI screen. If an individual is not found eligible for a MAGI group, the state AB 1428 Page 6 must collect necessary information and determine eligibility under all other Medicaid eligibility categories (i.e., MAGI-exempt groups, such as disability) and potential eligibility for APTC in the Exchange. States are required, to the maximum extent possible, to rely on electronic data matches with trusted third party sources to verify information provided by applicants. In order to verify eligibility, applicants will be providing personal identifying and personal financial information such as SSNs, state and FTI, date of birth, wage and income information, residency, and citizenship information. Verification will require that many Covered California employees, prospective employees, contractors, subcontractors, volunteers, and vendors will have access to applicant or enrollee PII, PHI, and/or FTI as defined in the Health Insurance Portability and Accountability Act, the California Information Practices Act, and IRS regulations. For example, Covered California will request tax return data regarding MAGI and family size from the federal Department of Health and Human Services (DHHS) through a data hub if they have a SSN or Taxpayer Identification Number and will use it to verify information provided by the applicant. Federal guidance requires that Covered California protect and safeguard customers from unauthorized and illegal access to or disclosure of this information. To comply with federal guidance, Covered California has determined that it must implement criminal records background checks to identify, and exclude from accessing personal information, applicants with a demonstrated history of abuse of personal information or other offenses that may indicate potential propensity to abuse such information. According to Covered California, background checks and security screening are required by CMS and the IRS for any employee who is authorized to have access to PII or FTI, respectively. Many state agencies in health, education and financial areas, including the Department of Managed Health Care and the California Department of Insurance, also require background checks. Based on federal guidance, Covered California has determined the Exchange must meet Minimum Acceptable Risk Standards for Exchanges (MARS-E), one of three on Exchange privacy and security standards. According to documents provided by Covered California, the MARS-E requires all individuals associated with the Exchange who would have access to AB 1428 Page 7 sensitive information such as PII, PHI, and FTI to be screened before they may be authorized to obtain access to the information system and devices containing such information. To meet these requirements, Covered California must perform a background check for all persons prior to authorizing access and require appropriate personnel to obtain and hold a moderate-risk security clearance as defined in the federal DHHS Personnel Security/Suitability Handbook. The MARS-E also requires periodic rescreening of individuals, consistent with the criticality or sensitivity rating of the position. Furthermore, according to Covered California, the IRS Publication 1075, Tax Information Security Guidelines requires screening and consideration of an individual's background and security clearance when designating personnel who are authorized to access FTI. 3)ASSISTERS PROGRAM . Covered California is in the process of establishing an Assisters Program that will include assister enrollment entities (AEE) and individual entities. AEEs are entities and organizations eligible to be trained and registered to provide in-person assistance to consumers and help them apply for Covered California programs, particularly entities that have access to Covered California's targeted population. Individual AEEs are individuals who are employed, trained, certified, and linked to AEEs to provide in-person assistance to consumers and help them apply for Covered California programs and are individuals who can provide assistance in a culturally and linguistically appropriate manner to consumers. The proposed compensation for AEEs is $58.00 per new enrollment into Covered California, including a person who was a MAGI-eligible Medi-Cal enrollee but upon redetermination qualifies for Covered California and when a currently enrolled person adds a new dependent. Compensation for annual renewal is $25.00. There is no compensation for an enrollment into Medi-Cal. The Board is expected to address regulations regarding AEE fingerprinting and records checks at the June 20, 2013 meeting. The proposed regulations applying to AEEs will provide for notification to the applicant of disqualifying information and allow for an appeal. These regulations will also provide for an opportunity to correct inaccurate or incomplete information and request a new determination of fitness for employment. AB 1428 Page 8 4)IMPLEMENTATION . According to a Board Recommendation Brief presented to the Exchange Board at the March 21, 2013 Board meeting, in analyzing options for conducting background checks, Covered California staff considered two standard types of clearances: a) non-fingerprint-based background check; and, b) fingerprint-based background check. A non-fingerprint-based background check is conducted using the applicant's identifying information, such as SSN, to check county data sources. The fingerprinting-based background check allows for a broader search including state and federal crime databases maintained by DOJ and the Federal Bureau of Investigation (FBI), respectively, and allows for subsequent arrest notifications. The staff determined that fingerprint-based background checks are necessary to comply with federal requirements for initial security clearance and ongoing monitoring. They noted that fingerprint-based background checks will identify convictions and any arrests for which charges are still pending and will not identify any arrests that did not result in conviction. Covered California explored the possibility of using existing fingerprint checks previously undergone by prospective Covered California personnel to satisfy Covered California's background check requirement. This approach was determined not to meet federal requirements because it will not provide a positive identification of the individual being screened and will not allow Covered California to receive required subsequent arrest notifications. On March 19, 2013, Insurance Commissioner (IC) Dave Jones sent a letter to Covered California regarding this issue. He stated that he supported the staff proposal on fingerprinting and background checks, but that in his opinion, it fell short with regard to Assisters. He further recommended a process and standards to certify that persons seeking to become assisters meet some minimum qualifications including that they not be known as criminals with a history of felony or misdemeanor convictions that indicate a history or dishonesty or breach of trust. The IC further recommended that applicants be excluded if convicted of a felony or certain types of crimes of dishonesty or moral turpitude and that applicants be required to disclose all criminal convictions and administrative actions. The IC also recommended that the list of disqualifying crimes be the same as those that apply to those seeking an insurance agent license and suggested guidelines on AB 1428 Page 9 how these crimes and acts are to be weighed when decisions are made to issue or revoke a license and recommended that Covered California use the CDI list of crime and other administrative standards. Covered California will use the judicially created standard of crimes of moral turpitude to guide potentially disqualifying offenses which could include theft, dishonesty, or fraud, as well as, the manufacture or distribution of drugs and certain violent or property offenses, such as assault with a deadly weapon, murder, and arson, which are performed with an evil intent. According to the Board Brief, this standard is used by many other state departments and is simple shorthand as compared to enumerating each disqualifying crime. Other crimes not likely to impact an individual's fitness for employment, such as driving under the influence, drug possession, and petty vandalism, will not be considered disqualifying. Background Checks are proposed to be performed as follows: a) Prospective Covered California employees : As a condition of employment, Covered California will require background checks of all prospective employees whose duties include access to PII, PHI, or FTI. Hiring offers will be made contingent on an acceptable background criminal record check, and prospective employees will not begin employment until the criminal record check is completed and approved. b) Prospective Covered California contractors, subcontractors, volunteers, and vendors : Covered California will require background checks of all prospective contractors, subcontractors, volunteers and vendors whose duties include access to PII, PHI, or FTI. AEEs would be considered volunteers or vendors depending on their compensation terms. For AEEs, acceptance to training will be contingent on an acceptable background criminal record check, and prospective AEEs will not begin training until the criminal record check is completed and approved. c) Current Covered California employees and contractors, subcontractors, volunteers and vendors : CMS requires all Covered California employees, contractors, subcontractors, volunteers, and vendors to have a criminal record check before hire. Because some individuals in these positions have already been hired and more will be hired before AB 1428 Page 10 legislation can be obtained to authorize access to criminal records, the treatment of existing personnel will need to be discussed with federal oversight agencies. d) Periodic rescreening of employees, contractors, subcontractors, volunteers, and vendors : Once an employee, contractor, subcontractor, volunteer, or vendor has been fingerprinted and approved for access to personal information, Covered California will receive any subsequent arrest and conviction information from DOJ for California offenses. There is no additional charge for this information, and no further action will be required of the employee, contractor, subcontractor, volunteer, or vendor. 5)UNITED STATES EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (EEOC) GUIDANCE . The EEOC enforces Title VII of the Civil Rights Act of 1964 (Title VII) which prohibits employment discrimination based on race, color, religion, sex, or national origin. In April of 2012, the EEOC issued an Enforcement Guidance on the consideration of arrest and conviction records in employment decisions as part of the EEOC's efforts to eliminate unlawful discrimination in employment screening, for hiring or retention, by entities covered by Title VII, including private employers as well as federal, state, and local governments. According to the Guidance, in the last twenty years, there has been a significant increase in the number of Americans who have had contact with the criminal justice system and, concomitantly, a major increase in the number of people with criminal records in the working-age population. In 1991, only 1.8% of the adult population had served time in prison. After 10 years, in 2001, the percentage rose to 2.7% (one in 37 adults). By the end of 2007, 3.2% of all adults in the United States (one in every 31) were under some form of correctional control involving probation, parole, prison, or jail. The DOJ's Bureau of Justice Statistics has concluded that, if incarceration rates do not decrease, approximately 6.6% of all persons born in the United States in 2001 will serve time in state or federal prison during their lifetimes. The Guidance goes on to point out that arrest and incarceration rates are particularly high for African American and Hispanic men. African Americans and Hispanics are arrested at a rate that is two to three times their proportion of the general population. Assuming that current incarceration rates remain unchanged, about one in 17 White men are expected to serve time in prison during their lifetime; by contrast, this rate climbs to one in AB 1428 Page 11 6 for Hispanic men; and, to one in three for African American men. In updating, consolidating, and incorporating longstanding court decisions and policy documents, the EEOC issued revised directions. Of relevance to this bill is the specific guidance on the disparate impact of a policy that may seem neutral on its face. The guidance states that a covered employer is liable for violating Title VII when the plaintiff demonstrates that the employer's neutral policy or practice has the effect of disproportionately screening out a Title VII-protected group and the employer fails to demonstrate that the policy or practice is job related for the position in question and consistent with business necessity. The first step is to look at which offenses or classes of offenses are reported to the employer (e.g., all felonies, all drug offenses); whether convictions (including sealed and/or expunged convictions), arrests, charges, or other criminal incidents were reported; how far back in time the reports reached (e.g., the last five, 10, or 20 years); and, the jobs for which the criminal background screening was conducted. In determining the impact, the Guidance points out that nationally, African Americans and Hispanics are arrested in numbers disproportionate to their representation in the general population. In 2010, 28% of all arrests were of African Americans, even though African Americans only comprised approximately 14% of the general population. In 2008, Hispanics were arrested for federal drug charges at a rate of approximately three times their proportion of the general population. Moreover, African Americans and Hispanics were more likely than Whites to be arrested, convicted, or sentenced for drug offenses even though their rate of drug use is similar to the rate of drug use for Whites. African Americans and Hispanics also are incarcerated at rates disproportionate to their numbers in the general population. Based on a state-by-state examination of incarceration rates in 2005, African Americans were incarcerated at a rate 5.6 times higher than Whites, and seven states had a Black-to-White ratio of incarceration that was 10 to one. In 2010, Black men had an imprisonment rate that was nearly seven times higher than White men and almost three times higher than Hispanic men. The Guidance concludes that this data supports a finding that criminal record exclusions have a disparate impact based on race and national origin. The Guidance further cites case law that suggests that exclusions, in order AB 1428 Page 12 to not be discriminatory, must consider the nature and gravity of the offense, the time that has passed since the offense and the nature of the job sought. Even the federal government, imposes criminal record restrictions on its workforce through "suitability" requirements for certain positions. The federal government's Office of Personnel Management (OPM) defines suitability as "determinations based on a person's character or conduct that may have an impact on the integrity or efficiency of the service." Under OPM's rules, agencies may bar individuals from federal employment for up to three years if they are found unsuitable based on criminal or dishonest conduct, among other factors. OPM gives federal agencies the discretion to consider relevant mitigating criteria when deciding whether an individual is suitable for a federal position. These mitigating criteria provide an individualized assessment of the applicant's background, and allow consideration of: a) the nature of the position for which the person is applying or in which the person is employed; b) the nature and seriousness of the conduct; c) the circumstances surrounding the conduct; d) how recent is the conduct; e) the age of the person involved at the time of the conduct; f) contributing societal conditions; and, g) the absence or presence of rehabilitation or efforts toward rehabilitation. 6)COST . The estimated cost for an individual criminal background check is approximately $65 which includes the cost of fingerprinting and fees charged by DOJ and the FBI. For employees or prospective employees and individuals who have successfully completed the training and certification process to be an AEE, the Exchange staff recommend that Covered California pay the cost for the background checks for year one. The policy to pay for background checks for certified Assisters will be specified in forthcoming Assister program recommendations. Covered California's other contactors, subcontractors, volunteers, and vendors that are not AEEs would pay for the cost of background checks for employees and prospective employees who would be required to undergo a background check. Covered California is planning to engage in negotiations to receive a state-wide discount rate through a company such as LiveScan and offer the services to contractors, subcontractors, volunteers, and vendors to reduce costs. AB 1428 Page 13 7)RELATED LEGISLATION . a) SB 509 (DeSaulnier), requires the Board of the Exchange to require fingerprint images and related information of all employees, prospective employees, contractors, subcontractors, volunteers, or vendors whose duties include or would include access to confidential information, PII, PHI, FTI, financial information, or any information as required by federal law or guidance, as applicable for the purposes of obtaining information as to the existence and content of a record of state or federal criminal history and information as to the existence and content of pending state or federal arrests, as specified. b) SB 4 X1 (Emmerson) and AB 3 X1 (Conway) would require all employees and vendors who would have access to financial or medical information to be subject to background checks and prohibit any person convicted of specified crimes from being employed by or to enter into a contract with the Exchange. 8)PREVIOUS LEGISLATION . AB 1602 (Pérez), Chapter 655, Statutes of 2010, and SB 900 (Alquist), Chapter 659, Statutes of 2010, establish the Exchange, now called Covered California, to screen low-income persons for Medi-Cal eligibility and as a market place for people with family incomes up to 400% FPL to purchase QHPs and to obtain APTCs and other cost sharing reductions. 9)POLICY COMMENTS . a) Inconsistent with the Exchange Proposed Policy. The language in this bill is both over inclusive and under inclusive with regard to the policy the Exchange Board is proposing to adopt and potentially with regard to compliance with federal law. For instance, SB 509 and the Draft Regulations proposed for adoption by the Exchange include volunteers in order to ensure that Assisters who work with Community-Based Organizations and will not necessarily be under contract with the Exchange, but nonetheless will have access to PII, PHI, and tax information are required to undergo a background check. This bill does not. In addition, SB 509 and the Draft Regulations cover employees and contractors who have access to this type of information in the course of working on the AB 1428 Page 14 California Healthcare Eligibility, Enrollment, and Retention System as technical experts maintaining the information technology system. This bill is limited to those who facilitate enrollment. On the other hand, this bill enacts an absolute bar for anyone who has been convicted of any of a list of offenses that include any felony conviction and misdemeanors such as resisting arrest. This would exclude someone who was convicted of resisting arrest as a result of a political demonstration at any time in the past. It would also exclude persons convicted of felonies that are unrelated to their current capacity to be trusted with financial or medical information, such drug-related offenses that occurred many years prior and for which the person has long since atoned, paid their debt to society and has been rehabilitated, regardless of the person's demonstrated current ability to be trusted with the information. This policy is inconsistent with the EEOC Guidance cited above and most likely would be found to violate Title VII of the Civil Rights Act of 1996. b) Vague and Overly Broad. This bill also has an overly broad provision that requires a person to notify the Exchange of actions taken against a professional license, which is not required under the federal guidance. It appears to be taken from a suggestion by the IC that a process be adopted similar to that used for licensed agents. However, this does not seem relevant to assisters or even Exchange employees. This bill also uses a list of crimes that are from federal law that are referenced in the IC's March 2013 letter. However, this bill does not include the additional provisions, as suggested in the IC's letter and that are in state law and regulation that allow discretion. Existing state law and regulation provide for a case by case analysis based on a variety of factors and not an absolute bar. c) Inconsistent with MARS-E. The bill does not provide for the use of the usual mechanism of conducting a criminal background check which is to require fingerprints and personal identifying information and to require the DOJ to use the criminal records data base to identify a person's criminal history. This mechanism would also allow for periodic screening to identify new arrests or convictions AB 1428 Page 15 as required by the MARS-E. d) Technical Issues. This bill has many technical issues that need to be addressed. For instance, it does not specify how the Exchange is to determine the existence of a criminal record other than asking an applicant. It requires fingerprints but does provide the necessary authorization to obtain the information from DOJ. This bill also does not provide for how the costs will be covered, does not allow for a person to contest the determination of a disqualifying conviction, and does not authorize the Exchange to take other actions necessary to implement its provisions. REGISTERED SUPPORT / OPPOSITION : Support None on file. Opposition None on file. Analysis Prepared by : Marjorie Swartz / HEALTH / (916) 319-2097