BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 20 (Hernandez) - Health care: workforce training.
Amended: February 14, 2013 Policy Vote: Health 9-0
Urgency: No Mandate: No
Hearing Date: April 15, 2013
Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 20 would requires all the fines and penalties
assessed by the Department of Managed Health Care on health
plans to be available for support of the Steven M. Thompson
Physician Corps Loan Repayment Program, once the Major Risk
Medical Insurance Program becomes inoperative.
Fiscal Impact: Ongoing costs in the low millions per year to
support physician loan repayments (General Fund). Over the last
decade, fines and penalties assessed by the Department of
Managed Health Care have ranged from a low of $640,000 to a high
of $13 million, with an average of about $3.6 million per year.
Background: Under current law, health plans in the state are
regulated by the Department of Managed Health Care, under the
Knox-Keene Health Care Service Act of 1975. The Department is
authorized to assess administrative fines and penalties on
health plans for violations of the Knox-Keene Act. Current law
requires the first $1 million in fines and penalties to be
transferred to the Medically Underserved Account for Physicians
(within the Health Professions Education Fund) to support the
Stephen M. Thompson Physician Corps Loan Repayment Program. Any
remaining fines and penalties are transferred to the Major Risk
Medical Insurance Fund, to support the Major Risk Medical
Insurance Program.
Under Current law, the Steven M. Thompson Physician Corps Loan
Repayment Program provides up to $105,000 in loan repayments for
physicians who agree to work in medically underserved areas for
at least three years
Under current law, the state operates the Major Risk Medical
Insurance Program, which provides health care coverage to
SB 20 (Hernandez)
Page 1
individuals who are unable to purchase coverage in the
individual market due to a pre-existing condition. Premiums in
the Program are set at 100 percent of what an equivalent policy
would cost in the private market. This program is supported by
subscriber premiums and state funds.
Proposed Law: SB 20 would requires all the fines and penalties
assessed by the Department of Managed Health Care on health
plans to be available for support of the Steven M. Thompson
Physician Corps Loan Repayment Program, once the Major Risk
Medical Insurance Program becomes inoperative.
Related Legislation:
SB 635 (Hernandez) of 2011 would have transferred fine and
penalty revenues generated by the Department of Managed
Health Care to another account for the support of medical
education. That bill was held in the Assembly Appropriations
Committee.
AB 860 (Perea and Bocanegra) would require certain fine and
penalty revenues to be transferred for use in a related
program to support medical education. That bill is in the
Assembly Appropriations Committee.
Staff Comments: While fines and penalties assessed by the
Department of Managed Health Care are deposited in the Managed
Care Administrative Fines and Penalties Fund, under law fines
and penalties are General Fund revenues.
The Major Risk Medical Insurance Program was created to allow
individuals who are unable to purchase health care coverage in
the private market because of a pre-existing condition to
purchase affordable coverage. Beginning in 2014, the federal
Affordable Care Act (and proposed state legislation) will
require insurance plans and health plans to provide "guaranteed
issue" coverage to individuals as long as the individual pays
his or her premiums. Individuals who have a pre-existing
condition should no longer be denied coverage in the private
market. Therefore, demand for coverage for the Major Risk
Medical Insurance Program is likely to decline significantly
after January 1, 2014. However, state law authorizing the
program has no sunset and there may be certain individuals (such
undocumented immigrants) who wish to continue to participate in
the program. The Governor's January budget proposal requests
SB 20 (Hernandez)
Page 2
full-year funding for the program in 2013-14. At this time it is
difficult to predict when demand for program funding will end
absent legislative action.