BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 20
                                                                  Page  1

          Date of Hearing:   August 14, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                 SB 20 (Hernández) - As Amended:  February 14, 2013 

          Policy Committee:                             HealthVote:19-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              No

           SUMMARY  

          This bill redirects penalty revenue currently earmarked for the  
          Major Risk Medical Insurance Program (MRMIP) to the Steven M.  
          Thompson Physician Corps Loan Repayment Program (STLRP), upon a  
          declaration from the Department of Finance that MRMIP is  
          inoperative and transfers to support MRMIP have ceased. 

           FISCAL EFFECT  

          Annual SF/GF costs in the range of less than $1 million to  
          several million dollars annually, depending upon the amount of  
          penalty revenue generated. 

          If this penalty revenue is no longer needed for MRMIP, and is  
          not allocated to the STLRP pursuant to this bill, it could  
          instead be redirected to offset GF costs for other programs.   
          The size of the Managed Care Administrative Fines and Penalties  
          Fund (Penalty Fund) varies based on Department of Managed Health  
          Care (DMHC) enforcement actions. Penalty Fund transfers to MRMIP  
          have been as high as $10 million (2008-09) and as low as $93,000  
          (2012-13).  

           COMMENTS  

          1)Rationale  .  The author intends to address California's  
            undersupply of primary care services and asserts funding for  
            MRMIP will no longer be necessary as a result of federal  
            health reform, freeing up money in the Penalty Fund for other  
            uses. Supporters argue this bill will improve access to care  
            in underserved areas.

           2)Managed Care Administrative Fines and Penalties Fund.   This  








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            fund receives revenues from penalties assessed on health care  
            service plans for violation of the Knox-Keene Act.  Currently,  
            the first million collected annually is transferred to the  
            Medically Underserved Account for Physicians within the Health  
            Professionals Education Fund and is, upon appropriation by the  
            Legislature, used for the Steven J. Thompson Physician Corps  
            Loan Repayment Program.  Moneys over the first million are  
            transferred to the Major Risk Medical Insurance Fund, which is  
            used to fund the Major Risk Medical Insurance Program (MRMIP),  
            the state's high-risk pool program for individuals who have  
            been denied coverage on the individual market.  Penalty  
            revenues are unpredictable and depend on administrative  
            actions taken against health plans. 

           3)MRMIP Background .  MRMIP is a high-risk insurance pool  
            operated by the Managed Risk Medical Insurance Board (MRMIB)  
            since 1991 to provide coverage to individuals unable to buy  
            coverage in the individual insurance market due to  
            pre-existing conditions.  Most of MRMIP's funding comes from  
            the Proposition 99 Cigarette and Tobacco Products Surtax.  The  
            Governor's proposed 2013-14 budget indicates MRMIP will  
            phase-out with implementation of federal health reform, but it  
            is unclear exactly when this will occur.  MRMIB uses the money  
            it receives from the Penalty Fund for amounts owed to health  
            plans for reconciliation of prior year services.  
                 
            4)Federal Health Care Reform Implementation  . The federal Patient  
            Protection and Affordable Care Act (ACA) contains a variety of  
            far-reaching provisions that will significantly change the  
            health care market in California. The ACA's requirement that  
            health plans accept anyone who applies for coverage regardless  
            of preexisting conditions is likely to reduce or eliminate the  
            demand for health care coverage through MRMIP, resulting in  
            cost savings to the state.  At the same time, the California  
            Health and Human Services Agency has also identified  
            significant new state costs associated with other aspects of  
            federal health care reform implementation.  
                
            5)Previous Legislation  

             a)   AB 589 (Perea), Chapter 339, Statutes of 2012,  
               establishes the Steven M. Thompson Scholarship Program, and  
               provides that its funding consist of private moneys and  
               interest on those funds.  









                                                                  SB 20
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             b)   SB 635 (Ed Hernandez) of 2012 redirected funds deposited  
               into the Penalty Fund in excess of $1 million to be  
               transferred each year to for the purpose of the Song-Brown  
               program, a workforce training program. SB 635 was held on  
               the Suspense File of this committee.
                
            1)Related Legislation  .  

             a)   AB 565 (Salas) revises program criteria of the STLRP and  
               revises the definition of practice setting for purposes of  
               the STLRP.  AB 565 is pending in Senate Appropriations  
               Committee.  

             b)   AB 860 (Perea and Bocanegra) appropriates $600,000 from  
               the Managed Care Fund to the Steven M. Thompson Medical  
               School Scholarship Program.  AB 860 was held on the  
               Suspense File of this committee.

             c)   AB 1176 (Bocanegra and Bonta) establishes the Medical  
               Residency Training Program to fund graduate medical  
               education (GME) residency programs in California, and  
               requires every health insurer or health care service plan  
               that provides health care coverage in this state to pay an  
               annual GME assessment of $5 for each covered life for  
               purposes of the MRT Program.  AB 1176 was held on the  
               Suspense File of this committee.

             d)   SB 271 (Hernandez) deletes the January 1, 2014, sunset  
               date on the Association Degree Nursing Scholarship Pilot  
               Program within OSHPD, and deletes references to program as  
               a pilot.  SB 271 is being heard today in this committee.
           
          Analysis Prepared by  :    Lisa Murawski / APPR. / (916) 319-2081