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 SB 20 Page 2 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 Page 3 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