BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB X1 3 (Hernandez) - Health care coverage: bridge plan.
Amended: March 6, 2013 Policy Vote: Health 8-0
Urgency: No Mandate: No
Hearing Date: April 8, 2013
Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB X1 3 requires Covered California (the state's
Health Benefit Exchange) to establish "bridge plans" for certain
low income consumers. Eligibility for bridge plans would be
limited to individuals who have lost Medi-Cal coverage, the
parents of Medi-Cal eligible children, and individuals with
income below 200 percent of the federal poverty level.
Fiscal Impact:
Administrative costs to establish bridge plans. The costs
to the Department of Health Care Services and Covered
California to establish bridge plans are likely to be minor
as they have already begun the process of developing this
option.
Information Technology costs. Adding bridge plans to the
existing information technology system under development to
support Covered California (CalHEERS) may increase project
costs. At this time, Covered California is planning to
incorporate bridge plans into CalHEERS. However, it is not
clear yet whether adding bridge plan support functions can
be accomplished within the project's current development
budget of about $183 million (mostly federal funds). If
there are additional IT costs, those costs may be covered
within the project's five-year operations and maintenance
cost of $176 million (mostly federal funds) or by fees
charged by Covered California on participating health plans.
Ongoing administrative costs for Covered California. The
administrative costs of operating Covered California will be
paid by fees on participating qualified health plans based
on the number of people enrolled through Covered California
(generally 3% of the average premium per member per month).
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It is important to note that this bill does not expand
eligibility for Covered California. However, it is likely
that some Exchange-eligible consumers would not apply for
coverage without a bridge plan option (for example, because
switching health plans and/or having to find a new primary
care doctor would discourage healthy consumers who have lost
Medi-Cal coverage from applying for coverage).
The marginal impact on Covered California enrollment due to
the bridge plan option is not known at this time. However,
projections made by the Urban Institute and the UC Labor
Center for enrollment in a proposed Basic Health Plan (which
would serve a similar population) indicate that potentially
around 100,000 additional consumers would enroll in a Basic
Health Plan, if available. Using these projections as a
proxy for the marginal enrollment in Covered California due
the availability of a bridge plan option, administrative
costs (and fee revenues) for Covered California are likely
to be about $15 million per year.
Enrollment impacts on Medi-Cal. The availability of a
bridge plan option will likely increase enrollment in
Medi-Cal. There are two elements of the bridge plan option
that are likely to increase overall Medi-Cal enrollment.
First, a low-cost bridge plan option is likely to keep
low-income consumers enrolled in Covered California and
connected to the health care system. A bridge plan
participant who experiences a reduction in income may be
more likely to apply for Medi-Cal than a person who would
have dropped coverage in the absence of a bridge plan
option. Second, the fact that bridge plans will mirror
Medi-Cal managed care plans means that a bridge plan
participant would not experience disruptions of coverage or
need to change primary care providers if he or she shifted
from a bridge plan to Medi-Cal managed care. This is likely
to encourage bridge plan participants who experience a
reduction in income to apply for Medi-Cal. The magnitude of
this impact, and its fiscal implications to Medi-Cal, is
unknown at this time.
Background: Under state and federal law, the Department of
Health Care Services operates the Medi-Cal program, which
provides health care coverage to pregnant women, children and
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their parents with incomes below 100 percent of the federal
poverty level, as well as blind, disabled, and certain other
populations. Generally, the federal government provides a 50
percent federal match for state Medi-Cal expenditures. Under
federal law, most Medi-Cal services are only available to
citizens and legal immigrants.
The federal Affordable Care Act allows states to expand Medicaid
(Medi-Cal in California) eligibility to persons under 65 years
of age, who are not pregnant, not entitled to Medicare Part A or
enrolled in Medicare Part B, and whose income does not exceed
133 percent of the federal poverty level (effectively 138
percent of the federal poverty level as calculated under the
Affordable Care Act).
In addition, the Affordable Care Act authorizes states to
establish Health Benefit Exchanges, which will function as
electronic market places wherein consumers can compare and
select health plans. Consumers with incomes between 138 percent
and 400 percent of the federal poverty level will be entitled to
subsidies that will offset some of the costs of purchasing
coverage through the Exchanges. California's Health Benefit
Exchange is referred to as Covered California.
Federal law authorizes states to establish "bridge plans" that
would provide a coverage option for certain low income groups.
The basic principal of a bridge plan is to provide a coverage
option for individuals with a connection to state Medicaid
programs (Medi-Cal in California) to provide continuity of care
and allow all family members to have the same health plan.
Bridge plans would be offered by the same health plans that
provide Medi-Cal managed care plans and would use similar
networks of providers. Federal law allows individuals who have
lost Medicaid eligibility (for example, due to an increase in
income) or the parents of children eligible for Medicaid to
purchase a bridge plan. Limiting eligibility for bridge plans to
these two groups is referred to as the "narrow bridge".
Proposed Law: SB X1 3 would require Covered California to
establish bridge plan products for certain groups of consumers.
Health plans that provide Medi-Cal managed care plans would be
authorized (but not required) to offer a bridge plan product
through Covered California, provided certain requirements are
SB X1 3 (Hernandez)
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met.
Under the bill, individuals eligible for bridge plan coverage
would include consumers who have lost Medi-Cal eligibility,
parents of Medi-Cal eligible children, and any consumer with
income below 200 percent of the federal poverty level (provided
the consumer is eligible for federal subsidies). Allowing all
three of these groups to receive bridge plan coverage is
referred to as the "broad bridge".
The bill specifies that consumers formerly eligible for Medi-Cal
can only enroll in a bridge plan offered by the health plan that
provided the consumer's prior Medi-Cal managed care plan.
Similarly, the bill specifies that the parents of Medi-Cal
eligible children are only allowed to enroll in a bridge plan
offered by the health plan that offers their child's Medi-Cal
managed care plan.
The bill exempts bridge plan products from certain requirements
of the Affordable Care Act in state law (or proposed for
adoption in state law in other bills this session). For example,
health plans offering a bridge plan would not have to offer a
similar product outside of Covered California, nor would they
have to accept all applicants for coverage.
The bill authorizes Covered California to adopt regulations to
implement the bill's provisions and exempts those regulations
from the Administrative Procedures Act (beginning at Government
Code Section 11340).
The bill specifies that Covered California shall only implement
its provisions to the extent authorized by the appropriate
federal agency.
Related Legislation:
AB X1 1 (J. Perez) would enact a number of changes to
simplify the eligibility, enrollment, and renewal process
for Medi-Cal and would extend Medi-Cal eligibility to all
non-pregnant, non-Medicare eligible, childless adults with
income below 138 percent of the federal poverty level, as
authorized by the federal Affordable Care Act. That bill is
in the Senate Health Committee.
SB X1 1 (Hernandez and Steinberg) is identical to AB X1 1.
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That bill is in the Assembly.
AB X1 2 (Pan) would make several changes to the individual
market for health care coverage. In particular, the bill
would require the guaranteed issue of coverage and prohibit
the use of preexisting conditions as a means of setting
rates. That bill applies those changes only to the Insurance
Code. That bill is in the Senate Health Committee.
SB X1 2 (Hernandez) Makes changes to the Health and Safety
Code regulating health plans substantially similar to the
changes made in AB X1 2. That bill is in the Assembly Health
Committee.
Staff Comments: It is important to note that the bill would not
impose costs on the state for the actual costs of providing
health care coverage for bridge plan participants. Non-Medi-Cal
participants in Covered California will not receive any state
subsidy for coverage. The cost of coverage for participants,
including any bridge plan participants, is covered by a
combination of individual premiums and federal subsidies.
There are two major issues that the author is still considering:
whether to authorize a "narrow bridge" or a "broad bridge" and
whether the bill should contain cost containment measures for
bridge plan products.
The Governing board of Covered California has recently voted to
develop a bridge plan option and Covered California has applied
to the federal government for authority to do so. That
application to the federal government generally conforms to the
requirements of this bill, with the exception that the Covered
California proposal would only be available to consumers who
have lost Medi-Cal eligibility and the parents of Medi-Cal
eligible children ("the narrow bridge" population).
Under current federal law, consumers with incomes below 400
percent of the federal poverty level will be eligible for
subsidized coverage. The level of subsidy an individual will be
entitled to will depend both on the individual's income and the
cost of the second lowest-cost plan in the silver tier of health
plans available through an exchange. An individual's subsidy
could then be used to purchase either a more or less expensive
health plan.
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Concerns have been raised that depending on how health plans
price bridge plan products, some consumers could actually be at
a financial disadvantage from the availability of a bridge plan
option. Depending on how a potential bridge plan is priced
compared to other options in the silver tier, a consumer could
theoretically be eligible for a smaller subsidy and thus have
fewer options for purchasing coverage without increasing the
consumer's monthly premium. Whether or not this scenario will
occur will not be known until more information is available
about the proposed premium costs for health plans within Covered
California (including bridge plan products).
The author indicates that he is considering potential strategies
to protect consumers from being financially disadvantaged by the
bridge plan option.