BILL ANALYSIS �
SB 3 X1
Page 1
SENATE THIRD READING
SB 3 X1 (Ed Hernandez)
As Amended June 19, 2013
Majority vote
SENATE VOTE :37-0
HEALTH 18-0 APPROPRIATIONS 12-1
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|Ayes:|Pan, Ammiano, Atkins, |Ayes:|Gatto, Bradford, Ian |
| |Bonilla, Bonta, Chesbro, | |Calderon, Campos, Eggman, |
| |Gomez, | |Gomez, Hall, Linder, Pan, |
| |Roger Hern�ndez, | |Quirk, Wagner, Weber |
| |Lowenthal, Maienschein, | | |
| |Mansoor, Mitchell, | | |
| |Nazarian, Nestande, | | |
| |V. Manuel P�rez, Wagner, | | |
| |Wieckowski, Wilk | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Donnelly |
| | | | |
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SUMMARY : Requires the California Health Benefit Exchange
(Exchange), by means of selective contracting, to make a bridge
plan product available to specified eligible individuals, as a
qualified health plan (QHP). Exempts the bridge plan product
from certain requirements that apply to QHPs relating to making
the product available and marketing and selling to all
individuals equally (guaranteed issue) outside the Exchange and
selling products at other levels of coverage. Requires the
Department of Health Care Services (DHCS) to include provisions
relating to bridge plan products in its contracts with Medi-Cal
managed care plans (MCPs). Requires the Exchange to evaluate
three years of data from the bridge plan products, as specified.
Repeals the Exchange's authority for enrollment in a bridge
plan product on the October 1 that falls five years after the
date of federal approval. Specifically, this bill :
1)Defines bridge plan product as an individual health benefit
plan that meets the standards for licensure by the Department
of Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 or as a health insurer licensed under
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the Insurance Code that contracts with the Exchange (now known
as Covered California).
2)Authorizes health care service plans and health insurers
offering a bridge plan product to limit the product to a
specified group of individuals and exempts bridge plans from
being subject to the requirement to sell products within each
of the five levels of coverage available in the Exchange and
the requirement known as guaranteed issue, inside and outside
the Exchange.
3)Requires DHCS to ensure that contracts with Medi-Cal MCPs or
insurers for the purpose of providing Medi-Cal managed care
coverage also limit enrollment in any bridge plan product to
the following individuals:
a) An individual who is eligible for the Exchange whose
Medi-Cal or Healthy Families Program (HFP) coverage was
terminated, and whose income is at or below 250% of the
federal poverty level (FPL) and requires the Exchange to
adopt a process to ensure there is no gap in coverage;
b) Other members of a household in which there is a
Medi-Cal or HFP enrollee if they are counted as part of the
Modified Adjusted Gross Income household; and,
c) Effective no later than January 1, 2015, and depending
on operational capacity, a parent or caretaker relative of
a child on Medi-Cal.
4)Requires the Exchange to seek federal approval to allow those
individuals described in 3) above to enroll in a different
bridge plan product if the individual's primary care provider
is included in the contracted network of a different bridge
plan and the bridge plan the individual would otherwise be
eligible for is not offered in the individual's service area
or the product is not offered as bridge plan product by the
Exchange.
5)Requires, to the extent federal approval has been obtained and
for the purpose of allowing, to the greatest extent possible,
a person to remain with the same plan when a person must move
from Medi-Cal to a QHP in the Exchange, the Exchange to make
bridge plan products available using its selective contracting
authority.
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6)Provides that to be qualified as bridge plan product, the plan
must:
a) Be a health care service plan or health insurer that
contracts with DHCS to provide Medi-Cal managed care
services;
b) Meet the Exchange requirements to contract as a QHP;
c) Meet a medical loss ratio (MLR) of 85% and requires the
methodology for calculating the MLR to be, to the extent
possible, the same as is utilized by other health care
service plans and insurers under applicable licensure and
Exchange requirements;
d) Limit enrollment to specified eligible individuals; and,
e) Demonstrate that the provider network is substantially
similar to the MCP offered by the health care service plan
or health insurer.
7)Provides for health care service plans and health insurers
that contract with the Exchange to obtain approval from the
respective licensure authorities and to operate pending the
approval or denial.
8)Provides that a health care service plan or a health insurer
selling a bridge plan product is not required to offer,
market, and sell the bridge plan product to any individual,
except individuals eligible pursuant to a contract entered
into by DHCS and allows Medi-Cal MCPs to limit enrollment into
bridge plan products based on limitations in contracted
network capacity.
9)Requires a health care service plan or an insurer selling a
bridge plan product to provide an initial open enrollment
period of six months, an annual enrollment period, and a
special enrollment period consistent with the annual
enrollment and special enrollment periods of the Exchange.
10)Requires the Exchange to provide information on all available
Exchange-qualified health plans in the area, including, but
not limited to, bridge plan product options for selection by
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individuals eligible to enroll in a bridge plan product.
11)Adds, to the annual report that the Exchange is currently
required to produce, data relating to bridge plan products
regarding the extent of overlap between MCP health care
provider and facility networks and those contracting for
services in the bridge plan.
12)Authorizes the Exchange to adopt regulations to implement the
provisions of this bill after consultation with stakeholders,
as specified in current law, and exempts the process for
adoption from the requirements for the Administrative
Procedures Act, until January 1, 2016.
13)Provides that the Medi-Cal MCP is to only offer a bridge plan
product if the premium contribution amount in the silver
category for the eligible individual is equal to or less than
the premium contribution amount for the lowest cost plan in
the silver category that would have been available to the
individual without the bridge plan product.
14)Authorizes DHCS to enter into a contract with the Exchange to
delegate the implementation of any part of these provisions to
the Exchange.
15)States it is the intent of the Legislature that the Exchange
provide a more affordable coverage option for low-income
individuals, improve continuity of care for individuals moving
from Medi-Cal to the Exchange, and reduce the need for
individuals enrolled in a MCP to change plans due to changes
in household income.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Covered California. Adding bridge plans to the existing
information technology (IT) system under development to
support Covered California may increase project costs. At
this time, Covered California is planning to incorporate
bridge plans into the California Healthcare Eligibility,
Enrollment, and Retention System (referred to as CalHEERS),
though it is unclear whether adding bridge plan support
functions can be accomplished within the project's current
development budget of about $183 million (mostly federal
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funds). If there are additional IT costs, they may be covered
within the project's five-year operations and maintenance
budget of $176 million (mostly federal funds) or by fees
charged by Covered California on participating health plans.
2)The ongoing administrative costs of operating Covered
California will be paid by fees on participating QHPs based on
the number of people enrolled through Covered California
(generally 3% of the average premium per member per month).
Although this bill does not expand eligibility for Covered
California, some consumers would not apply for coverage
without a bridge plan option making it easier to maintain
coverage. The marginal impact on Covered California
enrollment due to the bridge plan option is not known at this
time.
3)DHCS. Minor costs to DHCS for establishing bridge plans.
Availability of a bridge plan option will likely lead to a
very small increase in Medi-Cal enrollment to the extent this
bill accomplishes its goal of helping people maintain
continuous coverage despite changing circumstances. The
transition from the bridge product to Medi-Cal will be
seamless and is intended to prevent a person from falling off
of coverage altogether. The magnitude of this impact and its
fiscal implications to Medi-Cal are unknown at this time.
4)DMHC. Estimated costs to the Managed Care Fund (fee
supported) are $414,000 in 2013-14, $370,000 in 2014-15, and
$528,000 ongoing. DMHC's costs are primarily workload
increases for enforcement, financial oversight (including
routine exams and review of plans' MLR), licensing, and
premium rate review.
5)The California Department of Insurance (CDI). There is no CDI
estimate at this time because there are no Medi-Cal managed
care plans regulated by CDI. In order to qualify to sell a
bridge product, a carrier must first be a participant in
Medi-Cal managed care. It is unknown whether this could
change in the future.
COMMENTS : This bill is sponsored by the California Health and
Human Services Agency as one of the options to be considered in
the special session on health care reform implementation.
According to the author, this bill would establish a bridge
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health insurance plan for low-income individuals, the parents of
Medi-Cal and HFP-eligible individuals, and individuals moving
from Medi-Cal coverage to subsidized coverage through Covered
California. The author states that a bridge plan is a Covered
California product that promotes continuity of care, provides an
additional coverage choice to hard-working Californians, and
reduces the negative effects of "churning" back and forth
between systems of coverage where individuals are required to
shift health plans and health coverage programs because of
changes in their household income. By allowing individuals to
remain within their current health plan when they shift health
subsidy programs, this bill will prevent disruptions in
individuals' provider networks and improve continuity of care.
In addition, the author argues this bill would make it more
likely that Covered California-eligible parents of Medi-Cal
enrolled children would be covered by a single health plan with
the same provider network. The author states there are a number
of life experiences that affect an individual's income
eligibility for health subsidy programs (through Medi-Cal and
Covered California), such as the birth of a child, marriage or
divorce, getting or losing a job or receiving a pay raise or pay
reduction, and the aging out of a child from coverage.
The author states that in addition to promoting continuity of
care, this bill is needed to potentially provide a more
affordable health plan choice, which will increase the number of
individuals signing up for coverage (particularly individuals
moving from no-cost Medi-Cal to paying premiums in Covered
California), and therefore expand enrollment within Covered
California. Finally, the author argues that this bill will
provide protection for the safety net. Specifically, the author
states that even after full implementation of health care
reform, and under a best case scenario, an estimated three to
four million individuals will remain uninsured in California.
The bridge plan can help core safety net providers like public
hospital systems continue to serve the remaining uninsured, by
contributing to a diverse payor mix with Covered California
enrollees.
Beginning in 2014, individuals purchasing coverage through
Covered California with incomes up to 400% of the FPL
(approximately $45,690 for an individual in 2013) are eligible
for premium tax credits. The value of the tax credit is based
on the premium for the second lowest cost silver plan in Covered
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California in the area where the person is eligible to purchase
coverage. The premium tax credit caps the amount a person is
required to spend on premiums for the second lowest cost silver
plan. For example, individuals with incomes between 150% and
200% of the FPL would pay no more than 4% to 6.3%, respectively,
of their income on premiums (approximately $57 to $121 per
month) for the second lowest cost silver plan. The Patient
Protection and Affordable Care Act (ACA) also provides
cost-sharing subsidies for enrollees with incomes less than 250%
of the FPL who are enrolled in silver plans. These subsidies
reduce the out-of-pocket costs (co-payments and deductibles) an
eligible Covered California enrollee pays when receiving health
care services.
According to the author, despite the premium and cost-sharing
subsidies available through Covered California, there is a
concern that low-income individuals will have difficulty
affording even subsidized premiums, which will adversely affect
enrollment in Covered California. Additionally, significant
churning between Medi-Cal and Covered California income
eligibility and low Medi-Cal health plan participation in
Covered California will require individuals experiencing a
change in income to switch health plans and potentially health
care provider networks. The federal Centers for Medicare &
Medicaid Services (CMS) indicated that a state could allow a
Medicaid (Medi-Cal in California) health plan to offer QHPs in
the Exchange on a limited-enrollment basis to certain
populations. CMS stated an Exchange may allow an issuer with a
state Medicaid managed care organization contract to offer a QHP
as a Medicaid bridge plan under limited terms consistent with
this bill.
Federal premium subsidies in Covered California are based on the
individual's income, and cap the amount an individual has to
spend on the second lowest cost silver plan. The difference
between what the individual pays for the second lowest cost
silver plan and the actual cost of the premium is paid by the
federal premium subsidy. Individuals can use the dollar amount
of the federal premium subsidy to buy another plan (in the
platinum, gold, silver, or bronze tiers) but must pay the
difference between the federal premium subsidy amount and the
actual premium. In addition to the federal premium subsidies,
individuals with incomes at or below 250% of the FPL receive
cost-sharing subsidies (that lower the average amount an
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individual would pay out-of-pocket for co-payments, co-insurance
and deductibles). However, individuals only receive
cost-sharing subsidies in the silver benefit tier, so
individuals are likely to buy coverage in this benefit tier. In
response to questions to the Center for Consumer Information &
Insurance Oversight (CCIIO) at CMS, CCIIO staff stated that as
part of considering when to certify a bridge plan as a QHP, the
Exchange must ensure that bridge plan eligible individuals are
not disadvantaged in terms of the buying power of their advance
payments of premium tax credits. This bill provides that the
bridge plan product must have a cost at or less than the
lowest-cost silver. CCIIO staff also advised that limits based
on an exact amount or percentage discount may run afoul of the
ACA prohibition on price regulation.
On May 23, 2013, Covered California released a booklet outlining
health plans and rates for 2014. Contrary to predictions of
high premiums in the Exchange (the Congressional Budget Office
predicted monthly rates of $433, and a report by Milliman
predicted monthly rates of $450), the rates released by Covered
California included a statewide average for the second-cheapest
silver plan of $325 per month, or $3,900 per year (average
across all rating regions and age groups). Introducing a bridge
plan may reduce the federal subsidy for bridge-eligible
individuals. This is because the bridge plan is required to be
the least expensive silver plan on the market, which makes the
plan that was previously the cheapest would then be the
benchmark plan for calculation of the premium subsidy. Assuming
an even distribution of bridge-eligible individuals across
rating regions, the federal subsidy for bridge-eligible
individuals would be reduced by the difference between the
averages for the two lowest-priced silver plans. (Because the
introduction of a bridge plan is optional under this bill, this
average will depend on how many bridge plans are actually
offered and where they are offered.) This bill requires the
Exchange to use its selective contracting authority when
certifying bridge plans, with the intent that negotiated premium
rates would result in a patient premium contribution that is
equal to or lower than the lowest-cost silver. This could
result in the availability of a bridge plan that is more
affordable than the lowest-cost silver plan would have otherwise
been. At worst, it will result in a plan that is equal in cost.
The reduced value of the premium is offset by the opportunity
this provides for continuity of care for the person who is no
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longer eligible for Medi-Cal.
The Western Center on Law and Poverty (Western Center) supports
this bill's limitation on the premiums charged for bridge plans
to ensure that consumers' premium contribution is the same or
less than what they would pay in the lowest cost silver plan
without the bridge. The Western Center argues that this ensures
that beneficiaries eligible for the bridge will not have the
purchasing power of their tax credits undermined. However,
Western Center argues that this provision does nothing to ensure
greater affordability for the bridge plan than the lowest cost
silver plan. Western Center urges that this bill be amended to
set a specific threshold of premium differential to achieve the
stated goal of better premium affordability and that Covered
California use its selective contracting authority to only
approve bridge plans that have at least a 15% price differential
with the second lowest cost silver plan. Even with a 14% price
differential, Western Center writes, consumers at 200% FPL would
pay a premium of $44 to $58 per month, still a cost-prohibitive
amount for some consumers at this income level. Anthem Blue
Cross believes the 85% MLR requirement should be eliminated,
given that plans will already need to comply with the 80%
federal MLR requirement and further states that the proposed 85%
standard does not account for the additional requirements
affecting plans offered in the Exchange.
The American Cancer Society Cancer Action Network writes in
support that continuity of coverage is essential in order to
achieve positive health outcomes for all individuals, but even
more so for individuals with a history of complex health issues,
including cancer, and that this bill will keep low-income
consumers enrolled in Covered California and connected to the
health care system. Also in support, the California Association
of Public Hospitals and Health Systems (CAPH) writes that the
bridge plan will help ensure that many low-income individuals
and families will be able to afford plans offered through
Covered California. CAPH argues that the bridge-eligible
population has minimal room in their monthly budget for health
care premiums, and that developing a more affordable option for
these low-income families will make a big difference in whether
or not they enroll. In addition, CAPH writes that the bridge
plan will help core safety net providers like public hospital
systems continue to serve the state's remaining uninsured
(estimated at three to four million individuals) by contributing
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to a diverse payor mix with Covered California enrollees.
Analysis Prepared by : Marjorie Swartz and Benjamin Russell /
HEALTH / (916) 319-2097
FN: 0001270