BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 1005 (Lara) - Health care coverage: immigration status. Amended: April 22, 2014 Policy Vote: Health 6-1 Urgency: No Mandate: Yes Hearing Date: May 19, 2014 Consultant: Brendan McCarthy This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 1005 would extend Medi-Cal eligibility to individuals who would otherwise be eligible, except for their immigration status. The bill would also create a new health benefit exchange, to provide subsidized health care coverage to individuals who cannot purchase health care coverage through Covered California due to their immigration status Fiscal Impact: The fiscal estimates below are subject to a great deal of uncertainty. The rates at which undocumented immigrants are likely to apply for either Medi-Cal or subsidized coverage are unknown at this time and are likely to be heavily influenced by concerns over coming to the attention of immigration authorities and language barriers. In addition, the age and health status of those who ultimately would enroll in Medi-Cal or subsidized coverage will have a significant impact on the costs to provide coverage. At this time, there is limited information available to accurately project the cost to provide coverage to this population. Likely annual increase in Medi-Cal spending between $500 million and $900 million per year (General Fund). Under current law, undocumented immigrants are eligible for limited scope Medi-Cal benefits such as Emergency Medi-Cal and Pregnancy-Only Medi-Cal. Under federal law, federal matching funds are available for those services. This analysis assumes that 90 percent of those who currently receive these services transition to full-scope Medi-Cal under the bill and that the federal government allows the state to continue to draw down federal funding to offset additional state costs under the bill. In addition, this analysis assumes that between 20 percent and 40 percent of the undocumented population not receiving limited scope SB 1005 (Lara) Page 1 Medi-Cal and who would otherwise be eligible for Medi-Cal would enroll. This analysis assumes that the population enrolling in Medi-Cal under the bill would have a relatively low per member per month cost of $190, given that undocumented immigrants tend to be younger and healthier than the general population and tend to use fewer health care services than legal residents Likely annual costs of $200 million to $400 million per year to provide subsidized coverage through the new health benefit exchange created by the bill (General Fund). This analysis assumes that a relatively low percentage of eligible individuals and families would apply for coverage, between 20 percent and 40 percent of the eligible population. The analysis assumes that the cost to subsidize this coverage would be about $3,000 per year. (This is the projected average annual subsidy that the federal government will provide to California consumers purchasing subsidized coverage through Covered California.) While this population is likely to be younger and healthier than the general population, current requirements that health plans and insurers pool their risks across the market would likely mean that this population would pay similar rates (and the state would pay similar subsidies) as the larger population of consumers purchasing coverage through Covered California. Likely annual costs to operate the new health benefit exchange of $20 million to $40 million per year, based on projected enrollment and the current costs to operate Covered California (General Fund). Likely increased tax revenues to the state of $85 million to $110 million per year. The state levies a tax on managed care plans, in lieu of a sales tax. Since almost all new Medi-Cal enrollees and exchange enrollees would be enrolled in managed care plans, the state will receive tax revenue from this additional enrollment in managed care plans (including taxes on the premium contributions made directly by enrollees for coverage provided through the new exchange). Unknown, but potentially significant savings to the state under realignment (General Fund). Under current law, the SB 1005 (Lara) Page 2 state has set up a system to direct funds from the counties to the state, under the premise that expansion of Medi-Cal will reduce county expenditures for health care services to the uninsured. This process is generally governed by formulas that take into account historic and actual expenses by the counties. Under the system, there is a maximum amount of funding that can be redirected to the state. By expanding Medi-Cal coverage, this bill will further reduce county health care expenditures and should increase redirected funding to the state. The size of this impact is unknown, and would depend on enrollment in Medi-Cal, actual reductions in county spending, and the amount of additional redirections that would be allowed under the current system. 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 their parents with low incomes, as well as blind, disabled, and certain other populations. Generally, the federal government provides a 50 percent federal match for state expenditures. Pursuant to the federal Affordable Care Act, California has opted to expand eligibility for Medi-Cal up to 138 percent of the federal poverty level and to include childless adults. The Affordable Care Act provides a significantly enhanced federal match for the Medi-Cal expansion. Under the law, the federal government will pay for 100 percent of the cost of the Medi-Cal expansion in 2013-14, declining to a 90 percent federal match in the 2020 federal fiscal year and thereafter. With the exception of certain populations (for example, individuals eligible for limited scope Medi-Cal benefits or individuals dually eligible for Medi-Cal and Medicare in most counties), managed care is the primary system for providing Medi-Cal benefits. The Department estimates that in 2014-15, 7.5 million Medi-Cal beneficiaries (73 percent of total enrollment) will receive care through the managed care system. Federal law generally prohibits the use of federal matching funds for services provided to undocumented immigrants (with certain exceptions such as emergency coverage or pregnancy-only coverage). Under the federal Affordable Care Act states are required to SB 1005 (Lara) Page 3 establish American Health Benefit Exchanges. If a state does not create an Exchange, the federal government will do so. Within the Exchanges, individuals will be able to purchase health care coverage with standardized benefit packages and actuarial values. In addition, individuals with incomes between 100 percent and 400 percent of the federal poverty level will be eligible for subsidies for coverage purchased in the Exchanges. California has established its own California Health Benefit Exchange (referred to as "Covered California"). In order to establish eligibility for subsidies, Covered California operates call centers, contracts with counties, and utilizes certified insurance agents and certified enrollment counsellors to help consumers navigate the eligibility and enrollment process. The Affordable care act prohibits undocumented immigrants from purchasing coverage through health benefit exchanges set up with federal grant funds or from receiving federal tax subsidies through the exchanges. Proposed Law: SB 1005 would extend Medi-Cal eligibility to individuals who would otherwise be eligible, except for their immigration status. The bill would also create a new health benefit exchange, to provide subsidized health care coverage to individuals who cannot purchase health care coverage through Covered California due to their immigration status Specific provisions of the bill would: Make individuals who would be eligible for Medi-Cal except for their immigration status eligible for full-scope Medi-Cal; Require Medi-Cal benefits to be paid for with state funds, if federal matching funds are not available; Create a new California Health Exchange Program for All Californians, to be governed by the existing governing board of Covered California; State legislative intent to provide coverage for individuals who would be eligible for subsidized coverage through Covered California, except for their immigration status; Require the governing board to take specified steps to set up the new exchange; Generally apply all the market rules and procedures governing qualifying health plans sold through Covered SB 1005 (Lara) Page 4 California to apply to plans sold through the new exchange; Establish a new special fund to support the new exchange and continuously appropriates monies in the fund to the new exchange. Staff Comments: Current federal law allows states to apply for "waivers" of requirements of the federal Social Security Act. This process allows states, on a case by case basis, to make changes to their Medicaid program with the approval of the federal Centers for Medicare and Medicaid Services. In general, for the federal government to approve a waiver, the state must demonstrate that total federal costs will not exceed fee-for-service equivalent costs to the federal government over the period of the waiver. Presumably, the Department of Health Care Services would need to negotiate a waiver with the federal government to allow the state to continue to draw down the federal funding it currently receives to pay for limited-scope Medi-Cal benefits for undocumented immigrants. If the Department was unable to negotiate such a waiver, and the state was denied those funds, the costs indicated above would be as much as $700 million per year higher.