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
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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
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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
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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
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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.