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  

              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  

          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  
              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  
              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  

          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.