Amended in Assembly June 16, 2015

Senate BillNo. 98


Introduced by Committee on Budget and Fiscal Review

January 9, 2015


begin deleteAn act relating to the Budget Act of 2015. end deletebegin insertAn act to amend Sections 22775, 22781, 22844, 22865, 22866, and 22940 of, to add Section 22843.1 to, and to repeal Section 12439 of, the Government Code, relating to state government, and making an appropriation therefor, to take effect immediately, bill related to the budget.end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 98, as amended, Committee on Budget and Fiscal Review. begin deleteBudget Act of 2015. end deletebegin insertState government.end insert

begin insert

(1) The Public Employees’ Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees’ Retirement System, governs the funding and provision of postemployment health care benefits for eligible retired public employees and their families. PEMHCA defines “family member” for these purposes. PEMHCA authorizes the board to contract with carriers offering health benefit plans and prohibits employees, annuitants, and their family members who are eligible for Medicare, as specified, from enrolling in a basic health benefit plan. PEMHCA requires the board to make certain notifications and reports to the Legislature in connection with health benefit plans offered pursuant to its provisions.

end insert
begin insert

This bill would clarify the definition of family for the purposes of PEMHCA by specifically excluding former spouses and former domestic partners. The bill would require the employing office, as specified, of a state employee or state annuitant, pursuant to standards established by the Department of Human Resources, to possess documentation verifying eligibility of an employee’s family member prior to the enrollment of a family member in a health benefit plan and to verify continued eligibility pursuant to a specified schedule. The bill would prohibit the board from granting further exceptions to the rule against enrolling in employees, annuitants, and their family members who are eligible for Medicare, as specified, in a basic health benefit plan. The bill would revise the entities to which the board is required to provide notification of approval of proposed benefit and premium readjustments to exclude the Legislature as a whole and to instead require provision of an initial estimate of proposed changes in writing to the Joint Legislative Budget Committee, the chairpersons of the committees and subcommittees in each house of the Legislature that consider the Public Employees’ Retirement System’s budget and activities, the State Controller, the Director of Finance, and the Legislative Analyst. The bill would specify the latest date that this notification may take place. The bill would require the board to provide a specified, detailed report to the Legislature and the Director of Finance annually, on November 1, regarding the health benefit plans it provides.

end insert
begin insert

(2) PEMHCA establishes the Annuitants’ Health Care Coverage Fund, which is continuously appropriated for the purpose of prefunding of health care coverage for annuitants, including administrative costs. PEMHCA defines “prefunding” for these purposes.

end insert
begin insert

This bill would prohibit the use of certain state funds in the Annuitants’ Health Care Coverage Fund for the payment of benefits until the earlier of 2 specified dates. The bill would revise the definition of prefunding to include employee as well as employer payments and to provide that payments may fund the actuarially determined normal costs of postemployment health care benefits. By providing a new funding source for a continuously appropriated fund, this bill would make an appropriation.

end insert
begin insert

(3) Existing law prescribes the duties of the Controller, which generally regard supervision of the fiscal concerns of the state. Existing law requires the Controller to abolish a state position that is vacant for 6 consecutive monthly pay periods on the following July 1, and permits the Director of Finance to authorize reestablishment of a position abolished pursuant to this authority under certain conditions. Among other things, existing law requires the Controller to reestablish a position abolished pursuant to this authority if the director of the department in which that position existed prior to abolishment makes a certification by August 15, as specified.

end insert
begin insert

This bill would repeal the provisions pertaining to vacant positions described above.

end insert
begin insert

This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.

end insert
begin delete

This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2015.

end delete

Vote: majority. Appropriation: begin deleteno end deletebegin insertyesend insert. Fiscal committee: begin deleteno end deletebegin insertyesend insert. State-mandated local program: no.

The people of the State of California do enact as follows:

P3    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 12439 of the end insertbegin insertGovernment Codeend insertbegin insert is
2repealed.end insert

begin delete
3

12439.  

(a) Beginning July 1, 2002, any state position that is
4vacant for six consecutive monthly pay periods shall be abolished
5by the Controller on the following July 1. The six consecutive
6monthly pay periods may occur entirely within one fiscal year or
7between two consecutive fiscal years.

8(b) The Director of Finance may authorize the reestablishment
9of any positions abolished pursuant to this section if one or more
10of the following conditions existed during part or all of the six
11consecutive monthly pay periods:

12(1) There was a hiring freeze in effect during part or all of the
13six consecutive pay periods.

14(2) The department has diligently attempted to fill the position,
15but was unable to complete all the steps necessary to fill the
16position within six months.

17(3) The position has been designated as a management position
18for purposes of collective bargaining and has been held vacant
19pending the appointment of the director, or other chief executive
20officer, of the department as part of the transition from one
21Governor to the succeeding Governor.

22(4) The classification of the position is determined to be
23hard-to-fill.

24(5) Late enactment of the budget causes the department to delay
25filling the position.

26(c) The Controller shall reestablish any position for which the
27director of the department in which that position existed prior to
P4    1abolishment certifies by August 15 that one or more of the
2following conditions existed during part or all of the six
3consecutive pay periods:

4(1) The position is necessary for directly providing 24-hour care
5in an institution operated by the state.

6(2) The position is necessary for the state to satisfy any licensing
7requirements adopted by a local, state, or federal licensing or other
8regulatory agency.

9(3) The position is directly involved in services for public health,
10public safety, or homeland security.

11(4) The position is being held vacant because the previous
12incumbent is eligible to exercise a mandatory right of return from
13a leave of absence as may be required by any provision of law
14including, but not limited to, leaves for industrial disability,
15nonindustrial disability, military service, pregnancy, childbirth, or
16care of a newborn infant.

17(5) The position is being held vacant because the department
18has granted the previous incumbent a permissive leave of absence
19as may be authorized by any provision of law including, but not
20limited to, leaves for adoption of a child, education, civilian
21military work, or to assume a temporary assignment in another
22agency.

23(6) Elimination of the position will directly reduce state revenues
24or other income by more than would be saved by elimination of
25the position.

26(7) The position is funded entirely from moneys appropriated
27pursuant to Section 221 of the Food and Agricultural Code, was
28established with the Controller pursuant to Section 221.1 of the
29Food and Agricultural Code, and directly responds to unforeseen
30agricultural circumstances requiring the relative expertise that the
31position provides.

32(d) Each department shall maintain for future independent audit
33all records on which the department relied in determining that any
34position or positions satisfied one or more of the criteria specified
35in paragraphs (1) to (6), inclusive, of subdivision (c).

36(e) The only other exceptions to the abolishment required by
37subdivision (a) are those positions exempt from civil service or
38those instructional and instruction-related positions authorized for
39the California State University. No money appropriated by the
40subsequent Budget Act shall be used to pay the salary of any
P5    1otherwise authorized state position that is abolished pursuant to
2this section.

3(f) The Controller, no later than September 10 of each fiscal
4year, shall furnish the Department of Finance in writing a
5preliminary report of any authorized state positions that were
6abolished effective on the preceding July 1 pursuant to this section.

7(g) The Controller, no later than October 15 of each fiscal year,
8shall furnish the Joint Legislative Budget Committee and the
9Department of Finance a final report on all positions that were
10abolished effective on the preceding July 1.

11(h) Departments shall not execute any personnel transactions
12for the purpose of circumventing the provisions of this section.

13(i) Each department shall include a section discussing its
14compliance with this section when it prepares its report pursuant
15to Section 13405.

16(j) As used in this section, department refers to any department,
17agency, board, commission, or other organizational unit of state
18government that is empowered to appoint persons to civil service
19positions.

20(k) This section shall become operative July 1, 2002.

end delete
21begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 22775 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
22read:end insert

23

22775.  

“Family member” means an employee’s or annuitant’s
24spouse or domestic partner and any child, including an adopted
25child, a stepchild, or recognized natural child. The board shall, by
26regulation, prescribe age limits and other conditions and limitations
27pertaining to children.begin insert “Family member” does not include a former
28spouse or former domestic partner of an employee or annuitant.end insert

29begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 22781 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
30read:end insert

31

22781.  

“Prefunding” means the making of periodic payments
32by an employerbegin insert or employeeend insert to partially or completelybegin insert fund orend insert
33 amortize thebegin insert actuarially determined normal costs orend insert unfunded
34actuarial obligation of the employer forbegin insert postemploymentend insert health
35begin insert careend insert benefits provided to annuitants and their family members.

36begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 22843.1 is added to the end insertbegin insertGovernment Codeend insertbegin insert, to
37read:end insert

begin insert
38

begin insert22843.1.end insert  

(a) Pursuant to standards established by the
39Department of Human Resources, the employing office of a state
40employee or state annuitant shall possess documentation verifying
P6    1eligibility of an employee’s or annuitant’s family member prior to
2the enrollment of a family member in a health benefit plan. The
3employing office shall maintain the verifying documentation in the
4employee or annuitant’s official personnel or member file.

5(b) The employing office of the state employee or state annuitant
6shall obtain verifying documentation to substantiate the continued
7eligibility of family members as follows:

8(1) At least once every three years for the following family
9members:

10(A) Spouses.

11(B) Domestic partners.

12(C) Children and stepchildren.

13(D) Domestic partner children.

14(2) At least once annually for other children for whom the state
15employee or state annuitant has assumed a parent-child
16relationship.

17(c) For purposes of this section, the Public Employees’
18Retirement System is the employing office of a state annuitant.

end insert
19begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 22844 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
20read:end insert

21

22844.  

(a) Employees, annuitants, and family members who
22become eligible to enroll on or after January 1, 1985, in Part A
23and Part B of Medicarebegin delete mayend deletebegin insert shallend insert not be enrolled in a basic health
24benefit plan. If the employee, annuitant, or family member is
25enrolled in Part A and Part B of Medicare, he or she may enroll
26in a Medicare health benefit plan.

27(b) Employees, annuitants, and family members enrolled in a
28prescription drug plan under Part D of Medicarebegin delete mayend deletebegin insert shallend insert not be
29enrolled in a board-approved health benefit plan. This subdivision
30does not apply to an individual enrolled in a board-approved or
31offered health benefit plan that provides a prescription drug plan
32or qualified prescription drug coverage under Part D of Medicare
33as part of its benefit design.

34(c) This section does not apply to employees and family
35members that are specifically excluded from enrollment in a
36Medicare health benefit plan by federal law orbegin insert federalend insert regulation.

begin insert

37(d) The board shall not grant any further exemptions to this
38section after July 1, 2015.

end insert
39begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 22865 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
40read:end insert

P7    1

22865.  

begin deletePrior end deletebegin insertNot later than 30 days prior end insertto the approval of
2begin delete proposedend delete benefits and premium readjustments authorized under
3Section 22864, the board shallbegin delete notifyend deletebegin insert provide an initial estimate
4of proposed changes and costs in writing toend insert
thebegin delete Legislature,end deletebegin insert Joint
5Legislative Budget Committee,end insert
thebegin insert chairpersons of the committees
6and subcommittees in each house of the Legislature that consider
7the Public Employees’ Retirement System’s budget and activities,
8the State Controller, theend insert
Trustees of the California State University,
9begin delete andend delete the Department of Humanbegin delete Resourcesend deletebegin insert Resources, the Directorend insert
10 ofbegin insert Finance, andend insert thebegin delete proposed changes in writing.end deletebegin insert Legislative
11Analyst.end insert

12begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 22866 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
13read:end insert

14

22866.  

begin insert(a)end insertbegin insertend insert The board shall report to the Legislaturebegin insert and the
15Director of Financeend insert
annually, on November 1, regarding the
16begin delete success or failure of eachend delete healthbegin delete benefit plan.end deletebegin insert benefits program.end insert
17 The report shall include, but not be limitedbegin delete to, the costsend delete to thebegin delete board
18and to participants, the degree of satisfaction of members and
19annuitants with the health benefit plans and with the quality of the
20care provided, as determined by a representative sampling of
21participants, and the level of accessibility to preferred providers
22for rural members who do not have access to health maintenance
23organizations.end delete
begin insert following:end insert

begin insert

24(1) General overview of the health benefits program, including,
25but not limited to, the following:

end insert
begin insert

26(A) Description of health plans and benefits provided, including
27essential and nonessential benefits as required by state and federal
28law, member expected out-of-pocket expenses, and actuarial value
29by metal tier as defined by the federal Patient Protection and
30Affordable Care Act (Public Law 111-148), as amended by the
31federal Health Care and Education Reconciliation Act of 2010
32(Public Law 111-152).

end insert
begin insert

33(B) Geographic coverage.

end insert
begin insert

34(C) Historic enrollment information by basic and medicare
35plans, by state and contract agencies, by active and retired
36membership, and by subscriber and dependent tier.

end insert
begin insert

37(D) Historic expenditures by basic and medicare plans, by state
38and contract agencies, by active and retired membership, and by
39subscriber and dependent tier.

end insert
begin insert

P8    1(2) Reconciliation of premium increases or decreases from the
2prior plan year, and the reasons for those changes.

end insert
begin insert

3(A) Description of benefit design and benefit changes, including
4prescription drug coverage, by plan. The description shall detail
5whether benefit changes were required by statutory mandate,
6federal law, or an exercise of the board’s discretion, the costs or
7savings of the benefit change, and the impact of how the changes
8fit into a broader strategy.

end insert
begin insert

9(B) Discussion of risk.

end insert
begin insert

10(C) Description of medical trend changes in aggregate service
11categories for each plan. The aggregate service categories used
12shall include the standard categories of information collected by
13the board, consisting of the following: inpatient, emergency room,
14ambulatory surgery, office, ambulatory radiology, ambulatory
15lab, mental health and substance abuse, other professional,
16prescriptions, and all other service categories.

end insert
begin insert

17(D) Reconciliation of past year premiums against actual
18enrollments, revenues, and accounts receivables.

end insert
begin insert

19(3) Overall member health as reflected by data on chronic
20conditions.

end insert
begin insert

21(4) The impact of federal subsidies or contributions to the health
22care of members, including Medicare Part A, Part B, Part C, or
23Part D, low-income subsidies, or other federal program.

end insert
begin insert

24(5) The cost of benefits beyond Medicare contained in the
25board’s Medicare supplemental plans.

end insert
begin insert

26(6) A description of plan quality performance and member
27satisfaction, including, but not limited to, the following:

end insert
begin insert

28(A) The Healthcare Effectiveness Data and Information Set,
29referred to as HEDIS.

end insert
begin insert

30(B) The Medicare star rating for Medicare supplemental plans.

end insert
begin insert

31(C) The degree of satisfaction of members and annuitants with
32the health benefit plans and with the quality of the care provided,
33to the extent the board surveys participants.

end insert
begin insert

34(D) The level of accessibility to preferred providers for rural
35members who do not have access to health maintenance
36organizations.

end insert
begin insert

37(E) Other applicable quality measurements collected by the
38board as part of the board’s health plan contracts.

end insert
begin insert

P9    1(7) A description of risk assessment and risk mitigation policy
2related to the board’s self-funded and flex-funded plan offerings,
3including, but not limited to the following:

end insert
begin insert

4(A) Reserve levels and their adequacy to mitigate plan risk.

end insert
begin insert

5(B) The expected change in reserve levels and the factors leading
6to this change.

end insert
begin insert

7(C) Policies to reduce excess reserves or rebuild inadequate
8reserves.

end insert
begin insert

9(D) Decisions to lower premiums with excess reserves.

end insert
begin insert

10(E) The use of reinsurance and other alternatives to maintaining
11reserves.

end insert
begin insert

12(8) Description and reconciliation of administrative
13expenditures, including, but not limited to, the following:

end insert
begin insert

14(A) Organization and staffing levels, including salaries, wages,
15and benefits.

end insert
begin insert

16(B) Operating expenses and equipment expenditure items,
17including, but not limited to, internal and external consulting and
18intradepartmental transfers.

end insert
begin insert

19(C) Funding sources.

end insert
begin insert

20(D) Investment strategies, historic investment performance, and
21expected investment returns of the Public Employees’ Contingency
22Reserve Fund and the Public Employees’ Health Care Fund.

end insert
begin insert

23(9) Changes in strategic direction and major policy initiatives.

end insert
begin insert

24(b) A report submitted pursuant to subdivision (a) shall be
25provided in compliance with Section 9795.

end insert
26begin insert

begin insertSEC. 8.end insert  

end insert

begin insertSection 22940 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
27read:end insert

28

22940.  

begin insert(a)end insertbegin insertend insert There is in the State Treasury the Annuitants’
29Health Care Coverage Fund that is a trust fund and a retirement
30fund, within the meaning of Section 17 of Article XVI of the
31California Constitution.begin delete Notwithstandingend deletebegin insert Subject to the limitation
32provided in subdivision (b), notwithstandingend insert
Section 13340, all
33moneys in the fund are continuously appropriated without regard
34to fiscal years to the board for expenditure for the prefunding of
35health care coverage for annuitants pursuant to this part, including
36administrative costs. The board has sole and exclusive control and
37power over the administration and investment of the Annuitants’
38Health Care Coverage Fund and shall make investments pursuant
39to Part 3 (commencing with Section 20000).

begin insert

P10   1(b) (1) Moneys accumulated in the designated state subaccounts
2of the fund, or a successor fund, that are derived from investment
3income shall not be used to pay benefits for state annuitants and
4dependents until the earlier of:

end insert
begin insert

5(A) With regard to a particular designated state subaccount,
6the date the funded ratio of the designated state subaccount reaches
7at least 100 percent as determined in that employer’s
8postemployment benefits actuarial valuation and then only for the
9purpose of paying benefits for state annuitants and dependents
10associated with that subaccount.

end insert
begin insert

11(B) July 1, 2046.

end insert
begin insert

12(2) For purposes of this subdivision, “designed state
13 subaccount” means a separate account maintained within the fund
14to identify prefunding contributions and assets attributable to a
15specified state collective bargaining unit or other state entity for
16the purpose of providing benefits to state annuitants and
17dependents associated with a specified collective bargaining unit
18or other state entity.

end insert
begin insert

19(3) This subdivision shall not be construed as prohibiting an
20alternative funding strategy agreed to in a written memorandum
21of understanding.

end insert
22begin insert

begin insertSEC. 9.end insert  

end insert
begin insert

This act is a bill providing for appropriations related
23to the Budget Bill within the meaning of subdivision (e) of Section
2412 of Article IV of the California Constitution, has been identified
25as related to the budget in the Budget Bill, and shall take effect
26immediately.

end insert
begin delete
27

SECTION 1.  

It is the intent of the Legislature to enact statutory
28changes relating to the Budget Act of 2015.

end delete


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