BILL ANALYSIS Ó
SB 145
Page 1
Date of Hearing: September 9, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
SB
145 (Pan) - As Amended August 31, 2015
SENATE VOTE: Not relevant.
SUBJECT: Robert F. Kennedy Farm Workers Medical Plan.
SUMMARY: Requires the Department of Health Care Services (DHCS)
to annually reimburse the Robert F. Kennedy Farmworkers Medical
Plan (RFK Medical Plan) for claim payments that exceed $70,000.
Specifically, this bill:
1)Requires DHCS to annually reimburse the RFK Medical Plan for
claim payments that exceed $70,000 made by the plan on behalf
of an eligible employee or dependent for a single episode of
care on or after September 1, 2016.
2)Limits reimbursement to the RFK Medical Plan by the state to
no more than $3 million.
3)Requires the RFK Medical Plan, commencing after September 1,
2017, and annually thereafter, to submit to DHCS completed
data, verified by an independent certified public accountant,
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for claims paid by the plan for services during the preceding
year.
4)Requires DHCS to analyze the data to determine the aggregate
amount of claims that exceed $70,000 paid the plan on behalf
of an eligible employee or dependent for any separate episode
of care, and reimburse the plan that amount, up to $3 million,
within 60 days.
EXISTING LAW:
1)Provides for the regulation of health insurers by the
California Department of Insurance (CDI) under provisions of
the Insurance Code.
2)Establishes, pursuant to the state Insurance Code, regulatory
requirements for stop-loss insurance for small employers,
including on or after January 1, 2016, setting an individual
attachment point of $40,000 or greater and an aggregate
attachment point of the greater of $5,000 times the total
number of group members, 120% of expected claims, or $40,000;
and, exempts small employer stop-loss insurance issued prior
to September 1, 2013, from these attachment point
requirements.
3)Establishes, pursuant to federal law, the Employee Retirement
Income Security Act of 1974 (ERISA), which sets minimum
standards for most voluntarily established pension and health
plans in private industry, including Taft-Hartley
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Multi-Employer Health and Welfare Plans (Taft-Hartley plans).
Such plans are generally exempt from state insurance
regulation.
4)Establishes, pursuant to federal law, the Patient Protection
and Affordable Care Act (ACA) numerous insurance market
reforms in the individual and group markets, including
prohibitions on pre-existing condition exclusions, coverage of
dependents up to the age of 26, and prohibitions against
health insurers imposing annual and lifetime benefit limits.
FISCAL EFFECT: This bill, as amended, has not been analyzed by
a fiscal committee.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, 15 months ago,
the Legislature determined we could avoid state General Fund
(GF) Medi-Cal costs by $3.6 million if we made a one-time
appropriation of $3.2 million to the RFK Medical Plan, a farm
worker's health trust fund, to purchase stop-loss insurance.
The author states, through a second one-time appropriation to
the RFK Medical Plan in this year's state budget, we saved the
state's GF $4.1 million. The author states that this bill
reflects a longer-term strategy that will allow the state to
keep agricultural employer and farm worker contributions
flowing into health care, thereby allowing 13,000 farmworkers
and their families to preserve privately funded insurance.
The author argues that will save the state money in avoided
Medi-Cal costs. As such, the author concludes that this bill
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provides for good public and fiscal policy for both farm
workers and taxpayers.
2)BACKGROUND.
a) RFK Medical Plan. One way private sector unionized
employees obtain health and other benefits is through a
Taft-Hartley plan. Taft-Hartley plans are subject to the
federal ERISA, and thus are exempt from state insurance
laws. The RFK Medical Plan is a self-funded, self-insured
Taft-Hartley Plan that is subject to a collective
bargaining agreement between the United Farm Workers (UFW)
and multiple agricultural employers. According to the UFW,
the RFK Medical Plan provided health insurance to more than
13,000 people living in California farm worker families.
The ACA sets forth new standards for employer-sponsored
health coverage. Plans that were in existence prior to the
enactment of the ACA may be exempt from some ACA
requirements. These plans are referred to as
"grandfathered plans" and Taft-Hartley plans like the RFK
Medical Plan may obtain grandfathered status. However, all
employer-sponsored plans, including grandfathered plans,
are required to comply with certain provisions of the ACA,
including a prohibition on annual and lifetime benefit
limits.
The RFK Medical Plan had previously imposed annual limits
on benefits at $70,000. The purpose of the limit was to
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protect the financial solvency of the plan against high
claims costs that exceeded $70,000. In light of the ACA's
prohibition on annual limits, the RFK Medical Plan sought a
waiver from the federal government to keep the $70,000
limit in place. A waiver was granted, allowing the plan to
continue this benefit structure, but only until 2014.
Without the annual limit in place, the RFK Medical Plan is
at risk of claims costs that exceed $70,000.
According to the UFW, in addition to the federal waiver,
the RFK Medical Plan took other steps to sustain the plan
in light of the financial risk associated with the
high-cost claims. Specifically, the plan worked with both
union and employer partners to increase employer and
employee contributions to the RFK Medical Plan within the
maximum allowable limits for grandfathered Taft-Hartley
plans. Additionally, UFW states that the RFK Medical Plan
has continuously searched the market to try to purchase
stop-loss insurance in the private market, and is building
financial reserves through increasing the number of
beneficiaries, increasing contributions within allowable
limits, modifying benefits, and maintaining administrative
costs below 5% within the goal of eventually withstanding
larger claims.
b) Stop-loss insurance and previous budget actions.
Stop-loss insurance is commonly sold to employers that
self-insure their employee's health coverage.
Self-insurance involves greater risk to the employer since
employee health care costs could exceed expected estimates.
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In order for employers to minimize the risk involved with
self-insurance, insurance carriers sell stop-loss insurance
which covers claims in excess of a maximum dollar amount of
liability incurred by an employer for health care expenses.
This maximum dollar amount of employer liability is referred to
as an "attachment point." Attachment points can be based on the
health care claims of an individual employee or dependent, or
the aggregate health care claims for all covered employees and
dependents, or both.
The 2014-15 state budget included $3.2 million (special fund)
appropriation to the RFK Medical Plan for the purchase of
stop-loss insurance for any claims over the amount of $70,000.
Another one-time appropriation of $2.5 million was included in
the 2015/16 Budget for the same purpose. According to the
Assembly Budget Subcommittee #1, to secure the budget
appropriations, the RFK Medical Plan argued that there would be
off-setting savings in the Medi-Cal program. These arguments
were based on an assumption that the plan would not be
financially viable and dissolve without financial assistance to
purchase stop-loss insurance. If this occurred, the RFK Medical
Plan 's consultants assumed 50% of its members would be eligible
for Medi-Cal at a state cost of $4.7 million. Additionally, the
RFK Medical Plan argued that if it were to cease operating,
those insured by the plan not eligible for Medi-Cal would become
uninsured.
Rather than appropriating state funds to the RFK Medical
Plan for the purchase of stop-loss insurance, this bill
would require the state to instead reimburse the plan for
the claims that exceed the $70,000 attachment point for an
individual employee or dependent for a single episode of
care up to a total of $3 million. In other words, the
state would act as the stop-loss insurer for the RFK
Medical Plan. According to the UFW, the RFK Medical Plan
has one year of claims experience since it began to pay
claims above $70,000, and in the 2014 plan year (September
2014 to August 2015), 17 cases exceeded the $70,000
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threshold. The total payments made for these 17 cases were
$1.4 million.
c) Estimated Medi-Cal costs. According to the UFW, the
California Endowment estimated that, based on the number of
RFK Medical Plan enrollees eligible for Medi-Cal during the
2014 plan year, state costs to cover these enrollees would
be approximately $6.6 million.
According to DHCS, after reviewing the estimates, it could
not validate the assertions regarding the population that
would be eligible for Medi-Cal, or the overall savings
projected.
3)SUPPORT. The UFW is the sponsor of this bill, and states in
support that it ensures farm workers and their families who
are currently covered by the RFK Medical Plan continue to
obtain health benefits. The UFW argues that the ACA actually
reduced health care coverage for farm workers, and threatens
the UFW RFK Medical Plan, which has employer and union
trustees. The UFW states that by focusing on primary and
preventive care, the RFK Medical Plan has significantly
alleviated the burden on publicly-funded health resources in
its coverage areas. The UFW also argues that the Legislature
has determined that the RFK Medical Plan is the most efficient
and least expensive means to deliver health services to farm
workers and their families within the plan's coverage and that
it is in the state's interest to ensure these health services
continue.
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4)PREVIOUS LEGISLATION.
a) SB 75 (Committee on Budget and Fiscal Review), Chapter
18, Statutes of 2015, requires DHCS to allocate $2.5
million from the Major Risk Medical Insurance Fund, on a
one-time basis, to the RFK Medical Plan for purposes of
purchasing stop-loss insurance.
b) SB 870 (Committee on Budget and Fiscal Review), Chapter
40, Statutes of 2014, provides $3.2 million in one-time
funds from the Major Risk Medical Insurance Fund to the RFK
Medical Plan for purposes of purchasing stop-loss
insurance.
c) SB 161 (Ed Hernandez), Chapter 414, Statutes of 2013,
establishes regulatory requirements for stop-loss insurance
for small employers, including on or after January 1, 2016,
setting an individual attachment point of $40,000 or
greater and an aggregate attachment point of the greater of
$5,000 times the total number of group members, 120% of
expected claims, or $40,000; and, exempts small employer
stop-loss insurance issued prior to September 1, 2013, from
these attachment point requirements.
d) SB 1431 (De Leon) of 2012 would have set the stop-loss
insurance attachment point for small employers on policies
issued on or after January 1, 2012, at $45,000 for
individuals and the greater of $15,000 times the total
number of covered employees and dependents, 130% of
expected claims, or $60,000. SB 1431 died in the inactive
file on the Assembly Floor.
5)POLICY COMMENTS
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a) This bill sets a precedent for the state to act as a
stop-loss insurer. Under this bill, the state would act as
the stop-loss insurer for one single plan. This sets a new
precedent for the state and raises policy questions as to
whether or not it is the state's role to act as a stop-loss
insurer, and whether or not this policy should extend to
other plans that may be similarly situated as the RFK
Medical Plan.
b) Should the bill have a sunset date? Unlike previous
one-time budget actions appropriating funds to the RFK
Medical Plan to purchase stop-loss insurance on the private
market, this bill shifts the responsibility for direct
payment of claims exceeding $70,000 on the state in
perpetuity. The Committee may wish to amend the bill to
add a sunset date, perhaps a five-year sunset date, to
prevent the state from becoming the default payer of
high-cost claims for this plan on a permanent basis. A
sunset date also offers the RFK Medical Plan a timeline
under which it can continue to strive toward
self-sustainment, and report back its progress to the
Legislature.
c) Other proposed amendments.
i) Amend intent language. The proposed intent language
in the bill states that the Legislature has made a
determination that the RFK Medical Plan is the "most
efficient and least expensive means to deliver health
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care to farmworkers and their families?" However, while
the Legislature may have evaluated previous budget
actions and the current provisions proposed in this bill
in terms of costs as compared to the Medi-Cal program, it
is unclear that the Legislature has made this specific
determination. As such, the Committee may wish to
clarify the language as follows to more accurately
reflect the legislative intent associated with the bill's
provisions:
Proposed Section 1 (e):
The Legislature has determined that the plan is the most
an efficient and least expensive cost-effective means to
deliver health care services to farm workers and their
families within the plan's coverage areas. Thus, it is in
the state's interest to expand maintain the range of
health care services provided by the plan without
threatening the plan's financial viability.
ii) Technical amendment. The Committee may wish make
the following technical amendment for consistency
throughout the bill:
Proposed Health and Safety Section 100235 (c) (1):
If the department receives claims data from the plan
pursuant to subdivision (b), the department shall analyze
that data to determine the aggregate amount of claims
that exceed seventy thousand dollars ($70,000) paid by
the plan on behalf of an eligible employee or dependent
for any separate single episode of care.
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REGISTERED SUPPORT / OPPOSITION:
Support
United Farm Workers
Opposition
None on file.
Analysis Prepared by:Kelly Green / HEALTH / (916)
319-2097