BILL ANALYSIS Ó SB 145 Page 1 (Without Reference to File) SENATE THIRD READING SB 145 (Pan) As Amended September 10, 2015 Majority vote SENATE VOTE: Vote not relevant ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Health | | | | | | | | | |(vote not | | | | |relevant) | | | | | | | | | |----------------+-----+----------------------+--------------------| |Judiciary | | | | | | | | | |(vote not | | | | |relevant) | | | | | | | | | SB 145 Page 2 |----------------+-----+----------------------+--------------------| |Appropriations | | | | | | | | | |(vote not | | | | |relevant) | | | | | | | | | |----------------+-----+----------------------+--------------------| |Health |12-4 |Bonta, Bonilla, |Maienschein, | | | |Burke, Chiu, Gomez, |Lackey, Patterson, | | | |Gonzalez, Nazarian, |Steinorth | | | |Ridley-Thomas, | | | | |Rodriguez, Santiago, | | | | |Thurmond, Wood | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations | | Gomez, Bloom, Bonta, | Bigelow, Chang, | | |11-5 |Calderon, Daly, |Gallagher, Jones, | | | | |Wagner | | | | | | | | |Eduardo Garcia, | | | | |Holden, Quirk, | | | | |Rendon, Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------ 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. SB 145 Page 3 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, 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. 5)Sunsets on January 1, 2021. FISCAL EFFECT: This bill, as amended, has not been analyzed by a fiscal committee. COMMENTS: 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 provides for good public and fiscal policy for both farm workers and taxpayers. SB 145 Page 4 RFK Medical Plan. Taft-Hartley plans are subject to federal law, the Employee Retirement Income Security Act of 1974, 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, 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 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 is no longer allowed to keep the $70,000 limit in place. According to the UFW, the RFK Medical Plan obtained a federal waiver allowing it to keep the $70,000 limit in place until 2014. 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. Stop-loss insurance and previous budget actions. Stop-loss SB 145 Page 5 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. 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. 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 $70,000 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 SB 145 Page 6 2015), 17 cases exceeded the $70,000 threshold. The total payments made for these 17 cases were $1.4 million. 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. 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. Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097 FN: 0002403 SB 145 Page 7