BILL ANALYSIS Ó
SB 145
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(Without Reference to File)
SENATE THIRD READING
SB
145 (Pan)
As Amended September 10, 2015
Majority vote
SENATE VOTE: Vote not relevant
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|Committee |Votes|Ayes |Noes |
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|----------------+-----+----------------------+--------------------|
|Health | | | |
| | | | |
|(vote not | | | |
|relevant) | | | |
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|----------------+-----+----------------------+--------------------|
|Judiciary | | | |
| | | | |
|(vote not | | | |
|relevant) | | | |
| | | | |
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|----------------+-----+----------------------+--------------------|
|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 | |
| | | | |
| | | | |
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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.
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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.
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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
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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
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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
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