BILL ANALYSIS                                                                                                                                                                                                    



                                                                     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