BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 145    
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          |AUTHOR:        |Pan                                            |
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          |VERSION:       |September 10, 2015                             |
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          |HEARING DATE:  |September 11,  |               |               |
          |               |2015           |               |               |
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          |CONSULTANT:    |Teri Boughton                                  |
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          PURSUANT TO SENATE RULE 29.10

           SUBJECT  :  Robert F. Kennedy Farm Workers Medical Plan.

           SUMMARY  :1.  Requires the Department of Health Care Services (DHCS) to  
            annually reimburse the Robert F. Kennedy Farm Workers Medical  
            Plan (RFK Plan) for claim payments that exceed $70,000 made by  
            the RFK plan on behalf of an eligible employee or dependent  
            for a single episode of care on or after September 1, 2016.  
            Caps the reimbursement at $3 million per year.  Sunsets this  
            bill on January 1, 2021.
          
          Existing law:
          1)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.  Exempts small employer stop-loss  
            insurance issued prior to September 1, 2013, from these  
            attachment point requirements.  

          2)Provides $2.5 million in one-time funding to the RFK Plan to  
            purchase stop-loss insurance.

          3)Establishes under federal law, the Affordable Care Act (ACA),  
            which among other provisions, expands eligibility for Medicaid  
            (Medi-Cal in California), sets up health benefit exchanges,  
            and establishes reforms on private health insurance.
          
          This bill:
          1)Requires DHCS to annually reimburse the RFK Plan for claim  







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            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. Caps the reimbursement at $3  
            million per year.

          2)Requires the plan 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 from  
            September 1 to August 31, inclusive, to seek reimbursement  
            commencing after September 1, 2017, and annually thereafter.


          3)Requires DHCS to analyze claims data if received from the  
            plan, to determine the aggregate amount of claims that exceed  
            $70,000 paid by the plan on behalf of an eligible employee or  
            dependent for any separate episode of care.


          4)Requires no later than 60 days after DHCS receives claims data  
            submitted by the plan, DHCS to reimburse the plan the amount  
            determined pursuant to 3) above up to the amount of $3 million  
            per year.


          5)Includes  as legislative intent the following:


                  a)        The RFK Plan is a joint labor-management  
                    health plan for farm workers organized under Section  
                    302(c)(5) of the federal Labor Management Relations  
                    Act of 1947.


                  b)        This plan has been in existence for more than  
                    45 years and has provided vital health services to  
                    farm workers and their families, enabling them to lead  
                    healthier lives, make better use of their available  
                    income, and achieve self-sufficiency.


                  c)        The plan has focused on primary and preventive  
                    care and has significantly alleviated the burden on  
                    publicly funded health resources in the plan's  
                    coverage areas.









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                  d)        The plan has saved the state significant sums  
                    of money that would have otherwise been expended to  
                    provide health care.


                  e)        The Legislature has determined that the plan  
                    is an efficient and 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 maintain the range of  
                    health care services provided by the plan without  
                    threatening the plan's financial viability.


          6)Sunsets this bill on January 1, 2021.

           FISCAL  
          EFFECT  :  According to the Assembly Appropriations Committee,  
          General Fund costs of up to $3 million per year to DHCS to  
          reimburse the RFK Plan for episodes of high-cost care incurred  
          by the RFK Plan enrollees. 

           PRIOR VOTES  :
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          |Assembly Floor:                     |46 - 28                     |
          |------------------------------------+----------------------------|
          |Assembly Appropriations Committee:  |11 - 5                      |
          |------------------------------------+----------------------------|
          |Assembly Health Committee:          |12 - 4                      |
          |                                    |                            |
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          COMMENTS  :
          1)Author's statement.  According to the author, this bill  
            provides a longer-term strategy that will allow the state to  
            keep agricultural employer and farm worker contributions  
            flowing into health care, thereby allowing 16,000 farmworkers  
            and their families to preserve privately funded insurance. SB  
            145 will save the state money in avoided Medi-Cal costs and  
            provides good public and fiscal policy for both farm workers  
            and taxpayers.
          
          2)CA Farmworker Health Coverage.  According to background  








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            information provided at a July 10, 2014 briefing sponsored by  
            the California Program on Access to Care, provided by Ed  
            Kissam of the Werner-Kohnstamm Family Fund, there are  
            approximately 600,000 farmworkers in California. Agricultural  
            work is less seasonal in California than in other states.   
            Approximately, 300,000 farmworkers work less than 191 days a  
            year and might be deemed seasonal workers under the ACA. At  
            least three-quarters of farmworkers (74%) earn less than  
            $30,000 per year. More California farmworkers work for farm  
            labor contractors (FLC's) as compared to the rest of the U.S.  
            FLC employees are younger, more recently-arrived, and  
            typically earn less than those directly hired by growers.  
            Based on family income alone, at least 25% of farmworkers in  
            California would qualify for subsidized health insurance and  
            more than half (58%) would qualify for Medi-Cal. However,  
            about 400,000 of them lack legal status. So, they cannot  
            purchase subsidized insurance and can qualify only for  
            restricted-scope Medi-Cal.  There are also disparities in  
            health insurance coverage which correlate with legal status.  
            Slightly more than one-quarter (27%) of California's  
            authorized farmworkers are covered by their employers but only  
            9% of the unauthorized farmworkers are covered by their  
            employers. About 75% of California farmworkers who had health  
            insurance had visited a provider in the past two years while  
            only 43% of those without insurance did. 

          3)RFK Plan.  The RFK Plan was founded in 1969.  It is a  
            self-funded, self-administered plan with an employer  
            contribution that depends on collective-bargaining agreements.  
            According to information provided by this bill's sponsor, the  
            United Farm Workers (UFW), in terms of the employer  
            contribution: a $3.00-per-hour-per-employee contribution is  
            common; all agreements have contributions of between $2.50 and  
            $3.75 per hour per employee.  Less than 5% of the plan budget  
            goes to administrative costs, including legally mandated  
            costs.  The RFK plan covers everything from basic office  
            visits, out-patient diagnostic lab and x-ray to inpatient  
            hospitalizations, including physical therapy, chiropractic and  
            in some plans, home health care, skilled nursing and durable  
            medical equipment. Depending upon the benefit design, plan  
            participants can have small monthly premiums based on hours  
            worked, co-pays, and deductibles for hospitalization.  
            Deductibles vary from $5 to $170 in grandfathered plans. Most  
            plans have a 20% co-insurance and cover 80% of all benefits in  
            the particular plan. 








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          According to UFW, in the past year, the RFK plan provided health  
            insurance to more than 13,000 people living in farm worker  
            families in California.  Of those covered, about 6,100 are  
            adults and about 7,500 are children.  An estimated 9,132  
            members are eligible for full scope Medi-Cal, 1,560 are  
            eligible for limited scope Medi-Cal, 3,000 have income too  
            high to qualify for Medi-Cal.  The plan has one year (Sep  
            2014-Aug 2015) of claim experience above with claims above  
            $70,000.  Approximately 17 cases are claims over $70,000,  
            which total approximately $1.4 million.  The $70,000 limit is  
            based on the previous annual benefit limit the plan had in  
            place prior to its compliance with the ACA in 2014.

          In 2014, the plan secured a $3.2 million appropriation from  
            California to purchase stop-loss insurance. In the 2015-16  
            budget, UFW requested a lower amount of support from the state  
            ($2.5 million) because of an enrollment increase by more than  
            2,300 lives in California. In the budget process, the sponsors  
            indicated the request was a one-time funding solution for the  
            purchase of stop-loss insurance for an additional year.

          4)Stop-loss insurance.  Stop-loss insurance is sold to  
            purchasers (typically employers and labor trusts) that  
            self-insure their employee's health care coverage to limit the  
            purchaser's financial exposure. Stop-loss insurance is  
            available in two forms:  a) specific stop loss, where coverage  
            is initiated when a claim for an individual employee or  
            dependent reaches the threshold selected by the employer.  
            After the threshold is reached, the stop-loss policy would pay  
            claims up to the lifetime limit per employee; and, b)  
            aggregate stop loss, where coverage is initiated when the  
            employer's self-insurance total group health claims reach a  
            stipulated threshold selected by the employer.  This bill  
            would have the State of California, through DHCS; act as a  
            stop loss insurer.  Under this bill, the state would pay  
            claims for a single episode of care that exceeds $70,000 up to  
            a total cap across all claims over $70,000 of $3 million per  
            year until this bill sunsets in 2021.  The RFK plan total  
            premium for stop-loss insurance for 2014-2015, was $3.43  
            million. The total premium for 2015-2016 is estimated to be  
            $3.1 million.  
           
          5)Prior legislation. SB 75 (Committee on Budget and Fiscal  
            Review, Chapter 18, Statutes of 2015) requires DHCS to  








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            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.

            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.

            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.   

            SB 1431 (De Leon, 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.
            
          6)Support.  This bill is sponsored by the UFW, which writes that  
            this bill would ensure farm workers and their families can  
            continue to obtain medical health benefits.  UFW states that  
            even with President Obama's ACA, it is estimated that one  
            million Californians will remain uninsured and not eligible  
            for coverage due to immigration status.  UFW indicates that  
            the Medi-Cal costs for this population in 2015 are estimated  
            at 6.6 million.  With regard to stop-loss insurance, UFW  
            indicates that this bill reduces the potential state liability  
            and eliminates the need for on-going reliance on an uncertain  
            insurance market.
          
          7)Policy comments.
               a)     Precedent Setting.  While the ACA has transformed  
                 the U.S. health care system by expanding coverage to  
                 millions, including a significant drop in the rates of  
                 uninsured in California with notable decreases in  
                 uninsured rates for low-income and African Americans  
                 according to the California HealthCare Foundation, many  








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                 purchasers of health care have been affected by the  
                 changes brought about by the ACA.  Other purchasers of  
                 health care for farmworkers and other industries that  
                 employ low-wage workers may also wish to have this type  
                 of assistance from the state.  This proposal raises  
                 several policy questions, including whether it is  
                 appropriate for the state to assume the role of reinsurer  
                 for high cost claims, and if the state elects to do so,  
                 which entities and what criteria should make an entity  
                 eligible for this assistance. In addition, the phrase  
                 "episode of care" is not defined, and DHCS does not  
                 currently perform this type of payment function.
               
           SUPPORT AND OPPOSITION  :
          Support:  United Farm Workers (sponsor)
          
          Oppose:   None received

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