BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1471 (Hernandez) - Health professions development: loan
repayment
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|Version: April 21, 2016 |Policy Vote: HEALTH 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 9, 2016 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1471 would change the allocation of funds from the
Managed Care Administrative Fines and Penalties Fund that are
transferred each year to the Medically Underserved Account for
Physicians and the Major Risk Medical Insurance Fund.
Fiscal
Impact: Unknown potential future cost pressure due to the
reduction in funding for the Major Risk Medical Insurance
Program (General Fund or Proposition 99 funds). Under current
law, the cost of operating the Program is funded with subscriber
premiums and state funds. The state has used Proposition 99
(Tobacco Tax) funds and transfers from the Managed Care
Administrative Fines and Penalties Fund to subsidize the
program. Enrollment in the Program has declined significantly in
recent years, from 4,782 in January 2014 to a projected
enrollment of 1,400 in 2018. The declining Program enrollment
(and the existing Program fund balance) should reduce the need
for additional state funds in the future. However, as long as
the Program is active there is a potential need for additional
SB 1471 (Hernandez) Page 1 of
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state funding. It is also important to note that final
reconciliation of expenditures in the Program takes several
years, so there is some uncertainty about future Program funding
needs, even with declining enrollment.
Background: Under current law, health plans in the state are regulated by
the Department of Managed Health Care, under the Knox-Keene
Health Care Service Act of 1975. The Department is authorized to
assess administrative fines and penalties on health plans for
violations of the Knox-Keene Act. Current law requires the first
$1 million in fines and penalties to be transferred to the
Medically Underserved Account for Physicians (within the Health
Professions Education Fund) to support the Stephen M. Thompson
Physician Corps Loan Repayment Program. Any remaining fines and
penalties are transferred to the Major Risk Medical Insurance
Fund, to support the Major Risk Medical Insurance Program.
Under Current law, the Steven M. Thompson Physician Corps Loan
Repayment Program provides up to $105,000 in loan repayments for
physicians who agree to work in medically underserved areas for
at least three years
Under current law, the state operates the Major Risk Medical
Insurance Program, which provides health care coverage to
individuals who are unable to purchase coverage in the
individual market due to a pre-existing condition. Premiums in
the Program are set at 100 percent of what an equivalent policy
would cost in the private market. Because individuals in the
program have a preexisting condition, the cost of providing
coverage for this population is significantly larger than the
costs of the broader population. Therefore, the premiums paid by
the state to participating health plans are higher than normal
market rates. The state funds the gap between the cost coverage
and the premiums charged to subscribers.
Under current law, the first $1 million in fines and penalties
assessed by the Department of Managed Health Care is transferred
to the Steven M. Thompson program. Any funds above the initial
$1 million are transferred to support the Major Risk Medical
Insurance Program. The amount of funding transferred to the
Major Risk Medical Insurance Program has varied from less than
$100,000 to over $8,000,000 depending on the fines and penalties
SB 1471 (Hernandez) Page 2 of
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levied by the Department in any given year.
Proposed Law:
SB 1471 would change the allocation of that funds in the
Managed Care Administrative Fines and Penalties Fund that are
transferred each year to the Medically Underserved Account for
Physicians and the Major Risk Medical Insurance Fund.
Specifically, the bill would:
Continue to require the first $1 million in fines and
penalties in the Managed Care Administrative Fines and
Penalties Fund to be transferred to the Steven M. Thompson
Program;
Require the second $1 million in fines and penalties in
the Managed Care Administrative Fines and Penalties Fund to
be transferred to the Major Risk Medical Insurance Fund;
Require any funds beyond $2 million in fines and
penalties in the Managed Care Administrative Fines and
Penalties Fund to be transferred to the Steven M. Thompson
Program;
Authorize up to one-half of the funds (over $2 million)
transferred under the bill to be used for loan repayments
for psychiatrists under the Steven M. Thompson Program.
Related
Legislation:
SB 20 (Hernandez, 2013) would have required all the
fines and penalties assessed by the Department of Managed
Health Care to be available for support of the Steven M.
Thompson Physician Corps Loan Repayment Program, once the
Major Risk Medical Insurance Program becomes inoperative.
That bill was held on the Assembly Appropriations
Committee's Suspense File and subsequently amended for
another purpose.
SB 635 (Hernandez, 2011) would have transferred fine and
penalty revenues generated by the Department of Managed
Health Care to another account for the support of medical
education. That bill was held in the Assembly
Appropriations Committee.
AB 860 (Perea and Bocanegra) would have required certain
fine and penalty revenues to be transferred for use in a
related program to support medical education. That bill was
held in the Assembly Appropriations Committee.
SB 1471 (Hernandez) Page 3 of
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Staff
Comments: While fines and penalties assessed by the Department of
Managed Health Care are deposited in the Managed Care
Administrative Fines and Penalties Fund, under law fines and
penalties are General Fund revenues.
The Major Risk Medical Insurance Program was created to allow
individuals who are unable to purchase health care coverage in
the private market because of a pre-existing condition to
purchase affordable coverage. Beginning in 2014, the federal
Affordable Care Act (and implementing state legislation) require
insurance plans and health plans to provide "guaranteed issue"
coverage to individuals as long as the individual pays his or
her premiums. Individuals who have a pre-existing condition can
no longer be denied coverage in the private market. Therefore,
demand for coverage for the Major Risk Medical Insurance Program
has declined significantly since January 1, 2014. However, state
law authorizing the program has no sunset and there may be
certain individuals (such undocumented immigrants or uninsured
women who become pregnant) who may wish to participate in the
program. At this time it is difficult to predict when demand for
program funding will end absent legislative action.
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