BILL ANALYSIS
AB 1602
Page 1
Date of Hearing: May 12, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1602 (John A. Perez) - As Amended: April 15, 2010
Policy Committee: Health Vote:12-5
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill, the California Patient Protection and Affordable Care
Act, implements several provisions of federal health reform
(PL-111-148). Specifically, this bill:
1)Establishes the California Health Benefit Exchange (Exchange)
and requires the Exchange to facilitate the purchase of
qualified health coverage by individuals and small business
employees by January 1, 2014. This bill establishes the
Executive Board of the Exchange and establishes governance and
functions of the Exchange.
2)Establishes the California Health Trust Fund, a continuously
appropriated special fund. Requires the governing board of
the Exchange to use federal funding to support the planning
for and establishment of the Exchange. Authorizes the Board to
institute appropriate measures to ensure the fiscal solvency
of the Exchange.
3)Enacts private health insurance market reforms to prohibit the
limiting age of dependent health coverage to be less than 26
years of age; to prohibit the imposition of health coverage
lifetime limits; to prohibit the imposition of annual limits
except in specified circumstances; and to prohibit the use of
pre-existing conditions for health coverage underwriting for
individuals younger than 19 years of age.
FISCAL EFFECT
1)This bill establishes the California Health Benefits Exchange
Fund (Fund) as a continuously appropriated special fund used
to support the administrative workload of the Exchange and to
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facilitate the purchase of health coverage for several million
Californians. This bill authorizes unexpended or unencumbered
funds at the end of a fiscal year to be carried forward and
requires any interest earned to be retained by the Fund. This
bill requires the Fund to include a prudent reserve.
2)Federal funding to establish the Exchange will be available
from 2011 until January 1, 2015, at which time the Exchange
must be self-sustaining, for which this bill provides the
funding authority. Detail about the amount of federal funding
available to California to support establishing the Exchange
over the next few four years is not yet available.
3)According to estimates, by 2016, between three million and
eight million individuals and employees of small firms will be
purchasing coverage through the Exchange. About three million
of these individuals will be eligible for coverage subsidies
either because of income (family income of less than 400% of
federal poverty level) or because they work for small firms
benefiting from a related tax credit. The actual number of
people accessing health coverage through the Exchange will
depend on a number of factors, including access to subsidies
and tax credits, the kind of benefits and prices offered in
the Exchange, administrative savings generated by purchasing
economies of scale, and other market factors.
4)Unknown, fee-supported special fund costs to the California
Department of Managed Health Care (DMHC) and the California
Department of Insurance (CDI) to implement insurance market
reforms contained in this bill. There are several other bills
in the current session implementing related market reforms.
Actual implementation costs to these two departments for this
bill and others in the current session will depend on how well
market reforms function for the purposes of regulator workload
and oversight.
COMMENTS
1)Rationale . This bill enacts several major components of
federal health reform, the Patient Protection and Affordable
Care Act (PL-111-148), including establishing a
California-based health insurance exchange, and establishing
several insurance market reforms regarding dependent health
coverage and benefit limits. The Exchange addressed in this
bill will enable the purchase of coverage for between three
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and eight million individuals. This bill will be a major
factor in reducing the number of uninsured in California.
Currently, 25% of non-elderly adults statewide are uninsured.
2)The Health Insurance Exchange . The federal health reform law
made broad changes to the way health coverage is to be
provided and paid for in California. The federal law created a
new mechanism for purchasing coverage, called exchanges, which
are state-based entities established to create a more
organized and competitive market for health insurance.
Competition and efficiency is expected to increase by offering
a choice of health plans, establishing common rules regarding
the offering and pricing of insurance, and providing
information to help consumers better understand the options
available to them. Initially the California Exchange will
serve primarily individuals purchasing insurance on their own
and smaller employers. Several years later, California will
have the option of opening Exchanges to larger employers.
3)Dependent Health Coverage . Most individual and group health
coverage policies set a limiting age for coverage of dependent
children. The limiting age determines when children are no
longer considered dependents for the purposes of health
coverage. The age is often set at 19. However, contracts also
often allow a young person who is enrolled full-time in
college to remain on the policy as a dependent until age 23.
In addition, California statute establishes an exception to
the limiting age for those dependents who are incapable of
self-sustaining employment by reason of a physically or
mentally disabling injury, illness, or condition and who
remain chiefly dependent on the subscriber, member, or
policyholder for support and maintenance. This bill extends
the limiting age for health coverage until a dependent's 26th
birthday.
4)Insurance Benefit Limits . Under current law, health plans and
insurers may impose health coverage limits. For example, an
insurer may pay for a specified amount of care in a given year
or over an individual's lifetime. Federal health reform
prohibits health plans from placing lifetime limits health
coverage, effective in 2010. In addition, prior to 2014, group
health plans and health insurers may only impose a restricted
annual limit for essential health benefits under the Patient
Protection and Affordable Care Act. At this time, only
baseline federal guidance for the meaning of essential health
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benefits has been provided.
5)Related Legislation . Several bills in the current session
address features and requirements of federal health reform:
a) SB 900 (Alquist), pending in the Senate, establishes the
California Health Benefits Exchange within the California
Health and Human Services Agency.
b) SB 1088 (Price), pending in the Senate, increases the
limiting age of dependent health coverage until the
dependent's 26th birthday.
c) AB 1595 (Jones), also being heard in this committee
today, requires the California Department of Health Care
Services (DHCS) to expand Medi-Cal eligibility to
individuals with family income up to 133% of the federal
poverty level (FPL) without regard to family status.
d) AB 1887 (Villines), pending in this committee,
establishes California's temporary high risk pool to expand
the number of insured individuals with pre-existing
conditions.
e) AB 2244 (Feuer), pending in this committee, addresses
insurance market writing reforms for children and adults
with regard to pre-existing conditions and the renewability
of health insurance.
f) AB 2477 (Jones), pending on the Suspense File of this
committee, eliminates mid-year status reports for children
on Medi-Cal.
g) SB 1163 (Leno), pending in the Senate, requires detailed
health plan and insurer data and actuarial justification
for premium increases and non-standard premium charges.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081