BILL ANALYSIS
AB 1602
Page 1
CORRECTED - 06/02/2010 Technical change (Member name)
ASSEMBLY THIRD READING
AB 1602 (John A. Perez)
As Amended April 15, 2010
Majority vote
HEALTH 12-5 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Carter, |Ayes:|Fuentes, Ammiano, |
| |Caballero, Eng, Hayashi, | |Bradford, Charles |
| |Hernandez, Jones, Bonnie | |Calderon, Coto, Davis, |
| |Lowenthal, Nava, | |Monning, Ruskin, Skinner, |
| |V. Manuel Perez, Salas | |Solorio, Torlakson, |
| | | |Torrico |
|-----+--------------------------+-----+--------------------------|
|Nays:|Conway, Emmerson, Gaines, |Nays:|Conway, Harkey, Miller, |
| |Smyth, Audra Strickland | |Nielsen, Norby |
| | | | |
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SUMMARY : Enacts the California Patient Protection and Affordable
Care Act to implement reforms under the federal Patient Protection
and Affordable Care Act (Affordable Care Act) in California.
Prohibits group or individual health care service plans or health
insurers (collectively carriers) from establishing lifetime or
unreasonable annual limits on the dollar value of benefits.
Requires carriers to provide minimum coverage for specified
preventive services. Prohibits carriers from imposing preexisting
condition exclusions for enrollees or insureds under 19 years of
age. Prohibits the limiting age for dependent health care
coverage to be less than 26 years of age. Creates the California
Health Benefit Exchange (Exchange) for the purchase of health care
coverage. Specifically, this bill :
Market Reforms
1)Prohibits carriers, effective September 23, 2010, from
establishing lifetime limits on the dollar value of benefits for
any participant or beneficiary. With respect to plan years
prior to January 1, 2014, permits a group or individual health
care service plan contract, after September 23, 2010, to only
establish a restricted annual limit for the scope of benefits
that are "essential health benefits" under the Affordable Care
Act, with prior approval from by United States Secretary of
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Health and Human Services (DHHS).
2)Requires carriers, effective September 23, 2010, and subject to
the minimum interval established by DHHS Secretary pursuant to
the federal Affordable Care Act, to provide coverage, without
any cost sharing requirements, for specified preventive care,
screenings, and immunizations.
3)Prohibits health plans, effective September 23, 2010, from
imposing any preexisting condition exclusion with respect to
coverage under the plan of any enrollee under 19 years of age.
Exempts health plan contracts or health insurance policies that
are not required to provide essential health benefits, as
defined, from this provision.
Dependent Coverage
4)Prohibits the limiting age for dependent health care coverage to
be less than 26 years of age, except as specified.
5)Prohibits the limiting age provision from requiring specified
public employers to pay the cost of coverage for dependents who
between 23 and 26 years of age. Permits employees of those
entities to elect to provide coverage to dependents between 23
and 26 years of age, provided they contribute the premium for
that coverage.
6)Requires employment contracts subject to collective bargaining
that are issued, amended, or renewed on or after September 23,
2010, to be subject to the limiting age provisions. Exempts
employment contracts subject to collective bargaining that are
effective prior to September 23, 2010, from this provision.
The Exchange
7)Creates the Exchange, governed by an executive board consisting
of an unspecified number of members, to be appointed by the
Governor, the Senate Committee on Rules, and the Speaker of the
Assembly. Requires the board to be responsible for using the
funds awarded by DHHS for the planning and establishment of the
Exchange. Specifies the duties of the board.
8)Requires the Exchange to facilitate the purchase of qualified
health plans to qualified individuals and qualified employers by
January 1, 2014.
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California Health Trust Fund
9)Creates the California Health Trust Fund (Fund) in the State
Treasury for the purpose of this bill. Requires all moneys in
the Fund to be continuously appropriated without regard to
fiscal year and permits any unexpended or unencumbered moneys in
the Fund to be carried forward.
10)Requires the board to establish and maintain a prudent reserve
in the Fund.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)This bill establishes the California Health Benefits Exchange
Fund as a continuously appropriated special fund used to support
the administrative workload of the Exchange and to 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 California
Health Benefits Exchange Fund. This bill requires the California
Health Benefits Exchange 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
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
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Department of Managed Health Care and the California Department
of Insurance 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 : According to the author, given the recent passage of
the Affordable Care Act, California must begin the important task
of implementing federal law. Several of the federal health reform
provisions take effect this year, including the change in the
limiting age, the ban on lifetime limits, and the end of
pre-existing condition exclusions for children. This bill is a
necessary first step towards enacting these important insurance
market reforms. Additionally, federal health reform tasks the
states with establishing the new, organized marketplaces where
individuals and small businesses can more readily identify and
compare coverage choices; purchase value based coverage, and
access premium credits and cost sharing subsidies. This bill
establishes the California Health Benefit Exchange to enact these
key changes, and sets in motion the necessary duties to ensure
California can quickly use the federal planning dollars and
commence operations by January 1, 2014.
On March 23, 2010, President Obama signed the Affordable Care Act;
P. L. 111-148, as amended by the Health Care and Education
Reconciliation Act of 2010; P. L. 111-152. Among other
provisions, the new law makes statutory changes affecting the
regulation of and payment for certain types of private health
insurance. There are a number of health insurance provisions that
will take effect in 2010, including several provisions contained
in this bill.
Each state is required to establish an American Health Benefit
Exchange and a Small Business Health Options Program Exchange by
2014 for individuals and small employers with 50 to 100 employees;
after 2017, states have the option of opening the small business
exchange to employers with more than 100 employees. States can
opt to provide a single exchange for individuals and small
employers. Groups of states can form regional exchanges or states
can form more than one in-state exchange, but the exchanges must
serve a geographically distinct area. While the individual and
small-group markets will not be replaced by the exchanges, the
same market rules will apply inside and outside the exchanges.
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Premium subsidies can be used only for plans purchased through the
exchanges. If DHHS determines in 2013 that a state will not have
an exchange operational by 2014, DHHS is required to establish and
operate an exchange in the state. In 2017, states will have the
opportunity to opt out of the federal requirements to establish
insurance exchanges through a five-year waiver, if they are able
to demonstrate that they can offer all residents coverage at least
as comprehensive and affordable as that required by the Affordable
Care Act.
Analysis Prepared by : Melanie Moreno / HEALTH / (916) 319-2097
FN: 0004593