BILL ANALYSIS
AB 1887
Page 1
Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1887 (Villines) - As Introduced: February 16, 2010
SUBJECT : California Major Risk Medical Insurance Program.
SUMMARY : Requires the Managed Risk Medical Insurance Board to
apply for any federal funding it determines to be cost effective
for the purposes of extending major risk medical coverage to
more applicants.
EXISTING LAW :
1)Establishes the Managed Risk Medical Insurance Program
(MRMIP), administered by MRMIB, to provide health coverage for
individuals unable to purchase coverage because they have been
denied health coverage by at least one private health plan or
are offered only limited coverage or coverage significantly
above standard average individual rates, as determined by
MRMIB.
2)Requires MRMIB to provide health coverage to subscribers in
MRMIP through participating private health plans licensed by
either the Department of Managed Health Care or the California
Department of Insurance.
3)Provides MRMIP with a $30 million continuous appropriation
accompanied by an annual budget act Proposition 99
appropriation of $10 million to subsidize the premiums paid by
MRMIP enrollees.
4)Caps premiums that health plans and insurers can charge MRMIP
enrollees at 125% to 137.5% of the standard rate that a
carrier would charge in the commercial market.
5)Federal law, under the Patient Protection and Affordable Care
Act, establishes a temporary high risk health insurance pool
program beginning July 1, 2010 to provide coverage to
currently uninsured individual with pre-existing conditions.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
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COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
intended to implement the necessary changes to ensure that
California's high risk pool meets the federal guidelines to
receive federal funding for a high risk pool. The author
states that state high risk health insurance pools are
essential to expanding affordable coverage to the uninsured.
The author points out that typically, state high risk pools
offer coverage to residents who are unable to get insurance
due to a pre-existing condition or to those whose coverage
options are more expensive that the high risk plan.
2)BACKGROUND . On March 23, 2010, President Obama signed into
law the Patient Protection and Affordable Care Act (P.
L.111-148) as amended by the Health Care and Education
Reconciliation Act of 2010; (P. L. 111-152) to provide
coverage for over 90% of the presently uninsured population,
adopt broad-reaching reforms in insurance practices, and make
major new investments in public health. Federal health care
reform creates health insurance exchanges that will serve as
competitive market places for individuals and small businesses
to be able to purchase health insurance products. Insurers
participating in the exchange will be barred from
discriminating based on pre-existing conditions, health status
and gender.
Until the implementation of the exchange, certain individuals
with pre-existing conditions, who have not had coverage for
the prior six months and meet certain citizen or residency
requirements will be eligible for the temporary high risk pool
program. According to an April 2, 2010 letter from U.S.
Department of Health and Human Services (DHHS) Secretary
Sibelius, states may choose whether and how they participate
in the program. There is appropriated $5 billion in federal
funds to support the program. Although the letter did specify
state implementation options, there is no information
specifying how the funds will be distributed.
According to the letter, implementation options include:
a) Operate a new high risk pool alongside a current state
high risk pool;
b) Establish a new high risk pool (in a state that does not
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have one);
c) Build upon other existing coverage programs designed to
cover high risk individuals;
d) Contract with a current Health Insurance Portability and
Access Act carrier of last resort or other carrier to
provide subsidized coverage
e) Do nothing, in which case DHHS would carry out a
coverage program in the sate.
3)HIGH RISK POOLS. According to a January 2010 Kaiser Family
Foundation (KFF) Issue Brief, "Focus on Health Reform, Issues
for Structuring Interim High-Risk Pools," there are 35 state
high risk pools that have been established since 1976. High
risk pools provide a safety net for people who are denied
coverage by private insurers for health reasons and are
considered "uninsurable." Most states, including California,
that allow medical underwriting in the individual insurance
market have established high risk pools. According to the
2010 KFF Brief, the 2008 enrollment in all state high-risk
pools was approximately 200,000 people. However,
approximately 25% of individual health insurance applicants
receive adverse underwriting responses from insurers,
resulting in surcharged premiums, benefit retractions, or
denial of coverage. The primary cause of the low enrollment
is the program features, such as high premiums and the
imposition of pre-existing condition exclusions. Some
estimates of the number of medically uninsurable in California
range from 400,000 to 800,000 individuals.
4)MRMIP . MRMIP was established in California to provide health
insurance for Californians unable to obtain coverage in the
individual health insurance market because of their
pre-existing conditions. Californians qualifying for the
program participate in the cost of their coverage by paying
premiums. The State of California supplements those premiums
to cover the cost of care in MRMIP. Tobacco tax funds
currently subsidize MRMIP. As of March 1, 2010 there are
6,856 enrollees and a waiting list of 53 persons.
In order to be eligible, a person must be a California resident,
cannot be eligible for both Medicare both Part A and Part B,
cannot be eligible to purchase any insurance continuation of
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benefits under COBRA or Cal-COBRA and unable to secure
adequate coverage within the previous 12 months.
5)MRMIP AS COMPARED TO FEDERAL REQUIREMENTS.
------------------------------------------------------------
| ELIGIBLITY |
------------------------------------------------------------
|------------------------------+------------------------------|
|FEDERAL |MRMIP |
|------------------------------+------------------------------|
| | |
|------------------------------+------------------------------|
| ? Citizen or national | ? California resident |
| of the United States or | |
| lawfully present in the | |
| United States | |
|------------------------------+------------------------------|
| ? Uninsured for the | ? Unable to secure |
| previous 6 months before | adequate coverage within |
| applying for coverage | the last 12 months |
|------------------------------+------------------------------|
| ? Have a pre-existing | ? No requirement , but |
| condition, per federal | denial or termination of |
| guidance | insurance for other than |
| | nonpayment is one |
| | pathway to eligibility |
-------------------------------------------------------------
------------------------------------------------------------
| BENEFITS/COVERAGE |
------------------------------------------------------------
-------------------------------------------------------------
| ? Subscribers share of | ? Comprehensive |
| cost of benefits cannot | benefits with annual |
| exceed 35% of total | $500 household |
| allowed costs | deductible |
-------------------------------------------------------------
| ? No Pre-existing | ? Allows a 3 month |
| condition exclusion | waiting period or |
| allowed | pre-existing condition |
| | exclusion |
-------------------------------------------------------------
| ? Limits out-of-pocket | ? Limits out-of-pocket |
| to equivalent in | maximum per year to |
AB 1887
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| high-deductible plans | $2,500 for individuals |
| linked to health savings | and $4,000 for an entire |
| accounts ( $5,950 for an | household covered by the |
| individual) | MRMIP, must be in |
| | network provider. |
| | Out-of-Plan charges |
| |allowed. |
|------------------------------+------------------------------|
| ? Benefit limits to be | ? Benefit limits of |
| determined by | $75,000 per calendar |
| Secretary-lifetime and | year and $750,000 in a |
| unreasonable annual caps | lifetime. |
| prohibited in exchange | ? |
-------------------------------------------------------------
------------------------------------------------------------
| PREMIUMS |
------------------------------------------------------------
-------------------------------------------------------------
| ? 100% of the standard | ? 125% to 137% of the |
| rate for the benefits in | standard rate that a |
| the commercial market | carrier would charge for |
| | MRMIP benefits in the |
| | commercial market |
|------------------------------+------------------------------|
| ? Limits rate variation | ? 12 age variations |
| by age to a maximum of 4 | with no limit on |
| to 1 | differences |
| | ? 3 possible family |
| | sizes |
| | ? Six geographic |
| |regional variations |
-------------------------------------------------------------
1)STATE IMPLEMENTATION . In the April 2 letter, Secretary
Sibelius requested each state to submit the name of a primary
contact person by April 9, 2010 and to submit by April 30,
2010 a letter of intent indicating whether the state intends
to submit an application to contract with DHHS to operate a
high risk pool program. The letter is required to include
anticipated timing for the establishment of the program, as
well as information on any State legislative decisions that
would be needed in order to participate in the new high risk
pool. The letter also stated a request for advance indication
of which of the potential implementation options appears to be
most likely to be used, including any additional details such
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as outlines of programs, or other ideas about potential
mechanisms of providing coverage. A state must maintain
existing efforts by agreeing not to reduce the annual amount
the state expended for the operation of any of the existing
state high risk pools during the preceding year.
2)SUPPORT : Disability Rights California writes in support of
this bill, that the total number of individuals who can
participate in the existing MRMIP is limited because of the
limits on available funding. DRC further states in support
that obtaining federal funding for MRMIP would help expand
coverage.
3)SUPPORT IF AMENDED . Health Access requests amendments to: a)
direct the administering agency to attempt to enroll every
qualified Californian as quickly as possible; b) direct the
administering agency to seek additional federal funding if the
original allocation is depleted; c) establish an outreach and
education program; d) establish a 24 hour hotline and in
-person assistance; e) establish a grievance and appeal
process; f) allow on-line web access; g) consolidate the
application process with other programs; and, h) require
disclosure by health plans of the numbers of individuals
denied coverage and those where were requested to pay higher
premiums because of pre-existing conditions.
4)PROPOSED AMENDMENTS . In order to clarify that California
intends to operate a state high risk pool and to comply with
federal requirements, the author is proposing amendments to
this bill as follows:
SECTION 1. Section 12711 of the Insurance Code is amended to
read:
12711.The board shall have the authority to do all of the
following:
(a) To determine the eligibility of applicants.
(b) To determine the major risk medical coverage to be provided
to program subscribers.
(c) To research and assess the needs of persons not adequately
covered by existing private and public health care delivery
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systems and promote means of assuring the availability of
adequate health care services.
(d) To approve subscriber contributions , and plan rates , and
establish program contribution amounts.
(e) To provide major risk medical coverage for subscribers or to
contract with a participating health plan or plans to provide or
administer major risk medical coverage for subscribers.
(f) To authorize expenditures from the fund to pay program
expenses which that exceed subscriber contributions.
(g) To contract for administration of the program or any portion
thereof with any public agency, including any agency of state
government, or with any private entity.
(h) To issue rules and regulations to carry out the purposes of
this part.
(i) To authorize expenditures from the fund or from other moneys
appropriated in the annual Budget Act for purposes relating to
Section 10127.15 of this code or Section 1373.62 of the Health
and Safety Code.
(j) To apply for any federal funding the board determines to be
cost effective for purposes of extending major risk medical
coverage to more applicants.
(j) (j) To apply for federal funding to operate a Temporary High
Risk Pool consistent with the Patient Protection and Affordable
Care Act (the Affordable Care Act); P. L. 111-148, as amended by
the Health Care and Education Reconciliation Act of 2010; P. L.
111-152 .
(k) To exercise all powers reasonably necessary to carry out the
powers and responsibilities expressly granted or imposed upon it
under this part.
SECTION 2:
New Section:
(a)The Board shall establish a Temporary High Risk Pool to
administer a High Risk Pool Program.
(b) Each individual who is a citizen or national of the United
AB 1887
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States or is lawfully present in the United States, meeting the
eligibility criteria of this section, who has not been covered
under creditable coverage for the previous six months and has a
pre-existing condition is eligible to apply for coverage through
this program.
(c) The benefits and coverage shall at a minimum have an
actuarial value of at least 65 percent of total allowed costs,
an out-of-pocket limit no greater than the applicable amount for
high-deductible health plans linked to health savings accounts
and no pre-existing exclusion.
(d) The premiums shall be established at a standard rate for a
standard population and not have an age rating greater than 4:1.
REGISTERED SUPPORT / OPPOSITION :
Support
Disability Rights California
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097