BILL ANALYSIS
AB 1887
Page 1
ASSEMBLY THIRD READING
AB 1887 (Villines)
As Amended June 10, 2010
2/3 vote. Urgency
HEALTH 17-0 APPROPRIATIONS 17-0
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|Ayes:|Monning, Fletcher, |Ayes:|Fuentes, Conway, Ammiano, |
| |Ammiano, Carter, Conway, | |Bradford, Charles |
| |Caballero, Emmerson, Eng, | |Calderon, Coto, Davis, |
| |Gaines, Hayashi, | |Monning, Ruskin, Harkey, |
| |Hernandez, | |Miller, Nielsen, Norby, |
| |Bonnie Lowenthal, Nava, | |Skinner, Solorio, |
| |V. Manuel Perez, Salas, | |Torlakson, Torrico |
| |Smyth, Audra Strickland | | |
| | | | |
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SUMMARY : Establishes the funding mechanism for the operation of
the California Federal Temporary High Risk Pool (CFTHRP) of the
federal health care reform, the Patient Protection and
Affordable Care Act (PPACA) (Public Law 111-148) and authorizes
confidentiality of contract negotiations and rates.
Specifically, this bill :
1)Establishes a Federal Temporary High Risk Health Insurance
(FTHRI) Fund as a special fund and that is continuously
appropriated.
2)Limits the state's liabilities to the amount in the FTHRI Fund
and requires a prudent reserve.
3)Authorizes the Managed Risk Medical Insurance Board (MRMIB) to
spend money from the FTHRI Fund to cover program expenses and
an amount sufficient to pay for coverage under a temporary
high risk pool as established by PPACA.
4)Adds records of MRMIB activities relating to contracting or
other agreements with entities to provide or arrange services
relating to the CFTHRP to the existing exemption that applies
to the same activities for the Access for Infants and Mothers
Program (AIM) and the Managed Risk Medical Insurance Program
(MRMIP) and therefore opens all but the rate of payment for
public review after one year for the effective date or the
effective date of an amendment. The rate of payment will
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become public three years later.
5)Adds sessions relating to the development of rates and
contracting strategy for the federal temporary high risk pool
to the existing exemption from open meeting requirements that
applies to the Healthy Families Program, AIM, and MRMIP.
6)Adds legislative findings and declarations.
7)Adds a sunset clause for January 1, 2020.
8)Makes enactment conditional on enactment of SB 227 (Alquist).
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)According to preliminary information provided by the federal
government, California will receive $761 million (100%
federal) to administer a state-run high risk pool until
January 1, 2014, when broader insurance market reforms and
coverage expansions occur.
2)Funding will be used to support MRMIB workload as the pool
administrator and to provide premium support to enrollees
whose premium costs exceed a specified level. The eligibility
for the risk pool as well as the product design of the
coverage offered will determine how quickly the fixed
allocation of federal funding is spent.
3)The federal government proposes to allocate state funds based
on a formula used for the Children's Health Insurance Program,
which relies on a combination of factors including nonelderly
population, proportion of uninsured, and geographic cost
variation.
4)Under current law, California's high risk pool has only 7,000
enrollees, due to funding limitations. According to
estimates, several hundred thousand Californians may lack
access to health coverage due to pre-existing conditions. The
risk pool established pursuant to this bill may be able to
support an additional 20,000 to 25,000 enrollees.
5)Per federal requirements, premium pricing in the high risk
pool must be similar to the rates found in the individual
insurance market and cannot vary by a person's age by more
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than a four to one ratio.
COMMENTS : PPACA provides coverage for over 90% of the presently
uninsured population, adopts broad-reaching reforms in insurance
practices, and makes major new investments in public health. By
2014, states are required to create 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.
PPACA establishes a temporary high risk pool prior to the
implementation of the exchange for certain individuals with
pre-existing conditions, who have not had coverage for the prior
six months, and meet certain citizen or residency requirements.
According to an April 2, 2010 letter from U.S. Department of
Health and Human Services (DHHS) Secretary Sebelius, states may
choose whether and how they participate in the program. A total
of $5 billion in federal funds has been appropriated to support
the program. California has been allocated $761 million over
the life of the program. To date, 29 states plus D.C. have
elected to operate their own, 18 have elected to have DHHS run
it, two have deferred the decision, and one has not indicated.
According to the federal solicitation, states will have some
flexibility in the design of the benefit package as long the
issuer's share is not less than 65% of the total costs of the
benefit. There is also a limit on out-of-pocket expenses
($5,950 for individuals.).
California is among 35 states with an existing program for
medically uninsurable persons, MRMIP, that provides individual
coverage through private health plans for those whose
applications for private individual coverage are rejected by
health insurers because of the individual's health history or
health status. MRMIP is administered by MRMIB. There are two
major private health plans offered at the current time, Kaiser
Permanente HMO and Anthem Blue Cross PPO. High risk pools
provide a safety net for people who are denied coverage by
private insurers for health reasons and are considered
"uninsurable." Some estimates of the number of medically
uninsurable in California range from 400,000 to 800,000
individuals.
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On May 10, 2010, DHHS provided to the states that chose to run
their own pool, a solicitation for state proposals. The
solicitation stated that it is DHHS's goal to grant the
flexibility needed to permit successful and expeditious
implementation of the program by states. The state submission
was due June 1, 2010, for a July 1, 2010 implementation. States
will be reimbursed for all reasonable and allowable start-up and
administrative costs, including actuarial, legal, marketing, and
outreach as well as ongoing administrative costs with a cap of
10% of the total amount over the life of the program.
This bill is needed to enact the funding mechanism that allows
receipt of the federal funds and authorizes MRMIB to make the
expenditures necessary to begin implementation. It also allows
MRMIB to conduct confidential negotiations with health plans,
third party administrators or other entities in order to arrange
for health care coverage. If the existing MRMIP contractors are
not willing to enroll federal temporary high risk pool
applicants members, MRMIB is planning to use a third party
administrator to arrange and pay for health care services
directly.
SB 227 (Alquist) contains the authority for MRMIB to set
eligibility standards, subscriber contribution, premiums, and
cost-sharing, consistent with PPACA, to arrange for the
provision of health care coverage and to enroll subscribers.
This bill and SB 227 include contingent enactment language and
neither is operative without enactment of the other.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0004804