BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1887
A
AUTHOR: Villines
B
AMENDED: June 10, 2010
HEARING DATE: June 16, 2010
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CONSULTANT:
8
Bain
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SUBJECT
Temporary high-risk pool
SUMMARY
Establishes the Federal Temporary High Risk Health
Insurance Fund (Fund). Requires money in the Fund to be
continuously appropriated to the Managed Risk Medical
Insurance Board (MRMIB) for the purpose of establishing a
federal temporary high-risk pool (federal pool) established
under SB 227 (Alquist) for individuals with a pre-existing
medical condition. Takes effect immediately as an urgency
statute, contingent upon the enactment of SB 227.
CHANGES TO EXISTING LAW
Existing state law:
Establishes the Major Risk Medical Insurance Program
(MRMIP), which is administered by the Managed Risk Medical
Insurance Board (MRMIB), to provide major risk medical
coverage to California residents who have been rejected for
coverage by at least one private health plan, or if the
only private health coverage that the applicant can secure
would:
Continued---
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Impose substantial waivers or provide limited coverage
that the MRMIB determines would leave a subscriber
without adequate coverage for medically necessary
services; or,
Afford coverage only at an excessive price, which MRMIB
determines is significantly above standard average
individual coverage rates.
Caps the premium subscribers in MRMIP pay at 125 to 137.5
percent of the standard average individual rate the
enrollee would pay for comparable coverage.
Establishes the Major Risk Medical Insurance Fund, and,
except for the 2009-10 fiscal year, continuously
appropriates $30 million in Proposition 99 tobacco tax
funds from the Cigarette and Tobacco Products Surtax Fund
to this Fund.
Existing law exempts from the Public Records Act (PRA)
records of MRMIB related to contract negotiations and
deliberations, and exempts from the Bagley-Keene Open
Meeting Act matters related to the development of rates and
contracting strategy for entities contracting or seeking to
contract with MRMIB.
Existing federal law:
The federal health care reform bill, known as the Patient
Protection and Affordable Care Act (PPACA), requires the
federal Secretary of the Department of Health and Human
Services (DHHS) to establish a temporary high-risk health
insurance pool program to provide health insurance coverage
for eligible individuals until January 1, 2014. PPACA
authorizes the Secretary to carry out the program directly
or through contracts with a state or nonprofit entity. To
be eligible for the federal pool, an individual must meet
the following:
Be a citizen or national of the United States (U.S.) or
lawfully present in the U.S.;
Have not been covered under "creditable coverage" (as
defined in federal law) during the six-month period prior
to the date on which such individual is applying for
coverage through the high-risk pool; and,
Have a pre-existing condition, as determined in a manner
consistent with guidance issued by the Secretary of DHHS.
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Under PPACA, in order for a high-risk pool to be eligible
for federal funding, the pool must meet the following
criteria:
Provide health insurance coverage to all eligible
individuals that does not impose any pre-existing
condition exclusion;
Provide health insurance coverage:
o In which the health insurer's share of
the total allowed costs of benefits provided
under the coverage is not less than 65 percent of
such costs; and,
o That has an out-of-pocket limit not
greater than the amount in federal law for a high
deductible health plan offered in conjunction
with a health savings account (except that the
Secretary may modify such limit if necessary to
ensure the pool meets the actuarial value limit).
Require, with respect to the premium rate charged for
health insurance coverage offered to eligible individuals
through the high-risk pool, rates to:
o Vary only for family size (individual or
family), geographic rating area, and tobacco use;
o Vary on the basis of age by a factor of
not greater than 4 to 1;
o Be established at a standard rate for a
standard population; and,
o Meet any other requirements determined
appropriate by the Secretary of DHHS.
PPACA requires the Secretary of DHHS to develop procedures
to provide for the transition of eligible individuals
enrolled in health insurance coverage offered through a
high-risk pool into qualified health plans offered through
an Exchange.
PPACA appropriates to the Secretary of DHHS $5 billion to
pay claims against (and the administrative costs of) the
high-risk pool that are in excess of the amount of premiums
collected from eligible individuals enrolled in the
high-risk pool.
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This bill:
Establishes a special fund in the State Treasury known as
the Federal Temporary High Risk Health Insurance Fund
(Fund). Requires money in the Fund to be continuously
appropriated to MRMIB for the purpose of establishing a
federal temporary high-risk pool (federal pool) established
under SB 227 (Alquist).
Requires MRMIB to authorize the expenditure of money in the
Fund to cover program expenses of the federal pool,
including program expenses that exceed subscriber
contributions. Requires MRMIB to determine the amount of
funds expended for each of these purposes, taking into
consideration the requirements of the federal pool
established under SB 227.
Permits MRMIB, from amounts transferred to the Fund, to
expend sufficient funds to carry out the purposes of the
federal pool established by SB 227. Prohibits the state
from being liable beyond the assets of the Fund for any
obligations incurred, or liabilities sustained, in the
operation of the program.
Permits any moneys remaining in the Fund at the end of any
fiscal year to be carried forward to the next succeeding
fiscal year.
Requires MRMIB to establish a reserve that is sufficient to
prudently operate the program, unless DHHS establishes
other procedures to maintain a prudent reserve.
Applies the definitions in SB 227 to the provisions of this
bill.
Sunsets the above provisions in this bill on January 1,
2020.
Exempts from public disclosure under PRA records of MRMIB
related to activities governed by the federal high-risk
pool established by SB 227 (Alquist) that reveal
negotiations with entities seeking to contract with MRMIB.
The contract between MRMIB and other entities for the
federal high-risk pool established by SB 227 would be open
to inspection one year after their effective date, except
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the payment rates, which would be open to inspection three
years after the contract is open to inspection.
Exempts from public disclosure under the PRA records that
reveal negotiations with entities with whom MRMIB is
considering a contract, or entities with whom MRMIB is
considering or enters into any other arrangement under
which MRMIB provides, receives or arranges services or
reimbursement for MRMIB's existing programs and the federal
high-risk pool established by SB 227. Broadens the scope
of the current exemption from public disclosure for MRMIB
contracts to include all contracts entered into by MRMIB,
and not just contracts for health coverage.
Permits MRMIB to hold closed sessions when considering
matters related to the development of rates and contracting
strategy for entities contracting, or seeking to contract,
with MRMIB under the federal high-risk pool established by
SB 227.
Permits MRMIB to hold closed sessions when considering
entities with which MRMIB is considering a contract and
entities with which MRMIB is considering or enters into any
other arrangement under which MRMIB provides, receives, or
arranges services or reimbursement under its existing
programs and the federal high-risk pool established
pursuant to SB 227.
Provides that its provisions become operative only if SB
227 is also enacted and becomes operative.
FISCAL IMPACT
According to the Assembly Appropriations Committee:
1)According to preliminary information provided by the
federal government, California will receive $761 million
(100 percent 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
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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 non-elderly 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 than a four to one ratio.
BACKGROUND AND DISCUSSION
According to the author, California needs to establish a
high-risk pool that meets federal requirements in order to
receive and use federal funds to provide health insurance
for additional medically uninsurable individuals.
Legislation is needed in order to implement a new, federal
program that MRMIB does not currently have statutory
authority to implement. This bill would amend the state's
Public Records Act and open meetings law to permit MRMIB to
have discussions with health plans about contracting with
MRMIB for this new federal program. Additionally, this
bill would establish a Fund for the $761 million California
is estimated to receive in federal funds, and would provide
ongoing funding for the federal pool by continuously
appropriating these funds to MRMIB to provide coverage to
Californians with a pre-existing medical condition.
According to the author, this bill and SB 227 (Alquist) are
companion bills sponsored by the Schwarzenegger
Administration.
Background
Although most Californians obtain health insurance through
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their employer, many Californians do not have access to
employer-sponsored health coverage and cannot buy private
health insurance because they have a pre-existing medical
condition. Since 1991, California has operated a high-risk
pool known as MRMIP to provide the medically uninsurable
with health coverage. Premiums paid by individuals
receiving coverage are supplemented with state tobacco tax
revenues to fund coverage through the program. MRMIP
currently has approximately 6,800 individuals receiving
coverage in the program, and approximately 4,700
individuals who were previously enrolled in MRMIP under a
pilot program and whose costs above the amounts they pay in
premiums are split by health plans in MRMIP and the state.
However, MRMIP currently has a small waiting list, and the
program's current enrollment is much lower than the MRMIP's
maximum enrollment of 21,900 in June 1998. The 2010-11
proposed budget for MRMIP is $37 million.
In March 2010, President Obama signed into law PPACA
(Public Law 111-148) as amended by the Health Care and
Education Reconciliation Act of 2010 (Public Law 111-152)
to provide coverage for over 90 percent of the presently
uninsured population. Until the implementation of the
health insurance exchanges in 2014, individuals with
pre-existing conditions, who have not had coverage for the
prior six months and who meet certain citizen or residency
requirements will be eligible for the temporary high-risk
pool program created by PPACA.
PPACA appropriated $5 billion in federal funds to support
the high-risk pool program, of which California is
estimated to receive $761 million. According to an April
2, 2010 letter from the federal DHHS Secretary, states can
choose whether and how they participate in the program. To
be eligible to enter into a contract with the Secretary, a
state must agree to not reduce the annual amount the state
expended for the operation of its high-risk pool.
To date, twenty-nine states plus the District of Columbia
have elected to operate their own pool, eighteen states
have elected to have HHS run the pool, two have deferred
the decision and one has not indicated. In April 2010,
Governor Schwarzenegger indicated in a letter to the
federal DHHS Secretary his intention to contract with the
federal government to operate a temporary health insurance
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program for currently uninsured individuals with
preexisting medical conditions. The Governor's decision
indicated his decision was based on the Secretary's
assurances that 100 percent of the costs will be provided
by the federal government for the duration of the program.
The Governor announced the state will apply to operate the
federal high-risk pool alongside the current state
high-risk pool under the same governance and operational
framework.
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The federal high-risk pool and the current MRMIP have
different eligibility, benefit and premium requirements, as
illustrated in the chart below, that make a separate
statute necessary for MRMIB to administer the federal high
risk pool program:
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| Eligibility |
------------------------------------------------------------
|------------------------------+----------------------------|
| Federal High-Risk Pool | State MRMIP |
|------------------------------+----------------------------|
| | |
|------------------------------+----------------------------|
| Citizen or national of the | California resident. |
| US or lawfully present in | |
| the US. | |
|------------------------------+----------------------------|
| Have no creditable coverage | Unable to secure adequate |
| for the previous 6 months | coverage in the |
| before applying for | individual market within |
| coverage. | the last 12 months, and |
| | ineligible for Medicare, |
| | COBRA or Cal-COBRA. |
|------------------------------+----------------------------|
| Have a pre-existing | No pre-existing condition |
| condition, as determined in | requirement, but denial |
| a manner consistent with | or termination of |
| guidance issued by the | insurance for other than |
| Secretary of DHHS. | nonpayment is one pathway |
| | to eligibility. |
| | |
-----------------------------------------------------------
------------------------------------------------------------
| Benefits/Coverage |
------------------------------------------------------------
-----------------------------------------------------------
| High-risk pool average | Comprehensive benefits |
| share of total costs of | with annual $500 |
| required benefits must be | household deductible. |
| at least 65 percent of | Preventive services |
| costs. | excluded from the |
| | deductible. |
-----------------------------------------------------------
| No pre-existing condition | MRMIP plans have a three |
STAFF ANALYSIS OF ASSEMBLY BILL 1887 (Villines) Page
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| exclusion allowed. | month waiting period |
| | (HMO) or pre-existing |
| | condition exclusion |
| | (PPO). |
-----------------------------------------------------------
| Limits out-of-pocket to | Limits out-of-pocket |
| equivalent in | maximum per year to |
| 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/$11,900 for a | MRMIP (must be in network |
| family in 2010). | provider, out-of-plan |
| |charges allowed). |
|------------------------------+----------------------------|
| No specification on caps, | Annual benefit limits of |
| but lifetime and | $75,000 and lifetime |
| unreasonable annual caps | benefit limit of |
| prohibited under federal | $750,000. |
| health care reform. | |
-----------------------------------------------------------
------------------------------------------------------------
| Premiums |
------------------------------------------------------------
-----------------------------------------------------------
| Rates must be at a standard | Capped at 25 percent to |
| rate for a standard | 37.5 percent higher than |
| population. | the standard average |
| | individual rate that a |
| | plan would charge for |
| | MRMIP benefits in the |
| | commercial market. |
|------------------------------+----------------------------|
| Limits rate variation by | Twelve age variations |
| age to a maximum ratio of 4 | with no limit on |
| to 1. | permissible variation due |
| Rate variations allowed for | to age. |
| whether the plan covers an | Three possible family |
| individual or family, | sizes. |
| geographic regions, and for | Six geographic |
| tobacco use (but limited to |regions. |
| 1.5 to 1). | |
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Arguments in support
AARP writes in support of both this bill and SB 227 that
STAFF ANALYSIS OF ASSEMBLY BILL 1887 (Villines) Page
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this issue is very important to AARP members as the
individuals over age 50 are most likely to be denied
coverage on the basis of pre-existing health conditions.
AARP states that, while the federal government will
administer the program in California if the state does not,
this is not a good option for consumers. AARP argues the
state currently administers a high-risk pool for consumers
and will be able to coordinate outreach and enrollment for
the two programs so that it is seamless, much less
confusing for consumers, and much less likely to result in
consumers being dropped between the cracks of the two
programs. The danger of consumers getting lost in the
shuffle between two similar programs with distinct
eligibility requirements is magnified tremendously by
having them administered by two different entities and
levels of government, one of which have never before
administered such a program. AARP writes it is much more
comfortable that consumers will have meaningful access to
state program administrators to deal with the inevitable
glitches in any new program. AARP concludes that this is
such an important benefit for AARP members who have been
denied coverage based on pre-existing conditions that it
does not want to take any chances on a federal system that
has been designed in just a few months.
The California Medical Association (CMA) writes in support
that this bill and its companion measure, SB 227 (Alquist)
will provide the statutory authority necessary for
California to access $761 million in federal funds and
provide a vital coverage option to individuals with a
pre-existing medical condition. CMA states it supports
high risk pools, as they provide a critical health
insurance coverage option to those who do not have
employer-sponsored coverage and are otherwise medically
uninsurable in the individual market.
Related bills
SB 227 (Alquist), requires MRMIB to enter into an agreement
with the federal DHHS to administer a qualified high-risk
pool to provide health coverage, until January 1, 2014, to
individuals who have pre-existing conditions, consistent
with PPACA. SB 227 establishes the authority and
requirements for MRMIB in administering the federal pool,
consistent with federal law. SB 227 is operative
contingent upon enactment of AB 1887 (Villines), and both
STAFF ANALYSIS OF ASSEMBLY BILL 1887 (Villines) Page
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bills would sunset on January 1, 2020.
PRIOR ACTIONS
Assembly Health 17-0
Assembly Appropriations: 17-0
Assembly Floor: 71-0
POSITIONS
Support: AARP
Asthma and Allergy Foundation of America,
California Chapter
California Chronic Care Coalition
California Hepatitis C Task Force
California Hospital Association
California Medical Association
Consumers Union
Health Access California
Oppose: None received
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