BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1887|
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THIRD READING
Bill No: AB 1887
Author: Villines (R), et al
Amended: 6/10/10 in Assembly
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 6-2, 6/16/10
AYES: Alquist, Cedillo, Leno, Negrete McLeod, Pavley,
Romero
NOES: Strickland, Aanestad
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : 7-1, 6/17/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Walters
NO VOTE RECORDED: Cox, Denham, Wyland
ASSEMBLY FLOOR : 72-0, 6/14/10 - See last page for vote
SUBJECT : Temporary high risk pool
SOURCE : Department of Health Services
DIGEST : This bill establishes the Federal Temporary High
Risk Health Insurance Fund, requires money in the Fund to
be continuously appropriated to the Managed Risk Medical
Insurance Board for the purpose of establishing a federal
temporary high-risk pool (federal pool) established under
SB 227 (Alquist), 2009-10 Session, for individuals with a
pre-existing medical condition, and is contingent upon the
enactment of SB 227.
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ANALYSIS :
Existing state law:
1. 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:
A. Impose substantial waivers or provide limited
coverage that MRMIB determines would leave a
subscriber without adequate coverage for medically
necessary services.
B. Or, afford coverage only at an excessive price,
which MRMIB determines is significantly above
standard average individual coverage rates.
2. 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.
3. 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
1. The federal health care reform bill, known as the
Patient Protection and Affordable Care Act (PPACA),
requires the federal Secretary of the Department of
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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:
A. Be a citizen or national of the United States or
lawfully present in the United States.
B. 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.
C. Have a pre-existing condition, as determined in a
manner consistent with guidance issued by the
Secretary of the United States Department of Health
and Human Services (DHHS).
2. Under the Patient Protection and Affordable Care Act
(PPACA), in order for a high-risk pool to be eligible
for federal funding, the pool must meet the following
criteria:
A. Provide health insurance coverage to all eligible
individuals that does not impose any pre-existing
condition exclusion.
B. Provide health insurance coverage:
(1) 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.
(2) 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).
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C. Require, with respect to the premium rate charged
for health insurance coverage offered to eligible
individuals through the high-risk pool, rates to:
(1) Vary only for family size (individual or
family), geographic rating area, and tobacco use.
(2) Vary on the basis of age by a factor of not
greater than four to one.
(3) Be established at a standard rate for a
standard population.
(4) Meet any other requirements determined
appropriate by the Secretary of DHHS.
3. 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.
4. 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.
This bill:
1. Establishes a special fund in the State Treasury known
as the Federal Temporary High Risk Health Insurance Fund
(Fund).
2. 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).
3. 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.
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4. 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.
5. 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.
6. 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.
7. Permits any moneys remaining in the Fund at the end of
any fiscal year to be carried forward to the next
succeeding fiscal year.
8. Requires MRMIB to establish a reserve that is sufficient
to prudently operate the program, unless DHHS
establishes other procedures to maintain a prudent
reserve.
9. Applies the definitions in SB 227 to the provisions of
this bill.
10.Sunsets the above provisions in this bill on January 1,
2020.
11.Exempts from public disclosure under PRA records of
MRMIB related to activities governed by the federal
high-risk pool established by SB 227 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 the payment rates, which would be
open to inspection three years after the contract is
open to inspection.
12.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
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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.
13.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.
14.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.
15.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.
16.Provides that its provisions become operative only if SB
227 is also enacted and becomes operative.
Background
Although most Californians obtain health insurance through
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
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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, 29 states plus the District of Columbia have
elected to operate their own pool, 18 states have elected
to have DHHS 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 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.
Related Legislation
SB 227 (Alquist) requires MRMIB to enter into an agreement
with DHHS to administer a qualified high-risk pool to
provide health coverage, until January 1, 2014, to
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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
bills will sunset on January 1, 2020.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
California Federal up to $761 million from
date of Federal*
Temporary Health enactment until January
1, 2014
High Risk Pool
administration and
claims payment
* These funds would be accessed to the extent
subscriber premiums do not cover the full cost of
administration and claims payments.
SUPPORT : (Verified 6/18/10)
Department of Health Services (source)
AARP
Asthma and Allergy Foundation of America, California
Chapter
Blue Shield
California Chronic Care Coalition
California Hepatitis C Task Force
California Hospital Association
California Medical Association
Consumers Union
Health Access California
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ARGUMENTS IN SUPPORT : AARP writes in support of both
this bill and SB 227 that 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.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Blakeslee, Block, Blumenfield, Bradford,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
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Fuller, Furutani, Gaines, Galgiani, Garrick, Gatto,
Gilmore, Hagman, Harkey, Hayashi, Hernandez, Hill, Huber,
Huffman, Jeffries, Jones, Knight, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, V. Manuel Perez, Portantino, Ruskin,
Salas, Skinner, Solorio, Audra Strickland, Swanson,
Torres, Torrico, Tran, Villines, Yamada, John A. Perez
NO VOTE RECORDED: Tom Berryhill, Hall, Norby, Saldana,
Silva, Smyth, Torlakson, Vacancy
CTW:mw 6/18/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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