BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 227
S
AUTHOR: Alquist
B
AMENDED: April 13, 2009
HEARING DATE: April 22, 2009
2
CONSULTANT:
2
Park/
7
SUBJECT
Health care coverage
SUMMARY
Reforms and restructures the Major Risk Medical Insurance
Program (MRMIP). Requires health plans and health insurers
(collectively "carriers") to accept for coverage all
persons eligible for MRMIP, as they are assigned to the
carrier by the Managed Risk Medical Insurance Board
(MRMIB), or elect instead to pay a fee for support of
MRMIP, as specified. Revises subscriber contributions, from
a maximum of between 125 percent to 137.5 percent to
between 110 and 150 percent, which is set on a sliding
scale, and allows further premium subsides for low-income
subscribers upon receipt of federal funds. Prohibits
coverage in MRMIP from containing an annual benefit limit,
and makes other changes regarding benefits. Requires MRMIB
to establish a process for eligibility and re-enrollment of
persons enrolled in the Guaranteed Issue Pilot (GIP)
program, and requires MRMIB to provide certain reports to
the Legislature. Expands the duties of MRMIB consistent
with the provisions above, and establishes an 11-member
advisory board to advise MRMIB.
CHANGES TO EXISTING LAW
Continued---
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 2
Existing law establishes the 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.
Existing law requires MRMIB to provide health coverage to
subscribers in the MRMIP through participating private
health plans licensed by either the Department of Managed
Health Care (DMHC) or the California Department of
Insurance (CDI).
Funding and expansion of MRMIP
Existing law 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. Existing law caps
premiums that health plans and insurers can charge MRMIP
enrollees at 125 percent to 137.5 percent of standard
market rates, as specified.
This bill would increase the continuous appropriation to
$40 million to replace the annual budget act appropriation.
This bill would beginning January 1, 2010, require health
plans and health insurers (collectively "carriers") to
accept for coverage all persons eligible for MRMIP, as they
are assigned to the carrier by MRMIB, or elect instead to
pay a fee for support of MRMIP, as specified.
This bill would require MRMIB to determine how many
MRMIP-eligible persons will be assigned to carriers, taking
into account certain issues, including the costs of
providing coverage in MRMIP and the fees paid by carriers
who elect to pay the fee rather than accept assignment. The
bill would require MRMIB, in assigning individuals to
carriers, to take into account the carrier's geographic
service area and the geographic area where MRMIP eligible
persons reside, and would also require MRMIB, to the
greatest extent possible, to provide eligible persons with
a choice of carrier. The bill would require carriers who
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 3
accept persons eligible for MRMIP to provide MRMIP
benefits, as determined by the board, and charge a rate to
be determined by MRMIB.
The bill would require MRMIB to establish fees based on the
plan or insurer's relative number of covered lives for
carriers who elect to be payers, and establish that the fee
charged by the MRMIB shall not exceed $1 per covered life
per month for plans and insurers. The bill would provide
that the fee established under this bill will not be
considered administrative costs for regulatory purposes or
for purposes of calculation of any medical loss ratio
imposed on carriers by statute or regulation.
This bill would define "covered lives" to include
individuals who receive health care coverage provided,
indemnified, or administered by a health care service plan
or health insurer, and individuals who receive health care
services pursuant to an agreement by which the health care
service plan or health insurer rents or leases a contracted
network of providers.
This bill would require that each enrollee, insured, or
covered person be counted as one covered life, except in
the following instances: 1) for every 10 enrollees,
insureds, or covered persons in a group, the health plan or
health insurer providing, indemnifying, administering
health care coverage shall count the 10 as one covered
life; and 2) for covered lives in a group purchasing
arrangement where more than 25 percent of its enrollees or
insureds are retirees and more than 25 percent of enrollees
or insureds can be considered high-risk individuals, as
defined by the health plan or insurer, the health plan or
health insurer providing, indemnifying, administering
health care coverage shall exclude all the covered lives in
the group for the purposes of reporting the total number of
covered lives to MRMIB.
This bill would specify that covered lives include
individuals covered by individual coverage, conversion
coverage, guaranteed issue coverage pursuant to the federal
Health Insurance Portability and Accountability Act of
1996, small group coverage, other group coverage,
government employee coverage, other government coverage,
association coverage, services provided by an administrator
of health benefits coverage, and other coverage. The bill
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 4
would specify that covered lives continue to exclude
Medi-Cal, Medicare, Healthy Families, MRMIP, GIP, AIM,
Proposition 10, persons who have specified insurance
products that are not considered health insurance, or
persons served by a local, nonprofit program or county
serving children in families below 400 percent of the
federal poverty level (FPL).
This bill would define "administrator of health benefits
coverage" to mean a licensed health insurer or health care
service plan, or any person or entity affiliated with, or a
subsidiary of, a health insurer or health care service
plan, that collects any charge or premium from, or who
adjusts or settles claims on behalf of, residents of the
state or who leases contracted provider networks to
purchasers.
Benefit options and design
Existing law allows MRMIP to authorize required copayments
and deductibles, but limits copayments to 25 percent of the
cost of the service and deductibles to $500 per household,
or if deductibles are not used, allows $25 copayments for
office visits. Existing law sets the aggregate amount of
deductible and copayments payable annually at a maximum of
$2,500 for an individual and $4,000 for a family.
Existing regulation establishes an annual cap on coverage
in MRMIP at $75,000 per subscriber, or subscriber's
enrolled dependent, with a lifetime limit of $750,000.
Existing regulation requires the basic minimum scope of
benefits in MRMIP to comply with all requirements of the
Knox-Keene Health Care Service Plan Act of 1975 as well as
other benefits, including family planning services;
specified reconstructive surgery; prescription drugs;
durable medical equipment; specified human organ
transplants; and mental health benefits, not included in
mental health parity law, subject to limitations.
This bill would require MRMIP program benefits to have no
annual benefit cap and limit any lifetime benefit maximum
to $1 million or more. The bill would require benefits in
the program to provide comprehensive coverage, and,
effective January 1, 2011, include lower subscriber cost
sharing for primary and preventive health care services and
medications for the treatment of chronic health conditions.
The bill would require MRMIB to establish benefits that, at
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 5
a minimum, meet Knox-Keene licensure, plus prescription
drugs. The bill would authorize MRMIB to offer more than
one benefit design option with different subscriber cost
sharing. The bill would repeal the requirement that
copayments not exceed 25 percent and deductibles do not
exceed $500.
This bill would repeal the existing subscriber program
contribution formula and would establish a subscriber
contribution ceiling of no more than 150 percent and a
floor of no less than 110 percent of the standard average
individual rate for comparable coverage, as determined by
MRMIB. The bill would also require MRMIB to set a sliding
scale for subscriber contributions between these levels,
with lower requirements for subscribers at or below 300
percent of the federal poverty level. The bill would remove
the 110 percent floor, in the event federal funds are
received, and require MRMIB to lower subscriber
contributions for those at or below 300 percent of the
federal poverty level first, to no less than six percent of
income, and authorize MRMIB to additionally lower
contributions for those between 300 and 400 percent of the
federal poverty level.
This bill would require MRMIB to eliminate any waiting list
on MRMIP with federal funds, prior to applying these
premium subsidies, if federal fund use allowed, and would
also require any excess of federal funds after premium
subsidies to be factored into the following year's
assessment.
This bill would exclude from the subscriber contribution
portion of the standard average individual rate
attributable to elimination of annual benefit maximum and
increase in lifetime benefit maximum.
Guaranteed Issue Pilot Program
Existing law establishes a "Guaranteed Issue Pilot Program"
(GIP), for the period September 1, 2003, to December 31,
2007, under which a subscriber's enrollment in MRMIP is
limited to 36 months, and under which health plans and
insurers in California's individual health insurance market
are required to offer a standard benefit plan to persons
who have exhausted their MRMIP eligibility. Existing law
caps GIP premiums at 110 percent of MRMIP rates and
provides for the state to share equally with health plans
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 6
and insurers the costs of any losses (claims in excess of
subscriber premiums) for providing coverage to GIP
enrollees. Existing law sunset the program on December 31,
2007, but provides that health plans and insurers must
continue to provide coverage to existing GIP enrollees at
100 percent of MRMIP rates.
This bill would require MRMIB to establish a process for
eligibility and re-enrollment of persons enrolled in the
GIP program, and would provide that GIP enrollees may only
be re-enrolled in MRMIP if there is no waiting list for
MRMIP, and will be re-enrolled on a first-come, first-serve
basis, with those first disenrolled into GIP being made
eligible first.
This bill would require MRMIB to determine the maximum
number of GIP-enrolled individuals who can be re-enrolled
from each health plan participating in GIP based on the
proportion of enrollees enrolled in each plan, and would
require MRMIB to develop a notice to be provided by
carriers to GIP enrollees notifying them of their potential
eligibility. The bill would require carriers to provide to
MRMIB the number of lives covered through continuation
coverage under the GIP program in order to implement the
re-enrollment of GIP enrollees.
Individual insurance market
Existing law requires health care service plans and health
insurers in the individual market to issue, without
underwriting, the two most popular products or two most
representative products, as defined, to persons eligible
for guaranteed coverage under the Health Insurance
Portability and Accountability Act (HIPAA), as defined.
For contracts and policies that offer services through a
preferred provider arrangement, existing law requires that
the premium to federally eligible defined individuals not
exceed the average premium paid by a similar subscriber of
MRMIP, as specified. For all other contracts and policies,
existing law requires that the premium not exceed 170
percent of the standard premium charged to an individual of
the same age, in the geographic region in the individual
market.
This bill would require MRMIB to report to the Legislature
by September 1, 2010, regarding the status of benefits and
premiums for persons eligible for guaranteed coverage under
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 7
HIPAA, and the impact of changes in MRMIP benefits and
premiums on HIPAA benefits and premiums. The bill would
require carriers selling individual coverage to report to
DMHC or CDI information related to HIPAA rates and products
to inform the study by MRMIB.
Duties of MRMIB
Existing law imposes specified duties on MRMIB and provides
MRMIB with specified authority in the operation of MRMIP.
This bill would require MRMIB to establish the types of
covered lives that shall be reported by plans and insurers;
apply for federal funding that the board determines to be
cost effective; negotiate with the Center for Medicare and
Medicaid Services to secure federal funding; contract with
a reinsurer to obtain reinsurance or stop-loss coverage for
the program; establish reasonable participation
requirements for subscribers; assign persons eligible for
the program to plans and insurers that have elected to take
the assignment of eligible persons; establish guidelines
for disease management, case management, care management,
or other cost management strategies to be offered by the
program; implement strategies to ensure program integrity;
administer the program to maximize the program's
eligibility for federal funds and seek and apply for any
available federal funds; and utilize more generalized
criteria in contracting with carriers. The bill would allow
MRMIB more discretion in determining who may reapply for
coverage in MRMIP after disenrollment, and use of waiting
or affiliation periods by carriers.
This bill would require MRMIB to report to the Legislature
on implementation of MRMIP, as specified, by July 1, 2012,
and include a transition plan for an alternative approach
to insuring high-risk individuals by January 1, 2014.
This bill would require MRMIB to establish an 11-member
advisory panel, with staggered terms, to advise MRMIB on
MRMIP by February 1, 2010. The panel will consist of: four
health plans and insurers in the individual market, at
least three of which must be participating in MRMIP; two
program subscribers; two health care providers with
expertise in the care and treatment of chronic diseases, at
least one of which must be a physician and surgeon; and,
three representatives of organizations representing the
interests of health care consumers and medically
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 8
uninsurable persons.
Additional provisions
This bill would allow emergency rules and regulations to be
adopted by MRMIB, DMHC, or CDI to implement this act, and
exempt these from review by the Office of Administrative
Law.
This bill would exclude from the provisions of the bill:
specialized health care service plans, Medicare-only, and
Medicare-supplement-only health care service plans licensed
by DMHC; and Medicare supplement, specialized health,
CHAMPUS supplement insurance, hospital indemnity,
hospital-only, accident-only, specified disease insurance
that does not pay benefits on a fixed benefit cash payment
only basis, and short-term limited duration health
insurance that is issued certificates of authority under
CDI.
This bill would provide that the fee established under this
bill will not be considered administrative costs for
regulatory purposes or for purposes of calculation of any
medical loss ratio imposed on carriers by statute or
regulation.
This bill would make specified findings and declarations
with respect to MRMIP, and revise and add certain
definitions governing the operation of MRMIP.
This bill would impose duties on DMHC, CDI, health plans,
and health insurers related to the execution of and
compliance with the provisions above.
This bill would authorize MRMIB, subject to the approval of
the Department of Finance, to obtain loans from the General
Fund for all necessary and reasonable expenses related to
the administration of the fund, and would require MRMIB to
repay principal and interest, using the pooled money
investment account rate of interest, to the General Fund no
later than January 1, 2017.
FISCAL IMPACT
According to the Assembly Appropriations Committee analysis
of a similar measure, AB 2 (Dymally) of 2008, these
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 9
provisions would result in an increase of an annual special
fund (Proposition 99) continuous appropriation from $30
million to $40 million. Under current law, MRMIP is
budgeted with a $30 million continuous appropriation
accompanied by an annual budget act Proposition 99
appropriation of $10 million. This bill will increase the
continuous appropriation to replace the annual budget act
appropriation. The bill may result in additional annual
costs of between $1.4 million and $1.6 million to MRMIB in
2008-09, and 2009-10, and annual on-going costs of $700,000
in following years to support fiscal and accounting staff,
actuarial contracts, and other contracts, as required.
It is unclear to what extent the changes between AB 2 and
this bill alter these estimates.
BACKGROUND AND DISCUSSION
Author's statement
The author states that, although most Californians obtain
health insurance through their employer, many Californians
who do not have access to employer-sponsored health
coverage cannot buy private health insurance at any price,
or can only purchase such coverage at unaffordable prices.
The author notes that, somewhere between 420,000 and
790,000 Californians were considered "medically
uninsurable" last year and that number may grow to 1
million by 2010. The author points out that these
individuals are often among those with the greatest need
for health care.
The author states that this bill is necessary to
restructure and secure stable funding for the Major Risk
Medical Insurance Program (MRMIP), California's coverage
program for high risk and medically uninsurable persons,
which has been in operation since 1991. The author
emphasizes that subscriber premiums and state tobacco tax
revenues fund the program, but these revenues have never
been sufficient to allow all eligible individuals into the
program. The author highlights that MRMIP currently serves
a maximum of 7,100 individuals, far short of the almost 1
million people who may need such coverage next year.
The author points out that California is one of only three
states that subsidize high risk programs exclusively with
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 10
state funds and have capped program enrollment, and that
California is out of sync with how state-sponsored high
risk pools are being funded generally: of 34 states, 27
states use assessments on health insurers to fund at least
a portion of the program costs. The author also points out
that MRMIP is the only high risk pool in the nation to have
an annual benefit cap of $75,000, which has made the state
ineligible for millions of federal funds that could
otherwise enroll more people in MRMIP.
The author believes that without reform of MRMIP, many
Californians will be forced to go without needed health
care services, which will only result in increased
emergency room, or more costly care needed later. The
author states that, absent broader health care reform at
the state or federal level, increasing funding for MRMIP is
critical to stemming the growing ranks of the uninsured.
The problem of the medically uninsurable
An individual is "medically uninsurable" if a prior health
condition, a history of receiving health care services, a
genetic predisposition to illness, or other health-related
factors prevent the individual from finding an insurer that
will issue him or her a policy, or prevent the individual
from obtaining an affordable policy.
Currently, health plans and insurers selling coverage in
the individual heath insurance market may screen potential
policyholders for medical conditions (a process known as
medical underwriting), and may decline to provide coverage
or charge higher premiums for persons with prior medical
conditions. Carriers in the individual market state that
they must be able to control for "adverse selection," in as
much as a person actively searching for health insurance is
more likely to be in need of medical care (and, therefore,
more expensive for an insurer) than someone who receives
insurance more or less passively through an employer.
Medical underwriting practices render some Californians
uninsurable in the individual health insurance market,
including some who are unable to purchase coverage at any
price. According to a report by Harbage Consulting,
approximately 600,000 uninsurable people reside in
California, and this number could grow to more than 1
million by 2010.
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 11
A September 2006 Commonwealth Fund national survey found
that 89 percent of working-age adults who sought coverage
in the individual market during the past three years ended
up never buying a plan. A majority (58 percent) found it
very difficult or impossible to find affordable coverage.
One-fifth of those who sought to buy coverage were turned
down, were charged a higher price because of a pre-existing
condition, or had a health problem which was excluded from
coverage.
MRMIP and GIP
MRMIP began covering enrollees in 1991, providing
comprehensive health insurance benefits to individuals who
are unable to purchase private coverage because they were
denied individual coverage or were offered it at high
rates. Subscribers are charged a monthly premium ranging
from 125 percent to 137.5 percent of their plan's standard
average individual rate. Premiums for the program are
subsidized with Proposition 99 cigarette and tobacco tax
funds, and enrollment into the program is capped.
There are currently four carriers participating in MRMIP:
Kaiser HMO (54 percent of enrollment); Blue Cross PPO (45
percent); Blue Shield HMO (1 percent); and Contra Costa
Health Plan (less than one-half percent). Carriers'
participation in MRMIP is voluntary, and the program is
designed so that participating carriers do not lose money,
despite the fact that they are insuring a population with a
higher risk profile than they would normally insure in the
private market.
According to data published in March 2006, subscriber
premiums cover about 62 percent of MRMIP's cost. The
average premium was $466 per month in 2005. Between 1999
and 2004, around 80 percent of MRMIP subscribers had
medical costs of $5,000 or less per year, and, during 2004,
19 percent of MRMIP enrollees made no medical claims.
According to MRMIB, 60 percent of MRMIP subscribers have
incomes of below $60,000 per year. These subscribers pay
between 13 percent and 36 percent of their annual income on
MRMIP coverage. Due to the cap on subscriber premiums and
the set amount of available Proposition 99 monies, MRMIP
has historically been unable to meet the demand for the
program. In its first year of operation, MRMIP had a
waiting list of nearly 3,500 persons. By 2001, the waiting
list had grown to 7,098 people.
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 12
In order to address the growing waiting list for MRMIP, the
Legislature passed AB 1401 (Thomson) in 2002, which
established the GIP. Under the GIP, subscribers were
automatically disenrolled from MRMIP after 36 months. At
that time, subscribers could select guaranteed continued
coverage from insurers in the individual market. Plans
were required to offer the same benefit packages as those
available under MRMIP, but with a higher annual benefit cap
($200,000 versus $75,000), and a lifetime cap of $750,000.
Although the program sunset at the end of 2007, by law GIP
enrollees may retain their coverage indefinitely and pay an
additional 10 percent above the MRMIP rates for similar
coverage. The three health plans covering the bulk of MRMIP
subscribers also dominate in the GIP coverage market. The
state subsidizes 50 percent of carrier losses for GIP out
of the $40 million Prop 99 appropriation. The state pays
these costs first, and then estimates the number of MRMIP
subscribers who can be enrolled with remaining funds.
Current issues with MRMIP
This committee's analysis of AB 1971 (Chan) of 2006 and AB
2 (Dymally) of 2007-08, prior measures which sought to
reform MRMIP but failed, highlighted a number of problems
with the MRMIP/GIP programs, including the high premiums
that stand as likely barriers to medically uninsurable
individuals who cannot afford high-cost insurance; and the
$75,000 annual cap on benefits in MRMIP, which is low
relative to the commercial health insurance market and
which does not adequately serve the health care needs of
many persons with pre-existing health conditions. The
$75,000 annual cap also disqualifies the state from drawing
down federal funds that could be used to reduce MRMIP's
operational costs, reduce subscriber premiums, and increase
program benefits. In 2006, MRMIB estimated that the funding
loss was estimated to be between $4 and $8 million.
On April, 11, 2009, there were 265 on the waiting list, 62
of whom were satisfying a 3-month post-enrollment waiting
period.
High risk pools in other states
State-sponsored high risk pools for uninsurable persons
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 13
have been implemented in 34 states. Of these, 27 use
assessments on health insurers to fund at least a portion
of the program costs, in addition to participant premiums.
California is one of only three states that subsidize high
risk programs exclusively with state funds and which,
therefore, have capped program enrollment. MRMIP is the
third largest pool in the country, exceeded only by
Minnesota and Texas.
Related legislation
SB 57 (Aanestad) would reform the Major Risk Medical
Insurance Program (MRMIP), the state's program to insure
those who cannot obtain insurance in the private market, by
imposing a surcharge on health plans and insurers to
support the program; increasing deductible and maximum
out-of-pocket expenses for subscribers; requiring an option
to purchase a health benefit plan with a health savings
account; and requiring three declinations in the private
market or proof of a qualified medically uninsurable
condition, to be determined by the Managed Risk Medical
Insurance Board (MRMIB), which operates MRMIP. Reforms
rules governing the individual health insurance market by
allowing health plans and health insurers to exclude
coverage for certain health conditions in the individual
market, and changing rates charged to federally eligible
defined individuals, as defined, for health coverage in the
individual market. Makes other changes relative to the
operation of MRMIP. To be heard on April 22nd in the Senate
Health Committee.
Prior legislation
AB 2 (Dymally) would restructure the MRMIP, including
eligibility, benefits, and premium rates for the program,
and would require all health care service plans and
disability insurers selling health insurance in the
individual market to share in the costs of MRMIP, by either
paying a fee to the state to support MRMIP costs, or by
accepting MRMIP-eligible individuals assigned to them by
MRMIB. Vetoed by the Governor.
AB 1971 (Chan) of 2006, would have extended MRMIP and GIP,
which provide health insurance coverage to medically
uninsurable individuals, until December 31, 2007, and would
have, effective January 1, 2008, reformed and restructured
MRMIP. This bill would have secured additional funding for
the MRMIP by requiring all health plans and health insurers
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 14
in the state to share in the costs of the program, either
as a participating health plan in MRMIP or, in lieu of
participation, by paying a fee to the state to support
MRMIP program costs. Died on the Assembly Floor on
concurrence.
SB 1702 (Speier), Chapter 683, Statutes of 2006, extends
the GIP until December 31, 2007 and provided a one-time
appropriation of $4 million in Proposition 99 funds to
allow MRMIP to enroll an additional 1,160 individuals then
on the waiting list for MRMIP.
AB 1401 (Thomson), Chapter 794, Statutes of 2002, makes
various changes in the individual health insurance market
in California and establishes the GIP pilot project.
Arguments in support
Health Access California writes that the lack of access to
health coverage for persons with pre-existing conditions is
a major issue for consumers. Health Access notes that
people who buy health insurance on their own are not
wealthy and make substantial sacrifices to buy coverage,
which is all too often unavailable. Health Access states
that it supports individual market reforms that would
assure that all persons are able to obtain affordable
coverage, but that absent such reforms, this bill is a
critical measure, and that the availability of coverage for
the medically uninsurable needs to be protected and
expanded.
The California Medical Association writes that this measure
will ensure that Californians unable to obtain health
insurance on their own will have access to relatively
affordable coverage, which is especially important for the
health and wellness of people with higher health care needs
or preexisting conditions.
The California Association of Health Underwriters (CAHU),
which has a "support, if amended" position, writes that it
supports the additional funding source for the high risk
pool, expanded choice of products, and elimination of the
annual maximum and expansion of the lifetime maximum
benefits. Additionally, CAHU supports the change in
subscriber contribution, as well as the inclusion of
individuals under self-funded or partially self-funded
plans in the calculation of the fee. However, CAHU is
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 15
concerned about the inclusion of premium subsidies for
those making more than 300 percent of the federal poverty
level, and does not think it necessary to exclude from the
subscriber contributions the premium portions attributable
to the elimination of caps on annual and lifetime benefits.
CAHU is also concerned about the use of "standard average
individual rate" as a way to establish premium
requirements, and believes that the use of product designs
and rates in the marketplace today is clearer and
eliminates the opaque "average" concept.
Arguments in opposition
The California Labor Federation (CLF) writes, in reference
to a prior version of the bill, that while it strongly
supports efforts to expand health care coverage to those
without it, it cannot support the specific funding
mechanism included in the bill. CLF writes that health
plans and insurers operating in the individual market are
free to pick and choose the healthiest individuals for
coverage and profit richly from them. CLF writes that,
group coverage plans, like those administered by its union
trust funds, are not allowed to discriminate between the
healthy and the sick. CLF points out that its plans cover a
wide range of workers, including those with chronic and
expensive health care needs, and they have already
socialized the cost of unhealthy individuals across their
group costs. CLF believes that asking the workers and their
families who pay for coverage to take on the additional
cost of coverage for those in the individual market is
unfair. CLF believes that this measure does not ask those
who profit from the system or fail to provide coverage to
their own workers to contribute, and that absent new
revenues or comprehensive reform, it must oppose the
measure in its current form.
COMMENTS
1.Recent amendments. This measure was amended April 13, 2009.
Generally, those amendments: eliminate medical loss ratio
as a factor in the fee to be paid by payers electing to pay
a fee; explicitly include in the reporting of covered lives
for the purposes of calculating the fee all individuals who
receive health care coverage provided, indemnified, or
administered by a health plan or health insurer, or
pursuant to an agreement whereby a health plan or insurer
STAFF ANALYSIS OF SENATE BILL SB 227 (Alquist)Page 16
that rents or leases a contracted network of providers,
subject to certain exceptions; impose a 1 to 10 ratio for
the counting of all group lives, i.e., every 10 enrollees,
insureds, or covered persons in a group is counted as one
covered life, for the purposes of calculating a fee;
exclude from the counting of covered lives all lives in
group purchasing arrangements where more than 25 percent of
its enrollees or insureds are retirees and more than 25
percent of its enrollees or insureds can be considered
high-risk individuals, as defined by the health plan or
insurer; revise subscriber contributions to between 110 and
150 percent of the standard average individual rate for
comparable coverage; and change the way federal funds are
to be applied, if any are received, subject to allowable
use; and exclude from subscriber contributions the portion
attributable to elimination of annual cap and increase in
lifetime benefit maximum. The effect of these amendments is
to acknowledge that employer groups are more inclusive in
their coverage of people who may have higher health risks,
and to lower the contribution required by groups to support
the high-risk pool, assuming that health plans and insurers
pass on the costs of any fees paid according to the market
segment that is covered.
POSITIONS
Support: California Association of Health Underwriters (if
amended)
California Communities United Institute
California Medical Association
Congress of California Seniors
Health Access California
Oppose: California Labor Federation, AFL-CIO
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