BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 227|
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THIRD READING
Bill No: SB 227
Author: Alquist (D)
Amended: 5/28/09
Vote: 21
SENATE HEALTH COMMITTEE : 10-1, 4/22/09
AYES: Alquist, Aanestad, Cedillo, Cox, DeSaulnier, Leno,
Maldonado, Negrete McLeod, Pavley, Wolk
NOES: Strickland
SENATE APPROPRIATIONS COMMITTEE : 8-3, 5/28/09
AYES: Kehoe, Cox, Corbett, DeSaulnier, Hancock, Leno,
Oropeza, Yee
NOES: Denham, Runner, Walters
NO VOTE RECORDED: Wolk, Wyland
SUBJECT : Health care coverage
SOURCE : Author
DIGEST : This bill restructures the Major Risk Medical
Insurance Program (MRMIP), which provides health care
coverage for otherwise uninsurable Californians. The bill
requires all health care service plans and health insurers
to accept the MRMIP enrollees for coverage or to pay a fee
to the Managed Risk Medical Insurance Board, the state
entity that administers the MRMIP, to provide health
coverage for the MRMIP enrollees.
ANALYSIS : Existing law establishes the California Major
CONTINUED
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Risk Medical Insurance Program (MRMIP) that is administered
by the Managed Risk Medical Insurance Board (MRMIB) to
provide major risk medical coverage to persons who, among
other matters, have been rejected for coverage by at least
one private health plan. Existing law, the Knox-Keene
Health Care Service Plan Act of 1975, provides for the
licensure and regulation of health care service plans by
the Department of Managed Health Care and makes a willful
violation of the act a crime. Existing law also provides
for the regulation of health insurers by the Department of
Insurance. Existing law requires a health care service
plan and a health insurer to continue to provide coverage
to certain individuals who were members of a pilot program
that ended on December 31, 2007, and requires MRMIB to make
payments from the Major Risk Medical Insurance Fund, a
continuously appropriated fund, to health care service
plans and insurers for the provision of health services to
those individuals.
This bill:
1.Beginning January 1, 2010, 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 MRMIB, or elect instead to
pay a fee for support of MRMIP, as specified.
2.Requires 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 requires 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 also requires MRMIB, to the
greatest extent possible, to provide eligible persons
with a choice of carrier. The bill requires carriers
who accept persons eligible for MRMIP to provide MRMIP
benefits, as determined by the board, and charge a rate
to be determined by MRMIB.
3.Requires MRMIB to establish fees based on the plan or
insurer's relative number of covered lives for carriers
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who elect to be payers, and establish that the fee
charged by the MRMIB shall not exceed one dollar per
covered life per month for plans and insurers. The bill
provides 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.
4.Defines "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.
5.Requires that each enrollee, insured, or covered person
be counted as one covered life, except in the following
instances:
A. 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.
B. A health care service plan or health insurer
subject to this chapter that rents or leases a
contracted network of providers to a group shall
count every 10 individuals of the group as one
covered life.
6.Specifies 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
specifies that covered lives continue to exclude
Medi-Cal, Medicare, CalPERS Healthy Families, MRMIP,
Guaranteed Issue Pilot, AIM, Proposition 10, persons who
have specified insurance products that are not
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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).
7.Defines "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.
8.Requires MRMIP program benefits to have no annual
benefit cap and limit any lifetime benefit maximum to $1
million or more. The bill requires 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 requires MRMIB to establish
benefits that, at a minimum, meet Knox-Keene licensure,
plus prescription drugs. The bill authorizes MRMIB to
offer more than one benefit design option with different
subscriber cost sharing. The bill repeals the
requirement that copayments not exceed 25 percent and
deductibles do not exceed $500.
9.Repeals the existing subscriber program contribution
formula and establishes 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 also requires 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 removes
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
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the federal poverty level.
10.Requires 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
requires any excess of federal funds after premium
subsidies to be factored into the following year's
assessment.
11.Excludes from the subscriber contribution portion of the
standard average individual rate attributable to
elimination of annual benefit maximum and increase in
lifetime benefit maximum.
12.Requires MRMIB to establish a process for eligibility
and re-enrollment of persons enrolled in the Guaranteed
Insured Pilot (GIP) program, and provides 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.
13.Requires 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
requires 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.
14.Requires MRMIB to report to the Legislature by September
1, 2010, regarding the status of benefits and premiums
for persons eligible for guaranteed coverage under the
Health Insurance Portability and Accountability Act
(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 Department of Insurance (DOI) information
related to HIPAA rates and products to inform the study
by MRMIB.
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15.Requires 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 allows
MRMIB more discretion in determining who may reapply for
coverage in MRMIP after disenrollment, and use of
waiting or affiliation periods by carriers.
16.Requires 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.
17.Requires 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
uninsurable persons.
Additional provisions:
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18.Allows emergency rules and regulations to be adopted by
MRMIB, DMHC, or DOI to implement this act, and exempt
these from review by the Office of Administrative Law.
19.Excludes 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, Civilian Health and Medical Program of the
Uniformed Services (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 DOI.
20.Provides 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.
21.Makes specified findings and declarations with respect
to MRMIP, and revise and add certain definitions
governing the operation of MRMIP.
22.Imposes duties on DMHC, DOI, health plans, and health
insurers related to the execution of and compliance with
the provisions above.
23.Authorizes 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 requires 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 EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the latest Senate Appropriations Committee:
Fiscal Impact (in thousands)
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Major Provisions 2009-10
2010-2011 2011-12 Fund
MRMIB increased staff $184 $475 $475
Special*
MRMIB administrative costs, $395 $500 $500
Special*
consultants, actuaries
Fee revenue beginning
in FY 2010-11, Special
Revenues of up to about $25
million
*Major Risk Medical Insurance Fund
SUPPORT : (Verified 6/1/09)
American Federation of State, County and Municipal
Employees
California Association of Health Underwriters (if amended)
California Communities United Institute
California Medical Association
Congress of California Seniors
Health Access California
OPPOSITION : (Verified 6/1/09)
Aetna
California Labor Federation, AFL-CIO
California State Employees Association
CIGNA
UnitedHealthcare
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
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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.
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 this bill in its current form.
CTW:do 6/2/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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