BILL ANALYSIS
SB 227
Page 1
Date of Hearing: June 30, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
SB 227 (Alquist) - As Amended: May 28, 2009
SENATE VOTE : 23-15
SUBJECT : Health care coverage.
SUMMARY : Revises and secures additional funding for the Major
Risk Medical Insurance Program (MRMIP) for medically uninsurable
persons by requiring all health care service plans and health
insurers in the state (collectively "health plans") to share in
the costs of the program, either by accepting assignment of
persons eligible for the program or, in lieu of enrolling
eligible persons based on assignment, by paying a fee to the
state to support MRMIP program costs. Specifically, this bill :
1)Effective January 1, 2010, requires all health plans in the
state to accept for coverage persons eligible for MRMIP, as
assigned to each plan by the Managed Risk Medical Insurance
Board (MRMIB), regardless of the health status or previous
claims experience of the eligible individuals. Requires
health plans to guarantee renewal of the coverage.
2)Permits health plans and insurers, as an alternative to 1)
above, to pay a fee to support the costs of MRMIP, based on
the number of covered lives, as defined, and designates these
health plans as payers.
3)Exempts from the requirements in 1) above specialized health
plans, such as dental-only and vision-only, Medicare and other
similar health plans, hospital-only, hospital indemnity and
fixed benefit plans.
4)Requires health plans to make an annual election to accept
assignment of MRMIP-eligible persons or to instead pay a fee
based on covered lives and, for health plans electing to pay
the fee, requires the health plan to report to MRMIB on or
before March 1 of each year, beginning in 2010, the total
number of covered lives, as defined.
5)Defines "covered lives," for purposes of the optional fee, as
individuals receiving health care coverage provided,
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indemnified, or administered by a health plan, and individuals
who receive health care through an arrangement in which a
health plan rents or leases a contracted network of providers
(self-insured employers and other self-insured plans, such as
labor union benefit trusts, often lease networks and/or
contract for benefit administration).
6)Exempts from the definition of covered lives individuals
covered under government programs, including Medi-Cal,
Medicare, the Healthy Families Program, the Access for Infants
and Mothers Program, MRMIP and the Guaranteed Issue Pilot
(GIP) program, the California Children and Families Act of
1998, local nonprofit programs or counties providing coverage
for low-income children, as specified, and the California
Public Employees' Retirement System (CalPERS).
7)Caps the total amount of the fee at no more than $1.00 per
covered life per month, but for those lives enrolled through
group coverage arrangements requires that every ten enrolled
persons counts as one covered life for purposes of the fee.
The maximum fee that could be assessed would be $12.00 per
year for individual insurance purchasers and $1.20 per year
for persons in group coverage. Requires the Department of
Managed Health Care (DMHC) and the California Department of
Insurance (CDI) to collect and transmit any fee revenues to
MRMIB, to allow health plans to pay the fee quarterly and
exempts the fee from any consideration of health plan
administrative costs or calculation of health plan medical
loss ratios.
8)Establishes timelines and mechanisms for the setting,
collection, transferring and enforcement of the fee and
requires, in the event that fee revenues exceed MRMIP costs,
the excess to be retained in the fund to reduce the fee paid
by payers in the subsequent fiscal year.
9)Requires health plans accepting assignment of MRMIP-eligible
persons to provide coverage with the same level of benefits
provided to MRMIP subscribers, as determined by MRMIB, to
charge premium rates set by MRMIB, and limits health plans to
only those coverage exclusions or waiting periods authorized
by law or regulations adopted by MRMIB.
10)Requires MRMIB to do all of the following in administering
the revised MRMIP:
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a) Develop a process for and implement assignment of
MRMIP-eligible persons to health plans that takes into
account geographic locations of health plans and enrollees;
provides eligible persons with a choice of health plan, to
the greatest extent possible; and, determine the number of
persons to assign to each health plan, taking into
consideration program costs and fees paid by payers;
b) Implement strategies to ensure program integrity and to
ensure that the program serves the target population of
uninsurable individuals, including ensuring that applicants
provide adequate evidence of their inability to obtain
private individual coverage, as specified;
c) Administer the program to maximize eligibility for
federal high risk pool funds that may be available and to
apply for available federal funds that are consistent with
the program goals and requirements;
d) Establish by February 1, 2010 an 11-member advisory
panel, with specified membership, who would serve without
compensation, to advise MRMIB on policies, regulations and
MRMIP program operations; to make recommendations to
improve the quality and cost-effectiveness of MRMIP; and to
make recommendations to ensure the affordability of
coverage for subscribers, especially low-income
subscribers. Requires reimbursement for advisory committee
members and authorizes per diem compensation for consumer
representatives if the representatives are otherwise
economically unable to attend and participate in panel
activities; and,
e) Establish by regulation a process for eligibility and
voluntary reenrollment for persons enrolled in guaranteed
individual coverage under GIP pilot project established
pursuant to AB 1401 (Thomson), Chapter 794, Statutes of
2002. GIP, which sunset December 31, 2007, limited
enrollment in MRMIP to 36 months and required all health
plans selling individual coverage to accept for coverage
MRMIP enrollees reaching the time limit.
f) Requires GIP enrollees remaining in continuation
coverage to be eligible for voluntary reenrollment in MRMIP
if the following conditions are met:
i) There are no individuals on a MRMIP waiting list
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because of insufficient funds;
ii) GIP enrollees wishing to reenroll in MRMIP are made
eligible on a first-come, first serve basis, as funds
allow, and based on the date they were originally
disenrolled from MRMIP;
iii) MRMIB sets the number of GIP enrollees who may
reenroll from each GIP health plan based on the health
plan's proportion of GIP enrollment; and,
iv) GIP health plans provide specified notice to GIP
enrollees of the potential to reenroll.
g) Report to the Legislature on or before July 1, 2012 on
the implementation of this bill, as specified, and to
include in the report an implementation and transition plan
for an alternative approach to coverage of medically
uninsurable persons, as specified.
11)Revises MRMIP benefits and establishes criteria for MRMIB in
developing benefits as follows:
a) Prohibits any annual benefit limit, and requires a
lifetime benefit limit of $1 million;
b) Requires benefits to be comprehensive, compatible with
comprehensive products available in the individual market
to the greatest extent possible, and include no less than
the minimum benefits required under the Knox-Keene Health
Care Service Plan Act of 1975 (Knox-Keene) , plus
prescription drugs. (Knox-Keene is the body of law which
regulates health maintenance organizations (HMOs) and some
Preferred Provider Organization (PPO) health plans in
California);
c) Effective January 1, 2011, requires lower subscriber
cost sharing for primary and preventive care and the
medications necessary and appropriate for the treatment and
management of chronic health conditions;
d) Requires benefits and cost-sharing appropriate for a
program serving high-risk and medically uninsurable
persons;
e) Requires MRMIB to develop guidelines, as appropriate,
for disease management, case management, care management or
other cost management strategies to ensure cost-effective,
high-quality health care services for MRMIP subscribers;
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and,
f) Authorizes but does not require MRMIB to offer more than
one benefit design option with different subscriber cost
sharing in the form of copayments, deductibles, and annual
out-of-pocket costs.
12)Revises MRMIP subscriber contribution rates as follows:
a) Revises the subscriber rate from the current 125-137.5%
of market rates for comparable coverage to a rate set by
MRMIB, but requires that rate to be no less than 110% and
no more than 150% of market rates;
b) Requires MRMIB to establish a sliding scale with lower
contribution requirements for subscribers at or below 300%
of the federal poverty level (FPL) ($32,490 for a family of
one in 2009);
c) Allows MRMIB to set rates below 110% for persons at or
below 300% of FPL, if federal funds are available for that
purpose, and there are no MRMIP-eligibles on a waiting
list, as long as the subscriber rates are not lower than 6%
of income;
d) In addition, allows MRMIB to set rates below 110% for
persons with incomes 300-400% of FPL, if federal funds are
available, there are no MRMIP-eligibles on a waiting list,
and rates have been adjusted for persons at or below 300%
FPL, as long as the rates for those 300-400% FPL are not
lower than 6% of income; and,
e) Authorizes MRMIB to exclude from rates the cost
associated with eliminating annual benefit limits and
increasing the lifetime benefit maximum from $750,000 to $1
million pursuant to this bill.
13)Authorizes rather than requiring MRMIB to set a period of
time individuals must stay out of MRMIP if they voluntarily
disenroll, or are terminated for nonpayment of premium, unless
MRMIB determines that an individual applying for the program
had good cause for disenrolling and then reapplying for
coverage.
14)Makes changes to the duties, responsibilities and authority
of MRMIB consistent with the program changes in this bill, and
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makes clarifying changes to the MRMIB statute to reflect
common practices in the program, including requiring MRMIP to
only contract with participating health plans that are either
health insurers with a valid certificate of authority from CDI
or health care service plans licensed under Knox-Keene.
15)Authorizes DMHC and CDI to take all actions necessary to
enforce the provisions of this bill and makes demonstration of
the health plan's compliance with the assignment obligation,
or alternatively, timely payment of the fee, a prerequisite
for obtaining or retaining a health plan license or
certificate of health insurance in this state.
16)Requires MRMIB, on or before September 1, 2010, to assess
products provided in the private market to persons eligible
for guaranteed issue under the federal Health Insurance
Portability and Accountability Act (HIPAA), based on an
actuarial analysis MRMIB obtains, and to make recommendations
to the Legislature on needed policy changes related to HIPAA
rates, in relationship to MRMIP rates, including the impact of
MRMIP program changes on HIPAA rates. Requires health plans
to provide information requested by MRMIB related to the
study, as specified.
17)Authorizes the adoption and one re-adoption of emergency
regulations to implement this bill.
EXISTING LAW :
1)Establishes MRMIP, administered by MRMIB, to provide health
coverage for individuals unable to purchase private individual
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.
2)Establishes basic MRMIP program elements, including
eligibility, benefits, and subscriber contributions, and
limits any annual deductible for MRMIP coverage to $500 and
total annual out-of-pocket costs to $2,500 for an individual
and $4,000 for a family. Establishes, by regulation, an
annual cap on coverage in MRMIP at $75,000 per subscriber,
with a lifetime limit of $750,000.
3)Requires health plans selling individual coverage to provide
continuation coverage to any person enrolled with the health
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plan as part of the GIP prior to the December 31, 2007 sunset,
requires GIP health plans to charge GIP subscribers at 110% of
MRMIP rates, and requires MRMIB to continue to make payments
to GIP health plans equal to one-half of the amount of
expenses incurred by GIP enrollees, minus the premiums paid by
GIP subscribers, based on costs reported by GIP health plans.
FISCAL EFFECT : According to the Senate Appropriations
Committee analysis, MRMIB estimates that at least 4.5 positions
would be needed to implement this bill's provisions at costs of
$184,000 in fiscal year 2009-10 and $475,000 annually
thereafter. Additionally, MRMIB estimates that it would require
$395,000 in fiscal year 2009-10, and $500,000 annually
thereafter, to fund increased administrative costs. The
Committee estimates that the fees collected pursuant to this
bill would result in revenues of up to $25 million beginning in
fiscal year 2010-11.
COMMENTS :
1)PURPOSE OF THIS BILL . The author believes that this bill is
necessary to restructure and secure stable funding for MRMIP.
The author points out that, while subscriber premiums and
state tobacco tax revenues fund the program, these revenues
have rarely 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 contends that without reform of MRMIP, many
Californians will be forced to go without needed health care
services, which will only result in increased use of the
emergency room, or more costly care needed later. The author
cites a study referenced in the 22nd edition of the
Comprehensive Health Insurance for High-Risk Individuals: a
State-by-State Analysis, published by the National Association
of State Comprehensive Health Insurance Plans, which found
that the absence of high-risk pools would result in an
additional $1 billion in uncompensated care, and $1.1 billion
in care not rendered. The author believes 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.
2)BACKGROUND . Private health plans and insurers use "medical
underwriting" to screen applicants for individual health
coverage and determine the individual's risk profile and
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potential need for health care services. Health insurers
typically deny coverage or charge higher rates to individuals
with pre-existing serious health conditions, such as cancer or
heart disease. In addition, individuals with any previous
health service use, even for conditions that no longer exist
or with chronic conditions that are successfully being treated
(such as mental illness, diabetes, or asthma) are also often
denied coverage. In many cases, other health-related factors,
such as being overweight or being a tobacco user can result in
a coverage denial. There is limited data on the extent of
coverage denials in the individual health insurance market
because health plans and insurers are not required to report
the data. A September 2006 Commonwealth Fund national survey
found that 89% 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%) found it very difficult
or impossible to find affordable coverage. One-fifth (21%) 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 excluded from coverage.
3)MRMIP . California's program for medically uninsurable
persons, MRMIP, 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, which also administers the Healthy
Families Program, which provides coverage for low-income
children. Presently, subscribers pay approximately 60% of the
program costs, paying premiums that are 125-137.5% of what
they would pay in the private market for the same coverage.
There are four major private health plans that voluntarily
participate in the program - Blue Cross, Blue Shield, Kaiser,
and Contra Costa Health Plan. Premiums vary based on the age
and region of the subscriber and the health plan they choose.
For example, in Sacramento County, the 2009 premiums for a
person age 50-54 are $435 per month for the Kaiser Permanente
HMO plan, $776 for the Blue Cross PPO and $1,120 per month for
the Blue Shield HMO. These premiums pay for coverage that
stops at $75,000 per year and includes a lifetime maximum of
$750,000.
MRMIP receives annual appropriations which have in recent years
been set at $40 million in state Proposition 99 Cigarette and
Tobacco Products Surtax Funds ($30 million in the MRMIP
statute and $10 million through annual or one-time
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appropriations) to pay for the costs exceeding subscriber
premiums. The capped funding has routinely required the
program to limit enrollment. MRMIP can only enroll the number
of people that MRMIB's contracted actuaries,
PricewaterhouseCoopers (PwC), estimate can be served with the
funds available. PwC estimates the state share of GIP costs,
subtracts those costs from the funds appropriated for MRMIP,
and then estimates the number of MRMIP subscribers who can be
enrolled with the remaining funds. The current enrollment cap
is 7,100 and as of June 22, 2009, there were more than 225
persons on the waiting list because of insufficient funding.
SB 1702 (Speier), Chapter 683, Statutes of 2006, provided a
one-time additional appropriation of $4 million in Proposition
99 funds. SB 1379 (Ducheny), Chapter 607, Statutes of 2008,
resulted in a one-time allocation to MRMIP of $10 million of
the fines and penalties against health plans collected by
DMHC, to reduce MRMIP's waiting list, which had grown to 1,000
individuals by July 2008 because of the sunset of GIP. Prior
to the additional funds being made available, the MRMIP
waiting list consistently had at least 500 people and was only
open to new individuals when MRMIP subscribers disenrolled and
slots opened up. The $10 million allocation reduced the
waiting list of 700 uninsurable individuals in October 2008 to
zero (excluding those whose coverage was pending fulfillment
of a waiting period). This year, the most recent budget
proposal would eliminate $6.6 million in Proposition 99
funding for MRMIP for 2009-10.
MRMIP has served more than 100,000 individuals over the life of
the program, but as a result of recurring waiting lists, many
individuals most in need of health coverage and who are
willing to pay a high price for it are unable to purchase it.
Moreover, many observers believe that the wait list represents
only a fraction of those who would be eligible for the
program. Reasons offered for why many people would not even
sign up to be on the waiting list include the high MRMIP
premiums that make it unaffordable for many and the $75,000
annual cap on covered benefits which has not increased as
health care costs have grown.
4)GIP . The Legislature passed AB 1401 (Thomson), Chapter 794,
Statutes of 2002, establishing a pilot project to reduce what
had historically been long waiting lists in MRMIP. The GIP
pilot project sunset December 31, 2007. The essence of the AB
1401 pilot project, (also referred to as the incubator, the
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graduate program, or GIP), was that individuals were covered
through MRMIP for 36 months and, after 36 months, were
disenrolled with the option to seek private individual
coverage from any health plan selling individual health
insurance. Under the GIP rules, health plans were required to
offer GIP-eligible individuals coverage on a "guaranteed
issue" basis (accepting an applicant regardless of their age,
health status, health condition, or prior health service
utilization). The medical care costs for GIP subscribers that
exceed the premiums paid (losses) are covered in a 50/50 share
by the state and the health plans covering GIP subscribers.
By law, GIP enrollees pay an additional 10% above the MRMIP
rates for similar coverage. Although GIP enrollees have the
right to coverage from any carrier in the individual market,
the three health plans covering the bulk of MRMIP subscribers
also dominate in the GIP coverage market: Anthem Blue Cross,
Kaiser Permanente, and Blue Shield of California. Near the
end of the GIP project, data revealed that more than 85% of
GIP subscribers were enrolled in Anthem's GIP product.
Although the GIP project has ended, individuals enrolled while
the project was in effect are able to remain with GIP health
plans until they get other coverage, such as becoming eligible
for Medicare, or voluntarily disenroll. Although there is
inconsistent reporting of GIP enrollment by health plans,
there are an estimated 6,000 individuals who continue to be
enrolled in GIP coverage.
5)OTHER STATE HIGH RISK POOLS . State programs such as MRMIP are
typically referred to as "high-risk pools," because of the
risk and costs associated with individuals whose health status
disqualifies them for private coverage with most insurers.
California is one of only three states that subsidize coverage
programs for medically uninsurable persons exclusively with
state funds and have capped program enrollment.
State-sponsored high risk pools for uninsurable persons have
been implemented in 34 states, and 27 of the state programs
use assessments on health insurers to fund at least a portion
of the program costs. According to the National Association
of State Comprehensive Health Insurance Plans (NASCHIP), state
high risk pools serve nearly 200,000 eligible persons. MRMIP
is the only high risk pool in the nation to have an annual
benefit cap of $75,000, which has made MRMIP ineligible for
potentially millions of dollars in federal high risk pool
funds that could otherwise enroll more people in MRMIP.
MRMIP served 6,719 persons in May 2009, significantly fewer
people than high risk pools in other large states. By
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contrast, Minnesota has 31,000 subscribers, Texas has 28,000,
Oregon has 15,000 and Wisconsin has 19,000 (NASCHIP, 2007
data).
According to NASCHIP, state high risk pools support the
existence of an individual market for persons who have no
access to employer based group coverage. Health insurers
selling individual policies use underwriting to determine
which risks to insure and which risks to leave to the state
high risk pools. Those persons rejected, due to high risk
conditions, can seek health coverage through the state high
risk pool, if they live in one of the 34 states with a pool.
The existence of state high risk pools allows sellers of
individual coverage to offer affordable rates, to most of
their customers. NASCHIP points out that the flip side is
that high risk pools charge premiums significantly higher than
premiums for the average individual policy sold in the private
market.
6)PREVIOUS AND RELATED LEGISLATION .
a) SB 57 (Aanestad) would revise and restructure MRMIP,
including securing additional funding by requiring each
health plan and health insurer to add a surcharge on each
individual policy. SB 57 would also enact specified
program changes related to eligibility, plan choices,
benefit limits, and benefit exclusions, and related
changes. SB 57 failed passage in Senate Health Committee
on April 22, 2009 by a vote of 2-6.
b) SB 499 (Ducheny) requires MRMIB to report to the
Legislature no later than March 1, 2010, and annually
thereafter, on the amount and use of moneys transferred to
the Major Risk Medical Insurance Fund from the Managed Care
Administrative Fines and Penalties Fund, pursuant to SB
1379 (Ducheny) of 2008, and to report on the effect of the
transferred funds on the MRMIP waiting list.
c) SB 1379 (Ducheny) of 2008 requires fines and
administrative penalties levied against health plans under
Knox-Keene to be placed in the Managed Care Fund and used,
upon appropriation by the Legislature, for the Steven M.
Thompson Physician Corps Loan Repayment Program, a
physician loan repayment program, up to $1 million per
year, with the remainder being allocated to MRMIP.
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Requires DMHC to make a one-time transfer of $10 million to
MRMIP and $1 million to the Thompson Program. Prohibits
using the penalties authorized by Knox-Keene to reduce
assessments for support of DMHC, and prohibits any refunds
or reductions in those assessments because of penalty
revenues, as specified.
d) SB 27 X1 (Aanestad) of 2008 would have revised and
restructured MRMIP, including securing additional
funding by requiring each health plan and health
insurer to add a surcharge to each individual policy
and diverting penalties levied against health plans to
support MRMIP. SB 27 X1 would also have enacted
specified program changes related to eligibility, plan
choices, benefit limits, and benefit exclusions, as
well as enact other related changes. SB 27 X1 was
held in the Senate Health Committee without a hearing.
e) AB 2 (Dymally) of 2009 would have revised and
restructured MRMIP, in a manner similar to this bill,
but would have required only health plans selling
individual coverage in the state to accept assignment
of such persons or to support the costs of MRMIP
through a per person fee on individual health plan
contracts and policies. AB 2 was vetoed by Governor
Arnold Schwarzenegger. In his veto message, the
Governor objected to the assessment on individual
coverage and stated, in part, that AB 2 "would allow
health insurance companies to pass the fee onto their
enrollees, making it more expensive. This population
is the most sensitive to price. Many must bear the
entire cost of their coverage because they are
self-employed or their employers do not offer coverage
- a bill such as this only exacerbates their burden."
The Governor concluded that "Comprehensive health care
reform that guarantees issuance of coverage to all
individuals, along with an individual mandate,
cost-containment, prevention and shared responsibility
is the only solution for our health care crisis."
f) AB 1378 (Nakanishi) would have extended GIP for six
months to July 1, 2008 and tightened the eligibility
criteria for MRMIP. At the request of the author, AB 1378
was never heard in Assembly Health Committee.
g) SB 1702 (Speier), Chapter 683, Statutes of 2006, extends
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the GIP until December 31, 2007 and appropriates, on a
one-time basis, an additional $4 million in Proposition 99
funds for MRMIP.
h) AB 1971 (Chan) of 2006 would have extended the GIP until
December 31, 2007, and, effective January 1, 2008, would
have required all health plans 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. AB 1971 included
many similar elements to this bill and died pending
concurrence in Senate amendments on the Assembly floor.
i) 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.
7)SUPPORT . Health Access California supports this bill and
points out that half of those purchasing MRMIB coverage have
household incomes of less than $60,000 per year and
three-quarters make less than $100,000 per year, and yet are
still willing to pay very high premiums. Health Access states
that people who buy health insurance on their own are willing
to make substantial sacrifices to buy coverage and find all
too often private coverage is unavailable to them. Health
Access regards the lack of access to coverage for persons with
pre-existing conditions as a major issue for consumers.
Congress of California Seniors (CCS) supports this bill
stating that access to coverage for high risk persons is one
of the most pressing problems in efforts to ensure all
Californians have access to quality, affordable health care,
with the problem being especially acute for people over age
50. CCS notes that California was one of the first states to
establish a high risk pool but the program changes in this
bill are long overdue. The California Medical Association
(CMA) supports this bill and states that it is often nearly
impossible for uninsured Californians with pre-existing
conditions to secure insurance as an individual. CMA argues
that this bill will ensure that Californians who are unable to
obtain health insurance on their own have access to relatively
affordable coverage. According to CMA, having access to a
regular source of care is especially important for the health
and wellness of people with higher health care needs or
preexisting conditions. The American Federation of State,
County and Municipal Employees (AFSCME) supports this bill in
part because of amendments to this bill which exempt from the
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definition of covered lives individuals covered through
CalPERS.
8)SUPPORT IF AMENDED . MRMIB, an independent board with
membership appointed by the Governor and the Legislature,
supports this bill if amended to address specific policy and
technical concerns provided to the author's office. MRMIB
strongly urges the author to consider an amendment that
reduces the maximum subscriber contributions from 150% of the
standard average individual rate for comparable coverage to
125%. According to MRMIB, a maximum rate of 125% is
consistent with existing maximum subscriber contribution
rates. MRMIB writes that even at existing subscriber
contribution levels, it recognizes that MRMIP is unaffordable
to many Californians who are eligible for the program. MRMIB
contends that increasing the maximum subscriber contribution
to 150%, as proposed in this bill, would only exacerbate this
problem.
In support, MRMIB finds that this bill would expand access to
MRMIP-eligible individuals and broaden funding for the
program. In addition, MRMIB points out that the capped
appropriation has forced the Board to impose an annual benefit
limit of $75,000 in order to maximize enrollment, which can be
devastating to any subscriber who reaches this limit. MRMIB
indicates that this benefit limit is not found in benefits
sold in the California commercial market and is the primary
reason California does not qualify for federal high risk pool
funding which otherwise might help to support program costs.
Ultimately, MRMIB concludes that this bill is consistent with
the guiding principles adopted by the Board for the future of
MRMIP, which include: providing sufficient funding for the
program for all those wishing to purchase coverage,
eliminating the existing annual benefit caps, spreading the
costs of the MRMIP subsidy broadly so no one segment of
insured persons is disproportionately affected, allowing MRMIB
to address premium affordability for the lowest income
subscribers, and removing any disincentives for health plans
to voluntarily provide MRMIP coverage.
California Association of Health Underwriters (CAHU) supports
many of the provisions of this bill, stating that California
must have an insurer of last resort and fund it appropriately.
CAHU argues, however, that the program should have expanded
benefit choices to include a higher deductible product with a
Health Savings Account, advocates for assessments spread
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across all persons with health insurance, including
self-funded and partially self-funded plans, and expresses
concerns about the premium subsidies in this bill for persons
above 300% of FPL.
9)OPPOSE UNLESS AMENDED . The California Labor Federation
(CalFed) opposes this bill unless it is amended to exempt
collectively bargained health care coverage from the fee.
According to CalFed, group plans, such as union trust funds,
do not discriminate among the healthy and sick so should not
have to pay the fee. CalFed states that because union trusts
include those with chronic and expensive health care needs,
they have already socialized the costs of unhealthy
individuals in the group costs.
10)OPPOSITION . The California State Employees Association
opposes this bill because they argue that this bill would
penalize working families with group coverage while asking
nothing of those who profit from the system, or who fail to
provide coverage to their own employees. The California
Chamber of Commerce (CalChamber) opposes this bill arguing
that it creates a state bureaucracy, singles out a specific
industry, and, since the fee will most likely be passed on to
employers, will further erode coverage for workers. Three
health insurers whose California business is primarily in the
group rather than the individual market, Aetna, CIGNA and
UnitedHealthcare argue in opposition: this bill "singles out"
a specific industry when in fact all Californians should bear
the costs for MRMIP, the benefit design does not resemble
coverage in the individual market, and MRMIP subscribers
should be required to participate in wellness incentives and
disease management programs. The large group carriers also
suggest that there will be a legal challenge as to whether the
fee in this bill is a tax and whether the assessment imposed
on health plans providing administrative services to
self-insured plans is a violation of the federal Employee
Retirement Income and Security Act. Health insurer trade
associations and CalChamber oppose this bill as a tax on
insurers that will erode the affordability of health insurance
and state that this bill may be premature given the potential
for federal health insurance reform. The Association of
California Life and Health Insurance Companies states that the
fee in this bill should be subject to a 2/3 vote requirement
as a tax.
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11)POLICY ISSUES .
a) Rationale for this proposal . This bill is the latest in
a series of legislative proposals over the last decade
attempting to increase and stabilize funding for MRMIP.
This bill would secure additional revenues for MRMIP in the
same manner as 27 of the 34 high risk pools around the
country, through assessments on health insurance. Some
opponents argue to be excluded from this fee because they,
or their particular source of current health coverage, such
as a group health plan, do not contribute directly to the
number of medically uninsurable persons seeking individual
coverage. However, the policy rationale for a fee such as
the one proposed in this bill is fundamentally different.
The rationale is that everyone pays a small amount into the
pool while they have insurance so that if they are ever in
need of last resort coverage, it will be available to them.
Individuals in employment-based group health insurance, or
those currently with individual coverage, are one job
change, one new business opportunity, one disabling
illness, one early retirement, or one other change in life
circumstances away from needing to seek individual
coverage. Most people over the age of 50, and many younger
persons, have, or have had in the past, some health issue
or illness that could easily make them medically
uninsurable.
The policy rationale for the funding mechanism in this bill
is that everyone pays into the fund as a precaution should
they ever need high risk coverage in the future. In this
way, the fee in this bill is most analogous to state
disability insurance and is not intended to be an industry
penalty on health insurers because they exclude high cost
individuals from coverage. The author may wish to amend
this bill to emphasize the goal of the fee by allowing or
requiring health plans to separately identify and list the
assessment as part of all health insurance premium bills.
b) High-deductible health coverage options . As the
strategies for financing and restructuring MRMIP have been
debated in recent years, some stakeholders have suggested
that much of the affordability problem with MRMIB results
from benefits that are higher than the private market. At
the same time, the low annual and lifetime benefit caps in
the program are not mirrored in the private market. Some
stakeholders argue that MRMIP subscribers should have an
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option to choose a product with a higher deductible than
the current $500 deductible, because a higher deductible
plan would result in lower, more affordable premiums, would
be more in keeping with benefits in today's private
individual market, and would offer federal Health Savings
Account tax benefits to reduce subscriber costs overall.
However, it isn't clear what impact a high deductible option
would have on subscriber premiums or program costs given
the health status of MRMIP subscribers. The Commonwealth
Fund (TCF) has reported that 38% of adults with deductibles
of $1,000 or more reported at least one of four
cost-related problems: not filling a prescription, not
getting needed specialist care, skipping recommended tests
or follow-up, and having a medical problem but not visiting
a doctor or clinic. In addition, TCF reports that people
who are sick have a more difficult time obtaining needed
care with a deductible than healthier people, and medical
bill problems and medical debt are greater among those with
high deductibles, especially those with lower incomes. The
chance that MRMIP subscribers, already determined to be
high risk, would delay or forego needed medications or
regular medical follow-up could actually lead to increased
MRMIP program costs overall, if chronic illnesses are
poorly managed or a lack of access to regular medical
supervision fails to detect new health problems in a timely
manner.
A requirement for MRMIP to offer at least one high deductible
plan option should only be implemented if an actuarial
analysis determines that premiums, plus the total maximum
out-of-pocket costs for subscribers choosing the plan,
would be lower than existing MRMIP premiums, and that MRMIP
program costs would not be expected to increase as a result
of some individuals being enrolled in the reduced coverage
option. IN addition, requiring MRMIB to offer many benefit
designs is impractical and administratively complex for
such a small program.
c) Premium Affordability . This bill proposes to increase
subscriber premiums from a maximum of 125-137.5% to no more
than 150% of standard rates for comparable individual
coverage, while allowing for lower rates for low-income
subscribers. At 150%, for 2009, a 50-year old resident of
Sacramento County would be paying $1,164 per month, or
$13,968 annually, for the Blue Cross PPO product in MRMIP,
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with benefits that stop at $75,000 each year, and up to
$2,500 for deductibles and coinsurance. At this rate, a
person making $65,872 per year could be paying 25% of their
income for health insurance and cost sharing, with the
possibility of additional health care costs above $75,000
in a year where the person experienced a hospitalization,
surgery or other costly event. A person making $32,936 per
year would be paying 50% of their income for health
insurance, deductibles and copayments, but would be just
above the 300% FPL income level that allows for a lower
premium. Affordability is already a significant barrier
for medically uninsurable persons seeking coverage in
MRMIP, and the increased premium contributions proposed in
this bill have the very real potential to place premiums
for MRMIP out of reach for additional numbers of current
and future subscribers.
In addition, one likely result of higher premiums for most
eligible persons who are not at the lowest income levels
could be a drastic reduction in the take up rate among
MRMIP-eligibles who would be asked to pay the maximum
premium. The combination of reduced numbers of persons
paying the maximum premium, combined with subscribers at
the lowest incomes paying lower premiums, could actually
decrease revenues from subscriber premiums overall.
The increase in premium levels proposed in this bill seems
inconsistent with making coverage realistically available
for medically uninsurable persons and may be
counterproductive to maximizing program revenues. The
author may wish to re-consider the higher premium amount
proposed in this bill and keep MRMIP premium rates at no
more than 125% of standard market rates, consistent with
current premiums in MRMIP, but continue to allow premiums
to be set as low as 110% of standard rates for very low
income subscribers.
d) Bill language needs review . Many of the provisions of
this bill are similar to elements proposed in prior
legislation relating to MRMIP funding (AB 1971 of 2006 and
AB 2 of 2008). The prior bills underwent significant
negotiations and amendments in an effort to reach a
compromise on a MRMIP restructuring plan. This bill
incorporates many of these amendments. For example, this
bill requires MRMIB to meet complex benefit rules and cost
sharing standards aimed at focusing on primary and
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preventive care, disease management and other elements that
had been raised in opposition arguments. At this juncture,
the author may need to review and revise the bill language
and eliminate unnecessary elements of this bill that will
add administrative complexity and increase MRMIP program
costs without having eliminated the opposition of
stakeholders raising the various concerns.
e) Suggested amendments .
i) Technical amendment . Page 7, line 16, should read:
specialized health insurance
ii) Rate study . Delete or revise the study requiring
MRMIB to analyze rates for persons eligible for
guaranteed coverage under the Health Insurance
Portability and Accountability Act. This activity is
outside of the expertise of MRMIB and unrelated to the
MRMIP program. It should be deleted or assigned to DMHC
and CDI. (Page 5, lines 9-16; page 7, lines 21-29; page
14, lines 25-40; and page 15, lines 1-9).
iii) Proof of uninsurability . Delete language requiring
a MRMIP applicant to attest that the person does not have
health care coverage that meets their needs. Individuals
must currently show that they have been denied health
insurance coverage or quoted a rate higher than the MRMIP
premium. (Page 12, lines 14-16).
iv) Advisory panel . Authorize but do not require the
reimbursement of travel costs for advisory panel members.
Change shall to may . (Page 14, lines 17-20).
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
California Chiropractic Association
California Medical Association
Congress of California Seniors
Health Access California
Support if Amended
California Association of Health Underwriters
California Managed Risk Medical Insurance Board
Oppose unless Amended
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California Labor Federation
Opposition
Aetna
Association of California Life & Health Insurance Companies
California Association of Health Plans
California Chamber of Commerce
California Labor Federation
California State Employees Association
CIGNA
UnitedHealthcare
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097