BILL ANALYSIS
SB 227
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Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 227 (Alquist) - As Amended: July 13, 2009
Policy Committee: Health Vote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill makes significant changes to the funding and
administration of California's high risk insurance pool, the
Major Risk Medical Insurance Program (MRMIP) for medically
uninsurable individuals. Specifically, this bill:
1)Requires all health plans and health insurers by January 1,
2010 to either accept MRMIP enrollees for coverage or pay a
fee to support MRMIP program costs.
2)Requires the fees to be based on "covered lives", as defined.
The term covered lives refers to the number of enrollees for
which a particular insurer provides coverage. For enrollees in
group health coverage, this bill requires every 10 enrolled
individuals to count as one covered life for purpose of the
fee. This bill establishes a maximum fee of $1 per covered
life per month. This bill exempts Medi-Cal, Medicare, the
Healthy Families Program, and other publicly administered
coverage from the fee provisions.
3)Revises MRMIP benefits to prohibit an annual benefit limit and
increases the lifetime benefit limit from $750,000 to $1
million. Requires health plans and insurers to guarantee
renewal of health coverage.
4)Revises the enrollee payment rate to a rate set by the Managed
Risk Medical Insurance Board (MRMIB) of 110% to 125% of market
rates.
5)Requires MRMIB to complete various requirements with respect
to modifying and reforming MRMIP coverage and administration.
Requires the establishment of a new advisory board.
FISCAL EFFECT
SB 227
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1)Annual increased special fund revenues of approximately $40
million resulting from the fee paid by insurers on the number
of individuals they insure according to the requirements of
this bill. These funds will be used to subsidize premiums paid
by MRMIP enrollees.
2)Unknown one-time costs likely in the range of $200,000 to
MRMIB to administer provisions of this bill. Unknown on-going
costs to maintain oversight of MRMIP. This bill authorizes
MRMIB to seek GF loans for administration and requires MRMIB
to repay any loans, with interest, by January 1, 2017.
COMMENTS
1)Rationale . This bill reforms and restructures California's
high risk pool, MRMIP, which is administered by MRMIB.
California, along with 34 other states, has a high risk
insurance pool to accommodate individuals who have been unable
to obtain health coverage in the individual market. Under
current law, the program faces insufficient and unstable
funding sources to meet the demand for the program. Only
several thousand individuals are currently served in the
program while several hundred thousand individuals may need
such coverage. Under current law four large insurers
participate in MRMIP and monthly premium costs range from $435
to $1,120 for an individual 50 to 54 years old. This bill
requires participation by or financial support of health plans
and insurers to increase the stability and funding levels of
the program. In addition, this bill makes programmatic reforms
including prohibiting an annual benefit limit and lifting the
lifetime limit from $750,000 to $1 million.
2)California's Uninsured . According to estimates, more than 6
million Californians lack health coverage in the form of
private or public health insurance. Many are employed but work
for companies that do not offer insurance. Others work for
firms offering insurance but are not eligible for coverage for
a variety of reasons. For individuals lacking coverage, they
may be able to purchase coverage in the individual market
instead of the employment-based market. There is a wide range
of choice of plans in the individual health insurance market
in California and a wide array of pricing. However, many
individuals who seek coverage in the individual insurance
market find coverage is either unaffordable or unavailable.
This is especially true for individuals with pre-existing
health conditions and for older adults with health problems.
These individuals may be eligible for MRMIP coverage.
SB 227
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3)MRMIP was established in 1991 and provides health insurance to
California residents unable to obtain coverage due to medical
reasons. Under current law enrollee costs above a certain
level are subsidized by the state with a blend of state
funding and tobacco taxes. However, the program has been
limited by funding levels and the instability of funding
sources. Currently there are almost 7,000 individuals with
MRMIP coverage. In contrast, other states have many more
individuals in their high risk pools. For example, Minnesota
has 31,000; Texas has 28,000; Oregon has 15,000; and Wisconsin
has 19,000 enrollees.
4)Concerns . Several large business and health insurance industry
groups oppose this bill because of its focus on one industry,
the imposition of the fee, a concern such fees will eventually
be extended to employers, and a concern that costs should be
supported by a broader group than just insurers. The
California Labor Federation opposes this bill unless it is
amended to exempt collectively bargained health coverage from
the bill. The Labor Federation indicates employer coverage
continues to erode and the fee established on group coverage
in this bill will exert additional cost pressures.
5)Related Legislation . AB 2 (Dymally) in 2008 and AB 1971 (Chan)
in 2006 each addressed MRMIP reforms. AB 1971 failed passage
on concurrence in the Senate. AB 2 was vetoed due to concerns
about increasing the costs of health care and an assertion
that comprehensive health reform is the only solution to
escalating costs.
SB 1379 (Ducheny), Chapter 607, Statutes of 2008 requires fines
and penalties paid by health plans to the Department of
Managed Health Care (DMHC) to be transferred to MRMIB support
MRMIP. Requires a one-time transfer of $10 million and then
annual transfers of up to $1 million.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081