BILL ANALYSIS
SB 227
Page 1
Date of Hearing: June 15, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 227 (Alquist) - As Amended: June 3, 2010
SENATE VOTE : Not relevant
SUBJECT : Health care coverage: temporary high risk pool.
SUMMARY : Requires the Managed Risk Medical Insurance Board
(MRMIB) to enter into an agreement with the federal Department
of Health and Human Services (DHHS) to administer a qualified
high risk pool to provide health coverage, until January 1, 2014
to individuals who have pre-existing conditions, consistent with
the Patient Protection and Affordable Care Act, Public Law
111-148 (PPACA). Specifically, this bill :
1)Authorizes MRMIB to enter into an agreement with DHHS, to
administer the federal temporary high risk pool consistent
with PPACA and to do the following:
a) Determine eligibility, enrollment and disenrollment
criteria including waiting lists and enrollment limits;
b) Determine participation requirements for applicants,
subscribers, health plans, and third party administrators;
c) Provide for processing applications, enrollment of
subscribers, and when coverage begins and ends;
d) Contract for application processing, enrollment or other
activities, and exempt the contracts from competitive
bidding requirements;
e) Determine high risk medical coverage, including scope of
benefits and subscriber cost sharing and establish
subscriber premiums and plan rates;
f) Provide coverage by contracting with licensed health
plans or by contracting with third party administrators to
provide or administer the coverage as specified and allows
contracts with health plans to be for full or partial risk
or to provide administrative services only. Preserves a
plan's existing rights in the event MRMIB is unable to
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continue payments;
g) Align program administration with the Managed Risk
Medical Insurance Program (MRMIP);
h) Make expenditures from the Federal Temporary High Risk
Health Insurance Fund for covered, medically necessary
services that exceed the subscriber's contribution,
administration of the program, and marketing and outreach;
and,
i) Obtain General Fund loans for administration to be
repaid by January 1, 2014.
2)Requires MRMIB to do the following:
a) Administer the federal temporary high risk program in
conformance with the agreement between the state and DHHS;
b) Establish the scope and content of high risk medical
coverage;
c) Determine minimum standards for participating plans and
third party administrators, methods and procedures for
withdrawing program approval or limiting enrollment;
d) Research and assess the needs of persons without
adequate coverage and promote means of ensuring
availability of adequate health care services;
e) Adopt benefit and eligibility standards that are guided
by the needs of the eligible population and by prevailing
practices among private insurers;
f) Maintain enrollment and expenditures to ensure that the
program costs do not exceed the federal funds as allocated;
g) Post the monthly progress reports submitted to HHS on
the MRMIB web site as well as information about potential
waiting lists or disenrollemts due to fund limitations;
h) Implement a plan for marketing and outreach;
i) Provide coverage through licensed health plans or third
party administrators using provider networks; and,
j) Implement a procedure for transition of subscribers into
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qualified health plans through the exchange established
under PPACA.
3)Prohibits plan rates from being excessive, inadequate, or
unfairly discriminatory and requires rates to be adequate to
pay claims and services.
4)Provides for appeals of program decisions concerning
eligibility and coverage decisions through a procedure to be
established by MRMIB, as specified. Allows for appeals of
coverage decisions that are within the jurisdiction of the
Department of Managed Health Care (DMHC) to be exempted.
5)Requires a subscriber's contribution responsibility to begin
upon enrollment.
6)Allows subscribers to change plans as prescribed.
7)Adds information about the federal temporary high risk pool to
existing notice requirements health plans and insurers provide
to applicants who are denied individual coverage or are
offered coverage at a rate higher than the standard rate and
requires it to be placed on the DMHC and Department of
Insurance (CDI) Web sites.
8)Authorizes initial implementation without regulations,
authorizes emergency regulations and other contracting and
legal authorities.
9)Defines relevant terms and makes other conforming and
technical changes.
10)Terminates coverage through the federal high risk pool on
January 1, 2014, requires all claims to be submitted within 18
months following the delivery of service and sunsets this bill
January 1, 2020.
11)Makes enactment contingent on the enactment of AB 1887
(Villines).
EXISTING LAW :
1)Establishes 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
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health plan or are offered only limited coverage or coverage
significantly above standard average individual rates, as
determined by MRMIB.
2)Requires MRMIB to provide health coverage to subscribers in
MRMIP through participating private health plans licensed by
either the DMHC or the CDI.
3)Provides MRMIP with a $37 million continuous appropriation
accompanied by an annual budget act Proposition 99
appropriation.
4)Establishes basic MRMIP program elements, including
eligibility, premiums, benefits, and subscriber contributions,
limits annual deductible and annual out-of-pocket costs.
5)Establishes, under PPACA, a temporary high risk health
insurance pool program beginning July 1, 2010 to provide
coverage to currently uninsured individuals with pre-existing
conditions.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
needed to establish a high-risk pool that meets federal
requirements because MRMIP and the federal high-risk pool
program established by Section 1011 of PPACA differ in their
eligibility criteria, benefits, coverage, and premiums in ways
that would prevent MRMIP as it is currently structured from
being used as the federal high-risk pool. The author argues
that although most Californians obtain health insurance
through their employer, many Californians do not have access
to employer-sponsored health coverage and cannot buy private
health insurance at any price because they have a pre-existing
medical condition.
The author further points out that having a pool run at the
state level by a public board allows for better public
participation, on-going monitoring, and transparency. MRMIB
could provide a single point of application for people
applying for either high risk pool, and the federal government
has not directly administered a program similar to this
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before. Additionally, having similar programs run by
different levels of government is confusing for the public and
makes coordination of enrollment and outreach more difficult.
2)BACKGROUND . On March 23, 2010, President Obama signed into
law the PPACA to provide coverage for over 90% of the
presently uninsured population, adopt broad-reaching reforms
in insurance practices, and make major new investments in
public health. PPACA requires states to create health
insurance exchanges by 2014 that will serve as competitive
market places for individuals and small businesses to be able
to purchase health insurance products. Insurers participating
in the exchange will be barred from discriminating based on
pre-existing conditions, health status, and gender.
Until the implementation of state exchanges in 2014, certain
individuals with pre-existing conditions, who have not had
coverage for the prior six months and meet certain citizen or
residency requirements will be eligible for the temporary high
risk pool program. According to an April 2, 2010 letter from
DHHS Secretary Sibelius, states may choose whether and how
they participate in the program. A total of $5 billion in
federal funds has been appropriated to support the program.
California has been allocated $761 million over the life of
the program. To date, 29 states plus D.C. have elected to
operate their own, 18 have elected to have DHHS run it, two
have deferred the decision and one has not indicated.
3)MRMIP . Presently, subscribers to MRMIP 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 two major private health plans that
voluntarily participate in the program - Anthem Blue Cross and
Kaiser. Premiums vary based on the age and region of the
subscriber and the health plan they choose. For example, in
Sacramento County, the 2010 premiums for a person age 50-54
are $551 per month for the Kaiser Permanente HMO plan and $878
for the Blue Cross PPO. These premiums pay for coverage that
stops at $75,000 per year and includes a lifetime maximum of
$750,000.
MRMIP receives annual capped appropriations which have in recent
years been set at $37 million in state Proposition 99
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Cigarette and Tobacco Products Surtax Funds 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. As of April 1, 2010 there
are 6,941 enrollees.
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. 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).
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)HIGH RISK POOLS . Prior to the enactment of PPACA, 35 states
implemented high-risk health insurance pools to provide
coverage to individuals who were uninsurable due to a
pre-existing condition. According to the National Conference
of State Legislatures (NCSL), across these 35 states, the
national enrollment was slightly over 200,000 in December
2008. These uninsurable individuals have sought coverage, but
have been unable to purchase it because they have been
rejected or because they have been offered coverage only at
unaffordable, high premium rates. NCSL also reports that
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enrollee premiums financed almost 60% of the costs and that
states used other funds to cover the remainder such as insurer
assessments, tobacco settlement costs, and general funds.
Most states have an exclusionary period for individuals with
pre-existing conditions.
5)STATE IMPLEMENTATION . On April 29, 2010, Governor
Schwarzenegger notified Secretary Sibelius that the State of
California intended to exercise the option to contract with
the federal government to operate the federal high-risk pool
alongside our current state high-risk pool under the same
governance and operational framework. The Governor expressed
his intention to immediately begin working with the
Legislature and stakeholders and to make statutory changes
necessary.
On May 10, 2010 HHS provided to the states that chose to run
their own pool, a solicitation for state proposals. The
solicitation stated that the goal was to grant the flexibility
needed to permit successful and expeditious implementation of
the program by States. State submissions are due on a rolling
monthly basis beginning June 1, 2010 for a July 1, 2010
implementation. States will be reimbursed for all reasonable,
allowable start-up and administrative costs, including
actuarial, legal, marketing, and outreach as well as ongoing
administrative costs with a cap of 10% over the life of the
program.
The DHHS solicitation allows states to offer one or more benefit
plans as long as they comply with the PPACA requirement that
the plan's share is not less than 65% of the total cost of the
benefit. The DHHS solicitation requires the high risk pool to
demonstrate an adequate network to ensure that all covered
services are reasonably available and accessible. This bill
allows MRMIB to establish the specifics of premiums,
cost-sharing, and benefit packages initially by board action
without regulation in order to expedite implementation. AB
1887 (Villines), the companion legislation, allows MRMIB to
begin discussing these details with the plans or third party
administrators confidentially.
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6)MRMIP COMPARED TO PPACA HIGH RISK POOL .
--------------------------------------------------------------
| FEDERAL | MRMIP |
--------------------------------------------------------------
---------------------------------------------------------------
| ELIGIBLITY |
---------------------------------------------------------------
|------------------------------+-------------------------------|
|? Citizen or national of the | ? California resident |
| United States or lawfully | |
| present in the United | |
| States | |
--------------------------------------------------------------
|? Have no creditable coverage | ? Unable to secure adequate |
| for the previous six months | coverage in the individual |
| before applying for | market within the last 12 |
| coverage | months, ineligible for |
| | Medicare, COBRA or |
| | Cal-COBRA |
|------------------------------+-------------------------------|
|? Have a pre-existing | ? No requirement, but denial |
| condition, such as denial | or termination of insurance |
| of coverage, coverage only | for other than nonpayment |
| available with exclusion or | is one pathway to |
| presence of certain medical | eligibility |
| conditions specified by the | ? PPO products, three month |
| state and approved by the | waiting period for services |
| DHHS Secretary | for pre-existing conditions |
| | ? HMO product, three month |
| | post-enrollment waiting |
| | period |
--------------------------------------------------------------
---------------------------------------------------------------
| BENEFITS/COVERAGE |
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---------------------------------------------------------------
|? High Risk pool average | ? Comprehensive benefits with |
| share of total costs of | annual $500 household |
| required benefits must be | deductible |
| at least 65% of costs. | ? Preventive services |
| | excluded from deductible |
---------------------------------------------------------------
|? No Pre-existing condition | ? Allows a 3 month waiting |
| exclusion allowed | period or pre-existing |
| | condition exclusion |
---------------------------------------------------------------
|? Limits out-of-pocket to | ? Limits out-of-pocket |
| equivalent in | maximum per year to $2,500 |
| high-deductible plans | for individuals and $4,000 |
| linked to health savings | for an entire household |
| accounts ($5,950 for an | covered by the MRMIP. (Must |
| individual). | be in network provider, |
| | out-of-plan charges |
| |allowed.) |
|------------------------------+--------------------------------|
|? No specification on caps, | ? Benefit limits of $75,000 |
| but lifetime and | per calendar year and |
| unreasonable annual caps | $750,000 in a lifetime. |
| prohibited in exchange | |
---------------------------------------------------------------
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| FEDERAL | MRMIP |
--------------------------------------------------------------
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| PREMIUMS |
---------------------------------------------------------------
---------------------------------------------------------------
|? No more than 100% of the | ? 125% to 137% of the |
| standard rate for the | standard rate that a carrier |
| benefits in the commercial | would charge for MRMIP |
| market | benefits in the commercial |
| | market |
|------------------------------+--------------------------------|
|? Limits rate variation by | ? 12 age variations with no |
| age to a maximum of 4 to 1 | limit on differences |
|? Rate variations allowed for | ? 3 possible family sizes |
| whether the plan covers an | ? Six geographic regional |
| individual or family, based |variations |
| on regions, for tobacco use | |
| but limited to 1.5 to 1 | |
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| | |
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1)FEDERAL SPECIFICATIONS . The newly established Office of
Consumer Information and Insurance Oversight at DHHS issued a
Solicitation for State Proposals to Operate Qualified High
Risk Pools on May 10, 2010 to those states who indicated
intent to establish a federally qualified temporary high risk
pool. Some of the highlights are:
a) Six Month Bar . States are required to limit the
enrollment to persons who have not had creditable coverage
for a continuous six month period of time prior to the date
of application. Creditable coverage is broadly defined and
includes public and private health insurance that covers
medical, hospital, and surgical and is not supplemental,
Medicare, Medi-Cal, Healthy Families, or a state health
benefits risk pool.
b) Pre-existing Condition . States have some flexibility in
determining who meets the pre-existing condition
requirement. Examples provided are: i) Evidence of denial
co coverage; ii) Evidence that coverage is available with
only an exclusionary rider; and, iii) The presence of
certain medical conditions specified by the State and
approved by DHHS. This third pathway seems to be
consistent with the broadest eligibility that states have
used. For example, Minnesota allows people to enroll in
their high risk pools with a doctor's diagnosis.
c) Benefits Requirements . States also have flexibility to
offer one or more benefit plans as long as they met the
requirement that the issuer's share of the cost is not less
than 65% of the total costs of the benefit.
d) Premiums . States are required to determine a standard
risk rate based on premium rates charged for similar
benefits and cost-sharing by comparable products offered in
the individual market using reasonable actuarial
techniques. MRMIB has consulted PwC, who has provided a
preliminary estimate of premiums compared to the existing
MRMIP premiums. According to the report to the MRMIB on
May 7, 2010, the new federal high risk pool premium for a
benefit plan that mirrors MRMIP's plan design but with an
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annual benefit limit of at least $1 million and no lifetime
limit is estimated to be approximately 5% less than the
current MRMIP premiums, on average, given that premiums are
required to be no more than 100% of standard rate. An
alternative estimate was also provided based on the
application of either the minimum or maximum adjustments
made by plans in 2010, rather than an average adjustment,
and suggests that the premiums may range from 14% less to
3% more.
e) Administrative Costs . States are to be reimbursement
for a broad spectrum of administrative costs, such as
actuarial costs, agent referral fees, printing, salaries,
and legal expenses. The DHHS solicitation, in recognition
of the nature of initiating a new program, allows
reimbursement for costs that are not tied to specific
claims or enrollment until December 31, 2010. However,
DHHS anticipates that over the life of the program, total
administrative costs will not exceed 10% of the total
claims. The solicitation also provides that premiums
collected can be used to offset administrative costs as
well as enrollee service claims.
f) Maintenance of Effort. States that contract to
administer their own high risk pool also agree not to
reduce the annual amount spent to operate the existing high
risk pool during the year preceding the year the contract
is signed. The solicitation requires the state to provide
a narrative description of its maintenance of effort
strategy and a table identifying the state allocated funds
and revenues from premiums paid in 2009 and how the state
will maintain that level of support.
g) Capped Allocation . Each state has been provided with a
specific dollar allocation. The solicitation includes
numerous provisions and requirements to monitor
expenditures to protect a state from having any general
fund liability and to allow DHHS to determine if the state
will spend the full allocation. For instance, the state is
required to submit requests for payment for claims on a
weekly basis. An implementation plan is required to be
submitted within 10 days of the award that specifies the
date that enrollments will be accepted and progress reports
are due quarterly. The progress reports are required to
include the following:
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i) Evidence that major milestones have been met;
ii) Risks and problems identified or encountered and
mitigation strategies;
iii) Description of enrollment, broken down at a minimum
geographically and demographically and if it is
representative of the state;
iv) Information on disenrollment; and,
v) Updated cost projections and in the case of a
projected shortfall, cost-containment strategies.
The state is also required to submit monthly reports with a
complete accounting of the previous month's expenditures,
revenues, number of enrollees, average monthly premiums,
and out of pocket expenses.
h) Marketing and Outreach . States may access funds for the
high risk pool July 1, 2010. In order for California to
maximize its allotment, an outreach and marketing effort
must be undertaken immediately. The DHHS solicitation
provides that the state will receive reimbursement for
administrative costs, including marketing and outreach and
requires a description of the proposed efforts to conduct
marketing and outreach.
2)PRIOR AND RELATED LEGISLATION .
a) AB 1887 (Villines) establishes the funding mechanism for
the operation of the federal temporary high risk pool and
adds MRMIB contract negotiations and rate information to
existing open record and open meeting act exemptions. AB
1887 is pending on the Assembly floor.
b) SB 57 (Aanestad) would have revised and restructured
MRMIP, including securing additional funding by requiring
each health plan and health insurer to add a surcharge on
each individual policy and would have made specified
program changes related to eligibility, plan choices,
benefit limits and exclusions, and related changes. SB 57
failed passage in Senate Health Committee on April 22, 2009
by a vote of 2-6.
c) AB 1379 (Ducheny), Chapter 607, Statutes of 2008,
requires fines and administrative penalties levied against
health plans under the Knox-Keene Health Care Service Plan
Act of 1975 to be placed in the Managed Care Fund and used,
upon appropriation by the Legislature, for the Steven M.
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Thompson Physician Corps Loan Repayment Program, a
physician loan repayment program, up to $1 million per
year, with the remainder being allocated to MRMIP.
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 and would 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, 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 because it would
allow health insurance companies to pass the fee onto their
enrollees, making it more expensive and 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 Guaranteed Issue
Product (GIP) pilot project 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
the GIP until December 31, 2007 and appropriated, on a
one-time basis, an additional $4 million in Proposition 99
funds for MRMIP.
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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 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 established the GIP pilot project.
REGISTERED SUPPORT / OPPOSITION :
Support
Consumers Union
Health Access California
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097