BILL ANALYSIS
SB 227
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Date of Hearing: June 17, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 227 (Alquist) - As Amended: June 3, 2010
Policy Committee: HealthVote:18-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes the California Federal Temporary Health
High Risk pool (pool or high risk pool) to meet requirements of
federal health reform, the Patient Protection and Affordable
Care Act (PL-111-148). State-run high risk pools are to be
operational by June 23, 2010, three months after the enactment
of the federal law. Specifically, this bill:
1)Establishes the high risk pool within the California Health
and Human Services Agency and requires the pool to be managed
by the Managed Risk Medical Insurance Board (MRMIB). MRMIB
administers the current law state high risk pool, the Major
Risk Medical Insurance Program.
2)Provides authority to, and establishes requirements for, MRMIB
related to the federal high risk pool, including subscriber
eligibility and enrollment, health plan participation, scope
of health benefits, and contracts with health plans.
3)Requires MRMIB to maintain enrollment and expenditures to
ensure program costs do not exceed the federal funds
allocated. Authorizes MRMIB to make expenditures from the
Federal Temporary High Risk Health Insurance Fund (Fund) for
costs in excess of a subscriber's share of cost. The Fund is
established by AB 1887 (Villines), pending in the Senate.
Authorizes MRMIB to seek GF loans, subject to approval by the
Department of Finance. Requires GF loans to be repaid by
January 1, 2014.
4)Becomes operative contingent upon enactment of AB 1887
(Villines), pending in the Senate.
FISCAL EFFECT
SB 227
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1)According to information provided by the federal government,
California will receive $761 million (100% federal) to
administer the high risk pool until January 1, 2014 when
broader insurance market reforms and coverage expansions
occur. This allocation results in about $218 million (federal)
on an annualized basis. This funding will be used to provide
premium support to previously uninsured individuals. Depending
on the average monthly premium charged for coverage, between
25,000 and 35,000 individuals will benefit from this funding
support.
2)The federal government proposes to allocate state funds based
on a formula used for the Children's Health Insurance Program,
which relies on a combination of factors including nonelderly
population, proportion of uninsured, and geographic cost
variation. The federal government will reassess state high
risk pool allocations within two years. States, like
California, that have high rates of medically uninsured
individuals may pursue aggressive enrollment strategies to
ensure continued optimal funding when expenditures are
reassessed by the federal government.
3)This bill authorizes MRMIB to pursue GF loans only to the
extent needed to ensure continuity of operation. The pool will
be a new federally-funded, state-administered program, and
full guidance on the timing of federal reimbursement
mechanisms is not yet available. Providing GF loan authority
to MRMIB will ensure continuity of funding support and program
administration. Other provisions of the bill require MRMIB to
maintain enrollment and expenditures in line with federal
funding, ensure subsidies do not exceed the amount of federal
funding available, and ensure no state funds are spent in
support of the high risk pool.
COMMENTS
1) Rationale . This bill enacts California's option to establish
a temporary high risk pool until broader provisions of
federal health reform are implemented in 2014. According to
estimates, more than 400,000 Californians are uninsured due
to pre-existing medical conditions. The new federal high risk
pool will be available to individuals who have been uninsured
for at least six months. Individual premium payments, not yet
determined, will not exceed 35% of total premium costs and
several federal requirements of the pool established by this
SB 227
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bill translate to more robust coverage than the current law
high risk pool.
2) Proposed author's amendments , to be adopted in committee,
appropriate $761 million (federal) from the Federal Trust
Fund to MRMIB, add an urgency clause, and change the high
risk pool name established by the bill from the "California
Federal Temporary Health High Risk Pool" to the "Federal
Temporary High Risk Pool".
3) Current Law High Risk Pool . 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. The Major Risk Medical Insurance
Program (MRMIP) was established in 1991 and provides health
insurance to individuals unable to obtain coverage due to
medical reasons. Only 7,000 individuals are currently served
MRMIP while several hundred thousand individuals may need
such coverage. Under current law, MRMIP faces insufficient
and unstable funding sources to meet the demand for the
program. As a requirement of federal law, MRMIP will continue
to operate while the risk pool established in this bill
operates.
MRMIP premium costs are 125% to 137.5% of pricing in the
private market for similar coverage. Enrollees pay about 60%
of premium costs and public subsidies pay the remaining
costs. Premiums vary based on age, location, and health plan.
For example, in Sacramento County, the 2010 premiums for a
person 50 to 54 years of age are $551 per month for the
Kaiser Permanente health maintenance organization (HMO) plan
and $878 for the Blue Cross preferred provider organization
(PPO) plan. MRMIP coverage is limited to $75,000 per year and
includes a lifetime maximum of $750,000.
4) Related Legislation . AB 1887 (Villines), pending in the
Senate, establishes the Federal Temporary High Risk Health
Insurance Fund and provides MRMIB authority to ensure
confidentiality of contract negotiations and high risk pool
rates
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081