BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 227|
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UNFINISHED BUSINESS
Bill No: SB 227
Author: Alquist (D)
Amended: 6/21/10
Vote: 27 - Urgency
SENATE PRIOR VOTES NOT RELEVANT
SENATE HEALTH COMMITTEE : Not available
ASSEMBLY FLOOR : 76-0, 6/21/10 - See last page for vote
SUBJECT : Health care coverage
SOURCE : The Governors Administration
DIGEST : This bill requires the Managed Risk Medical
Insurance Board (MRMIB) to enter into an agreement with the
federal Department of Health and Human Services to
administer a qualified high-risk pool to provide health
coverage , until January 1, 2014, to individuals who have
pre-existing conditions, consistent with Patient Protection
and Affordable Care Act, establishes the authority and
requirements for MRMIB in administering the federal pool,
consistent with federal law, appropriates $761 million from
the Federal Trust Fund to MRMIB, makes this bill operative
contingent upon enactment of AB 1887 (Villines), and
sunsets both on January 1, 2020.
Assembly Amendments deleted the previous version of the
bill dealing with Managed Risk Medical Insurance Program
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(MRMIP) and instead require the MRMIB to enter into an
agreement with the federal Department of Health and Human
Services to administer a federally funded qualified
high-risk pool to provide health coverage, until January 1,
2014, to individuals who have pre-existing conditions,
consistent with federal health care reform.
ANALYSIS :
Existing state law
1. Establishes the MRMIP, which is administered by the
MRMIB, to provide major risk medical coverage to
California residents who have been rejected for coverage
by at least one private health plan, or if the only
private health coverage that the applicant can secure
will:
A. Impose substantial waivers or provide limited
coverage that the MRMIB determines leaves a
subscriber without adequate coverage for medically
necessary service.
B. Afford coverage only at an excessive price,
which MRMIB determines is significantly above
standard average individual coverage rates.
2. Caps the premium subscribers in MRMIP pay at 125 to
137.5 percent of the standard average individual rate
the enrollee pays would pay for comparable coverage.
3. Establishes the Major Risk Medical Insurance fund, and,
except for the 2009-10 fiscal year, continuously
appropriates $30 million in Proposition 99 tobacco tax
funds from the Cigarette and Tobacco Products Surtax
Fund to this Fund.
Existing federal law . The federal health care reform bill,
known as the Patient Protection and Affordable Care Act
(PPACA), requires the federal Secretary of the Department
of Health and Human Services (DHHS) to establish a
temporary high-risk health insurance pool program to
provide health insurance coverage for eligible individuals
until January 1, 2014. PPACA authorizes the Secretary to
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carry out the program directly or through contracts with a
state or nonprofit entity. To be eligible for the federal
pool, an individual must meet the following:
1.Be a citizen or national of the United States (U.S.) or
lawfully present in the U.S.
2.Have not been covered under "creditable coverage" (as
defined in federal law) during the six-month period prior
to the date on which such individual is applying for
coverage through the high-risk pool.
3.Have a pre-existing condition, as determined in a manner
consistent with guidance issued by the Secretary of DHHS.
Under PPACA, in order for a high-risk pool to be eligible
for federal funding, the pool must meet the following
criteria:
1.Provide health insurance coverage to all eligible
individuals that does not impose any pre-existing
condition exclusion.
2.Provide health insurance coverage:
A. In which the health insurer's share of the total
allowed costs of benefits provided under the
coverage is not less than 65 percent of such costs.
B. That has an out-of-pocket limit not greater than
the amount in federal law for a high deductible
health plan offered in conjunction with a health
savings account (except that the Secretary may
modify such limit if necessary to ensure the pool
meets the actuarial value limit).
3.Require, with respect to the premium rate charged for
health insurance coverage offered to eligible individuals
through the high-risk pool, rates to:
A. Vary only for family size (individual or family),
geographic rating area, and tobacco use.
B. Vary on the basis of age by a factor of not
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greater than 4 to 1.
C. Be established at a standard rate for a standard
population.
D. Meet any other requirements determined
appropriate by the Secretary of DHHS.
PPACA requires the Secretary of DHHS to develop procedures
to provide for the transition of eligible individuals
enrolled in health insurance coverage offered through a
high-risk pool into qualified health plans offered through
an Exchange.
PPACA appropriates to the Secretary of DHHS $5 billion to
pay claims against (and the administrative costs of) the
high-risk pool that are in excess of the amount of premiums
collected from eligible individuals enrolled in the
high-risk pool.
This bill:
1. Establishes the Federal Temporary High Risk Pool in the
Health and Human Services Agency, and requires the
program to be managed by MRMIB.
2. Authorizes MRMIB to take the specified actions,
consistent with the provisions of PPACA establishing a
federal pool. These include the following:
A. Entering in an agreement with the federal DHHS
to administer the federal pool.
B. Determining eligibility criteria for the federal
pool, including when coverage begins and ends.
C. Determining the high-risk medical coverage to be
provided (including the scope of benefits and
cost-sharing).
D. Establishing rates paid by individuals enrolled
in the federal pool.
E. Providing coverage through health plans or
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third-party administrators (TPA).
F. Determining participation requirements for
people enrolling in the federal pool, and entities
contracting with MRMIB.
G. Contracting with private and public entities for
program administration.
H. Issuing rules and regulations.
I. Initially implementing the provisions of this
bill pursuant to the agreement with DHHS without
taking regulatory action.
J. Aligning program administration with MRMIP.
K. Authorizing expenditures for the federal pool.
3. Requires, consistent with PPACA, state and federal law
and contingent on the agreement of the federal DHHS and
receipt of sufficient federal funding, MRMIB to enter
into an agreement with the federal DHHS to administer
the federal temporary high risk pool.
4. Requires MRMIB, if the federal DHHS and the state enter
into an agreement, to take specified actions to
administer the program, including:
A. Establishing the scope and content of high risk
medical coverage.
B. Determining standards for participating health
plans, TPAs, and other contractors.
C. Implementing procedures to transition
individuals into health plans offered through an
exchange after the end of the federal pool.
D. Developing a plan for marketing and outreach.
5. Prohibits plan rates for high risk medical benefits
approved for the federal pool from being excessive,
inadequate, or unfairly discriminatory, but requires
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plans rates to be adequate to pay anticipated costs of
claims or services and administration.
6. Requires MRMIB to provide coverage under this bill
through participating health plans or through provider
networks using a TPA, and permits MRMIB to contract for
the processing of applications, the enrollment of
subscribers, and all activities necessary to administer
the program.
7. Exempts any contract entered into under this bill from
provisions of law relating to competitive bidding, and
also exempts contracts from the review or approval of
the Department of General Services.
8. Permits program decisions concerning an applicant's or
subscriber's eligibility or eligibility date to be
appealed to MRMIB, according to procedures to be
established by MRMIB.
9. Permits coverage determinations to be appealed to MRMIB,
according to procedures established by MRMIB. If
allowed by DHHS, MRMIB is not required to provide an
appeal concerning a coverage determination if the
subject of the appeal is within the jurisdiction of the
Department of Managed Health Care or the Department of
Insurance.
10.Requires hearings to be conducted according to the
requirements of the federal DHHS and, insofar as
practicable and not inconsistent with those
requirements, pursuant to the APA.
11.Appropriates $761 million in federal funds without
regard to fiscal years from the Federal Trust Fund to
MRMIB for transfer to the Federal Temporary High Risk
Health Insurance Fund created by AB 1887 for covered,
medically necessary services that exceed subscribers'
contributions, program administration, and marketing and
outreach.
12.Permits MRMIB to obtain loans from the General Fund
(GF), subject to the approval of the Department of
Finance, for all necessary and reasonable expenses
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related to the administration of the fund and the
program. MRMIB must repay principal and interest to the
GF, using the pooled money investment account rate of
interest, no later than July 1, 2014.
13.Requires MRMIB to ensure that the program subsidy amount
does not exceed amounts transferred to the fund under
this bill, and that the aggregate amount spent for high
risk medical coverage and program administration does
not exceed the federal funds available to the state for
this purpose, and that no state funds are spent for the
purposes of this bill.
14.Requires MRMIB to maintain enrollment and expenditures
to ensure that expenditures do not exceed amounts
available in the fund and that no state funds are spent
for purposes of this bill. If sufficient funds are not
available to cover the estimated cost of program
expenditures, MRMIB is required to institute appropriate
measures to limit enrollment.
15.Requires health plans and health insurers to inform
applicants rejected for coverage, or offered coverage at
higher than a standard rate, about the temporary high
risk health insurance pool established by this bill, and
would require that the information be provided in
accordance with standards developed by the Department of
Managed Health Care or the Department of Insurance, as
specified.
16.Prohibits any liability in a private capacity from being
imposed on the part of MRMIB or any member of the board,
or any officer or employee of MRMIB for or on account of
any act performed or obligation entered into in an
official capacity, when done in good faith, without
intent to defraud, and in connection with the
administration, management, or conduct of this bill or
affairs related to this bill.
17.Requires MRMIB to cease to provide coverage through the
program on January 1, 2014, and at that time to cease to
operate the program except as required to complete
payments to, or payment reconciliations with,
participating health plans or other contractors, process
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appeals, or conduct other necessary transition
activities, including, but not limited to, transition of
subscribers into an exchange or exchanges established
under PPACA.
18.Makes this bill operative contingent upon enactment of
AB 1887 (Villines), and sunsets this bill on January 1,
2020.
Background
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 because they have a pre-existing medical
condition. Since 1991, California has operated a high-risk
pool known as MRMIP to provide the medically uninsurable
with health coverage. Premiums paid by individuals
receiving coverage are supplemented with state tobacco tax
revenues to fund coverage through the program. MRMIP
currently has approximately 6,800 individuals receiving
coverage in the program, and approximately 4,700
individuals who were previously enrolled in MRMIP under a
pilot program, and whose costs above the amounts they pay
in premiums, are split by health plans in MRMIP and the
state. However, the program's current enrollment is much
lower than the MRMIP's maximum enrollment of 21,900 in June
1998. The 2010-11 proposed budget for MRMIP is $37
million.
In March 2010, President Obama signed into law PPACA
(Public Law 111-148) as amended by the Health Care and
Education Reconciliation Act of 2010 (Public Law 111-152)
to provide coverage for over 90 percent of the presently
uninsured population. Until the implementation of the
health insurance exchanges in 2014, individuals with
pre-existing conditions, who have not had coverage for the
prior six months and who meet certain citizen or residency
requirements will be eligible for the temporary high-risk
pool program created by PPACA.
PPACA appropriated $5 billion in federal funds to support
the high-risk pool program, of which California is
estimated to receive $761 million. According to an April
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2, 2010 letter from the federal DHHS Secretary, states can
choose whether and how they participate in the program. To
be eligible to enter into a contract with the Secretary, a
state must agree to not reduce the annual amount the state
expended for the operation of its high-risk pool.
To date, twenty-nine states plus the District of Columbia
have elected to operate their own pool, eighteen states
have elected to have HHS run the pool, two have deferred
the decision and one has not indicated. In April 2010,
Governor Schwarzenegger indicated in a letter to the
federal DHHS Secretary his intention to contract with the
federal government to operate a temporary health insurance
program for currently uninsured individuals with
preexisting medical conditions. The Governor's indicated
his decision was based on the Secretary's assurances that
100 percent of the costs will be provided by the federal
government for the duration of the program. The Governor
announced the state will apply to operate the federal
high-risk pool alongside the current state high-risk pool,
under the same governance and operational framework.
Related Legislation
AB 1887 (Villines) establishes the Federal Temporary High
Risk Health Insurance Fund (Fund). Requires money in the
Fund to be continuously appropriated to the MRMIB for the
purpose of establishing a federal temporary high-risk pool
established under this bill for individuals with a
pre-existing medical condition. Takes effect immediately
as an urgency statute, contingent upon the enactment of
this bill.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee,
according to information provided by the federal
government, California will receive $761 million (100
percent federal) to administer the high risk pool until
January 1, 2014 when broader insurance market re 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
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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.
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.
This bill authorizes MRMIB to pursue General Fund (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 funds, ensure that
subsidies do not exceed the amount of federal funding
available, and ensure no state funds are spent in support
of the high risk pool.
SUPPORT : (Verified 6/23/10)
The Governor's Administration (source)
AARP
Asthma and Allergy Foundation, California Chapter
Blue Shield of California
California Academy of Family Physicians
California Association of Health Plans
California Chronic Care Coalition
California Chiropractic Association
California Hepatitis C Task Force
California Hospital Association
California Medical Association
Consumers Union
Health Access California
TMJ Society of California
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ARGUMENTS IN SUPPORT : Governor Schwarzenegger, is the
sponsor of this bill and AB 1887, writes in support for
several reasons. First, the Governor states the $761
million allocated to California is for a time-limited
purpose, and the Governor argues California can maximize
these federal funds in a way that will quickly and capably
address the needs of our state's medically uninsured.
Second, the federal government, which is operating these
high-risk pools in other states, does not have the ability
to address California's unique and diverse needs. Third,
the Governor agues California is in the best position to
run a program for our residents, as we can bring jobs to
California by directing as much work as possible to
California-based companies and vendors. While it is true
that the federal government can step in and run a federal
pool for the states that decline to do so, the Governor
argues that he believes running our own federal high-risk
pool allows us an opportunity to maximize jobs here in
California. Finally, the Governor concludes that these
bills have strong provisions that protect our state's
General Fund, and California will use this federal money
responsibly and without risking our state's own precarious
fiscal resources.
AARP writes in support of this bill and AB 1887, that this
issue is very important to AARP members as the individuals
over age 50 are most likely to be denied coverage on the
basis of pre-existing health conditions. AARP states that,
while the federal government will administer the program in
California if the state does not, this is not a good option
for consumers. AARP argues the state currently administers
a high-risk pool for consumers and will be able to
coordinate outreach and enrollment for the two programs so
that it is seamless, much less confusing for consumers, and
much less likely to result in consumers being dropped
between the cracks of the two programs. The danger of
consumers getting lost in the shuffle between two similar
programs with distinct eligibility requirements is
magnified tremendously by having them administered by two
different entities and levels of government, one of which
have never before administered such a program. AARP writes
it is much more comfortable that consumers will have
meaningful access to state program administrators to deal
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with the inevitable glitches in any new program. AARP
concludes that this is such an important benefit for AARP
members who have been denied coverage based on pre-existing
conditions that it does not want to take any chances on a
federal system that has been designed in just a few months.
The California Medical Association (CMA) writes in support
that this bill and its companion measure, AB 1887
(Villines) will provide the statutory authority necessary
for California to access $761 million in federal funds and
provide a vital coverage option to individuals with a
pre-existing medical condition. CMA states it supports
high risk pools, as they provide a critical health
insurance coverage option to those who do not have
employer-sponsored coverage and are otherwise medically
uninsurable in the individual market.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Tom Berryhill, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De
La Torre, De Leon, DeVore, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
Garrick, Gatto, Gilmore, Hagman, Hall, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jeffries, Knight, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,
Nava, Nestande, Niello, Nielsen, Norby, V. Manuel Perez,
Portantino, Ruskin, Salas, Saldana, Silva, Smyth,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada, John A. Perez
NO VOTE RECORDED: Blakeslee, Jones, Skinner, Vacancy
CTW:do 6/23/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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