BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 499
S
AUTHOR: Ducheny
B
AMENDED: As Introduced
HEARING DATE: April 15, 2009
4
CONSULTANT:
9
Park/cjt
9
SUBJECT
Managed Care Administrative Fines and Penalties Fund:
California Major Risk Medical Insurance Program
SUMMARY
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.
CHANGES TO EXISTING LAW
Existing law:
Existing law establishes the California Major Risk Medical
Insurance Program (MRMIP), which is administered by the
Managed Risk Medical Insurance Board (MRMIB) to provide
major risk medical coverage to eligible persons who have
been rejected for coverage by at least one private health
plan. Existing law creates the Major Risk Medical Insurance
Fund for purposes of MRMIP.
Continued---
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 2
Existing law, the Knox-Keene Health Care Service Plan Act
of 1975, provides for the licensure and regulation of
health care service plans by the Department of Managed
Health Care. Existing law requires the deposit of fines and
administrative penalties assessed against health care
service plans in the Managed Care Administrative Fines and
Penalties Fund. Beginning September 1, 2009, existing law
requires that any amount over the first $1,000,000
deposited in the fund be transferred to the Major Risk
Medical Insurance Fund to be used, upon appropriation by
the Legislature, for purposes of MRMIP.
This bill:
This bill would require 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 and the effect of those moneys on
the waiting list for MRMIP.
FISCAL IMPACT
Unknown, but presumably minor costs to MRMIB to prepare the
reports required by the bill.
BACKGROUND AND DISCUSSION
Author's statement
The author states that this measure allows for legislative
oversight and accountability of funds applied through SB
1379 (Ducheny), Chapter 607, Statutes of 2008, which
required that the first $1 million in fines and penalties
levied on HMOs be diverted to the Steven M. Thompson
Physician Loan Repayment Program (STPLRP) and the remainder
to MRMIP under MRMIB.
The author states that, upon enactment of SB 1379, $10
million of the fines and penalties collected by DMHC last
year were transferred directly to MRMIP, and that MRMIP's
wait list, which had grown to a high of 1,000 uninsured
individuals in July 2008 due to policy changes brought about
by the sunset of the Guaranteed Issue Pilot Program within
MRMIP in December 2007, immediately went from almost 700
uninsurable individuals in October 2008 to zero (excluding
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 3
those who voluntarily deferred enrollment).
The author notes that amounts deposited into the fund from
year to year will fluctuate, and this bill will allow for
legislative oversight and accountability for the funds
applied through SB 1379 of last year and in the future.
MRMIP and GIP
MRMIP began covering enrollees in 1991, providing
comprehensive health insurance benefits to individuals who
are unable to purchase private coverage because they were
denied individual coverage or were offered it at high
rates. Subscribers are charged a monthly premium ranging
from 125 percent to 137.5 percent of their plan's standard
average individual rate. Subscriber contributions cover 62
percent of the MRMIP's cost. Premiums for the program are
subsidized with Proposition 99 cigarette and tobacco tax
funds, and enrollment in the program is capped, based on
the availability of funds.
Due to the cap on subscriber premiums and the set amount of
available Proposition 99 monies, MRMIP has historically
been unable to meet the demand for the program. MRMIP had
a waiting list its first year of operation in 1999, which
had grown to 7,098 people in 2001. In order to address the
growing waiting list for MRMIP, the Legislature passed AB
1401 (Thomson) in 2002, which established the Guaranteed
Issue Pilot Program (GIP). Under GIP, subscribers were
automatically disenrolled from MRMIP after 36 months, after
which subscribers were able to select guaranteed continued
coverage from insurers in the individual market. The
program sunset in December 2007.
Several issues remain with funding MRMIP. Although the
current wait list stands at 52 individuals (4 due to closed
enrollment, and 48 due to a post-enrollment waiting
period), several reasons may account for the historically
low number of individuals on the waiting list, including
growing inability of many to afford the premiums and the
$75,000 annual cap on benefits.
Related legislation
SB 57 (Aanestad) would revise and restructure MRMIP,
including securing additional funding by requiring each
health care service plan and health insurer to add a
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 4
surcharge to each life covered by an individual health plan
contract or individual health insurance policy. Would enact
specified program changes related to eligibility, plan
choices, benefit limits, and benefit exclusions, as well as
enact other related changes. Set for hearing in Senate
Health Committee on April 22, 2009.
SB 227 (Alquist) would revise and restructure MRMIP,
including securing additional funding and coverage for
MRMIP-eligible persons by requiring all health plans and
health insurers selling health coverage in the state to
accept assignment of such persons or to support the costs
of MRMIP through a per person fee on health plan contracts
and policies. Would enact specified program changes
related to premium affordability, eligibility, benefits,
and program administration, as well as enact other related
changes. Set for hearing in Senate Health Committee on
April 22, 2009.
Prior legislation
SB 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 Administrative Fines
and Penalties Fund and used, upon appropriation by the
Legislature, for a physician loan repayment program and the
Major Risk Medical Insurance Program (MRMIP), instead of
being deposited in the State Managed Care Fund. Requires
DMHC to make a one-time transfer of fine and administrative
penalty revenue of $10 million to MRMIP and $1 million to
the loan repayment program. Prohibits using the fines and
administrative penalties authorized by the Knox-Keene Act
to reduce assessments on health care service plans that
support administration of the Knox-Keene Act, and prohibits
any refunds or reductions in those assessments in specified
circumstances.
SB X1 27 (Aanestad, 2008) would have revised and
restructured MRMIP, including securing additional funding
by requiring each health care service plan and health
insurer to add a surcharge to each life covered by an
individual health plan contract or individual health
insurance policy, and diverting penalties levied against
health plans to support MRMIP. Would have enacted specified
program changes related to eligibility, plan choices,
benefit limits, and benefit exclusions, as well as enact
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 5
other related changes. Held in the Senate Health Committee
without a hearing.
AB 2 (Dymally, 2008) would have revised and restructured
MRMIP. Would have secured additional funding and coverage
for MRMIP-eligible persons by requiring all health plans
and health insurers (collectively carriers) 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. Would have enacted specified program changes
related to eligibility, benefits, and program
administration. Vetoed.
AB 1971 (Chan, 2006) would have extended MRMIP and GIP
until December 31, 2007, and would have, effective January
1, 2008, reformed and restructured MRMIP. This bill would
have secured additional funding for the MRMIP by requiring
all health plans and health insurers 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.
Died on Assembly Floor on concurrence.
SB 1702 (Speier), Chapter 683, Statutes of 2006, extended
the GIP until December 31, 2007 and provided a one-time
appropriation of $4 million in Proposition 99 funds to
allow MRMIP to enroll an additional 1,160 individuals then
on the waiting list for MRMIP.
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.
Arguments in support
The California Medical Association writes that the measure
will provide accountability and oversight into the use of
funds authorized by SB 1379 (Ducheny) to fund MRMIP.
COMMENTS
1.Work with MRMIB. The author may wish to work with MRMIB
to specify more clearly what information may be most
useful in understanding how these health plan fine and
penalty funds are supporting the program.
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 6
POSITIONS
Support: American Federation of State, County and
Municipal Employees
California Medical Association
Oppose: None received
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