BILL ANALYSIS
SB 499
Page 1
Date of Hearing: June 9, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
SB 499 (Ducheny) - As Introduced: February 26, 2009
SENATE VOTE : 35-0
SUBJECT : Managed Care Administrative Fines and Penalties Fund:
California Major Risk Medical Insurance Program.
SUMMARY : Requires the Managed Risk Medical Insurance Board
(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 (Managed
Care Fund), pursuant to existing law, and the effect of the
transferred funds on the waiting list for the Major Risk Medical
Insurance Program (MRMIP).
EXISTING LAW :
1)Provides for the licensure and regulation of health care
service plans (health plans) by the Department of Managed
Health Care (DMHC) under the Knox-Keene Health Care Service
Plan Act of 1975 (Knox-Keene), and requires administrative
penalties levied under Knox-Keene to be paid into the Managed
Care Fund.
2)Establishes MRMIP, administered by MRMIB, to provide health
coverage for individuals rejected by at least one private
health plan, or individuals who can only secure limited
coverage that would leave the individual without adequate
coverage for medically necessary services, or coverage only at
an excessive price significantly above standard average
individual coverage rates.
3)Requires each health plan to pay to the director of DMHC an
amount estimated by the director for the ensuing fiscal year
as reimbursement of its share of all costs and expenses in
administering Knox-Keene. If the director determines that the
charges and assessments in existing law for any year are in
excess of the amount necessary, or are insufficient, to meet
DMHC administrative costs for that year, the assessments and
charges for the following year must be adjusted to recover the
SB 499
Page 2
actual costs of administration.
4)Creates a Managed Care Administrative Fines and Penalties Fund
(Fund), and requires administrative fines and penalties
collected under Knox-Keene to be deposited into the Fund.
Prohibits the fines and penalties authorized under Knox-Keene
from being used to reduce the assessments imposed on health
plans.
5)Requires, beginning September 1, 2009, the first $1 million in
fines and administrative penalties paid for violations of
Knox-Keene to be transferred from the Fund to the Medically
Underserved Account for Physicians within the Health
Professions Education Foundation (Foundation). Requires, upon
appropriation by the Legislature, the fines and administrative
penalties to be used for purposes of the Steven M. Thompson
Physician Corps Loan Repayment Program (Thompson Program), a
physician loan repayment program.
6)Requires fines and administrative penalties paid for
violations of Knox-Keene in amounts over the first $1 million,
including accrued interest in the Fund, to be paid to the
Major Risk Medical Insurance Fund. Requires, upon
appropriation by the Legislature, the fines and administrative
penalties to be used for MRMIP.
7)Requires, following the passage of SB 1379 (Ducheny), Chapter
607, Statutes of 2008, an urgency statute, DMHC to make a
one-time transfer of fine and administrative penalty revenue
from the Managed Care Fund of $1 million, to be used for
purposes of the Thompson Program, and, $10 million to the
MRMIP Fund, to be used for MRMIP to cover program expenses.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS :
1)PURPOSE OF THIS BILL . The author states that this measure
allows for legislative oversight and accountability of funds
made available to MRMIP in 2008 by SB 1379 (Ducheny). SB 1379
requires the first $1 million in fines and penalties levied
against Knox-Keene health plans to be diverted to the Thompson
Program and any remaining funds to be made available to
subsidize health care coverage provided through MRMIP. The
author notes that amounts deposited into the Fund from year to
SB 499
Page 3
year will fluctuate, and this bill will allow for legislative
oversight and accountability, and ensure that the Legislature
can closely monitor the allocation of funds as well as the
financial status of MRMIP.
2)BACKGROUND . MRMIP provides state-subsidized coverage through
four private health plans to individuals denied coverage in
the individual market or whose premiums exceed MRMIP premiums.
Premiums paid by individuals enrolled in MRMIP are set at
125-137.5% of what the MRMIP benefit package would cost in the
commercial market. In 2007, premiums paid by MRMIP enrollees
paid for 66% of MRMIP costs, and the remaining 34% came from
state tobacco tax funds. MRMIP currently has a waiting list
for enrollment in the program of approximately 848 people.
Premiums for MRMIP 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 fixed amount of
available Proposition 99 funds, 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), Chapter 794, Statutes of 2002, which established
the Guaranteed Issue Pilot Program (GIP). Under GIP,
subscribers were automatically disenrolled from MRMIP after 36
months, and became eligible for guaranteed continued coverage
from insurers in the individual market at 10% above the
premiums charged for MRMIP. The GIP program sunset in
December 2007.
Upon enactment of SB 1379 in 2008, $10 million of the fines and
penalties collected by DMHC were transferred directly to
MRMIP, and MRMIP's waiting list, which had grown to 1,000
individuals by July 2008 because of the sunset of GIP. 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 eliminated the
waiting list of 700 uninsurable individuals in October 2008 to
zero (excluding those whose coverage was pending fulfillment
of a waiting period). As of June 1, 2009, the MRMIP waiting
list stands at 451 individuals (392 due to closed enrollment,
and 59 due to a post-enrollment waiting period). Many
SB 499
Page 4
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. In the Sacramento area, a 55-year old person
would currently pay MRMIP premiums of $567 per month for the
Kaiser Health Maintenance Organization and $968 for the Anthem
Preferred Provider Organization plan.
Administered by the Foundation, the Thompson Program, which
received $1 million under the provisions of SB 1379, repays up
to $105,000 in government or commercial educational loans for
expenses incurred for undergraduate education and graduate
medical education for physicians who agree to practice in
medically underserved areas.
3)RELATED LEGISLATION .
a) SB 57 (Aanestad) would revise and restructure MRMIP,
including securing additional funding by requiring each
health plan and health insurer to add a surcharge on each
individual policy. SB 57 would also enact specified
program changes related to eligibility, plan choices,
benefit limits, and benefit exclusions, and related
changes. SB 57 failed passage in Senate Health Committee on
April 22, 2009 by a vote of 2-6.
b) 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. SB 227 passed the Senate floor and is headed to
the Assembly for consideration.
4)PRIOR LEGISLATION .
a) SB 1379 (Ducheny), Chapter 607, Statutes of 2008,
requires fines and administrative penalties levied against
SB 499
Page 5
health plans under Knox-Keene to be placed in the Managed
Care Fund and used, upon appropriation by the Legislature,
for the Thompson Program. Requires DMHC to make a one-time
transfer of fine and administrative penalty revenue of $10
million to MRMIP and $1 million to the Thompson Program.
Prohibits using the fines and administrative penalties
authorized by Knox-Keene to reduce assessments for support
of DMHC, and prohibits any refunds or reductions in those
assessments, as specified.
b) 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. SB 27 X1
would also 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.
c) AB 2 (Dymally) of 2008 would have revised and
restructured MRMIP. AB 2 would have secured
additional funding and coverage for MRMIP-eligible
persons by requiring all health plans and health
insurers 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
policies. AB 2 would also have enacted specified
program changes related to eligibility, benefits, and
program administration. AB 2 was vetoed by Governor
Schwarzenegger. The veto message stated the
Governor's objection to a fee applied only to covered
lives in the individual market, and called for
comprehensive health care reform that guarantees
issuance of coverage to all individuals, along with an
individual mandate, cost-containment, prevention and
shared responsibility, as the solution for the health
care crisis.
d) AB 1971 (Chan) of 2006 would have extended MRMIP and GIP
until December 31, 2007, and would have, effective January
1, 2008, reformed and restructured MRMIP. AB 1971 would
have secured additional funding for MRMIP by requiring all
health plans and health insurers in the state to share in
SB 499
Page 6
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
stalled on the Assembly Floor on concurrence.
e) 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.
f) 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.
5)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.
REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association
Opposition
None on file.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097