BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 900|
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THIRD READING
Bill No: SB 900
Author: Alquist (D), et al
Amended: 5/20/10
Vote: 21
SENATE HEALTH COMMITTEE : 5-0, 4/21/10
AYES: Alquist, Leno, Negrete McLeod, Pavley, Romero
NO VOTE RECORDED: Strickland, Aanestad, Cedillo, Cox
SENATE APPROPRIATIONS COMMITTEE : 7-2, 5/27/10
AYES: Alquist, Corbett, Kehoe, Leno, Price, Wolk, Yee
NOES: Denham, Walters
NO VOTE RECOREDE: Cox, Wyland
SUBJECT : California Health Benefits Exchange
SOURCE : Author
DIGEST : This bill (1) establishes in the California
Health and Human Services Agency (Agency) the California
Health Benefits Exchange (Exchange), (2) specifies the
duties and authority of the Exchange, (3) requires the
Exchange be governed by a board composed of eight members
appointed by the Governor and the Legislature, (4) requires
the Exchange to negotiate and enter into contracts with
health plans, (5) requires the Exchange to offer a choice
of health plans in each region of the state, including a
choice in each region of the state between the five levels
of coverage contained in federal law (a platinum, gold,
silver, bronze and catastrophic level benefit plan), and
CONTINUED
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(6) requires the Agency to apply for and receive federal
funds for purposes of establishing the Exchange and makes
those funds available to the agency and the board for those
purposes upon appropriation by the Legislature.
ANALYSIS : Existing state law establishes the Managed
Risk Medical Insurance Board (MRMIB), which administers the
Healthy Families Program, the Major Risk Medical Insurance
Program, and the Access for Infants and Mothers Program.
MRMIB is a seven-member board in the Agency with three
gubernatorial appointments, two legislative appointments
and two ex officio non-voting members. MRMIB administers
three programs (the Healthy Families Program, the Access
for Infants and Mothers Program and the Major Risk Medical
Insurance Program), under which it has authority to
contract with health plans.
Existing federal law, the federal Patient Protection and
Affordable Care Act (the federal Act), (Public Law
111-148), requires each state, by January 1, 2014, to
establish an American Health Benefit Exchange that makes
qualified health plans available to qualified individuals
and qualified employers. Federal law establishes
requirements for the Exchange, for health plans
participating in the Exchange, and defines who is eligible
to receive coverage in the Exchange.
Effective January 1, 2014, the federal Act allows
individual taxpayers whose household income equals or
exceeds 100 percent, but does not exceed 400 percent of the
federal poverty level, a refundable tax credit for a
percentage of the cost of premiums for coverage under a
qualified health plan. The federal Act also requires
reductions in the maximum limits for out-of-pocket expenses
for individuals enrolled in qualified health plans whose
incomes are between 100 percent and 400 percent of the
federal poverty level.
The federal Act also allows "qualified small employers" to
elect, beginning in 2010, a tax credit worth up to 35
percent of a small business' health insurance premium costs
in 2010. On January 1, 2014, this rate increases to 50
percent (35 percent for tax-exempt employers). A
qualifying employer must cover at least 50 percent of the
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cost of health care coverage for some of its workers based
on the single rate. A qualifying employer must have less
than the equivalent of 25 full-time workers (for example,
an employer with fewer than 50 half-time workers may be
eligible). A qualifying employer must pay average annual
wages below $50,000. Both taxable (for-profit) and
tax-exempt firms (nonprofits) qualify. The credit phases
out gradually for firms with average wages between $25,000
and $50,000 and for firms with the equivalent of between 10
and 25 full-time workers. After January 1, 2014, the tax
credit is only available for coverage purchased through the
Exchange, and only for two consecutive years.
This bill:
1. Establishes in the Agency the Exchange, and makes the
purpose of this bill to implement the provisions of the
federal Act requiring the establishment of an American
Health Benefit Exchange. Requires the Exchange be
governed by a board governed by a board consisting of
eight members with four-year terms. Of the eight
members, four shall be appointed by the Governor, two
shall be appointed by the senate Committee on Rules, and
two shall be appointed by the Speaker of the Assembly.
Each of the appointed members shall have demonstrated
knowledge and experience in health care and issues
relevant to the board's responsibilities..
2. Requires the Exchange board to hold public meetings on a
bimonthly basis, or more frequently as necessary.
States legislative intent that the Exchange provides a
consumer-friendly process that facilitates the seamless
enrollment of individuals in health care coverage.
3. Requires the Exchange to meet various requirements,
including:
A. Negotiating and entering into contracts,
including selective provider contracts, with health
plans seeking to offer coverage in the Exchange.
B. Providing a choice of health plans in each
region of the state, including a choice in each
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region of the state between the five levels of
coverage contained in federal law (a platinum,
gold, silver, bronze and catastrophic benefit
plan).
C. Requiring the Exchange to employ necessary
staff, including actuarial staff.
D. Requiring the Exchange to receive federal funds
for purposes of establishing and administering the
Exchange, including funds made available by the
federal Act.
4. Requires the Exchange to meet the requirements of the
federal Act for establishing an Exchange, and requires
the Exchange to perform the following federal
requirements in a consumer-friendly manner:
A. Provide for the operation of a toll-free
telephone hotline to respond to requests for
assistance.
B. Maintain an Internet website through which
enrollees and prospective enrollees of qualified
health plans can obtain standardized comparative
information on those plans.
C. Assign a rating to each qualified health plan
offered through the Exchange in accordance with
federal criteria developed under the Act.
D. Utilize a standardized format for presenting
health benefits plan options in the Exchange,
including the use of the uniform outline of
coverage established under federal law.
E. Inform individuals of eligibility requirements
for the Medi-Cal Program, the Healthy Families
Program, or any applicable state or local public
health care coverage program and, if eligible,
enroll the individual in that program.
F. Establish and make available by electronic means
a calculator to determine the actual cost of
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coverage after the application of any premium tax
credit and any cost-sharing reduction under the
federal Act.
G. Grant a certification, subject to the federal
Act and any implementing regulations, attesting
that an individual is exempt from the individual
responsibility requirement (known as the individual
mandate) or from the penalty imposed because of
either of the following:
(1) There is no affordable qualified health
plan available through the Exchange, or the
individual's employer, covering the
individual.
(2) The individual meets the requirements
for any other exemption from the individual
responsibility requirement or penalty.
H. Establish quality incentives and rewards
consistent with specified provisions of the Act,
including, but not limited to, incentives that
encourage the use of delivery systems that deliver
cost-effective, high-quality care.
5. Permits the Exchange to do the following:
A. Issue rules and regulations, as necessary, and
until January 1, 2014, emergency regulations.
B. Apply for and receive funds from private
foundations.
C. Exercise the federal option to provide a single
exchange for providing services to both qualified
individuals and qualified small employers, if the
Exchange makes all of the following determinations:
(1) Providing coverage through a single
exchange will provide a significant benefit for
the health coverage marketplace in the state.
(2) Providing coverage through a single
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exchange will be cost effective for both
qualified individuals and qualified small
employers.
(3) The Exchange can make coverage available
through a single exchange on a guarantee issue
basis without undue risk of adverse selection.
D. Enter into other contracts as are necessary or
proper to carry out the duties of the Exchange,
including, but not limited to, contracts for
enrollment processing.
E. Determine the health benefits coverage for small
employers that the Exchange will contract to purchase
from participating carriers.
F. Appoint committees, as necessary, to provide
technical assistance in the operation of the
Exchange.
G. Undertake activities necessary to administer the
Exchange, including marketing and publicizing the
Exchange and establishing rules, conditions, and
procedures for ensuring carrier, employer, and
enrollee compliance with Exchange requirements,
consistent with federal law and regulations.
H. Consistent with federal procedures established by
the Act, establish procedures to allow agents or
brokers to do both of the following:
(1) Enroll individuals in any qualified health
plan in the individual or small group market as
soon as the plan is offered through the
Exchange.
(2) Assist individuals in applying for premium
tax credits and cost-sharing reductions for
health plans sold through the Exchange.
(3) Include within the premiums charged to
enrollees or employers purchasing coverage
through the Exchange an amount sufficient to pay
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the actual, reasonable, and necessary
administrative costs of the Exchange.
6. Prohibits the Exchange from being subject to licensure
or regulation by the California Department of Insurance
or the Department of Managed Health Care.
7. Requires carriers that contract with the Exchange to be
in good standing with their respective regulatory
agencies.
8. Allows individuals and employers the right to appeal to
the board if they are dissatisfied with any action or
failure to act that has occurred in connection with
eligibility for, or enrollment in, the Exchange.
Requires the individual/employer be accorded an
opportunity for a fair hearing, and requires hearings to
be conducted pursuant to the provisions of the
Administrative Procedure Act.
9. Prohibits this bill from being construed to compel an
individual to enroll in a qualified health plan or to
participate in the Exchange.
10.Requires the California Health and Human Services Agency
shall apply for and receive federal funds for purposes
of establishing the Exchange.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Initial start-up costs unknown,
likely in the millions General/*
of dollars annually throughFederal
January 1, 2014
Ongoing CHBE unknown,
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likely to start January 1, Special**
administration 1014, in the tens of millions of
dollars annually
CDI oversight, filing approximately
$160 ongoing once Special***
CHBE is operational
*Unspecified amount of federal funds available likely in
2011; General Fund pressure if total expenses not met by
federal funds grant
**California Health Benefits Exchange Fund-likely be fully
supported by an assessment on consumer premiums
***Insurance Fund
SUPPORT : (Verified 5/27/10)
CALPIRG
Congress of California Seniors
Consumers Union
Health Access California
OPPOSITION : (Verified 5/27/10)
Anthem Blue Cross
ARGUMENTS IN SUPPORT : According to the author's office,
the Exchange would be an "active purchaser" on behalf of
people receiving coverage in the Exchange. It would
negotiate and enter into contracts with health plans
seeking to participate in the Exchange, and would establish
quality incentives for health plans that encourage the use
of cost-effective, high-quality delivery systems.
Additionally, the author's office argues a broad choice of
health plans should be available in the Exchange beyond
what is required under federal law. This bill requires the
Exchange to offer a choice of health plans in each region
of the state of the five levels of coverage (platinum,
gold, silver, bronze and catastrophic) contained in federal
law, rather than the two levels of coverage (gold and
silver) required in the federal Act.
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The author's office points out that California is familiar
with the Exchange model as the state currently administers
a purchasing pool for approximately 1.3 million public
employees (through CalPERS) and three smaller purchasing
pools, one for pregnant women, one for low-income children,
and one for medically uninsurable individuals, that are
administered by the Managed Risk Medical Insurance Board
and that have a combined enrollment of over 900,000
individuals. MRMIB also previously administered a
purchasing pool for small employers known as the Health
Insurance Plan of California or "HIPC."
While there are many policy decisions to make regarding
state implementation of an Exchange, the author's office
believes the statutory framework must be built early so
that the state can begin establishing the administrative
infrastructure (hiring staff, contracting with health plans
and vendors, and establishing enrollment processes) for an
entity that will ultimately facilitate the enrollment of
millions of Californians in health coverage.
ARGUMENTS IN OPPOSITION : Anthem Blue Cross (ABC) writes
in opposition that the Exchange established by this bill is
inconsistent with the concept of consumer choice because it
requires the Exchange to determine the health benefits
coverage for small employers. ABC argues having the
Exchange determine the health benefits coverage is
duplicative of federal requirements, will limit the choice
of plans for those purchasing coverage with a tax credit in
the Exchange, and having the Exchange perform this function
adds an added layer of expense because DMHC and CDI already
will be approving products consistent with the new federal
Act.
ABC also objects to allowing Medi-Cal County Organized
Health Systems (COHS) to provide coverage in the private
market through the Exchange. ABC argues COHS are
government-run plans, and the idea of allowing the
government to sell coverage in the private market was
rejected during the federal legislative process. ABC
argues the COHS would not meet federal requirements to
qualify as a qualifying plan in the Exchange.
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CTW:do 5/27/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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