BILL ANALYSIS
SB 900
Page 1
Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 900 (Alquist) - As Amended: August 2, 2010
Policy Committee: HealthVote:13-6
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes the California Health Benefits Exchange
(Exchange) within the California Health and Human Services
Agency (HHSA) to conform to requirements of federal health
reform (PL-111-148). Federal law requires California to
establish an operational state-based exchange by January 1, 2014
or to allow the federal government to provide the exchange
functions. Specifically, this bill:
1)Requires HHSA to apply for and receive federal funding for
establishing the Exchange.
2)Establishes a scope of work for the Exchange and requires the
Exchange to establish a governing board, receive federal
funding for establishing and administering the Exchange,
present standard health benefit packages, contract with health
plans and insurers (carriers), determine carrier eligibility,
inform individuals about eligibility related to Medi-Cal and
the Healthy Families Program, provide an electronic coverage
cost calculator, and grant certification of exemption from the
individual mandate to have health coverage. Authorizes the
Exchange to pursue a variety of regulatory and administrative
functions, including establishing self-funding mechanisms.
3)Establishes the California Health Benefits Exchange Fund
(Fund), and authorizes unexpended or unencumbered funds to be
spent without regard to fiscal year. Requires the governing
board to establish a prudent reserve. Prohibits loans from the
Fund to the state General Fund, state special funds, or county
funds.
FISCAL EFFECT
SB 900
Page 2
1)This bill establishes the California Health Benefits Exchange
Fund, a special fund subject to appropriation by the
Legislature to be used to support the administrative workload
of the Exchange and to facilitate the purchase of health
coverage for several million Californians. This bill
authorizes unexpended or unencumbered funds at the end of a
fiscal year to be carried forward and requires any interest
earned to be retained by the Fund. This bill requires the Fund
to include a prudent reserve.
2)Annual costs in 2011 through 2014 of $1 million (100% federal)
to $2 million (100% federal) to the California Department of
Managed Health Care (DMHC) and the California Department of
Insurance (CDI), combined, to provide support in establishing
the Exchange.
3)Federal funding to establish the Exchange will be available
from 2011 until January 1, 2015, at which time the Exchange
must be self-sustaining. The federal government recently
announced the availability of an initial allocation of $1
million per state to help states begin to establish exchanges.
Applications for state funding are due September 1, 2010. This
bill provides the Exchange the authority to establish
self-funding mechanisms when federal funding support ends.
4)A key function of the Exchange will be to administer federally
funded premium subsidies for low-income individuals. According
to estimates, by 2016, between three million and eight million
individuals and employees of small firms will be purchasing
coverage through the Exchange. About three million of these
individuals will be eligible for coverage subsidies either
because of income (family income of less than 400% of federal
poverty level) or because they work for small firms benefiting
from a related tax credit.
The actual number of people accessing health coverage through
the Exchange will depend on a number of factors, including
access to subsidies and tax credits, the kind of benefits and
prices offered in the Exchange, administrative savings
generated by purchasing economies of scale, and other market
factors.
COMMENTS
SB 900
Page 3
1)Rationale . This bill enacts a key feature of federal health
reform by establishing the California Health Benefits
Exchange. According to the author this bill will enable the
purchase of several million health insurance policies for
between three and eight million individuals. The Exchange will
be an active purchaser of coverage and will contract with
health plans to provide high quality, affordable care.
Standardized coverage available in the Exchange will conform
to federal requirements regarding benefit design and essential
health benefits. The Exchange will be a major factor in
reducing the number of uninsured in California. Currently, 25%
of non-elderly adults statewide are uninsured. Recent
amendments address scope of work for the Exchange, reporting
requirements related to the functioning of the Exchange, and
clarifications on governing board policies.
2)State-Based Health Insurance Exchanges . The federal health
reform law made broad changes to the way health coverage is to
be provided and paid for in California. The federal law
created a new mechanism for purchasing coverage, called
exchanges, which are state-based entities established to
create a more organized and competitive market for health
insurance. Competition and efficiency is expected to increase
by offering a choice of health plans, establishing common
rules regarding the offering and pricing of insurance, and
providing information to help consumers better understand the
options available to them.
Initially, the California Exchange will serve primarily
individuals purchasing insurance on their own and smaller
employers. In 2017, California will have the option of
opening the Exchange to larger employers.
3)Related Legislation . AB 1602 (J. Perez), pending in the
Senate, enacts a series of changes related to health reform
including establishing the California Health Benefits Exchange
and allowing young adults to stay on their parents' health
coverage until age 26.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081