BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 1063
S
AUTHOR: Cox
B
AMENDED: As Introduced
HEARING DATE: April 14, 2010
1
CONSULTANT:
0
Dunstan/cjt
6
3
SUBJECT
Healthy Families Program
SUMMARY
Specifies how the Managed Risk Medical Insurance Board
(MRMIB) shall structure copayments for prescription drugs
and emergency health care services for the Healthy Families
program and increases program's annual family copayment
maximum.
CHANGES TO EXISTING LAW
Existing federal law:
Establishes the Children's Insurance Fund (CHIP) which
provides matching funds for state health insurance
programs. Provides that the federal share of these state
programs shall be 65 percent and the state share 35
percent. Limits aggregate cost sharing in separate CHIP
state programs to no more than five percent of family
income.
Existing state law:
Establishes the Healthy Families program to provide
affordable insurance, including health, dental and vision
coverage, to children who do not have health insurance, do
not qualify for free Medi-Cal and are in families at or
Continued---
STAFF ANALYSIS OF SENATE BILL 1063 (Cox) Page 2
below 250 percent of the federal poverty level (FPL).
Provides that MRMIB administers Healthy Families.
Establishes premiums that families must pay for their
Healthy Families coverage. Requires MRMIB, for the Healthy
Families program, to the extent possible, set copayments to
reflect the copayment established through the Public
Employees Retirements System (PERS), effective January 1,
1998. Mandates that MRMIB, in setting copayments for
Healthy Families, not exceed the copayment level
established for state employees, effective January 1, 1998.
Limits maximum annual copayments charged to subscribers to
$250 per family.
This bill:
Requires MRMIB to set copayments for prescription drugs in
the Healthy Families program so that any copayment for a
brand drug is at least 150 percent of the copayment for the
equivalent generic drug, except where there is no generic
or medical necessity requires the use of the branded drug.
Requires MRMIB to set copayments for emergency health care
services in the Healthy Families program so that any
copayment charged for those services is at least 150
percent of the copayment for the highest nonpreventive
health care service.
Eliminates the current requirement that copayments
established by MRMIB for Healthly Families not exceed the
copayment level established for state employees, effective
January 1, 1998, through the Public Employees Retirements
System (PERS).
Increases the annual family copayment maximum for the HFP
by $100 (to $350 total).
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, this bill will place into law the
decision by MRMIB to impose a tiered copayment structure on
STAFF ANALYSIS OF SENATE BILL 1063 (Cox) Page 3
subscribers to the Healthy Families program for specified
benefits. The author argues that the copayments authorized
by MRMIB last year encourage responsible use of HFP
benefits, specifically encouraging the use of generic
rather than brand name drugs, and discouraging the
unnecessary use of emergency rooms. The author notes that
since the bill only mandates the ratio of certain
copayments to one another and does not specify a dollar
figure, the bill maintains MRMIB's ability to adjust
copayments as needed as long as the ratios are preserved.
The author argues that by placing these copayment ratios
into law, it ensures that future MRMIB board members will
not reverse these important provisions.
Background
CHIP was created as part of the federal Balanced Budget Act
of 1997. Under CHIP, the federal government uses a formula
to determine how much money each state will be allocated;
the money is then used to provide the federal match to
state funds. California's program is called Healthy
Families. California currently receives 65 percent of its
Healthy Families program expenses from the federal match;
the state contributes the other 35 percent. As of February
2010, approximately 875,000 children were enrolled in
Healthy Families.
Healthy Families has faced budgetary challenges in the last
year. Significant reductions were made to the program as
part of the enacted 2009-2010 state budget. As a result,
MRMIB projected that 650,000 children would need to be
disenrolled, however this did not occur. The California
Children and Families Commission voted to grant MRMIB $81
million, which would allow coverage for children age zero
to five to be maintained. A tax on Medi-Cal managed care
plans was enacted which provided considerable additional
funding for the program. Additionally, MRMIB approved a
number of Healthy Family program benefit changes at its
August 2009 meeting, including changes to the copayment
structure.
These copayment changes, which took effect November 1,
2009, encourage the use of generic prescription drugs over
brand name drugs, and discourage the use of hospital
emergency departments for non-emergent conditions.
Specifically, copayments for non-preventive health, dental,
and vision services increased from $5 to $10. Copayments
STAFF ANALYSIS OF SENATE BILL 1063 (Cox) Page 4
for generic prescription drugs increased from $5 to $10.
Copayments for brand name prescription drugs increased from
$5 to $15, unless no generic equivalent is available or the
brand name drug is medically necessary. Copayments for
emergency department visits increased from $5 to $15; the
copayment is waived if the individual is admitted to the
hospital.
Copayments are charges that beneficiaries pay when they
receive a service and are an integral feature in insurance
in this country. Copayments are an important tool that can
encourage appropriate subscriber behavior regarding the use
of health care resources. While some families served by
these programs are able to pay premiums or make copayments,
others, especially those at lower-income levels or with
extensive health care needs, may find that such fees make
it difficult for them to access needed care. Research has
established that cost sharing, including copayment
requirements, will reduce enrollment and use of health care
services, especially among low-income groups. The services
that are reduced are often primary care and preventive
services.
Arguments in opposition
The 100% Campaign opposes this bill because they argue it
will keep children from accessing timely and needed
treatment. They argue that Healthy Families is a source of
affordable coverage for children and at this time of
economic hardship, an increase in the costs of health care
will be a barrier to care. The American Federation of
State, County and Municipal Employees (AFSCME) oppose SB
1063 because they argue it will raise copayments for those
Californians most in need of assistance. They also point
out that it would set the stage for even higher copayments
by removing language establishing copayment parity with
CalPERS.
COMMENTS
1. This bill would set specific restrictions on copayments
in statute. Currently, only the maximum annual cap is in
statute. MRMIB has administrative authority to adjust
copayments for specific services. Given that MRMIB has
just raised copayments, and there has not been an
evaluation of the impact on utilization, the committee
STAFF ANALYSIS OF SENATE BILL 1063 (Cox) Page 5
should consider whether it is advisable to reduce the
authority and flexibility of MRMIB by codifying copayment
standards in SB 1063.
2. Copayments should be set to balance the two goals of
encouraging appropriate use of health care but not
deterring use of services which may be to the detriment of
the subscriber. The research on cost sharing is clear that
premiums and cost sharing charges will decrease enrollment
and use of services among low-income families. That does
not mean that there should be no copayments as they can be
useful tools to encourage efficient utilization. However,
the research does not definitively answer the question of
what is the appropriate level, especially for a program
such as Healthy Families that covers families that are very
poor, slightly above 100 percent of the FPL and families
with moderate means, (up to 250 percent of the FPL).
POSITIONS
Support: None received
Oppose: 100% Campaign, a consortium of Children's
Partnership, Children Now,
Children's Defense Fund California and
PICO California
AFSCME
California Academy of Family Physicians
California Children's Hospital Association
California Labor Federation
Health Access California
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