BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1526 (Monning) - California Major Risk Medical Insurance
Program.
Amended: June 20, 2012 Policy Vote: Health 8-0
Urgency: No Mandate: No
Hearing Date: August 16, 2012
Consultant: Brendan McCarthy
SUSPENSE FILE.
Bill Summary: AB 1526 authorizes the Managed Risk Medical
Insurance Board to eliminate the annual and lifetime benefit
limits in the state's Major Risk Medical Insurance Program,
without requiring subscriber premium contributions to offset the
cost increase. The bill also simplifies the process for
enrolling in the program.
Fiscal Impact:
One-time costs of about $16 million (Proposition 99 funds)
in 2013 due to elimination of annual and lifetime benefit
caps.
On average over the last year, the program has seen about
150 new enrollees per month. Assuming that the changes to
the enrollment process in the bill speed the enrollment
process by one month, costs would be about $100,000
(Proposition 99 funds) in 2013.
Minor costs to change program eligibility and cost sharing
rules (Proposition 99 funds).
Background: Under current law, the state operates a high-risk
insurance pool for people who cannot afford or have been
rejected from private health coverage. Typically, these are
people who have pre-existing medical conditions. The Major Risk
Medical Insurance Program provides subsidized health coverage to
people who have been denied private coverage. Under the program,
participants are required to pay premiums between 125 percent
and 137.5 percent of the standard average individual rate they
would pay for comparable coverage. In addition, the program has
annual benefit limits of $75,000 and lifetime benefit limits of
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$750,000.
Currently, subscriber premiums cover 78 percent of total program
costs. The state share of the program's cost, about $32 million
per year, is funded from Proposition 99 tobacco tax revenues. In
order to control program costs, the Board has instituted an
enrollment cap of 8,000 individuals. Currently there are about
6,000 enrollees.
Under the federal Patient Protection and Affordable Care Act
(Affordable Care Act) the state is also operating a federally
subsidized Pre-Existing Condition Insurance Program. This new
program is similar to the existing Major Risk Medical Insurance
Program, except that the new program has no annual cap on
benefits and lower subscriber premiums, generally making the new
program more attractive to subscribers. However, the new program
requires applicants to have been without coverage for six
months, a requirement not in the existing program and a
provision that makes transitioning from the old program to the
new program difficult because of a required gap in coverage.
Therefore, the state continues to operate the existing program,
but with declining enrollment as new applicants often elect to
enroll in the Pre-Existing Condition Insurance Program.
Federal law requires the state to maintain the same level of
effort that was in place prior to the enactment of the
Affordable Care Act, which for California is about $32 million
per year.
Proposed Law: AB 1526 authorizes the Managed Risk Medical
Insurance Board to eliminate the annual and lifetime benefit
limits in the state's Major Risk Medical Insurance Program,
without requiring subscriber premium contributions to offset the
cost increase.
The bill also simplifies the application process, by allowing
applicants to demonstrate eligibility by providing information
from a health care provider of the existence of a pre-existing
condition. (Rather than having to demonstrate that the applicant
has been rejected from private coverage.)
The bill authorizes the Board to adopt or update existing
regulations to implement the bill as emergency regulations.
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Staff Comments: The bill's provisions will increase state
expenditures for the Major Risk Medical Insurance Program
compared to projected expenditures under current law. However,
because of declining enrollment in the program, the state must
increase per member expenditures if it is going to meet the
federal maintenance of effort requirement. (If the state does
not meet this requirement, it could risk federal funding for the
Pre-Existing Condition Program.)
After 2014, the Affordable Care Act requires health plans and
insurers in the individual and small group market to provide
"guaranteed issue" of policies, without regard to health status
or pre-existing conditions, if an applicant pays the premiums.
In addition, the Affordable Care Act expands Medi-Cal
eligibility and provides subsidies for health coverage to low
income individuals. Due to these changes, it is unlikely that
there will be demand for either the Major Risk Medical Insurance
Program or the Pre-Existing Condition Program after January 1,
2014.