BILL ANALYSIS �
AB 1846
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ASSEMBLY THIRD READING
AB 1846 (Gordon)
As Amended May 17, 2012
Majority vote
HEALTH 13-6 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield, |
| |Bonilla, Eng, Gordon, | |Bradford, Charles |
| |Hayashi, | |Calderon, Campos, Davis, |
| |Roger Hern�ndez, Bonnie | |Gatto, Ammiano, Hill, |
| |Lowenthal, Mitchell, Pan, | |Lara, Mitchell, Solorio |
| |V. Manuel P�rez, Williams | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Garrick, Mansoor, |Nays:|Harkey, Donnelly, |
| |Nestande, Silva, Smyth | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Establishes a licensing framework at the California
Department of Insurance (CDI) and the Department of Managed
Health Care (DMHC) for Consumer Operated and Oriented Plans
(CO-OPs), which may be established and seeks funding under the
Patient Protection and Affordable Care Act (ACA). Specifically,
this bill :
1)Specifies legislative intent that a CO-OP be subject to the
California Health Benefit Exchange (Exchange), that a CO-OP
must adhere to California-specific standards established by
the Exchange, and that a CO-OP be subject to the Exchange's
selective contracting requirements, including rate
negotiations.
2)Requires the CDI Commissioner (IC) to have the authority to
issue a certificate of authority and the DMHC Director
(Director) to license a CO-OP that has been organized as a
nonprofit member organization or nonprofit member corporation
under the laws of this state.
3)Requires a CO-OP to be subject at all times to the
prohibitions in the ACA against converting or selling to a
for-profit or nonconsumer-operated entity at any time after
receiving a solvency loan.
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4)Places in state law existing federal requirements on CO-OP
governance and establishes additional conflict-of-interest
provisions. States that a CO-OP is required at all times to
be in full compliance with the requirements of the ACA
governing CO-OPs.
5)Authorizes the Exchange if a CO-OP is unable to reach
agreement with the Exchange on terms, conditions, or price, to
impose terms, conditions, or prices on the CO-OP. Authorizes
sanctions and any other actions permitted under federal law,
including limiting enrollment in the qualified health plan
offered by a CO-OP, if the CO-OP fails to comply with Exchange
contract specifications.
6)Authorizes the IC and the Director to request the federal
government's certification that a CO-OP is in compliance with
the requirements of the ACA governing CO-OPs, as well as the
status of the CO-OPs compliance with its obligations under any
loan or loan modification agreement.
7)Authorizes CDI and the DMHC to adopt regulations implementing
this bill pursuant to the Administrative Procedure Act, as
specified.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, CDI and DMHC will incur one-time administrative
costs, likely in the range of $100,000 (special fund) to
promulgate regulations, review federal requirements, and
establish policies and procedures specific to CO-OP licensure.
CDI and DMHC will also experience ongoing oversight costs to the
extent more CO-OPs become licensed. Most of this workload would
be required in absence of this bill if either department
received an application for licensure from a CO-OP. By
clarifying CO-OP licensure rules, this bill may streamline the
licensure process and avoid administrative costs related to
legal questions that may otherwise arise.
COMMENTS : The author states that the ACA anticipates the
licensing of at least one CO-OP in each state as a health issuer
(either as an insurer or a health maintenance organization).
According to the sponsor, CDI, this bill would establish a
framework for health CO-OPs to mirror what currently exists in
the Insurance Code for mutual insurers and incorporate
provisions unique to the CO-OP framework established by the ACA,
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including guidelines for formation, consumer governance,
incorporation of a unique form of capitalization which relies on
solvency loans from the federal government, and participation in
the Exchange. CDI indicates that this bill would allow CO-OPs
to become eligible for federal funding. To date more than 10
states have received funds for CO-OPs located within their
boundaries, including states such as New York and Oregon.
The ACA imposes new requirements on individuals, employers, and
health plans; restructure the private health insurance market;
set minimum standards for health coverage; and, provide
financial assistance to certain individuals and, in some cases,
small employers. The ACA also creates a new CO-OP program,
which will allow new nonprofit, member-run health insurance
companies to be eligible for grants and loans. As part of the
CO-OP program, the federal government will make $6 billion
available to foster the creation of new nonprofit, member-run
health insurance issuers that will offer qualified insurance in
the individual and small group markets. The funds will be
distributed as loans, which may be repaid, for start-up costs
and grants for meeting solvency requirements. There is at least
one application pending for CO-OP funding for California
entities. The California Asian Pacific Chamber of Commerce
believes the type of competition created by CO-OPs should and
would be based on quality and value, and ultimately brings down
prices for the policyholder. The Small Business Majority
supports this bill because entrepreneurs are looking for
innovative approaches to lower their health care costs while
providing their workers with meaningful coverage.
Health Access California (HAC) believes CO-OPs will undercut the
effectiveness of the Exchange because federal law requires a
state exchange to contract with a CO-OP and because, in
California, the Exchange has been given authority to selectively
contract with qualified health plans (QHPs). HAC fears the
Exchange will not have bargaining power and consumers will be
harmed if the Exchange cannot negotiate with CO-OPs on cost and
quality. Amendments adopted in the Assembly Appropriations
Committee are intended to address some of the concerns raised by
HAC.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0003807
AB 1846
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