BILL ANALYSIS �
AB 1921
Page 1
ASSEMBLY THIRD READING
AB 1921 (Hill)
As Amended April 23, 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 the California Transitional Reinsurance
Program (CTRP), pursuant to the federal Patient Protection and
Affordable Care Act (ACA), effective January 1, 2013, with
contributing entities remitting payment on or after October 1,
2013, and payment to eligible recipients occurring on or after
January 1, 2014. Terminates CTRP on January 1, 2018.
Specifically, this bill :
1)Establishes the CTRP in which "contributing entities,"
(licensed health plans, and insurers) are required to make
payments to a nonprofit reinsurance entity that carries out
specified duties. Under the CTRP, "reinsurance-eligible
recipients," (any health plan or health insurance coverage
offered in the California individual market that are not
grandfathered plans) will receive reinsurance payments for
covered individual claims.
2)Requires the Department of Managed Health Care (DMHC) and the
California Department of Insurance (CDI) to select the
applicable reinsurance entity based upon a competitive
process. Requires the regulators to jointly modify the
federal reinsurance benefits and payment parameters by issuing
a California-specific notice of benefits and payment
parameters by March 1 of the year prior to the benefit year.
AB 1921
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3)Establishes specified duties of the applicable reinsurance
entity, including collecting reinsurance contributions from
contributing entities, remitting a portion of payments
collected from contributing entities to the United States
Treasury, receiving and maintaining required claims data on
all covered individual claims submitted by
reinsurance-eligible recipients, coordinating the reinsurance
program with state high-risk pools to the extent necessary as
may be required by state or federal law, and any other duties
as further defined by the ACA, state regulations or any
California-specific reinsurance and benefit payment
parameters.
4)Permits the DMHC and CDI to adopt regulations, and requires
consultation between DMHC and CDI in adopting necessary
regulations. Provides that the adoption or amendment of the
regulations is an emergency.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time regulatory and program development costs to
CDI and DMHC in the range of $250,000 (Insurance Fund and
Managed Care Fund) over the 2012-13 and 2013-14 fiscal years.
Due to the compressed time frame of this program, these costs
will likely need to be absorbed within existing resources.
Staff costs potentially exceeding $100,000 (Insurance Fund) to
CDI annually through fiscal year 2014-15 to perform analytical
work to monitor the effectiveness of the program and recommend
adjustment to state-specific parameters. Some level of workload
would likely be performed by CDI in the absence of this bill
pursuant to federal law establishing the program and requiring
input to federal entities from state Insurance Commissioners.
Ongoing staff costs through fiscal year 2016-17 for staff to
monitor the reinsurance entity contract and enforce compliance
with the program among licensed entities potentially exceeding
$100,000 (Insurance Fund and Managed Care Fund) per year between
CDI and DMHC. Up-front and ongoing administrative costs to the
transitional reinsurance entity for operating the program will
be directly funded by a portion of the contributions collected
from plans.
COMMENTS : The transitional reinsurance program is intended to
help stabilize premiums for coverage in the individual market
due to individuals with higher cost needs gaining insurance
AB 1921
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coverage during the first three years of Exchange operation.
Under the final rules, states now have the option to establish a
reinsurance program. If a state elects not to establish a
program, the federal Department of Health and Human Services
establish the program and perform the reinsurance functions for
the state. Payments will be based on a portion of costs per
enrollee paid once claims costs reach a certain level or
"attachment point" and until a payment limit or "cap" is
reached.
According to the sponsor, CDI, legislation is required to
establish the state's transitional reinsurance program, and must
be in effect by 2013 in order to allow time for the selection of
a contracting nonprofit entity that would implement the program
by the last quarter of 2013. CDI states that this bill would
create a fund that would be used to pay health insurers and HMOs
writing in the individual market that incur large claims and a
portion of the funds would help make payments to the United
States Treasury to offset some of the costs of health care
reform. CDI indicates that one of the goals of this program is
to prevent adverse selection and help stabilize the market.
Health Access California supports this bill because the
information gained from running a reinsurance program about the
market impacts and shifts will prove valuable to regulators and
policy makers.
The California Association of Health Plans (CAHP) writes in
opposition that the influx of new lives into the market is
important but has the potential of causing uncertainty and
financial risk at the outset. CAHP opposes this bill because it
presupposes that it is in California's best interest to operate
its own reinsurance program versus utilizing the federal option.
CAHP believes it is impossible to know which option is best for
the state because federal final notice and parameters will not
be known until the fall. The Association of California Life &
Health Insurance Companies believes this bill is premature and
removes the option for California to allow the federal
government to run this short-lived reinsurance program.
America's Health Insurance Plans supports the goals of the
reinsurance program but respectfully opposes this bill because
it rushes to judgment that a California-specific transitional
reinsurance program under the ACA is the best option for the
state.
AB 1921
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Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0003963