BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 615|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 615
Author: Calderon (D)
Amended: 8/6/12
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : 76-1, 8/9/12 - See last page for vote
SUBJECT : Multiple employer welfare arrangements:
benefits
SOURCE : California Association of Small Employer Health
Plans
DIGEST : This bill prohibits multiple employer welfare
arrangements (MEWAs) from offering, marketing,
representing, or selling any product, contract, or discount
arrangement as a minimum essential coverage (MEC) or as
compliant with Essential Health Benefits (EHB) as defined
by the federal Patient Protection and Affordable Care Act
(ACA), unless it meets the applicable requirements under
the ACA.
Assembly Amendments delete the Senate version of the bill,
which required solicitors and solicitor firms engaged in
the supervision of solicitation for health care service
plan contracts to complete specified training, and instead
add the current language.
CONTINUED
SB 615
Page
2
ANALYSIS :
Existing law:
1. Provides for the regulation of health insurers by the
California
Department of Insurance (CDI), and confers limited
authority to regulate MEWAs on CDI, under provisions of
the Insurance Code.
2. Requires, under the ACA, a health insurance issuer that
offers health insurance coverage in the individual or
small group market to ensure that such coverage includes
the EHB package, as specified, and that it includes 10
categories of services including ambulatory patient
services and emergency services.
This bill prohibits MEWAs from offering, marketing,
representing, or selling any product, contract, or discount
arrangement as a MEC or as compliant with EHB as defined by
the federal ACA, unless it meets the applicable
requirements under the ACA.
Comments
The author's office writes that existing state law does not
address whether MEWAs must offer health plans that cover
EHBs. In fact, the ACA exempted self-funded or partially
self-funded Employee Retirement Income Security Act of 1974
(ERISA) plans such as MEWA trusts. As such, unless there
is an obligation to disclose whether the health plans
offered by MEWAs cover MEC, employers who are members of
the MEWAs and who purchase health care benefits from the
MEWA will not be aware of whether the health plan meets the
MEC pursuant to the ACA. This bill seeks to establish
disclosure requirements on California regulated MEWAs
associated with MEC and EHBs.
According to the CDI, MEWAs, compared to other insurers,
have lower required surplus; no Risked Based Capital
requirements; no guaranty fund coverage; and no premium
tax. However, MEWAs must have stop loss insurance and are
statutorily presumed to be subject to all insurance
statutes, but that is a rebuttable presumption for laws
CONTINUED
SB 615
Page
3
that are applicable and not inconsistent with ERISA or the
code. In addition, pursuant to existing law, MEWA rates
are filed with the CDI for informational purposes.
According to the California Association of Small Employer
Health Plans (CASEHP), there are only four MEWAs operating
in California: Printing Industry Association of Southern
California Trust; Western Growers of California Trust;
California Society of Certified Public Accountants Trust;
and, United Agribusiness League Trust. The California
HealthCare Foundation report indicates that all three of
the four MEWAs are both self and fully insured in some
geographic areas, depending on the needs of their
membership and the availability of policies from insurers.
Coverage offered through self-insured MEWAs is priced to
compete with carriers when options are available.
The ACA requires an individual and his/her dependents to
have MEC or pay a penalty unless certain exemptions apply.
The ACA requires employers with over 50 employees to
provide MEC and may assess penalties if an employee obtains
a tax credit through a health benefit exchange. The ACA
also establishes minimum EHBs, which are health care
benefits that are required to be covered by small group and
individual (not grandfathered) plans both inside and
outside a health benefit exchange. According to the
sponsor a fully insured MEWA is not subject to ACA market
reforms (no pre-existing condition exclusions, no annual or
lifetime limits, dependent coverage, preventive services,
etc.,) but the coverage purchased from the health insurance
issuer is subject to the market reforms of the ACA
including the requirement to cover EHBs in the individual
and small group markets. The sponsor indicates that
self-funded or partially self-funded MEWAs that are also
employee welfare benefit plans are subject to the ACA
market reforms as a group health plan but are not required
to cover EHBs. Additionally, self-funded or partially
funded MEWAs that are not employee welfare benefit plans
are subject to the ACA market reforms as a health insurance
issuer and must provide EHBs in the individual and small
group markets. The CDI agrees. According to CDI, the EHB
statute at 42 United States Code (USC) 300gg-6 states: "A
health insurance issuer that offers health insurance
coverage in the individual or small group market shall
ensure that such coverage includes the essential health
CONTINUED
SB 615
Page
4
benefits package required under section 1302(a) of the
Patient Protection and Affordable Care Act �42 USC
Subsection 18022(a)]." MEWAs are not "health insurance
issuers." Section 2791(b)(1)-(2) of the Public Health
Service Act defines insurance coverage as coverage "offered
by a health insurance issuer" and that same section states
that a health insurance issuer "does not include a group
health plan." Under 2791(a) a group health plan is an
employee welfare benefit plan as defined under ERISA.
Under ERISA, MEWAs are a form of employee welfare benefit
plan (29 USC 1002(40).) In addition, the Insurance Code
states that "A multiple employer welfare arrangement shall
comply with the criteria set forth for an employee welfare
benefit plan in order to qualify for a certificate of
compliance." Therefore, since MEWAs are a form of employee
welfare benefit plan, which are a group health plan, they
cannot be insurance issuers subject to the EHB requirements
under federal law. MEWAs are not subject to the small
group requirement of covering the EHBs only.
This bill is sponsored by CASEHP, which is an association
of California MEWAs. According to CASEHP, together those
ERISA trust plans provide health care benefits to over
100,000 employees and their dependents. Members of the
CASEHP have provided health care benefits to their employer
members for several decades. As such, it is important to
their continued operation to be transparent by providing
full disclosure of whether health care benefits provided by
these trusts meet the coverage requirement of the ACA.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/9/12)
California Association of Small Employer Health Plans
(source)
ASSEMBLY FLOOR : 76-1, 8/9/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Brownley,
Buchanan, Butler, Campos, Carter, Cedillo, Chesbro,
Conway, Cook, Davis, Dickinson, Eng, Feuer, Fletcher,
CONTINUED
SB 615
Page
5
Fong, Fuentes, Furutani, Beth Gaines, Galgiani, Garrick,
Gatto, Gordon, Gorell, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries,
Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma,
Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
P�rez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. P�rez
NOES: Donnelly
NO VOTE RECORDED: Bradford, Charles Calderon, Roger
Hern�ndez
JJA:k 8/10/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED