BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 615
AUTHOR: Calderon
AMENDED: August 6, 2012
HEARING DATE: August 15, 2012
CONSULTANT: Trueworthy
PURSUANT TO SENATE RULE 29.10
SUBJECT : Multiple employer welfare arrangements: benefits.
SUMMARY : Prohibits a multiple employer welfare arrangement
(MEWA) from offering, marketing, representing, or selling any
product, contract, or discount arrangement as minimum essential
coverage or as compliant with the essential health benefits
(EHBs) unless it meets the applicable requirements of minimum
essential coverage or EHBs.
Existing law:
1.Establishes the Patient Protection Affordability Care Act
(ACA), which imposes various requirements, some of which take
effect on January 1, 2014, on states, carriers, employers, and
individuals regarding health care coverage.
2.Requires, under the ACA, carriers that offer coverage in the
small group or individual market to ensure coverage includes
EHBs, as defined. Provides that the EHB package will be
determined by the federal Department of Health and Human
Services Secretary and must include, at a minimum, ambulatory
patient services, emergency services, hospitalizations, and
prescription drugs, among other things.
3.Provides for regulation of health insurers by the California
Department of Insurance (CDI) and designates limited authority
to regulate MEWA to CDI, under the Insurance Code.
4.Prohibits a self-funded or partially self-funded MEWA from
providing any benefits for any resident of this state without
obtaining a certificate of compliance from the Insurance
Commissioner.
5.Establishes various eligibility requirements on MEWAs in order
to obtain a certificate of compliance, including that it be a
nonprofit corporation, that it be established and maintained
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by a specified association with at least 200 paid members, and
that benefits be offered only to association members.
6.Limits self-funded MEWAs to provide certain benefits which
include medical, dental, and surgical benefits.
7.Requires a MEWA to offer health care coverage benefits to any
newly eligible person and his or her dependents under terms
and conditions no less favorable than those offered to the
MEWA employers' existing employees and their dependents under
specified circumstances.
This bill: Prohibits a MEWA from offering, marketing,
representing, or selling any product, contract, or discount
arrangement as minimum essential coverage or as compliant with
the EHBs unless it meets the applicable requirements of minimum
essential coverage or EHBs.
FISCAL EFFECT : This bill is keyed non-fiscal.
PRIOR VOTES : Assembly Floor: 76- 1. Other votes not relevant.
COMMENTS :
1.Author's statement. Self-funded or partially self-funded
MEWAs may lawfully offer health plans that do not meet ACA
standards for essential health benefits and minimum essential
coverage. SB 615 ensures that the information provided about
those plans accurately reflects whether they comply or do not
comply with those standards. SB 615 is designed to avoid
confusion that might arise as to whether health benefits
offered through a MEWA meet federal health care reform
standards. Self-funded or partially self-funded MEWAs,
established under ERISA, are not required to provide EHBs or
qualify as meeting minimum essential coverage as defined under
the ACA. Some plans will likely meet those standards
voluntarily while others might not. SB 615 sets minimum
labeling and marketing standards related to whether MEWA plans
offer EHB or qualify as minimum essential coverage.
2.MEWAs. A MEWA is a type of group purchasing arrangement for
small businesses, self-employed individuals, and people with
seasonal jobs, such as agricultural workers. The law allows
only MEWAs that filed an application by November 1995 to be
eligible for licensing, which means no new MEWAs can be
licensed in California. MEWAs provide an alternative to
traditional coverage by allowing employers to band together in
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order to purchase health insurance or self-insure health
benefits. Some MEWAs provide coverage to people who might
otherwise not have access to health insurance. For example, in
the agriculture industry, workers tend to be seasonal and
part-time and work in rural areas where managed care plans are
less dominant. Plan coverage in the traditional employer
market is typically available for full-time employees, not
seasonal workers.
Some MEWAs that self-insure collect premiums from enrollees for
a special trust account established to pay medical claims.
Fully insured MEWAs contract with insurance companies or
health plans to provide benefits. Self-insured MEWAs avoid
premium taxes paid by commercial insurers and are subject to
less stringent solvency requirements. Self-insured MEWAs
provide a range of benefit packages. Employers can choose to
offer more comprehensive coverage to management and more basic
plans to low-wage workers. MEWAs are subject to California's
small group laws such as guaranteed access, renewability, and
rate standards.
According to CDI, MEWAs, compared to other insurers, have
lower required surplus; no risk-based capital requirements; no
guaranty fund coverage; and no premium tax. MEWA rates are
filed with CDI for informational purposes. There are 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.
3.ACA. The ACA requires an individual and his or her dependents
to have minimum essential coverage or pay a penalty, unless
certain specified exemptions apply. The ACA requires employers
with over 50 employees to provide minimum essential coverage
and may assess penalties if an employee obtains a tax credit
through a health benefit exchange. The ACA also establishes
minimum EHBs to be covered by small group and individual plans
both inside and outside a health benefit exchange. Because
MEWAs are a form of an employee welfare benefit plan, which
are a group health plan, they cannot be insurance issuers
subject to the EHB requirements under federal law and MEWAs
are not subject to the small group requirement of covering the
EHBs.
4.Related legislation. SB 951 (Hernandez) and AB 1453 (Monning)
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would designate the Kaiser Small Group HMO as California's
benchmark plan to serve as the EHB benchmark standard. SB 951
is now pending before the Assembly Appropriations Committee,
and AB 1453 is pending before the Senate Appropriations
Committee.
SB 961 (Hernandez) and AB 1461 (Monning) reform California's
individual market. B 961 is pending before the Assembly
Appropriations Committee, and AB 1461 is pending before the
Senate Appropriations Committee.
5.Prior legislation. AB 1188 (Coto), Chapter 428, Statutes of
2008, authorizes a self-funded or partially self-funded MEWA
to use the excess assets of the MEWA to purchase an office
building or buildings that are used for its principal
operations and business, as specified.
AB 493 (Frommer), Chapter 218, Statutes of 2005, allows for
limited investment by MEWAs, using specified limited
proportions of MEWA assets, in bond mutual funds subject to
strict criteria.
SB 212 (Machado), Chapter 320, Statutes of 2003, authorizes
MEWAs to utilize mutual funds to invest excess funds. The
intent of SB 212 was to allow MEWAs to earn a higher return on
investments but to limit mutual fund investing to excess
funds.
SB 1880 (Machado), Chapter 357, Statutes of 2002, makes
permanent the original MEWA regulatory program in 2002.
SB 1465 (Machado), Chapter 317, Statutes of 1999, extends the
sunset date to December 31, 2004, and requires CDI to evaluate
and report on MEWAs.
SB 1430 (Johnston), Chapter 1082, Statutes of 1994, requires
MEWAs to obtain a certificate of compliance from CDI by
December 1, 1995, authorizes CDI to set fiscal solvency
standards, and imposes upon MEWAs the same mandated benefits
imposed upon health insurers. SB 1430 also limits MEWAs to
covering only employers in a similar trade, profession, or
industrial association.
6.Support. The California Association of Small Employer Health
Plans supports SB 615 writing that MEWAs are exempt from the
essential health provisions of the ACA and because there may
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be tax consequences and/or subsidies available for these
individuals and entities, it is important that employer
members of MEWAs be notified whether health plans offered by
these trusts meet the federal minimum EHBs. The Printing
Industries of California write in support that SB 615 will
insure the ability of MEWAs in the state to continue to serve
workers in the printing industry as they believe they will
meet the requirements set forth in the ACA.
SUPPORT AND OPPOSITION :
Support: California Association of Small Employer Health Plans
Printing Industries of California
Oppose: None received.
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