BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 635 (Hernandez)
Hearing Date: 4/11/2011 Amended: As Introduced
Consultant: Katie Johnson Policy Vote: Health 9-0
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BILL SUMMARY: SB 635 would require that, commencing January 1,
2014, any amount of funds over $1 million deposited into the
Managed Care Administrative Fines and Penalties Fund that
currently are transferred to the Major Risk Medical Insurance
Fund for use in the Major Risk Medical Insurance Program (MRMIP)
be redirected to the Office of Statewide Health Planning and
Development (OSHPD) for use in the Song-Brown Health Care
Workforce Training Act (Song-Brown Program) to support health
care workforce development.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Redirection of General $2,000 - $3,000 annually,
commencingGeneral
Fund revenue January 1, 2014, and ongoing
MRMIP cost pressure $2,000 - $3,000 annually,
commencingGeneral
January 1, 2014, and ongoing
Increase in Song-Brown $2,000 - $3,000 annually,
commencingSpecial*
Program funds January 1, 2014, and ongoing
*Fund into which the monies would be deposited is unspecified.
See Staff Comments.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
SB 1379 (Ducheny), Chapter 607, Statutes of 2008, established
the Managed Care Administrative Fines and Penalties Fund and
required revenues from fines and penalties levied on health care
service plans by DMHC be deposited into it. Prior to SB 1379,
penalty and fine revenues were collected by DMHC and deposited
into the Managed Care Fund, a special fund made up of fees
charged to health care service plans to fund DMHC's budget.
Thus, penalty and fine revenues were offsetting administrative
fee increases on the organizations that had committed the
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offenses.
SB 1379 (Ducheny), now existing law, requires that the monies
deposited into the Managed Care Administrative Fines and
Penalties Fund be allocated as follows:
1) The first $1 million be transferred to the Medically
Underserved Account for Physicians within the Health
Professions Education Fund to be used for student loan
repayment under the Steven M. Thompson Loan Repayment Program.
2) Any amount over $1 million be transferred to the Major
Risk Medical Insurance Fund to provide additional funding for
MRMIP.
Commencing January 1, 2014, this bill would require that the
amount of funds currently transferred to MRMIP instead be
transferred to OSHPD for use in the Song-Brown Program.
The Song-Brown Program was established in 1973 to address the
shortage of physicians engaged in family practice in California.
It provides financial awards to family practice residency, nurse
practitioner, physician assistant, and registered nurse
education programs. Since 2001, the program has received 667
applications and made awards to 540 applicants, which accounts
for over $60 million to eligible training sites. At one time a
100 percent General Fund program, it is currently proposed to be
funded from the California Health Data and Planning Fund and
from the Mental Health Services Fund in the amount of $475,000
for administration and $7.6 million for awards for FY 2011-12.
MRMIP provides health care coverage for individuals who are
unable to obtain health insurance in California's individual
marketplace due to preexisting conditions. Enrollment is capped
at 7,800 enrollees and there is currently no waiting list. The
program is funded by enrollee premiums, approximately $30
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million annually in Proposition 99 tobacco tax revenue, and
fines and penalties transferred from the Managed Care
Administrative Fines and Penalties Fund. Since the enactment of
SB 1379 (Ducheny), in 2008, the program has received $2.1
million, $1.8 million, and $3.6 million in FY 2009-10, FY
2010-11, and, as proposed, FY 2011-12, respectively. It equates
to $2.5 million on average.
Although it is unclear the amount of fine and penalty revenues
that would be available in FY 2013-14, if fine and penalty
revenue collected by DMHC continues at its current level, OSHPD
could expect to receive similar annual amounts for the
Song-Brown Program, approximately $2 million - $3 million
annually, commencing January 1, 2014. The funds could either
augment the program's annual budget or could be used to offset
the elimination of General Fund support for the program.
All fine and penalty revenues collected by the state are
presumed to be General Fund monies. Therefore, it is the
Legislature's prerogative to direct these funds to a particular
purpose, whether it be to the General Fund, or to a program, as
this bill does. In directing the use of General Fund monies to a
specific purpose, this bill would deprive the General Fund of
unrestricted funds. For example, these funds could be used as
the non-federal share of Medi-Cal or Healthy Families Program
expenditures and could draw down federal matching funds.
With the passage of The Patient Protection and Affordable Care
Act (ACA) (Public Law 11-148), as amended by the Health Care
Education and Reconciliation Act of 2010 (Public Law 11-152), by
January 1, 2014, 1) each state is required to establish an
American Health Benefit Exchange (Exchange), to be run either by
the state or the federal government at the state's option, 2)
health insurers and health care service plans are required to
offer coverage to all individuals, regardless of the existence
of preexisting conditions, and 3) all individuals are required
to obtain health care coverage, with exceptions. Thus, on
January 1, 2014, individuals enrolled in MRMIP, who were
previously uninsurable, would presumably be able to obtain
insurance in the private market or through the California Health
Benefit Exchange and make MRMIP
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unnecessary. However, this bill does not include a date on which
MRMIP would cease to exist. Additionally, there are several
lawsuits pending that could affect ACA implementation. It is
unclear what the state of the insurance market will be and when
and if individuals enrolled in MRMIP could transition to private
health care coverage on January 1, 2014.
Staff notes that this bill would transfer these funds from MRMIP
to OSHPD prior to the end of the MRMIP program and would thereby
put General Fund cost pressure on MRMIP to backfill the loss of
funds. Staff recommends that the bill be amended to 1) commence
the redirection of the funds from MRMIP to OSHPD on the day that
the MRMIP program is repealed; 2) require that the Director of
the Department of Finance notify the Joint Legislative Budget
Committee of the program's repeal and the new disposition of
these funds; and, 3) specify a fund into which the monies would
be transferred or appropriated.