BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 703|
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THIRD READING
Bill No: SB 703
Author: Hernandez (D)
Amended: 5/31/11
Vote: 21
SENATE HEALTH COMMITTEE : 6-3, 4/6/11
AYES: Hernandez, Alquist, De Le�n, DeSaulnier, Rubio, Wolk
NOES: Strickland, Anderson, Blakeslee
SENATE APPROPRIATIONS COMMITTEE : 6-2, 5/26/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Runner
NO VOTE RECORDED: Emmerson
SUBJECT : Health care coverage: Basic Health Program
SOURCE : Local Health Plans of California
DIGEST : This bill establishes the Basic Health Program
and requires the Managed Risk Medical Insurance Board to
administer it, in accordance with the basic health program
option created by federal health care reform.
ANALYSIS :
Existing federal law:
1. Requires, under the federal Patient Protection and
Affordable Care Act (PPACA), (Public Law 111-148), as
amended by the Health Care Education and Reconciliation
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Act of 2010 (Public Law 111-152), each state, by January
1, 2014, to establish an American Health Benefit
Exchange (Exchange) that makes qualified health plans
available to qualified individuals and qualified
employers. If a state does not establish an Exchange,
the federal government administers the Exchange.
2. Establishes requirements for the Exchange, for health
plans participating in the Exchange, and defines who is
eligible to receive coverage in the Exchange.
3. Allows, effective January 1, 2014, eligible individual
taxpayers whose household income equals or exceeds 100
percent, but does not exceed 400 percent of the federal
poverty level (FPL), an advanceable and refundable tax
credit for a percentage of the cost of premiums for
coverage under a qualified health plan offered in the
Exchange. PPACA also requires a reduction in
cost-sharing for individuals with incomes below 250
percent of the FPL, and a lower maximum limit on
out-of-pocket expenses for individuals whose incomes are
between 100 percent and 400 percent of the FPL. Legal
immigrants with household incomes less than 100 percent
of the FPL who are ineligible for Medicaid because of
their immigration status are also eligible for the
premium tax credit and the cost-sharing reductions.
4. Requires health plans sold to individuals and small
employers, and products sold in the Exchange and BHP, to
provide the federally required "essential health
benefits," effective January 1, 2014.
5. Requires the federal Secretary of the Department of
Health and Human Services (DHHS) to establish a BHP
under which a state is authorized to enter into
contracts to offer one or more standard health plans
providing at least the essential health benefits to
eligible individuals, in lieu of offering such
individuals coverage through an Exchange.
6. Defines an individual eligible ("eligible individuals")
to enroll in the BHP as an individual under age 65 at
the beginning of the plan year who is not eligible for
minimum essential coverage, or who is eligible for an
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employer-sponsored plan that is not affordable and who
meets either of the following requirements:
A. Has household income that exceeds 133 percent but
does not exceed 200 percent of the FPL; or
B. Is an immigrant lawfully present in the United
States whose income is not greater than 133 percent
of the FPL but who is ineligible for federal Medicaid
because of his/her immigration status.
7. Prohibits, in a state that has a BHP, an eligible
individual from being eligible for enrollment in a
qualified health plan offered through the Exchange.
8. Requires the federal DHHS Secretary, for a state that
meets the requirements of a BHP, to transfer to the
state in each fiscal year the amount the Secretary
determines is equal to 95 percent of the premium tax
credits and the cost-sharing reductions that would have
been provided to eligible individuals in the state if
such eligible individuals were allowed to enroll in
qualified health plans through the Exchange.
Existing state law:
1. Establishes the Managed Risk Medical Insurance Board
(MRMIB), which administers the Healthy Families Program
(HFP), the Major Risk Medical Insurance Program, and the
Access for Infants and Mothers Program. MRMIB is a
seven-member board in the Health and Human Services
Agency (Agency) with three gubernatorial appointments,
two legislative appointments and two ex officio
non-voting members. MRMIB has broad authority to
administer these three programs, including the authority
to contract with health plans.
2. Establishes the California Health Benefits Exchange
(Exchange) in state government, and specifies the duties
and authority of the Exchange.
3. Requires the Exchange be governed by a board that
includes the Secretary of the Agency and four members
with specified expertise who are appointed by the
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Governor and the Legislature.
4. Requires the Exchange to determine the minimum
requirements health plans must meet for participation in
the Exchange and the standards and criteria for
selecting health plans to be offered in the Exchange.
5. Requires the Exchange to provide, in each region of the
state, a choice of qualified health plans, at each of
the five levels of coverage contained in federal law (a
platinum, gold, silver, bronze and catastrophic-level
benefit plan).
This bill establishes the Basic Health Program (BHP) and
provides that it would be administered by MRMIB.
Enrollment would commence
January 1, 2014. MRMIB would be required to, among other
duties, do the following:
1. Determine eligibility criteria for, participation
requirements of eligible individuals in, and the scope
of coverage for individuals enrolled in BHP;
2. Determine participation requirements of participating
health plans;
3. Determine, through negotiation with health plans,
premium and cost-sharing amounts, and collect premiums;
4. Maintain enrollment and expenditures to ensure that
expenditures do not exceed amounts available in the
fund, and if sufficient funds are not available to cover
the estimated cost of the program, institute appropriate
measures to reduce costs;
5. Issue rules and regulations; until January 1, 2016, any
rules and regulations may be adopted as emergency
regulations;
6. Make application assistance payments to Certified
Application Assistants who successfully enroll eligible
individuals in BHP.
This bill permits federal and private funds to be used
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during late budget years, and requires plans to accept full
financial risk.
Background
Who is eligible for the Basic Health Program?
If a state elects to establish a BHP, federal law makes the
following two groups of individuals eligible ("eligible
individuals") to enroll in BHP who would otherwise be
eligible for the Exchange:
Individuals whose household income exceeds 133 percent
but does not exceed 200 percent of the FPL; or
Immigrants lawfully present in the United States whose
income is not greater than 133 percent of the FPL but who
are ineligible for federal Medicaid because of his or her
immigration status.
An "eligible individual" must be under age 65 at the
beginning of the plan year. Finally, an eligible
individual cannot be an individual who is eligible for
minimum essential coverage (e.g., through public or
employment-based coverage meeting minimum standards).
Federal law prohibits an eligible individual from being
eligible for enrollment in a qualified health plan offered
through the Exchange if the person is eligible for BHP.
The UCLA Center for Health Policy Research estimates there
are 829,000 individuals eligible for the BHP. Of these
829,000 individuals, 783,000 individuals will be eligible
for the BHP because they have family incomes between 138
and 200 percent of the FPL (Medi-Cal will effectively be up
to 138 percent of the FPL because of a 5 percent income
disregard that increases income eligibility from 133
percent to 138 percent). An additional 46,000 individuals
who are immigrants lawfully present in the United States,
whose income is less than 133 percent of the FPL but who
are ineligible for federal Medicaid because of immigration
status, will also be eligible for BHP.
Medical loss ratio in Exchange compared to Basic Health
Program
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The amount of money that a health plan or health insurer
spends on medical care, versus administrative expenses and
profit, is referred to in the health care industry as a
medical loss ratio (MLR).
Federal health care reform requires health insurers
offering coverage in the large group market to have a MLR
of 85 percent, or a higher percentage that a state may, by
regulation determine. With respect to a health insurance
issuer offering coverage in the small group market or in
the individual market, the MLR must be 80 percent, or such
higher percentage as a state may by regulation determine,
except that the Secretary may adjust such percentage with
respect to a state if the federal DHHS Secretary determines
that the application of the 80 percent MLR may destabilize
the individual market in such a state. The federal law
requires annual rebates to enrollees on a pro rata basis if
the plan does not meet the minimum ratio. For coverage in
the BHP, PPACA requires the MLR to be 85 percent, instead
of 80 percent in the individual and small group market.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
Start-up funding unknown, likely in the
millions of General*
dollars annually
Ongoing cost to likely in the billions of dollars
annually Federal/**
operate BHP Private
* Permits a General Fund loan to be repaid by July 1, 2016,
with interest
**BHP funded by federal funds and subscriber premiums
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SUPPORT : (Verified 5/31/11)
Local Health Plans of California (source)
American Federation of State, County and Municipal
Employees
Congress of California Seniors
Health Access
ARGUMENTS IN SUPPORT : This bill is sponsored by the
Local Health Plans of California (LHPC), an association of
community-based non-profit health plans in California that
serves over 2.5 million primarily low-income Californians.
LHPC believes that California should exercise the option
offered in the PPACA to establish a BHP as an extension of
the HPF because a BHP would benefit low-income working
families who will find it difficult to sustain the premium
and cost-sharing requirements of Exchange coverage. LHPC
states the BHP will offer these low-income working families
a better benefit at lower cost than will be available to
them in the Exchange. LHPC also argues the BHP will
provide for continuity and the convenience of unified care
for low-income California families whose children are
participating in the HFP, as parents and children will be
able to have the same providers in the same health plan
networks. Additionally, LHPC argues BHP, as an extension
of the HFP, will allow HFP health plans and their
safety-net providers who deliver health care to low-income
Californians to preserve their patient base and revenue
streams. LHPC states California will continue to need
safety-net providers after national health care reform is
fully implemented, and the preservation of safety-net
providers and the health plans that have organized networks
for care of the low-income is important for California's
future health care needs. Finally, LHPC argues BHP has the
potential to raise the level of compensation for HFP
providers by providing them with a more sustainable funding
base through the BHP.
The Congress of California Seniors (CCS) writes in support
of providing more affordable coverage to low-income
individuals by taking advantage of options created by
federal health care reform. CCS writes that the BHP would
be administered by MRMIB and would therefore not incur any
additional cost to the state, and this bill would retain
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the existing incentive to for individuals to choose plans
with safety net providers.
CTW:mw 5/31/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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