BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1321
AUTHOR: Harman
AMENDED: May 30, 2012
HEARING DATE: June 20, 2012
CONSULTANT: Bain
SUBJECT : California Health Benefit Exchange: executive board
SUMMARY : Requires the California Health Benefit Exchange board
(Exchange Board), if any part of the federal Patient Protection
and Affordable Care Act (ACA) is amended, invalidated, or
repealed, to report to the Legislature regarding the impact on
the Exchange of the ACA sections amended, invalidated, or
repealed and to provide the Legislature with a plan on how the
Exchange will operate given the ACA sections amended,
invalidated, or repealed. Requires the Exchange Board to halt
all work related to implementing the Exchange if it does not
provide the Legislature with the report within 90 days of the
amendment, invalidation, or repeal of any section of ACA.
Existing law:
1.Requires, under the ACA (Public Law 111-148), as amended by
the Health Care Education and Reconciliation Act of 2010
(Public Law 111-152), each state, by January 1, 2014, to
establish an American Health Benefit 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. The
ACA establishes requirements for the Exchange and for health
plans participating in the Exchange, and the ACA defines who
is eligible to receive coverage in the Exchange.
2.Allows, under the ACA and 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. The ACA 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 and 400 percent of the FPL. Legal immigrants
with household incomes less than 100 percent of the FPL who
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are ineligible for Medicaid because of their immigration
status are also eligible for the premium tax credit and the
cost-sharing reductions.
3.Establishes the California Health Benefit Exchange in state
government, and specifies the duties and authority of the
Exchange. Requires the Exchange be governed by a board that
includes the Secretary of the California Health and Human
Services Agency (Agency) and four members with specified
expertise who are appointed by the Governor and the
Legislature.
This bill: Establishes, if any part of the federal ACA is
amended, invalidated, or repealed, the following provisions to
apply:
1.Requires the Exchange Board to do all of the following:
a. Report to the Legislature regarding the impact
on the Exchange of the ACA sections amended,
invalidated, or repealed;
b. Include in this report an assessment of the
Exchange's long-term viability and ability to function
without the use of any state funds; and
c. Provide to the Legislature a plan, to be
included with the report, on how the Exchange will
operate in light of the ACA sections amended,
invalidated, or repealed.
2.Requires the Exchange Board to halt all work related to
implementation of the Exchange if the Board does not provide
the Legislature with the required report within 90 days of the
amendment, invalidation, or repeal of any section of the ACA.
3.Prohibits state moneys from being used to fund any Exchange
operations or related functions, and prohibits state moneys
from being used to replace or supplant federal funds currently
or previously dedicated to Exchange operations or related
functions.
4.Takes effect immediately as an urgency statute in order to
ensure that the Legislature has the information it needs to
respond at the earliest possible time to changes in the ACA
and its impact on the Exchange.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
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COMMENTS :
1.Author's statement. While California has led the nation in
the implementation of the federal ACA, little attention has
been given to the critical question of how California will
address issues like funding should all or part of the ACA be
struck down by the United States (US) Supreme Court. The
California Health Benefit Exchange is a case in point. Created
in 2010, the Exchange is being designed to operate under the
assumption that massive federal subsidies will be available to
accommodate the needs of low- and middle- income earners
requiring assistance to purchase the health coverage offered
through the Exchange. Should the ACA be struck down, there is
a real possibility that ACA-related funding will dry up. SB
1321 is not anti-ACA. A fiscally prudent ACA supporter can
also support this bill. All SB 1321 does is require the
Exchange board to present a plan on how to continue operating
should the Court strike down all or part of the ACA. It also
prohibits state dollars from a) funding Exchange operations or
related functions, and b) replacing lost federal dollars
dedicated for this purpose. California perpetually struggles
with multi-billion dollar budget deficits, and the state's
General Fund does not have the capacity to pick up the tab for
a large-scale healthcare expansion. If California is going to
continue to implement the ACA, it should do so in a fiscally
responsible fashion. SB 1321 is a reasonable response to these
challenges.
2.California Health Benefit Exchange. During the 2009-10
session, the Legislature passed and then-Governor
Schwarzenegger signed into law two bills establishing a
California Health Benefit Exchange. SB 900 (Alquist), Chapter
659, Statutes of 2010, established the Exchange as an
independent public entity within state government, and
requires the Exchange to be governed by a board composed of
the Agency Secretary, or his or her designee, and four other
members appointed by the Governor and the Legislature who meet
specified criteria. AB 1602 (John A. P�rez), Chapter 655,
Statutes of 2010, specifies the powers and duties of the
Exchange relative to determining eligibility for enrollment in
the Exchange and arranging for coverage under qualified health
plans and establishes requirements for health plans in and
outside the Exchange.
According to estimates in a recent study in the health policy
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journal, Health Affairs by Peter Long and Jonathan Gruber, the
ACA will provide health insurance for an additional 3.4
million people in California in 2016. The authors state this
will mean that nearly 96 percent of documented residents of
California under age 65 will be insured. The authors estimate
4.0 million people are expected to enroll in the state's
Exchange.
3.Exchange funding and existing reporting requirement on
resources. To date, the Exchange has been funded by federal
funds. Federal law requires Exchanges to be self-sustaining
beginning on January 1, 2015.
Current state law requires the Exchange board to assess a charge
on the qualified health plans offered by carriers that is
reasonable and necessary to support the development,
operations, and prudent cash management of the Exchange. In
addition, the Exchange board is required to ensure that the
establishment, operation, and administrative functions of the
Exchange do not exceed the combination of federal funds,
private donations, and other non-General Fund moneys available
for this purpose. Existing law prohibits state General Fund
(GF) money from being used for any purpose under the Exchange
statute without a subsequent appropriation.
If the Exchange board determines that the level of resources in
the California Health Trust Fund (which is used to fund the
Exchange) cannot support the actions and responsibilities in
establishing, operating and administering the Exchange, it is
required to provide the Department of Finance and the Joint
Legislative Budget Committee with a detailed report on the
changes to the functions, contracts, or staffing necessary to
address the fiscal deficiency, along with any contingency plan
should it be impossible to operate the Exchange without the
use of GF moneys.
4.US Supreme Court hearing on the ACA. In November 2011, the
Supreme Court agreed to hear an appeal on three petitions
concerning the constitutionality of the ACA. In March 2012,
the Court heard three days of testimony focused on four
issues. First, the Court considered the issue of severability
of the individual mandate from the other provisions of the
ACA. Second, the Court considered the constitutionality of the
individual mandate, and whether the Commerce Clause of Article
I of the Constitution grants Congress the powers to enact the
minimum coverage requirements of the ACA. Third, the Court
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considered whether the suit brought by challenging the
individual mandate is barred by the Anti-Injunction Act
(whether the insurance mandate penalties amount to a type of
tax that can only be challenged after it is collected, rather
than before). Fourth and finally, the Court heard arguments on
the constitutionality of the expansion of the Medicaid program
to individuals earning up to 133 percent of the FPL (whether
the spending conditions that the ACA imposes on the states in
funding additional Medicaid beneficiaries are effectively
"coercive," such that they amount to an impermissible
commandeering of state dollars by the federal government under
the Constitution).
If the Court determines that the individual mandate is
unconstitutional, it must also decide whether the mandate is
severable from the rest of the ACA. If the ACA is found to be
unconstitutional and not severable, the entire ACA could be
struck down. The Court could invalidate some provisions of the
law, but would have to determine whether the rest of the law
can function independently of the individual mandate provision
and whether Congress would have enacted the ACA's other
provisions without the mandate. The Court's decision is
expected in June of 2012.
5.Related legislation. SB 1487 (Hernandez) would have required
the Department of Health Care Services to extend Medi-Cal
eligibility to youth who were formerly in foster care and who
are under 26 years of age, subject to federal financial
participation being available and to the extent required by
federal law. SB 1487 also made legislative findings and
declarations regarding the ACA and stated legislative intent
to ensure full implementation of the ACA and to enact into
state law any provision of the ACA that may be struck down by
the US Supreme Court. SB 1487 was held on the Senate
Appropriations suspense file.
6.Opposition. Consumers Union (CU) writes in opposition that
this bill seeks to interfere with and potentially halt all
activity at the Exchange. CU writes his bill would require the
Exchange Board to produce detailed reports on any Supreme
Court decision that amends, invalidates or repeals even the
smallest piece of the ACA. CU states this bill would require
the Exchange Board to develop a plan of operation without any
state funds when the Exchange already operates without any
state funds, a requirement built into the founding
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legislation. CU argues this bill would distract the Exchange
from its crucial endeavor underway: creating the
infrastructure for furnishing health coverage so that
California families, small businesses, and the state economy
can flourish. CU concludes that this bill is unnecessary and
counter-productive to that important goal.
SUPPORT AND OPPOSITION :
Support: None received.
Oppose: California Coverage & Health Initiatives
California Labor Federation
Children Now
Children's Defense Fund- California
The Children's Partnership
Consumers Union
Health Access California
United Ways of California
Western Center on Law and Poverty
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