BILL ANALYSIS
AB 8
Page 1
CORRECTED - June 4, 2007
ASSEMBLY THIRD READING
AB 8 (Nunez)
As Amended May 17, 2007
Majority vote
HEALTH 12-5 APPROPRIATIONS 12-5
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|Ayes:|Dymally, Bass, Berg, De |Ayes:|Leno, Caballero, Davis, |
| |La Torre, De Leon, | |DeSaulnier, Huffman, |
| |Hancock, Hayashi, | |Karnette, Krekorian, |
| |Hernandez, Jones, Lieber, | |Lieu, Ma, Nava, Solorio, |
| |Ma, Salas | |Feuer |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Nakanishi, Emmerson, |Nays:|Walters, Emmerson, La |
| |Gaines, Huff, Strickland | |Malfa, Nakanishi, Sharon |
| | | |Runner |
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SUMMARY : Establishes a comprehensive package of health care
reforms, including expansion of eligibility for the Medi-Cal and
Healthy Families Programs (HFP), creation of a statewide health
care purchasing program (California Health Insurance Purchasing
Program or Cal-CHIPP), and modifications to the rules governing
private individual and group health insurance. Specifically,
this bill :
1)Makes changes to expand and simplify health coverage for
low-income parents and children, effective July 1, 2008.
Expands public programs to cover all children up to 300% of the
federal poverty level (FPL), regardless of their immigration
status, and eligible parents up to 300% of the FPL, through
either Medi-Cal or HFP. Clarifies eligibility for families, so
that, generally speaking, eligible families at or below 133% of
FPL (except for infants and pregnant women), are in Medi-Cal,
and eligible families with incomes above 133% of the FPL and up
to 300% FPL are in HFP type coverage. Parents 133%-300% of FPL
not in Medi-Cal would receive a "benchmark" plan (similar to
HFP) and pay sliding scale premiums based on income, as
determined by the Managed Risk Medical Insurance Board (MRMIB).
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2)Establishes a premium assistance program for employees and
their dependents eligible for the Medi-Cal Program and HFP
expansions that subsidizes, based on income, their premium, if
employer sponsored insurance is available to them.
3)Requires, on or after July 1, 2008, health plans and health
insurers (carriers) selling group coverage to offer a benchmark
benefit plan developed and approved by MRMIB, and subject to
rate negotiation and approval by MRMIB and available only to
employees and their dependents eligible under the Medi-Cal
Program or HFP.
4)Establishes the California Cooperative Health Insurance
Purchasing Program (Cal-CHIPP) as a state purchasing pool
administered by MRMIB, to negotiate and contract with carriers
to offer health coverage to eligible persons.
5)Requires employees of employers who have elected to pay a fee
to enroll in Cal-CHIPP, except that an employee is exempt from
this requirement if the employee is able to demonstrate that
the employee has other group coverage.
6)Requires MRMIB to develop and offer at least three uniform
benefit designs, as specified, and requires all carriers to
offer all of the uniform benefit designs developed by MRMIB in
all individual and group markets in which the plan or insurer
sells health coverage, but stipulates that this requirement
does not preclude plans and insurers from offering other
benefit plan designs.
7)Requires the Department of Managed Health Care and California
Department of Insurance to adopt regulations by July 1, 2009,
defining and limiting administrative costs such that at least
85% of revenues received by carriers must be spent on health
care services rather than administration or profit,
establishing a minimum "medical loss ratio." Requires, in
addition, carriers to disclose to all prospective purchasers
the medical loss ratio for the carrier's preceding fiscal year,
as specified.
8)Effective July 1, 2008, requires carriers to use a standard
form, developed by MRMIB, in screening applicants for
individual health coverage, requires MRMIB to develop a list of
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serious health conditions or diagnoses making an individual
applicant automatically eligible for the state's high risk
health insurance program, the Major Risk Medical Insurance
Program (MRMIP), and prohibits carriers from excluding any
applicants from private individual coverage based on health
status, except for those individuals with conditions on the
list.
9)On and after January 1, 2008, extends to employers with 51-250
employees (mid-size employers) the existing rating and
underwriting requirements applicable to employers of two-50
employees (small employers) including, among other things, the
requirement that carriers offer and sell all health coverage
products available for mid-size employer groups to all
applicant groups, without any exclusion due to medical
underwriting, or any other criteria other than the employer's
willingness to make the premium payments and meet reasonable
participation requirements. Subjects the coverage to specific
rating restrictions. Requires renewal of such coverage, as
specified, and requires carriers to publish rates for each
geographic region in which they sell coverage, (up to nine
defined geographic regions), by age (one of seven specified age
categories) and family size (one of four specified categories).
Authorizes carriers to offer different benefit designs for
small and mid-size employers.
10)Requires MRMIB to assume lead agency responsibility for
professional review and development of best practice standards
in the care and treatment of persons with high cost chronic
diseases, such as asthma and diabetes, to be implemented in
every state health coverage program, including the California
Public Employees Retirement System (CalPERS), Medi-Cal, HFP,
and Cal-CHIPP.
11)Requires the California Health and Human Services Agency
(CHHSA) to consult with CalPERS, and affected health provider
groups, to develop performance benchmarks for quality
measurement and reporting into a common "pay for performance"
model to be offered in every state-administered health care
program, as specified, and advanced as a common statewide
framework for quality measurement and improvement.
12)Requires CHHSA to encourage fitness, wellness, and health
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promotion programs that promote safe workplaces, healthy
employer practices, and individual efforts to improve health.
13)Expresses legislative intent that all health care providers
and health insurers participate in an Internet-based personal
health record system under which patient's have access to their
own health records, as specified.
14)Establishes the California Health Trust Fund (Fund) for the
purpose of financing Cal-CHIPP, and requires MRMIB to pay the
nonfederal share of cost for employees and dependents eligible
for federally supported health coverage programs from the Fund.
15)Requires MRMIB, and Department of Health Care Services as the
state Medicaid agency, to implement the expansions in Medi-Cal
and HFP in this bill consistent with existing federal law and
any necessary federal waivers, such that the state will receive
the maximum increase in available federal funds under both
federal Medicaid and the federal State Children's Health
Insurance Program (SCHIP).
16)Effective January 1, 2009, establishes an election for
employers to either: a) make health care expenditures, defined
as any amount paid by an employer to or on behalf of its
employees and dependents to provide health or health-related
services, or to reimburse the costs of those services, for its
full-time or part-time employees, or both; or, b) pay an
equivalent amount to the Fund, and establishes a minimum
spending requirement for employers equal to 7.5% of Social
Security wages for full-time employees working 30 or more hours
per week and part-time employees working less than 30 hours per
week.
17)Requires the Employment Development Department (EDD) to
administer and collect employer fees remitted pursuant to #15)
above, and deposit them into the Fund, to develop regulations
relating to part-time employees, and to exempt from the above
requirement businesses with payrolls of less than $100,000 in a
fiscal year, new businesses during the first three years of the
establishment of the business, and businesses with fewer than
two employees.
18)Requires, to the extent permitted in state and federal law,
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employers to establish a cafeteria plan, as authorized under
Internal Revenue Code Section 125, for the purpose of allowing
employees to pay their portion of health insurance premiums
with pre-tax funds.
19)Extends to negotiations and contracts in Cal-CHIPP the
existing Public Records Act exemptions granted for activities
of MRMIB related to negotiations with contracting entities or
entities seeking to contract with MRMIB, and makes legislative
findings and declarations as to the need for the exemptions.
20)Requires CHHSA to establish an aggressive and timely
evaluation and oversight effort to monitor progress on the
implementation of this bill, measuring specified indicators,
and requires CHHSA to conduct a comprehensive evaluation in
five years to determine if the goals of this bill are being
met.
FISCAL EFFECT : According to the Assembly appropriations
Committee, based on a micro simulation model of this bill created
by Jonathan Gruber, Ph.D., Professor of Economics at the
Massachusetts Institute of Technology, this bill results in the
following:
1)Net annual General Fund (GF) savings of $380 million based on
the following costs and savings:
a) Annual Cal-CHIPP costs of $7.4 billion. Costs are offset
by revenues in the Fund consisting of employer fees ($5
billion), employee fees ($2.8 billion), and federal matching
payments ($640 million) for low-income individuals eligible
for public coverage;
b) Annual savings of $950 million ($370 million GF) to
Medi-Cal and HFP due to a net movement of individuals from
public programs;
c) Annual increase of $1.8 billion ($880 million GF) to
provide premium assistance to low-income workers eligible
for public programs under the bill; and,
d) Annual reduced GF revenues of $110 million due to a
reduction of state personal income tax collections
associated with employee use of Section 125 plans.
2)Unknown annual administrative costs to MRMIB, EDD, local human
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services departments and other public entities to provide
administrative support pursuant to the requirements of this
bill.
COMMENTS : According to the author, this bill will enact
comprehensive reforms to California's health care delivery
system. This bill is intended to accomplish several critical and
longstanding state policy goals, including:
1)Expanding access to and improving the quality of health care
for all Californians, whether they are working or not, in a
comprehensive manner. The author states that this bill creates
a partnership between state government, individuals, and
employers, based on the principles of shared responsibility,
maintaining and strengthening California's health insurance
system, and offering choice in the marketplace to both
individuals and employers.
2)Covering all children, regardless of their immigration status,
by July 1, 2008.
3)Expanding and restructuring public coverage programs so that
parents and children of all ages in low-income families will
receive coverage in one program to the greatest extent
possible.
4)Maximizing federal financial participation in the costs of
coverage for low-income persons.
5)Improving the availability and transparency of private health
insurance coverage through health insurance market reforms in
the individual and group markets, limits on the administrative
costs and profits of health insurers and standardization of
benefits to allow purchasers to make "apples to apples"
comparisons.
6)Controlling rising health care costs in a comprehensive manner,
including prevention and management of chronic disease,
reducing the cost shifts to commercial payors by reducing the
number of uninsured, subsidizing low-income workers through
premium assistance to enable increased affordability in the
group market, and increasing the number of employees who pay
their share of premiums with pretax dollars.
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Other proposals to significantly expand and reform health care
coverage have also been announced this year. SB 48 (Perata) of
2007, pending in the Senate, proposes a major restructuring of
the health care financing system, establishing a minimum standard
of 7.5% for employer spending on employee health care, requiring
individuals over 400% of the FPL to have health insurance, with
specified exemptions, and expanding eligibility for public health
insurance programs.
In January, Governor Schwarzenegger announced a comprehensive
plan to establish a universal coverage program, which, among
other things, includes expansion of public programs, a mandate
that all individuals have minimum health coverage with subsidies
for low income persons, a requirement for employers not providing
health coverage for their employees to pay a 4% fee to the state,
and increases in Medi-Cal provider rates combined with fees
imposed on physicians (2% of revenues) and hospitals (4% of
revenues). The Governor has not designated a legislative vehicle
or provided the Legislature with proposed bill language to
implement his proposal.
The Senate Republican plan relies on tax incentives, redirection
of existing health program funding and increased availability of
community and primary care clinics to expand access to health
care. The Assembly Republican plan includes 17 bills that
emphasize access to health savings accounts, decreased regulation
of insurers, fewer insurance mandates, a state insurance exchange
for individuals, and expanded state tax deductions for medical
expenses, and combined health and workers compensation insurance
policies.
The 100% Campaign, a coalition of Children Now, Children's
Defense Fund, and The Children's Partnership, supports this bill
because it extends health coverage to all children at or below
300% FPL. Numerous organizations write in support of this bill
if amended to incorporate a range of proposed changes, additions
and amendments as this bill moves through the legislative
process. These suggestions include, among other items: limiting
any requirement that employees sign-up for employer sponsored
coverage if doing so requires an unaffordable individual or
family contribution; establishing employer contributions indexed
to inflation; guaranteeing a minimum standard of health care
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coverage in all private health insurance plans and policies; and,
adopting modified community rating to prevent insurers from
engaging in unfair price discrimination based on age, gender or
illness and guaranteeing that employers cannot find ways to evade
their obligations. In addition, labor groups want state
regulation of health insurance premiums, deductibles, and
copayments, and insurance broker fees, and increased reporting
and data collection related to costs and quality for both
hospitals and insurers. Several supporting organizations call
for review of MRMIB's governance structure and consumer
responsiveness in light of the proposed significant increases in
its responsibilities. Blue Shield of California supports this
bill but is concerned about the underwriting reforms in the
individual market.
Business groups oppose this bill as a mandated employer health
care system, suggesting that the smallest employers simply cannot
afford health care coverage for themselves or their employees,
and warn that entrepreneurs will site their business in other
states rather than face the prospect of paying rising health care
premiums or another payroll tax. In addition, businesses in
opposition seek assurances that health care costs and premiums
would not continue to rise faster than inflation and payroll.
California Chamber of Commerce is concerned that the requirements
on employers in this bill will hurt California businesses and
result in the loss of jobs.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097
FN: 0001269