BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 227
                                                                  Page  1

          (  Without Reference to File  )

          SB 227 (Alquist)
          As Amended June 21, 2010
          2/3 vote.  Urgency 

           SENATE VOTE  :Vote not relevant  
           HEALTH              18-0        APPROPRIATIONS      14-0        
          |Ayes:|Monning, Fletcher,        |Ayes:|Fuentes, Conway, Ammiano, |
          |     |Ammiano, Carter, Conway,  |     |Bradford, Charles         |
          |     |De La Torre, De Leon,     |     |Calderon, Coto,   De      |
          |     |Eng, Gaines, Hayashi,     |     |Leon, Hall, Harkey,       |
          |     |Hernandez, Jones, Bonnie  |     |Miller, Nielsen, Skinner, |
          |     |Lowenthal, V. Manuel      |     |Solorio, Torlakson        |
          |     |Perez, Salas, Smyth,      |     |                          |
          |     |Audra Strickland,         |     |                          |
          |     |Nestande                  |     |                          |
          |     |                          |     |                          |
           SUMMARY  :  Requires the Managed Risk Medical Insurance Board  
          (MRMIB) to enter into an agreement with the federal Department  
          of Health and Human Services (DHHS) to administer a qualified  
          high risk pool to provide health coverage, until January 1, 2014  
          to individuals who have pre-existing conditions, consistent with  
          the Patient Protection and Affordable Care Act, Public Law  
          111-148 (PPACA).  Specifically,  this bill  :   

          1)Authorizes MRMIB to administer the federal temporary high risk  
            pool consistent with PPACA, including eligibility, enrollment,  
            participation requirements, determine high risk medical  
            coverage, including scope of benefits and subscriber cost  
            sharing and establish subscriber premiums and plan rates.

          2)Authorizes MRMIB to provide coverage by contracting with  
            licensed health plans or by contracting with third party  
            administrators to provide or administer the coverage.

          3)Authorizes expenditures from the Federal Temporary High Risk  
            Health Insurance Fund for covered, medically necessary  
            services that exceed the subscriber's contribution,  


                                                                  SB 227
                                                                  Page  2

            administration of the program, and marketing and outreach. 

          4)Requires MRMIB to do the following:

             a)   Establish the scope and content of high risk medical  
               coverage, and adopt benefit and eligibility standards as  

             b)   Maintain enrollment and expenditures to ensure that the  
               program costs do not exceed the federal funds as allocated;

             c)   Implement a plan for marketing and outreach; and,

             d)   Implement a procedure for transition of subscribers into  
               qualified health plans through the exchange established  
               under PPACA.

          5)Prohibits plan rates from being excessive, inadequate, or  
            unfairly discriminatory and requires rates to be adequate to  
            pay claims and services.

          6)Provides for appeals of program decisions concerning  
            eligibility and coverage decisions through a procedure to be  
            established by MRMIB, as specified.  Allows for appeals of  
            coverage decisions that are within the jurisdiction of the  
            Department of Managed Health Care (DMHC) to be exempted. 

          7)Allows subscribers to change plans as prescribed. 

          8)Adds information about the federal temporary high risk pool to  
            existing notice requirements health plans and insurers provide  
            to applicants who are denied individual coverage or are  
            offered coverage at a rate higher than the standard rate and  
            requires it to be placed on the DMHC and Department of  
            Insurance Web sites.

          9)Terminates coverage through the federal high risk pool on  
            January 1, 2014, requires all claims to be submitted within 18  
            months following the delivery of service and sunsets this bill  
            January 1, 2020. 

          10)Appropriates $ 761 million in federal funds. 

          11)Makes enactment contingent on the enactment of AB 1887  


                                                                  SB 227
                                                                  Page  3


           FISCAL EFFECT  :  According to the Assembly Appropriations  

          1)According to information provided by the federal government,  
            California will receive $761 million (100% federal) to  
            administer the high risk pool until January 1, 2014 when  
            broader insurance market re reforms and coverage expansions  
            occur.  This allocation results in about $218 million  
            (federal) on an annualized basis.  This funding will be used  
            to provide premium support to previously uninsured  
            individuals.  Depending on the average monthly premium charged  
            for coverage, between 25,000 and 35,000 individuals will  
            benefit from this funding support.

          2)The federal government proposes to allocate state funds based  
            on a formula used for the Children's Health Insurance Program,  
            which relies on a combination of factors including nonelderly  
            population, proportion of uninsured, and geographic cost  
            variation.  The federal government will reassess state high  
            risk pool allocations within two years.  States, like  
            California, that have high rates of medically uninsured  
            individuals may pursue aggressive enrollment strategies to  
            ensure continued optimal funding when expenditures are  
            reassessed by the federal government.

          3)This bill authorizes MRMIB to pursue General Fund (GF) loans  
            only to the extent needed to ensure continuity of operation.  
            The pool will be a new federally-funded, state-administered  
            program, and full guidance on the timing of federal  
            reimbursement mechanisms is not yet available. Providing GF  
            loan authority to MRMIB will ensure continuity of funding  
            support and program administration.  Other provisions of the  
            bill require MRMIB to maintain enrollment and expenditures in  
            line with federal funds, ensure that subsidies do not exceed  
            the amount of federal funding available, and ensure no state  
            funds are spent in support of the high risk pool.
           COMMENTS  :  According to the author, this bill is needed to  
          establish a high-risk pool that meets federal requirements  
          because Major Risk Medical Insurance Program (MRMIP) and the  
          federal high-risk pool program established by PPACA differ in  
          their eligibility criteria, benefits, coverage, and premiums in  
          ways that would prevent MRMIP, as it is currently structured,  


                                                                  SB 227
                                                                  Page  4

          from being used as the federal high-risk pool.  The author  
          argues that although most Californians obtain health insurance  
          through their employer, many Californians do not have access to  
          employer-sponsored health coverage and cannot buy private health  
          insurance at any price because they have a pre-existing medical  

          The author further points out that having a pool run at the  
          state level by a public board allows for better public  
          participation, on-going monitoring, and transparency.  MRMIB  
          could provide a single point of application for people applying  
          for either high risk pool, and the federal government has not  
          directly administered a program similar to this before.   
          Additionally, having similar programs run by different levels of  
          government is confusing for the public and makes coordination of  
          enrollment and outreach more difficult.

          On March 23, 2010, President Obama signed into law the PPACA to  
          provide coverage for over 90% of the presently uninsured  
          population, adopt broad-reaching reforms in insurance practices,  
          and make major new investments in public health.  PPACA requires  
          states to create health insurance exchanges by 2014 that will  
          serve as competitive market places for individuals and small  
          businesses to be able to purchase health insurance products.   
          Insurers participating in the exchange will be barred from  
          discriminating based on pre-existing conditions, health status,  
          and gender.  

          Until the implementation of state exchanges in 2014, certain  
          individuals with pre-existing conditions, who have not had  
          coverage for the prior six months and will be eligible for the  
          temporary high risk pool program.  PPACA specifically gave the  
          DHHS the authority to run the temporary high risk health  
          insurance pool program or to contract with states or non-profits  
          to provide coverage for high risk individuals.  In response to  
          an April 2010 letter from Kathleen Sebelius, Secretary of DHHS,  
          Governor Arnold Schwarzenegger sent a letter indicating  
          California's intent to contract with the federal government to  
          operate a temporary high risk health insurance pool program.   
          The Governor's letter indicated that MRMIB would operate the  
          temporary high risk health insurance pool program alongside  
          MRMIP.  On May 10, 2010, DHHS released the solicitation for  
          states proposing to establish the temporary federal high risk  
          pool.  A total of $5 billion in federal funds has been  


                                                                  SB 227
                                                                  Page  5

          appropriated to support the program.  California has been  
          allocated $761 million over the life of the program.  To date,  
          29 states plus Washington, D.C. have elected to operate their  
          own, 18 have elected to have DHHS run it, two have deferred the  
          decision and one has not indicated. 

          MRMIB has consulted PricewaterhouseCoopers, who has provided  
          preliminary estimates of premiums compared to the existing MRMIP  
          premiums.  According to a report to the MRMIB on June16, 2010,  
          plan premium rates in the new federal high risk pool could range  
          from a high of $585 to a low of $545 depending on various  
          factors including deductibles, as compared to existing MRMIP  
          products that range up to $900 and have annual limits of  

           Analysis Prepared by  :    Marjorie Swartz / HEALTH / (916)  
          319-2097                                               FN: