Californians to Be Covered

Estimated 3.6 million (about 70% of uninsured Californians).

Requirements Imposed on
Consumers/ Individuals

• All Californians and their dependents living in California longer than six months are required to have “minimum creditable coverage,” to be determined by the Managed Risk Medical Insurance Board (MRMIB).

• If the total cost of coverage for the minimum mandated policy exceeds 5% of family income, for individuals earning below 250% FPL, then individual is exempt from the mandate.
• MRMIB will consider additional exemptions in cases of serious hardship.

Treatment of Self-Employed

Same individual mandate applies.

Requirements Imposed on
Employers

• Pay or play approach—employers required to pay 1 - 6.5% of Social Security wages
  for employee health care expenditures or pay equivalent amount into a trust fund to allow employees to access coverage
  through a pool (subject to voter approval on the ballot).
• Sliding scaled based on payroll size (Social Security wages) of the firm.
• 1% for firms with wages up to $250,000
• 4% for firms with wages up to $1 million
• 6% for firms with wages up to $15 million
• 6.5% for firms with wages over $15 million. 
  

Treatment of Small Employers

Lower payroll employers would pay a smaller contribution based on a sliding scale, as noted above.

Requirements Imposed on
Providers

Changes in Provider Payments/Funding

Medi-Cal rate increases for physicians up to 100% of Medicare rates, contingent on appropriation in the state budget.

Medi-Cal rate increases for hospitals up to 100% of Medicare rates (both subject to voter approval of ballot initiative).

Public Program Expansions and
Support for Low-Income Individuals

• Healthy Families expansion for children in families with incomes up to 300% FPL,
  regardless of immigration status, pending the appropriation of state funds.
• Expands Healthy Families coverage to include parents with incomes 100% - 250% FPL, pending federal approval and pending the appropriation of state funds.
• New Medicaid coverage program for childless adults with incomes up to 250% FPL. Childless adults with income up to 100% FPL may be provided coverage through a local coverage option, where applicable. (Benefits may be less than traditional Medi-Cal).
• Medi-Cal expansion (via benchmark plan with new pool) to adults ages 19 and 20
  earning less than 250% FPL (benefits may be less than traditional Medi-Cal).
• Individuals without employer coverage and with incomes 250 - 400% FPL will receive a tax subsidy to help purchase coverage through the pool, as will certain early retirees (details of latter not yet specified).
• Individual/family earning less than 250% FPL can obtain coverage through new pool; contribution would not exceed 5% of family income.
• 0 - 150% FPL would pay no premiums or out-of-pocket costs.

Role of Counties

• Counties would cover 40% of the costs of state coverage for some categories of uninsured (subject to voter approval).

• Counties with a public hospital can apply to the state to provide coverage through new Local Coverage Option program.

Role of Federal Government

Expansion of Healthy Families and Medi-Cal would generate federal matching funds, as would increases in Medi-Cal provider payment rates.

Changes in State Tax Code and State Tax Revenue

Individuals with incomes 250 - 400% FPL, without employer coverage and not eligible for public programs would receive an advanceable, refundable tax subsidy to help purchase coverage.

Insurance Market Requirements/ Reforms:

Guaranteed Issue, Rating Reforms, and Other Requirements Imposed on Health Plans

• By 2010, all health plans required to guarantee issue.
• Simplified medical underwriting, including standardized individual application form. Requires health plans to offer five classes of benefits to facilitate comparison shopping.
• Based on health status, premiums may vary by ±20% from the “standard risk rate” for the first two year, ±10% for the
  next two years, and may not vary by health status thereafter.
• Health plans must spend 85% of premiums on patient care.

Insurance Market Requirements/ Reforms:

Connector/Purchasing Pool

Establishes California Cooperative Health Insurance Purchasing Program (Cal-CHIPP) to be administered by MRMIB to negotiate and purchase health insurance for eligible enrollees.

Insurance Market
Requirements/Reforms:

Participant Contribution to Obtain
Coverage Through Purchasing Pool

• Maximum contribution cannot exceed 5% of family income for families earning less than 250% FPL.
• MRMIB would set premiums for those earning less than 250% FPL to meet the 5% requirement.

Financing Sources and Cost Estimates

ABX1 1 expresses intent that financing come from:

• Employer contributions (subject to voter approval)
• Employee and individual contributions
• Federal funds
• County contributions (subject to voter approval)
• Hospital fees (subject to voter approval)
• New increase in tobacco tax of $1.75 per pack of cigarettes (subject to voter approval).

Cost Containment:

Prevention and Wellness

• Community makeover grants to local health departments for obesity prevention and other preventive issues (contingent on state budget appropriation).
• Focus on prevention in obesity, diabetes (creates new Comprehensive Diabetes Service Program), and smoking cessation.
• Requires all plans to offer one “Healthy Action” plan with benefits designed to promote wellness.

Cost Containment:

Additional Provisions

• Establishes a new Health Care Cost and Quality Transparency Commission to establish a cost, quality, and transparency plan.
• Cap on health plan administrative costs and profits (must spend 85% of premiums on patient care).
• Makes a variety of changes aimed at increasing health care quality and efficiency and reducing costs, including changes to professional scope of practice, promotion of PHRs in CalPERS, and requirements on pharmacies for e-prescribing.

Enforcement

Plan envisions uninsured individuals would be automatically enrolled in minimum creditable
coverage.

Implementation Timeline

• January 2009 – Cal-CHIPP created.
• July 2009 – Healthy Families expansion, pending the appropriation of funds.
• January 2010 – Insurance market reforms begin (guarantee issue).
• January 2010 – Employers begin paying payroll fee (subject to voter approval).
• July 1, 2010 – Individual mandate.
• July 1, 2010 – Coverage under Cal-CHIPP begins.
• July 2010 – Health plans must spend at least 85% of premiums on patient services.
• July 2010 – Medi-Cal expansion, pending the appropriation of state funds.