The Public Employees Medical and Hospital Care Act, which is administered by the Board of Administration of the Public Employees Retirement System, governs the funding and provision of postemployment health care benefits for eligible retired public employees and their beneficiaries. Existing law requires the board to approve an employee association health benefit plan previously approved by the board in the 198788 contract year or prior, if the plan continues to meet the minimum standards prescribed by the board. Existing law authorizes the California Correctional Peace Officer Association Health Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state.

This bill would also authorize the Peace Officers Research Association of California Insurance and Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state. The bill would prohibit the trustees of these health benefit plan trusts from using geographic regions that are different from the geographic regions established by the board for the regional premiums authorized for contracting agencies, except as specified.

The Public Employees Medical and Hospital Care Act, which is administered by the Board of Administration of the Public Employees Retirement System, governs the funding and provision of postemployment health care benefits for eligible retired public employees and their beneficiaries. Existing law requires the board to approve an employee association health benefit plan previously approved by the board in the 198788 contract year or prior, if the plan continues to meet the minimum standards prescribed by the board. Existing law authorizes the California Correctional Peace Officer Association Health Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state.

This bill would also authorize the Peace Officers Research Association of California Insurance and Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state. The bill would prohibit the trustees of these health benefit plan trusts from using geographic regions that are different from the geographic regions established by the board for the regional premiums authorized for contracting agencies, except as specified.

The Public Employees Medical and Hospital Care Act, which is administered by the Board of Administration of the Public Employees Retirement System, governs the funding and provision of postemployment health care benefits for eligible retired public employees and their beneficiaries. Existing law requires the board to approve an employee association health benefit plan previously approved by the board in the 198788 contract year or prior, if the plan continues to meet the minimum standards prescribed by the board. Existing law authorizes the California Correctional Peace Officer Association Health Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state.

This bill would also authorize the Peace Officers Research Association of California Insurance and Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state. The bill would prohibit the trustees of these health benefit plan trusts from using geographic regions that are different from the geographic regions established by the board for the regional premiums authorized for contracting agencies, except as specified.

The Public Employees Medical and Hospital Care Act, which is administered by the Board of Administration of the Public Employees Retirement System, governs the funding and provision of postemployment health care benefits for eligible retired public employees and their beneficiaries. Existing law requires the board to approve an employee association health benefit plan previously approved by the board in the 198788 contract year or prior, if the plan continues to meet the minimum standards prescribed by the board. Existing law authorizes the California Correctional Peace Officer Association Health Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state.

This bill would also authorize the Peace Officers Research Association of California Insurance and Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state.

Date of Hearing: August 8, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 1195

Author:(Portantino) – As Amended Ver:April 2, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes the trust of the Peace Officers Research Association of California (PORAC) to implement regional premium pricing, as specified.

FISCAL EFFECT:

Negligible state costs. Any costs to expand association plans for members would be borne by the respective benefit trust and contracting entity offering the association plan, if it chooses to offer such a plan.

COMMENTS:

1. Background. Three state employee associations – the CAHP, CCPOA, and PORAC – offer their members association-designed health benefit plans managed by each organization’s trustees. These plans are authorized by the Public Employees’ Medical and Hospital Care Act (PEMHCA), which also requires the California Public Employees Retirement System (CalPERS) to annually review the rates and benefits of these plans. These plans are generally only available to dues-paying members of that organization and their families. Unlike other CalPERS-tied health plans, the employee associations negotiate directly with the carrier regarding health plan benefit designs and rates.
2. Regional rates. While the health plans offered to members of these three employee associations are meant to be better tailored to members’ needs, existing law allows limited flexibility in their design. For example, while CalPERS incorporates regional rates in establishing rates for CalPERS-designed plans offered to contracting agencies, this option is not available to PORAC. Therefore, despite significant regional cost differences for provider services, PORAC may offer only a plan structure that utilizes a statewide rate. One result is that members in lower-cost areas likely are paying a higher premium for an association plan than they would on non-association plans.
3. Veto. SB 599 (Portantino), of the 2017-18 Legislative Session, was similar to this bill. SB 599 was vetoed by the governor, whose veto messages stated:

Existing association health benefit plans are currently afforded very little oversight by the California Public Employees' Retirement System. By allowing these employee associations to offer additional health plans to their members, CalPERS would be left with major unanticipated costs should any of the plans fail.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: June 20, 2018

ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL SECURITY

Freddie Rodriguez, Chair

SBPCA Bill Id:SB 1195

Author:(Portantino) – As Amended Ver:April 2, 2018

SENATE VOTE: 38-0

SUBJECT: Public Employees’ Medical and Hospital Care Act: health benefit plans

SUMMARY: Permits the Peace Office Research Association of California (PORAC) Insurance and Benefits Trust to offer regional health benefit plans with varying premiums in different areas of the state.

The trustees of these health benefit plan trusts must not use geographic regions that are different from those established by the California Public Employees’ Retirement System (CalPERS) for contracting agency regional premiums, but are permitted to use north or south geographic regions different from those established by CalPERS.

EXISTING LAW:

1. Establishes the Public Employees’ Hospital and Medical Care Act (PEMHCA) that charges CalPERS with responsibility to administer health benefits for state employees and annuitants.
2. Authorizes CalPERS to contract for, or approve, health benefit plans exclusively for the employees and annuitants of contracting agencies. State employees and annuitants may not enroll in these plans.
3. Authorizes CalPERS to enter into contracts with health insurances carriers offering health benefit plans or with entities offering services relating to the administration of health benefit plans.
4. Provides that CalPERS may contract with carriers for health benefit plans or approve health benefit plans offered by employee organizations, as specified.
5. Allows CalPERS to contract for, or approve, health benefit plans that charge a contracting agency and its employees and annuitants rates based on regional variations in the costs of health care services.
6. Requires CalPERS to approve any employee association health benefit plan that was approved by the board in the 1987–88 contract year or prior, provided the plan continues to meet the minimum standards prescribed by the board. The trustees of an employee association health benefit plan are responsible for providing health benefit plan administration and services to its enrollees.
7. Permits the California Correctional Peace Officer Association (CCPOA) to offer different health benefit plan designs with varying premiums in different areas of the state.

FISCAL EFFECT: None. This bill is keyed nonfiscal by Legislative Counsel.

COMMENTS: According to the author and PORAC, “[a]ccording to CalPERS, PORAC cannot offer alternative rates without amending Government Code Section 22850(g), which is the section allowing CalPERS Health Benefits Trust, to offer to their members’ regional rates. Again, this change only affects PORAC’s Trust and PORAC’s own members, and only if they choose in the future to offer regional rates.”

1) Background

CalPERS provides health benefit coverage to local contracting agency employees through contracted Health Maintenance Organizations (HMOs) and self-funded plans. Additionally, three employee associations – the California Association of Highway Patrolmen (CAHP), PORAC, and the CCPOA – offer association designed health benefit plans through PEMHCA exclusively to their respective members.

As required by PEMHCA, CalPERS annually reviews the rate and benefits proposals for the three association plans, as well as CalPERS-contracted HMOs and self-funded plans.

CalPERS incorporates regional rates in establishing rates for the CalPERS designed plans offered to contracting agencies. Under existing statutory construction, some of the association plans can only offer a plan structure that utilizes a statewide rate when determining what costs they can charge to the member. Since there are regional cost differences in the state for provider services, association plans in lower-cost regions may be not be competitive with other plans that use regional costs.

A possible consequence of permitting the association plans to use regional rates may be that members in higher-cost regions could see their premiums rise to reflect those higher costs. However, this impact should be relatively minor since under the current plan design members in lower cost regions likely already opt for less expensive, nonassociation plans that use regional rating and thus, probably are not in the association pool of covered lives used by carriers when determining the premium structure.

By expanding authority for these association health plans to also offer multiple health plan options and multi-regional rates, it would provide their respective members options regarding health coverage.

2) Related/Prior Legislation

Assembly Bill 2696 (Rodriguez), prior to being substantially amended, authorized the respective trusts of PORAC and CCPOA to implement regional ratings (i.e., regional premium pricing) for their respective association basic health plans, which are offered through the PEMHCA.

Senate Bill 599 (Portantino, 2017) would have authorized PORAC to implement regional health plan rates, and would have required CalPERS to approve an employee association health benefit plan, provided the plan met minimum standards prescribed by the board. This bill was vetoed by the Governor who stated in part that, “[e]xisting association health benefit plans are currently afforded very little oversight by CalPERS. By allowing these employee associations to offer additional health plans to their members, CalPERS would be left with major unanticipated costs should any of the plans fail.”

REGISTERED SUPPORT / OPPOSITION:

Support

Peace Officers Research Association of California (Sponsor)

Opposition

None on file.

Analysis Prepared by: Michael Bolden / P.E.,R., & S.S. / (916) 319-3957

 CONSENT  

Bill No: SB 1195

Author:

:

Vote:

SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 4/9/18

AYES: Pan, Morrell, Leyva, Moorlach, Portantino

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT:

SOURCE: Peace Officers Research Association of California

DIGEST:

This bill permits the Peace Officers Research Association of California (PORAC) Insurance and Benefits Trust to offer regional health benefit plans with varying premiums, as specified.

ANALYSIS:

Existing law:

1. Establishes the Public Employees’ Medical and Hospital Care Act (PEMHCA), which charges the California Public Employees’ Retirement System (CalPERS) with the responsibility to administer health benefits for state employees and retirees.
2. Authorizes CalPERS to enter into contracts with health insurance carriers offering health benefit plans or with entities offering services relating to the administration of health benefit plans.
3. Provides that CalPERS may contract with carriers for health benefit plans or approve health benefit plans offered by employee associations, as specified.
4. Allows CalPERS to contract for, or approve, health benefit plans that charge a contracting agency and its employees and retirees rates based on regional variations in the cost of health care services.
5. Requires CalPERS to approve any employee association health benefit plan that was approved by CalPERS in the 1987–88 contract year or prior, provided the plan continues to meet the minimum standards prescribed by the board. The trustees of an employee association health benefit plan are responsible for providing health benefit plan administration and services to its enrollees.
6. Permits the California Correctional Peace Officer Association Health Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state.

This bill:

1. Permits PORAC to offer health benefit plan designs with varying premiums in different areas of the state.
2. Stipulates that employee association health benefit plan trusts shall not use geographic regions that are different from the geographic regions established by CalPERS for contracting agency regional premiums, as specified, except that they may use a north or south geographic region of the state different from the regions established by the board.

Background

CalPERS provides health benefit coverage to local contracting agency employees through contracted Health Maintenance Organizations (HMOs) and self-funded plans. Additionally, three employee associations - the California Association of Highway Patrolmen (CAHP), the California Correctional Peace Officers Association (CCPOA), and PORAC - offer association designed health benefit plans exclusively to their membership through PEMHCA.

As required by PEMHCA, CalPERS annually reviews the rate and benefits proposals for the three association plans, as well as CalPERS-contracted HMOs and self-funded plans.

CalPERS incorporates regional rates in establishing rates for the CalPERS designed plans offered to contracting agencies. Under existing statutory construction, PORAC can only offer a plan structure that utilizes a statewide rate when determining what cost PORAC can charge to the member. Since there are regional cost differences in the state for provider services, PORAC plans in lower cost regions may be not be competitive with other plans that use regional rates. This bill allows PORAC, like CCPOA and CalPERS, to incorporate regional rates in their plan design and offer lower premiums to their members in lower cost regions.

A possible consequence of permitting PORAC to use regional rates may be that members in higher cost regions could see their premiums rise. However, this impact should be relatively minor since under the current plan design members in lower cost regions are likely to opt for less expensive, non-PORAC plans and thus, would probably not remain in the PORAC pool of covered lives used by carriers when determining the premium structure.

Related/Prior Legislation

SB 599 (Portantino, 2017), vetoed by the Governor, would have authorized PORAC to implement regional health plan rates, and would have required CalPERS to approve an employee association health benefit plan, provided the plan met minimum standards prescribed by the board.

According to the Governor’s veto message, “by allowing these employee associations to offer additional health plans to their members, CalPERS would be left with major unanticipated costs should any of the plans fail.”

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 4/17/18)

Peace Officers Research Association of California (source)

OPPOSITION: (Verified 4/17/18)

None received

ARGUMENTS IN SUPPORT: The author’s office states, “this change only affects PORAC’s Trust and PORAC’s own members, and only if they choose to offer regional rates in the future.”

Prepared by:

4/18/18 11:59:36

**** END ****

SENATE COMMITTEE ON

PUBLIC EMPLOYMENT AND RETIREMENT

Dr. Richard Pan, Chair

2017 - 2018 Regular

Bill No: SB 1195 Hearing Date: 4/9/18

Subject: Public Employees’ Medical and Hospital Care Act

SOURCE: Peace Officers Research Association of California

DIGEST: This bill permits the Peace Officers Research Association of California (PORAC) Insurance and Benefits Trust to offer regional health benefit plans with varying premiums, as specified.

ANALYSIS:

Existing law:

1. Establishes the Public Employees’ Medical and Hospital Care Act (PEMHCA), which charges the California Public Employees’ Retirement System (CalPERS) with the responsibility to administer health benefits for state employees and retirees.
2. Authorizes CalPERS to enter into contracts with health insurance carriers offering health benefit plans or with entities offering services relating to the administration of health benefit plans.
3. Provides that CalPERS may contract with carriers for health benefit plans or approve health benefit plans offered by employee associations, as specified.
4. Allows CalPERS to contract for, or approve, health benefit plans that charge a contracting agency and its employees and retirees rates based on regional variations in the cost of health care services.
5. Requires CalPERS to approve any employee association health benefit plan that was approved by CalPERS in the 1987–88 contract year or prior, provided the plan continues to meet the minimum standards prescribed by the board. The trustees of an employee association health benefit plan are responsible for providing health benefit plan administration and services to its enrollees.
6. Permits the California Correctional Peace Officer Association Health Benefits Trust to offer different health benefit plan designs with varying premiums in different areas of the state.

This bill:

1. Permits the Peace Officers Research Association of California (PORAC) to offer health benefit plan designs with varying premiums in different areas of the state.
2. Stipulates that employee association health benefit plan trusts shall not use geographic regions that are different from the geographic regions established by CalPERS for contracting agency regional premiums, as specified, except that they may use a north or south geographic region of the state different from the regions established by the board.

Background

CalPERS provides health benefit coverage to local contracting agency employees through contracted Health Maintenance Organizations (HMOs) and self-funded plans. Additionally, three employee associations - the California Association of Highway Patrolmen (CAHP), the California Correctional Peace Officers Association (CCPOA), and PORAC - offer association designed health benefit plans exclusively to their membership through PEMHCA.

As required by PEMHCA, CalPERS annually reviews the rate and benefits proposals for the three association plans, as well as CalPERS-contracted HMOs and self-funded plans.

CalPERS incorporates regional rates in establishing rates for the CalPERS designed plans offered to contracting agencies. Under existing statutory construction, PORAC can only offer a plan structure that utilizes a statewide rate when determining what cost PORAC can charge to the member. Since there are regional cost differences in the state for provider services, PORAC plans in lower cost regions may be not be competitive with other plans that use regional rates. This bill would allow PORAC, like CCPOA and CalPERS, to incorporate regional rates in their plan design and offer lower premiums to their members in lower cost regions.

A possible consequence of permitting PORAC to use regional rates may be that members in higher cost regions could see their premiums rise. However, this impact should be relatively minor since under the current plan design members in lower cost regions are likely to opt for less expensive, non-PORAC plans and thus, would probably not remain in the PORAC pool of covered lives used by carriers when determining the premium structure.

Related/Prior Legislation

SB 599 (Portantino, 2017) would have authorized PORAC to implement regional health plan rates, and required CalPERS to approve an employee association health benefit plan, provided the plan met minimum standards prescribed by the board.

According to the Governor’s veto message, “by allowing these employee associations to offer additional health plans to their members, CalPERS would be left with major unanticipated costs should any of the plans fail.”

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

Peace Officers Research Association of California (source)

OPPOSITION:

None received.

ARGUMENTS IN SUPPORT:

The author’s office states, “this change only affects PORAC’s Trust and PORAC’s own members, and only if they choose to offer regional rates in the future.”