Existing federal law, the Patient Protection and Affordable Care Act (PPACA), requires each state to establish an American Health Benefit Exchange to facilitate the purchase of qualified health benefit plans by qualified individuals and qualified small employers. Existing state law creates the California Health Benefit Exchange, also known as Covered California, to facilitate the enrollment of qualified individuals and qualified small employers in qualified health plans as required under PPACA. Existing law requires the Exchange to administer a program of financial assistance to help low- and middle-income Californians, by providing financial assistance to residents with household incomes at or below 600% of the federal poverty level, including appropriate subsidies designed to make health care coverage more accessible and affordable for individuals and households. Existing law requires a premium assistance subsidy provided by the program to be able to be advanced to a program participant and remitted by the Exchange to a qualified health plan issuer, based on specified factors.

Existing law establishes the Health Care Affordability Reserve Fund, and authorizes the Controller to use funds in the Health Care Affordability Reserve Fund for cashflow loans to the General Fund. Existing law requires the fund to be used, upon appropriation by the Legislature, for the purpose of health care affordability programs operated by the Exchange. Existing law requires the Exchange to consult with the Legislature and stakeholders to develop options to reduce cost sharing for low- and middle-income Californians, as specified.

This bill would delete the qualification making assistance under the program available to residents with household incomes at or below 600% of the federal poverty level. The bill would require the Exchange to annually update the proposed program design for cost-sharing reduction, as specified, and would require the Exchange, in developing benefit designs, to maximize the number of low- and middle-income Californians with zero deductibles. The bill would provide that the premium assistance subsidy program would not be operative in any year in which federal premium subsidies are equal to or greater than those provided for the 2023 program year. year, and would require the program to include subsidies for cost sharing and maximum out-of-pocket limits until January 1, 2029, if federal premium subsidies continue at the level for the 2023 coverage year. The bill would make related conforming changes and delete obsolete provisions.

Existing federal law, the Patient Protection and Affordable Care Act (PPACA), requires each state to establish an American Health Benefit Exchange to facilitate the purchase of qualified health benefit plans by qualified individuals and qualified small employers. Existing state law creates the California Health Benefit Exchange, also known as Covered California, to facilitate the enrollment of qualified individuals and qualified small employers in qualified health plans as required under PPACA. Existing law requires the Exchange to administer a program of financial assistance to help low- and middle-income Californians, by providing financial assistance to residents with household incomes at or below 600% of the federal poverty level, including appropriate subsidies designed to make health care coverage more accessible and affordable for individuals and households. Existing law requires a premium assistance subsidy provided by the program to be able to be advanced to a program participant and remitted by the Exchange to a qualified health plan issuer, based on specified factors.

Existing law establishes the Health Care Affordability Reserve Fund, and authorizes the Controller to use funds in the Health Care Affordability Reserve Fund for cashflow loans to the General Fund. Existing law requires the fund to be used, upon appropriation by the Legislature, for the purpose of health care affordability programs operated by the Exchange. Existing law requires the Exchange to consult with the Legislature and stakeholders to develop options to reduce cost sharing for low- and middle-income Californians, as specified.

This bill would delete the qualification making assistance under the program available to residents with household incomes at or below 600% of the federal poverty level. The bill would require the Exchange to annually update the proposed program design for cost-sharing reduction, as specified, and would require the Exchange, in developing benefit designs, to maximize the number of low- and middle-income Californians with zero deductibles. The bill would provide that the premium assistance subsidy program would not be operative in any year in which federal premium subsidies are equal to or greater than those provided for the 2023 program year. The bill would make related conforming changes and delete obsolete provisions.

Date of Hearing: April 19, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 1208

Author:(Schiavo) – As Amended Ver:March 29, 2023

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

SUMMARY:

This bill requires Covered California to annually update the proposed program design for cost-sharing reduction, as specified, and, in developing benefit designs, to maximize the number of low- and middle-income Californians with zero deductibles.

Specifically, this bill:

1. Requires Covered California to annually update options for providing subsidies to reduce cost sharing for low- and middle-income Californians, and report those updated options to the Legislature, Governor, and the Healthy California for All Commission.
2. Requires Covered California to base benefit designs on funding made available in the Health Care Affordability Reserve Fund (Fund), and other funds, as appropriated for the program for that coverage year, and to maximize the number of low- and middle-income Californians with zero deductibles.
3. Provides for subsidies for cost-sharing if federal premium subsidies continue at the level for the 2023 coverage year.
4. Clarifies the premium assistance subsidy program is inoperative any year in which federal premium subsidies are equal to or greater than those provided for the 2023 program year.
   

FISCAL EFFECT:

Covered California states the state-funded cost sharing reduction (CSR) program design would expand CSR benefits for enrollees currently receiving federal CSR benefits – those with incomes up to 250% of the Federal Poverty Level (FPL) – and extend CSR benefits to other enrollees with incomes between 250% and 600% FPL. (In 2023, for an individual, FPL is $14,580 and 250% FPL is $36,450. For a family of four people, FPL is $30,000.)

The estimated annual state cost of providing CSRs to individuals enrolled in silver tier plans (actuarial value (AV) 70%) is $245 million (Health Care Affordability Reserve Fund). Covered California, in developing this cost estimate, assumed enrollment would continue on its current trend of higher enrollment than assumed in Covered California’s fiscal year (FY) 2022-23 approved budget, and used FY 2022-23 premium and subsidy levels.

Covered California estimates annual state costs of $258 million and $270 million if 5% or 10% of individuals currently enrolled in lower tier or higher tier plans switch to silver tier plans to access the increased savings materializing from the state-funded CSR program.  Covered California also expects premiums to increase in FY 2023-24. Any changes in the CSR program design could also alter the total cost estimate.

COMMENTS:

1. Purpose. According to the author:

As deductibles and co-pays continue to skyrocket, affordability remains a major barrier to care for Covered California enrollees. Despite lower-than-ever premiums guaranteed through 2025 thanks to the Federal Inflation Reduction Act, many with coverage still can’t afford the out-of-pocket costs of seeing a provider. AB 1208 will direct Covered California to provide state subsidies to lower co-pays and deductibles, for as long as these enhanced federal premium affordability subsidies continue.

1. Background.

The Federal Patient Protection and Affordable Care Act (ACA). Enacted in March 2010, the ACA provides the framework, policies, and guidelines for comprehensive health care reform by the states. The ACA prohibits insurers from denying coverage or charging higher premiums based on preexisting conditions, provides federal financial assistance in the form of an advance premium tax credit (APTC, an income-based tax credit that can be taken in advance of tax filing to lower monthly premiums) and CSRs for low- and middle-income people buying insurance in new health benefit exchanges such as Covered California.

The ACA establishes tiers of coverage, named for metals, that vary by AV: bronze plans have an AV of 60%, silver plans have an AV of 80%, gold plans have an AV of 80%, and platinum plans have an AV of 90%. Enrollees pay for the remaining health care costs in the form of deductibles, copays and coinsurance, collectively referred to as member cost-sharing. Plans with lower AV generally have lower monthly premiums but higher cost-sharing. To purchase coverage through Covered California, an individual must meet federal eligibility requirements for citizenship or immigration status and state residency. An individual who does not have affordable coverage through an employer, Medicaid, Medicare, or another program may receive income-based APTCs or CSRs, or both. An enrollee’s required contribution toward their premium ranges from 0% to 8.5% of their income. The ACA also requires insurance carriers with certain products available through marketplaces like Covered California to reduce member cost sharing for consumers with incomes at or below 250% FPL. Enrollees access these benefits through plans built on silver-level coverage. For the lowest income enrollees, CSR plans provide coverage near or above the platinum level for highly subsidized silver premium prices.

Covered California. Covered California, California’s health benefit exchange authorized under the ACA, selects participating health insurance carriers and other contractors to make health insurance available to individuals and small businesses. According to Covered California, more than 1.4 million Californians renewed their health insurance for 2023, bringing Covered California’s enrollment to 1.74 million. Nine of every 10 Covered California consumers qualify for financial help, and more than two-thirds of consumers can get comprehensive coverage for less than $10 a month.

2020-2022 California Premium Subsidies (SB 78). SB 78 (Committee on Budget and Fiscal Review), Chapter 38, Statutes of 2019, established the Individual Market Assistance Program until January 2023, and provided for California Premium Subsidies in addition to ACA subsidies. SB 78 appropriated $429 million for plan year 2020 for premium subsidies. SB 78 included a state individual mandate and penalty that closely mirrored the federal mandate that was in place under the ACA until Congress repealed it in 2017.

American Rescue Plan. In 2021, the American Rescue Plan Act provided, through 2022, a significant increase in premium assistance by expanding eligibility for assistance and reducing enrollee premium contributions so that even an individual over 400% FPL does not have to exceed 8.5% of their income on health insurance premiums. According to Covered California, after implementation of the American Rescue Plan, more than half of households with coverage through Covered California in 2021 had a $1 per member, per month premium, compared to only 11% of households previously.

In response to the availability of funds from the American Rescue Plan, the State Budget Act of 2021 (AB 128) and health omnibus trailer bill, AB 133 (Committee on Budget), Chapter 143, Statutes of 2021, redirected $333.4 million that would have been spent on state premium subsidies to the new California Health Care Affordability Reserve Fund, to instead pay for affordability programs in Covered California, starting in the 2023 plan year.

Inflation Reduction Act. The federal Inflation Reduction Act extends until 2025 subsidy assistance that was set to expire at the end of 2022 under the American Rescue Plan.

2023 Budget Proposal. The state's Budget Act of 2022 included $304 million for the California Premium Subsidy Program and provided that if federal premium subsidies are available for the 2023 calendar year, then the appropriation may be used to fund a program of financial assistance by Covered California. Federal subsidies were extended until 2025 through the Inflation Reduction Act, so the contingency was placed in the Fund to ensure that state-only premium subsidies are available again in the future. Due to declining General Fund revenues, the 2023 proposed budget transfers the available Fund balance of $333.4 million to the General Fund. These funds will be returned after federal subsidies end in 2025-26.

Individual Mandate Monies. According to a recent California Healthline article, revenue collected through the SB 78 state individual mandate penalties in 2020 through 2022 is estimated to total about $1.3 billion. The article states the penalty revenue was intended to help fund state-based subsidies for low- and middle-income Californians purchasing coverage through Covered California, and supplement the existing federal financial assistance offered under the ACA. For the 2020 tax year, the first year of the mandate, California collected about $403 million from uninsured people, with an average per-person penalty of $1,196, according to the Franchise Tax Board. Approximately 225,400 of the 337,000 Californians penalized were at or below 400% FPL. According to the article, most of that money will be deposited into the state General Fund and can be used for anything the governor and lawmakers choose.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: March 21, 2023

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 1208

Author:(Schiavo) – As Introduced Ver:February 16, 2023

SUBJECT: California Health Benefit Exchange: Health Care Affordabiity Reserve Fund.

SUMMARY: Deletes the eligibility criteria making assistance under the existing California financial assistance program (affordability program) available to residents with household incomes at or below 600% of the federal poverty level (FPL). Requires California’s Health Benefit Exchange (Exchange or Covered California) to annually update the proposed program design for cost-sharing reduction, as specified, and requires Covered California, in developing benefit designs, to maximize the number of low- and middle-income Californians with zero deductibles. Specifically, this bill:

1. Requires Covered California to annually update the affordability program design. Defines cost sharing to include copays and maximum out-of-pocket costs (OOP), coinsurance, and deductibles, if any. Requires Covered California to maximize the number of low and middle income Californians with zero deductibles.
2. Revises the affordability program to delete the eligibility criteria that the program provide financial assistance to California residents at or below 600% FPL and instead allows the program to provide financial assistance, including appropriate subsidies designed to make health care coverage more accessible and affordable. Provides for subsidies for cost-sharing if federal premium subsidies continue at the level for the 2023 coverage year.
3. Specifies that a resolution adopting an annual program design by the Covered California Board is not effective until notice is provided to the Department of Finance Director.
4. Requires the affordability program design adopted for a coverage year to be based on funds made available in the Health Care Affordability Reserve Fund (Fund) as specified, as well as other funds, as appropriated for the program for that coverage year.
5. Clarifies that California’s premium assistance subsidy program is inoperative in any year in which federal premium subsidies are equal to or greater than those provided for the 2023 program year.
6. Makes other conforming changes and deletes obsolete provisions.

EXISTING LAW

1. Establishes Covered California (or Exchange) as an independent entity in state government not affiliated with any state agency or department, governed by a five-member board. Requires the Covered California Executive Board to establish and use a competitive process to select participating carriers and other contractors, and to make health insurance available to individuals and small businesses as authorized under the federal Patient Protection and Affordable Care Act (ACA). [Government Code (GOV) §100500 -100522]
2. Creates, until January 1, 2023, the Individual Market Assistance Program, which authorizes the Exchange to provide health care coverage financial assistance to California residents with household incomes at or below 600% of the FPL, including advanced premium assistance subsidies. [GOV 100800]
3. Creates the Fund, and, requires the Fund to be utilized, in addition to any other appropriations made by the Legislature for the same purpose, for the purpose of health care affordability programs operated by Covered California. [GOV §100520.5]
4. Requires Covered California to develop options for providing cost sharing reduction subsidies to reduce cost sharing for low- and middle-income Californians. Requires the options to be reported to the Legislature, Governor, and the Healthy California for All Commission on or before January 1, 2022, for consideration in the 2022–23 budget process. [GOV §100520.5]
5. Requires the options described in 3) above to:
   1. Include options for all Covered California enrollees with income up to 400% FPL to reduce cost sharing, including copays, deductibles, coinsurance, and maximum OOP;
   2. Include options to provide zero deductibles for all Covered California enrollees with income under 400% FPL and upgrading those with income between 200% and 400% FPL, inclusive, to gold-tier cost sharing;
   3. Address any operational issues that might impede implementation of enhanced cost-sharing reductions for the 2023 calendar year; and,
   4. Maximize federal funding and address interactions with federal law regarding federal cost-sharing reduction subsidies. [GOV §100520.5]
6. Requires, under the Minimum Essential Coverage (MEC) Individual Mandate (state mandate requiring health coverage), for each month beginning on or after January 1, 2020, a California resident to be enrolled in and maintain MEC for that month, and for any person who qualifies as a spouse or dependent of the resident except as provided below,:
   1. An individual who has in effect a certificate of exemption for hardship or religious conscience issued by Covered California for that month;
   2. An individual who is a member of a health care sharing ministry, as specified for that month;
   3. An individual who is incarcerated for that month, other than incarceration pending the disposition of charges;
   4. An individual who is not a citizen or national of the US and is not lawfully present in the US for that month;
   5. An individual who is a member of an Indian tribe, as defined, during that month;
   6. An individual for whom that month occurs during a period living abroad, as described;
   7. An individual who is a bona fide resident of a possession of the U.S., as specified;
   8. An individual who is a bona fide resident of another state for that month; and,
   9. An individual who is enrolled in limited or restricted scope coverage under the Medi-Cal program or another health care coverage program administered by and determined to be substantially similar to limited or restricted scope coverage by the Department of Health Care Services (DHCS) for that month. [GOV §100705]
7. Requires an Individual Shared Responsibility Penalty to be imposed for failure to meet the requirement of the MEC Individual Mandate. [GOV §100705]

FISCAL EFFECT: Unknown. This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, as deductibles and co-pays continue to skyrocket, affordability remains a major barrier to care for Covered California enrollees. Despite lower-than-ever premiums guaranteed through 2025 thanks to the Federal Inflation Reduction Act, many with coverage still can not afford the out-of-pocket (OOP) costs of seeing a provider. The author concludes that this bill will direct Covered California to provide state subsidies to lower co-pays and deductibles, for as long as these enhanced federal premium affordability subsidies continue.
2. BACKGROUND. A recently released survey of Californians by the California Health Care Foundation and the University of Chicago found that making health care affordable was still a top priority for Californians. In a state that mandated health coverage for every individual starting in 2020, and exempted or subsidized those unable to afford a health policy, the revelation that cost was the number one factor for health care, was eye-opening. Eighty-one percent of those polled said affordability was extremely or very important, placing health care costs as a top concern just below inflation and housing affordability. Californians with higher incomes were less likely to think of items as extremely or very important compared to those with low incomes. Among all ethnic groups 98% of Blacks said that affordability was extremely or very important compared to 87% for Latinos, 88% for Asians and 76% for whites. Overall, nine out of ten Californians would like to see legislation making health care and housing more affordable in the state. 
   1. ACA. Enacted in March 2010, the ACA provides the framework, policies, regulations and guidelines for the implementation of comprehensive health care reform by the states. The ACA expands access to quality, affordable insurance and health care. As of January 1, 2014, insurers are no longer able to deny coverage or charge higher premiums based on preexisting conditions (under rules referred to as guaranteed issue and modified community rating, respectively). These aspects of the ACA, along with tax credits for low and middle income people buying insurance on their own in new health benefit exchanges, make it easier for people with preexisting conditions to gain insurance coverage.
   2. ACA subsidies. Under the ACA, qualified individuals are able to obtain financial assistance, also known as advanced payment tax credits (APTCs) and cost sharing reductions (CSRs) for health insurance purchased through an exchange. A person must be a citizen or lawfully present, must have qualifying income, and not be eligible for government programs or not have affordable coverage through an employer. According to Covered California, more than 1.4 million Californians renewed their health insurance for 2023, bringing Covered California’s enrollment to 1.74 million. Nine out of every 10 Covered California consumers qualify for financial help, and more than two-thirds of consumers can get comprehensive coverage for less than $10 a month.
   3. Affordability Challenges. Kaiser Health News reported on an analysis of government data that estimates that 9% of adults, or roughly 23 million people, owe more than $250 due to health costs. About half of those reporting significant medical debt owe more than $2,000. A small share (representing about 1% of all adults) owes more than $10,000, and the group accounts for the vast majority of all medical debt owed by people in the United States. Health plans use cost-sharing (deductibles, copayments, and coinsurance) as incentives for enrollees to use services efficiently and to shop for lower cost options when they do need care. Cost-sharing that is too high, however, can discourage enrollees from getting the care they need or drive them into financial distress and even bankruptcy. On the contrary, enrollees in private health insurance plans may have to pay thousands of dollars to meet plan deductibles, coinsurance and copayments.

According to the Legislative Analysts Office, affordability of health care remains a challenge. Over the last several decades, health care costs have grown significantly. To a significant degree, this cost growth has been driven by growth in health care prices. Medical inflation in major California metro areas has far outpaced inflation for other goods and services in recent decades, reducing what Californians can afford to spend on these other goods and services. While other expenditures such as housing have a greater impact on California’s cost of living, Californians need to balance health care costs with these other expenditures.

• 1. 2020-2022 California Premium Subsidies. SB 78 (Committee on Budget and Fiscal Review), Chapter 38, Statutes of 2019, establishes the Individual Market Assistance Program until January 2023, and provides for California Premium Subsidies in addition to ACA subsidies. The budget appropriated $428,629,000 for plan year 2020 for state premium subsidies for consumers at or below 138% FPL and above 200 and at or below 600% FPL. To receive state subsidies, individuals must purchase coverage through Covered California and otherwise meet eligibility requirements for federal premium subsidies, except for those with incomes at 400 to 600% FPL. SB 78 also includes a state individual mandate and penalty that would closely mirror the federal structure that was in place prior to the penalty being zeroed out by Congress in 2017.
  2. American Rescue Plan (ARP). In 2021, due to COVID-19, the federal ARP significantly increases and expands federal premium assistance for marketplace enrollees nationwide for 2021 and 2022. Among its many provisions, the ARP lowered required premium contributions for marketplace enrollees earning less than 400% of the FPL and expanded premium subsidies to individuals earning more than 400% of the FPL, so that no subsidy-eligible marketplace enrollee has to spend more than 8.5% of their income on a benchmark plan. In addition, no individual with income below 150% of the FPL, or any individual that receives unemployment insurance payments at any point in 2021, will pay any premiums at all for silver level coverage.

For Covered California enrollees, average household subsidies increased by more than $100 per month, bringing the average monthly premium subsidy to $704 and the average household net premium to $109. Notably, more than half of households that enrolled through Covered California in 2021 had a $1 per member, per month premium after implementation of the ARP, compared to only 11 % of households with only ACA subsidies. While the ARP made significant increases in support for consumers’ premiums, it did not increase cost-sharing support to lower consumers’ OOP costs.

• 1. State response to the ARP. As a result of the more generous subsidies provided by the ARP, the three-year state premium subsidy program implemented by the 2019 Budget Act was absorbed by the new federal subsidies. The state subsidy program was designed to limit individuals between 400 and 600% of the FPL to spending between 9.68% and 18% of income on premiums. Because the ARP caps premiums at 8.5% for all income levels, no state premium subsidy is necessary to reach the required contribution levels included in the state premium subsidy design. As a result, the 2021 Budget Act reverted General Fund expenditure authority of $405.6 million in 2021-22 to reflect savings in the state subsidy program resulting from the more generous federal premium subsidies. California’s 2021-22 state budget and health omnibus trailer bill (AB 133 (Committee on Budget), Chapter 143, Statutes of 2021)) redirected $333.4 million from California’s General Fund that would have been spent on state premium subsidies (and established in the 2019 budget) to a newly established Fund. The Fund would be used for affordability programs operated by Covered California starting in the plan year 2023. AB 133 also required Covered California to report on options for using the Fund to reduce OOP costs for consumers.
  2. Recent Federal and State Action. The federal Inflation Reduction Act includes extending until 2025 additional ACA subsidy assistance that were set to expire at the end of t2022. Additionally, the state's Budget Act of 2022 includes $304 million for the California Premium Subsidy Program and provides that if federal premium subsidies are available for the 2023 calendar year, then the appropriation may be used to fund a program of financial assistance and program designed adopted by Covered California.
  3. 2023 January Budget Proposal. According to the Governor’s January Budget, last year, the Budget provided a contingency in case federal subsidies were not extended. Federal subsidies were extended until 2025, so the contingency was placed in the Fund to ensure that state-only premium subsidies are available again in the future when they are most needed. Due to declining General Fund revenues, the Budget transfers the available Fund balance of $333.4 million to the General Fund. These funds will be returned after federal subsidies end, which is scheduled in 2025-26.
  4. Individual Mandate Monies. According to a recent California Healthline article, officials have estimated that the revenue collected through the state individual mandate in its first three years, from 2020 through 2022, will total about $1.3 billion. The article states that the penalty revenue was supposed to help fund state-based subsidies for low- and middle-income Californians who purchase coverage through Covered California and state subsidies would supplement the existing federal financial assistance offered under the ACA. California assesses its penalty on uninsured residents when they file their annual state income taxes. For the 2020 tax year, the first year the mandate was in place, California collected about $403 million from uninsured people, with the average per-person penalty amounting to $1,196, according to the Franchise Tax Board. Of the roughly 337,000 Californians penalized that year, about 225,400 had incomes at or below 400% FPL, or $49,960 for a single person and $85,320 for a family of three. Some lowest-income earners are exempt from the penalty. According to the article, most of that money will be deposited into the state general fund and can be used for anything the governor and lawmakers choose to spend it on. Meanwhile, premiums are rising for many consumers purchasing coverage through Covered California, with an average increase of 5.6% for 2023. Deductibles and other OOP costs are also going up for some people, and consumer advocates fear that without greater financial assistance, more Californians will opt out of purchasing coverage — or forgo care altogether. For instance, a mid-tier Covered California insurance plan for an individual will have a $4,750 medical deductible and an annual OOP maximum of $8,750 in 2023, up from $3,700 and $8,200, respectively, this year.

1. SUPPORT. Health Access California (HAC), sponsor, writes that affordability continues to be a major barrier to care, even for Californians with coverage. While premiums are lower than ever for those in Covered California, thanks to federal premium subsidies resulting from the Inflation Reduction Act, OOP costs continue to skyrocket. Sixty percent of Californians report feeling worried about OOP when using health insurance, a greater percentage than those worried about the cost of housing, utilities, or groceries. Half of Californians skipped or delayed care in the past year as a result of costs; for low-income Californians, that percentage increased to a staggering two-thirds. Over the past decade, medical deductibles for Covered California standard Silver plan enrollees will have more than doubled, and maximum OOP have increased to almost $9,000. While Covered California Silver plan deductibles only apply for inpatient hospital and skilled nursing care stays, coverage for that hospital bill doesn’t kick in until paying over $4,750. Continuing California’s efforts to keep health care affordable, this bill proposes to direct Covered California to provide state subsidies to lower co-pays and deductibles, for as long as enhanced federal affordability assistance continues for premiums. Given our higher cost-of-living, California has a state subsidy program to further help those in our state afford care and coverage in Covered California, and if the federal government supplants those subsidies, those state dollars should continue to go to help reduce cost-sharing. While OOP continue to skyrocket for Californians, our state is meanwhile collecting hundreds of millions in revenue from those who are uninsured, collected as a result of our state individual mandate penalty. With additional federal premium assistance supplanting state subsidies through at least 2025 as a result of Inflation Reduction Act, legislators and advocates have urged that the revenue raised from the individual mandate penalty continue to go affordability assistance, to reduce ever-increasing cost-sharing. In the just the first three years of the state mandate from 2020-2022, about $1.3 billion has been generated from Californians lacking health coverage and paying the penalty. HAC concludes that this assistance would provide real, concrete relief to Californians—to help encourage folks to sign up for coverage and not be dissuaded by a high deductible, to reduce financial obstacles to getting needed care, to remove a big barrier for families to seek hospital care, and to prevent those who do get hospitalized to not have such a financial hit that would wipe out the savings of many families.
2. RELATED LEGISLATION.
   1. AB 494 (Arambula) increases the reimbursement amount of the Robert F. Kennedy Farm Workers Medical Plan for claim payments that exceed seventy thousand dollars ($70,000) made by the plan on behalf of an eligible employee or dependent for a single episode of care on or after September 1, 2016, from exceeding $3 million to $4 billion. Deletes the sunset of 2026 to make the provisions of this bill permanent. AB 494 is currently pending in Assembly Health Committee.
   2. AB 4 (Arambula) deletes the requirement that limits coverage for specified individuals to the California qualified health plans. Specifies that contingent upon federal approval of the waiver, specified requirements for applicants eligible for the coverage described in this bill would become operative on January 1, 2025, for coverage effective for qualified health plans beginning January 1, 2026. AB 4 is currently pending in Assembly Health Committee.
   3. AB 1091 (Wood) prohibits a contract issued, amended, or renewed on or after January 1, 2024, between a health plan or health insurer and a health care provider or health facility from containing terms that, among other things, restrict the plan or insurer from steering an enrollee or insured to another provider or facility or require the plan or insurer to contract with other affiliated providers or facilities. Requires specified health entities to provide written notice to the Attorney General at the same time as another state or federal agency is notified or otherwise at least 90 days before entering an agreement or transaction to make a specified material change with a value of $15 million or more. Authorizes the Attorney General to consent to, give conditional consent to, or not consent to that agreement, and would require the Attorney General to notify the entity of the decision within 90 days, which may be extended by one 45-day period if specified conditions are met. AB 1091 is currently pending in Assembly Health Committee.
3. PREVIOUS LEGISLATION.
   1. SB 184 (Committee on Budget and Fiscal Review), Chapter 47, Statutes of 2202, establishes the Office of Health Care Affordability (OHCA) within the Department of Health Care Access and Information (HCAI). Identifies OHCAs three primary responsibilities: managing spending targets, monitoring system performance, and assessing market consolidation. Requires OHCA to collect, analyze, and publicly report data on total health care expenditures, and enforce spending targets set by a Health Care Affordability Board.
   2. SB 944 (Pan) would have required the Exchange to implement options for providing health care affordability assistance. SB 944 would have required the affordability assistance to reduce cost-sharing, including copays, coinsurance, and maximum OOP, if specified enhanced federal premium subsidies are made available for the 2023 and 2024 calendar years, and would have eliminated deductibles for all benefits to the extent feasible. Governor Newsom vetoed this bill:

In my January budget proposal, I indicated that the Administration would work with the Legislature, Covered California, and stakeholders on options to further improve affordability and access to health care coverage, while considering what level of federal subsidies would be available through Covered California. Because of the uncertainty of whether the American Rescue Plan Act's enhanced federal subsidies would be extended beyond the initial two-year period, I proposed approximately $300 million in state-only premium subsidies in 2022-23 to partially offset the loss of federal funds. With the very recent extension of enhanced federal subsidies through the federal Inflation Reduction Act for a new three-year period, the Administration's goal has been to reserve the proposed $300 million state-only premium subsidies for when they would be needed again after the enhanced federal subsidies sunset in 36 months.

Furthermore, while the goal of this bill to establish new state-only subsidies for cost-sharing is laudatory, I am concerned about a downturn in revenues that may make such a new program unsustainable, especially in light of our important commitment to fund the expansion of the Medi-Cal program in 2024 to remaining low-income populations. Rather, the funds should be reserved to ensure that state-only premium subsidies are available again when they are most needed.

• 1. AB 1878 (Wood) of 2022 was substantially similar to SB 944 and was held in Senate Appropriations Committee.
  2. AB 2530 (Wood), Chapter 695, Statutes of 2022, requires Covered California, upon appropriation by the Legislature, to administer a program of financial assistance to help Californians obtain and maintain health benefits through the Exchange if they lose employer-provided health care coverage as a result of a labor dispute.
  3. ABX1 2 (Pan), Chapter 1, Statutes of 2013-14 First Extraordinary Session and SBX1 2 (Hernandez), Chapter 2, Statutes of 2013-14 First Extraordinary Session, establish health insurance market reforms contained in the ACA specific to individual purchasers, such as prohibiting insurers from denying coverage based on preexisting conditions; and, make conforming changes to small employer health insurance laws resulting from final federal regulations.
  4. AB 1602 (John A Pérez), Chapter 655, Statutes of 2010, and SB 900 (Alquist), Chapter 659, Statutes of 2010, establish the Exchange in California and delineate its powers and duties.

1. AMENDMENTS. The Committee recommends the following amendments to narrow the scope of this bill:
   1. Reinstate the eligibility requirements of existing law that the program provides financial assistance to California residents with household incomes at or below 600% of the FPL; and,
   2. Add a 5-year sunset.

REGISTERED SUPPORT / OPPOSITION:

Support

Health Access California (sponsor)

Access Reproductive Justice
AFSCME
Asian American Drug Abuse Program, INC.
California Association of Health Plans
California Pan - Ethnic Health Network
Community Health Councils
Health Access California
LA Care Health Plan
Maternal and Child Health Access
Orange County United Way
Small Business Majority
Thai Community Development Center
The Leukemia & Lymphoma Society
Western Center on Law & Poverty, INC.

Opposition

None on file.

Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097