Health Omnibus Bill: Individual Mandate, Insurance Subsidies for up to 600% of FPL, Changes in Actuarial Value, Managed Care Organization Tax, Drug Rebate Fund, Advisory Group on Medi-Cal Pharmacy Benefits, Value Based Payments –

Among other things, this bill would create the Minimum Essential Coverage Individual Mandate to require an individual who is a California resident to ensure that the individual, and any spouse or dependent of the individual, is enrolled in and maintains minimum essential coverage for each month beginning on and after January 1, 2020, except as specified. The bill would require the Exchange to grant exemptions from the mandate for reason of hardship or religious conscience, and would require the Exchange to establish a process for determining eligibility for an exemption. The bill would impose the Individual Shared Responsibility Penalty for the failure to maintain minimum essential coverage, as determined and collected by the Franchise Tax Board, in collaboration with the Exchange, as specified. The bill would require the Franchise Tax Board to provide specified information to the Exchange regarding individuals who do not maintain minimum essential coverage, and would require the Exchange to conduct annual outreach and enrollment efforts with those individuals. The bill would require an applicable entity, as defined, that provides minimum essential coverage to an individual to file specified returns to the Franchise Tax Board regarding that coverage, as prescribed. Until January 1, 2023, the bill would create Individual Market Assistance, which would be authorized to provide health care coverage financial assistance to California residents with household incomes at or below 600% of the federal poverty level, including advanced premium assistance subsidies. The bill would authorize a health care service plan or health insurer to cancel a contract or policy for nonpayment after a 3-month grace period if the individual receives that advanced premium assistance subsidy or advance payments of the federal premium tax credit, but would require a plan or insurer to provide health care coverage for the first month of the grace period and to return the subsidy and tax credit for the 2nd and 3rd months of the grace period if the outstanding premiums are not paid. Because a willful violation of the bill’s requirements relative to health care service plans would be a crime, the bill would impose a state-mandated local program. The bill would also expand the purposes of the California Health Trust Fund to include the Exchange’s operational costs of the Minimum Essential Coverage Individual Mandate and Individual Market Assistance. By expanding the purposes of a continuously appropriated fund, the bill would make an appropriation.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, which provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime, and similar provisions of the Insurance Code, which provide for the regulation of health insurers by the Department of Insurance, prohibit the actuarial value for a nongrandfathered individual or small employer health plan or health insurance policy from varying by more than plus or minus 2%. This bill would instead authorize the actuarial value for a nongrandfathered bronze level high deductible health plan or health insurance policy to range from plus 4% to minus 2%. Because a willful violation of the bill’s requirements relative to health care service plans would be a crime, the bill would impose a state-mandated local program.

Under existing law, one of the methods by which Medi-Cal services are provided is pursuant to contracts with various types of managed care plans. Existing law imposes a managed care organization provider tax, which is administered by the State Department of Health Care Services, on licensed health care service plans, managed care plans contracted with the department to provide Medi-Cal services, and alternate health care service plans, as defined. Existing law terminates that tax on July 1, 2019. This bill would declare the intent of the Legislature to enact a managed care organization provider tax in California. The bill would make collection of the tax and the associated revenue contingent upon receipt of approval from the federal Centers for Medicare and Medicaid Services.

Existing law authorizes the State Department of Health Care Services, among other things, to enter into contracts with certain drug manufacturers that provide for state rebates for purposes of the Medi-Cal program. Under existing law, the department is entitled to various drug rebates, including federal rebates in accordance with certain conditions, and drug manufacturers are required to calculate and pay interest on late or unpaid rebates. This bill would establish the Medi-Cal Drug Rebate Fund in the State Treasury, and would provide that nonfederal moneys collected by the department and deposited into the account be continuously appropriated for purposes of funding the nonfederal share of health care services provided under the Medi-Cal program. The bill would authorize the Controller to use any money in the fund for cashflow loans to the General Fund, as specified. By establishing a continuously appropriated fund, the bill would make an appropriation.

Existing law requires the State Department of Health Care Services to consult with the Medi-Cal Contract Drug Advisory Committee regarding contract drugs under the Medi-Cal program. This bill would require the department to convene an advisory group to receive feedback on the changes, modifications, and operational timeframes regarding the implementation of pharmacy benefits offered in the Medi-Cal program.

Existing law, the California Healthcare, Research, and Prevention Tobacco Tax Act of 2016, or Proposition 56, which was approved by voters at the November 8, 2016, statewide general election, increases taxes imposed on distributors of cigarettes and tobacco products and allocates a specified percentage of those revenues to the department to increase funding for the Medi-Cal program, in a manner that, among other things, ensures timely access, limits specific geographic shortages of services, or ensures quality care. Existing law establishes the Healthcare Treatment Fund for this purpose. This bill would require the State Department of Health Care Services to develop value-based payment (VBP) programs that would require designated Medi-Cal managed care plans to make incentive payments to qualified network providers, aimed at improving behavioral health integration, prenatal and postpartum care, chronic disease management, and quality and outcomes for children, for the purpose of improving care for some of the most vulnerable or at-risk populations in the Medi-Cal managed care delivery system. The bill would require the department to implement the VBP programs for a period no shorter than 3 fiscal years, effective no earlier than July 1, 2019. The bill would condition program implementation on receipt of any necessary federal approvals, availability of federal financial participation, and an appropriation of moneys to the department in the annual Budget Act from the Healthcare Treatment Fund in accordance with Proposition 56. The bill would authorize the department to implement these provisions by means of plan letters or other similar instructions, and by entering into exclusive or nonexclusive contracts, or amending existing contracts, on a bid or negotiated basis.