California Becomes First State To Create Health Benefit Exchange

On Thursday, Gov. Arnold Schwarzenegger (R) signed two bills that will make California the first state to establish a health insurance exchange under the federal health reform law, the San Francisco Chronicle reports.

Thursday was the last day for the governor to sign and veto all pending legislation.

AB 1602, by Assembly Speaker John Pérez (D- Los Angeles), and SB 900, by Sen. Elaine Alquist (D- Santa Clara), will provide the foundation for the California Health Benefit Exchange. The exchange will offer a marketplace of health insurance options for individuals and small businesses, as required under the federal reform law (Colliver/Lagos, San Francisco Chronicle, 10/1).  

During a phone call on Wednesday, President Obama encouraged Schwarzenegger to sign the companion bills so California's insurance exchange could begin operating by the January 2014 federal deadline (Calvan, Sacramento Bee, 10/1).

Details on California Exchange

California's health insurance exchange is likely to be the largest exchange operated by a single state, with as many as 8.3 million residents expected to be eligible for coverage.

The exchange will provide consumers with a marketplace of insurance plans through a website that will provide standardized, detailed information about the plans and offer a toll-free number to help consumers understand their options.

In accordance with federal requirements, California's exchange will offer health plans in five categories, ranging from catastrophic coverage for young adults to high-end plans with extensive benefits. The exchange also will provide resources to connect eligible Californians to federal subsidies for health coverage or government programs such as Medi-Cal, California's Medicaid program (California Healthline, 8/26).

The program is expected to bring as much as $10 billion in subsidies for California over a 10-year period.

Oversight Board

AB 1602 and SB 900 also established an independent, five-member board to oversee California's exchange (Sacramento Bee, 10/1). The board will select health insurers to participate in the exchange and determine the process for enrolling Californians in the program.

Schwarzenegger will select two board members before his term ends and the Legislature will appoint the remaining members (Hindery, AP/Ventura County Star, 9/30);

For additional coverage of the California Health Benefit Exchange, see today's feature article and Capitol Desk post.

Other Approved Health Care Bills

Schwarzenegger signed several additional health care-related bills, including:

  • SB 1088, by Sen. Curren Price (D- Los Angeles), which allows young adults to retain coverage under their parents' health insurance plan until age 26;
  • AB 2244, by Assembly member Mike Feuer (D- Los Angeles), which prohibits health plans from denying coverage to children with pre-existing health conditions;
  • AB 2470, by Assembly member Hector De La Torre (D- South Gate), which bars health insurers from rescinding a member's health insurance coverage except in cases where fraud or intentional misrepresentation has occurred (Sacramento Bee, 10/1);
  • SB 1163, by Sen. Mark Leno (D- San Francisco), which requires independent actuaries to review and certify health insurers' rate filings to ensure that premium costs are calculated accurately and that all proposed rate hikes are posted on insurer and state websites;
  • AB 2345, by De La Torre, which requires all health plans to cover certain preventive services with no cost-sharing (Office of the Governor release, 9/30);
  • AB 52, by Assembly member Anthony Portantino (D- La Cañada Flintridge), which allows parents to voluntarily donate umbilical cord blood that could help treat cancer and other illnesses (Ferriss, "Capitol Alert," Sacramento Bee, 9/30); and
  • AB 2541, by Assembly members Portantino and Nathan Fletcher (R-San Diego), which provides additional tools for California to improve its HIV/AIDS surveillance activities and apply for federal Ryan White CARE Act funds (AIDS Healthcare Foundation release, 9/30).

Vetoed Pension-Related Bills

Meanwhile, Schwarzenegger vetoed pension-related bills that were introduced following public outcry over compensation for public employees in the city of Bell.

The governor vetoed:

  • SB 1425, by Sen. Joe Simitian (D- Palo Alto), which would have prohibited state employees covered by CalPERS and the California State Teachers' Retirement System from inflating their pensions by boosting their end-of-year salaries (McGreevy/Dolan, Los Angeles Times, 10/1); and
  • AB 1987 by Assembly member Fiona Ma (D- San Francisco), which was a companion bill to SB 1425 that also would have prohibited pension spiking.

The governor said he vetoed the measures because they do not go far enough in reforming the state pension system (AP/San Diego Union-Tribune, 9/30).


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