Summary of the CHOICE Option

The CHOICE Program is designed so that all of the health insurance options Californians presently have are retained and no one is forced to change their coverage. However, CHOICE offers Californians a new option that is designed to meet their preferences as patients, health care providers, and employers. The CHOICE Program was developed based on experiences over the last 40 years under private fee-for-service and managed care systems, as well as under the Medicare and Medi-Cal programs.  Every effort has been made to retain those features of these systems and programs that foster the underlying goals of security, equity, liberty and efficiency and to eliminate those features that are contrary to achieving these goals.  The economic incentives in the CHOICE Program are designed in such a way that nearly all employers and more than 70% of non-elderly Californians will elect to enroll and get their coverage through CHOICE.  The CHOICE Program is estimated to result in coverage for 94.4% of all Californians of all ages, regardless of their legal status. [1]

         The key principles embedded in the CHOICE Program are the following:

1.  Everyone pays their fair share of health insurance costs and only what they can afford.
2. Administrative waste and associated costs are reduced and administrative processes are simplified and made more rational.
3.  Individuals, employers, and health care providers have freedom in their selection of health care systems and type of health insurance.
4. Comprehensive coverage is provided to ensure access to high quality health care.
5. Benefit design places the greatest importance on prevention and management of disease and disability, steering patients to centers of excellence for their acute care needs, and limiting out-of pocket costs that act as barriers to receiving needed care.
6.  Health care providers receive reasonable and fair payments for the services they deliver in an effort to retain and recruit the best health care professionals for Californians.
7. Medical care decision-making is returned to health care professionals and their patients, while health care providers are held accountable for the care they deliver.

Thus, the CHOICE Program will reform California’s health care system through the voluntary actions of individuals, employers, and health care providers based on their preferences and economic incentives. The CHOICE Program involves no state mandates of individuals, no regulation of employer-sponsored health benefits, no new Federal waivers, no additional Federal funding, and no ERISA waiver. Rather, it restructures current payment mechanisms and adds new choices such that 94.4% of all Californians will have comprehensive, affordable health insurance coverage, with access to high quality health care services that promote their health, within one year of implementing the CHOICE Program. [2]

 

All Californians who elect to enroll in CHOICE will have two major options for affordable, comprehensive health insurance coverage:

1)    to get their medical care from any licensed health care professional or facility that contracts with the statewide CHOICE fee-for-service network for provision of covered services.  Providers may elect to participate in the CHOICE Network or not.

2)    to enroll in any state licensed organized delivery system (ODS) including group model HMOs, County Organized Health Systems (COHS), or Local Initiative (LI) plans that contract with the CHOICE Program. Eligible ODS may elect to participate in CHOICE or not. Health insurance carriers and health plans will be offered state tax incentives to partner with large multi-specialty groups in exclusive arrangements to create new ODS.

 

The Major Risk Medical Insurance Board (MRMIB) will administer the CHOICE Program. The program is fully funded. Existing sources of financing include: the State and Federal share-of-cost for those who are eligible under Healthy Families and Medi-Cal; state funding for those who are eligible under MRMIP (Major Risk Medical Insurance Program) and AIM (Access for Infants and Mothers Program), 80% of the savings in the State’s and counties’ direct subsidies for indigent medical care (does not include federal DSH payments) resulting from insurance coverage of those who were previously uninsured.  This will result in an increase in per capita State funding of indigent care programs for the remaining uninsured population.  New sources of financing include a wage-based, capped monthly premium (for those who choose to enroll), a quarterly employer payroll tax that varies by firm size (and is refundable for employees who are covered under the employer’s plan), three public health taxes ($1 tax increase per pack of cigarettes, an increase in the surcharge on motor vehicle fines, a ten cent tax per 12-ounce can of soda), an 0.25% increase in the sales tax, a 1.25% increase in the state income tax, and funding from the proposed NAFTA Social Integration Fund to help finance health insurance coverage under CHOICE for Mexican citizens who reside and work in California.

 

Summary of the
Cal-Health Option  

The Cal-Health option is based on Assembly Bill 32 (AB 32), which was introduced by Assembly Member Richman, Senator Figueroa, and Assembly Member Chan in December 2000. In 1999, 66% of California’s uninsured were in families with annual incomes below 250% of the federal poverty level, representing 4.5 million Californians.  Cal-Health will increase eligibility for health insurance coverage for all Californians with incomes below 250% of poverty, and will make private insurance more affordable for persons with incomes above 250% of poverty by permitting health plans to offer a low-cost standard uniform benefit package (SUBP) in the individual and small group market.  

Objectives and Target Populations: The objectives of Cal-Health are:

1) To provide the uninsured with an easy, one-step streamlined process for enrolling in health insurance by coordinating the administrative functions of Healthy Families and Medi-Cal and providing for accelerated enrollment in these programs under Cal-Health. Existing Medi-Cal and Healthy Families income and resource methodologies, other eligibility rules and applications, enrollment, retention and seamless bridging procedures will be simplified, streamlined, and coordinated under Cal-Health.

2) To target outreach through schools and health care facilities. Every pre-school and public elementary and secondary school will inform the parent or primary care taker of every enrolled child at least once a year about Cal-Health and an application may be submitted at the school. All licensed hospitals, clinics and other health care facilities will inform all uninsured patients seen or admitted about Cal-Health and may enroll them at the site of care using an automated enrollment system with paperless verification. Providers who enroll uninsured adults and children at the point of service will be reimbursed for services. It is estimated that the state will realize approximately $94 million in administrative savings from accelerated enrollment. [1]

3) To expand eligibility to parents under the Healthy Families program to those with family incomes between 200% FPL and 250% FPL. If fully implemented in 2002, it is estimated that 66,000 parents would newly enroll along with 51,000 of their children. [2]

4) To create an standard uniform benefits package (SUBP) that will be more affordable than the current products available in the market, which private carriers may sell in the individual market for those with incomes above 250% of poverty and to small businesses. (50 or fewer employees). It is estimated that 59,000 Californians would be newly covered by the SUBP. [3]

5) To expand coverage to low-income, non-custodial adults through the Medi-Cal program for persons with incomes at or below 133%of FPL and who are not currently eligible for other programs, and through Healthy Families for persons with incomes between 133% and 250% of FPL and who are not currently eligible for other programs. If the federal waiver is approved, 1.7 million Californians would be newly covered by this expansion.  

Eligibility: There will be NO assets test for adults and children in Cal-Health. Persons covered by employer-sponsored health insurance in the six months prior to application for coverage will not be eligible for Cal-Health.

Administration and State Regulation: The state will administer the Cal-Health program and will coordinate Cal-Health with Healthy Families and Medi-Cal. Cal-Health will create a single, simplified and streamlined process for the determination of eligibility and enrollment with one portal for entry for all Californians eligible for either program, which will reduce administrative costs. There are two major Federal and State legal or regulatory changes that are required to implement the Cal-Health program. The first is that the state will need a federal waiver to expand the Healthy Families program to parents with incomes up to 250% of FPL.  Second, the state will need to obtain approval for a unique federal waiver request that would waive the long-standing requirement of budget neutrality to the federal government to expand Medi-Cal and Healthy Families to low-income non-custodial adults.  In addition, by expanding eligibility for the Medi-Cal program, which is currently determined by the counties, this option imposes a state-mandated local program by expanding the scope of those duties.  

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Health Benefits: Persons enrolled in Healthy Families will have health care coverage for the services mandated by the Healthy Families program. Similarly, persons enrolled in Medi-Cal will have access to the health care services mandated by the Medi-Cal program. Persons who purchase private coverage with the SUBP will have coverage for hospitalization, outpatient visits, preventive care, ambulance services, dialysis care, maternity care, mental health care, emergency and out-of-area care, family planning, hospice care, health education, imaging, lab tests and special procedures, reconstructive surgery, and transplants. In addition, coverage with limits will be offered for physical, occupational and speech therapy, multidisciplinary rehabilitation, and home health care. Two SUBPs will be offered: one for persons who are 19-34 years, which reflects their lower health care needs and utilization, and one for persons who are 35-64, which reflects their greater health care needs and utilization.  

Financing Mechanisms: Financing for this option will come from both the state and federal governments for Medi-Cal and Healthy Families.  As the previously uninsured population enrolls in Cal-Health, 70% of the average per capita cost of safety net funding for medical care per uninsured person will be transferred to help finance the state and federal share of Cal-Health (this will not include Federal DSH funds). Over time, the funding levels for the safety net to provide care to uninsured persons will increase as it retains both its current funding levels for persons who remain uninsured plus 30% of the funding from those who were previously uninsured and have enrolled in Cal-Health.  Over time, this option assumes that the State’s need to directly subsidize the health care safety net providers, including county health programs, community clinics, and DSH hospitals, will decline and that these providers will receive a more stable and generous source of revenue through insurance payments, as Cal-Health will significantly increase the number of previously uninsured individuals seeking medical care in these facilities.  

Impact of Cal-Health on Costs and Coverage: If the federal waiver for non-custodial adults is NOT approved, Cal-Health will extend new coverage to 444,000 Californians at a net savings to the state of $40 million. [4]   If the federal waiver for non-custodial adults IS approved, Cal-Health will extend new coverage to 2.12 million Californians at a total net cost to the state of $857 million. [5]