CA Assembly Makes Further Changes to Health Care Legislation

August 23, 2007 ( - California employers might have to offer health coverage or contribute 7.5% to a state-run purchasing pool sooner than they thought, according to further amendments to pending legislation.

The bill ( A.B. 8 ) was amended for the seventh time on August 20 in the Assembly, and will move up the date employers will have to abide by the rules to January 1, 2009.

President Pro Tem Don Perata must now reconcile the two versions of the bill before sending it off to Governor ArnoldSchwarzenegger. Perata unveiled his version of the proposal in December 2006, which would give employers a choice of providing health insurance to their employees or contributing to a state purchasing pool – dubbed the Connector – that would then negotiate the best health coverage rates (See Legislation Threatens to Force CA Employers to Pay for Health Care  and  CA Senator Proposes Worker Health Care Plan).

It must clear both houses of the Legislature by September 14, the last day of the regular legislative session.

The most recent amendments say that employers would be required to actually begin purchasing coverage for their workers by October 1, 2009, or pay into the California Cooperative Health Insurance Purchasing Program (Cal-CHIPP). The pool will be administered by the Major Risk Medical Insurance Board (MRMIB).

Some of the amendments to the measure include:

  • Cal-CHIPP must provide three “uniform benefit plan designs” that include various benefit levels, deductibles, co-insurance factors or co-payments and annual limits on out-of-pocket expenses.
  • Revenues would be deposited into the California Health Trust Fund created under A.B. 8, titled the California Health Care Reform and Cost Control Act.
  • MRMIB would be able to provide prescription drug coverage for Cal-CHIPP enrollees by contracting with health plans or insurers, pharmacy benefits managers, or by purchasing medications directly through the state’s prescription drug purchasing program.

The amendments also require employers to set up a cafeteria plan under Section 125 of the Internal Revenue Code (See   IRS Puts Out Updated Cafeteria Benefit Plan Proposed Regs ). This would allow employees to pay premiums for coverage to the extent that those payments can be excluded from the employee’s gross income. Failure to set up a cafeteria plan would come at a $100 penalty for each employee and $500 fine if the employer willfully refuses to offer the plan.

The amendments also force California employers to file quarterly returns with the state’s Employment Development Department (EDD) reporting wages and health expenditures for the prior quarter. Employers paying into purchasing pool would be required to continue doing so for a minimum of two years.