Assigned to FIN & HEALTH                                                                                                          FOR COMMITTEE

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

FACT SHEET FOR H.B. 2044

AHCCCS: premium sharing program

(NOW: premium sharing tax credit; eligibility)

Purpose

Establishes a Premium Sharing Program (Program) to provide a subsidized health insurance premium to certain low-income individuals and individuals with chronic health conditions.  Allows health insurers that provide reduced-cost health insurance to Program enrollees to take a tax credit against their premium tax liability.  Limits the total tax credits in any calendar year to $20 million.

Background

            The original Premium Sharing Program (PSP) in the Arizona Health Care Cost Containment System (AHCCCS), was established in 1996 and began as a pilot program that operated in Maricopa, Pima, Pinal and Cochise counties to provide low-cost health insurance for individuals who earned too much to be eligible for AHCCCS entitlement programs, were not otherwise able to afford private insurance and did not receive insurance through their workplace (Laws 1996, Chapter 368).  Enrollment in the program began February 1, 1998.  PSP was made a permanent program and expanded statewide October 1, 2001 (Laws 2001, Chapter 385). 

            A PSP enrollee was required to be without insurance for at least 30 days, could not be a Medicare recipient and had a gross income of at or below 200 percent of the federal poverty level (FPL).  Although insurance premiums were subsidized by the state, the members were required to pay a percentage of the premium as well as a copayment for services.  Premiums were capped at six percent of the household income.  In addition, a maximum of 200 persons who had specific chronic illnesses and income up to 400 percent of FPL were authorized to enroll in PSP but were required to pay the full premium amount. 

            The PSP was terminated during the 2003 legislative session.  According to AHCCCS, at the time of termination, there were 2,099 persons enrolled in PSP.  Earlier PSP enrollment had been higher than that figure, however, some enrollees had transferred into the KidsCare Parents program upon its inception.

            H.B. 2044 establishes a Premium Sharing Program with most of the same requirements that existed in the original PSP, including an oversight committee and required reporting.  The new Program, however, is limited to individuals in rural counties and caps enrollment for individuals with chronic conditions at 100 persons.  In addition, H.B. 2044 does not provide direct funding to AHCCCS to administer or operate the program. 

            The bill does, however, provide a tax credit against a health insurer’s premium tax liability to a health insurer who offers a premium at a reduced price to a person enrolled in the Program.  Premium taxes for health insurers are equal to two percent of the net premiums or charges paid by enrollees.  The total amount of tax credits in any given year is capped at $20 million but the bill does not specify how the cap is administered.  In addition, the amount of the credit is not specified and there is no maximum credit amount for an individual insurer.  It is unclear whether this tax credit constitutes the required state subsidy for the premiums.

            The fiscal impact to the state General Fund is unknown.  The tax credit is capped at $20 million but it is unknown how many insurers will claim the credit.  In addition, the AHCCCS Administration estimates the program would require $800,000 million in administrative costs (the average administration cost for the PSP was $643,000).  There is no appropriation in the bill for AHCCCS administrative costs.

Provisions

General Program Structure

1. Requires the AHCCCS Administration, beginning October 1, 2006, to contract with willing health insurers to provide a subsidized health insurance premium to persons who are eligible for the Program.

2. Establishes the following eligibility requirements for a person enrolling in the Program:

a) is uninsured.

b) has household income of up to 200 percent of the federal poverty guidelines or 400 percent of the federal poverty guidelines if the person has a chronic condition, excluding chronic conditions caused by alcohol, drug or chemical abuse.

c) is a resident of Arizona and a U.S. citizen or qualified alien.

d) submits an application.

e) demonstrates that he or she did not voluntarily discontinue health insurance in the 30 days prior to applying.

f) agrees to pay the required share of the premium for the Program.

g) agrees to cooperate in income verification by the AHCCCS Administration.

h) is not eligible for Medicare or benefits through the Veteran’s Administration.

i) is not eligible for AHCCCS, the KidsCare Program or the Arizona Long Term Care System, except for women receiving family-planning services only.

3. Requires the AHCCCS Administration to enroll eligible persons and family members and assess premiums and copayments.

4. Provides the AHCCCS director with full operational authority and administrative responsibility to implement the program and requires the director to establish rules to:

a) contract with health insurers who agree to provide a reduced premium to enrollees.

b) establish an application process that defines gross household income.

c) establish a redetermination process that occurs at least once a year.

d) define a chronic condition.

e) establish the chronic condition cap and a process for the waiting list.

f) establish an aggressive disenrollment process for enrollees who default on paying premiums or who do not comply with program requirements.

g) establish a grievance and appeals process that conforms with the current AHCCCS process.

h) define the scope of services, including: a) cornea and kidney transplants for persons with incomes up to 200 percent of federal poverty guidelines; b) all transplants currently covered by AHCCCS, for persons with incomes between 200 percent and 400 percent of federal poverty guidelines; c) medically necessary breast reconstructions following a mastectomy performed by a contractor; and d) a prohibition on using pregnancy as a preexisting condition.

Persons with Chronic Conditions

5. Limits the number of persons with chronic conditions that are enrolled in the Program to 100 persons.

6. Includes an individual who is enrolled in the Program who subsequently develops a chronic condition in the cap but excludes individuals who had a chronic condition and subsequently recovered.

7. Establishes a waiting list for persons with chronic conditions when the cap is reached.

Enrollee Cost Sharing

8. Requires enrollees to pay copayments upon delivery of services and allows providers to withhold nonemergency services for nonpayment of the copayments.

9. Requires enrollees to pay a monthly subsidized premium and requires the AHCCCS Administration to establish premium costs based on the enrollee’s gross household income and household size. 

10. Limits the premium for households with incomes up to 200 percent of federal poverty guidelines to six percent of the enrollee’s gross household income. 

11. Requires enrollees who have chronic conditions and household incomes between 200 percent and 400 percent of federal poverty guidelines to pay the full premium; prohibits a direct state subsidy for those individuals.

Oversight Committee and Reporting Requirements

12. Establishes a Premium Sharing Oversight Committee (Committee) and prescribes its membership.

13. Requires the Committee to review the capitation rates, premiums and copayments established by the Administration and to submit an annual report on its recommendations and observations to the Governor, President of the Senate and Speaker of the House, with copies to the Secretary of State, the Director of the Arizona State Library, Archives and Public Records and the Director of the Legislative Council.

14. Requires the AHCCCS Administration to report semiannually to the Committee and submit the report to the Governor, President of the Senate and Speaker of the House, the Secretary of State, the Arizona State Library, Archives and Public Records and the Director of the Legislative Council.

15. Requires the Director of the Legislative Council to report semiannually to the Committee on:

a) a review of the medical costs and premiums charged.

b) an analysis of client satisfaction.

c) enrollment information, including average income of the enrollee.

d) annual medical service expenditures.

e) total monies collected from enrollees.

f) information necessary to evaluate the effectiveness of the Program.

Premium Tax Credit

16. Allows a health insurer to take a tax credit against the insurer’s premium tax liability for offering a premium at a reduced price to a Program enrollee. 

17. Requires a health insurer to notify the AHCCCS Administration within 30 days of enrolling the individual of the amount of the premium the insurer intends to claim.

18. Limits the total tax credits claimed in any calendar year to $20 million.

19. Requires AHCCCS to cap program enrollment to not exceed the costs equal to the x tax credits taken by health insurers.

20. Defines health insurer as a disability, group disability or blanket disability insurer, a health care services organization, accountable health plan, medical service corporation or hospital, medical, dental and optometric service corporation.

Miscellaneous

21. Ends the Program on September 30, 2016.

22. Becomes effective on the general effective date.

House Action

HEALTH        2/8/06      DPA/SE      9-0-0-0

FII                   2/20/06    DPA/SE      9-0-0-0

3^rd Read           3/13/06                        49-11-0

Prepared by Senate Research

March 23, 2006

BKL/ac