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Created in 1990, MRMIB’s initial mission was to advise California lawmakers on strategies for reducing the number of uninsured persons in the state. Its volunteer board members oversee several worthwhile programs such as Access for Infant and Mothers, Healthy Families and the Major Risk Medical Insurance Plan for otherwise uninsurable individuals. (The MRMIB web site has more information on the Board and its programs).
But this influence on the state’s well being is nothing compared to what MRMIB would exert if Assembly Bill 8 (Nunez) becomes law. AB 8 gives MRMIB amazing new powers even Peter Parker would envy. Here’s how:
- Under AB 8 MRMIB would manage a new program, the California Cooperative Health Insurance Purchasing Program (Cal-CHIPP).
- AB 8 requires employers to spend at least 7.5 percent of their Social Security wages on health benefits for full-time and part-time employees. (Social Security wages caps the payroll calculation at $97,500 for each employee in 2007). Instead of obtaining coverage in the open market, employers can pay the state a fee equal to 7.5 percent of their Social Security wages. Their workers would then be required to enroll for health coverage in Cal-CHIPP.
- AB 8 empowers MRMIB to increase this 7.5 percent fee (some call it a tax, but that’s not important for the purposes of this post) if it determines there is a need to do so and by however much it deems necessary. This may seem like a startling abdication of authority by the Legislature, but it’s fairly common for state agencies to have the authority the fees for programs they manage.
What’s different about this situation is the magnitude of the dollars involved. The 7.5 percent levy is expected to raise over $7.4 billion annually. Significantly, as noted in earlier posts , the need for an increase to the fee is likely to arise almost immediately upon the launch of Cal-CHIPP. So MRMIB is likely to be flexing its new economic superpowers very quickly.
And superpowrs they are. Because when MRMIB adjusts the fee for employers participating in Cal-CHIPP it automatically increases the percentage of payroll non-participating firms need to spend on health-related benefits.
Think about that. Let’s say the 7.5 percent fee was sufficient to support Cal-CHIPP (it’s not, but let’s pretend). MRMIB, however, decides to increase benefits or make other changes which require additional revenues. It can then unilaterally raise the fee to be paid the pool and that will increase the percentage of payroll companies outside the pool have to spend on health care benefits.
Never mind that those companies might prefer to spend this money on increased wages, research and development, capital investment, or increasing profits. If MRMIB says more needs to be spent on health care, other purposes have to take a back seat. Unions don’t have this power. The Legislature isn’t asking for this power. But under AB 8 the volunteer members of the Managed Risk Medical Insurance Board would have this power.
Does AB 8 require MRMIB to take into account the effect its fee increase will have on the state’s economy? Or how it will impact state revenues? Or whether the increase will discourage job creation? Or whether it will drive businesses from the state? Does it need to consult with the Department of Finance? Does it need to consult with anyone?
No. The only factor MRMIB needs to consider is the amount of revenue it needs to support Cal-CHIPP.
If I’m missing something here, or misread the bill, I hope someone will correct me. Because the way it looks to me, AB 8 is making MRMIB more than just a strategist for decreasing the number of uninsured Californians. It makes the agency a mini-Federal Reserve Board of Governors. Hmm, do you think Alan Greespan would volunteer to serve?
Note: AB 8 was amended on August 20th. It appears MRMIB can only make a change to the fee/spending percentage only once a year, not as often as it wants to as I previously posted. I’ve edited this post to reflect this.