BILL NUMBER: AB 124 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 16, 2015
INTRODUCED BY Committee on Budget (Weber (Chair), Bloom, Bonta,
Campos, Chiu, Cooper, Gordon, Jones-Sawyer, McCarty, Mullin,
Nazarian, O'Donnell, Rodriguez, Thurmond, Ting, and Williams)
JANUARY 9, 2015
An act relating to the Budget Act of 2015.
An act to amend Sections 22775, 22781, 22844, 22865, 22866, and
22940 of, to add Section 22843.1 to, and to repeal Section 12439 of,
the Government Code, relating to state government, and making an
appropriation therefor, to take effect immediately, bill related to
the budget.
LEGISLATIVE COUNSEL'S DIGEST
AB 124, as amended, Committee on Budget. Budget Act of
2015. State government.
(1) The Public Employees' Medical and Hospital Care Act (PEMHCA),
which is administered by the Board of Administration of the Public
Employees' Retirement System, governs the funding and provision of
postemployment health care benefits for eligible retired public
employees and their families. PEMHCA defines "family member" for
these purposes. PEMHCA authorizes the board to contract with carriers
offering health benefit plans and prohibits employees, annuitants,
and their family members who are eligible for Medicare, as specified,
from enrolling in a basic health benefit plan. PEMHCA requires the
board to make certain notifications and reports to the Legislature in
connection with health benefit plans offered pursuant to its
provisions.
This bill would clarify the definition of family for the purposes
of PEMHCA by specifically excluding former spouses and former
domestic partners. The bill would require the employing office, as
specified, of a state employee or state annuitant, pursuant to
standards established by the Department of Human Resources, to
possess documentation verifying eligibility of an employee's family
member prior to the enrollment of a family member in a health benefit
plan and to verify continued eligibility pursuant to a specified
schedule. The bill would prohibit the board from granting further
exceptions to the rule against enrolling in employees, annuitants,
and their family members who are eligible for Medicare, as specified,
in a basic health benefit plan. The bill would revise the entities
to which the board is required to provide notification of approval of
proposed benefit and premium readjustments to exclude the
Legislature as a whole and to instead require provision of an initial
estimate of proposed changes in writing to the Joint Legislative
Budget Committee, the chairpersons of the committees and
subcommittees in each house of the Legislature that consider the
Public Employees' Retirement System's budget and activities, the
State Controller, the Director of Finance, and the Legislative
Analyst. The bill would specify the latest date that this
notification may take place. The bill would require the board to
provide a specified, detailed report to the Legislature and the
Director of Finance annually, on November 1, regarding the health
benefit plans it provides.
(2) PEMHCA establishes the Annuitants' Health Care Coverage Fund,
which is continuously appropriated for the purpose of prefunding of
health care coverage for annuitants, including administrative costs.
PEMHCA defines "prefunding" for these purposes.
This bill would prohibit the use of certain state funds in the
Annuitants' Health Care Coverage Fund for the payment of benefits
until the earlier of 2 specified dates. The bill would revise the
definition of prefunding to include employee as well as employer
payments and to provide that payments may fund the actuarially
determined normal costs of postemployment health care benefits. By
providing a new funding source for a continuously appropriated fund,
this bill would make an appropriation.
(3) Existing law prescribes the duties of the Controller, which
generally regard supervision of the fiscal concerns of the state.
Existing law requires the Controller to abolish a state position that
is vacant for 6 consecutive monthly pay periods on the following
July 1, and permits the Director of Finance to authorize
reestablishment of a position abolished pursuant to this authority
under certain conditions. Among other things, existing law requires
the Controller to reestablish a position abolished pursuant to this
authority if the director of the department in which that position
existed prior to abolishment makes a certification by August 15, as
specified.
This bill would repeal the provisions pertaining to vacant
positions described above.
This bill would declare that it is to take effect immediately as a
bill providing for appropriations related to the Budget Bill.
This bill would express the intent of the Legislature to enact
statutory changes relating to the Budget Act of 2015.
Vote: majority. Appropriation: no yes
. Fiscal committee: no yes .
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12439 of the
Government Code is repealed.
12439. (a) Beginning July 1, 2002, any state position that is
vacant for six consecutive monthly pay periods shall be abolished by
the Controller on the following July 1. The six consecutive monthly
pay periods may occur entirely within one fiscal year or between two
consecutive fiscal years.
(b) The Director of Finance may authorize the reestablishment of
any positions abolished pursuant to this section if one or more of
the following conditions existed during part or all of the six
consecutive monthly pay periods:
(1) There was a hiring freeze in effect during part or all of the
six consecutive pay periods.
(2) The department has diligently attempted to fill the position,
but was unable to complete all the steps necessary to fill the
position within six months.
(3) The position has been designated as a management position for
purposes of collective bargaining and has been held vacant pending
the appointment of the director, or other chief executive officer, of
the department as part of the transition from one Governor to the
succeeding Governor.
(4) The classification of the position is determined to be
hard-to-fill.
(5) Late enactment of the budget causes the department to delay
filling the position.
(c) The Controller shall reestablish any position for which the
director of the department in which that position existed prior to
abolishment certifies by August 15 that one or more of the following
conditions existed during part or all of the six consecutive pay
periods:
(1) The position is necessary for directly providing 24-hour care
in an institution operated by the state.
(2) The position is necessary for the state to satisfy any
licensing requirements adopted by a local, state, or federal
licensing or other regulatory agency.
(3) The position is directly involved in services for public
health, public safety, or homeland security.
(4) The position is being held vacant because the previous
incumbent is eligible to exercise a mandatory right of return from a
leave of absence as may be required by any provision of law
including, but not limited to, leaves for industrial disability,
nonindustrial disability, military service, pregnancy, childbirth, or
care of a newborn infant.
(5) The position is being held vacant because the department has
granted the previous incumbent a permissive leave of absence as may
be authorized by any provision of law including, but not limited to,
leaves for adoption of a child, education, civilian military work, or
to assume a temporary assignment in another agency.
(6) Elimination of the position will directly reduce state
revenues or other income by more than would be saved by elimination
of the position.
(7) The position is funded entirely from moneys appropriated
pursuant to Section 221 of the Food and Agricultural Code, was
established with the Controller pursuant to Section 221.1 of the Food
and Agricultural Code, and directly responds to unforeseen
agricultural circumstances requiring the relative expertise that the
position provides.
(d) Each department shall maintain for future independent audit
all records on which the department relied in determining that any
position or positions satisfied one or more of the criteria specified
in paragraphs (1) to (6), inclusive, of subdivision (c).
(e) The only other exceptions to the abolishment required by
subdivision (a) are those positions exempt from civil service or
those instructional and instruction-related positions authorized for
the California State University. No money appropriated by the
subsequent Budget Act shall be used to pay the salary of any
otherwise authorized state position that is abolished pursuant to
this section.
(f) The Controller, no later than September 10 of each fiscal
year, shall furnish the Department of Finance in writing a
preliminary report of any authorized state positions that were
abolished effective on the preceding July 1 pursuant to this section.
(g) The Controller, no later than October 15 of each fiscal year,
shall furnish the Joint Legislative Budget Committee and the
Department of Finance a final report on all positions that were
abolished effective on the preceding July 1.
(h) Departments shall not execute any personnel transactions for
the purpose of circumventing the provisions of this section.
(i) Each department shall include a section discussing its
compliance with this section when it prepares its report pursuant to
Section 13405.
(j) As used in this section, department refers to any department,
agency, board, commission, or other organizational unit of state
government that is empowered to appoint persons to civil service
positions.
(k) This section shall become operative July 1, 2002.
SEC. 2. Section 22775 of the Government
Code is amended to read:
22775. "Family member" means an employee's or annuitant's spouse
or domestic partner and any child, including an adopted child, a
stepchild, or recognized natural child. The board shall, by
regulation, prescribe age limits and other conditions and limitations
pertaining to children. "Family member" does not include a
former spouse or former domestic partner of an employee or annuitant.
SEC. 3. Section 22781 of the Government
Code is amended to read:
22781. "Prefunding" means the making of periodic payments by an
employer or employee to partially or completely fund
or amortize the actuarially determined normal costs or
unfunded actuarial obligation of the employer for
postemployment health care benefits provided to
annuitants and their family members.
SEC. 4. Section 22843.1 is added to the
Government Code , to read:
22843.1. (a) Pursuant to standards established by the Department
of Human Resources, the employing office of a state employee or state
annuitant shall possess documentation verifying eligibility of an
employee's or annuitant's family member prior to the enrollment of a
family member in a health benefit plan. The employing office shall
maintain the verifying documentation in the employee or annuitant's
official personnel or member file.
(b) The employing office of the state employee or state annuitant
shall obtain verifying documentation to substantiate the continued
eligibility of family members as follows:
(1) At least once every three years for the following family
members:
(A) Spouses.
(B) Domestic partners.
(C) Children and stepchildren.
(D) Domestic partner children.
(2) At least once annually for other children for whom the state
employee or state annuitant has assumed a parent-child relationship.
(c) For purposes of this section, the Public Employees' Retirement
System is the employing office of a state annuitant.
SEC. 5. Section 22844 of the Government
Code is amended to read:
22844. (a) Employees, annuitants, and family members who become
eligible to enroll on or after January 1, 1985, in Part A and Part B
of Medicare may shall not be enrolled
in a basic health benefit plan. If the employee, annuitant, or family
member is enrolled in Part A and Part B of Medicare, he or she may
enroll in a Medicare health benefit plan.
(b) Employees, annuitants, and family members enrolled in a
prescription drug plan under Part D of Medicare may
shall not be enrolled in a board-approved health
benefit plan. This subdivision does not apply to an individual
enrolled in a board-approved or offered health benefit plan that
provides a prescription drug plan or qualified prescription drug
coverage under Part D of Medicare as part of its benefit design.
(c) This section does not apply to employees and family members
that are specifically excluded from enrollment in a Medicare health
benefit plan by federal law or federal regulation.
(d) The board shall not grant any further exemptions to this
section after July 1, 2015.
SEC. 6. Section 22865 of the Government
Code is amended to read:
22865. Prior Not later than 30 days prior
to the approval of proposed benefits and
premium readjustments authorized under Section 22864, the board shall
notify provide an initial estimate of
proposed changes and costs in writing to the
Legislature, Joint Legislative Budget Committee,
the chairpersons of the committees and subcommittees in each
house of the Legislature that consider the Public Employees'
Retirement System's budget and activities, the State Controller, the
Trustees of the California State University, and
the Department of Human Resources
Resources, the Director of Finance, and the
proposed changes in writing. Legislative Analyst.
SEC. 7. Section 22866 of the Government
Code is amended to read:
22866. (a) The board shall report to the
Legislature and the Director of Finance annually, on
November 1, regarding the success or failure of each
health benefit plan. benefits
program. The report shall include, but not be limited
to, the costs to the board and to participants,
the degree of satisfaction of members and annuitants with the health
benefit plans and with the quality of the care provided, as
determined by a representative sampling of participants, and the
level of accessibility to preferred providers for rural members who
do not have access to health maintenance organizations.
following:
(1) General overview of the health benefits program, including,
but not limited to, the following:
(A) Description of health plans and benefits provided, including
essential and nonessential benefits as required by state and federal
law, member expected out-of-pocket expenses, and actuarial value by
metal tier as defined by the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the federal
Health Care and Education Reconciliation Act of 2010 (Public Law
111-152).
(B) Geographic coverage.
(C) Historic enrollment information by basic and medicare plans,
by state and contract agencies, by active and retired membership, and
by subscriber and dependent tier.
(D) Historic expenditures by basic and medicare plans, by state
and contract agencies, by active and retired membership, and by
subscriber and dependent tier.
(2) Reconciliation of premium increases or decreases from the
prior plan year, and the reasons for those changes.
(A) Description of benefit design and benefit changes, including
prescription drug coverage, by plan. The description shall detail
whether benefit changes were required by statutory mandate, federal
law, or an exercise of the board's discretion, the costs or savings
of the benefit change, and the impact of how the changes fit into a
broader strategy.
(B) Discussion of risk.
(C) Description of medical trend changes in aggregate service
categories for each plan. The aggregate service categories used shall
include the standard categories of information collected by the
board, consisting of the following: inpatient, emergency room,
ambulatory surgery, office, ambulatory radiology, ambulatory lab,
mental health and substance abuse, other professional, prescriptions,
and all other service categories.
(D) Reconciliation of past year premiums against actual
enrollments, revenues, and accounts receivables.
(3) Overall member health as reflected by data on chronic
conditions.
(4) The impact of federal subsidies or contributions to the health
care of members, including Medicare Part A, Part B, Part C, or Part
D, low-income subsidies, or other federal program.
(5) The cost of benefits beyond Medicare contained in the board's
Medicare supplemental plans.
(6) A description of plan quality performance and member
satisfaction, including, but not limited to, the following:
(A) The Healthcare Effectiveness Data and Information Set,
referred to as HEDIS.
(B) The Medicare star rating for Medicare supplemental plans.
(C) The degree of satisfaction of members and annuitants with the
health benefit plans and with the quality of the care provided, to
the extent the board surveys participants.
(D) The level of accessibility to preferred providers for rural
members who do not have access to health maintenance organizations.
(E) Other applicable quality measurements collected by the board
as part of the board's health plan contracts.
(7) A description of risk assessment and risk mitigation policy
related to the board's self-funded and flex-funded plan offerings,
including, but not limited to the following:
(A) Reserve levels and their adequacy to mitigate plan risk.
(B) The expected change in reserve levels and the factors leading
to this change.
(C) Policies to reduce excess reserves or rebuild inadequate
reserves.
(D) Decisions to lower premiums with excess reserves.
(E) The use of reinsurance and other alternatives to maintaining
reserves.
(8) Description and reconciliation of administrative expenditures,
including, but not limited to, the following:
(A) Organization and staffing levels, including salaries, wages,
and benefits.
(B) Operating expenses and equipment expenditure items, including,
but not limited to, internal and external consulting and
intradepartmental transfers.
(C) Funding sources.
(D) Investment strategies, historic investment performance, and
expected investment returns of the Public Employees' Contingency
Reserve Fund and the Public Employees' Health Care Fund.
(9) Changes in strategic direction and major policy initiatives.
(b) A report submitted pursuant to subdivision (a) shall be
provided in compliance with Section 9795.
SEC. 8. Section 22940 of the Government
Code is amended to read:
22940. (a) There is in the State Treasury
the Annuitants' Health Care Coverage Fund that is a trust fund and a
retirement fund, within the meaning of Section 17 of Article XVI of
the California Constitution. Notwithstanding
Subject to the limitation provided in subdivision (b),
notwithstanding Section 13340, all moneys in the fund are
continuously appropriated without regard to fiscal years to the board
for expenditure for the prefunding of health care coverage for
annuitants pursuant to this part, including administrative costs. The
board has sole and exclusive control and power over the
administration and investment of the Annuitants' Health Care Coverage
Fund and shall make investments pursuant to Part 3 (commencing with
Section 20000).
(b) (1) Moneys accumulated in the designated state subaccounts of
the fund, or a successor fund, that are derived from investment
income shall not be used to pay benefits for state annuitants and
dependents until the earlier of:
(A) With regard to a particular designated state subaccount, the
date the funded ratio of the designated state subaccount reaches at
least 100 percent as determined in that employer's postemployment
benefits actuarial valuation and then only for the purpose of paying
benefits for state annuitants and dependents associated with that
subaccount.
(B) July 1, 2046.
(2) For purposes of this subdivision, "designed state subaccount"
means a separate account maintained within the fund to identify
prefunding contributions and assets attributable to a specified state
collective bargaining unit or other state entity for the purpose of
providing benefits to state annuitants and dependents associated with
a specified collective bargaining unit or other state entity.
(3) This subdivision shall not be construed as prohibiting an
alternative funding strategy agreed to in a written memorandum of
understanding.
SEC. 9. This act is a bill providing for
appropriations related to the Budget Bill within the meaning of
subdivision (e) of Section 12 of Article IV of the California
Constitution, has been identified as related to the budget in the
Budget Bill, and shall take effect immediately.
SECTION 1. It is the intent of the Legislature
to enact statutory changes relating to the Budget Act of 2015.