|Budget Issue:||Positions to implement the California Health Benefit Exchange|
|Program:||Department of Insurance|
|Finding or Recommendation:||Reconsider request during the May Revise, rather than at this time. There will likely be more information on both the number carriers under CDI's authority and the level of funding from the Exchange to CDI for these activities.|
Governor's Proposal. The Governor's budget for 2013-14 provides $947,000 from the Insurance Fund to the California Department of Insurance (CDI) for staff to implement the California Health Benefit Exchange (exchange). Specifically, it provides (1) $113,000 for one permanent attorney and (2) $834,000 for seven limited-term attorneys in 2013-14 (the seven attorneys positions would be reduced to 3.5 positions in 2014-15). Chapter 659, Statutes of 2010 (SB 900, Alquist) created the exchange and requires CDI along with the Department of Managed Health Care (DMHC) to review the federal internet portal prior to January 2015 to determine its adequacy. Chapter 655, Statutes of 2010 (AB 1602, Perez) requires carriers that contract with the exchange must have a certificate of authority from either CDI or the Department of Managed Health Care (DMHC).
Certification Workload May Be Overestimated and Funding Uncertain. Based on our review of the Governor's proposal, the department may be overestimating its workload associated with certifying carriers with the exchange. CDI projects it will certify 20 carriers. Based on initial interest, a maximum of 33 carriers will contract with the exchange, and it is likely a majority of these carriers will be certified by DMHC. Therefore, less than the projected 20 carriers may be under CDI’s authority. In addition, we note that CDI and the exchange are in the process of finalizing an agreement that will likely include reimbursements from the exchange to CDI for its certification workload. Therefore, it is likely CDI will recive funding for the positions which is not taken into account in the proposal. At the time of the May Revise, there will be better information on the number of carriers under CDI's authority and the level of funding from the exchange for the required workload.
LAO Recommendation. In view of the above, we recommend the Legislature wait until the May Revise to consider the Governor's proposal, rather than consider the proposal at this time. We also recommend that the Legislature direct CDI to report at budget hearings on the level of funding from the exchange for the required workload and the number of carriers under CDI's authority.