BILL ANALYSIS
AB 23
Page 1
Date of Hearing: March 24, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 23 (Jones and Fletcher) - As Amended: March 19, 2009
SUBJECT : Cal-COBRA: premium assistance.
SUMMARY : Requires health plans and health insurers (health
plans) to provide notice to qualified beneficiaries eligible for
premium assistance for Cal-COBRA coverage pursuant to the
federal American Recovery and Reinvestment Act of 2009 (ARRA) of
the availability of that assistance. Authorizes individuals who
were involuntarily terminated dating back to September 1, 2008
and are therefore eligible for premium assistance under ARRA, an
additional opportunity to enroll in Cal-COBRA coverage.
Specifically, this bill :
1)Requires health plans, or employers or administrators that
contract to perform the notice and administrative functions,
to provide notice to every qualified beneficiary (QB) eligible
for premium assistance of the QB's ability to elect Cal-COBRA
continuation coverage and receive premium assistance no later
than 60 days after receipt of that notice. (A QB is a person
enrolled in a health plan who has had a qualifying event [such
as the loss of a job] that would cause them to lose coverage
under their small employer group health plan and would be
eligible for continuation coverage under Cal-COBRA.)
2)Requires the notice in #1 above to be provided within 14 days
of the effective date of this bill, and to inform the QB
regarding: a) the availability of premium assistance in the
amount of 65% of the Cal-COBRA premium; and, b) the duration
of the premium assistance under ARRA.
3)Requires the notice to use language that adequately informs a
reasonable person that changes in federal law permit employees
involuntarily terminated between September 1, 2008, and
December 31, 2009 to qualify for a 65% subsidy of Cal-COBRA
premiums for up to nine months, and that any eligible employee
who had previously rejected Cal-COBRA has the right under
California law to withdraw that rejection and accept the
coverage with the new subsidy. Requires the notice to also
provide the QB with all necessary premium information,
enrollment forms, and disclosures to allow the QB to formally
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elect continuation coverage.
4)Establishes in law an opportunity for a QB notified pursuant
to this bill to notify the health plan, or the employer if the
plan has contracted with the employer for administrative
services, of the QB's election to continue Cal-COBRA coverage
within 60 days after receipt of the notice required under this
bill, if the QB meets all of the following requirements:
a) The QB receives a notice under this bill;
b) The QB became eligible for Cal-COBRA continuation
coverage prior to the effective date of this bill;
c) The QB is eligible for COBRA premium assistance under
ARRA; and,
d) The QB failed to provide notification within the 60-day
period following the later of the following:
i) The date that the enrollee's coverage under the
group benefit plan terminated or will terminate by reason
of a qualifying event; and,
ii) The date the enrollee was sent notice of the ability
to continue coverage under the group benefit plan.
5)Adds to the categories of QBs eligible for Cal-COBRA coverage,
a person who meets the following:
a) Is eligible for premium assistance under the federal
ARRA;
b) Is eligible for Cal-COBRA coverage as result of the
involuntary termination of the covered employee's
employment from September 1, 2008 through December 31,
2009;
c) Elects Cal-COBRA coverage; and,
d) Meets the definition of a QB under the federal Employee
Retirement Income Security Act of 1974.
6)Prohibits health plans from using the time period between the
qualifying event and the effective date of Cal-COBRA
continuation coverage as a break in coverage in determining
whether to apply a pre-existing condition exclusion.
7)Permits the director of the Department of Managed Health Care
(DMHC) and the commissioner of the California Department of
Insurance (CDI) to adopt emergency regulations to implement
Cal-COBRA, and requires the adoption of these regulations to
be considered by the Office of Administrative Law to be
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necessary to avoid serious harm to the public peace, health,
safety, or general welfare.
8)Defines health plans as a person entitled to reimbursement for
the amount of the premium subsidy when the plan receives an
election notice from a QB who is eligible for premium
assistance under ARRA.
9)States legislative intent that any federal assistance that is
or may become available to QBs under Cal-COBRA be effectively
and promptly implemented by DMHC and CDI.
EXISTING LAW :
1)Requires health plans and insurers that provide coverage under
a group benefit plan to an employer with 2-19 eligible
employees to offer continuation coverage to a QB (a person
enrolled in the health plan), upon a qualifying event, without
evidence of insurability. This body of law is known as
Cal-COBRA.
2)Defines, for purposes of eligibility for Cal-COBRA, a
"qualifying event" as any of the following events that would
result in a loss of group coverage by a QB if the person did
not elect Cal-COBRA coverage:
a) The death of the covered employee;
b) The termination of employment or reduction in hours of
the covered employee's employment, except that termination
for gross misconduct does not constitute a qualifying
event;
c) The divorce or legal separation of the covered employee
from the covered employee's spouse;
d) The loss of dependent status by a dependent enrolled in
the group benefit plan; and,
e) With respect to a covered dependent only, the covered
employee's entitlement to benefits under Medicare.
3)Requires health plans to provide a disclosure that informs
individuals eligible for Cal-COBRA that failure to make the
notification to the insurer, or to the employer when under
contract to provide the administrative services, within the 60
days, will disqualify the QB from receiving Cal-COBRA
continuation coverage.
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4)Requires a QB electing Cal-COBRA continuation coverage to pay
to the health plan not more than 110% of the applicable rate
charged for a covered employee or, in the case of dependent
coverage, not more than 110% of the applicable rate charged to
a similarly situated individual under the group benefit plan
being continued under the group contract.
5)Requires every group contract between a health plan and an
employer with 2-19 eligible employees to require the employer
to notify the plan, in writing, of any employee who has had a
qualifying event related to termination of employment or a
reduction in hours of the covered employee within 30 days of
the qualifying event.
6)Requires health plans, or employers or administrators that
contract to perform the notice and administrative services, to
provide to the QB in #5 above the necessary benefits
information, premium information, enrollment forms, and
disclosures to allow the QB to formally elect Cal-COBRA
coverage within 14 days of receiving a notice of a qualifying
event.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE . According to the author, this bill would ensure that
Californians who lose their job while working for a small
employer through a layoff or other involuntarily termination
are notified that they may be eligible for premium assistance
through the federal stimulus bill to help them pay for and
keep their health coverage through Cal-COBRA. Additionally,
for those individuals who lost their jobs going back to
September 2008, AB 23 would give them a second chance to elect
coverage under Cal-COBRA now that premium assistance is
available. The author points out that California has one of
the highest uninsured rates in the country (a 3-year average
of 20.5%, compared to 17.4% nationally), and one of the
highest unemployment rates (currently 10.5%) in the country.
Job loss is the primary reason people lose health coverage
because most insured Californians receive coverage through
their employment. The author argues this bill would ensure
that Californians who were laid off as a result of the current
economic downturn are aware of their eligibility for premium
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assistance and have a second chance to enroll in Cal-COBRA
coverage. The author states this bill is urgently needed to
avoid increasing the number of Californians without health
insurance.
2)BACKGROUND . The federal Consolidated Omnibus Budget
Reconciliation Act of 1985, commonly called COBRA, gives
workers and their dependents who have a qualifying event (such
as the loss of a job or a reduction in hours, death of the
covered employee, divorce of the covered employee from the
covered employee's spouse, or the loss of dependent status by
a dependent enrolled in the health plan) the right to continue
their group health coverage through the employer's health
plan. If the employer continues to offer a group health plan,
the employee and his/her family can retain their group health
coverage by paying the full premium at group rates which are
capped at 102% for COBRA and 110% for Cal-COBRA. COBRA
applies to employers providing group health coverage who have
at least 20 employees. California's "mini-COBRA" law,
Cal-COBRA, applies to health plans and insurers offering small
group health coverage to employers with 2-19 employees who are
not eligible for continuation coverage under federal COBRA.
Prior to ARRA, premium assistance was not available to
individuals electing COBRA or Cal-COBRA coverage.
Few workers currently elect COBRA coverage now, in large part
because they must pay the entire cost of the premium at a time
when they are facing a reduction of hours, divorce, or loss of
employment. California workers contribute, on average, $582
or 12% of the cost of the $4,906 total annual average cost of
employer-based single coverage and $3,194 or 24% of the total
annual average cost of $13,427 for employer-based family
coverage in 2008, but must bear the entire cost plus an
additional 10% when paying for Cal-COBRA coverage. A
Commonwealth Fund issue brief released in 2009 found that only
9% of unemployed adults bought health insurance under COBRA in
2006.
3)COBRA PREMIUM ASSISTANCE UNDER ARRA . ARRA (Public Law 111-5)
provides for premium assistance for health benefits under
COBRA, and state mini-COBRA laws such as Cal-COBRA, for
individuals and their dependents that were involuntarily
terminated between September 1, 2008 and December 31, 2009.
Instead of paying the entire COBRA premium amount, eligible
individuals would pay 35% of premium, and the remaining 65%
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would be reimbursable to the employer or health plan as a
credit against certain employment taxes. The premium
assistance applies to periods of health coverage beginning on
or after February 17, 2009 and lasts for up to nine months.
Eligibility for the ARRA premium assistance is narrower than
eligibility for Cal-COBRA. Under Cal-COBRA, an individual can
become eligible for Cal-COBRA because of a loss of employment,
a reduction in hours, the death of the covered employee, the
divorce of the covered employee from the covered employee's
spouse, or the loss of dependent status. By contrast,
eligibility for ARRA premium assistance is limited to
individuals and their dependents who meet the following
criteria:
a) Are eligible for COBRA continuation coverage at any time
between September 1, 2008 and December 31, 2009;
b) Elect COBRA coverage; and,
c) Are eligible for COBRA as a result of the employee's
involuntary termination between September 1, 2008 and
December 31, 2009.
Eligibility for the full amount of premium assistance is
limited to individuals with a modified adjusted gross income
of $125,000 or less ($250,000 for joint filers). For
taxpayers with modified adjusted gross income between $125,000
and $145,000 (or $250,000 and $290,000 for joint filers), the
amount of the premium reduction that must be repaid is reduced
proportionately, and taxpayers with modified adjusted gross
incomes above those amounts must repay the amount of premium
reduction received.
Individuals who are eligible for other group health coverage
(such as a spouse's plan), or eligible for Medicare are not
eligible for the premium reduction, and there is no premium
reduction for premiums paid for periods of coverage prior to
February 17, 2009.
Under federal law, the premium reduction (65% of the full
premium) is reimbursable to the employer, insurer, or health
plan as a credit against certain employment taxes. Federal
guidance for state mini-COBRA laws indicates the health
insurance issuer providing the coverage to the group health
plan would receive the payroll tax credit once the individual
beneficiary pays the 35% of premium. If the credit amount is
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greater than the taxes due, the Secretary of the Treasury will
directly reimburse the employer, insurer, or plan for the
excess. The premium assistance for an individual on COBRA or
Cal-COBRA ends upon eligibility for other group coverage (or
Medicare), after 9 months, or when the maximum period of COBRA
coverage ends, whichever occurs first. Individuals paying
reduced COBRA/Cal-COBRA premiums must inform their plans if
they become eligible for coverage under another group health
plan or Medicare.
Individuals involuntarily terminated from September 1, 2008
through February 16, 2009, who did not elect COBRA when it was
first offered, or who did elect COBRA but who are no longer
enrolled (for example, because they were unable to continue
paying the premium) have a new opportunity to elect COBRA
coverage under ARRA. This special election period begins on
February 17, 2009 and ends 60 days after the required notice.
However, the federal Department of Labor has advised that this
special election period opportunity does not apply to coverage
sponsored by employers with less than 20 employees subject to
state law (such as California's Cal-COBRA law).
For state mini-COBRA laws, federal guidance indicates the
issuer of the group health plan must provide QBs an election
notice that contains information on how to request treatment
as a person eligible for premium assistance, and the notice
must be provided within timeframes specified under state law.
4)SUPPORT . The California Medical Association (CMA) writes in
support that this is an important bill for ensuring that
Californians get full advantage of the COBRA provisions of the
federal economic stimulus package. CMA indicates the
conforming changes in this bill will go a long way towards
keeping recently unemployed Californians enrolled in private
insurance and will reduce demand for already-overburdened
state and local health programs.
5)RELATED LEGISLATION . SB 796 (Alquist), pending in the Senate,
would delete the requirement that a person must elect and
exhaust COBRA or Cal-COBRA coverage in order to qualify for
access to guaranteed issue individual health care coverage
under the Health Insurance Portability and Accountability Act.
6)URGENCY CLAUSE . The author intends to add an urgency clause
to this measure so its provisions take effect immediately upon
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enactment.
7)POLICY QUESTIONS .
a) Who should receive the required notice under this bill ?
Under this bill, health plans must provide every QB
eligible for premium assistance under ARRA notice of the
QB's ability to elect continuation coverage no later than
60 days after receipt of that notice. However, since
individuals may be qualified for Cal-COBRA because of many
events (such as loss of employment, divorce, death of a
spouse, etc.) health plans may not have the information as
to which qualified beneficiaries are eligible for the
federal premium assistance because they were involuntarily
terminated, as required by federal law. Would it be more
workable to require the health plans to provide notice to
the known list of persons who had any Cal-COBRA qualifying
event and require health plans to simply let recipients of
the notice know of the changes in federal law, and the
opportunity for federal premium assistance for eligible
persons?
b) Should emergency regulations adopted by DMHC and CDI be
done in consultation with the other respective regulator ?
This bill permits DMHC and CDI to each adopt emergency
regulations. To ensure the regulations are done uniformly,
should the regulations be required to be done in
consultation with the other regulatory department?
c) Federal COBRA option to switch plans . ARRA gives COBRA
beneficiaries eligible for premium assistance the ability
to enroll in a different health plan than the plan the
individual was enrolled in at the time of the qualifying
event, subject to certain requirements. Under this option,
the employer has to allow such individuals to enroll in
different coverage, the premium for the different coverage
cannot exceed the premium for the coverage in which the
person was enrolled at the time of the qualifying event,
the coverage the person elects to enroll in must be offered
to active employees at the time of the election, and the
different coverage cannot be limited coverage, such as
dental, vision, counseling, a flexible spending arrangement
or coverage that provides services furnished at a on-site
medical facility maintained by the employer. Should
California adopt in its Cal-COBRA law a state option that
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would allow premium assistance-eligible individuals to
switch plans, similar to the federal option for COBRA
beneficiaries?
REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association
Opposition
None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097