BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 838
Author: Strickland (R), et al
Amended: 5/6/10
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 9-0, 3/24/10
AYES: Alquist, Strickland, Aanestad, Cedillo, Cox, Leno,
Negrete McLeod, Pavley, Romero
SENATE APPROPRIATIONS COMMITTEE : 10-0, 4/12/10
AYES: Kehoe, Cox, Alquist, Corbett, Denham, Leno, Price,
Wolk, Wyland, Yee
NO VOTE RECORDED: Walters
SENATE FLOOR : 35-0, 4/15/10
AYES: Aanestad, Alquist, Ashburn, Calderon, Cedillo,
Cogdill, Corbett, Correa, Cox, DeSaulnier, Dutton,
Florez, Hancock, Harman, Hollingsworth, Huff, Kehoe,
Leno, Liu, Lowenthal, Maldonado, Negrete McLeod, Oropeza,
Padilla, Pavley, Price, Romero, Runner, Simitian,
Steinberg, Strickland, Walters, Wolk, Wright, Yee
NO VOTE RECORDED: Denham, Ducheny, Wiggins, Wyland
ASSEMBLY FLOOR : 72-0, 5/20/10 - See last page for vote
SUBJECT : Cal-COBRA: premium assistance
SOURCE : Author
DIGEST : This bill conforms California law to federal
CONTINUED
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requirements for continuation health coverage under the
California Omnibus Budget Reconciliation Act (Cal-COBRA)
statutes. Cal-COBRA provides the option of continuation
coverage for workers at small firms (two to 19 employees).
This bill clarifies notification requirements for
employers, health plans, and health insurers to allow
unemployed individuals to continue health coverage with a
federal subsidy for 65 percent of monthly premium costs.
Assembly Amendments clarify eligibility regarding special
elections and reduction in hours followed by involuntary
termination of employment for specified individuals.
ANALYSIS : Existing law, the federal Consolidated Omnibus
Budget Reconciliation Act (COBRA) of 1985 (Public Law
99-272), gives employees who work for employers with 20 or
more workers, their spouses, and dependent children the
right to continue employer-sponsored group health coverage
(generally for up to 18 months) when they lose their health
care benefits after a qualifying event, as defined,
provided the employer provides group health coverage for
current employees. Qualifying events include circumstances
such as job loss, a reduction in the hours worked, death,
and divorce. Existing law requires employees, their
spouses, and dependent children (known collectively as
qualified beneficiaries) to pay 102 percent of the group
rate when electing continuation coverage under COBRA.
Existing federal law establishes premium assistance for
health benefits under COBRA and state mini-COBRA programs
(which apply to health plans selling to small employers not
covered by federal COBRA) for "assistance eligible
individuals." The federal premium assistance covers 65
percent of the costs of the COBRA coverage. Generally,
individuals eligible for the premium assistance
("assistance eligible individuals") are defined in federal
law as individuals who:
1. Were "involuntarily terminated" between September 1,
2008, and March 31, 2010; or,
2. Had a reduction in hours resulting in a loss of health
coverage on and after September 1, 2008 and were then
subsequently "involuntarily terminated" between March 2,
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2010 and March 31, 2010.
Existing law makes available premium assistance for periods
of health coverage beginning on or after February 17, 2009.
Premium assistance lasts for up to 15 months, subject to
other limitations.
Existing state law 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 qualified beneficiary (QB), upon a qualifying event,
without evidence of insurability. This body of law is
known as Cal-COBRA.
Existing state law 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:
1. The death of the covered employee;
2. 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;
3. The divorce or legal separation of the covered employee
from the covered employee's spouse;
4. The loss of dependent status by a dependent enrolled in
the group benefit plan; and,
5. With respect to a covered dependent only, the covered
employee's entitlement to benefits under Medicare.
This bill conforms California law to federal requirements
for continuation health coverage under the Cal-COBRA
statutes. Cal-COBRA provides the option of continuation
coverage for workers at small firms (two to 19 employees).
This bill clarifies notification requirements for
employers, health plans, and health insurers to allow
unemployed individuals to continue health coverage with a
federal subsidy for 65 percent of monthly premium costs.
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The premium subsidy was established in the federal American
Recovery and Reinvestment Act (PL-111-5) in February 2009.
Since that time, the subsidy has been extended and
eligibility has been broadened three times by federal
legislation.
Background
A federal law enacted in 1985, provides workers at larger
firms (20 or more employees) continuity of health coverage
by allowing former employees to choose to pay the full
premium cost (capped at 102 percent for COBRA) otherwise
paid by the employer. For workers at small firms (two to
19 employees), California has Cal-COBRA (capped at 110
percent of full premium cost). COBRA is available for up
to 18, 29, or 36 months and Cal-COBRA is available for up
to 36 months depending on eligibility. In addition,
individuals who exhaust 18 months of COBRA also have access
to continuity coverage through Cal-COBRA. Individuals who
exhaust Cal-COBRA coverage have access to continuation
coverage under the federal Health Insurance Portability and
Accountability Act. The federal subsidies for COBRA and
Cal-COBRA are now available for a total of 15 months.
The unemployment rate statewide has hovered between 10
percent and more than 12 percent over the past year. In
many parts of the state, the unemployment rate is higher.
Because a majority of people access health coverage through
an employer, the rate of unemployment has contributed to
erosion in health coverage. According to recent research,
the number of uninsured adults increased from 5.3 million
to 6.8 million, with job-based coverage dropping from 57
percent to 51 percent.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to recent analysis, COBRA enrollments have
doubled since the provision of federal subsidies. Due to
the expense of unsubsidized health coverage, only 10
percent of individuals accept unsubsidized continuation
coverage during a period of unemployment. This bill
enables continued support of premium subsidies and the
higher take-up rate of continuation health coverage.
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The average monthly health premium is approximately $400
for an individual and $1,100 for a family. The federal
subsidies addressed in this bill mean these monthly
premiums will drop to $140 for individuals and $385 for
families. Without premium assistance, health premiums
account for 30 percent to 85 percent of an individual's
unemployment benefits.
The federal subsidy is phased out for higher income
individuals with adjusted gross income above $125,000 and
couples with adjusted gross income above $250,000.
SUPPORT : (Verified 5/20/10)
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Hospital Association
California Medical Association
Department of Managed Health Care
ARGUMENTS IN SUPPORT : The California Medical Association
writes in support that this bill makes conforming changes
to Cal-COBRA to help Californians take advantage of an
extension in premium subsidies available through recent
federal legislation.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Tom Berryhill, Blakeslee, Block,
Blumenfield, Bradford, Brownley, Buchanan, Caballero,
Charles Calderon, Carter, Chesbro, Conway, Cook, Coto,
Davis, De Leon, DeVore, Emmerson, Eng, Feuer, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Hayashi, Hernandez, Hill, Huber,
Huffman, Jeffries, Jones, Knight, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nestande,
Niello, Nielsen, Norby, V. Manuel Perez, Portantino,
Ruskin, Salas, Saldana, Silva, Skinner, Smyth, Solorio,
Audra Strickland, Swanson, Torlakson, Torres, Torrico,
Tran, Yamada
NO VOTE RECORDED: De La Torre, Evans, Fletcher, Harkey,
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Nava, Villines, John A. Perez
CTW:nl 5/26/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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