BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 1088
S
AUTHOR: Price
B
AMENDED: April 13, 2010
HEARING DATE: April 21, 2010
1
CONSULTANT:
0
Chan-Sawin/
8 8
SUBJECT
Health care coverage
SUMMARY
Prohibits health care service plans (health plans) and
health insurers from using a limiting age for dependent
children covered by their parent's health plan contract, or
health insurance policy, from being less than 26 years of
age. Allows, but does not require, employers to pay
premiums associated with extending dependent coverage for
those between 23 and 26 years old. States legislative
intent to enact legislation conforming state law with
recently enacted federal legislation regarding dependent
coverage, including defining a dependent to be a child up
to 26 years of age, as specified. States legislative
intent to apply the extension of dependent coverage to
vision, dental, and vision and dental policies.
CHANGES TO EXISTING LAW
Existing federal law:
Existing law, the federal Patient Protection and Affordable
Care Act (the federal health reform act), (Public Law
111-148), among other things, requires group health plans,
and health insurers offering group and individual policies,
to allow young people, up to their 26th birthday, to remain
Continued---
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on their parents' health plan contract or health insurance
policy beginning October 1, 2010.
The federal health reform act also directs the federal
Secretary of Health and Human Services to promulgate
regulations to define "dependents."
Existing law, the federal Reconciliation Act of 2010 (the
federal health reform reconciliation act), (Public Law
111-152) makes changes to the federal health reform act
and, among other things, clarifies the definition of an
adult dependent, as it relates to the income definition
under the Internal Revenue Code of 1986, as any child of a
taxpayer who, as of the end of the taxable year, has not
attained their 27th birthday.
Provisions in the federal health reform reconciliation act
specify that the dependent coverage provisions in federal
health reform apply to married individuals who are still
dependent on his or her parent.
Existing state law:
Existing law provides for the regulation of health care
health plans by the Department of Managed Health Care
(DMHC) and for the regulation of health insurers by the
Department of Insurance (CDI).
Existing law allows for the use of a limiting age (as
specified in the health plan contract or health insurance
policy) as a condition of coverage for dependents.
Existing law also specifically prohibits health plan
contracts and health insurance policies that provide
dependent coverage, where coverage terminates upon
attainment of the limiting age specified in the contract or
policy, from terminating coverage for a child who meets
certain conditions, as specified.
Existing law prevents a health plan or health insurer from
excluding any eligible dependent who would otherwise be
entitled to health care services on the basis of their
health status, medical condition, the claims experience,
the medical history, the genetic information, or the
disability or evidence of insurability including conditions
arising out of acts of domestic violence of that employee
or dependent, except in the case of a "late enrollee," or
for satisfaction of a preexisting condition clause in the
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case of initial coverage of an eligible employee. Existing
law also defines "late enrollee" and "preexisting
condition."
This bill:
This bill prohibits health plans and health insurers from
setting the limiting age for dependent children covered by
their parent's health plan contract or health insurance
policy at less than 26 years of age. This bill also
allows, but does not require, employers to pay premiums
associated with extending dependent coverage for dependents
between the ages of 23 and 26 years.
This bill states the intent of the Legislature to enact
conforming legislation extending the coverage of dependent
children, per the requirements of the federal health reform
law, including:
Requiring all group health plan contracts and group
health insurance policies to offer dependent coverage;
Defining dependents to be children up to 26 years
of age, regardless of marital status, state of
residency, employment status, income level, and
whether he or she has children;
Allowing parents to cover dependents under their
health plan or health policy even after the dependent
has ceased to be covered under that plan or policy.
These dependents would be exempt from the definition
of "late enrollee," and thus not subject to medical
underwriting;
Requiring plans and policies to cover a dependent,
regardless of any preexisting medical conditions,
until federal requirements banning use of preexisting
conditions as a condition for coverage in January 1,
2014; and,
Allowing, but not requiring, employers to pay a
portion of the premium for an enrollee's covered
dependent.
This bill also states legislative intent to extend the
dependent coverage requirements to plans and policies for
vision, dental, or vision and dental coverage.
FISCAL IMPACT
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This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
The author states that the recently passed federal health
care legislation requires insurers to expand coverage to
dependents up to their 26th birthday, beginning in
September 2010. This bill seeks to provide statutory
implementation guidelines for the State of California to
comply with federal law.
According to research, young adults compose one of the
largest and fastest growing segments of the uninsured.
Young adults often lose health coverage at age 19, as a
result of being dropped from their parent's policy, or
because of losing eligibility for public programs, like
Medi-Cal or Healthy Families.
In addition, the author points out that one-third of
college graduates will be uninsured in the year following
graduation. Only half of 19 to 29 year olds are eligible
for coverage offered by their employers as compared to 75
percent of 30 to 64 year old workers.
Rates of insurance among young adults
According to the White House health reform website,
www.healthreform.gov , young adults often times fall through
the cracks in our broken health care system. A mainstay of
coverage for children - dependent coverage under a parent's
employer heath plan - can vanish overnight after a
teenager's 19th birthday. As health care costs skyrocket,
finding affordable coverage becomes more and more difficult
for young adults who are starting their careers and
establishing their financial independence. Compounding
this, as employer-based coverage erodes, young adults are
even more likely to lose coverage.
According to the Robert Wood Johnson Foundation, young
adults are more likely to be medically uninsured than any
other age group. Young adults age 19 to 29 make up nearly
one-third of the uninsured population, and account for
about 13 million of the 47 million Americans living without
health insurance. That amounts to approximately 30 percent
of the U.S. population between the ages of 19 and 29 being
uninsured. In comparison, less than 20 percent of persons
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ages 35 to 64 and less than 10 percent of children under
age 18 were uninsured in 2008.
According to the 2007 California Health Interview Survey,
1,412,000 Californians between the ages of 19 and 29,
roughly 26.4 percent of all young adults in that age group,
were uninsured.
Barriers to securing and maintaining coverage
Typically, parents, who cover their children as dependents
on their policy, do so through their employer's health
insurance benefits. Most employer-covered health plans do
not cover dependents after age 19 if they are not enrolled
in college full time. Most young adults covered through
public programs, such as Medicaid or the State Children's
Health Insurance Plan (CHIP), also lose program eligibility
when they reach 19 years of age.
A May 2008 issue brief by the Commonwealth Fund (TCF)
suggests that the protections afforded young adults by
virtue of being a full-time student (i.e. coverage through
a parent's employer-based insurance or a
university-sponsored policy), are lost upon graduation.
TCF states that one-third of college graduates can expect
to spend at least some time uninsured in the year following
graduation.
Young adults' ability to attain and secure health insurance
coverage for themselves is often difficult. Ordinary
transitions in and out of school and jobs throughout their
20s affect their ability to remain on their parent's or
guardian's policy, or become eligible for
employer-sponsored health insurance. Entry level
low-paying and temporary jobs typically do not offer health
benefits. Purchasing health insurance in the individual
market is unaffordable given that 50 percent of uninsured
young adults reside in households with incomes below the
federal poverty level.
This lack of insurance exists despite the fact that many
young people are employed. Twenty-eight percent of young
adults who are employed are uninsured, while only sixteen
percent of working older adults are uninsured. In part,
this is because nearly half of employed young adults only
work part-time, and part-time workers are less likely to be
offered coverage.
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Beyond a lack of reliable employer-based coverage, young
adults have additional financial barriers to obtaining
coverage compared to older adults. They are more likely to
be low-income (38 percent versus 25 percent in older
adults), and coverage in the individual insurance market is
costly, even for a relatively healthy person.
Uninsurance among young adults also has important financial
implications. Uninsured young adults are 20 percent more
likely than their insured peers to report having trouble
paying medical bills or carrying medical debt. From an
insurance perspective, the absence of young adults from
insurance risk pools has consequences for others in the
form of higher costs, since insured young adults pay into
these pools while utilizing fewer services than other age
groups, thus subsidizing members who cost more to insure.
Cost barriers are particularly problematic for young women.
Younger women are often charged higher premiums than men
during their reproductive years. In 33 states, insurance
companies are permitted to charge higher premiums based on
age, gender, and health status without any restrictions
whatsoever. Holding other factors constant, a 22-year-old
woman can be charged one and a half times the premium of a
22-year-old man. Such a premium hike can mean the
difference between coverage that is affordable and coverage
that is prohibitively expensive.
Health impact of uninsurance during young adulthood
The relatively high rates of uninsurance among young adults
may impact their current and future health and health care
needs. While young adults as a population have fewer health
care needs than older adults, they are in a critical
developmental period during which the potential long-term
risks of conditions and behaviors such as obesity, tobacco
use, and sexually transmitted infections, are best
addressed. Additionally, uninsured young adults who do
have health care needs are two to four times more likely
than their insured peers to delay or forgo medical care or
a prescription due to costs
Dependent coverage in other states
In 1994, Utah became the first state to enact legislation
allowing coverage for unmarried dependents to continue up
to age 26, regardless of school enrollment status. A 2006
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New Jersey law provides coverage for unmarried dependents
up to age 31, as long as they do not have any dependents of
their own.
At least 30 states had adult dependent coverage policies in
place, or have enacted similar legislation to extend
dependent coverage regardless of enrollment in school. Two
states, Iowa and Texas, eliminated the age limit for
students altogether.
Federal health reform
The recently enacted federal health reform act contains
significant and sweeping changes to the health care and
health insurance industry in the United States. Among
these changes are a provision allowing young adults to stay
on their parents' plans longer by expanding dependent
eligibility until age 26, effective October 2010. This
provision is intended to reduce the uninsured rate among
this group, and this expansion provision received
widespread support during the federal reform debate.
Related bills
AB 1602 (Perez) implements a number of provisions from the
federal health reform act, including expanding dependent
coverage in private insurance to age 26, among other
related provisions. AB 1602 is set for hearing in the
Assembly Health Committee on April 20, 2010.
AB 29 (Price) would have prohibited the limiting age of
dependent health plan and insurance coverage from being
less than 27 years of age. The limiting age determines when
children are no longer considered dependents for the
purposes of health coverage. Failed passage in Assembly
Appropriations Committee.
Prior legislation
AB 1698 (N??ez) of 2005 would have prohibited health plan
contracts or insurance policies that cover dependent
children from establishing a limiting age prior to a
dependent's 26th birthday. Vetoed by the Governor, who
cited concern that the bill would have had the unintended
consequence of actually reducing the number of employers
taking advantage of dependent health care coverage, leading
to fewer persons with health insurance, not more.
SB 1168 (Runner), Chapter 390, Statutes of 2008, prohibited
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the termination of health coverage for a dependent young
adult older than 18 years old and enrolled at a secondary
or postsecondary educational institution if the individual
takes a medical leave of absence from school.
AB 910 (Karnette), Chapter 617, Statutes of 2007, amended
sections of law addressed in this bill regarding dependent
adults incapable of self-sustaining employment due to
disability.
Arguments in support
The American Congress of Obstetricians and Gynecologists
(ACOG) writes in support, stating that SB 1088 provides an
avenue for young adults, still dependent on their parents
for financial support, to be able to maintain coverage
during the transition to independence. ACOG further states
that it is particularly important for young women to
maintain coverage, as the mid-twenties are crucial years
for reproductive health.
Writing in support, the California Medical Association
states that young adults in this age group are particularly
vulnerable to being uninsured due to not having access to
health coverage through their employer or being unable to
afford to buy comprehensive coverage. As a result, they
are often targeted by health plan marketing of policies
with high-deductibles and out-of-pocket costs, or skinny
policies that do not offer meaningful coverage and can lead
to high medical debt when a serious health issue arises.
CMA further argues that this bill ensures that the health
insurance marketplace works for young people who may be
struggling to make ends meet and get their careers off the
ground.
Health Access California also supports the bill, stating
that young adults represent the largest and fastest growing
segment among the uninsured: 30 percent of the uninsured
are young adults, though they represent just 17 percent of
the population generally, according to a study by the
Commonwealth Fund. Furthermore, Health Access points out
that SB 1088 takes the first step in implementing
provisions in federal health reform around dependent
coverage.
Arguments in opposition
Anthem Blue Cross (Blue Cross) writes in opposition,
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stating that, despite a provision allowing insurers to
institute a surcharge for families with overage dependents,
this bill will result in higher premiums for families
during challenging economic times. Blue Cross believes
that insurers would not be able to establish a surcharge
and, instead, will increase the cost of family coverage to
account for a larger average family size and the adverse
selection associated with overage dependents in a
guaranteed issue environment. Blue Cross points out that
when similar legislation passed in Colorado, it accounted
for a premium increase of 1.5-2 percent. Blue Cross also
believes that the definition of dependent may run afoul of
federal rules related to health care reform.
The Association of California Life & Health Insurance
Companies (ACLHIC) opposes the bill as it makes some
deviations from federal legislation. For instance, the
federal law only requires health insurers that currently
provide dependent coverage to make coverage available to
dependents until age 26, this bill goes beyond that and
requires all insurers to offer extended dependent coverage,
regardless of whether they currently offer the coverage.
ACLHIC states that federal law is sufficient, and it would
be easier and more cost efficient to only require health
insurers to comply with one federal law.
COMMENTS
1.Decision to offer or accept dependent coverage up to plans
and enrollees. While this bill prohibits health plans and
health insurers providing dependent coverage from limiting
the age of dependent to less than 26 years of age, it does
not require plans and policies to offer or provide
dependent coverage. In addition, health plan enrollees,
insureds, and policyholders could elect whether to accept
dependent coverage from a health plan or health insurer
that offers it. Who would pay for dependent coverage,
including the extended coverage mandated by the bill, would
be left up to individual employers and employees.
2.Goes beyond federal health reform to apply to vision,
dental, and vision and dental policies. The federal health
reform legislation applies to health plan contracts and
health insurance policies for health care coverage, and not
specialized plans and policies, such as vision, dental, and
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vision and dental. The author's intent language goes
beyond what is envisioned in federal health reform.
3.Additional federal guidance needed. It is unknown when the
federal Secretary of Health and Human Services will be
issuing additional federal guidance defining a "dependent,"
or if the guidance will address other issues related to
implementation of dependent coverage, such as whether
dependents can switch from their existing
employer-sponsored coverage back to their parent's
coverage.
POSITIONS
Support: The American Congress of Obstetricians and
Gynecologists
California Medical Association
California School Employees Association, AFL-CIO
Health Access California
Oppose: Anthem Blue Cross
Association of California Life & Health Insurance
Companies
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