BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  SB 1034
          Author:   Monning (D)
          Amended:  4/21/14
          Vote:     21

           
           SENATE HEALTH COMMITTEE  :  8-0, 4/9/14
          AYES:  Hernandez, Anderson, Beall, DeSaulnier, Evans, Monning,  
            Nielsen, Wolk
          NO VOTE RECORDED: De León

           SENATE APPROPRIATIONS COMMITTEE  :  5-0, 4/28/14
          AYES:  De León, Gaines, Hill, Lara, Steinberg
          NO VOTE RECORDED:  Walters, Padilla


           SUBJECT  :    Health care coverage:  waiting periods

           SOURCE  :     Author


           DIGEST  :    This bill prohibits waiting or affiliation periods in  
          the group health insurance market (through health benefit  
          plans).

           ANALYSIS  :    

          Existing law:

          1. Regulates health plans through the Department of Managed  
             Health Care (DMHC) and health insurance policies through the  
             Department of Insurance (CDI).  Health plans include Health  
             Maintenance Organizations (HMOs) and some Preferred Provider  
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             Organizations (PPOs).  Health insurance policies include PPOs  
             but not HMOs.

          2. Prohibits a health benefit plan for individual coverage from  
             imposing any waiting or affiliation period.

          3. Defines a health benefit plan as any individual or group  
             health plan contract that provides medical, hospital, and  
             surgical benefits, or any individual or group policy of  
             health insurance, as defined.  The term does not include a  
             specialized health plan contract/insurance policy, a health  
             plan contract/insurance policy provided in the Medi-Cal  
             program, the Healthy Families Program, the Access for Infants  
             and Mothers Program, or Medicare supplement coverage, to the  
             extent consistent with the Affordable Care Act (ACA).

          4. Defines affiliation period as a period under the terms of a  
             health plan contract that must expire before health care  
             services under the contract become effective.  

          5. Defines waiting period as a period that is required to pass  
             with respect to an employee before the employee is eligible  
             to be covered for benefits under the terms of the contract.

          6. Authorizes a health benefit plan for group coverage  
             (including small employers) to apply a waiting period of up  
             to 60 days as a condition of employment if applied equally to  
             all eligible employees and dependents and if consistent with  
             the ACA.

          7. Prohibits a waiting or affiliation period from being based on  
             a pre-existing condition of an employee or dependent, the  
             health status of an employee or dependent, or any other  
             factor, as specified.

          8.  Allows the health plan not to provide health care services  
             during a waiting or affiliation period and prohibits a  
             premium from being charged.

          9. Subjects a late enrollee to a waiting period not to exceed 60  
             days for health plans regulated by DMHC and a period of 12  
             months for policies regulated by CDI.

          10.Establishes the following effective dates of coverage:  

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             A.    For individual coverage purchased during annual open  
                enrollment through the Covered California, effective  
                dates are consistent with federal regulations.

             B.    For individual coverage purchased during annual open  
                enrollment outside of Covered California, if payment is  
                delivered or postmarked, whichever occurs later, by  
                December 15, coverage is effective as of January 1, as  
                specified.

             C.    For small group coverage purchased through Covered  
                California, coverage effective dates are consistent with  
                those required under federal regulations.

             D.    For small group coverage purchased outside Covered  
                California, when a small employer's premium payment is  
                delivered or postmarked within the first 15 days of the  
                month, coverage is effective no later than the first day  
                of the following month, as specified.

          11.Under the ACA, prohibits a group health plan or a health  
             insurance issuer offering group health insurance coverage  
             from applying any waiting period that exceeds 90 days.

          This bill:

          1. Declares legislative intent to: 

             A.    Prohibit a health care service plan or health insurer  
                offering group coverage from imposing a separate waiting  
                or affiliation period in addition to any waiting period  
                imposed by an employer for a group health plan on an  
                otherwise eligible employee or dependent.
              
             B.    Permit a health care service plan or health insurer  
                offering group coverage to administer a waiting period  
                imposed by a plan sponsor, as defined.

          2. Prohibits a health benefit plan for group coverage from  
             imposing any waiting or affiliation period.

          3. Deletes references to waiting or affiliation period  
             authorizations from existing law governing group health  

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             insurance.

           Background
           
           The ACA and federal regulations  .  The ACA, enacted on March 23,  
          2010, and amended on March 30, 2010 reorganizes, amends, and  
          adds to the Public Health Service Act (PHS Act) relating to  
          group health plans and health insurance issuers in the group and  
          individual markets.  The term "group health plan" refers to an  
          employee welfare benefit plan to the extent that the plan  
          provides medical care to employees or their dependents directly  
          through insurance, reimbursement, or otherwise, and it includes  
          both insured and self-insured group health plans.  "Health  
          insurance issuer" refers to an insurance company, insurance  
          service, or insurance organization (including an HMO) which is  
          licensed to engage in the business of insurance in a state and  
          is subject to state laws which regulate insurance, as specified.

          Prior to the ACA, federal regulations defined a waiting period  
          to mean the period that must pass before coverage for an  
          employee or dependent who is otherwise eligible to enroll under  
          the terms of a group health plan can become effective.  The ACA  
          includes a provision which prohibits an otherwise eligible  
          employee (or dependent) from being required to wait more than 90  
          days before coverage becomes effective.  This "90-day  
          limitation" applies to both grandfathered and non-grandfathered  
          group health plans and group health insurance coverage for plan  
          years beginning on or after January 1, 2014.  Proposed  
          regulations were issued in March of 2013.  Final regulations  
          effective March 26, 2014, apply to group health plans and group  
          health insurance issuers for plan years beginning on or after  
          January 1, 2015.

          The final regulations provide that a group health plan, and  
          health insurance issuer offering group health insurance  
          coverage, may not apply a waiting period that exceeds 90 days.   
          The regulations clarify that plans or issuers are not required  
          to have waiting periods and could have waiting periods shorter  
          than 90 days.

          The final regulations also clarify that, if an individual  
          enrolls as a late enrollee or under special enrollment  
          circumstances, any period before the late or special enrollment  
          is not a waiting period.  The effective date of coverage for  

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          special enrollees continues to be that set forth in other  
          federal regulations governing special enrollment or guaranteed  
          availability.  The final regulations set forth rules governing  
          the relationship between a plan's eligibility criteria and the  
          90-day waiting period limitation.  Specifically, these final  
          regulations provide that being otherwise eligible to enroll in a  
          plan means having met the plan's substantive eligibility  
          conditions (such as, for example, being in an eligible job  
          classification, achieving job-related licensure requirements  
          specified in the plan's terms, or satisfying a reasonable and  
          bona fide employment-based orientation period).  Under these  
          final regulations, eligibility conditions that are based solely  
          on time passing are permissible for no more than 90 days.  Other  
          conditions for eligibility under the terms of a group health  
          plan (that is, those that are not based solely on the lapse of  
          time) are generally permissible under the ACA and these final  
          regulations, unless the condition is designed to avoid  
          compliance with the 90-day waiting period limitation.

           Prior legislation
           
          AB 1083 (Monning, Chapter 852, Statutes of 2012), amends  
          California's small group health insurance laws to enact the  
          relevant ACA provisions, such as eliminating pre-existing  
          condition requirements and establishing premium rating factors  
          based only on age, family size, and geographic regions.  AB 1083  
          permits a waiting period of no longer than 60 days, requires an  
          affiliation period under a health plan contract to run  
          concurrently with any waiting period under that contract, not to  
          exceed 60 days, and allows a waiting period for plan years on or  
          after January 1, 2014, to be applied as a condition of  
          employment if applied equally to all full-time employees,  
          consistent with ACA and any rules, regulations, or guidance  
          issued consistent with that law.  

          As noted in an August 17, 2011 bill analysis of an earlier  
          version of AB 1083 which would have allowed a health plan or  
          insurer to impose a waiting period of up to 90 days as a  
          condition of employment, if applied equally to all full-time  
          employees and if consistent with the ACA, CDI raised concerns  
          that the provision would make employees wait unnecessarily  
          longer for health insurance coverage.  The following is from  
          CDI's letter:


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          "California law currently allows an employer to set their own  
          waiting period for a new employee to be eligible for health  
          insurance coverage as long as the waiting period is consistent  
          for all new employees. Once an employee is eligible and enrolled  
          in coverage, California law allows an insurer to either have a  
          60-day waiting or affiliation period where the person is  
          enrolled but no premium is paid and no services are provided or  
          a 6-month pre-existing period during which no payments are  
          provided for a pre-existing medical condition.  AB 1083 would  
          take California's current 60-day waiting or affiliation period  
          and change it to 90 days; your bill's sponsor has stated to CDI  
          staff that this is for purposes of federal ACA conformity.   
          However, upon review of the current federal definition by CDI  
          staff, the federal definition is very similar to California's  
          current definition of 60-day waiting or affiliation period.   
          Therefore, AB 1083 would unnecessarily make consumers wait an  
          additional 30-day to receive "health insurance" coverage when  
          federal and state laws currently allow that waiting period to be  
          60-days, not 90-days."

          Based on this information from CDI, then Assemblymember Monning  
          revised the 90-day provision to 60 days.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes


          According to the Senate Appropriations Committee:


           Costs of about $120,000 in 2014-15, $70,000 in 2015-16, and  
            about $30,000 per year thereafter by the DMHC to review  
            compliance by health plans and take enforcement actions  
            (Managed Care Fund).

           Minor costs to review health insurer filings to ensure  
            compliance by CDI (Insurance Fund).

           SUPPORT  :   (Verified  4/30/14)

          American Federation of State, County and Municipal Employees,  
          AFL-CIO
          Association of Life and Health Insurance Companies
          Bay Area Council

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          BayBio
          California Association of Health Underwriters
          California Chamber of Commerce
          California Farm Bureau Federation
          California Hospital Association
          California Manufacturers and Technology Association
          California Optometric Association
          Congress of California Seniors
          Health Access
          Independent Agents and Brokers of California
          Los Angeles Area Chamber of Commerce
          National Association of Insurance and Financial Advisors of  
          California
          National Federation of Independent Business

           ARGUMENTS IN SUPPORT  :    Numerous supporters state that this  
          bill eliminates confusion between the state and federal rules  
          governing health care enrollment waiting periods.  The  
          supporters claim that inconsistencies between the state and  
          federal laws have indirectly impacted employers and created  
          confusion about whether health care can be treated like other  
          benefits, which are often instated after 90 days of employment  
          and believe this bill will allow employers to continue treating  
          all employee benefits as a group, easing administration and  
          compliance with the law.  Supporters also state that  
          clarification of the law will help multi-state employers by  
          ensuring they have just one date to keep in mind when  
          determining when a new hire or otherwise newly qualified  
          employee must be enrolled in a health care plan.


          JL:d  4/30/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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