BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 503 (Hernandez) - Cal-COBRA:  disclosures
          
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          |Version: May 5, 2015            |Policy Vote: HEALTH 9 - 0       |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 18, 2015      |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.



          


          Bill  
          Summary:  SB 503 would delete an obsolete notification  
          requirement on health plans and health insurers and replace it  
          with a new notification requirement providing information to  
          consumers about the availability of health care coverage through  
          Covered California, Medi-Cal, or through an insured spouse.


          Fiscal  
          Impact:  
           One-time costs of $20,000 for the Department of Insurance to  
            review required notices for health insurers (Insurance Fund).

           Minor costs for the Department of Managed health care to  
            review required notices for health plans (Managed Care Fund).

           Unknown costs for additional enrollment in Medi-Cal (General  







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            Fund and federal funds). The new notice required under the  
            bill would provide consumers with information about their  
            opportunity to receive health care coverage through Covered  
            California or Medi-Cal if they decline to continue their  
            employer-sponsored coverage. Giving consumers information  
            about the availability of Medi-Cal coverage may encourage some  
            consumers to opt to apply for Medi-Cal, rather than purchasing  
            continuation coverage from their current insurer or health  
            plan. The extent to which this will occur is unknown. This  
            effect may be small, given the significant public awareness of  
            access to coverage through Covered California and Medi-Cal  
            following the implementation of the Affordable Care Act and  
            the imposition of an individual mandate to have health care  
            coverage. However, even a very small overall increase in  
            Medi-Cal enrollment would have a significant fiscal impact,  
            since the cost to provide coverage to an adult in Medi-Cal  
            ranges from about $1,200 per year to $6,000 per year (General  
            Fund and federal funds).


          Background:  Under current federal law, an employee who leaves the group  
          health care coverage provided by an employer can opt to continue  
          to receive health care coverage from the same health plan or  
          insurance policy that was offered by the employer. (For example,  
          an employee who laid off from a job and does not yet have a new  
          job that provides health care coverage.) The individual is  
          required to pay the full cost of such coverage. Under federal  
          law, this requirement applies to employers with more than 20  
          employees and the employee is required to pay 102% of the  
          premium. Under state law, this requirement applies to employers  
          with 2 to 19 employees and the individual is required to pay  
          110% of the premium. (These requirements are commonly referred  
          to as COBRA and Cal-COBRA coverage, respectively.)
          Under current law, health insurers and health plans are required  
          to provide consumers with information regarding their options  
          for continuing their employer-sponsored health care coverage (at  
          their own expense). The existing notification includes  
          information that no longer relevant, due to changes to health  
          insurance markets made by the Affordable Care Act and related  
          state legislation.


          Prior to the implementation of the Affordable Care Act, health  
          insurers and health plans could use an individual's medical  








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          history to set premium rates or decline an individual's  
          application for health care coverage. The Affordable Care Act  
          prohibits that kind of underwriting, requiring the "guaranteed  
          issue" of health care coverage in the individual health care  
          market.




          Proposed Law:  
            SB 503 would delete an obsolete notification requirement on  
          health plans and health insurers and replace it with a new  
          notification requirement providing information to consumers  
          about the availability of health care coverage through Covered  
          California, Medi-Cal, or through an insured spouse.
          Specifically, the bill would delete a requirement that health  
          plans and health insurers notify individuals that if they  
          decline to continue their employer sponsored coverage, their  
          ability to secure new coverage may be limited by their health  
          status. However, the bill would reinstate that notification  
          requirement, if a specific provision of the federal Affordable  
          Care Act prohibiting insurance underwriting by health status is  
          repealed.


          The bill would specify the information on coverage options  
          through Covered California and Medi-Cal that must be provided to  
          consumers.




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