BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 503 (Hernandez) - Cal-COBRA: disclosures ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 5, 2015 |Policy Vote: HEALTH 9 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- 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 SB 503 (Hernandez) Page 1 of ? 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 SB 503 (Hernandez) Page 2 of ? 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. -- END --