BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 503|
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THIRD READING
Bill No: SB 503
Author: Hernandez (D)
Amended: 5/5/15
Vote: 21
SENATE HEALTH COMMITTEE: 9-0, 4/29/15
AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen,
Pan, Roth, Wolk
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Cal-COBRA: disclosures
SOURCE: Author
DIGEST: This bill deletes an obsolete warning notice required
of health plans and insurers providing group coverage and
replaces it with a notice providing information about obtaining
other health coverage, including through Medi-Cal or Covered
California.
ANALYSIS:
Existing law:
1)Establishes the Department of Managed Health Care (DMHC) to
regulate health plans under the Knox-Keene Health Care
Services Plan Act of 1975 and the California Department of
Insurance (CDI) to regulate health insurers; the California
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Health Benefit Exchange (referred to as Covered California) to
compare and make available through selective contracting with
health plans and health insurers, insurance for individual and
small business purchasers as authorized under the Affordable
Care Act (ACA); and, the Department of Health Care Services to
administer Medi-Cal, a health care program for qualified
low-income adults, children, and people with disabilities.
2)Requires every health plan and health insurer disclosure form
provided to covered employees of group benefit plans to
include a statement that the enrollee or insured may be
entitled to continuation of group coverage and that additional
information regarding eligibility for this coverage may be
found in the plan's or insurer's evidence of coverage.
3)Requires every disclosure issued, amended, or renewed on and
after July 1, 2006, for a group benefit plan to include the
following notice:
"Please examine your options carefully before
declining this coverage. You should be aware that
companies selling individual health insurance typically
require a review of your medical history that could
result in a higher premium or you could be denied
coverage entirely."
This bill:
1)Requires a disclosure issued, amended, or renewed on or after
July 1, 2016, for a group benefit plan to include the
following notice:
"In addition to your coverage continuation options, you may be
eligible for the following:
1. Coverage through the state health insurance marketplace,
also known as Covered California. By enrolling through
Covered California, you may qualify for lower monthly
premiums and lower out-of-pocket costs. Your family members
may also qualify for coverage through Covered California.
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2. Coverage through Medi-Cal. Depending on your income, you
may qualify for low or no-cost coverage through Medi-Cal.
Your family members may also qualify for Medi-Cal.
3. Coverage through an insured spouse. If your spouse has
coverage that extends to family members, you may be able to
be added on that benefit plan.
Be aware that there is a deadline to enroll in Covered
California, although you can apply for Medi-Cal anytime. To
find out more about how to apply for Covered California and
Medi-Cal, visit the Covered California Internet Web site at
http://www.coveredca.com."
1)Requires a group contract between a group benefit plan and an
employer that is issued, amended or renewed on or after July
1, 2016, to require the employer to give the notice in 1)
above to a qualified beneficiary.
2)Deletes an obsolete warning that companies selling individual
health insurance typically require a review of medical history
that could result in higher premium or denial of coverage.
Reinstates this provision if the ACA requirement to have
health insurance is repealed or amended to no longer apply to
the individual market 12 months after the date of that repeal
or amendment.
3)Makes technical conforming changes to update cross references
brought about by the provisions of this bill.
Comments
1)Author's statement. According to the author, the ACA has
brought about significant transformation in the health
insurance market place providing opportunities for employees
to leave group based coverage without the fear of going
uninsured. Prior to the ACA, it was very important that
people be made aware of the challenges obtaining health
insurance in the individual market where medical underwriting
and denials of coverage based on health status were permitted.
Those challenges do not exist today. Consumer notifications
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need to be updated to reflect coverage options that are now
available. This bill simply revises consumer notices to
inform people about options for other coverage including
through Medi-Cal and Covered California.
2)Consolidated Omnibus Budget Reconciliation Act (COBRA).
Federal law that governs continuation coverage for employees
leaving group coverage is called COBRA, which applies to
employers who have more than 20 employees, and requires the
terminated employee to pay 102 percent of the premium in order
to maintain coverage. California law, referred to as
Cal-COBRA, applied to employers that have two to 19 employees,
and required the terminated employee to pay 110 percent of the
premium.
3)ACA. The ACA makes statutory changes affecting the regulation
of and payment for certain types of private health insurance.
As of 2014, individuals are required to maintain health
insurance or pay a penalty, with exceptions for financial
hardship (if health insurance premiums exceed eight percent of
household adjusted gross income), religion, incarceration, and
immigration status. Several insurance market reforms are also
required, such as prohibitions against health insurers
imposing pre-existing health condition exclusions. These
reforms impose new requirements on states related to the
allocation of insurance risk, prohibit insurers from basing
eligibility for coverage on health status-related factors,
allow the offering of premium discounts or rewards based on
enrollee participation in wellness programs, impose
nondiscrimination requirements, require insurers to offer
coverage on a guaranteed issue and renewal basis, and
determine premiums based on adjusted community rating (age,
family, geography, and tobacco use). Additionally, states
have been permitted to establish health benefit exchanges
where individuals with income below 400 percent of the federal
poverty level can qualify for credits toward their premium
costs and subsidies toward their cost-sharing for insurance
purchased through an exchange. California has established
Covered California, as a state-based exchange that is
operating as an independent government entity with a
five-member board of directors.
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4)Tie Back. ABX1-2 (Pan, Chapter 1, Statutes of 2013) and
SBX1-2 (Hernandez, Chapter 2, Statutes of 2013) together
implement ACA health insurance reforms in California in the
individual market, and include tie back provisions requested
by the Brown Administration and health insurers. These ACA
tie back provisions make inoperative in state law some ACA
provisions 12 months after the repeal of the federal
requirement that individuals have health insurance, and
reinstate provisions of law that were protective of consumers
prior to the ACA.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee:
1)One-time costs of $20,000 for CDI to review required notices
for health insurers (Insurance Fund).
2)Minor costs for DMHC to review required notices for health
plans (Managed Care Fund).
3)Unknown costs for additional enrollment in Medi-Cal (General
Fund and federal funds). The new notice required under this
bill provides 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 ACA 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).
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SUPPORT: (Verified5/28/15)
Health Access California
Western Center on Law and Poverty
OPPOSITION: (Verified5/28/15)
None received
ARGUMENTS IN SUPPORT: According to the Western Center on Law
and Poverty, COBRA is a federal program allowing employees who
leave their jobs to buy into their former employer coverage. It
applies to employers with 20 or more employees. California has a
similar program for continuation coverage for employers with
between two and 19 employees - Cal COBRA. SB 503 adds to the
required Cal COBRA notice information regarding Medi-Cal and
Covered California. For those who are income-eligible for
Medi-Cal or subsidies in Covered California, that coverage will
likely be more affordable than buying into Cal COBRA. Health
Access California indicates that this bill proposes to repeal
these notices because this language is no longer applicable now
that California has adopted the insurance market rules required
under the ACA. Health Access is aware that despite the benefits
to millions, there are still efforts to repeal the ACA as well
as continued litigation aimed at denying millions its benefits.
For this reason, the repeal of this notice must be tied to the
continued consumer protections of guaranteed issue and modified
community rating.
Prepared by:Teri Boughton / HEALTH /
5/30/15 17:11:57
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