BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 503| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 SB 503 Page 2 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. SB 503 Page 3 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 SB 503 Page 4 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. SB 503 Page 5 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). SB 503 Page 6 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 **** END **** SB 503 Page 7