BILL ANALYSIS                                                                                                                                                                                                    Ó




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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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