BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  July 14, 2015


                            ASSEMBLY COMMITTEE ON HEALTH


                                  Rob Bonta, Chair


          SB  
          503 (Ed Hernandez) - As Amended May 5, 2015


          SENATE VOTE:  40-0


          SUBJECT:  Cal-COBRA:  disclosures.


          SUMMARY:  Deletes an obsolete notice included in disclosures of  
          employee options to continue group coverage under the California  
          Continuation Benefits Replacement Act (Cal-COBRA), and replaces  
          it with a notice providing information about obtaining other  
          health coverage, including Medi-Cal or Covered California.   
          Specifically, this bill:  


          1)Requires every evidence of coverage provided for group benefit  
            plans issued, amended, or renewed on or after July 1, 2016 to  
            include the following notice with regard to disclosures about  
            the ability of covered employees of group benefit plans to  
            continue coverage:

            "In addition to your coverage continuation options, you may be  
            eligible for the following:

             a)   Coverage through the state health insurance marketplace,  
               also known as Covered California.  By enrolling through  
               Covered California, you may qualify for lower monthly  








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               premiums and lower out-of-pocket costs.  Your family  
               members may also qualify for coverage through Covered  
               California.

             b)   Coverage through Medi-Cal.  Depending on your income,  
               you may qualify for low or no-cost coverage though  
               Medi-Cal.  Your family members may also qualify for  
               Medi-Cal.

             c)   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 at any time.  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."

          2)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.

          3)Deletes the following obsolete warning from the disclosure:

            "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."

          4)Reinstates the warning in 3) above if the Patient Protection  
            and Affordable Care Act (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. 

          5)Makes technical conforming changes to update cross references  








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            brought about by the provisions of the bill.
          
          EXISTING LAW:  

          1)Establishes, under federal law, the Consolidated Omnibus  
            Budget Reconciliation Act (COBRA), which applies to employers  
            and group health plans that cover 20 or more employees, and  
            allows employees leaving group coverage to keep their group  
            health plan.

          2)Establishes Cal-COBRA, similar to COBRA, which applies to  
            employers and group health plans that cover two to 19  
            employees.

          3)Establishes the Knox-Keene Health Care Service Plan Act of  
            1975 (Knox-Keene Act), the body of law governing health care  
            service plans, and establishes the Department of Managed  
            Health Care (DMHC) to regulate health plans.

          4)Establishes the California Department of Insurance (CDI) to  
            regulate health insurers.

          5)Establishes the California Health Benefits Exchange (now  
            Covered California) to compare and make available through  
            selective contracting with carriers, insurance for individual  
            and small group purchasers.

          6)Requires carriers to provide a disclosure form to covered  
            employees of group benefit plans, and for the form to disclose  
            to the employee the ability to continue coverage, and that  
            additional information regarding eligibility for this coverage  
            may be found in the plan's evidence of coverage.

          7)Requires every disclosure for a group benefit plan to include  
            the following notice:

            "Please examine your options carefully before declining this  
            coverage.  You should be aware that the companies selling  
            individual health insurance typically require a review of your  








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            medical history that could result in a higher premium or you  
            could be denied coverage entirely."
          


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, this bill will result in:

          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 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 and 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).
          


          COMMENTS:


            








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          1)PURPOSE OF THIS BILL.  According to the author, this bill is  
            necessary to relieve employers of the requirement to issue a  
            notice that is no longer relevant with the health insurance  
            market reforms brought about by the ACA.  The author states  
            that, more helpful to individuals moving off group health  
            insurance coverage is information about options for health  
            coverage through Medi-Cal and Covered California.  This bill  
            replaces an obsolete notification with a notification that  
            informs these individuals about options for individual  
            coverage that are available today and where more assistance  
            can be obtained.  The author concludes by stating that this  
            bill restores the notice if the individual mandate is  
            repealed.

          2)BACKGROUND.  


             a)   COBRA and Cal-COBRA.  COBRA is a federal law that  
               applies to employers and group health plans that cover 20  
               or more employees.  COBRA gives workers and their families  
               who lose their health benefits upon specified qualifying  
               events such as voluntary or involuntary job loss, reduction  
               in work hours, transition between jobs, death, divorce, and  
               other life events, the right to choose to continue group  
               health benefits provided by their group health plan for at  
               least 18 months and up to 36 months. 



             Cal-COBRA is a state law that is similar to the federal  
               COBRA.  Cal-COBRA applies to employers and group health  
               plans that cover two to 19 employees, and allows employees  
               to keep their group plan for up to 36 months.   
               Additionally, an employee who qualifies for no more than 18  
               months of coverage under COBRA may use Cal-COBRA for an  
               additional 18 months of coverage up to a total of 36  
               months.








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             Employees who choose to keep their group coverage under COBRA  
               or Cal-COBRA are responsible for paying the total premium,  
               including the employer's share, as well as administrative  
               fees.  Under COBRA, employees pay 102% of the premium, and  
               110% of the total premium under Cal-COBRA.  According to  
               the federal Department of Labor, employees should consider  
               all options they may have to get other health coverage  
               before deciding to use COBRA as there may be more  
               affordable or more generous coverage options through other  
               group health plan coverage (such as a spouse's plan), the  
               health insurance marketplaces (such as Covered California),  
               or Medicaid.  
             b)   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  
               8% of household adjusted gross income), religion,  
               incarceration, and immigration status.  


               i)     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).  


               ii)    Additionally, states have been permitted to  
                 establish health benefit exchanges where individuals with  








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                 income below 400% 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.  Covered California is  
                 California's state-based exchange.  Further, until the  
                 implementation of the ACA, Medi-Cal eligibility was  
                 limited to low-income families with children, seniors and  
                 persons with disabilities, and pregnant women.  The ACA  
                 expanded eligibility to additional low-income  
                 populations, including childless adults.  The state  
                 conformed to the federal ACA changes expanding Medi-Cal  
                 coverage to these populations. 


             c)   Tie Back.  AB X1 2  (Pan), Chapter 1, Statutes of 2013  
               and SB X1 2 (Ed 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, including prohibitions on coverage  
               determinations based on pre-existing conditions, and  
               eligibility rules based on health status and other factors,  
               and reinstate provisions of law that were protective of  
               consumers prior to the ACA, should that occur.


          3)SUPPORT.  Supporters state that this bill repeals a notice  
            required by state law that is no longer applicable now that  
            California has adopted the insurance market rules under the  
            ACA, and the bill's provisions requiring notice of the  
            availability of Medi-Cal and Covered California will make  
            employees losing their employer coverage aware of potentially  
            more affordable coverage options.   


          4)PREVIOUS LEGISLATION.  








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             a)   AB 1180 (Pan), Chapter 441, Statutes of 2013, makes  
               inoperative, because of the ACA, several provisions in  
               existing law that implement state health insurance laws of  
               the federal Health Insurance Portability and Accountability  
               Act of 1996 (HIPAA) and additional provisions that provide  
               former employees rights to convert their group health  
               insurance coverage to individual market coverage without  
               medical underwriting.  Establishes notification  
               requirements informing individuals affected by AB 1180 of  
               health insurance available in 2014.

             b)   AB X1 2 (Pan) and SB X1 2 (Ed Hernandez), establish  
               health insurance market reforms contained in the ACA  
               specific to individual purchasers, such as prohibiting  
               insurers from denying coverage based on pre-existing  
               conditions; and make conforming changes to small employer  
               health insurance laws resulting from final federal  
               regulations.

             c)   SB 961 (Ed Hernandez) and AB 1461 (Monning) of 2012 were  
               identical bills that would have reformed California's  
               individual market similar to the provisions in SB X1 2.  SB  
               961 and AB 1461 were vetoed by Governor Brown.

             d)   AB 1083 (Monning), Chapter 854, Statutes of 2012,  
               establishes reforms in the small group health insurance  
               market to implement the ACA.

             e)   AB 2244 (Feuer), Chapter 656, Statutes of 2010, requires  
               guaranteed issue of health plan and health insurance  
               products for children beginning in January 1, 2011.

             f)   SB 900 (Alquist), Chapter 659, Statutes of 2010, and AB  
               1602 (Perez), Chapter 655, Statutes of 2010, establish  








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               Covered California.

          5)SUGGESTED AMENDMENT.  The tie back language in this bill  
            applies solely to the disclosure made to employees by  
            carriers.  It does not apply to the notice provided to  
            employees by their employers.  Thus, if the ACA's individual  
            mandate is repealed, the employer's notice to employees would  
            not include language making them aware that carriers selling  
            individual coverage could impose higher premiums or deny  
            coverage based on medical history.  For consistency, and to  
            better ensure employees are informed of their coverage options  
            in the case they lose coverage through their employer, the  
            author may wish to amend the bill to require both the carrier  
            and employer disclosures to include the same language  
            regarding coverage options if the ACA's individual mandate is  
            repealed.
            


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Health Access California


          Western Center on Law and Poverty




          Opposition


          None on file.








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          Analysis Prepared by:Kelly Green / HEALTH / (916)  
          319-2097