BILL ANALYSIS Ó
SB 503
Page 1
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