BILL ANALYSIS
AB 23
Page 1
( Without Reference to File )
ASSEMBLY THIRD READING
AB 23 (Jones)
As Amended April 2, 2009
2/3 vote. Urgency
HEALTH 19-0 APPROPRIATIONS 16-0
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|Ayes:|Jones, Fletcher, Adams, |Ayes:|De Leon, Nielsen, |
| |Ammiano, Block, Carter, | |Ammiano, Davis, Duvall, |
| |Conway, De La Torre, De | |Fuentes, Hall, Harkey, |
| |Leon, Emmerson, Gaines, | |Jones, Miller, John A. |
| |Hall, Hayashi, Hernandez, | |Perez, Price, Skinner, |
| | | |Solorio, Audra |
| |Bonnie Lowenthal, Nava, | |Strickland, Torlakson |
| |V. Manuel Perez, Salas, | | |
| |Audra Strickland | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Establishes, for purposes of the Cal-COBRA program,
specific notice requirements and enrollment opportunities for persons
eligible for premium assistance under the American Recovery and
Reinvestment Act of 2009 (ARRA). Specifically, this bill :
1)Requires health plans to provide to a qualified beneficiary (QB)
who has a qualifying event between September 1, 2008 and December
31, 2009 a written notice containing information on the
availability of premium assistance under ARRA for Cal-COBRA
coverage, to be sent to the QB's last known address. (A QB is a
person working in a firm of two to 19 employees, who because of a
qualifying event [such as the loss of a job] loses employer
coverage and becomes eligible for continuation coverage under
Cal-COBRA.)
2)Permits a QB eligible for premium assistance under ARRA to elect
Cal-COBRA continuation coverage no later than 60 days after the
date of the required notice.
3)Requires the notice in 1) above to include language that adequately
informs a reasonable person of changes in federal law that provide
a new opportunity to elect Cal-COBRA continuation coverage with a
65% premium subsidy, and to include all of the following:
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a) A statement that a QB eligible for premium assistance under
ARRA may elect Cal-COBRA continuation coverage no later than 60
days after the date of the notice;
b) A statement that a QB eligible for premium assistance under
ARRA who had previously rejected or discontinued Cal-COBRA
continuation coverage has the right to withdraw that rejection
and elect continuation coverage with the premium assistance;
c) The amount of the premium the person will pay. For qualified
beneficiaries who had a qualifying event between September 1,
2008, and the effective date of this bill, if a health plan is
unable to provide the correct premium amount in the notice, the
notice may contain the last known premium amount and an
opportunity for the QB to request, through a toll-free telephone
number, the correct premium that would apply to the beneficiary;
d) The eligibility requirements for premium assistance in the
amount of 65% of the premium under ARRA, and the duration of
premium assistance under ARRA;
e) Enrollment forms and any other information required to be
included to allow the QB to elect Cal-COBRA continuation
coverage, except that this information is not to be included in
notices sent to QBs currently enrolled in Cal-COBRA continuation
coverage; and,
f) A description of the option to enroll in different coverage,
as provided in federal law, which allows a person to elect a
cheaper plan, if the employer approves, the health plan is open
to other active employees, and is not a limited benefit plan.
4)Requires, with respect to QBs who had a qualifying event between
September 1, 2008, and the effective date of this bill, health
plans to provide the notice described in 1) above within 14 days of
the effective date of this bill.
5)Requires, with respect to QBs who had or have a qualifying event
between the day after the effective date of this bill and December
31, 2009, health plans to provide the notice in 1) above within the
period of time specified under current law.
6)Permits the California Department of Insurance (CDI) and the
Department of Managed Health Care (DMHC), for purposes of
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compliance with the notice requirements of this bill, to designate
a model notice or notices that may be used by health plans. Allows
use of the model notice or notices without prior approval by the
DMHC or CDI, and exempts any model notice or notices designated by
the DMHC or CDI from the requirements of the Administrative
Procedure Act.
7)Prohibits this bill from being construed to require a health plan
to provide the plan's evidence of coverage as a part of the notice
required by this bill.
8)Prohibits health plans from using the time period between the
qualifying event and the effective date of Cal-COBRA continuation
coverage as a break in coverage in determining whether to apply a
pre-existing condition exclusion.
9)Requires, for a QB who is eligible for premium assistance because
of an involuntary termination of a covered employee between
September 1, 2008 and February 16, 2009, the Cal-COBRA continuation
coverage to commence on the first day of the month following the
election.
10)Requires, for a QB who has or had a qualifying event between
February 17, 2009, and the effective date of this bill, who elects
Cal-COBRA continuation coverage, the effective date of the
continuation coverage to be the date of the qualifying event or the
first day of the month following the election, at the option of the
beneficiary, provided the beneficiary pays the applicable premiums.
11)Permits a QB to elect to enroll in different coverage subject to
the criteria provided under ARRA, if the employer approves, the
health plan is available to other active employees, and the health
plan contract is not a limited benefit plan.
12)Permits a QB enrolled in Cal-COBRA continuation coverage as of
February 17, 2009 who is eligible for premium assistance under
ARRA, to request application of the premium assistance as of March
1, 2009, or later, consistent with ARRA.
13)Defines a QB eligible for premium assistance under ARRA as a QB
who meets the following:
a) Who was or is eligible for Cal-COBRA coverage as result of
the involuntary termination of the covered employee's employment
from September 1, 2008 through December 31, 2009;
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b) Who elects Cal-COBRA coverage; and,
c) Who meets the definition of a QB under the federal Employee
Retirement Income Security Act of 1974.
14)Permits the Director of the DMHC and the Commissioner of CDI to
adopt emergency regulations to implement Cal-COBRA, and requires
the adoption of these regulations to be considered by the Office of
Administrative Law to be necessary to avoid serious harm to the
public peace, health, safety, or general welfare. Requires, if
regulations are adopted, the respective regulations to be
substantially similar and done in consultation with the other
regulator.
15)Defines a health plan as a person entitled to reimbursement for
the amount of the federal premium subsidy, when the plan receives
an election notice from a QB who is eligible for premium assistance
under ARRA.
16)States legislative intent that any federal assistance that is or
may become available to QBs under Cal-COBRA be effectively and
promptly implemented by DMHC and CDI.
EXISTING LAW :
1)Requires health plans and insurers that provide coverage under a
group benefit plan to an employer with two to 19 eligible employees
to offer continuation coverage to a QB (a person enrolled in the
health plan), upon a qualifying event, without evidence of
insurability. This body of law is known as Cal-COBRA.
2)Defines, for purposes of eligibility for Cal-COBRA, a "qualifying
event" as any of the following events that result in a loss of
group coverage by a QB:
a) The death of the covered employee;
b) The termination of employment or reduction in hours of the
covered employee's employment, except that termination for gross
misconduct does not constitute a qualifying event;
c) The divorce or legal separation of the covered employee from
the covered employee's spouse;
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d) The loss of dependent status by a dependent enrolled in the
group benefit plan; and,
e) With respect to a covered dependent only, the covered
employee's entitlement to benefits under Medicare.
3)Requires health plans to provide a disclosure that informs
individuals eligible for Cal-COBRA that failure to make the
notification to the insurer within the 60 days will disqualify the
QB from receiving Cal-COBRA continuation coverage.
4)Requires a QB electing Cal-COBRA continuation coverage to pay not
more than 110% of the applicable rate charged for a covered
employee or, in the case of dependent coverage, not more than 110%
of the applicable rate charged to a similarly situated individual
under the group benefit plan.
5)Requires every group contract between a health plan and an employer
with two to 19 eligible employees to require the employer to notify
the plan, in writing, of any employee who has had a qualifying
event related to termination of employment or a reduction in hours
of the covered employee within 30 days of the qualifying event.
6)Requires health plans, or employers or administrators that contract
to perform the notice and administrative services, to provide to
the QB in 5) above the necessary benefits information, premium
information, enrollment forms, and disclosures to allow the QB to
formally elect Cal-COBRA coverage within 14 days of receiving a
notice of a qualifying event.
FISCAL EFFECT : According to the Assembly Appropriations Committee,
one-time federal funding of $250 million to $400 million in Cal-COBRA
premium assistance to 60,000 to 100,000 unemployed individuals and
their families. This estimate assumes 10% to 20% of premium
assistance notices will result in new continuation coverage, in
addition to the 10% of individuals who have chosen coverage in the
absence of premium subsidies. Absorbable workload during 2009 for
state agencies with health coverage and administrative oversight
obligations.
COMMENTS : According to the author, this bill would ensure that
Californians who lose their job while working for a small employer
through a layoff or other involuntarily termination are notified that
they may be eligible for premium assistance through the federal
stimulus bill to help them pay for and keep their health coverage
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through Cal-COBRA. Additionally, for those individuals who lost
their jobs going back to September 2008, AB 23 would give them a
second chance to elect coverage under Cal-COBRA now that premium
assistance is available. The author points out that California has
one of the highest uninsured rates in the country (a 3-year average
of 20.5%, compared to 17.4% nationally), and one of the highest
unemployment rates (currently 10.5%) in the country. Job loss is the
primary reason people lose health coverage because most insured
Californians receive coverage through their employment. The author
argues this bill would ensure that Californians who were laid off as
a result of the current economic downturn are aware of their
eligibility for premium assistance and have a second chance to enroll
in Cal-COBRA coverage. The author states this bill is urgently
needed to avoid increasing the number of Californians without health
insurance.
The federal Consolidated Omnibus Budget Reconciliation Act of 1985,
commonly called COBRA, gives workers and their dependents who have a
qualifying event (such as the loss of a job or a reduction in hours,
death of the covered employee, divorce of the covered employee from
the covered employee's spouse, or the loss of dependent status by a
dependent enrolled in the health plan) the right to continue their
group health coverage through the employer's health plan. If the
employer continues to offer a group health plan, the employee and
his/her family can retain their group health coverage by paying the
full premium at group rates, which are capped at 102% for COBRA.
COBRA applies to employers providing group health coverage who have
at least 20 employees. California's "mini-COBRA" law, Cal-COBRA,
applies to health plans and insurers offering small group health
coverage to employers with two to nineteen employees who are not
eligible for continuation coverage under federal COBRA. Premiums in
Cal-COBRA cannot exceed 110% of the group rate. Prior to ARRA,
premium assistance was not available to individuals electing COBRA or
Cal-COBRA coverage.
Few workers currently elect COBRA coverage now, in large part because
they must pay the entire cost of the premium at a time when they are
facing a reduction of hours, divorce, or loss of employment.
California workers contributed, on average, $582 or 12% of the cost
of the $4,906 total annual average cost of employer-based single
coverage and $3,194 or 24% of the total annual average cost of
$13,427 for employer-based family coverage in 2008. Individuals
buying Cal-COBRA coverage pay the entire cost plus an additional 10%.
A Commonwealth Fund issue brief released in 2009 found that only 9%
of unemployed adults bought health insurance under COBRA in 2006.
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ARRA (Public Law 111-5) provides premium assistance for health
benefits under COBRA, and state mini-COBRA laws such as Cal-COBRA,
for individuals and their dependents that were involuntarily
terminated between September 1, 2008 and December 31, 2009. Instead
of paying the entire COBRA premium amount, eligible individuals would
pay 35% of premium, and the remaining 65% would be reimbursable to
the employer or health plan as a credit against certain payroll
taxes. The premium assistance applies to periods of health coverage
beginning on or after February 17, 2009 and lasts for up to nine
months.
Eligibility for the ARRA premium assistance is narrower than
eligibility for Cal-COBRA. Under Cal-COBRA, an individual can become
eligible for Cal-COBRA because of a loss of employment, a reduction
in hours, the death of the covered employee, the divorce of the
covered employee from the covered employee's spouse, or the loss of
dependent status. By contrast, eligibility for ARRA premium
assistance is limited to individuals and their dependents who meet
the following criteria:
1)Are eligible for COBRA continuation coverage at any time between
September 1, 2008 and December 31, 2009.
2)Elect COBRA coverage.
3)Are eligible for COBRA as a result of the employee's involuntary
termination between September 1, 2008 and December 31, 2009.
Eligibility for the full amount of premium assistance is limited to
individuals with a modified adjusted gross income of $125,000 or less
($250,000 for joint filers). For taxpayers with modified adjusted
gross income between $125,000 and $145,000 (or $250,000 and $290,000
for joint filers), the amount of the premium reduction that must be
repaid is reduced proportionately, and taxpayers with modified
adjusted gross incomes above those amounts must repay the amount of
premium reduction received.
Individuals who are eligible for other group health coverage (such as
a spouse's plan), or eligible for Medicare, are not eligible for the
premium reduction, and there is no premium reduction for premiums
paid for periods of coverage prior to February 17, 2009.
Under federal law, the premium reduction (65% of the full premium) is
reimbursable to the employer, insurer, or health plan as a credit
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against certain employment taxes. Federal guidance from the
Department of Health and Human Services (DHHS) for state mini-COBRA
laws indicates the health insurance issuer providing the coverage to
the group health plan would receive the payroll tax credit once the
individual beneficiary pays the 35% of premium. If the credit amount
is greater than the taxes due, the Secretary of the Treasury will
reimburse the employer, insurer, or plan for the excess. The premium
assistance for an individual on COBRA or Cal-COBRA ends upon
eligibility for other group coverage (or Medicare), after 9 months,
or when the maximum period of COBRA coverage ends, whichever occurs
first. Individuals paying reduced COBRA/Cal-COBRA premiums must
inform health plans if they become eligible for coverage under
another group health plan or Medicare.
Individuals involuntarily terminated from September 1, 2008 through
February 16, 2009, who did not elect COBRA when it was first offered,
or who did elect COBRA but who are no longer enrolled (for example,
because they were unable to continue paying the premium), have a new
opportunity to elect COBRA coverage under ARRA. This special
election period begins on February 17, 2009 and ends 60 days after
the required notice. However, the federal Department of Labor has
advised that this special election period opportunity does not apply
to coverage sponsored by employers with less than 20 employees
subject to state law (such as California's Cal-COBRA law). This bill
would implement an additional special election for individuals
eligible for Cal-COBRA similar to the election period for federal
COBRA.
Federal law also permits qualified beneficiaries eligible for premium
assistance to switch Cal-COBRA health plans, under certain
conditions. In order for the qualified beneficiary to switch COBRA
coverage, the employer must permit switching coverage, the premium
for the other coverage must be less, the other coverage must offered
to active employees of the employer, and the different coverage
cannot be limited coverage (such as coverage that provides only
dental, vision, or counseling). This bill would authorize this
option for Cal-COBRA beneficiaries under the same terms as the
federal law. According to a survey done on behalf of the California
HealthCare Foundation, 18.6% of employers with 3-19 employees offer a
choice of different plans (e.g., an HMO and a PPO product), and 24.2%
of firms offer a choice of carrier.
For state mini-COBRA laws, federal guidance from DHHS indicates the
issuer of the group health plan must provide QBs an election notice
that contains information on how to request treatment as a person
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eligible for premium assistance, and the notice must be provided
within timeframes specified under state law.
This measure is sponsored by Insurance Commissioner Steve Poizner and
supported by the California Medical Association, the California Labor
Federation, AARP, and the California Hospital Association among
others, who argue this bill will ensure Californians are able to take
full advantage of federal premium assistance made available by ARRA.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097
FN: 0000236