BILL ANALYSIS
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THIRD READING
Bill No: AB 23
Author: Jones (D) and Fletcher (R), et al
Amended: 5/4/09 in Senate
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 11-0, 4/15/09
AYES: Alquist, Strickland, Aanestad, Cedillo, Cox,
DeSaulnier, Leno, Maldonado, Negrete McLeod, Pavley, Wolk
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 74-0, 4/2/09 - See last page for vote
SUBJECT : Cal-COBRA: premium assistance
SOURCE : Department of Insurance
DIGEST : This bill 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).
Senate Floor Amendments of 5/4/09 make modifications to the
notice requirements pertaining to potential eligibility for
federal subsidy of continuation coverage under the ARRA.
ANALYSIS : Existing federal law:
Existing law, under the federal Consolidated Omnibus Budget
CONTINUED
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Reconciliation Act (COBRA) of 1985, gives employees, who
work for employers with 20 or more workers, their spouses,
and dependent children the right to continue group health
coverage provided by the employer generally for up to 18
months when they lose their health care benefits after a
qualifying event, as defined, provided the employer
provides group health coverage for current employees.
Qualifying events include circumstances such as voluntary
or involuntary job loss, reduction in the hours worked,
death, divorce, and other life events. Existing law
requires employees, their spouses, and dependent children
(known collectively as qualified beneficiaries) to pay 102
percent of the group rate when electing continuation
coverage under COBRA.
Existing law, under ARRA (Public Law 111-5), provides
premium assistance for health benefits under COBRA and
state COBRA programs (see below) for "assistance eligible
individuals," who are federally defined qualified
beneficiaries who were involuntarily terminated between
September 1, 2008, and December 31, 2009. Existing law
provides that the premium assistance applies to periods of
health coverage beginning on or after February 17, 2009,
and lasts for up to nine months, subject to other
limitations.
Existing law, under ARRA, allows certain qualified
beneficiaries a second opportunity to elect COBRA, if they
had rejected or discontinued COBRA in the past, with
premium assistance. Existing law, under ARRA, allows
certain qualified beneficiaries the right to enroll in
another health benefit plan offered by the employer under
COBRA, under specified circumstances.
Existing state law:
Existing law provides for licensing and regulation of
health care service plans by the Department of Managed
Health Care (DMHC), and provides for regulation of health
insurers by the California Department of Insurance (CDI).
Existing law, under the California Continuation Benefits
Replacement Act, or Cal-COBRA, requires health plans and
insurers that provide coverage under a group benefit plan
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to an employer with 2 to19 eligible employees to offer
continuation coverage to a qualified beneficiary (a person
enrolled in the employer's group benefit plan), upon a
qualifying event, without evidence of insurability.
Existing law defines, for purposes of eligibility for
Cal-COBRA, a "qualifying event" as any of the following
events that result in a loss of coverage under the group
benefit plan by a qualified beneficiary: the death of the
covered employee; the termination of employment or
reduction in hours of the covered employee's employment,
except termination for gross misconduct; the divorce or
legal separation of the covered employee from the covered
employee's spouse; the loss of dependent status by a
dependent enrolled in the group benefit plan; and, with
respect to a covered dependent only, the covered employee's
entitlement to benefits under Medicare.
Existing law requires health plans and insurers to provide
a disclosure that informs individuals eligible for
Cal-COBRA that failure to make the notification of all
qualifying events to the health plan, insurer, or employer
contracting to perform Cal-COBRA administrative services,
within the 60 days of the qualifying event, will disqualify
the qualified beneficiary from receiving Cal-COBRA
continuation coverage.
Existing law requires a qualified beneficiary electing
Cal-COBRA continuation coverage to pay not more than 110
percent of the applicable rate charged for a covered
employee or, in the case of dependent coverage, not more
than 110 percent of the applicable rate charged to a
similarly situated individual under the group benefit plan.
Existing law requires every group contract between a health
plan or insurer and an employer with 2 to19 eligible
employees to require the employer to notify the plan or
insurer, 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.
Existing law requires health plans and insurers, or the
contracting entities that perform the notice and
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administrative services of Cal-COBRA, to provide to the
qualified beneficiary, within 14 days of receiving notice
of a qualifying event, the necessary benefits information,
premium information, enrollment forms, and disclosures to
allow the qualified beneficiary to formally elect Cal-COBRA
coverage.
Existing law requires a qualified beneficiary who wishes to
continue coverage under the group benefit plan to request
the continuation in writing to the health plan or insurer,
or contracting entity, within the 60-day period following
the later of: (1) the date that the enrollee or insured's
coverage under the group benefit plan terminated or will
terminate by reason of a qualifying event; or (2) the date
the enrollee or insured was sent the information necessary
to elect Cal-COBRA coverage.
This bill:
1. Requires health plans and insurers to provide to a
qualified beneficiary 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 qualified beneficiary's last known
address.
2. Requires the notice to include clear and easily
understandable language to inform a qualified
beneficiary that changes in federal law provide a new
opportunity to elect Cal-COBRA continuation coverage
with a 65 percent premium subsidy, and to include
specified information.
3. Requires, with respect to qualified beneficiaries who
had a qualifying event between September 1, 2008, and
the effective date of this bill, health plans, insurers,
or their contracting entities, to provide the notice
within the later of 14 calendar days of the effective
date of the bill or seven business days after the date
the insurer receives notice of the qualifying event.
The bill requires, with respect to qualified
beneficiaries who had or have a qualifying event between
the day after the effective date of this bill and
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December 31, 2009, health plans, insurers, or their
contracting entities to provide the notice within the
period of time specified under current law, which is
also 14 days.
4. Creates a separate definition for "qualified beneficiary
eligible for premium assistance under ARRA," (distinct
from the definition of "qualified beneficiary") as a
qualified beneficiary who was or is eligible for
Cal-COBRA coverage as a result of the involuntary
termination of the covered employee's employment from
September 1, 2008, through December 31, 2009; who elects
Cal-COBRA coverage; and, who meets the definition of a
qualified beneficiary under the federal Employee
Retirement Income Security Act of 1974.
5. Permits a qualified beneficiary eligible for premium
assistance under ARRA to elect Cal-COBRA continuation
coverage no later than 60 days after the date of the
required notice.
6. Requires, for a qualified beneficiary 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. For a qualified beneficiary 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 bill requires 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.
7. Permits a qualified beneficiary eligible for premium
assistance under ARRA to elect to enroll in different
coverage subject to the criteria provided under ARRA
(including if the employer approves of the change, the
benefit plan is open to other active employees, is not a
limited benefit plan, and is a cheaper plan than the one
the qualified beneficiary had coverage under at the time
of the qualifying event).
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8. Permits a qualified beneficiary 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.
9. Prohibits, for qualified beneficiaries who are eligible
for premium assistance and who elect continuation
coverage, health plans or insurers 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.
10.Defines a health plan or insurer as a person entitled to
reimbursement for the amount of the federal premium
subsidy, when the plan or insurer receives an election
notice from a qualified beneficiary who is eligible for
premium assistance under ARRA.
11.Permits a health plan or insurer, in absence of guidance
from the federal government, or if specifically required
by the federal government, to request verification of
the involuntary termination of the covered employee from
either a qualified beneficiary seeking premium
assistance under ARRA or from the covered employee's
former employer, within certain timeframes and methods
of delivery, as specified.
12.Permits a qualified beneficiary requesting premium
assistance under ARRA to furnish to the health plan or
insurer a written document or other information from the
covered employee's former employer indicating that the
covered employee's employment was involuntarily
terminated.
13.Requires this document or information to be deemed
sufficient by the health plan to establish that the
covered employee's employment was involuntarily
terminated for purposes of ARRA unless the plan makes a
reasonable and timely determination that the documents
or information provided by the qualified beneficiary are
legally insufficient to establish involuntary
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termination of employment.
14.Requires a health plan/insurer, which requests
verification but cannot verify involuntary termination
of employment within 14 business days from the date the
employer receives the verification request, or from the
date the plan receives documentation or other
information from the qualified beneficiary, to either:
A. Provide continuation coverage with the
federal premium assistance to the qualified
beneficiary; or,
B. Send the qualified beneficiary a denial
letter which includes notice of his or her right
to appeal that determination under ARRA.
15.Prohibits any person from intentionally delaying
verification of involuntary termination of employment
under the provisions of the bill.
16.Prohibits the provision of information and forms related
to the premium assistance available pursuant to
individuals by a health care service plan prior to the
effective date of this bill from being considered a
violation of the Knox-Keene Act, provided that the plan
complies with all Cal-COBRA requirements.
17.Makes other minor changes related to the required
notice, and other technical and clarifying amendments.
18.Makes other related changes, including permitting the
adoption of emergency regulations by regulators, and
allowing use of model notices.
Background
COBRA versus Cal-COBRA . COBRA, which was enacted in 1985,
gives qualified beneficiaries who have a qualifying event
(e.g., voluntary or involuntary loss of a job, 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
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coverage through the employer's health plan generally for
up to 18 months. COBRA applies to employers with at least
20 workers; requires qualified beneficiaries to pay both
the employer and employee's share of premium and a two
percent administration fee, totaling no more than 102
percent of the group rate (although disability may extend
this cap to 150 percent of the group rate for 11 months
after the initial 18-month period); and is enforced by the
federal Department of Labor.
California's "mini-COBRA" or state COBRA law, called
Cal-COBRA, applies to health plans and insurers offering
small group health coverage to employers with 2 to 19
employees who are not eligible for continuation coverage
under federal COBRA. Premiums in Cal-COBRA cannot exceed
110 percent of the group rate, with specified exceptions,
and is paid entirely by qualified beneficiaries. Cal-COBRA
also applies to individuals who have exhausted their 18
months of continuation coverage under COBRA, and allows a
maximum of 36 months of continuation coverage under
Cal-COBRA, or COBRA and Cal-COBRA combined. Cal-COBRA is
enforced by DMHC and CDI.
Federal and state continuation coverage programs differ as
to who may be considered a qualified beneficiary. Qualified
beneficiaries under federal law include the covered
employee, spouse or a dependent child of a covered
employee, who have been covered under the employer's plan
on the day before the qualifying event. (A special rule
applies for children born to or adopted by a covered
employee during a period of COBRA continuation coverage.)
State law defines a qualified beneficiary as any individual
who, on the day before the qualifying event, is an enrollee
in a group benefit plan offered by a health care service
plan or disability insurer and has a qualifying event.
Affordability of COBRA and Cal-COBRA continuation coverage .
According to a 2009 Families USA report, for most
individuals and families, the cost of COBRA coverage is
prohibitively high, especially when compared to average
unemployment benefits. A Commonwealth Fund issue brief
released in 2009 found that only nine percent of unemployed
adults bought health insurance under COBRA in 2006. The
same study found that employees pay on average 16 percent
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for a single-person plan and 27 percent for a family plan,
as their share of employer-sponsored health coverage, based
on recent employer surveys.
According to data from a 2008 California Employer Health
Benefits Survey, sponsored by the California HealthCare
Foundation, California workers contributed, on average,
$582 or 12 percent of the cost of the $4,906 total annual
average cost of employer-based single coverage and $3,194
or 24 percent 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 of coverage
plus an additional 10 percent.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 5/5/09)
Department of Insurance (source)
Adventist Health
American Association of Retired Persons
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Association of Health Underwriters
California Hospital Association
California Labor Federation
California Medical Association
California Nurses Association
California Professional Firefighters
California Society for Clinical Social Work
Consumers Union
Loma Linda University Adventist Health Sciences Center
Service Employees International Union
Small Business California
ARGUMENTS IN SUPPORT : The Insurance Commissioner and
other supporters write that it is vital that the state
enact this measure as quickly as possible to make sure
employees of small businesses in California have access to
this federal subsidy to maintain their health insurance
through these difficult economic times.
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The California Association of Health Underwriters states
that this bill will bring California's version of COBRA
into compliance with the newly enacted federal statute
providing financial assistance for health benefits.
California Hospital Association writes that this measure
will help the recently unemployed maintain a connection
with a primary care provider. The California Labor
Federation states that this bill will help the state better
maximize federal economic stimulus assistance and offer
working families help when they need it the most. The
California Medical Association (CMA) writes that the
conforming changes in this bill will go a long way towards
keeping recently unemployed Californians enrolled in
private insurance and will reduce demand for
already-overburdened state and local health programs.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, De La Torre, De Leon,
DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
Garrick, Gilmore, Hagman, Harkey, Hayashi, Hernandez,
Hill, Huber, Huffman, Jeffries, Jones, Knight, Krekorian,
Logue, Bonnie Lowenthal, Mendoza, Miller, Monning, Nava,
Nestande, Niello, Nielsen, V. Manuel Perez, Portantino,
Price, Ruskin, Salas, Saldana, Silva, Skinner, Smyth,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Villines, Yamada, Bass
NO VOTE RECORDED: Davis, Hall, Lieu, Ma, John A. Perez,
Tran
CTW:nl 5/5/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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