BILL ANALYSIS
AB 29
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Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 29 (Price) - As Amended: March 24, 2009
Policy Committee: Health Vote:13-5
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill prohibits the limiting age of dependent health plan
and insurance coverage from being less than 27 years of age. The
limiting age determines when children are no longer considered
dependents for the purposes of health coverage.
FISCAL EFFECT
1)One-time costs of $2.5 million (60% GF) to $3 million (60% GF)
to the California Public Employee Retiree System (CalPERS) for
information technology, data, and system modifications to
accommodate distinct enrollment of eligible dependents 23 to
27 years of age and account for separate billing processes.
2)CalPERS currently has a major technology reengineering
project, including payment and information systems, underway
to be finalized in the spring of 2010. The fixed contract
amount of this project is $211 million. AB 29, by requiring
additional and different processes and data, may put some
contract features and related deliverables at risk.
3)Although this bill does not require employee participation in
dependent health coverage premiums for young adults between
the ages of 23 and 27, increased premium pressures on
employers, including public sector employers, to provide
financial support of dependent coverage premiums may result
from this bill.
a) An earlier version of this bill, AB 1698 (Nunez) in 2005
(in early amended versions) would have required partial
employer participation for an expansion of dependent
coverage. That bill generated estimated costs to CalPERS of
AB 29
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approximately $60 million (GF) per year on behalf of state
employee families and $36 million (local costs) per year
for contracting agency members, assuming the employer paid
80% of the premium. CalPERS covers 1.3 million active state
and local employees, retirees, and their families.
b) AB 1698 also generated GF cost pressures to the
University of California (UC) to continue coverage an
additional two years for dependents. UC estimates at that
time were $1.4 million to $4 million annually.
4)Potential premium pressures to the extent this bill increases
adverse risk selection. Adverse risk selection occurs when
lower-risk individuals with less health care needs and
higher-risk individuals with greater health care needs make
different coverage choices. Insurers indicate this bill could
result in young adults with greater health care needs staying
on their parents' coverage for longer than under current law
when the young person would otherwise enter another health
insurance pool through an employer or the individual market.
COMMENTS
1)Rationale . This bill, supported by consumer and provider
groups, prevents young adults who are enrolled on their
parents' insurance from being terminated prior to their 27th
birthday. According to research, young adults compose one of
the largest and fastest growing segments of the uninsured.
Young adults often lose health coverage at age 19 as a result
of being dropped from their parents' policies or because of
losing eligibility for public programs like Medi-Cal or
Healthy Families. One-third of college graduates will spend
some time uninsured in the year following graduation. Only
about half of 19 to 29 year olds are eligible for coverage
offered by their employers as compared to three-quarters of 30
to 64 year old workers. This bill increases the continuity of
health coverage for young adults and reduces the number of
young adults who become uninsured as they reach adulthood.
2)Dependent Health Coverage . Most individual and group health
coverage policies set a limiting age for coverage of dependent
children. The limiting age determines when children are no
longer considered dependents for the purposes of health
coverage. The age is often set at 19. However, contracts also
often allow a young person who is enrolled full-time in
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college to remain on the policy as a dependent until age 23.
In addition, California statute establishes an exception to
the limiting age for those dependents who are incapable of
self-sustaining employment by reason of a physically or
mentally disabling injury, illness, or condition and who
remain chiefly dependent on the subscriber, member, or
policyholder for support and maintenance.
3)Concerns . A number of health plans and insurers oppose this
bill. The industry groups indicate this bill mandates
guaranteed coverage to a new group of dependents until age 27
without the opportunity to assess potential risks and costs.
Opponents are concerned this lack of underwriting may result
in adverse selection and premium pressures which may lead some
employers to drop dependent coverage.
4)Related Legislation . SB 1168 (Runner), Chapter 390, Statutes
of 2008 prohibited the termination of health coverage for a
dependent young adult older than 18 years old and enrolled at
a secondary or postsecondary educational institution if the
individual takes a medical leave of absence from school.
AB 910 (Karnette), Chapter 617, Statutes of 2007 amended
sections of law addressed in this bill regarding dependent
adults incapable of self-sustaining employment due to
disability.
AB 1698 (Nunez) in 2006 extended the limiting age for all
dependent coverage to 26 years of age. This bill was vetoed
due to concerns about employer costs for health coverage.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081