BILL ANALYSIS
SB 838
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 838 (Tony Strickland) - As Amended: April 29, 2010
SUBJECT : Cal-COBRA: premium assistance.
SUMMARY : Extends the state law requirements placed on health
care service plans (health plans) and health insurers offering
Cal-COBRA (the Consolidated Omnibus Budget Reconciliation Act of
1985) coverage to notify qualified beneficiaries of their
potential eligibility for federal premium assistance, and to
allow them to enroll in coverage. Specifically, this bill :
1)Conforms the definition of a "qualified beneficiary eligible
for premium assistance" (QB) in Cal-COBRA to federal law,
which currently includes individuals involuntarily terminated
between September 1, 2008 and May 31, 2010.
2)Requires health plans and insurers to provide to QBs with
qualifying events with a written notice on the availability of
premium assistance. Requires the notice to contain
information that meets existing state law requirements, such
as the amount of the premium the person will pay and the
eligibility requirements for premium assistance. Permits a QB
receiving this notice to elect Cal-COBRA coverage no later
than 60 days after the date of the notice.
3)Requires Cal-COBRA coverage, for a QB who had a reduction in
hours (which is a qualifying event) and was subsequently
involuntarily terminated after March 1, 2010, to be effective
as of the first day of the first period of coverage after
termination of employment. However, if federal law permits,
coverage would take effect on the first day of the month
following the election.
4)Requires health plans and insurers, or an administrator or
employer if administrative obligations have been assumed by
those entities, to send a notice to employers, within 14 days
of the effective date of this bill, that:
a) Advises the employer that employees whose employment is
terminated on or after March 2, 2010, who were previously
enrolled in any group health plan or health insurance
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policy offered by the employer may be entitled to special
health coverage rights, including a subsidy paid by the
federal government for a portion of the premium;
b) Asks the employer to provide the health plan with the
name, address, and date of termination of employment for
any employee whose employment is terminated on or after
March 2, 2010, and who was at any time covered by any
health plan or health insurance policy offered to their
employees on or after September 1, 2008; and,
c) Provides employers with a format and instructions for
submitting the information to the health plan or insurer,
or their administrator or employer who has assumed
administrative obligations, by telephone, fax, electronic
mail, or mail.
5)Requires employers to provide the name, address, and date of
termination of employment for any employee whose employment is
terminated on or after March 2, 2010, and who was enrolled at
any time in a health plan or health insurance policy offered
by the employer on or after September 1, 2008, to the health
plan or health insurer within 14 days of receipt of the
notification in 3) above.
6)Requires employers to continue to provide this information
within 14 days after the end of each month for any employee
whose employment is terminated in the prior month until the
last date specified in federal law. Requires health plans and
insurers, within 14 days of receipt of the information, to
send the written notice to the identified individuals.
7)Requires health plans and insurers, if an individual contacts
them and indicates that he or she experienced a qualifying
event, to provide the individual with the written notice
required under federal law, regardless of whether the plan
receives information from the individual's previous employer.
Requires health plans and insurers to review the individual's
application for coverage to determine if the individual
qualifies for the special election period and premium
assistance.
8)Deems the written notice requirement placed on health plans
and insurers to be satisfied if the plan or insurer previously
provided the written notice and additional election
opportunity prior to the effective date of this bill.
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9)Requires health plans and insurers, if a person does not
qualify for either the special enrollment election or the
premium assistance, to provide a written notice to that person
that includes information on the right to appeal.
10)Requires health plans and insurers to provide information
regarding the premium assistance and any special election
period on its publicly accessible Web site, as specified.
Permits this requirement to be fulfilled by linking or
otherwise directing consumers to the information regarding
COBRA continuation coverage premium assistance located on the
United States Department of Labor Web site.
11)Permits individuals whose Cal-COBRA premium assistance ended
in 2009 to be able to pay premiums retroactively and maintain
Cal-COBRA coverage, through reference to the first federal
extension of premium assistance in federal law.
12)States legislative intent to enact legislation that would
implement federal legislation, such as a specific section of
the Jobs for Main Street Act, 2010 (HR 2847), that makes
changes to the premium assistance made available under the
federal American Recovery and Reinvestment Act of 2009 (ARRA).
13)Contains an urgency clause to ensure that the provisions of
this bill go into immediate effect upon enactment.
EXISTING FEDERAL LAW :
1)Under COBRA (Public Law 99-272), gives employees who work for
employers with 20 or more workers, their spouses, and
dependent children the right to continue employer-sponsored
group health coverage (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 job loss, a reduction in the hours
worked, death, and divorce. Existing law requires employees,
their spouses, and dependent children (known collectively as
qualified beneficiaries) to pay 102% of the group rate when
electing continuation coverage under COBRA.
2)Establishes premium assistance for health benefits under COBRA
and state mini-COBRA programs (which apply to health plans
selling to small employers not covered by federal COBRA) for
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"assistance eligible individuals." The federal premium
assistance covers 65% of the costs of the COBRA coverage.
Generally, individuals eligible for the premium assistance
("assistance eligible individuals") are defined in federal law
as individuals who:
a) Were "involuntarily terminated" between September 1,
2008, and May 31, 2010; or,
b) Had a reduction in hours resulting in a loss of health
coverage on and after September 1, 2008 and were then
subsequently "involuntarily terminated" between March 2,
2010 and May 31, 2010.
3)Makes available premium assistance for periods of health
coverage beginning on or after February 17, 2009. Premium
assistance lasts for up to 15 months, subject to other
limitations.
EXISTING STATE LAW :
1)Requires health plans and insurers that provide coverage under
a group benefit plan to an employer with 2-19 eligible
employees to offer continuation coverage to a QB, 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 would
result in a loss of group coverage by a QB if the person did
not elect Cal-COBRA coverage:
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;
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 Cal-COBRA health plans and health insurers to provide
notice to QBs eligible for premium assistance pursuant to ARRA
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of the availability of that assistance. This notice goes to
QBs who were involuntarily terminated between September 1,
2008 and December 31, 2009. Existing state law also
authorized individuals who were involuntarily terminated
dating back to September 1, 2008 and are therefore eligible
for premium assistance under ARRA, an additional opportunity
to enroll in Cal-COBRA coverage. QBs eligible for premium
assistance can elect Cal-COBRA coverage no later than 60 days
after the date of the notice of the availability of premium
assistance. Existing law authorizes the health insurance
state regulators (the Department of Managed Health Care and
the California Department of Insurance), in consultation with
each other, to adopt emergency regulations in the event that
any federal assistance is or becomes available to qualified
beneficiaries under Cal-COBRA. These provisions of law were
enacted by AB 23 (Jones and Fletcher), Chapter 3, Statutes of
2009, which took effect as an urgency statute.
FISCAL EFFECT : According to the Senate Appropriations Committee
analysis, this bill will have possible costs to the Labor
Enforcement and Compliance Fund from $0 up to $64,000 in fiscal
year (FY) 2009-10; and, from $0 up to $383,000 in FYs 2010-11
and 2011-12.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
intended to conform state Cal-COBRA law to federal law
extending COBRA premium assistance subsidies. The author
notes that last year's ARRA, also known as the federal
economic stimulus bill, included a 65% premium subsidy to
individuals who were eligible for COBRA continuation health
coverage between September 1, 2008 and December 31, 2009. In
response, the Legislature passed, on a bipartisan vote, and
Governor Schwarzenegger signed, AB 23 (Jones and Fletcher),
which established, for purposes of the Cal-COBRA program,
specific notice requirements and enrollment opportunities for
persons eligible for premium assistance under ARRA. Congress
and the President have since extended the COBRA premium
subsidy, and there is the possibility of an additional
extension. The author concludes that additional state
legislation is needed to ensure conformity between state and
federal law.
2)COBRA AND CAL-COBRA . COBRA gives workers and their dependents
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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%. COBRA
applies to employers providing group health coverage who have
at least 20 employees. Individuals experiencing a qualifying
event generally have 60 days to elect COBRA/Cal-COBRA
coverage. California's "mini-COBRA" law, Cal-COBRA, applies
to health plans and insurers offering small group health
coverage to employers with 2-19 employees who are not eligible
for continuation coverage under federal COBRA. Premium rates
are capped at 110% for Cal-COBRA.
3)PREMIUM ASSISTANCE UNDER FEDERAL LAW . The federal stimulus
bill known as ARRA established a system of premium assistance
for health benefits under COBRA, and state mini-COBRA laws
such as Cal-COBRA, for individuals and their dependents who
were involuntarily terminated between September 1, 2008 and
December 31, 2009 (this date has since been extended to May
31, 2010). Instead of paying the entire COBRA/Cal-COBRA
premium amount, eligible individuals pay 35% of the premium,
and the remaining 65% is reimbursable to the employer or
health plan as a credit against certain employment taxes. The
premium assistance applies to periods of health coverage
beginning on or after February 17, 2009 and lasts for up to 15
months per beneficiary.
Eligibility for premium assistance under ARRA 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, in
order for a person for be eligible for premium assistance, the
individual must be "involuntarily terminated" and meet the
following criteria:
a) Are eligible for COBRA continuation coverage at any time
between September 1, 2008 and May 31, 2010;
b) Elect COBRA coverage; and,
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c) Are eligible for COBRA as a result of being
"involuntarily terminated" between September 1, 2008, and
May 31, 2010; or, having a reduction in hours between
September 1, 2008 and May 31, 2010 that resulted in a loss
of health coverage (for example, an employee's work hours
were reduced from full-time to part-time status) and who
were then subsequently "involuntarily terminated" on or
after March 2, 2010 but before May 31, 2010.
Eligibility for the full amount of premium assistance is based
on income. To be eligible for full premium assistance,
individuals must have a modified adjusted gross income (AGI)
of $125,000 or less ($250,000 for joint filers). The subsidy
is phased-out for higher income individuals, with a reduced
subsidy for individuals with modified AGI less than $145,000
for single filers (and $290,000 for joint filers).
Individuals who are eligible for other group health coverage
(such as a spouse's plan), or 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. The premium assistance for an individual on COBRA or
Cal-COBRA ends upon eligibility for other group coverage (or
Medicare), after 15 months, or when the maximum period of
COBRA coverage ends, whichever occurs first. Individuals
paying reduced COBRA/Cal-COBRA premiums must inform their
plans if they become eligible for coverage under another group
health plan or Medicare.
4)RECENT EXTENSIONS OF FEDERAL PREMIUM ASSISTANCE . There have
been three federal extensions of premium assistance since the
enactment of ARRA. In December 2009, Congress passed and
President Obama signed into law HR 3326, the federal
Department of Defense Appropriations Act, 2010 (DOD Act),
Public Law 111-118. The two major provisions of the DOD Act
related to COBRA are:
a) Extended premium assistance to individuals involuntarily
terminated between January 1, 2010, and February 28, 2010
(the ARRA premium assistance ended December 31, 2009); and,
b) Extended the duration of premium assistance for an
additional six months (for a total of 15 months).
The 2010 DOD Act also contained a provision which applied to
COBRA and state mini-COBRA laws that allowed individuals whose
premium assistance expired in 2009 (premium assistance was
limited to nine months) to resume their coverage with premium
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assistance.
The second extension of premium assistance was in HR 4691
(Public Law 111-114), the Temporary Extension Act of 2010
(TEA), which was signed into law on March 2, 2010. TEA
extended the COBRA premium reduction eligibility period for
one additional month (from February 28, 2010 until March 31,
2010). TEA also expanded eligibility for premium assistance
to individuals who experienced a qualifying event because of a
reduction of hours (meaning the person lost health coverage)
between September 1, 2008 through March 31, 2010, which is
then followed by an involuntary termination of employment on
or after March 2, 2010 through March 31, 2010. TEA provides a
second COBRA election opportunity for these individuals.
These individuals, who either did not elect COBRA continuation
coverage when it was first offered, or who elected COBRA and
subsequently discontinued COBRA, will have a second
opportunity to sign up for COBRA with premium assistance.
The third extension was in HR 4851 (Public Law 111-157), the
Continuing Extension Act of 2010 (CEA), was signed into law on
April 15, 2010. CEA extended COBRA premium reduction
eligibility for two additional months (from March 31, 2010 to
May 31, 2010). CEA also prescribes a special rule for an
individual who experiences a qualifying event related to a
termination of employment on or after April 1, 2010, and
before the enactment of CEA. This provision applies to all
COBRA continuation coverage, including state continuation
coverage programs, with respect to such individual rules
similar to those in the ARRA: a) extending the election period
for, and the effect on, COBRA continuation coverage; and, b)
requiring a notice of such action by the administrator of a
group health plan.
5)CALIFORNIA'S UNINSURED AND UNEMPLOYED . Data from the
Employment Development Department as of March 10, 2010
indicates that California has 2.4 million people who are
unemployed and an unemployment rate of 13.2%. According to
the UCLA Center for Health Policy Research's (HPR) March 2010
report, nearly 2 million Californians lost their health
insurance during 2008 and 2009. HPR estimates 8.2 million of
the non-elderly population were uninsured for all or part of
2009, representing one quarter of the non-elderly population.
HPR indicates this number represents a 28% increase in the
number of uninsured since 2007, when an estimated 6.4 million
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Californians lacked insurance for all or part of the year.
6)INCREASE IN THE COBRA ELECTION RATE . Prior to the enactment
of premium assistance, few workers elected COBRA coverage, 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 unemployment. An analysis from Hewitt Associates
(a human resources company) found that COBRA enrollment has
doubled since the enactment of premium assistance. Hewitt's
analysis examined the COBRA enrollment activity for 200 large
U.S. companies representing 8 million employees. From March
2009 to June 2009, monthly COBRA enrollment rates for
Americans eligible for the subsidy averaged 38%, up from 19%
for the period of September 2008 through February 2009.
7)PRIOR LEGISLATION . AB 23 (Jones and Fletcher) provided QBs
who were involuntarily terminated from September 1, 2008
through February 16, 2009, who did not elect Cal-COBRA when it
was first offered, or who did elect Cal-COBRA but who were no
longer enrolled (for example, because they were unable to
continue paying the premium), a new opportunity to elect
Cal-COBRA coverage due to the availability of premium
assistance. A state law change was required to give these
individuals a "second chance" election opportunity to enroll
in Cal-COBRA outside of the normal Cal-COBRA election
timeframe. AB 23 also allowed individuals with a qualifying
event between February 17, 2009 (when the federal law was
passed) and May 12, 2009 (when AB 23 was signed into law) the
choice of having Cal-COBRA coverage take effect on the date of
the qualifying event, or on the first day of the month
following their election of Cal-COBRA coverage. AB 23 also
specified the contents of the notice, and gave individuals an
opportunity to elect Cal-COBRA no later than 60 days after the
date of the notice.
8)TECHNICAL AMENDMENTS . On page 13, line 14 and on page 28,
line 10, after "ARRA" insert "to such a qualified beneficiary"
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California Life and Health Insurance Companies
California Association of Health Plans
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California Hospital Association
California Medical Association
Opposition
None on file.
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097