BILL ANALYSIS
SB 838
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Date of Hearing: May 12, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 838 (Strickland) - As Amended: May 6, 2010
Policy Committee: Health Vote:19-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill conforms California law to federal requirements for
continuation health coverage under the California Omnibus Budget
Reconciliation Act (Cal-COBRA) statutes. Cal-COBRA provides the
option of continuation coverage for workers at small firms (two
to 19 employees). This bill clarifies notification requirements
for employers, health plans, and health insurers to allow
unemployed individuals to continue health coverage with a
federal subsidy for 65% of monthly premium costs.
The premium subsidy was established in the federal American
Recovery and Reinvestment Act (ARRA) (PL-111-5) in February
2009. Since that time, the subsidy has been extended and
eligibility has been broadened three times by federal
legislation.
FISCAL EFFECT
1)According to recent analysis, COBRA enrollments have doubled
since the provision of federal subsidies. Due to the expense
of unsubsidized health coverage, only 10% of individuals
accept unsubsidized continuation coverage during a period of
unemployment. This bill enables continued support of premium
subsidies and the higher take-up rate of continuation health
coverage.
2)The average monthly health premium is approximately $400 for
an individual and $1,100 for a family. The federal subsidies
addressed in this bill mean these monthly premiums will drop
to $140 for individuals and $385 for families. Without premium
assistance, health premiums account for 30% to 85% of an
individual's unemployment benefits.
SB 838
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3)The federal subsidy is phased out for higher income
individuals with adjusted gross income above $125,000 and
couples with adjusted gross income above $250,000.
COMMENTS
1)Rationale . This bill clarifies notification requirements about
premium subsidies for unemployed workers from firms with fewer
than 20 employees. This bill ensures these workers and their
families have the option of accepting health coverage with
major premium support from the federal government. By enabling
a 65% federal subsidy, this bill reduces a barrier to health
coverage significantly.
2)COBRA , a federal law enacted in 1985, provides workers at
larger firms (20 or more employees) continuity of health
coverage by allowing former employees to choose to pay the
full premium cost (capped at 102% for COBRA) otherwise paid by
the employer. For workers at small firms (two to 19
employees), California has Cal-COBRA (capped at 110% of full
premium cost). COBRA is available for up to 18, 29, or 36
months and Cal-COBRA is available for up to 36 months
depending on eligibility. In addition, individuals who exhaust
18 months of COBRA also have access to continuity coverage
through Cal-COBRA. Individuals who exhaust Cal-COBRA coverage
have access to continuation coverage under the federal Health
Insurance Portability and Accountability Act (HIPAA). The
federal subsidies for COBRA and Cal-COBRA are now available
for a total of 15 months.
3)Highest Unemployment Rate in Decades Erodes Health Coverage .
The unemployment rate statewide has hovered between 10% and
more than 12% over the past year. In many parts of the state,
the unemployment rate is higher. Because a majority of people
access health coverage through an employer, the rate of
unemployment has contributed to erosion in health coverage.
According to recent research, the number of uninsured adults
increased from 5.3 million to 6.8 million, with job-based
coverage dropping from 57% to 51%.
4)Related Legislation
AB 23 (Jones), Chapter 3, Statutes of 2009 conformed
California law to federal American Recovery and Reinvestment
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Act (ARRA) (Public Law 111-5, 2009) requirements for
continuation health coverage under the Cal-COBRA statutes.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081