BILL ANALYSIS
SB 1088
Page 1
Date of Hearing: June 29, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 1088 (Price) - As Amended: June 23, 2010
SENATE VOTE : 21-13
SUBJECT : Health care coverage: dependents.
SUMMARY : Prohibits, with specified exceptions, the limiting age
for dependents covered by health plan contracts and health
insurance policies from being less than 26 years of age and
prohibits health plan contracts and health insurance policies
from being required to cover a child of a child receiving
dependent coverage. Specifically, this bill :
1)Prohibits the limiting age for dependents covered by health
plan contracts and health insurance policies from being less
than 26 years of age except under specified circumstances.
2)Permits, for plan and policy years beginning before January 1,
2014, group health plans and group health insurance policies
that qualify as grandfathered health plans under federal law,
and that make available dependent coverage, to exclude from
coverage an adult child who has not attained the age of 26
years only if the adult child is eligible to enroll in an
employer-sponsored health plan other than a group health plan
of a parent.
3)Requires health plans and health insurers providing plan
contracts or insurance policies under which a dependent was
denied or not eligible for coverage, or under which coverage
ended before the dependent turned 26, to give the dependent a
continuous 30 day opportunity to enroll.
4)Requires health plans and health insurers to provide written
notice in accordance with 3) above and allows the notice to be
provided to the dependent's parent on behalf of the dependent.
Requires the notice to be prominent if it is included with
enrollment materials for a group plan or policy.
5)Provides that a dependent enrolling in a group plan or policy
for coverage pursuant to this bill must be treated as a
special enrollee, as specified.
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6)Requires health plans and health insurers to offer the
recipient of the notice all of the benefit packages available
to similarly situated individuals who did not lose coverage by
reason of cessation of dependent status. Specifies that any
difference in benefits or cost-sharing requirements
constitutes a different benefit package.
7)Clarifies that nothing in this bill requires a plan contract
or insurance policy to cover a child of a covered dependent.
8)Prohibits this bill from being construed to modify the
definition of "dependent" for tax treatment purposes, as
specified.
EXISTING FEDERAL LAW :
1)Establishes the federal Patient Protection and Affordable Care
Act (PPACA), known as federal health reform, to, among other
things, require group health plans and health insurers
offering group and individual policies, to allow young people,
up to their 26th birthday, to remain on their parents' health
plan contract or health insurance policy, beginning on
September 23, 2010.
2)Requires a plan or issuer that makes available dependent
coverage of children to make such coverage available for
children until attainment of 26 years of age for plan or
policy years beginning on or after September 23, 2010.
3)Clarifies, with respect to children who have not attained age
26, that a plan or issuer may not define dependent for
purposes of eligibility for dependent coverage of children
other than in terms of the relationship between the child and
the participant, or in the individual market, the primary
subscriber.
4)Specifies, as it relates to the income definition under the
federal Internal Revenue Code, that the definition of an adult
dependent is any child of a taxpayer who, as of the end of the
taxable year, has not attained their 27th birthday.
5)Specifies that dependent coverage applies to a married
individual who is still dependent on his or her parent.
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6)Requires a plan or issuer to give a child whose coverage
ended, or who was denied coverage (or ineligible for coverage)
under a group health plan or health insurance policy because,
under the terms of the plan or policy, the availability of
dependent coverage ended before he or she turned 26, an
opportunity to enroll that continues for at least 30 days
(including written notice of the opportunity to enroll),
regardless of whether the plan or policy offers an open
enrollment period and regardless of when any open enrollment
period might otherwise occur.
7)Requires the enrollment opportunity (including the written
notice) specified in 6) above to be provided no later than the
first day of the first plan year (or in the individual market,
policy year) beginning on or after September 23, 2010.
8)Specifies that certain plans or coverage existing as of the
March 23, 2010, enactment date of the PPACA, i.e.,
grandfathered health plans, are only subject to certain
provisions of the PPACA.
EXISTING STATE LAW :
1)Provides for the regulation of health plans by the state
Department of Managed Health Care and health insurers by the
California Department of Insurance.
2)Prohibits health plan contracts and health insurance policies
that provide dependent coverage, where coverage terminates
upon attainment of the limiting age specified in the contract
or policy, from terminating coverage for a child that
continues to be both of the following:
a) Incapable of self-sustaining employment by reason of
mental retardation or physical handicap; and,
b) Chiefly dependent on the subscriber for support and
maintenance, provided proof of the incapacity and
dependency is furnished to the plan or insurer, as
specified.
3)Prohibits a health plan or health insurer from excluding any
eligible dependent who would otherwise be entitled to health
care services on the basis of their health status, medical
condition, claims experience, medical history, genetic
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information, or disability or evidence of insurability
including conditions arising out of acts of domestic violence
of that employee or dependent, as specified.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, the recently
enacted PPACA requires health plans and health insurers to
expand coverage to dependents up to age 26, beginning in
September 2010. The author states that this bill seeks to
provide statutory implementation guidelines to enable the
state to comply with federal law. The author maintains that
young adults comprise one of the largest and fastest-growing
segments of the uninsured population and often lose health
coverage at ages 19-21 as a result of being dropped from their
parents' policies or losing eligibility for public programs
like Medi-Cal or Healthy Families that become inaccessible to
young, healthy, childless adults. The author notes that
one-third of college graduates will spend some time uninsured
in the year after graduation and only about half of 19 to 29
year olds are eligible for coverage offered by their
employers. This bill conforms state statute to federal law by
preventing young adults who are enrolled on their parents'
insurance from being terminated prior to their 26th birthday.
2)BACKGROUND . According to a December 2008 briefing paper by
the National Conference of State Legislatures (NCSL), young
adults between the ages of 19 and 29 are the largest growing
age group in the U.S. at risk of being uninsured and currently
account for 30% of the uninsured population. In California,
they make up 20% of the state's uninsured. Young adults often
lose their health insurance if covered under their parent's or
guardian's policy once they graduate from high school,
college, or turn 19. Typically, parents who cover their
children as dependents on their plan or policy do so through
their employer's health insurance benefits. Most
employer-sponsored health insurance does not cover dependents
after age 19 if they are not enrolled in college full-time.
However, a May 2008 issue brief by The Commonwealth Fund (TCF)
suggests that the protections afforded young adults by virtue
of being a full-time student, i.e. coverage through a parent's
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employer-based insurance or a university-sponsored policy, are
lost upon graduation. TCF states that one-third of college
graduates can expect to spend at least some time uninsured in
the year following graduation.
In addition, NCSL points out young adults often have difficulty
obtaining and securing health insurance coverage for
themselves. NCSL cites ordinary transitions in and out of
school and jobs throughout their 20s as the leading factor
affecting the ability of young adults to remain on their
parent's or guardian's coverage or become eligible for
employer-sponsored health insurance. NCSL notes that young
people often have entry level low-paying and temporary jobs
that typically do not offer health benefits and high premiums
for health insurance in the individual market make purchasing
insurance out of reach.
According to TCF, young adults generally constitute a healthy
group, but going without insurance disrupts their access to
the health care system and leaves young adults and their
families at risk for high out-of-pocket costs and financial
hardship in the event of a serious illness or severe injury.
To address the gaps in coverage for this population, NCSL and
TCF report that at least 30 states have enacted legislation to
extend dependent coverage regardless of a dependent's
enrollment status in school.
3)FEDERAL DEPENDENT COVERAGE REQUIREMENTS . Among the broad and
sweeping changes of the PPACA is a provision to keep young
adults covered. Starting September 2010, children under 26
will be allowed to stay on their parent's family policy, or be
added to it. Interim final regulations issued by the federal
Departments of Health and Human Services, Labor, and Treasury,
on May 13, 2010, provide guidance to employers, group health
plans, and group health insurance issuers for implementing
this provision. According to the health reform Internet Web
site managed by the federal Department of Health and Human
Services, many insurance companies and employers have agreed
to implement the dependent coverage provision early to avoid a
gap in coverage for new college graduates and other young
adults.
The regulations prohibit a plan or issuer from defining
dependent for purposes of eligibility for dependent coverage
of children other than in terms of the relationship between
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the child and the participant, or in the individual market,
the primary subscriber. Examples of factors that cannot be
used for defining dependent for purposes of eligibility (or
continued eligibility) include: financial dependency on the
participant or primary subscriber (or any other person);
residency with the participant or primary subscriber (or any
other person); student status; employment; eligibility for
other coverage; or, any combination of these factors. The
regulations also provide that the terms of the plan or policy
for dependent coverage cannot vary based on the age of a
child, except for children age 26 or older. For children
under age 26, the plan cannot vary benefits based on the age.
Additionally, under the regulations, plans and issuers may not
limit dependent coverage based on whether a child is married.
However, a plan or issuer is not required to cover the spouse
of an eligible child. Under both the PPACA and the
accompanying regulations, nothing requires a plan or issuer to
make available coverage for a child of a covered dependent.
Group health plans that are grandfathered plans, meaning
certain plans that are only subject to certain provisions of
the PPACA, can limit the dependent coverage provision to adult
children who do not have another offer of employment-based
coverage.
According to the regulations, the dependent coverage
requirements are expected to affect approximately 2.4 million
young adults, 1.8 million of whom are currently uninsured and
0.6 million are currently covered by their own individual
coverage. The range of these young adults who will actually
take up enrolling on their parents' coverage varies between
30% and 80%, depending on their current health care coverage
status (young adults already covered by individual insurance
are most likely to take advantage of the dependent coverage
option since they have shown a strong preference for coverage
by purchasing individual insurance and can almost always save
money and get better coverage by switching to their parents'
policy); their physical health status (young adults in fair or
poor health are more likely to take advantage of the option
than those in excellent, very good or good health); and, their
living situation (those living with their parents are more
likely to take up the option than those not living with their
parents).
4)RELATED LEGISLATION . AB 1602 (John A. Perez) implements a
number of provisions of federal health reform, including:
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expanding dependent coverage in private insurance to age 26,
except as specified; prohibiting the limiting age provision
from requiring specified public employers to pay the cost of
coverage for dependents who are between 23 and 26 years of
age; and, permitting employees of those employers to elect to
provide coverage to dependents between 23 and 26 years of age,
provided they contribute the premium for that coverage. AB
1602 is scheduled to heard in the Senate Health Committee on
June 30, 2010.
5)PRIOR LEGISLATION .
a) AB 29 (Price) of 2009 would have prohibited the limiting
age for dependents covered by health plan contracts and
group health insurance policies from being less than 27
years of age and would have allowed subscribers, employees
or members to elect to continue coverage for these
dependents if they contributed the premium for that
coverage. AB 29 died on the Assembly Appropriations
Committee Suspense File.
b) AB 1698 (N??ez) of 2005 would have prohibited health
plan contracts or insurance policies that cover dependent
children from establishing a limiting age prior to a
dependent's 26th birthday. AB 1698 was vetoed by Governor
Schwarzenegger who was concerned that the bill would have
had the unintended consequence of actually reducing the
number of employers taking advantage of dependent health
care coverage, leading to fewer persons with health
insurance, not more.
6)SUPPORT . Supporters, including the California Children's
Health Initiatives, California Medical Association, California
State Association of Counties, and Health Access California,
write that young adults between the ages of 19-25 are
particularly vulnerable to being uninsured due to not having
access to employer-sponsored health coverage or being unable
to afford comprehensive coverage and this bill will ensure
that the health insurance marketplace works for young people
who may be struggling to make ends meet and get their careers
off the ground. The American Federation of State, County and
Municipal Employees notes in support that given our difficult
economic climate, which has had an especially harsh impact on
recent college graduates, it is important to move forward with
this bill so that the youth of California remain healthy.
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7)OPPOSE UNLESS AMENDED . Opponents, representing health plans
and health insurers, object to this bill unless it is amended
to simply reference federal law and regulations. They believe
federal law is sufficient and does not require any
supplemental state legislation. Opponents remain concerned
that any difference between state law and federal law may lead
to ambiguities with regard to implementation and enforcement.
REGISTERED SUPPORT / OPPOSITION :
Support
AARP (prior version)
American College of Obstetricians and Gynecologists, District IX
(prior version)
American Federation of State, County and Municipal Employees,
AFL-CIO
California Children's Health Initiatives
California Chiropractic Association
California Medical Association
California School Employees Association (prior version)
California State Association of Counties
Health Access California
Oppose Unless Amended
Association of California Life and Health Insurance Companies
California Association of Health Plans
Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097