BILL ANALYSIS �
AB 2433
Page 1
Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 2433 (Mansoor) - As Introduced: February 21, 2014
SUBJECT : Health care coverage: catastrophic plans.
SUMMARY : Allows individuals whose health coverage was cancelled
between December 1, 2013 and March 31, 2014 to purchase
catastrophic health coverage. Specifically, this bill :
1)Requires, to the extent permitted by the federal Patient
Protection and Affordable Care Act (ACA), an individual whose
health care service plan contract or health insurance policy
(health coverage) was cancelled between December 1, 2013 and
March 31, 2014 to be deemed to face hardship, making them
eligible to purchase individual catastrophic coverage.
2)Applies the hardship exemption to instances where health
coverage is cancelled because the health plan or insurer
stopped providing individual or small group coverage, as
specified, or withdrew a specific plan or contract from the
market.
3)Allows policies or contracts that are supplemental to Medicare
and specialized contracts or policies, such as dental-only and
vision-only coverage, to be purchased without a finding of
hardship.
4)Contains an urgency clause to ensure that the provisions of
this bill go into effect immediately upon enactment.
EXISTING LAW :
1)Establishes the Department of Managed Health Care (DMHC) to
regulate health plans and the California Department of
Insurance (CDI) to regulate health insurers.
2) Requires health plans and insurers issuing health
benefit plans in the individual and small group markets to
comply with specific rules in the offering, sale, and scope
of that coverage, unless the coverage is grandfathered
pursuant to the ACA.
AB 2433
Page 2
3)Limits non-grandfathered coverage that may be offered in the
individual market to five categories: four benefit levels
determined by the actuarial value of the coverage (bronze,
silver, gold, and platinum) and catastrophic coverage, but
allows only health plans and insurers offering coverage in the
California Health Benefit Exchange (Covered California) to
offer catastrophic coverage outside of the exchange.
4)Restricts eligibility for catastrophic coverage to individuals
less than 30 years of age or individuals exempt from the
federal requirement to maintain minimum essential coverage
(MEC), either because the person is not offered affordable
coverage or faces hardship.
5)Restricts the purchase of guaranteed individual coverage to an
initial open enrollment period (October 1, 2013-March 31,
2014), annual enrollment periods, and in special enrollment
circumstances such as marriage, divorce, or loss of MEC, as
defined in state and federal law.
6) Existing federal law, the ACA, enacts various health
care coverage and market reforms, including, among other
things, the requirement for individuals to maintain MEC, as
defined, unless they are exempt because the individual is
not offered affordable coverage or faces hardship. The ACA
also restricts eligibility for catastrophic coverage to
individuals less than 30 years of age or individuals exempt
from the requirement to maintain MEC, as specified.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
needed to implement federal policy allowing individuals with
canceled coverage to buy catastrophic policies. The author
points to 2013 federal guidance declaring that consumers whose
coverage was cancelled or not renewed would be eligible for a
hardship exemption and would be able to enroll in catastrophic
coverage. The author seeks to have that option implemented in
California.
2)BACKGROUND .
a) Catastrophic coverage. Under the ACA, and implementing
AB 2433
Page 3
California law, catastrophic health coverage provides no
benefits until the enrollee has incurred cost-sharing
expenses that equal the statutory annual limit on
out-of-pocket costs ($6,350 for 2014), except that the
contract or policy must provide coverage for at least three
primary care visits. Health plans and insurers can only
offer catastrophic coverage to eligible individuals who are
either under 30 years of age or exempt from the federal
individual coverage requirement because either they are not
offered affordable coverage or face hardship.
b) Federal policy affecting catastrophic coverage. On
December 19, 2013, the federal Center for Consumer
Information and Insurance Oversight (CCIIO) issued guidance
entitled, "Options Available for Consumers with Cancelled
Policies" (December guidance) reminding consumers they
would be eligible for other individual coverage and could
not be denied such coverage, including coverage through
exchanges. In addition, CCIIO clarified that individuals
with cancelled policies would be eligible for a hardship
exemption and, therefore, eligible to purchase catastrophic
coverage.
c) Hardship exemptions. Under the ACA, most people must
have health coverage or pay a fee known as the "individual
shared responsibility payment". The fee in 2014 is 1% of
annual income or $95 per person for the year, whichever is
higher, and increases every year. Proof of coverage and
payment of the fee if individuals cannot demonstrate that
they have qualifying coverage will occur in conjunction
with federal income tax filings. Federal law establishes
the circumstances under which individuals may qualify for
an exemption from the shared responsibility payment which
include, among other situations, that the lowest-priced
coverage available to the person would cost more than 8% of
household income, the person is not lawfully present in the
U.S., or is a member of a federally recognized tribe or
eligible for Indian Health Services. In addition,
individuals may qualify for an exemption if any of thirteen
specified "hardship" conditions exist or an individual
experiences another hardship in obtaining health insurance.
d) Exemption processing. Federal exchange rules (45 CFR
�155.600-155.635) require state exchanges to make the
AB 2433
Page 4
eligibility determinations for exemptions from the
individual responsibility payment, but also allow states to
rely on the federal Department of Health and Human Services
(HHS) for the determinations. In 2013, Covered California
decided to use the federally-managed service for
exemptions. However, in the preamble to proposed federal
market and exchange rules for 2015, HHS stated its intent
to remove the option for states to use the federal
determination process after November 15, 2014 (Federal
Register, Vol. 79, No 55, Friday, March 21, 2014).
Comments are due on the proposed federal rules by April 21,
2014.
According to the December guidance and information available
from Covered California, in order to purchase catastrophic
coverage inside or outside of the exchange (during an open
enrollment period or if a person has a special enrollment
circumstance), individuals whose coverage was cancelled can
present a completed hardship exemption form directly to a
health plan or insurer, along with documentation of the
cancellation, unless it is the same health plan or insurer
who cancelled the coverage and can directly verify the
cancellation to process the exemption. The health plan or
insurer in turn will submit the information to the Centers
for Medicare and Medicaid Services which will verify the
individual is eligible for the hardship exemption.
3)OPPOSITION . Health Access California opposes this bill
stating it is not necessary because the federal government has
already acted to allow hardship exemptions for individuals
with cancelled policies. Health Access points out that
hardship exemptions are governed by the federal Internal
Revenue Code as federal income tax exemptions. In addition,
Health Access points out that open enrollment for 2014 already
ended March 31, 2014.
4)RELATED LEGISLATION . AB 1507 (Logue) would allow an
individual or small employer health benefit plan in effect on
October 1, 2013, that does not qualify as a grandfathered
health plan under the ACA, to be renewed until October 1,
2014, and to continue in force until December 31, 2014. AB
1507 is set for hearing on April 29, 2014 in this Committee.
5)PREVIOUS LEGISLATION . SB 639 (Ed Hernandez), Chapter 316,
Statutes of 2013, enacted in state law and enhanced provisions
AB 2433
Page 5
of the ACA related to coverage and cost-sharing, including
establishing the five levels of coverage in the individual
market, federal eligibility criteria for catastrophic coverage
and limits on consumer cost sharing for coverage that includes
minimum essential benefits.
6)POLICY COMMENTS .
a) Need for this bill . This bill codifies in state law one
specific category of federal hardship exemption allowing
individuals to purchase catastrophic coverage. Existing
state law related to catastrophic coverage references the
applicable federal citation, and thereby makes any
individual exempt from the individual responsibility
payment for any reason allowed under federal law, eligible
for catastrophic coverage. This means without this bill
Californians with cancelled coverage are eligible to
purchase catastrophic coverage, as outlined in the
background. Individuals must still purchase coverage
during the open enrollment period, or a special enrollment
period if someone qualifies because of a major life event
or loss of MEC. Open enrollment for the 2014 coverage year
ended March 31, 2014. This bill does not alter the open
and special enrollment periods.
b) Codifying federal rules . Since passage of the ACA in
2010, federal agencies responsible for its implementation
have proposed and adopted extensive federal rules and
guidance for state exchanges, health plans, and other
affected constituencies, including revisions,
modifications, and additions to those rules as
implementation proceeds. While the requirement in this
bill related to catastrophic coverage is consistent with
current federal rules and guidance, it is not specifically
referenced in the ACA. It may be unwise to codify this
exemption in state law because it is subject to future
revisions in federal rules or guidance leaving the state
with a body of law inconsistent with the federal program.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
AB 2433
Page 6
Opposition
Health Access California
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097