BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1034
AUTHOR: Monning
INTRODUCED: February 14, 2014
HEARING DATE: April 9, 2014
CONSULTANT: Boughton
SUBJECT : Health care coverage: waiting periods.
SUMMARY : Prohibits waiting or affiliation periods in the group
health insurance market (through health benefit plans).
Existing law:
1.Regulates health plans through the Department of Managed
Health Care (DMHC) and health insurance policies through the
California Department of Insurance (CDI). Health plans
include Health Maintenance Organizations (HMOs) and some
Preferred Provider Organizations (PPOs). Health insurance
policies include PPOs but not HMOs.
2.Prohibits a health benefit plan for individual coverage from
imposing any waiting or affiliation period.
3.Defines a health benefit plan as any individual or group
health plan contract that provides medical, hospital, and
surgical benefits, or any individual or group policy of health
insurance, as defined. The term does not include a
specialized health plan contract/insurance policy, a health
plan contract/insurance policy provided in the Medi-Cal
program, the Healthy Families Program, the Access for Infants
and Mothers Program, or Medicare supplement coverage, to the
extent consistent with the Affordable Care Act (ACA).
4.Defines affiliation period as a period under the terms of a
health plan contract that must expire before health care
services under the contract become effective.
5.Defines waiting period as a period that is required to pass
with respect to an employee before the employee is eligible to
be covered for benefits under the terms of the contract.
6.Authorizes a health benefit plan for group coverage (including
small employers) to apply a waiting period of up to 60 days as
a condition of employment if applied equally to all eligible
Continued---
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employees and dependents and if consistent with the ACA.
7.Prohibits a health benefit plan for group coverage through an
HMO from imposing any affiliation periods that exceed 60 days.
8.Prohibits a waiting or affiliation period from being based on
a pre-existing condition of an employee or dependent, the
health status of an employee or dependent, or any other
factor, as specified.
9.Requires an affiliation period to run concurrently with a
waiting period for plans regulated by DMHC.
10.Allows the health plan not to provide health care services
during a waiting or affiliation period and prohibits a premium
from being charged.
11.Subjects a late enrollee to a waiting period not to exceed 60
days for health plans regulated by DMHC and a period of 12
months for policies regulated by CDI.
12.Establishes the following effective dates of coverage:
a. For individual coverage purchased during
annual open enrollment through the California health
benefit exchange (Exchange), effective dates are
consistent with federal regulations.
b. For individual coverage purchased during
annual open enrollment outside of the Exchange, if
payment is delivered or postmarked, whichever occurs
later, by December 15, coverage is effective as of
January 1. When that payment is delivered or
postmarked within the first 15 days of any subsequent
month, coverage is effective no later than the first
day of the following month. When payment is delivered
or postmarked between December 16 and December 31,
inclusive, or after the 15th day of any subsequent
month, coverage is effective no later than the first
day of the second month following delivery or postmark
of the payment.
c. For small group coverage purchased through the
Exchange, coverage effective dates are consistent with
those required under federal regulations.
d. For small group coverage purchased outside the
Exchange, when a small employer's premium payment is
delivered or postmarked within the first 15 days of
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the month, coverage is effective no later than the
first day of the following month. After the 15th day
of the month, coverage is effective no later than the
first day of the second month following delivery or
postmark of the payment.
13.Under the ACA, prohibits a group health plan or a health
insurance issuer offering group health insurance coverage from
applying any waiting period that exceeds 90 days.
This bill:
1.Prohibits a health benefit plan for group coverage from
imposing any waiting or affiliation period.
2.Deletes references to waiting or affiliation period
authorizations from existing law governing group health
insurance.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, since the
passage of AB 1083 (Monning), Chapter 852, Statutes 2012,
which implemented portions of the ACA relating to small group
health care coverage, there have been numerous discussions
about the interaction between California's 60-day waiting
period requirement and the ACA's 90-day waiting period
requirement. Given the ACA now requires guaranteed issue of
health insurance and no pre-existing condition exclusions,
there is no reason that health insurance companies (as opposed
to employers) should have a waiting period before coverage can
go into effect. SB 1034 resolves a confusion that exists
between state and federal laws by removing the current waiting
periods for health plans and insurers.
2.The ACA and Federal Regulations. The ACA, enacted on March
23, 2010, and amended on March 30, 2010 reorganizes, amends,
and adds to the Public Health Service Act (PHS Act) relating
to group health plans and health insurance issuers in the
group and individual markets. The term "group health plan"
refers to an employee welfare benefit plan to the extent that
the plan provides medical care to employees or their
dependents directly through insurance, reimbursement, or
otherwise, and it includes both insured and self-insured group
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health plans. "Health insurance issuer" refers to an
insurance company, insurance service, or insurance
organization (including an HMO) which is licensed to engage in
the business of insurance in a state and is subject to state
laws that regulate insurance, as specified.
Prior to the ACA, federal regulations defined a waiting period
to mean the period that must pass before coverage for an
employee or dependent who is otherwise eligible to enroll
under the terms of a group health plan can become effective.
The ACA includes a provision which prohibits an otherwise
eligible employee (or dependent) from being required to wait
more than 90 days before coverage becomes effective. This
"90-day limitation" applies to both grandfathered and
non-grandfathered group health plans and group health
insurance coverage for plan years beginning on or after
January 1, 2014. Proposed regulations were issued in March of
2013. Final regulations effective March 26, 2014 apply to
group health plans and group health insurance issuers for plan
years beginning on or after January 1, 2015.
The final regulations provide that a group health plan, and
health insurance issuer offering group health insurance
coverage, may not apply a waiting period that exceeds 90 days.
The regulations clarify that plans or issuers are not required
to have waiting periods and could have waiting periods shorter
than 90 days.
The final regulations also clarify that, if an individual
enrolls as a late enrollee or under special enrollment
circumstances, any period before the late or special
enrollment is not a waiting period. The effective date of
coverage for special enrollees continues to be that set forth
in other federal regulations governing special enrollment or
guaranteed availability. The final regulations set forth
rules governing the relationship between a plan's eligibility
criteria and the 90-day waiting period limitation.
Specifically, these final regulations provide that being
otherwise eligible to enroll in a plan means having met the
plan's substantive eligibility conditions (for example, being
in an eligible job classification, achieving job-related
licensure requirements specified in the plan's terms, or
satisfying a reasonable and bona fide employment-based
orientation period). Under these final regulations,
eligibility conditions that are based solely on time passing
are permissible for no more than 90 days. Other conditions for
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eligibility under the terms of a group health plan (that is,
those that are not based solely on the lapse of time) are
generally permissible under the ACA and these final
regulations, unless the condition is designed to avoid
compliance with the 90-day waiting period limitation.
3.Related legislation. SB 959 (Hernandez) contains numerous
clean up provisions to health insurance reform and other ACA
implementation bills previously enacted. This bill was heard
in this committee on March 26, 2014 and passed out with a 7-0
vote.
4.Prior legislation. AB 1083 amends California's small group
health insurance laws to enact the relevant ACA provisions,
such as eliminating pre-existing condition requirements and
establishing premium rating factors based only on age, family
size, and geographic regions. AB 1083 permits a waiting
period of no longer than 60 days, requires an affiliation
period under a health plan contract to run concurrently with
any waiting period under that contract, not to exceed 60 days,
and allows a waiting period for plan years on or after January
1, 2014 to be applied as a condition of employment if applied
equally to all full-time employees, consistent with ACA and
any rules, regulations, or guidance issued consistent with
that law.
As noted in an August 17, 2011 bill analysis of an earlier
version of AB 1083, which would have allowed a health plan or
insurer to impose a waiting period of up to 90 days as a
condition of employment, if applied equally to all full-time
employees and if consistent with the ACA, CDI raised concerns
that the provision would unnecessarily make employees wait
longer for health insurance coverage. The following is from
CDI's letter:
"California law currently allows an employer to set
their own waiting period for a new employee to be
eligible for health insurance coverage as long as the
waiting period is consistent for all new employees.
Once an employee is eligible and enrolled in coverage,
California law allows an insurer to either have a
60-day waiting or affiliation period where the person
is enrolled but no premium is paid and no services are
provided or a 6-month pre-existing period during which
no payments are provided for a pre-existing medical
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condition. AB 1083 would take California's current
60-day waiting or affiliation period and change it to
90 days; your bill's sponsor has stated to CDI staff
that this is for purposes of federal ACA conformity.
However, upon review of the current federal definition
by CDI staff, the federal definition is very similar to
California's current definition of 60-day waiting or
affiliation period. Therefore, AB 1083 would
unnecessarily make consumers wait an additional 30 days
to receive "health insurance" coverage when federal and
state law currently allow that waiting period to be
60-days, not 90-days."
Based on this information from CDI, then Assemblymember
Monning revised the 90-day provision to 60 days. As indicated
by the author, insurance agents and advisors to employers have
raised many questions and concerns about how these state and
federal provisions interact. This bill would restrict health
plans and insurers from imposing any waiting periods in
California. Since state health insurance laws do not extend
to employers it is the understanding of committee staff that
employer imposed waiting period meeting the ACA requirements
would be permitted with the enactment of this bill as long as
the waiting period is not a health plan or insurer imposed
requirement and it does not exist in a health plan or insurer
contract.
5.Support. Health Access California believes this bill conforms
to federal law with respect to waiting periods for health
insurance. According to Health Access, federal law and
guidance provide that employers may impose a waiting period of
90 days on health coverage for employees and dependents,
however; the point at which that period begins is subject to
convoluted and complicated federal guidance, which the state
cannot replicate because state regulation of employer health
benefits is preempted by the Employee Retirement Income
Security Act of 1974 (ERISA). Health Access sponsored AB 1083
and hopes this bill will eliminate confusion. The Congress of
California Seniors supports this bill because it would ban
unnecessary waiting periods for health insurance coverage.
The American Federation of State, County and Municipal
Employees supports this bill indicating that health care is a
basic right and should not be subject to delays.
6.Support if Amended. The California Chamber of Commerce
supports this bill if it is amended to clarify that health
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plans and insurers in California are subject to the maximum
90-day waiting period codified in the ACA. The Chamber is
supportive of the intent of this bill to eliminate confusion
between state and federal rules governing health care
enrollment periods. Inconsistencies have indirectly impacted
employers and created confusion about whether health care can
be treated like other benefits, which are often instated after
90 days of employment. The Chamber believes this bill will
allow employers to continue treating all employee benefits as
a group, easing administration and compliance with the law,
while ensuring that employees receive coverage no later than
the 91st day. Clarification will also help multistate
employers by ensuring they have just one date to keep in mind
when determining when a new hire or otherwise newly qualified
employee must be signed up for health care.
7.Amendments.
a. The following amendments are necessary to clean up
the existing code sections amended by this bill:
Health and Safety code section 1357.51 and Insurance code
section 10198.7 move the existing subdivision (d) to a
new paragraph (4) in subdivision (b).
(b)(4) In determining whether a pre-existing condition
provision applies to an enrollee/person under this
subdivision, a plan/health benefit plan shall credit the
time the enrollee/person was covered under creditable
coverage, provided that the enrollee becomes eligible for
coverage under the succeeding plan contract within 62
days of termination of prior coverage, and applies for
coverage under the succeeding plan within the applicable
enrollment period. A plan shall also credit any time
that an eligible employee must wait before enrolling in
the plan, including any post enrollment or
employer-imposed waiting (or affiliation) period.
b. The following amendments respond to the issue raised
by the California Chamber of Commerce and are
proposed as uncodified legislative intent.
It is the intent of the Legislature, in enacting this
legislation, to prohibit group health care benefit
plans from imposing a separate waiting or affiliation
period in addition to any waiting period imposed by an
employer in a group contract on an otherwise eligible
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employee or dependent.
The Legislature further intends to permit a health
care service plan or health insurer, as a provision of
a health benefit plan contract for group coverage, to
administer a waiting period imposed by a plan sponsor
(as defined in ERISA) if consistent with Section 2708
of the federal Patient Protection and Affordable Care
Act (Public Law 111-148).
SUPPORT AND OPPOSITION :
Support: American Federation of State, County and Municipal
Employees, AFL-CIO
Bay Area Council
BayBio
Congress of California Seniors
Health Access California
Oppose: None received.
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