BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 1034
Author: Monning (D)
Amended: 6/26/14
Vote: 21
SENATE HEALTH COMMITTEE : 8-0, 4/9/14
AYES: Hernandez, Anderson, Beall, DeSaulnier, Evans, Monning,
Nielsen, Wolk
NO VOTE RECORDED: De Le�n
SENATE APPROPRIATIONS COMMITTEE : 5-0, 4/28/14
AYES: De Le�n, Gaines, Hill, Lara, Steinberg
NO VOTE RECORDED: Walters, Padilla
SENATE FLOOR : 35-0, 5/1/14
AYES: Anderson, Berryhill, Block, Cannella, Corbett, Correa, De
Le�n, DeSaulnier, Evans, Fuller, Gaines, Galgiani, Hancock,
Hernandez, Hill, Hueso, Huff, Knight, Lara, Leno, Lieu, Liu,
Mitchell, Monning, Morrell, Nielsen, Padilla, Pavley, Roth,
Steinberg, Torres, Vidak, Walters, Wolk, Wyland
NO VOTE RECORDED: Beall, Calderon, Jackson, Wright, Yee
ASSEMBLY FLOOR : 77-0, 6/30/14 - See last page for vote
SUBJECT : Health care coverage: waiting periods
SOURCE : Author
DIGEST : This bill prohibits waiting or affiliation periods in
the group health insurance market (through health benefit
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plans).
Assembly Amendments change the notice an employer offering a
health plan sends to a late enrollee, from stating that he/she
may be excluded from coverage for a specified period of time,
and instead specify that they may be excluded until the next
open enrollment period; and add double-jointing language and
make other technical changes.
ANALYSIS :
Existing law:
1. Regulates health plans through the Department of Managed
Health Care (DMHC) and health insurance policies through the
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.
4. Specifies that the notice the employer offering a health care
service plan is required to send to a person who fails to
enroll during an open enrollment period, that the eligible
employee or dependent may be excluded from eligibility for
coverage until the next open enrollment period, instead of
the current notice that states a specified period of time.
5. This bill incorporates additional changes to the Insurance
Code proposed by SB 959 that becomes operative if this bill
and SB 959 are both enacted and this bill is enacted last.
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 employees and dependents and if consistent with
the Affordable Care Act (ACA).
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7. 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.
8. Allows the health plan not to provide health care services
during a waiting or affiliation period and prohibits a
premium from being charged.
9. 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.
10.Establishes the following effective dates of coverage:
A. For individual coverage purchased during annual open
enrollment through the Covered California, effective
dates are consistent with federal regulations.
B. For individual coverage purchased during annual open
enrollment outside of Covered California, if payment is
delivered or postmarked, whichever occurs later, by
December 15, coverage is effective as of January 1, as
specified.
C. For small group coverage purchased through Covered
California, coverage effective dates are consistent with
those required under federal regulations.
D. For small group coverage purchased outside Covered
California, when a small employer's premium payment is
delivered or postmarked within the first 15 days of the
month, coverage is effective no later than the first day
of the following month, as specified.
11.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. Declares legislative intent to:
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A. Prohibit a health care service plan or health insurer
offering group coverage from imposing a separate waiting
or affiliation period in addition to any waiting period
imposed by an employer for a group health plan on an
otherwise eligible employee or dependent.
B. Permit a health care service plan or health insurer
offering group coverage to administer a waiting period
imposed by a plan sponsor, as defined.
2. Prohibits a health benefit plan for group coverage from
imposing any waiting or affiliation period.
3. Deletes references to waiting or affiliation period
authorizations from existing law governing group health
insurance.
4. Specifies that the notice the employer offering a health care
service plan is required to send to a person who fails to
enroll during an open enrollment period, that the eligible
employee or dependent may be excluded from eligibility for
coverage until the next open enrollment period, instead of
the current notice that states a specified period of time.
5. Incorporates additional changes to the Insurance Code
proposed by SB 959 (Hernandez) that becomes operative if this
bill and SB 959 are both enacted and this bill is enacted
last.
Background
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 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 which regulate insurance, as specified.
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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 (such as, 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 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
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compliance with the 90-day waiting period limitation.
Prior legislation
AB 1083 (Monning, Chapter 852, Statutes of 2012), 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 make employees wait unnecessarily
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 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-day to receive "health insurance" coverage when
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federal and state laws 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Costs of about $120,000 in 2014-15, $70,000 in 2015-16, and
about $30,000 per year thereafter by the DMHC to review
compliance by health plans and take enforcement actions
(Managed Care Fund).
Minor costs to review health insurer filings to ensure
compliance by CDI (Insurance Fund).
SUPPORT : (Verified 6/10/14 - per Assembly Health Committee
analysis, unable to re-verify)
AFSCME, AFL-CIO
American Cancer Society Cancer Action Network
Association of Life and Health Insurance Companies
Bay Area Council
BayBio
California Association of Health Underwriters
California Chamber of Commerce
California Farm Bureau Federation
California Hospital Association
California Manufacturers and Technology Association
California Optometric Association
California Retailers Association
Congress of California Seniors
Health Access California
Independent Insurance Agents and Brokers of California
Los Angeles Area Chamber of Commerce
National Association of Insurance and Financial Advisors of
California
National Federation of Independent Business
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ARGUMENTS IN SUPPORT : Numerous supporters state that this
bill eliminates confusion between the state and federal rules
governing health care enrollment waiting periods. The
supporters claim that inconsistencies between the state and
federal laws 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
and believe this bill will allow employers to continue treating
all employee benefits as a group, easing administration and
compliance with the law. Supporters also state that
clarification of the law will help multi-state 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 enrolled in a health care plan.
ASSEMBLY FLOOR : 77-0, 6/30/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Harkey, Roger Hern�ndez, Holden,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A.
P�rez, V. Manuel P�rez, Quirk, Quirk-Silva,
Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting,
Wagner, Waldron, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Hall, Weber, Vacancy
JL:d 7/2/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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