DEPARTMENT OF

Managed
STATE OF CALIFORNIA

Health 4 re DEPARTMENT OF MANAGED HEALTH CARE

August 11, 2010

Jay Angoff

Office of Consumer Information and Insurance Oversight
Department of Health and Human Services

Attention: File Code OCIID-4150-IFC

P.O. Box 8016

Baltimore, MD 21244-1850

RE: INTERIM FINAL REGULATIONS FOR PHSA § 2714 (DEPENDENT COVERAGE)
FILE CODE OCIID-4150-I1FC

Dear Mr. Angoff:

The California Department of Managed Health Care (DMHC) appreciates the opportunity
to comment on the Interim Final Regulations (Rules) for Dependent Coverage of
Children to Age 26 under the Patient Protection and Affordable Coverage Act of 2010
(ACA).

The DMHC is the California agency that licenses and regulates health care service plans
(health plans) under the Knox-Keene Health Care Service Plan Act of 1975. There are
108 health plans providing managed health care services to 21 million Californians and
operating under this state licensing law.

The DMHC has identified several scenarios for which additional clarification would be
helpful so that interested parties (health plans, providers, consumers) would better
understand their rights and obligations under the federal laws.

I. CLARIFICATION OF PRE-EXISTING CONDITIONS
The Rules for the Public Health Services Act (PHSA) § 2714, as amended by the ACA,

require group health plans and health insurance issuers offering group or individual
health insurance coverage to give any child whose coverage ended or was

ARNOLD SCHWARZENEGGER

GOVERNOR 980 9th Street 320 West 4th Street Lucinpa A. EXNES
Suite 500 Suite 880 . Director
pusiness, Sfamento, CA 95814-2724 Los Angeles, CA 90013-2353
TRANSPORTATION
AND HOUSING 916-324-8176 Voice 213-620-2744 Voice

www. healthhelp.ca.go
AGENCY 916-322-9430 Fax 213-576-7183 Fax 1-888-HMO-2219 “en


Jay Angoff Page 2
Interim Final Regulations for PHSA § 2714 August 11, 2010

denied coverage before attaining age 26, and who becomes eligible for coverage under
this provision, an opportunity to enroll in dependent coverage for plan years beginning on
or after September 23, 2010. The limiting age for dependent coverage is extended to 26
years old and the Rules eliminate consideration of all other factors, such as marital status,
financial status, residency status, or student status, to determine coverage eligibility.
While the Rules specifically enumerate factors that will no longer affect coverage
eligibility, they do not expressly address whether a pre-existing condition will have an
effect on coverage eligibility for dependents between 19 and 26 years old.

Notably, the PHSA § 2704, as amended by the ACA, prohibits group health plans and
group and individual health insurance coverage, except for grandfathered individual
health plans, from imposing any pre-existing condition exclusions. This prohibition
applies to enrollees under the age of 19 for plan years beginning on or after September
23, 2010, and generally applies to all enrollees for plan years beginning on or after
January 1, 2014.

The DMHC anticipates that various interested parties will receive inquiries regarding
dependents with a pre-existing condition, who are between 19 and 26 years old, and who
want to rejoin their parent’s coverage as a dependent prior to January 1, 2014. Please
provide an explanation for how the following three scenarios would be addressed under
PHSA § 2714, as amended by the ACA, and the Rules:

A. Scenario I

X is a 20-year-old young adult who had been denied health care coverage under his
parents’ health plan during his youth, due to a pre-existing condition. X now wants to
join his parent’s coverage as a dependent under PHSA § 2714, when their plan year starts
on October 1, 2010. May his parents’ health plan continue to deny X coverage?

B. Scenario II

X aged out of his parents’ health care coverage last year when he turned 19 years old on
January 15, 2009. Subsequently, while uninsured, X was diagnosed with a medical
condition constituting a pre-existing condition. X wants to re-join his parent’s coverage
as a dependent when their plan year starts on October 1, 2010. May his parent’s health
plan impose a pre-existing condition exclusion to prevent him from rejoining the plan or,
alternatively, impose a waiting period or a waivered condition provision for that pre-
existing condition?

Cc. Scenario IIL
X is 20 years old. X had been added to his parent’s group coverage at 16 years old, after

fulfilling a six month pre-existing condition waiting period. X aged out of his dependent
coverage last year when he turned 19 years old. Now X wants to re-join his parent’s


Jay Angoff Page 3
Interim Final Regulations for PHSA § 2714 August 11, 2010

coverage as a dependent when their plan year starts on October 1, 2010. May his parents’
plan impose a new six-month pre-existing waiting period?

II. CONCLUSION

In issuing the Rules, the Department of Health and Human Services (HHS) has
enumerated specific factors that will no longer affect coverage eligibility for dependents,
without specifically addressing pre-existing condition exclusions. Accordingly, further
consideration should be given to provide clarity on the above scenarios to help avoid
misunderstanding by various affected parties attempting to apply the Rules.

Thank you for the opportunity to comment on the proposed Rules. Should you have
questions, please do not hesitate to contact me at (916) 322-2012 or

cehnes@dmhc.ca.gov.

Sincerely,

Vk l bloo

or Lok . Ehnes, Esq.
Director
California Department of Managed Health Care

EM:em