Ins. Code, § 12693.71

(a) The board shall monitor applications to determine whether employers and employees have dropped employer-sponsored dependent coverage in order to participate in the program.

(b) The board may disapprove an application if it is determined that the children to be covered under the application were covered by an employer-sponsored insurance within the last three months.

(c) If the board imposes the limitation identified in subdivision (b) or (d), it shall also establish exceptions to this limitation in cases where prior coverage ended due to reasons unrelated to the availability of the program. This shall include, but not be limited to:

(1) Loss of employment due to factors other than voluntary termination.

(2) Change to a new employer that does not provide an option for dependent coverage.

(3) Change of address so that no employer sponsored coverage is available.

(4) Discontinuation of health benefits to all employees of the applicant’s employer.

(5) Expiration of COBRA coverage period.

(6) Coverage provided pursuant to an exemption authorized under subdivision (i) of Section 1367 of the Health and Safety Code.

(d) If the board determines, based on evidence gathered during a reasonable period of program operation, that a substantial share of funds expended for the program are providing health coverage for children that have discontinued employer-based coverage in order to enter the program or if required by the federal government for state plan approval, the board may take actions to increase the three-month time limit specified in subdivision (b), to such a time limit that cannot exceed six months.