Bill Text: CA AB1083 | 2011-2012 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Health care coverage.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Passed) 2012-09-30 - Chaptered by Secretary of State - Chapter 852, Statutes of 2012. [AB1083 Detail]
Download: California-2011-AB1083-Amended.html
Bill Title: Health care coverage.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Passed) 2012-09-30 - Chaptered by Secretary of State - Chapter 852, Statutes of 2012. [AB1083 Detail]
Download: California-2011-AB1083-Amended.html
BILL NUMBER: AB 1083 AMENDED
BILL TEXT
AMENDED IN SENATE SEPTEMBER 2, 2011
AMENDED IN SENATE AUGUST 31, 2011
AMENDED IN SENATE AUGUST 15, 2011
AMENDED IN SENATE JULY 14, 2011
AMENDED IN SENATE JUNE 27, 2011
AMENDED IN ASSEMBLY MAY 24, 2011
AMENDED IN ASSEMBLY MAY 10, 2011
AMENDED IN ASSEMBLY MARCH 29, 2011
INTRODUCED BY Assembly Member Monning
(Principal coauthor: Assembly Member Feuer)
FEBRUARY 18, 2011
An act to amend Sections 1357, 1357.03, 1357.05, 1357.06, 1357.07,
and 1357.14 of, to amend, repeal, and add Sections 1357.12 and
1357.15 of, and to add Section 1348.95 to, the Health and Safety
Code, and to amend Sections 10700, 10705, 10706, 10707, 10708, 10709,
and 10716 of, to amend, repeal, and add Sections 10714 and 10717 of,
and to add Sections 106.5 and 10127.19 to, the Insurance Code,
relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 1083, as amended, Monning. Health care coverage.
Existing law, the federal Patient Protection and Affordable Care
Act, imposes various requirements, some of which take effect on
January 1, 2014, on states, health plans, employers, and individuals
regarding health care coverage. Pursuant to the requirements of that
act, existing state law establishes the California Health Benefit
Exchange for the purpose of, among other things, making available
qualified health plans to qualified individuals and employers, as
specified.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the regulation of health care service plans by the
Department of Managed Health Care and makes a willful violation of
the act a crime. Existing law provides for the regulation of health
carriers by the Department of Insurance. Existing law provides for
the regulation of health care service plans and health carriers that
offer plan contracts or health benefit plans, respectively, to small
employers with regard to eligible employees, as defined. Existing law
prohibits a plan or solicitor or a carrier or agent or broker from
encouraging or directing small employers to seek coverage from
another plan or carrier or the Voluntary Alliance Uniting Employers
Purchasing Program. Existing law also regulates provisions related to
preexisting conditions and late enrollees, as defined.
For purposes of that coverage, this bill would change the
definitions and criteria related to eligible employees and rating
periods, and, for plan years commencing on or after January 1, 2014,
risk adjustment factors, age categories, and health status-related
factors, as specified. The bill would prohibit the use of risk
adjustment factors and preexisting condition provisions on and after
January 1, 2014. With regard to premium rates charged by a health
plan on and after January 1, 2014, the bill would only allow rates to
be varied with respect to family rating, rating area, and age, as
specified. The bill would change the definition of small employer and
would require employer contribution requirements to be consistent
with the federal Patient Protection and Affordable Care Act. With
regard to the sale of plan contracts or health benefit plans, the
bill would prohibit specified persons or entities from encouraging or
directing small employers to seek coverage from another plan or the
voluntary purchasing pool established under the California Health
Benefit Exchange. The bill would authorize the director and
commissioner to issue emergency regulations to carry out provisions
related to the categories of age, family size, and geographic region
to make them consistent with the federal Patient Protection and
Affordable Care Act. The bill would require health care service plans
and health insurers to report to the departments the number of
enrollees and covered lives that receive health care coverage under
specified contracts or policies, and would require the departments to
post that information on their Internet Web sites.
The bill would also require all policies of individual health
insurance that are offered, sold, renewed, or delivered on or after
January 1, 2014, to provide coverage for essential health benefits,
as defined, except as specified.
Because a willful violation of the bill's provisions relative to
health care service plans would be a crime, the bill would impose a
state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1348.95 is added to the Health and Safety Code,
to read:
1348.95. Commencing March 1, 2012, and at least annually
thereafter, every health care service plan, not including a health
care service plan offering specialized health care service plan
contracts, shall provide to the department, in a form and manner
determined by the department in consultation with the Department of
Insurance, the number of enrollees as of December 31 of the prior
year, that receive health care coverage under a health care service
plan contract that covers individuals, small groups, groups of
51-100, groups of 101 or more, or administrative services only
business lines. Health care service plans shall include the
unduplicated enrollment data in specific product lines as determined
by the department, including, but not limited to, HMO,
point-of-service, PPO, Medicare excluding Medicare supplement,
Medi-Cal managed care, and traditional indemnity non-PPO health
insurance. The department shall publicly report the data provided by
each health care service plan pursuant to this section, including,
but not limited to, posting the data on the department's Internet Web
site. The department shall consult with the Department of Insurance
to ensure that the data reported is comparable and consistent.
SEC. 2. Section 1357 of the Health and Safety Code is amended to
read:
1357. As used in this article:
(a) "Dependent" means the spouse or child of an eligible employee,
subject to applicable terms of the health care plan contract
covering the employee, and includes dependents of guaranteed
association members if the association elects to include dependents
under its health coverage at the same time it determines its
membership composition pursuant to subdivision (o).
(b) "Eligible employee" means either of the following:
(1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of an average of 30 hours per week over the course of
a month, at the small employer's regular places of business, who has
met any statutorily authorized applicable waiting period
requirements. The term includes sole proprietors or partners of a
partnership, if they are actively engaged on a full-time basis in the
small employer's business and included as employees under a health
care plan contract of a small employer, but does not include
employees who work on a part-time, temporary, or substitute basis. It
includes any eligible employee, as defined in this paragraph, who
obtains coverage through a guaranteed association. Employees of
employers purchasing through a guaranteed association shall be deemed
to be eligible employees if they would otherwise meet the definition
except for the number of persons employed by the employer. Permanent
employees who work at least 20 hours but not more than 29 hours are
deemed to be eligible employees if all four of the following apply:
(A) They otherwise meet the definition of an eligible employee
except for the number of hours worked.
(B) The employer offers the employees health coverage under a
health benefit plan.
(C) All similarly situated individuals are offered coverage under
the health benefit plan.
(D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The health care service plan may request any
necessary information to document the hours and time period in
question, including, but not limited to, payroll records and employee
wage and tax filings.
(2) Any member of a guaranteed association as defined in
subdivision (o).
(c) "In force business" means an existing health benefit plan
contract issued by the plan to a small employer.
(d) "Late enrollee" means an eligible employee or dependent who
has declined enrollment in a health benefit plan offered by a small
employer at the time of the initial enrollment period provided under
the terms of the health benefit plan and who subsequently requests
enrollment in a health benefit plan of that small employer, provided
that the initial enrollment period shall be a period of at least 30
days. It also means any member of an association that is a guaranteed
association as well as any other person eligible to purchase through
the guaranteed association when that person has failed to purchase
coverage during the initial enrollment period provided under the
terms of the guaranteed association's plan contract and who
subsequently requests enrollment in the plan, provided that the
initial enrollment period shall be a period of at least 30 days.
However, an eligible employee, any other person eligible for coverage
through a guaranteed association pursuant to subdivision (o), or an
eligible dependent shall not be considered a late enrollee if any of
the following is applicable:
(1) The individual meets all of the following requirements:
(A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, the Medi-Cal program, or the California Health
Benefit Exchange at the time the individual was eligible to enroll.
(B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, the Medi-Cal program, or the
California Health Benefit Exchange was the reason for declining
enrollment, provided that, if the individual was covered under
another employer health plan, the individual was given the
opportunity to make the certification required by this subdivision
and was notified that failure to do so could result in later
treatment as a late enrollee.
(C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the individual
or of a person through whom the individual was covered as a
dependent, termination of the other plan's coverage, cessation of an
employer's contribution toward an employee's or dependent's coverage,
death of the person through whom the individual was covered as a
dependent, legal separation, or divorce; or he or she has lost or
will lose coverage under the Healthy Families Program, the AIM
Program, the Medi-Cal program, or the California Health Benefit
Exchange.
(D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, Healthy Families Program coverage, or coverage through the
California Health Benefit Exchange.
(2) The employer offers multiple health benefit plans and the
employee elects a different plan during an open enrollment period.
(3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
(4) (A) Until December 31, 2013, in the case of an eligible
employee, as defined in paragraph (1) of subdivision (b), the plan
cannot produce a written statement from the employer stating that the
individual or the person through whom the individual was eligible to
be covered as a dependent, prior to declining coverage, was provided
with, and signed, acknowledgment of an explicit written notice in
boldface type specifying that failure to elect coverage during the
initial enrollment period permits the plan to impose, at the time of
the individual's later decision to elect coverage, an exclusion from
coverage for a period of 12 months as well as a six-month preexisting
condition exclusion, unless the individual meets the criteria
specified in paragraph (1), (2), or (3). For plan years commencing on
or after January 1, 2014, a waiting period of no longer than 90 days
is permitted, unless the individual meets the criteria specified in
paragraph (1), (2), or (3).
(B) Until December 31, 2013, in the case of an association member
who did not purchase coverage through a guaranteed association, the
plan cannot produce a written statement from the association stating
that the association sent a written notice in boldface type to all
potentially eligible association members at their last known address
prior to the initial enrollment period informing members that failure
to elect coverage during the initial enrollment period permits the
plan to impose, at the time of the member's later decision to elect
coverage, an exclusion from coverage for a period of 12 months as
well as a six-month preexisting condition exclusion unless the member
can demonstrate that he or she meets the requirements of
subparagraphs (A), (C), and (D) of paragraph (1) or meets the
requirements of paragraph (2) or (3). For plan years commencing on or
after January 1, 2014, a waiting period of no longer than 90 days is
permitted, unless the individual meets the criteria specified in
paragraph (1), (2), or (3).
(C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for enrollment was made within 30
days of the change.
(5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 1373.621 shall apply.
(6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, the Medi-Cal program, or the
California Health Benefit Exchange, and requests enrollment within 60
days after termination of that coverage.
(7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
(8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan at the time of the previous
enrollment period. That individual may enroll himself or herself or
his or her dependents for plan coverage during a special open
enrollment opportunity if his or her dependents have lost or will
lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
(e) "New business" means a health care service plan contract
issued to a small employer that is not the plan's in force business.
(f) (1) For plan years commencing on or before December 31, 2013,
"preexisting condition provision" means a contract provision that
excludes coverage for charges or expenses incurred during a specified
period following the employee's effective date of coverage, as to a
condition for which medical advice, diagnosis, care, or treatment was
recommended or received during a specified period immediately
preceding the effective date of coverage.
(2) For plan years commencing on or after January 1, 2014, no
health care service plan shall limit or exclude coverage for any
individual based on a preexisting condition whether or not any
medical advice, diagnosis, care, or treatment was recommended or
received before that date. A preexisting condition provision includes
any limitation or exclusion of benefits, including a denial of
coverage, applicable to an individual as a result of information
relating to an individual's health status before the individual's
effective date of coverage under a group health plan, such as a
condition identified as a result of a preenrollment questionnaire or
physical examination given to the individual, or review of medical
records relating to the preenrollment period.
(g) "Creditable coverage" means:
(1) Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(2) The Medicare Program pursuant to Title XVIII of the federal
Social Security Act (42 U.S.C. Sec. 1395 et seq.).
(3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
(4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
(5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
(6) A medical care program of the Indian Health Service or of a
tribal organization.
(7) A state health benefits risk pool.
(8) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the Public Health Service Act,
as amended by Public Law 104-191, the Health Insurance Portability
and Accountability Act of 1996.
(10) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C. Sec. 2504(e)).
(11) Any other creditable coverage as defined by subdivision (c)
of Section 2704 of Title XXVII of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg-3(c)).
(h) "Rating period" means the period for which premium rates
established by a plan are in effect and shall be no less than 12
months. This subdivision shall be implemented to the extent permitted
under the federal Patient Protection and Affordable Care Act (Public
Law 111-148) and any rules, regulations, or guidance issued
consistent with that law.
(i) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor. For plan years
commencing on or after January 1, 2014, no risk adjustment factor
shall be used in the determination of rates.
(j) "Risk adjustment factor" means the percentage adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
cost of services. This factor may not be more than 120 percent or
less than 80 percent until July 1, 1996. Effective July 1, 1996, this
factor may not be more than 110 percent or less than 90 percent. For
plan years commencing on or after January 1, 2014, no risk
adjustment factor shall be used in the determination of rates.
(k) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family composition of
the employee, plus the health benefit plan selected by the small
employer to the extent permitted under the federal Patient Protection
and Affordable Care Act (Public Law 111-148) and any rules,
regulations, or guidance issued consistent with that law.
(1) No more than the following age categories may be used in
determining premium rates:
Under 30
30-39
40-49
50-54
55-59
60-64
65 and over
However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the plan
contract will be primary or secondary to benefits provided by the
Medicare Program pursuant to Title XVIII of the federal Social
Security Act (42 U.S.C. Sec. 1395 et seq.). For plan years commencing
on or after January 1, 2014, the rate for age shall not vary by more
than three to one for adults.
(2) Small employer health care service plans shall base rates to
small employers using no more than the following family size
categories:
(A) Single.
(B) Married couple or registered domestic partners. "Domestic
partner" shall have the same meaning as that term is used in Section
297 of the Family Code.
(C) One adult and child or children.
(D) Married couple and child or children or registered domestic
partners and child or children.
(3) The director may issue regulations developed in
collaboration after consultation with the
Insurance Commissioner that are necessary to carry out the purpose of
this subdivision to make the categories of age, family size, and
geographic region consistent with the federal Patient Protection and
Affordable Care Act (Public Law 111-148), and any rules, regulations,
or guidance issued consistent with that law. Any rules and
regulations adopted pursuant to this subdivision may be adopted as
emergency regulations in accordance with the Administrative Procedure
Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code). Until December 31,
2015, the adoption of these regulations shall be deemed an emergency
and necessary for the immediate preservation of the public peace,
health and safety, or general welfare.
(4) (A) In determining rates for small employers, a plan that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
divide no county into more than two regions. Plans shall be deemed to
be operating statewide if their coverage area includes 90 percent or
more of the state's population. Geographic regions established
pursuant to this section shall, as a group, cover the entire state,
and the area encompassed in a geographic region shall be separate and
distinct from areas encompassed in other geographic regions.
Geographic regions may be noncontiguous.
(B) (i) In determining rates for small employers, a plan that does
not operate statewide shall use no more than the number of
geographic regions in the state that is determined by the following
formula: the population, as determined in the last federal census, of
all counties that are included in their entirety in a plan's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No plan
shall have less than one geographic area.
(ii) If the formula in clause (i) results in a plan that operates
in more than one county having only one geographic region, then the
formula in clause (i) shall not apply and the plan may have two
geographic regions, provided that no county is divided into more than
one region.
Nothing in this section shall be construed to require a plan to
establish a new service area or to offer health coverage on a
statewide basis, outside of the plan's existing service area.
(l) "Small employer" means any of the following:
(1) For plan years commencing on or before December 31, 2013, any
person, firm, proprietary or nonprofit corporation, partnership,
public agency, or association that is actively engaged in business or
service, that, on at least 50 percent of its working days during the
preceding calendar quarter or preceding calendar year, employed at
least two, but no more than 50, eligible employees, the majority of
whom were employed within this state, that was not formed primarily
for purposes of buying health care service plan contracts, and in
which a bona fide employer-employee relationship exists. For plan
years commencing on or after January 1, 2014, and on or before
December 31, 2015, any person, firm, proprietary or nonprofit
corporation, partnership, public agency, or association that is
actively engaged in business or service, that, on at least 50 percent
of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 50,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
care service plan contracts, and in which a bona fide
employer-employee relationship exists.For plan years commencing on or
after January 1, 2016, any person, firm, proprietary or nonprofit
corporation, partnership, public agency, or association that is
actively engaged in business or service, that, on at least 50 percent
of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 100,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
care service plan contracts, and in which a bona fide
employer-employee relationship exists. In determining whether to
apply the calendar quarter or calendar year test, a health care
service plan shall use the test that ensures eligibility if only one
test would establish eligibility. In determining the number of
eligible employees, companies that are affiliated companies and that
are eligible to file a combined tax return for purposes of state
taxation shall be considered one employer. Subsequent to the issuance
of a health care service plan contract to a small employer pursuant
to this article, and for the purpose of determining eligibility, the
size of a small employer shall be determined annually. Except as
otherwise specifically provided in this article, provisions of this
article that apply to a small employer shall continue to apply until
the plan contract anniversary following the date the employer no
longer meets the requirements of this definition. It includes any
small employer as defined in this paragraph who purchases coverage
through a guaranteed association, and any employer purchasing
coverage for employees through a guaranteed association. This
paragraph shall be implemented to the extent consistent with the
federal Patient Protection and Affordable Care Act (Public Law
111-148; PPACA) and any rules, regulations, or guidance issued
consistent with that law, except that the minimum requirement of one
employee shall be implemented only to the extent required by PPACA
and any rules, regulations, or guidance issued consistent with
that law .
(2) Any guaranteed association, as defined in subdivision (n),
that purchases health coverage for members of the association.
(3) For plan years commencing on or after January 1, 2014, the
definition of an employer, for purposes of determining whether an
employer with one employee shall include sole proprietors, certain
owners of "S" corporations, or other individuals, shall be consistent
with Section 1304 of the federal Patient Protection and Affordable
Care Act (Public Law 111-148) and any federal rules, regulations, or
guidance issued consistent with that law.
(m) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
(n) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria, and that (1) includes one or more small
employers as defined in paragraph (1) of subdivision (l), (2) does
not condition membership directly or indirectly on the health or
claims history of any person, (3) uses membership dues solely for and
in consideration of the membership and membership benefits, except
that the amount of the dues shall not depend on whether the member
applies for or purchases insurance offered to the association, (4) is
organized and maintained in good faith for purposes unrelated to
insurance, (5) has been in active existence on January 1, 1992, and
for at least five years prior to that date, (6) has included health
insurance as a membership benefit for at least five years prior to
January 1, 1992, (7) has a constitution and bylaws, or other
analogous governing documents that provide for election of the
governing board of the association by its members, (8)
offers any plan contract that is
purchased to all individual members and employer members in this
state, (9) includes any member choosing to enroll in the plan
contracts offered to the association provided that the member has
agreed to make the required premium payments, and (10) covers at
least 1,000 persons with the health care service plan with which it
contracts. The requirement of 1,000 persons may be met if component
chapters of a statewide association contracting separately with the
same carrier cover at least 1,000 persons in the aggregate.
This subdivision applies regardless of whether a contract issued
by a plan is with an association, or a trust formed for or sponsored
by an association, to administer benefits for association members.
For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
(o) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
also may include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include these persons as members of the
guaranteed association, the association shall make that election in
advance of purchasing a plan contract. Health care service plans may
require an association to adhere to the membership composition it
selects for up to 12 months.
(p) "Affiliation period" means a period that, under the terms of
the health care service plan contract, must expire before health care
services under the contract become effective. An affiliation period
under a health care service plan contract shall run concurrently with
any waiting period under that plan contract. An affiliation period
may not exceed 60 days or, in the case of a late enrollee, 90 days.
(q) "Waiting period" means the period that is required to pass
with respect to the employee before the employee is eligible to be
covered for benefits under the terms of the policy. However, such
periods shall not be based upon the health status of the employee or
dependent. For plan years commencing on or after January 1, 2014, a
health plan may apply a waiting period of up to 90 days as a
condition of employment if applied equally to all full-time
employees, consistent with the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any rules, regulations,
or guidance issued consistent with that law.
(r) "Plan year" has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.
(s) "PPACA" means the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the federal Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152), and
any rules, regulations, or guidance issued thereunder.
(t) "Grandfathered health plan" has the meaning set forth in
Section 1251 of PPACA.
SEC. 3. Section 1357.03 of the Health and Safety Code is amended
to read:
1357.03. (a) (1) Upon the effective date of this article, a plan
shall fairly and affirmatively offer, market, and sell all of the
plan's health care service plan contracts that are sold to small
employers or to associations that include small employers to all
small employers in each service area in which the plan provides or
arranges for the provision of health care services.
(2) Each plan shall make available to each small employer all
small employer health care service plan contracts that the plan
offers and sells to small employers or to associations that include
small employers in this state.
(3) No plan or solicitor shall induce or otherwise encourage a
small employer to separate or otherwise exclude an eligible employee
from a health care service plan contract that is provided in
connection with the employee's employment or membership in a
guaranteed association.
(4) A plan contracting to participate in the voluntary purchasing
pool for small employers offered through the California Health
Benefit Exchange shall be deemed in compliance with the requirements
of paragraph (1) for a contract offered through the California Health
Benefit Exchange in those geographic regions in which plans
participate in the California Health Benefit Exchange.
(5) (A) A plan shall be deemed to meet the requirements of
paragraphs (1) and (2) with respect to a plan contract that qualifies
as a grandfathered health plan under Section 1251 of PPACA if all of
the following requirements are met:
(i) The plan offers to renew the plan contract, unless the plan
withdraws the plan contract from the small employer market pursuant
to subdivision (e) of Section 1357.11.
(ii) The plan provides appropriate notice of the grandfathered
status of the contract in any materials provided to an enrollee of
the contract describing the benefits provided under the contract, as
required under PPACA.
(iii) The plan makes no changes to the benefits covered under the
plan contract other than those required by a state or federal law,
regulation, rule, or guidance and those permitted to be made to a
grandfathered health plan under PPACA.
(B) For purposes of this paragraph, "PPACA" means the federal
Patient Protection and Affordable Care Act (Public Law 111-148), as
amended by the federal Health Care and Education Reconciliation Act
of 2010 (Public Law 111-152), and any rules, regulations, or guidance
issued thereunder. For purposes of this paragraph, a "grandfathered
health plan" shall have the meaning set forth in Section 1251 of
PPACA.
(b) Every plan shall file with the director the reasonable
employee participation requirements and employer contribution
requirements that will be applied in offering its plan contracts.
Participation requirements shall be applied uniformly among all small
employer groups, except that a plan may vary application of minimum
employee participation requirements by the size of the small employer
group and whether the employer contributes 100 percent of the
eligible employee's premium. Employer contribution requirements shall
not vary by employer size. Employer contribution requirements shall
be consistent with the federal Patient Protection and Affordable Care
Act (Public Law 111-148). A health care service plan shall not
establish a participation requirement that (1) requires a person who
meets the definition of a dependent in subdivision (a) of Section
1357 to enroll as a dependent if he or she is otherwise eligible for
coverage and wishes to enroll as an eligible employee and (2) allows
a plan to reject an otherwise eligible small employer because of the
number of persons that waive coverage due to coverage through another
employer. Members of an association eligible for health coverage
under subdivision (o) of Section 1357, but not electing any health
coverage through the association, shall not be counted as eligible
employees for purposes of determining whether the guaranteed
association meets a plan's reasonable participation standards.
(c) The plan shall not reject an application from a small employer
for a health care service plan contract if all of the following are
met:
(1) The small employer, as defined by paragraph (1) of subdivision
( l ) of Section 1357, offers health benefits to 100
percent of its eligible employees, as defined by paragraph (1) of
subdivision (b) of Section 1357. Employees who waive coverage on the
grounds that they have other group coverage shall not be counted as
eligible employees.
(2) The small employer agrees to make the required premium
payments.
(3) The small employer agrees to inform the small employers'
employees of the availability of coverage and the provision that
those not electing coverage must wait one year to obtain coverage
through the group if they later decide they would like to have
coverage.
(4) The employees and their dependents who are to be covered by
the plan contract work or reside in the service area in which the
plan provides or otherwise arranges for the provision of health care
services.
(d) No plan or solicitor shall, directly or indirectly, engage in
the following activities:
(1) Encourage or direct small employers to refrain from filing an
application for coverage with a plan because of the health status,
claims experience, industry, occupation of the small employer, or
geographic location provided that it is within the plan's approved
service area.
(2) Encourage or direct small employers to seek coverage from
another plan or the voluntary purchasing pool established under the
California Health Benefit Exchange because of the health status,
claims experience, industry, occupation of the small employer, or
geographic location provided that it is within the plan's approved
service area.
(e) A plan shall not, directly or indirectly, enter into any
contract, agreement, or arrangement with a solicitor that provides
for or results in the compensation paid to a solicitor for the sale
of a health care service plan contract to be varied because of the
health status, claims experience, industry, occupation, or geographic
location of the small employer or small employer's employees. This
subdivision does not apply to a compensation arrangement that
provides compensation to a solicitor on the basis of percentage of
premium, provided that the percentage shall not vary because of the
health status, claims experience, industry, occupation, or geographic
area of the small employer.
(f) A policy or contract that covers a small employer, as defined
in Section 1304(b) of PPACA and in subdivision (l) of Section 1357,
shall not establish rules for eligibility, including continued
eligibility, of an individual, or dependent of an individual, to
enroll under the terms of the plan based on any of the following
health status-related factors:
(1) Health status.
(2) Medical condition, including physical and mental illnesses.
(3) Claims experience.
(4) Receipt of health care.
(5) Medical history.
(6) Genetic information.
(7) Evidence of insurability, including conditions arising out of
acts of domestic violence.
(8) Disability.
(9) Any other health status-related factor as determined by the
department.
(g) A plan shall comply with the requirements of Section 1374.3.
SEC. 4. Section 1357.05 of the Health and Safety Code is amended
to read:
1357.05. (a) For plan years commencing on or before December 31,
2013, except in the case of a late enrollee, or for satisfaction of a
preexisting condition clause in the case of initial coverage of an
eligible employee, a plan may not exclude any eligible employee or
dependent who would otherwise be entitled to health care services on
the basis of an actual or expected health condition of that employee
or dependent. No plan contract may limit or exclude coverage for a
specific eligible employee or dependent by type of illness,
treatment, medical condition, or accident, except for preexisting
conditions as permitted by Section 1357.06.
(b) For plan years commencing on or after January 1, 2014, a plan
may not exclude any eligible employee or dependent who would
otherwise be entitled to health care services on the basis of an
actual or expected health condition of that employee or dependent. No
plan contract may limit or exclude coverage for a specific eligible
employee or dependent by type of illness, treatment, medical
condition, or accident, except for preexisting conditions as
permitted by Section 1357.06.
SEC. 5. Section 1357.06 of the Health and Safety Code is amended
to read:
1357.06. (a) (1) For plan years commencing on or before December
31, 2013, preexisting condition provisions of a plan contract shall
not exclude coverage for a period beyond six months following the
individual's effective date of coverage and may only relate to
conditions for which medical advice, diagnosis, care, or treatment,
including prescription drugs, was recommended or received from a
licensed health practitioner during the six months immediately
preceding the effective date of coverage.
(2) Notwithstanding paragraph (1), a plan contract offered to a
small employer shall not impose any preexisting condition provision
upon any child under 19 years of age.
(3) For plan years commencing on or after January 1, 2014, a
health plan offered to a small employer shall not impose a
preexisting condition provision upon any individual.
(b) (1) For plan years commencing on or before December 31, 2013,
a plan that does not utilize a preexisting condition provision may
impose a waiting or affiliation period, not to exceed 60 days, before
the coverage issued subject to this article shall become effective.
During the waiting or affiliation period no premiums shall be charged
to the enrollee or the subscriber.
(2) For plan years commencing on or after January 1, 2014, no
waiting or affiliation period based on a preexisting condition,
health status, or any other factor prohibited under subdivision (f)
of Section 1357.03 shall be imposed.
(3) A plan contract may apply 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 federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any rules, regulations,
or guidance issued consistent with that law. A waiting period under a
plan contract shall run concurrently with any affiliation period
under the plan. During the waiting period, no plan premiums shall be
charged to the enrollee or subscriber.
(4) A plan may impose an affiliation period, not to exceed 60 days
or, in the case of a late enrollee, 90 days before the coverage
issued subject to this article shall become effective. During the
affiliation period, no premiums shall be charged to the enrollee or
the subscriber. An affiliation period under a plan contract shall run
concurrently with any waiting period under that contract.
(c) For plan years commencing on or before December 31, 2013, in
determining whether a preexisting condition provision or a waiting or
affiliation period applies to any person, a plan shall credit the
time the person was covered under creditable coverage, provided the
person becomes eligible for coverage under the succeeding plan
contract within 62 days of termination of prior coverage, exclusive
of any waiting or affiliation period, and applies for coverage with
the succeeding plan contract within the applicable enrollment period.
A plan shall also credit any time an eligible employee must wait
before enrolling in the plan, including any affiliation or
employer-imposed waiting or affiliation period. However, if a person'
s employment has ended, the availability of health coverage offered
through employment or sponsored by an employer has terminated, or an
employer's contribution toward health coverage has terminated, a plan
shall credit the time the person was covered under creditable
coverage if the person becomes eligible for health coverage offered
through employment or sponsored by an employer within 180 days,
exclusive of any waiting or affiliation period, and applies for
coverage under the succeeding plan contract within the applicable
enrollment period.
(d) For plan years commencing on or after January 1, 2014, in
determining whether a waiting or affiliation period applies to any
person, a plan shall credit the time the person was covered under
creditable coverage, provided the person becomes eligible for
coverage under the succeeding plan contract within 62 days of
termination of prior coverage, exclusive of any waiting or
affiliation period, and applies for coverage with the succeeding plan
contract within the applicable enrollment period. A plan shall also
credit any time an eligible employee must wait before enrolling in
the plan, including any affiliation or employer-imposed waiting or
affiliation period. However, if a person's employment has ended, the
availability of health coverage offered through employment or
sponsored by an employer has terminated, or an employer's
contribution toward health coverage has terminated, a plan shall
credit the time the person was covered under creditable coverage if
the person becomes eligible for health coverage offered through
employment or sponsored by an employer within 180 days, exclusive of
any waiting or affiliation period, and applies for coverage under the
succeeding plan contract within the applicable enrollment period.
(e) For plan years commencing on or before December 31, 2013, in
addition to the preexisting condition exclusions authorized by
subdivision (a) and the waiting or affiliation period authorized by
subdivision (b), health plans providing coverage to a guaranteed
association may impose on employers or individuals purchasing
coverage who would not be eligible for guaranteed coverage if they
were not purchasing through the association a waiting or affiliation
period, not to exceed 60 days, before the coverage issued subject to
this article shall become effective. During the waiting or
affiliation period, no premiums shall be charged to the enrollee or
the subscriber.
(f) An individual's period of creditable coverage shall be
certified pursuant to subdivision (e) of Section 2704 of Title XXVII
of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-3(e)).
(g) A health care service plan issuing group coverage may not
impose a preexisting condition exclusion to a condition relating to
benefits for pregnancy or maternity care. For plan years commencing
on or after January 1, 2014, a health care service plan issuing group
coverage may not impose any preexisting condition exclusion on any
individual.
SEC. 6. Section 1357.07 of the Health and Safety Code is amended
to read:
1357.07. (a) For plan years commencing on or before December 31,
2013, no plan contract may exclude a late enrollee from coverage for
more than 12 months from the date of the late enrollee's application
for coverage. No premium shall be charged to the late enrollee until
the exclusion period has ended.
(b) For plan years commencing on or after January 1, 2014, no plan
contract may exclude a late enrollee from coverage for more than 90
days from the date of the late enrollee's application for coverage to
the extent consistent with the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any rules, regulations,
or guidance issued consistent with that law. No premium shall be
charged to the late enrollee until the exclusion period has ended.
Nothing in this subdivision shall be construed as prohibiting a
health care service plan from restricting enrollment of late
enrollees to open enrollment periods as authorized under Section 2702
of the federal Patient Protection and Affordable Care Act (Public
Law 111-148) and any rules, regulations, or guidance issued
consistent with that law.
SEC. 7. Section 1357.12 of the Health and Safety Code is amended
to read:
1357.12. Premiums for contracts offered or delivered by plans on
or after the effective date of this article shall be subject to the
following requirements:
(a) (1) The premium for new business shall be determined for an
eligible employee in a particular risk category after applying a risk
adjustment factor to the plan's standard employee risk rates. The
risk adjusted employee risk rate may not be more than 120 percent or
less than 80 percent of the plan's applicable standard employee risk
rate until July 1, 1996. Effective July 1, 1996, this factor may not
be more than 110 percent or less than 90 percent. For plan years
commencing on or after January 1, 2014, no risk adjustment factor
shall be used in the determination of rates.
(2) The premium charged a small employer for new business shall be
equal to the sum of the risk adjusted employee risk rates.
(3) The standard employee risk rates applied to a small employer
for new business shall be in effect for no less than 12 months. This
subdivision shall be implemented to the extent permitted under the
federal Patient Protection and Affordable Care Act (Public Law
111-148) and any rules, regulations, or guidance issued consistent
with that law.
(b) (1) The premium for in force business shall be determined for
an eligible employee in a particular risk category after applying a
risk adjustment factor to the plan's standard employee risk rates.
The risk adjusted employee risk rates may not be more than 120
percent or less than 80 percent of the plan's applicable standard
employee risk rate until July 1, 1996. Effective July 1, 1996, this
factor may not be more than 110 percent or less than 90 percent. The
factor effective July 1, 1996, shall apply to in force business at
the earlier of either the time of renewal or July 1, 1997. For plan
years commencing on or before December 31, 2013, the risk adjustment
factor applied to a small employer may not increase by more than 10
percentage points from the risk adjustment factor applied in the
prior rating period. The risk adjustment factor for a small employer
may not be modified more frequently than every 12 months. For plan
years commencing on or after January 1, 2014, no risk adjustment
factor shall be used in the determination of rates.
(2) The premium charged a small employer for in force business
shall be equal to the sum of the risk adjusted employee risk rates.
The standard employee risk rates shall be in effect for no less than
six months.
(3) For a contract that a plan has discontinued offering, the risk
adjustment factor applied to the standard employee risk rates for
the first rating period of the new contract that the small employer
elects to purchase shall be no greater than the risk adjustment
factor applied in the prior rating period to the discontinued
contract. However, the risk adjusted employee risk rate may not be
more than 120 percent or less than 80 percent of the plan's
applicable standard employee risk rate until July 1, 1996. Effective
July 1, 1996, this factor may not be more than 110 percent or less
than 90 percent. The factor effective July 1, 1996, shall apply to in
force business at the earlier of either the time of renewal or July
1, 1997. The risk adjustment factor for a small employer may not be
modified more frequently than every 12 months. For plan years
commencing on or after January 1, 2014, no risk adjustment factor
shall be used in the determination of rates.
(c) (1) For any small employer, a plan may, with the consent of
the small employer, establish composite employee and dependent rates
for either new business or renewal of in force business. The
composite rates shall be determined as the average of the risk
adjusted employee risk rates for the small employer, as determined in
accordance with the requirements of subdivisions (a) and (b). The
sum of the composite rates so determined shall be equal to the sum of
the risk adjusted employee risk rates for the small employer.
(2) The composite rates shall be used for all employees and
dependents covered throughout a rating period of no less than six
months nor more than 12 months, except that a plan may reserve the
right to redetermine the composite rates if the enrollment under the
contract changes by more than a specified percentage during the
rating period. Any redetermination of the composite rates shall be
based on the same risk adjusted employee risk rates used to determine
the initial composite rates for the rating period. If a plan
reserves the right to redetermine the rates and the enrollment
changes more than the specified percentage, the plan shall
redetermine the composite rates if the redetermined rates would
result in a lower premium for the small employer. A plan reserving
the right to redetermine the composite rates based upon a change in
enrollment shall use the same specified percentage to measure that
change with respect to all small employers electing composite rates.
(d) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
SEC. 8. Section 1357.12 is added to the Health and Safety Code, to
read:
1357.12. (a) Premium rates for contracts offered or delivered by
plans on or after January 1, 2014, shall be subject to the following
requirements:
(1) With respect to the premium rate charged by a health plan,
such rate shall vary with respect to the particular plan or coverage
involved only by any of the following:
(A) Whether such plan or coverage covers an individual or family.
(B) Rating area.
(C) Age, except that such rate shall not vary by more than 3 to 1
for adults.
(2) Such rate shall not vary with respect to the particular plan
or coverage involved by any other factor not described in paragraph
(1).
(b) This section shall become operative on January 1, 2014.
SEC. 9. Section 1357.14 of the Health and Safety Code is amended
to read:
1357.14. In connection with the offering for sale of any plan
contract to a small employer, each plan shall make a reasonable
disclosure, as part of its solicitation and sales materials, of the
following:
(a) For plan years commencing on or before December 31, 2013, the
extent to which premium rates for a specified small employer are
established or adjusted in part based upon the actual or expected
variation in service costs or actual or expected variation in health
condition of the employees and dependents of the small employer.
(b) The provisions concerning the plan's right to change premium
rates and the factors other than provision of services experience
that affect changes in premium rates.
(c) Provisions relating to the guaranteed issue and renewal of
contracts.
(d) For plan years commencing on or before December 31, 2013,
provisions relating to the effect of any preexisting condition
provision.
(e) Provisions relating to the small employer's right to apply for
any contract written, issued, or administered by the plan at the
time of application for a new health care service plan contract, or
at the time of renewal of a health care service plan contract,
consistent with the requirements of PPACA.
(f) The
availability, upon request, of a listing of all the plan's contracts
and benefit plan designs offered, both inside and outside the
California Health Benefit Exchange, to small employers, including the
rates for each contract.
(g) At the time it offers a contract to a small employer, each
plan shall provide the small employer with a statement of all of its
plan contracts offered to small employers, including the rates for
each plan contract, in the service area in which the employer's
employees and eligible dependents who are to be covered by the plan
contract work or reside. For purposes of this subdivision, plans that
are affiliated plans or that are eligible to file a consolidated
income tax return shall be treated as one health plan.
(h) Each plan shall do all of the following:
(1) Prepare a brochure that summarizes all of its plan contracts
offered to small employers and to make this summary available to any
small employer and to solicitors upon request. The summary shall
include for each contract information on benefits provided, a generic
description of the manner in which services are provided, such as
how access to providers is limited, benefit limitations, required
copayments and deductibles, for plan years commencing on or before
December 31, 2013, standard employee risk rates, and, for plan years
commencing on or before December 31, 2013, an explanation of the
manner in which creditable coverage is calculated if a preexisting
condition or affiliation period is imposed. The summary shall also
include a telephone number that can be called for more detailed
benefit information. Plans are required to keep the information
contained in the brochure accurate and up to date and, upon updating
the brochure, send copies to solicitors and solicitor firms with whom
the plan contracts to solicit enrollments or subscriptions. For plan
years commencing on or after January 1, 2014, a health benefit plan
offered to a small employer shall not impose any preexisting
condition provision upon any individual. Nothing in this paragraph
shall be construed as prohibiting a health benefit plan from
restricting enrollment of enrollees to open enrollment periods as
authorized under Section 2702 of the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any rules, regulations,
or guidance issued consistent with that law.
(2) For each contract, prepare a more detailed evidence of
coverage and make it available to small employers, solicitors, and
solicitor firms upon request. The evidence of coverage shall contain
all information that a prudent buyer would need to be aware of in
making contract selections.
(3) For plan years commencing on or before December 31, 2013,
provide to small employers and solicitors, upon request, for any
given small employer the sum of the standard employee risk rates and
the sum of the risk adjusted employee risk rates. When requesting
this information, small employers, solicitors, and solicitor firms
shall provide the plan with the information the plan needs to
determine the small employer's risk adjusted employee risk rate. For
plan years commencing on or after January 1, 2014, no risk adjustment
factor may be used in the determination of rates.
(4) Provide copies of the current summary brochure to all
solicitors and solicitor firms contracting with the plan to solicit
enrollments or subscriptions from small employers.
For purposes of this subdivision, plans that are affiliated plans
or that are eligible to file a consolidated income tax return shall
be treated as one health plan.
(i) Every solicitor or solicitor firm contracting with one or more
plans to solicit enrollments or subscriptions from small employers
shall do all of the following:
(1) When providing information on contracts to a small employer
but making no specific recommendations on particular plan contracts:
(A) Advise the small employer of the plan's obligation to sell to
any small employer any plan contract it offers to small employers and
provide them, upon request, with the actual rates that would be
charged to that employer for a given contract.
(B) Notify the small employer that the solicitor or solicitor firm
will procure rate and benefit information for the small employer on
any plan contract offered by a plan whose contract the solicitor
sells.
(C) Notify the small employer that upon request the solicitor or
solicitor firm will provide the small employer with the summary
brochure required under paragraph (1) of subdivision (h) for any plan
contract offered by a plan with whom the solicitor or solicitor firm
has contracted with to solicit enrollments or subscriptions.
(D) Notify the small employer of the availability of coverage
through the California Health Benefit Exchange and
the availability of tax credits for certain employers , and
through the Exchange. consistent with the federal
Patient Protection and Affordable Care Act (Public Law 111-148) and
state law, including any rules, regulati ons, or guidance
issued in connection therewith.
(2) When recommending a particular benefit plan design or designs,
advise the small employer that, upon request, the agent will provide
the small employer with the brochure required by paragraph (1) of
subdivision (h) containing the benefit plan design or designs being
recommended by the agent or broker.
(3) Prior to filing an application for a small employer for a
particular contract:
(A) For each of the plan contracts offered by the plan whose
contract the solicitor or solicitor firm is offering, provide the
small employer with the benefit summary required in paragraph (1) of
subdivision (h) and, for plan years commencing on or before December
31, 2013, the sum of the standard employee risk rates for that
particular employer.
(B) Notify the small employer that, upon request, the solicitor or
solicitor firm will provide the small employer with an evidence of
coverage brochure for each contract the plan offers.
(C) For plan years commencing on or before December 31, 2013,
notify the small employer that actual rates may be 10 percent higher
or lower than the sum of the standard employee risk rates, depending
on how the plan assesses the risk of the small employer's group. For
plan years commencing on or after January 1, 2014, no risk adjustment
factor may be used in the determination of rates.
(D) For plan years commencing on or before December 31, 2013,
notify the small employer that, upon request, the solicitor or
solicitor firm will submit information to the plan to ascertain the
small employer's sum of the risk adjusted employee risk rate for any
contract the plan offers. On or after November 1, 2013, notify the
small employer of the employee rate effective January 1, 2014. For
plan years commencing on or after January 1, 2014, no risk adjustment
factor may be used in the determination of rates.
(E) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this section.
SEC. 10. Section 1357.15 of the Health and Safety Code is amended
to read:
1357.15. (a) At least 60 calendar days prior to renewing or
amending a plan contract subject to this article which will be in
force on the operative date of this article, a plan shall file a
notice of material modification with the director in accordance with
the provisions of Section 1352. The notice of material modification
shall include a statement certifying that the plan is in compliance
with subdivision (j) of Section 1357 and Section 1357.12. For rates
in effect until January 1, 2014, the certified statement shall set
forth the standard employee risk rate for each risk category and the
highest and lowest risk adjustment factors that will be used in
setting the rates at which the contract will be renewed or amended.
Any action by the director, as permitted under Section 1352, to
disapprove, suspend, or postpone the plan's use of a plan contract
shall be in writing, specifying the reasons that the plan contract
does not comply with the requirements of this chapter.
(b) At least 60 calendar days prior to offering a plan contract
subject to this article, all plans shall file a notice of material
modification with the director in accordance with the provisions of
Section 1352. The notice of material modification shall include a
statement certifying that the plan is in compliance with subdivision
(j) of Section 1357 and Section 1357.12. For rates in effect until
January 1, 2014, the certified statement shall set forth the standard
employee risk rate for each risk category and the highest and lowest
risk adjustment factors that will be used in setting the rates at
which the contract will be offered. Plans that will be offering to a
small employer plan contracts approved by the director prior to the
effective date of this article shall file a notice of material
modification in accordance with this subdivision. Any action by the
director, as permitted under Section 1352, to disapprove, suspend, or
postpone the plan's use of a plan contract shall be in writing,
specifying the reasons that the plan contract does not comply with
the requirements of this chapter.
(c) For plan years commencing on or before December 31, 2013,
prior to making any changes in the risk categories or standard
employee risk rates filed with the director pursuant to subdivision
(a) or (b), the plan shall file as an amendment a statement setting
forth the changes and certifying that the plan is in compliance with
subdivision (j) of Section 1357 and Section 1357.12. A plan may
commence offering plan contracts utilizing the changed risk
categories set forth in the certified statement on the 31st day from
the date of the filing, or at an earlier time determined by the
director, unless the director disapproves the amendment by written
notice, stating the reasons therefor. If only the standard employee
risk rate is being changed, and not the risk categories, a plan may
commence offering plan contracts utilizing the changed standard
employee risk rate upon filing the certified statement unless the
director disapproves the amendment by written notice.
(d) Periodic changes to the standard employee risk rate that a
plan proposes to implement over the course of up to 12 consecutive
months may be filed in conjunction with the certified statement filed
under subdivision (a), (b), or (c).
(e) Each plan shall maintain at its principal place of business
all of the information required to be filed with the director
pursuant to this section.
(f) For plan years commencing on or before December 31, 2013, each
plan shall make available to the director, on request, the risk
adjustment factor used in determining the rate for any particular
small employer.
(g) Nothing in this section shall be construed to limit the
director's authority to enforce the rating practices set forth in
this article.
(h) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
SEC. 11. Section 1357.15 is added to the Health and Safety Code,
to read:
1357.15. (a) At least 60 calendar days prior to renewing or
amending a plan contract subject to this article which will be in
force on the operative date of this article, a plan shall file a
notice of material modification with the director in accordance with
the provisions of Section 1352. The notice of material modification
shall include a statement certifying that the plan is in compliance
with subdivision (j) of Section 1357 and Section 1357.12. Any action
by the director, as permitted under Section 1352, to disapprove,
suspend, or postpone the plan's use of a plan contract shall be in
writing, specifying the reasons that the plan contract does not
comply with the requirements of this chapter.
(b) At least 60 calendar days prior to offering a plan contract
subject to this article, all plans shall file a notice of material
modification with the director in accordance with the provisions of
Section 1352. The notice of material modification shall include a
statement certifying that the plan is in compliance with subdivision
(j) of Section 1357 and Section 1357.12. Plans that will be offering
to a small employer plan contracts approved by the director prior to
the effective date of this article shall file a notice of material
modification in accordance with this subdivision. Any action by the
director, as permitted under Section 1352, to disapprove, suspend, or
postpone the plan's use of a plan contract shall be in writing,
specifying the reasons that the plan contract does not comply with
the requirements of this chapter.
(c) Each plan shall maintain at its principal place of business
all of the information required to be filed with the director
pursuant to this section.
(d) Nothing in this section shall be construed to limit the
director's authority to enforce the rating practices set forth in
this article.
(e) This section shall become operative on January 1, 2014.
SEC. 12. Section 106.5 is added to the Insurance Code, to read:
106.5. (a) All nongrandfathered policies of individual health
insurance, except Medicare supplement policies, as defined in Article
6 (commencing with Section 10192.05) of Chapter 1 of Part 2, or
small employer health insurance, as defined in Chapter 8 (commencing
with Section 10700) of Part 2, that are offered, sold, renewed, or
delivered on or after January 1, 2014, shall provide coverage for
essential health benefits, as described in Section 2707 of the
federal Patient Protection and Affordable Care Act (Public Law
111-148).
(b) A nongrandfathered policy is a policy that is not
grandfathered, as defined in Section 147.140 of Title 45 of the Code
of Federal Regulations.
SEC. 13. Section 10127.19 is added to the Insurance Code, to read:
10127.19. Commencing March 1, 2012, and at least annually
thereafter, every health insurer, not including a health insurer
offering specialized health insurance policies, shall provide to the
department, in a form and manner determined by the department in
consultation with the Department of Managed Health Care, the number
of covered lives, as of December 31 of the prior year, that receive
health care coverage under a health insurance policy that covers
individuals, small groups, groups of 51-100, groups of 101 or more,
or administrative services only business lines. Health insurers shall
include the unduplicated enrollment data in specific product lines
as determined by the department, including, but not limited to HMO,
point-of-service, PPO, Medicare excluding Medicare supplement,
Medi-Cal managed care, and traditional indemnity non-PPO health
insurance. The department shall publicly report the data provided by
each health insurer pursuant to this section, including, but not
limited to, posting the data on the department's Internet Web site.
The department shall consult with the Department of Managed Health
Care to ensure that the data reported is comparable and consistent.
SEC. 14. Section 10700 of the Insurance Code is amended to read:
10700. As used in this chapter:
(a) "Agent or broker" means a person or entity licensed under
Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.
(b) "Benefit plan design" means a specific health coverage product
issued by a carrier to small employers, to trustees of associations
that include small employers, or to individuals if the coverage is
offered through employment or sponsored by an employer. It includes
services covered and the levels of copayment and deductibles, and it
may include the professional providers who are to provide those
services and the sites where those services are to be provided. A
benefit plan design may also be an integrated system for the
financing and delivery of quality health care services which has
significant incentives for the covered individuals to use the system.
(c) "Board" means the Major Risk Medical Insurance Board.
(d) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans that
cover the employees of small employers, regardless of the situs of
the contract or master policyholder. For the purposes of Articles 3
(commencing with Section 10719) and 4 (commencing with Section
10730), "carrier" also includes health care service plans.
(e) "Dependent" means the spouse or child of an eligible employee,
subject to applicable terms of the health benefit plan covering the
employee, and includes dependents of guaranteed association members
if the association elects to include dependents under its health
coverage at the same time it determines its membership composition
pursuant to subdivision (z).
(f) "Eligible employee" means either of the following:
(1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of an average of 30 hours per week over the course of
a month, in the small employer's regular place of business, who has
met any statutorily authorized applicable waiting period
requirements. The term includes sole proprietors or partners of a
partnership, if they are actively engaged on a full-time basis in the
small employer's business, and they are included as employees under
a health benefit plan of a small employer, but does not include
employees who work on a part-time, temporary, or substitute basis. It
includes any eligible employee, as defined in this paragraph, who
obtains coverage through a guaranteed association. Employees of
employers purchasing through a guaranteed association shall be deemed
to be eligible employees if they would otherwise meet the definition
except for the number of persons employed by the employer. A
permanent employee who works at least 20 hours but not more than 29
hours is deemed to be an eligible employee if all four of the
following apply:
(A) The employee otherwise meets the definition of an eligible
employee except for the number of hours worked.
(B) The employer offers the employee health coverage under a
health benefit plan.
(C) All similarly situated individuals are offered coverage under
the health benefit plan.
(D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The insurer may request any necessary information
to document the hours and time period in question, including, but not
limited to, payroll records and employee wage and tax filings.
(2) Any member of a guaranteed association as defined in
subdivision (z).
(g) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
(h) "Financially impaired" means, for the purposes of this
chapter, a carrier that, on or after the effective date of this
chapter, is not insolvent and is either:
(1) Deemed by the commissioner to be potentially unable to fulfill
its contractual obligations.
(2) Placed under an order of rehabilitation or conservation by a
court of competent jurisdiction.
(i) "Fund" means the California Small Group Reinsurance Fund.
(j) "Health benefit plan" means a policy or contract written or
administered by a carrier that arranges or provides health care
benefits for the covered eligible employees of a small employer and
their dependents. The term does not include accident only, credit,
disability income, coverage of Medicare services pursuant to
contracts with the United States government, Medicare supplement,
long-term care insurance, dental, vision, coverage issued as a
supplement to liability insurance, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(k) "In force business" means an existing health benefit plan
issued by the carrier to a small employer.
(l) "Late enrollee" means an eligible employee or dependent who
has declined health coverage under a health benefit plan offered by a
small employer at the time of the initial enrollment period provided
under the terms of the health benefit plan and who subsequently
requests enrollment in a health benefit plan of that small employer,
provided that the initial enrollment period shall be a period of at
least 30 days. It also means any member of an association that is a
guaranteed association as well as any other person eligible to
purchase through the guaranteed association when that person has
failed to purchase coverage during the initial enrollment period
provided under the terms of the guaranteed association's health
benefit plan and who subsequently requests enrollment in the plan,
provided that the initial enrollment period shall be a period of at
least 30 days. However, an eligible employee, another person eligible
for coverage through a guaranteed association pursuant to
subdivision (z), or an eligible dependent shall not be considered a
late enrollee if any of the following is applicable:
(1) The individual meets all of the following requirements:
(A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, the Medi-Cal program, or the California Health
Benefit Exchange, at the time the individual was eligible to enroll.
(B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, the Medi-Cal program, or the
California Health Benefit Exchange was the reason for declining
enrollment provided that, if the individual was covered under another
employer health plan, the individual was given the opportunity to
make the certification required by this subdivision and was notified
that failure to do so could result in later treatment as a late
enrollee.
(C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the
individual, or of a person through whom the individual was covered as
a dependent, the termination of the other plan's coverage, cessation
of an employer's contribution toward an employee's or dependent's
coverage, death of the person through whom the individual was covered
as a dependent, legal separation, or divorce; or he or she has lost
or will lose coverage under the Healthy Families Program, the AIM
Program, the Medi-Cal program, or the California Health Benefit
Exchange.
(D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, Healthy Families Program coverage, or coverage through the
California Health Benefit Exchange.
(2) The individual is employed by an employer who offers multiple
health benefit plans and the individual elects a different plan
during an open enrollment period.
(3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
(4) (A) For plan years commencing on or before December 31, 2013,
in the case of an eligible employee as defined in paragraph (1) of
subdivision (f), the carrier cannot produce a written statement from
the employer stating that the individual or the person through whom
an individual was eligible to be covered as a dependent, prior to
declining coverage, was provided with, and signed acknowledgment of,
an explicit written notice in boldface type specifying that failure
to elect coverage during the initial enrollment period permits the
carrier to impose, at the time of the individual's later decision to
elect coverage, an exclusion from coverage for a period of 12 months
as well as a six-month preexisting condition exclusion unless the
individual meets the criteria specified in paragraph (1), (2), or
(3). For plan years commencing on or after January 1, 2014, a waiting
period of no longer than 90 days is permitted unless the individual
meets the criteria specified in paragraph (1), (2), or (3).
(B) For plan years commencing on or before December 31, 2013, in
the case of an eligible employee who is a guaranteed association
member, the plan cannot produce a written statement from the
guaranteed association stating that the association sent a written
notice in boldface type to all potentially eligible association
members at their last known address prior to the initial enrollment
period informing members that failure to elect coverage during the
initial enrollment period permits the plan to impose, at the time of
the member's later decision to elect coverage, an exclusion from
coverage for a period of 12 months as well as a six-month preexisting
condition exclusion unless the member can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1) or meets the requirements of paragraph (2) or (3). For
plan years commencing on or after January 1, 2014, a waiting period
of no longer than 90 days is permitted unless the individual meets
the criteria specified in paragraph (1), (2), or (3).
(C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for coverage was made within 30
days of the change.
(5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 10116.5 shall apply.
(6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, the Medi-Cal program, or the
California Health Benefit
Exchange, and requests enrollment within 60 days after termination
of that coverage.
(7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
(8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan at the time of the previous
enrollment period. That individual may enroll himself or herself or
his or her dependents for plan coverage during a special open
enrollment opportunity if his or her dependents have lost or will
lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
(m) "New business" means a health benefit plan issued to a small
employer that is not the carrier's in force business.
(n) "Participating carrier" means a carrier that has entered into
a contract with the program to provide health benefits coverage under
this part.
(o) "Plan of operation" means the plan of operation of the fund,
including articles, bylaws, and operating rules adopted by the fund
pursuant to Article 3 (commencing with Section 10719).
(p) (1) For plan years commencing on or before December 31, 2013,
"preexisting condition provision" means a policy provision that
excludes coverage for charges or expenses incurred during a specified
period following the insured's effective date of coverage, as to a
condition for which medical advice, diagnosis, care, or treatment was
recommended or received during a specified period immediately
preceding the effective date of coverage.
(2) For plan years commencing on or after January 1, 2014, no
insurer shall limit or exclude coverage for any individual based on a
preexisting condition whether or not any medical advice, diagnosis,
care, or treatment was recommended or received before that date. A
preexisting condition exclusion includes any limitation or exclusion
of benefits, including a denial of coverage, applicable to an
individual as a result of information relating to an individual's
health status before the individual's effective date of coverage
under a group health plan, or group or individual health insurance
coverage, such as a condition identified as a result of a
preenrollment questionnaire or physical examination given to the
individual, or review of medical records relating to the
preenrollment period.
(q) "Creditable coverage" means:
(1) Any individual or group policy, contract, or program, that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(2) The federal Medicare Program pursuant to Title XVIII of the
federal Social Security Act (42 U.S.C. Sec. 1395 et seq.).
(3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
(4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
(5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
(6) A medical care program of the Indian Health Service or of a
tribal organization.
(7) A state health benefits risk pool.
(8) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.
(10) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).
(11) Any other creditable coverage as defined by subsection (c) of
Section 2704 of Title XXVII of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-3(c)).
(r) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than 12
months. This subdivision shall be implemented to the extent permitted
under the federal Patient Protection and Affordable Care Act (Public
Law 111-148) and any rules, regulations, or guidance issued
consistent with that law.
(s) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor. For plan years
commencing on or after January 1, 2014, no risk adjustment factor
shall be used in the determination of rates.
(t) "Risk adjustment factor" means the percent adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
claims. This factor may not be more than 120 percent or less than 80
percent until July 1, 1996. Effective July 1, 1996, this factor may
not be more than 110 percent or less than 90 percent. For plan years
commencing on or after January 1, 2014, no risk adjustment factor
shall be used in the determination of rates.
(u) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family size of the
employee, plus the benefit plan design selected by the small employer
to the extent permitted under the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any rules, regulations,
or guidance issued consistent with that law.
(1) No more than the following age categories may be used in
determining premium rates:
Under 30
30-39
40-49
50-54
55-59
60-64
65 and over
However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the health
benefit plan will be primary or secondary to benefits provided by the
federal Medicare Program pursuant to Title XVIII of the federal
Social Security Act. For plan years commencing on or after January 1,
2014, the rate for age shall not vary by more than three to one for
adults.
(2) Small employer carriers shall base rates to small employers
using no more than the following family size categories:
(A) Single.
(B) Married couple or registered domestic partners. "Domestic
partner" shall have the same meaning as that term is used in Section
297 of the Family Code.
(C) One adult and child or children.
(D) Married couple and child or children or registered domestic
partners and child or children.
(3) The commissioner may issue regulations developed in
collaboration after consultation with the
Director of Managed Health Care that are necessary to carry out the
purpose of this subdivision to make the categories of age, family
size, and geographic region consistent with the federal Patient
Protection and Affordable Care Act (Public Law 111-148), and any
rules, regulations, or guidance issued consistent with that law. Any
rules and regulations adopted pursuant to this subdivision may be
adopted as emergency regulations in accordance with the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
Until December 31, 2015, the adoption of these regulations shall be
deemed an emergency and necessary for the immediate preservation of
the public peace, health and safety, or general welfare.
(4) (A) In determining rates for small employers, a carrier that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
shall divide no county into more than two regions. Carriers shall be
deemed to be operating statewide if their coverage area includes 90
percent or more of the state's population. Geographic regions
established pursuant to this section shall, as a group, cover the
entire state, and the area encompassed in a geographic region shall
be separate and distinct from areas encompassed in other geographic
regions. Geographic regions may be noncontiguous.
(B) In determining rates for small employers, a carrier that does
not operate statewide shall use no more than the number of geographic
regions in the state than is determined by the following formula:
the population, as determined in the last federal census, of all
counties which are included in their entirety in a carrier's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No
carrier shall have less than one geographic area.
(v) "Small employer" means either of the following:
(1) For plan years commencing on or after December 31, 2013, any
person, proprietary or nonprofit firm, corporation, partnership,
public agency, or association that is actively engaged in business or
service that, on at least 50 percent of its working days during the
preceding calendar quarter, or preceding calendar year, employed at
least two, but not more than 50, eligible employees, the majority of
whom were employed within this state, that was not formed primarily
for purposes of buying health insurance and in which a bona fide
employer-employee relationship exists. For plan years commencing on
or after January 1, 2014, and on or before December 31, 2015, any
person, firm, proprietary or nonprofit corporation, partnership,
public agency, or association that is actively engaged in business or
service, that, on at least 50 percent of its working days during the
preceding calendar quarter or preceding calendar year, employed at
least one, but no more than 50, eligible employees, the majority of
whom were employed within this state, that was not formed primarily
for purposes of buying health insurance, and in which a bona fide
employer-employee relationship exists. For plan years commencing on
or after January 1, 2016, any person, firm, proprietary or nonprofit
corporation, partnership, public agency, or association that is
actively engaged in business or service, that, on at least 50 percent
of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 100,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
benefit plans, and in which a bona fide employer-employee
relationship exists. In determining whether to apply the calendar
quarter or calendar year test, the insurer shall use the test that
ensures eligibility if only one test would establish eligibility. In
determining the number of eligible employees, companies that are
affiliated companies and that are eligible to file a combined income
tax return for purposes of state taxation shall be considered one
employer. Subsequent to the issuance of a health benefit plan to a
small employer pursuant to this chapter, and for the purpose of
determining eligibility, the size of a small employer shall be
determined annually. Except as otherwise specifically provided,
provisions of this chapter that apply to a small employer shall
continue to apply until the health benefit plan anniversary following
the date the employer no longer meets the requirements of this
definition. It includes any small employer as defined in this
paragraph who purchases coverage through a guaranteed association,
and any employer purchasing coverage for employees through a
guaranteed association. This paragraph shall be implemented to the
extent consistent with the federal Patient Protection and Affordable
Care Act (Public Law 111-148) and any rules, regulations, or guidance
issued consistent with that law, except that the minimum requirement
of one employee shall be implemented only to the extent required by
PPACA and any rules, regulations, or guidance issued consistent
with that law .
(2) Any guaranteed association, as defined in subdivision (y),
that purchases health coverage for members of the association.
(3) For plan years commencing on or after January 1, 2014, the
definition of an employer, for purposes of determining whether an
employer with one employee shall include sole proprietors, certain
owners of "S" corporations, or other individuals, shall be consistent
with Section 1304 of the federal Patient Protection and Affordable
Care Act (Public Law 111-148) and any federal rules, regulations, or
guidance issued consistent with that law.
(w) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group. For plan years commencing on or after January 1, 2014, no risk
adjustment factor shall be used to determine rates.
(x) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria which (1) includes one or more small employers as
defined in paragraph (1) of subdivision (w), (2) does not condition
membership directly or indirectly on the health or claims history of
any person, (3) uses membership dues solely for and in consideration
of the membership and membership benefits, except that the amount of
the dues shall not depend on whether the member applies for or
purchases insurance offered by the association, (4) is organized and
maintained in good faith for purposes unrelated to insurance, (5) has
been in active existence on January 1, 1992, and for at least five
years prior to that date, (6) has been offering health insurance to
its members for at least five years prior to January 1, 1992, (7) has
a constitution and bylaws, or other analogous governing documents
that provide for election of the governing board of the association
by its members, (8) offers any benefit plan design that is purchased
to all individual members and employer members in this state, (9)
includes any member choosing to enroll in the benefit plan design
offered to the association provided that the member has agreed to
make the required premium payments, and (10) covers at least 1,000
persons with the carrier with which it contracts. The requirement of
1,000 persons may be met if component chapters of a statewide
association contracting separately with the same carrier cover at
least 1,000 persons in the aggregate.
This subdivision applies regardless of whether a master policy by
an admitted insurer is delivered directly to the association or a
trust formed for or sponsored by an association to administer
benefits for association members.
For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
(y) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
may also include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include those persons as members of the
guaranteed association, the association must so elect in advance of
purchasing coverage from a plan. Health plans may require an
association to adhere to the membership composition it selects for up
to 12 months.
(z) "Affiliation period" means a period that, under the terms of
the health benefit plan, must expire before health care services
under the plan become effective until December 31, 2013.
An affiliation period under a plan contract shall run concurrently
with any waiting period under the plan contract. An affiliation
period may not exceed 60 days or, in the case of a late enrollee, 90
days.
(aa) "Plan year" has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.
(ab) "PPACA" means the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the federal Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152), and
any rules, regulations, or guidance issued thereunder.
(ac) "Grandfathered health plan" has the meaning set forth in
Section 1251 of PPACA.
(ad) "Waiting period" means the period that is required to pass
with respect to the employee before the employee is eligible to be
covered for benefits under the terms of the policy. However, such
periods shall not be based upon the health status of the employee or
dependent. For plan years commencing on or after January 1, 2014, a
health benefit plan may apply a waiting period of up to 90 days as a
condition of employment if applied equally to all full-time
employees, consistent with the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any rules, regulations,
or guidance issued consistent with that law.
SEC. 15. Section 10705 of the Insurance Code is amended to read:
10705. Upon the effective date of this act:
(a) No group or individual policy or contract or certificate of
group insurance or statement of group coverage providing benefits to
employees of small employers as defined in this chapter shall be
issued or delivered by a carrier subject to the jurisdiction of the
commissioner regardless of the situs of the contract or master
policyholder or of the domicile of the carrier nor, except as
otherwise provided in Sections 10270.91 and 10270.92, shall a carrier
provide coverage subject to this chapter until a copy of the form of
the policy, contract, certificate, or statement of coverage is filed
with and approved by the commissioner in accordance with Sections
10290 and 10291, and the carrier has complied with the requirements
of Section 10717.
(b) (1) Each carrier, except a self-funded employer, shall fairly
and affirmatively offer, market, and sell all of the carrier's
benefit plan designs that are sold to, offered through, or sponsored
by, small employers or associations that include small employers to
all small employers in each geographic region in which the carrier
makes coverage available or provides benefits.
(2) A carrier contracting to participate in the California Health
Benefit Exchange shall be deemed to be in compliance with paragraph
(1) for a benefit plan design offered in those geographic regions in
which the carrier participates in the California Health Benefit
Exchange.
(3) (A) A carrier shall be deemed to meet the requirements of
paragraph (1) and subdivision (c) with respect to a benefit plan
design that qualifies as a grandfathered health plan under Section
1251 of PPACA if all of the following requirements are met:
(i) The carrier offers to renew the benefit plan design, unless
the carrier withdraws the benefit plan design from the small employer
market pursuant to subdivision (e) of Section 10713.
(ii) The carrier provides appropriate notice of the grandfathered
status of the benefit plan design in any materials provided to an
insured of the design describing the benefits provided under the
design, as required under PPACA.
(iii) The carrier makes no changes to the benefits covered under
the benefit plan design other than those required by a state or
federal law, regulation, rule, or guidance and those permitted to be
made to a grandfathered health plan under PPACA.
(B) For purposes of this paragraph, "PPACA" means the federal
Patient Protection and Affordable Care Act (Public Law 111-148), as
amended by the federal Health Care and Education Reconciliation Act
of 2010 (Public Law 111-152), and any rules, regulations, or guidance
issued thereunder. For purposes of this paragraph, a "grandfathered
health plan" shall have the meaning set forth in Section 1251 of
PPACA.
(4) Nothing in this section shall be construed to require an
association, or a trust established and maintained by an association
to receive a master insurance policy issued by an admitted insurer
and to administer the benefits thereof solely for association
members, to offer, market, or sell a benefit plan design to those who
are not members of the association. However, if the association
markets, offers, or sells a benefit plan design to those who are not
members of the association it is subject to the requirements of this
section. This shall apply to an association that otherwise meets the
requirements of paragraph (8) formed by merger of two or more
associations after January 1, 1992, if the predecessor organizations
had been in active existence on January 1, 1992, and for at least
five years prior to that date and met the requirements of paragraph
(5).
(5) A carrier which (A) effective January 1, 1992, and at least 20
years prior to that date, markets, offers, or sells benefit plan
designs only to all members of one association and (B) does not
market, offer, or sell any other individual, selected group, or group
policy or contract providing medical, hospital, and surgical
benefits shall not be required to market, offer, or sell to those who
are not members of the association. However, if the carrier markets,
offers, or sells any benefit plan design or any other individual,
selected group, or group policy or contract providing medical,
hospital, and surgical benefits to those who are not members of the
association it is subject to the requirements of this section.
(6) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (5) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (5) and which, for
the one association, lists all the information required by paragraph
(7).
(7) Each carrier that sells health benefit plans to members of any
association shall submit an annual statement to the commissioner
which lists each association to which the carrier sells health
benefit plans, the industry or profession which is served by the
association, the association's membership criteria, a list of
officers, the state in which the association is organized, and the
site of its principal office.
(8) For purposes of paragraphs (4) and (5), an association is a
nonprofit organization comprised of a group of individuals or
employers who associate based solely on participation in a specified
profession or industry, accepting for membership any individual or
small employer meeting its membership criteria, which do not
condition membership directly or indirectly on the health or claims
history of any person, which uses membership dues solely for and in
consideration of the membership and membership benefits, except that
the amount of the dues shall not depend on whether the member applies
for or purchases insurance offered by the association, which is
organized and maintained in good faith for purposes unrelated to
insurance, which has been in active existence on January 1, 1992, and
at least five years prior to that date, which has a constitution and
bylaws, or other analogous governing documents which provide for
election of the governing board of the association by its members,
which has contracted with one or more carriers to offer one or more
health benefit plans to all individual members and small employer
members in this state.
(c) Each carrier shall make available to each small employer all
benefit plan designs that the carrier offers or sells to small
employers or to associations that include small employers.
Notwithstanding subdivision (d) of Section 10700, for purposes of
this subdivision, companies that are affiliated companies or that are
eligible to file a consolidated income tax return shall be treated
as one carrier.
(d) Each carrier shall do all of the following:
(1) Prepare a brochure that summarizes all of its benefit plan
designs and make this summary available to small employers, agents,
and brokers upon request. The summary shall include for each benefit
plan design information on benefits provided, a generic description
of the manner in which services are provided, such as how access to
providers is limited, benefit limitations, required copayments and
deductibles, standard employee risk rates, and, until January 1,
2014, an explanation of how creditable coverage is calculated if a
preexisting condition or affiliation period is imposed. The summary
shall also include a telephone number that can be called for more
detailed benefit information. Carriers are required to keep the
information contained in the brochure accurate and up to date, and,
upon updating the brochure, send copies to agents and brokers
representing the carrier. Any entity that provides administrative
services only with regard to a benefit plan design written or issued
by another carrier shall not be required to prepare a summary
brochure which includes that benefit plan design. For plan years
commencing on or after January 1, 2014, a health benefit plan offered
to a small employer shall not impose any preexisting condition
provision upon any individual. Nothing in this paragraph shall be
construed as prohibiting a health benefit plan from restricting
enrollment of enrollees to open enrollment periods as authorized
under Section 2702 of the federal Patient Protection and Affordable
Care Act (Public Law 111-148) and any rules, regulations, or guidance
issued consistent with that law.
(2) For each benefit plan design, prepare a more detailed evidence
of coverage and make it available to small employers, agents and
brokers upon request. The evidence of coverage shall contain all
information that a prudent buyer would need to be aware of in making
selections of benefit plan designs. An entity that provides
administrative services only with regard to a benefit plan design
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that benefit plan design.
(3) Provide to small employers, agents, and brokers, upon request,
for any given small employer the sum of the standard employee risk
rates and the sum of the risk adjusted standard employee risk rates.
When requesting this information, small employers, agents, and
brokers shall provide the carrier with the information the carrier
needs to determine the small employer's risk adjusted employee risk
rate. For plan years commencing on or after January 1, 2014, no risk
adjustment factor may be used in the determination of rates.
(4) Provide copies of the current summary brochure to all agents
or brokers who represent the carrier and, upon updating the brochure,
send copies of the updated brochure to agents and brokers
representing the carrier for the purpose of selling health benefit
plans.
(5) Notwithstanding subdivision (d) of Section 10700, for purposes
of this subdivision, companies that are affiliated companies or that
are eligible to file a consolidated income tax return shall be
treated as one carrier.
(e) Every agent or broker representing one or more carriers for
the purpose of selling health benefit plans to small employers shall
do all of the following:
(1) When providing information on a health benefit plan to a small
employer but making no specific recommendations on particular
benefit plan designs:
(A) Advise the small employer of the carrier's obligation to sell
to any small employer any of the benefit plan designs it offers to
small employers and provide them, upon request, with the actual rates
that would be charged to that employer for a given benefit plan
design.
(B) Notify the small employer that the agent or broker will
procure rate and benefit information for the small employer on any
benefit plan design offered by a carrier for whom the agent or broker
sells health benefit plans.
(C) Notify the small employer that, upon request, the agent or
broker will provide the small employer with the summary brochure
required in paragraph (1) of subdivision (d) for any benefit plan
design offered by a carrier whom the agent or broker represents.
(D) Notify the small employer of the availability of coverage
through the California Health Benefit Exchange and
the availability of tax credits for certain employers, and
effective January 1, 2014, the availability of tax credits through
the Exchange. consistent with the federal Patient
Protection and Affordable Care Act (Public Law 111-148) and state
law, including any rules, regulations, or guidance issued in
connection therewith.
(2) When recommending a particular benefit plan design or designs,
advise the small employer that, upon request, the agent will provide
the small employer with the brochure required by paragraph (1) of
subdivision (d) containing the benefit plan design or designs being
recommended by the agent or broker.
(3) Prior to filing an application for a small employer for a
particular health benefit plan:
(A) For each of the benefit plan designs offered by the carrier
whose benefit plan design the agent or broker is presenting, provide
the small employer with the benefit summary required in paragraph (1)
of subdivision (d) and the sum of the standard employee risk rates
for that particular employer.
(B) Notify the small employer that, upon request, the agent or
broker will provide the small employer with an evidence of coverage
brochure for each benefit plan design the carrier offers.
(C) For plan years commencing on or before December 31, 2013,
notify the small employer that actual rates may be 10 percent higher
or lower than the sum of the standard employee risk rates depending
on how the carrier assesses the risk of the small employer's group.
For plan years commencing on or after January 1, 2014, no risk
adjustment factor may be used in the determination of rates.
(D) For plan years commencing on or before December 31, 2013,
notify the small employer that, upon request, the agent or broker
will submit information to the carrier to ascertain the small
employer's sum of the risk adjusted standard employee risk rate for
any benefit plan design the carrier offers. On or afterNovember 1,
2013, notify the small employer of the employee rate effective
January 1, 2014. For plan years commencing on or after January 1,
2014, no risk adjustment factor may be used in the determination of
rates.
(E) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this paragraph and Section 10716.
(f) No carrier, agent, or broker shall induce or otherwise
encourage a small employer to separate or otherwise exclude an
eligible employee from a health benefit plan which, in the case of an
eligible employee meeting the definition in paragraph (1) of
subdivision (f) of Section 10700, is provided in connection with the
employee's employment or which, in the case of an eligible employee
as defined in paragraph (2) of subdivision (f) of Section 10700, is
provided in connection with a guaranteed association.
(g) No carrier shall reject an application from a small employer
for a benefit plan design provided:
(1) The small employer as defined by paragraph (1) of subdivision
(w) of Section 10700 offers health benefits to 100 percent of its
eligible employees as defined in paragraph (1) of subdivision (f) of
Section 10700. Employees who waive coverage on the grounds that they
have other group coverage shall not be counted as eligible employees.
(2) The small employer agrees to make the required premium
payments.
(h) No carrier or agent or broker shall, directly or indirectly,
engage in the following activities:
(1) Encourage or direct small employers to refrain from filing an
application for coverage with a carrier because of the health status,
claims experience, industry, occupation, or geographic location
within the carrier's approved service area of the small employer or
the small employer's employees.
(2) Encourage or direct small employers to seek coverage from
another carrier or the California Health Benefit Exchange because of
the health status, claims experience, industry, occupation, or
geographic location within the carrier's approved service area of the
small employer or the small employer's employees.
(i) No carrier shall, directly or indirectly, enter into any
contract, agreement, or arrangement with an agent or broker that
provides for or results in the compensation paid to an agent or
broker for a health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the small employer or the small employer's employees.
This subdivision shall not apply with respect to a compensation
arrangement that provides compensation to an agent or broker on the
basis of percentage of premium, provided that the percentage shall
not vary because of the health status, claims experience, industry,
occupation, or geographic area of the small employer.
(j) For plan years commencing on or before December 31, 2013, in
the case of a late insured, or for satisfaction of a preexisting
condition clause in the case of initial coverage of an eligible
employee, a health insurer may not exclude any eligible employee or
dependent who would otherwise be entitled to health care services on
the basis of any of the following: the health status, the medical
condition, including both physical and mental illnesses, the claims
experience, the medical history, receipt of health care, the genetic
information, the disability or evidence of insurability, including
conditions arising out of acts of domestic violence of that employee
or dependent, or any other health status-related factor as determined
by the department. No health benefit plan may limit or exclude
coverage for a specific eligible employee or dependent by type of
illness, treatment, medical condition, or accident, except for
preexisting conditions as permitted by Section 10198.7 or 10708.
However, this exception for preexisting conditions shall not apply
after December 31, 2013. For plan years commencing on or after
January 1, 2014, a health benefit plan offered to a small employer
shall not impose any preexisting condition provision upon any
individual. Nothing in this subdivision shall be construed as
prohibiting a health benefit plan from restricting enrollment of
enrollees, including late enrollees, to open enrollment periods as
authorized under Section 2702 of the federal Patient Protection and
Affordable Care Act (Public Law 111-148) and any rules, regulations,
or guidance issued consistent with that law.
(k) If a carrier enters into a contract, agreement, or other
arrangement with a third-party administrator or other entity to
provide administrative, marketing, or other services related to the
offering of health benefit plans to small employers in this state,
the third-party administrator shall be subject to this chapter.
(l) (1) With respect to the obligation to provide coverage newly
issued under subdivision (d), the carrier may cease enrolling new
small employer groups and new eligible employees as defined by
paragraph (2) of subdivision (f) of Section 10700 if it certifies to
the commissioner that the number of eligible employees and
dependents, of the employers newly enrolled or insured during the
current calendar year by the carrier equals or exceeds: (A) in the
case of a carrier that administers any self-funded health benefits
arrangement in California, 10 percent of the total number of eligible
employees, or eligible employees and dependents, respectively,
enrolled or insured in California by that carrier as of December 31
of the preceding year, or (B) in the case of a carrier that does not
administer any self-funded health benefit arrangements in California,
8 percent of the total number of eligible employees, or eligible
employees and dependents, respectively, enrolled or insured by the
carrier in California as of December 31 of the preceding year.
(2) Certification shall be deemed approved if not disapproved
within 45 days after submission to the commissioner. If that
certification is approved, the small employer carrier shall not offer
coverage to any small employers under any health benefit plans
during the remainder of the current year. If the certification is not
approved, the carrier shall continue to issue coverage as required
by subdivision (d) and be subject to administrative penalties as
established in Section 10718.
SEC. 16. Section 10706 of the Insurance Code is amended to read:
10706. Every carrier shall file with the commissioner the
reasonable participation requirements and employer contribution
requirements that are to be included in its health benefit plans.
Participation requirements shall be applied uniformly among all small
employer groups, except that a carrier may vary application of
minimum employer participation requirements by the size of the small
employer group and whether the employer contributes 100 percent of
the eligible employee's premium. Employer contribution requirements
shall not vary by employer size. Employer contribution requirements
shall be consistent with the federal Patient Protection and
Affordable Care Act (Public Law 111-148). A carrier shall not
establish a participation requirement that (1) requires a person who
meets the definition of a dependent in subdivision (e) of Section
10700 to enroll as a dependent if he or she is otherwise eligible for
coverage and wishes to enroll as an eligible employee and (2) allows
a carrier to reject an otherwise eligible small employer because of
the number of persons that waive coverage due to coverage through
another employer. Members of an association eligible for health
coverage eligible under subdivision (z) of Section 10700 but not
electing any health coverage through the association shall not be
counted as eligible employees for purposes of determining whether the
guaranteed association meets a carrier's reasonable participation
standards.
SEC. 17. Section 10707 of the Insurance Code is amended to read:
10707. (a) For plan years commencing on or before December 31,
2013, except in the case of a late enrollee, or for satisfaction of a
preexisting condition clause in the case of initial coverage of an
eligible employee, a carrier may not exclude any eligible employee or
dependent who would otherwise be covered, on the basis of an actual
or expected health condition of that employee or dependent. No health
benefit plan may limit or exclude coverage for a specific eligible
employee or dependent by type of illness, treatment, medical
condition, or accident, except for preexisting conditions as
permitted by Section 10708.
(b) For plan years commencing on or after January 1, 2014, a
carrier may not exclude any eligible employee or dependent who would
otherwise by entitled to health care services on the basis of an
actual or expected health condition of that employee or dependent. No
health benefit plan may limit or exclude coverage for a specific
eligible employee or dependent by type of illness, treatment, medical
condition, or accident.
SEC. 18. Section 10708 of the Insurance Code is amended to read:
10708. (a) (1) For plan years commencing on or before December
31, 2013, health benefit plans shall not exclude coverage for a
period beyond six months following the individual's effective date of
coverage and may only relate to conditions for which medical advice,
diagnosis, care, or treatment, including the use of prescription
medications, was recommended by or received from a licensed health
practitioner during the six months immediately preceding the
effective date of coverage.
(2) Notwithstanding paragraph (1), a health benefit plan offered
to a small employer shall not impose any preexisting condition
provision upon any child under 19 years of age.
(3) For plan years commencing on or after January 1, 2014, a
health benefit plan offered to a small employer shall not impose any
preexisting condition provision upon any individual.
(b) (1) For plan years commencing on or before December 31, 2013,
a carrier that does not utilize a preexisting condition provision may
impose a waiting or affiliation period, not to exceed 60 days,
before the coverage issued subject to this chapter shall become
effective. During the waiting or affiliation period, the carrier is
not required to provide health care benefits and no premiums shall be
charged to the subscriber or enrollee.
(2) For plan years commencing on or after January 1, 2014, no
waiting or affiliation period based on a preexisting condition,
health status, or any other factor prohibited under subdivision (e)
of Section 10198.7 shall be imposed. A carrier may apply 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 federal
Patient Protection and Affordable Care Act (Public Law 111-148) and
any rules, regulations, or guidance issued consistent with that law.
(c) For plan years commencing on or before December 31, 2013, in
determining whether a preexisting condition provision or a waiting
period applies to any person, a plan shall credit the time the person
was covered under creditable coverage, provided the person becomes
eligible for coverage under the succeeding plan contract within 62
days of termination of prior coverage, exclusive of any waiting or
affiliation period, and applies for coverage with the succeeding
health benefit plan contract within the applicable enrollment period.
A plan shall also credit any time an eligible employee must wait
before enrolling in the health benefit plan, including any
postenrollment or employer-imposed waiting or affiliation period.
However, if a person's employment has ended, the availability of
health coverage offered through employment or sponsored by an
employer has terminated, or an employer's contribution toward health
coverage has terminated, a plan shall credit the time the person was
covered under creditable coverage if the person becomes eligible for
health coverage offered through employment or sponsored by an
employer within 180 days, exclusive of any waiting or affiliation
period, and applies for coverage under the succeeding health benefit
plan within the applicable enrollment period. Nothing in this
subdivision shall be construed as prohibiting a health benefit plan
from restricting enrollment of enrollees to open enrollment periods
as authorized under Section 2702 of the federal Patient Protection
and Affordable Care Act (Public Law 111-148) and any rules,
regulations, or guidance issued under that law.
(d) For plan years commencing on or after January 1, 2014, in
determining whether a waiting period applies to any person, a plan
shall credit the time the person was covered under creditable
coverage, provided the person becomes eligible for coverage under the
succeeding plan contract within 62 days of termination of prior
coverage, exclusive of any waiting period, and applies for coverage
with the succeeding plan contract within the applicable enrollment
period. A plan shall also credit any time an eligible employee must
wait before enrolling in the plan, including any waiting period.
However, if a person's employment has ended, the availability of
health coverage offered through the employment or sponsored by an
employer has terminated, or an employer's contribution toward health
coverage has terminated, a plan shall credit the time the person was
covered under creditable coverage if the person becomes eligible for
health coverage offered through employment or sponsored by an
employer within 180 days, exclusive of any waiting period, and
applies for coverage under the succeeding plan contract within the
applicable enrollment period.
(d)
(e) Group health benefit plans may not impose a
preexisting conditions exclusion to a condition relating to benefits
for pregnancy or maternity care.
(e)
(f) (1) For plan years commencing on or before December
31, 2013, a carrier providing aggregate or specific stop loss
coverage or any other assumption of risk with reference to a health
benefit plan shall provide that the plan meets all requirements of
this section concerning preexisting condition provisions and waiting
or affiliation periods.
(2) For plan years commencing on or after January 1, 2014, a
carrier providing aggregate or specific stoploss coverage or any
other assumption of risk with reference to a health benefit plan
shall provide that the plan meets all requirements of this section
concerning waiting periods.
(3) The requirements set forth under this subdivision shall only
be exercised to the extent they are not preempted by ERISA.
(f)
(g) For plan years commencing on or before December 31,
2013, in addition to the preexisting condition exclusions authorized
by subdivision (a) and the waiting or affiliation period authorized
by subdivision (b), carriers providing coverage to a guaranteed
association may impose on employers or individuals purchasing
coverage who would not be eligible for guaranteed coverage if they
were not purchasing through the association a waiting or affiliation
period, not to exceed 60 days, before the coverage issued subject to
this chapter shall become effective. During the waiting or
affiliation period, the carrier is not required to provide health
care benefits and no premiums shall be charged to the insured. For
plan years commencing on or after January 1, 2014, no waiting or
affiliation period based on a preexisting condition, health status,
or any other factor prohibited under subdivision (u) of Section 10700
shall be imposed.
SEC. 19. Section 10709 of the Insurance Code is amended to read:
10709. (a) (1) Until December 31, 2013, no health benefit plan
may exclude late enrollees from coverage for more than 12 months from
the date of the late enrollee's application for coverage. No
premiums shall be charged to the late enrollee until the exclusion
period has ended.
(2) For plan years commencing on or after January 1, 2014, no
health benefit plan may exclude late enrollees from coverage for more
than 90 days from the date of the late enrollee's application for
coverage. No premium shall be charged to the late enrollee until the
exclusion waiting period has ended.
Nothing in this paragraph shall be construed as prohibiting a health
benefit plan from restricting enrollment of late enrollees to open
enrollment periods as authorized under Section 2702 of the federal
Patient Protection and Affordable Care Act (Public Law 111-148) and
any rules, regulations, or guidance issued consistent with that law.
(3) For plan years commencing on or after January 1, 2014, a
health benefit plan may apply 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 federal Patient Protection and Affordable
Care Act (Public Law 111-148) and any rules, regulations, or
guidance issued consistent with that law.
(b) A carrier providing aggregate or specific stop loss coverage
or any other assumption of risk with reference to a health benefit
plan shall provide that the plan meets all requirements of this
section concerning late enrollees. The requirements set forth under
this subdivision shall only be exercised to the extent they are not
preempted by ERISA.
SEC. 20. Section 10714 of the Insurance Code is amended to read:
10714. Premiums for benefit plan designs written, issued, or
administered by carriers on or after the effective date of this act,
shall be subject to the following requirements:
(a) (1) The premium for new business shall be determined for an
eligible employee in a particular risk category after applying a risk
adjustment factor to the carrier's standard employee risk rates. The
risk adjusted employee risk rate may not be more than 120 percent or
less than 80 percent of the carrier's applicable standard employee
risk rate until July 1, 1996. Effective July 1, 1996, the risk
adjusted employee risk rate may not be more than 110 percent or less
than 90 percent.For plan years commencing on or after January 1,
2014, no risk adjustment factor shall be used in the determination of
rates. For plan years commencing on or after January 1, 2014, no
risk adjustment shall be used in the determination of rates.
(2) The premium charged a small employer for new business shall be
equal to the sum of the risk adjusted employee risk rates. For plan
years commencing on or after January 1, 2014, no risk adjustment
shall be used in the determination of rates.
(3) The standard employee risk rates applied to a small employer
for new business shall be in effect for no less than 12 months. This
subdivision shall be implemented to the extent permitted under the
federal Patient Protection and Affordable Care Act (Public Law
111-148) and any rules, regulations, or guidance issued consistent
with that law.
(b) (1) The premium for in force business shall be determined for
an eligible employee in a particular risk category after applying a
risk adjustment factor to the carrier's standard employee risk rates.
The risk adjusted employee risk rates may not be more than 120
percent or less than 80 percent of the carrier's applicable standard
employee risk rate until July 1, 1996. Effective July 1, 1996, the
risk adjusted employee risk rate may not be more than 110 percent or
less than 90 percent. The factor effective July 1, 1996, shall apply
to in force business at the earlier of either the time of renewal or
July 1, 1997. For plan years commencing on or before December 31,
2013, the risk adjustment factor applied to a small employer may not
increase by more than 10 percentage points from the risk adjustment
factor applied in the prior rating period. For plan years commencing
on or after January 1, 2014, no risk adjustment factor shall be used
in the determination of rates. The risk adjustment factor for a small
employer may not be modified more frequently than every 12 months.
(2) The premium charged a small employer for in force business
shall be equal to the sum of the risk adjusted employee risk rates.
The standard employee risk rates shall be in effect for no less than
12 months.
(3) For a benefit plan design that a carrier has discontinued
offering, the risk adjustment factor applied to the standard employee
risk rates for the first
rating period of the new benefit plan design that the small employer
elects to purchase shall be no greater than the risk adjustment
factor applied in the prior rating period to the discontinued benefit
plan design. However, the risk adjusted employee rate may not be
more than 120 percent or less than 80 percent of the carrier's
applicable standard employee risk rate until July 1, 1996. Effective
July 1, 1996, the risk adjusted employee risk rate may not be more
than 110 percent or less than 90 percent. The factor effective July
1, 1996, shall apply to in force business at the earlier of either
the time of renewal or July 1, 1997. For plan years commencing on or
after January 1, 2014, no risk adjustment factor shall be used in the
determination of rates. The risk adjustment factor for a small
employer may not be modified more frequently than every 12 months.
(c) (1) For any small employer, a carrier may, with the consent of
the small employer, establish composite employee and dependent rates
for either new business or renewal of in force business. The
composite rates shall be determined as the average of the risk
adjusted employee risk rates for the small employer, as determined in
accordance with the requirements of subdivisions (a) and (b). The
sum of the composite rates so determined shall be equal to the sum of
the risk adjusted employee risk rates for the small employer.
(2) The composite rates shall be used for all employees and
dependents covered throughout a rating period of 12 months, except
that a carrier may reserve the right to redetermine the composite
rates if the enrollment under the health benefit plan changes by more
than a specified percentage during the rating period. Any
redetermination of the composite rates shall be based on the same
risk adjusted employee risk rates used to determine the initial
composite rates for the rating period. If a carrier reserves the
right to redetermine the rates and the enrollment changes more than
the specified percentage, the carrier shall redetermine the composite
rates if the redetermined rates would result in a lower premium for
the small employer. A carrier reserving the right to redetermine the
composite rates based upon a change in enrollment shall use the same
specified percentage to measure that change with respect to all small
employers electing composite rates.
(d) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
SEC. 21. Section 10714 is added to the Insurance Code, to read:
10714. (a) Premium rates for contracts offered or delivered by
plans on or after January 1, 2014, shall be subject to the following
requirements:
(1) With respect to the premium rate charged by a health benefit
plan, such rate shall vary with respect to the particular plan or
coverage involved only by any of the following:
(A) Whether such plan or coverage covers an individual or family.
(B) Rating area.
(C) Age, except that such rate shall not vary by more than 3 to 1
for adults.
(2) Such rate shall not vary with respect to the particular plan
or coverage involved by any other factor not described in
subparagraph (1).
(b) This section shall become operative on January 1, 2014.
SEC. 22. Section 10716 of the Insurance Code is amended to read:
10716. In connection with the offering for sale of any benefit
plan design to small employers:
Each carrier shall make a reasonable disclosure, as part of its
solicitation and sales materials, of the following:
(a) For plan years commencing on or before December 31, 2013, the
extent to which the premium rates for a specified small employer are
established or adjusted in part based upon the actual or expected
variation in claims costs or actual or expected variation in health
conditions of the employees and dependents of the small employer.
(b) The provisions concerning the carrier's ability to change
premium rates and the factors other than claim experience which
affect changes in premium rates. For plan years commencing on or
after January 1, 2014, no premium rate adjustments based on actual or
expected claims costs or health conditions of employees or
dependents shall be used.
(c) Provisions relating to the guaranteed issue of policies and
contracts.
(d) For plan years commencing on or before December 31, 2013,
provisions relating to the effect of any preexisting condition
provision. For plan years commencing on or after January 1, 2014, a
health benefit plan offered to a small employer shall not impose any
preexisting condition provision upon any individual. Nothing in this
subdivision shall be construed as prohibiting a health benefit plan
from restricting enrollment of late enrollees to open enrollment
periods as authorized under Section 2702 of the federal Patient
Protection and Affordable Care Act (Public Law 111-148) and any
rules, regulations, or guidance issued consistent with that law.
(e) Provisions relating to the small employer's right to apply for
any benefit plan design written, issued, or administered by the
carrier at the time of application for a new health benefit plan, or
at the time of renewal of a health benefit plan.
(f) The availability, upon request, of a listing of all the
carrier's benefit plan designs, including the rates for each benefit
plan design.
SEC. 23. Section 10717 of the Insurance Code is amended to read:
10717. (a) No carrier shall provide or renew coverage subject to
this chapter until it has done all of the following:
(1) A statement has been filed with the commissioner listing all
of the carrier's benefit plan designs currently in force that are
offered or proposed to be offered for sale in this state, identified
by form number, and, if previously approved by the commissioner, the
date approved by the commissioner as well as, until December 31,
2013, the standard employee risk rate for each risk category for each
benefit plan design and the highest and lowest risk adjustment
factors that the carrier intends to use in determining rates for each
benefit plan design. When filing a new benefit plan design pursuant
to Section 10705, carriers may submit both the policy form and, until
December 31, 2013, the standard employee risk rates for each risk
category at the same time. For plan years commencing on or after
January 1, 2014, no risk adjustment factor may be used in the
determination of rates.
(2) Until December 31, 2013:
(A) Thirty days expires after that statement is filed without
written notice from the commissioner specifying the reasons for his
or her opinion that the carrier's risk categories or risk adjustment
factors do not comply with the requirements of this chapter.
(B) Prior to that time the commissioner gives the carrier written
notice that the carrier's risk categories and risk adjustment factors
as filed comply with the requirements of this chapter.
(b) No carrier shall issue, deliver, renew, or revise a benefit
plan design lawfully provided pursuant to subdivision (a), and no
carrier shall change the risk categories, risk adjustment factors, or
standard employee risk rates for any benefit plan design until all
of the following requirements are met:
(1) The carrier files with the commissioner a statement of the
specific changes which the carrier proposes in the risk categories,
risk adjustment factors, or standard employee risk rates. For plan
years commencing on or after January 1, 2014, no risk adjustment
factor may be used in the determination of rates.
(2) Until December 31, 2013:
(A) Thirty days expires after such statement is filed without
written notice from the commissioner specifying the reasons for his
or her opinion that the carrier's risk categories or risk adjustment
factors do not comply with the requirements of this chapter.
(B) Prior to that time the commissioner gives the carrier written
notice that the carrier's risk categories and risk adjustment factors
as filed comply with the requirements of this chapter.
(c) Notwithstanding any provision to the contrary, until December
31, 2013, when a carrier is changing the standard employee risk rates
of a benefit plan design lawfully provided under subdivision (a) or
(b) but is not changing the risk categories or risk adjustment
factors which have been previously authorized, the carrier need not
comply with the requirements of paragraph (2) of subdivision (b), but
instead shall submit the revised standard employee risk rates for
the benefit plan design prior to offering or renewing the benefit
plan design. For plan years commencing on or after January 1, 2014,
no risk adjustment factor may be used in the determination of rates.
(d) When submitting filings under subdivision (a), (b), or (c), a
carrier may also file with the commissioner at the time of the
filings, until December 31, 2013, a statement of the standard
employee risk rate for each risk category the carrier intends to use
for each month in the 12 months subsequent to the date of the filing.
Once the requirements of the applicable subdivision (a), (b), or
(c), have been met, these rates, until December 31, 2013, shall be
used by the carrier for the 12-month period unless the carrier is
otherwise informed by the commissioner in his or her response to the
filings submitted under subdivision (a), (b), or (c), provided that
any subsequent change in the standard employee risk rates charged by
the carrier which differ from those previously filed with the
commissioner must be newly filed in accordance with this subdivision
and provided that the carrier does not change the risk categories or
risk adjustment factors for the benefit plan design. For plan years
commencing on or after January 1, 2014, no risk adjustment factor may
be used in the determination of rates.
(e) Until December 31, 2013, if the commissioner notifies the
carrier, in writing, that the carrier's risk categories or risk
adjustment factors do not comply with the requirements of this
chapter, specifying the reasons for his or her opinion, it is
unlawful for the carrier, at any time after the receipt of such
notice, to utilize the noncomplying health benefit plan, benefit plan
design, risk categories, or risk adjustment factors in conjunction
with the health benefit plans or benefit plan designs for which the
filing was made. For plan years commencing on or after January 1,
2014, no risk adjustment factor may be used in the determination of
rates.
(f) Each carrier shall maintain at its principal place of business
copies of all information required to be filed with the commissioner
pursuant to this section.
(g) Each carrier shall make the information and documentation
described in this section available to the commissioner upon request.
(h) Nothing in this section shall be construed to permit the
commissioner to establish or approve the rates charged to
policyholders for health benefit plans.
(i) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
SEC. 24. Section 10717 is added to the Insurance Code, to read:
10717. (a) For plan years commencing on or after January 1, 2014,
no carrier shall provide or renew coverage subject to this chapter
until it has filed a statement with the commissioner listing all of
the carrier's benefit plan designs currently in force that are
offered or proposed to be offered for sale in this state, identified
by form number, and, if previously approved by the commissioner, the
date approved by the commissioner.
(b) Each carrier shall maintain at its principal place of business
copies of all information required to be filed with the commissioner
pursuant to this section.
(c) Each carrier shall make the information and documentation
described in this section available to the commissioner upon request.
(d) Nothing in this section shall be construed to limit the
commissioner's authority to enforce the rating practices set forth in
this chapter.
(e) This section shall become operative on January 1, 2014.
SEC. 25. Nothing in this act shall preclude the Legislature from
considering and adopting future legislation to allow premium ratings
based on tobacco use and wellness incentives, to the extent permitted
under the federal Patient Protection and Affordable Care Act (Public
Law 111-148) and any rules, regulations, or guidance issued
consistent with that law.
SEC. 26. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
