Bill Text: CA AB1425 | 2015-2016 | Regular Session | Introduced
Bill Title: Small employers: health reimbursement arrangements.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2016-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB1425 Detail]
Download: California-2015-AB1425-Introduced.html
BILL NUMBER: AB 1425 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Travis Allen
FEBRUARY 27, 2015
An act to amend Sections 1357.03, 1357.503, and 1357.604 of the
Health and Safety Code, and to amend Sections 10700, 10705, 10753,
10753.05, 10755, and 10755.05 of the Insurance Code, relating to
health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 1425, as introduced, Travis Allen. Small employers: health
reimbursement arrangements.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and 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 also provides for the
regulation of health insurers by the Department of Insurance.
Existing law requires, on and after October 1, 2013, a health care
service plan or health insurer to fairly and affirmatively offer,
market, and sell all of the plan's or insurer's small employer health
benefit plans for plan years on or after January 1, 2014, to all
small employers in each service area or geographic region in which
the plan or insurer provides or arranges for health care services or
benefits. Existing law requires a health care service plan or health
insurer to fairly and affirmatively renew a grandfathered plan
contract or health benefit plan with small employers. For
nongrandfathered small employer health care service plan contracts or
health insurance policies, existing law requires employer
contributions toward health reimbursement accounts and health savings
accounts to count toward the actuarial value of the product in the
manner specified in federal rules and guidance.
This bill would prohibit a health care service plan or health
insurer from prohibiting the pairing of a specific health coverage
product issued by a plan or insurer to a small employer with a health
reimbursement arrangement or other employer-sponsored method for
reimbursing employees for all or part of their deductibles,
copayments, or other out-of-pocket medical expenses under the plan
contract or policy. The bill would prohibit a plan or insurer from
entering into a contract with a solicitor, or an agent or broker that
results in compensation paid to a solicitor, or an agent or broker
for the sale of a health care service plan contract or a health
benefit plan to be varied because the small employer is or will
implement a health reimbursement arrangement to supplement the
benefits of the plan contract or health benefit plan for its
employees. Because a willful violation of the bill's provisions by a
health care service plan would be a crime, this 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. This act shall be known, and may be cited as, the Small
Business Access to Coverage Act.
SEC. 2. (a) The Legislature finds and declares that the federal
Affordable Care Act provides additional protections for small
business employers to ensure access to affordable health insurance
coverage for California employers. Small employers with fewer than 50
employees represent more than 95 percent of California employers and
more than one-half of our states' workforce. Over the past decade,
employer-sponsored health coverage has declined by 1 percent per year
as small businesses struggle to provide coverage to their employees.
While small employers are not required to offer employer-sponsored
coverage under the federal Affordable Care Act, more than 45 percent
of employers with 50 or fewer employees continue to offer affordable
group health coverage.
(b) It is the intent of the Legislature, with the enactment of
this act, to protect access to alternative coverage options for small
businesses and support employers offering employer-sponsored
coverage, in both the private commercial marketplace and the public
marketplace, the Small Business Health Options Program (SHOP).
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 provided for under Article 4 (commencing
with Section 10730) of Chapter 8 of Part 2 of Division 2 of the
Insurance Code shall be deemed in compliance with the requirements of
paragraph (1) for a contract offered through the voluntary
purchasing pool established under Article 4 (commencing with Section
10730) of Chapter 8 of Part 2 of Division 2 of the Insurance Code in
those geographic regions in which plans participate in the pool, if
the contract is offered exclusively through the pool.
(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.
(6) A plan shall not prohibit the pairing of a specific health
coverage product issued by the plan to a small employer with a health
reimbursement arrangement or other employer-sponsored method for
reimbursing employees for all or part of their deductibles,
copayments, or other out-of-pocket expenses under the health care
service plan contract.
(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. 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. area, or because the small
employer is or will implement a health reimbursement arrangement to
supplement the benefits of the plan contract for its
employees.
(2) Encourage or direct small employers to seek coverage from
another plan or the voluntary purchasing pool established under
Article 4 (commencing with Section 10730) of Chapter 8 of Part 2 of
Division 2 of the Insurance Code 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. area, or because the small
employer is or will implement a health reimbursement arrangement to
supplement the benefits of the plan contract for its
employees.
(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. employer, or
because the small employer is or will implement a health
reimbursement arrangement to supplement the benefits of
the plan contract for its 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. employer, or
because the small employer is or will implement a health
reimbursement arrangement to supplement the benefits of
the plan contract for its employees.
(f) A policy or contract that covers two or more employees 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.
(g) A plan shall comply with the requirements of Section 1374.3.
SEC. 4. Section 1357.503 of the Health and Safety Code is amended
to read:
1357.503. (a) (1) On and after October 1, 2013, a plan shall
fairly and affirmatively offer, market, and sell all of the plan's
small employer health care service plan contracts for plan years on
or after January 1, 2014, to all small employers in each service area
in which the plan provides or arranges for the provision of health
care services.
(2) On and after October 1, 2013, a 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 for plan
years on or after January 1, 2014. Health coverage through an
association that is not related to employment shall be considered
individual coverage pursuant to Section 144.102(c) of Title 45 of the
Code of Federal Regulations.
(3) A plan that offers qualified health plans through the Exchange
shall be deemed to be in compliance with paragraphs (1) and (2) with
respect to small employer health care service plan contracts offered
through the Exchange in those geographic regions in which the plan
offers plan contracts through the Exchange.
(4) A plan shall not prohibit the pairing of a specific health
coverage product issued by the plan to a small employer with a health
reimbursement arrangement or other employer-sponsored method for
reimbursing employees for all or part of their deductibles,
copayments, or other out-of-pocket expenses under the health care
service plan contract.
(b) A plan shall provide enrollment periods consistent with PPACA
and described in Section 155.725 of Title 45 of the Code of Federal
Regulations. Commencing January 1, 2014, a plan shall provide special
enrollment periods consistent with the special enrollment periods
described in Section 1399.849, to the extent permitted by PPACA,
except for the triggering events identified in paragraphs (d)(3) and
(d)(6) of Section 155.420 of Title 45 of the Code of Federal
Regulations with respect to plan contracts offered through the
Exchange.
(c) 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 employee's employment or membership in a guaranteed
association.
(d) 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. A health care service plan shall not
establish a participation requirement that (1) requires a person who
meets the definition of a dependent in Section 1357.500 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 (m) of Section 1357.500, 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.
(e) The plan shall not reject an application from a small employer
for a small employer health care service plan contract if all of the
following conditions are met:
(1) The small employer offers health benefits to 100 percent of
its eligible employees. 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 employer's
employees of the availability of coverage and the provision that
those not electing coverage must wait until the next open enrollment
or a special enrollment period 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.
(f) 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. area, or because the small
employer is or will implement a health reimbursement arrangement to
suppleme nt the benefits of the plan contract
for its employees.
(2) Encourage or direct small employers to seek coverage from
another 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.
area, or because the small employer is or will
implement a health reimbursement arrangement to supplement the
benefits of the plan contract for its employees.
(3) Employ marketing practices or benefit designs that will have
the effect of discouraging the enrollment of individuals with
significant health needs or discriminate based on an individual's
race, color, national origin, present or predicted disability, age,
sex, gender identity, sexual orientation, expected length of life,
degree of medical dependency, quality of life, or other health
conditions.
(g) 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. employer, or
because the small employer is or will implement a health
reimbursement arrangement to su pplement the benefits of
the plan contract for its 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. employer, or
because the small employer is or will implement a health
reimbursement arrangement to supplement the benefits of the plan
contract for its employees.
(h) (1) A policy or contract that covers a small employer, as
defined in Section 1304(b) of PPACA and in Section 1357.500, shall
not establish rules for eligibility, including continued eligibility,
of an individual, or dependent of an individual, to enroll under the
terms of the policy or contract based on any of the following health
status-related factors:
(A) Health status.
(B) Medical condition, including physical and mental illnesses.
(C) Claims experience.
(D) Receipt of health care.
(E) Medical history.
(F) Genetic information.
(G) Evidence of insurability, including conditions arising out of
acts of domestic violence.
(H) Disability.
(I) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
(2) Notwithstanding Section 1389.1, a health care service plan
shall not require an eligible employee or dependent to fill out a
health assessment or medical questionnaire prior to enrollment under
a small employer health care service plan contract. A health care
service plan shall not acquire or request information that relates to
a health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment of the individual.
(i) (1) A health care service plan shall consider as a single risk
pool for rating purposes in the small employer market the claims
experience of all enrollees in all nongrandfathered small employer
health benefit plans offered by the health care service plan in this
state, whether offered as health care service plan contracts or
health insurance policies, including those insureds and enrollees who
enroll in coverage through the Exchange and insureds and enrollees
covered by the health care service plan outside of the Exchange.
(2) At least each calendar year, and no more frequently than each
calendar quarter, a health care service plan shall establish an index
rate for the small employer market in the state based on the total
combined claims costs for providing essential health benefits, as
defined pursuant to Section 1302 of PPACA and Section 1367.005,
within the single risk pool required under paragraph (1). The index
rate shall be adjusted on a marketwide basis based on the total
expected marketwide payments and charges under the risk adjustment
and reinsurance programs established for the state pursuant to
Sections 1343 and 1341 of PPACA and Exchange user fees, as described
in subdivision (d) of Section 156.80 of Title 45 of the Code of
Federal Regulations. The premium rate for all of the nongrandfathered
small employer health benefit plans within the single risk pool
required under paragraph (1) shall use the applicable marketwide
adjusted index rate, subject only to the adjustments permitted under
paragraph (3).
(3) A health care service plan may vary premium rates for a
particular nongrandfathered small employer health care service plan
contract from its index rate based only on the following actuarially
justified plan-specific factors:
(A) The actuarial value and cost-sharing design of the plan
contract.
(B) The plan contract's provider network, delivery system
characteristics, and utilization management practices.
(C) The benefits provided under the plan contract that are in
addition to the essential health benefits, as defined pursuant to
Section 1302 of PPACA. These additional benefits shall be pooled with
similar benefits within the single risk pool required under
paragraph (1) and the claims experience from those benefits shall be
utilized to determine rate variations for plan contracts that offer
those benefits in addition to essential health benefits.
(D) With respect to catastrophic plans, as described in subsection
(e) of Section 1302 of PPACA, the expected impact of the specific
eligibility categories for those plans.
(E) Administrative costs, excluding any user fees required by the
Exchange.
(j) A plan shall comply with the requirements of Section 1374.3.
(k) (1) Except as provided in paragraph (2), if Section 2702 of
the federal Public Health Service Act (42 U.S.C. Sec. 300gg-1), as
added by Section 1201 of PPACA, is repealed, this section shall
become inoperative 12 months after the repeal date, in which case
health care service plans subject to this section shall instead be
governed by Section 1357.03 to the extent permitted by federal law,
and all references in this article to this section shall instead
refer to Section 1357.03 except for purposes of paragraph (2).
(2) Subdivision (b) shall remain operative with respect to health
care service plan contracts offered through the Exchange.
SEC. 5. Section 1357.604 of the Health and Safety Code is amended
to read:
1357.604. (a) (1) A plan shall fairly and affirmatively renew a
grandfathered health plan contract with a small employer.
(2) Each plan shall make available to each small employer all
nongrandfathered 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 consistent with Article
3.1 (commencing with Section 1357).
(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 shall not prohibit the pairing of a specific health
coverage product issued by the plan to a small employer with a health
reimbursement arrangement or other employer-sponsored method for
reimbursing employees for all or part of their deductibles,
copayments, or other out-of-pocket expenses under the health care
service plan contract.
(b) Every plan shall file with the director the reasonable
employee participation requirements and employer contribution
requirements that will be applied in renewing its grandfathered
health care service 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. 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 1357.600 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 (n)
of Section 1357.600, 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) 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 or renewal of 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.
area, or because the small employer is or will implement a health
reimbursement arrangement to supplement the benefits of the plan
contract for its employees.
(2) Encourage or direct small employers to seek coverage from
another plan, or coverage offered through 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.
area, or because the small employer is or will
implement a health reimbursement arrangement to supplement the
benefits of the plan contract for its employees.
(d) 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. employer, or
because the small employer is or will implement a health
reimbursement arrangement to supplement the benefits of the plan
contract for its 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 or small employer's employees.
employees, or because the small employer is or will implement a
health reimbursement arrangement to supplement the benefits of the
plan contract for its employees.
(e) A policy or contract that covers a small employer, as defined
in Section 1304(b) of PPACA and in subdivision (k) of Section
1357.600 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 any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
(f) A plan shall comply with the requirements of Section 1374.3.
SEC. 6. 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.
A benefit plan design shall not prohibit the pairing of a
health coverage product issued by a carrier to a small employer with
a health reimbursement arrangement or other employer-sponsored method
for reimbursing employees for all or part of their deductibles,
copayments, or other out-of-pocket medical expenses under the policy.
(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 at least 30 hours, 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, or the Medi-Cal program 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, or the Medi-Cal program 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 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, or the Medi-Cal program.
(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, or Healthy Families Program coverage.
(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) 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).
(B) 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).
(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, or the Medi-Cal program 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) "Program" means the Health Insurance Plan of California.
(q) "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.
(r) "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 subdivision (c)
of Section 2701 of Title XXVII of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg(c)).
(s) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than six
months.
(t) "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.
(u) "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.
(v) "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.
(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.
(2) Small employer carriers shall base rates to small employers
using no more than the following family size categories:
(A) Single.
(B) Married couple.
(C) One adult and child or children.
(D) Married couple and child or children.
(3) (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.
(w) "Small employer" means either of the following:
(1) 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 2, 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. 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. However, for purposes of subdivisions
(b) and (h) of Section 10705, the definition shall include employers
with at least three eligible employees until July 1, 1997, and two
eligible employees thereafter. 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.
(2) Any guaranteed association, as defined in subdivision (y),
that purchases health coverage for members of the association.
(x) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
(y) "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.
(z) "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.
(aa) "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.
(ab) "Health reimbursement arrangement" means an
employer-sponsored method for reimbursing employees for all or part
of their deductibles, copayments, or other out-of-pocket medical
expenses. A health reimbursement arrangement includes, but is not
limited to, arrangements governed under Section 105, 125, or 223 of
the Internal Revenue Code.
SEC. 7. 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 Voluntary Alliance
Uniting Employers Purchasing Program shall be deemed to be in
compliance with paragraph (1) for a benefit plan design offered
through the program in those geographic regions in which the carrier
participates in the program and the benefit plan design is offered
exclusively through the program.
(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, an explanation of how
creditable coverage is calculated if a preexisting condition or
affiliation period is imposed, and 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.
(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.
(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.
(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) Notify the small employer that, from July 1, 1993, to July 1,
1996, actual rates may be 20 percent higher or lower than the sum of
the standard employee risk rates, and from July 1, 1996, and
thereafter, 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.
(D) 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.
(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 17000, 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. employees, or
because the small employer is or will implement a health
reimbursement arrangement to supplement the benefits of the health
benefit plan for its employees.
(2) Encourage or direct small employers to seek coverage from
another carrier or the program 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. employees, or because
the small employer is or will implement a health reimbursement
arrangement to supplement the benefits of the health
benefit plan for its 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. employees, or because the small employer is
or will implement a health reimbursement arrangement to supplement
the benefits of the health benefit plan for its 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. employer , or because
the small employer is or will implement a health reimbursement
arrangement to supplement the benefits of the health
benefit plan for its employees.
(j) Except 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 disability 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, the genetic information, or
the disability or evidence of insurability, including conditions
arising out of acts of domestic violence 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 10198.7 or 10708.
(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. 8. Section 10753 of the Insurance Code is amended to read:
10753. (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.
A benefit plan design shall not prohibit the pairing of a
health coverage product issued by a carrier to a small employer with
a health reimbursement arrangement or other employer-sponsored method
for reimbursing employees for all or part of their deductibles,
copayments, or other out-of-pocket medical expenses under the policy.
(c) "Carrier" means a health insurer 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.
(d) "Child" means a child described in Section 22775 of the
Government Code and subdivisions (n) to (p), inclusive, of Section
599.500 of Title 2 of the California Code of Regulations.
(e) "Dependent" means the spouse or registered domestic partner,
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 (s).
(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 (s).
(g) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
(h) "Exchange" means the California Health Benefit Exchange
created by Section 100500 of the Government Code.
(i) "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.
(j) "Health benefit plan" means a policy of health insurance, as
defined in Section 106, for the covered eligible employees of a small
employer and their dependents. The term does not include coverage of
Medicare services pursuant to contracts with the United States
government, or coverage that provides excepted benefits, as described
in Sections 2722 and 2791 of the federal Public Health Service Act,
subject to Section 10701.
(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 consistent with the
periods provided pursuant to Section 10753.05 and who subsequently
requests enrollment in a health benefit plan of that small employer,
except where the employee or dependent qualifies for a special
enrollment period provided pursuant to Section 10753.05. 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 consistent
with the periods provided pursuant to Section 10753.05 and who
subsequently requests enrollment in the plan, except where the
employee or dependent qualifies for a special enrollment period
provided pursuant to Section 10753.05.
(m) "New business" means a health benefit plan issued to a small
employer that is not the carrier's in force business.
(n) "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.
(o) "Creditable coverage" means:
(1) Any individual or group policy, contract, or program, that is
written or administered by a health 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 health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(8) 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.
(9) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).
(10) 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)).
(p) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than 12
months from the date of issuance or renewal of the health benefit
plan.
(q) (1) "Small employer" means either of the following:
(A) 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 benefit
plans, 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, a carrier 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
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 in this chapter, provisions of this chapter 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 subparagraph who purchases coverage through a
guaranteed association, and any employer purchasing coverage for
employees through a guaranteed association. This subparagraph shall
be implemented to the extent consistent with PPACA, except that the
minimum requirement of one employee shall be implemented only to the
extent required by PPACA.
(B) Any guaranteed association, as defined in subdivision (r),
that purchases health coverage for members of the association.
(2) 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 PPACA.
(r) "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 subparagraph (A) of paragraph (1) of subdivision (q), (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.
(s) "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.
(t) "Grandfathered health plan" has the meaning set forth in
Section 1251 of PPACA.
(u) "Nongrandfathered health benefit plan" means a health benefit
plan that is not a grandfathered health plan.
(v) "Plan year" has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.
(w) "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.
(x) "Waiting period" means a 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 contract.
(y) "Registered domestic partner" means a person who has
established a domestic partnership as described in Section 297 of the
Family Code.
(z) "Family" means the policyholder and his or her dependents.
(aa) "Health reimbursement arrangement" means an
employer-sponsored method for reimbursing employees for all or part
of their deductibles, copayments, or other out-of-pocket medical
expenses. A health reimbursement arrangement includes, but is not
limited to, arrangements governed under Section 105, 125, or 223 of
the Internal Revenue Code.
SEC. 9. Section 10753.05 of the Insurance Code is amended to read:
10753.05. (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 10753.17.
(b) (1) On and after October 1, 2013, each carrier shall fairly
and affirmatively offer, market, and sell all of the carrier's health
benefit plans that are sold to, offered through, or sponsored by,
small employers or associations that include small employers for plan
years on or after January 1, 2014, to all small employers in each
geographic region in which the carrier makes coverage available or
provides benefits.
(2) A carrier that offers qualified health plans through the
Exchange shall be deemed to be in compliance with paragraph (1) with
respect to health benefit plans offered through the Exchange in those
geographic regions in which the carrier offers plans through the
Exchange.
(3) A carrier shall provide enrollment periods consistent with
PPACA and described in Section 155.725 of Title 45 of the Code of
Federal Regulations. Commencing January 1, 2014, a carrier shall
provide special enrollment periods consistent with the special
enrollment periods described in Section 10965.3, to the extent
permitted by PPACA, except for the triggering events identified in
paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the
Code of Federal Regulations with respect to health benefit plans
offered through the Exchange.
(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 (6), 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. Health coverage through an association that is
not related to employment shall be considered individual coverage
pursuant to Section 144.102(c) of Title 45 of the Code of Federal
Regulations.
(c) On and after October 1, 2013, each carrier shall make
available to each small employer all health benefit plans that the
carrier offers or sells to small employers or to associations that
include small employers for plan years on or after January 1, 2014.
Notwithstanding subdivision (c) of Section 10753, 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 health benefit
plans and make this summary available to small employers, agents, and
brokers upon request. The summary shall include for each plan
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,
and 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 health benefit plan written or issued by another carrier shall not
be required to prepare a summary brochure which includes that
benefit plan.
(2) For each health benefit plan, 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 health benefit plan
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that health benefit plan.
(3) 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.
(4) Notwithstanding subdivision (c) of Section 10753, 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 health benefit plans it offers to
small employers, consistent with PPACA, and provide them, upon
request, with the actual rates that would be charged to that employer
for a given health benefit plan.
(B) Notify the small employer that the agent or broker will
procure rate and benefit information for the small employer on any
health benefit plan 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 and
the availability of tax credits for certain employers consistent with
PPACA 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 health benefit plans offered by the carrier
whose health benefit plan the agent or broker is presenting, provide
the small employer with the benefit summary required in paragraph (1)
of subdivision (d) and the premium 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 health benefit plan the carrier offers.
(C) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this paragraph and Section 10753.16.
(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 10753, 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 10753, is
provided in connection with a guaranteed association.
(g) No carrier shall reject an application from a small employer
for a health benefit plan provided:
(1) The small employer as defined by subparagraph (A) of paragraph
(1) of subdivision (q) of Section 10753 offers health benefits to
100 percent of its eligible employees as defined in paragraph (1) of
subdivision (f) of Section 10753. 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. employees, or
because the small employer is or will implement a health
reimbursement arrangement to supplement the benefits of the
health benefit plan for its employees.
(2) Encourage or direct small employers to seek coverage from
another 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. employees, or because
the small employer is or will implement a health reimbursement
arrangement to supplement the benefits of the health
benefit plan for its employees.
(3) Employ marketing practices or benefit designs that will have
the effect of discouraging the enrollment of individuals with
significant health needs or discriminate based on the individual's
race, color, national origin, present or predicted disability, age,
sex, gender identity, sexual orientation, expected length of life,
degree of medical dependency, quality of life, or other health
conditions.
This subdivision shall be enforced in the same manner as Section
790.03, including through Sections 790.035 and 790.05.
(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. employees, or because the small employer is
or will implement a health reimbursement arrangement to supplement
the benefits of the health benefit plan for its 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. employer, or because the small
employer is or will implement a health reimbursement arrangement to
supplement the benefits of the health benefit plan for its
employees.
(j) (1) A health benefit plan offered to a small employer, as
defined in Section 1304(b) of PPACA and in Section 10753, 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:
(A) Health status.
(B) Medical condition, including physical and mental illnesses.
(C) Claims experience.
(D) Receipt of health care.
(E) Medical history.
(F) Genetic information.
(G) Evidence of insurability, including conditions arising out of
acts of domestic violence.
(H) Disability.
(I) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
(2) Notwithstanding Section 10291.5, a carrier shall not require
an eligible employee or dependent to fill out a health assessment or
medical questionnaire prior to enrollment under a health benefit
plan. A carrier shall not acquire or request information that relates
to a health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment of the individual.
(k) (1) A carrier shall consider as a single risk pool for rating
purposes in the small employer market the claims experience of all
insureds in all nongrandfathered small employer health benefit plans
offered by the carrier in this state, whether offered as health care
service plan contracts or health insurance policies, including those
insureds and enrollees who enroll in coverage through the Exchange
and insureds and enrollees covered by the carrier outside of the
Exchange.
(2) At least each calendar year, and no more frequently than each
calendar quarter, a carrier shall establish an index rate for the
small employer market in the state based on the total combined claims
costs for providing essential health benefits, as defined pursuant
to Section 1302 of PPACA and Section 10112.27, within the single risk
pool required under paragraph (1). The index rate shall be adjusted
on a marketwide basis based on the total expected marketwide payments
and charges under the risk adjustment and reinsurance programs
established for the state pursuant to Sections 1343 and 1341 of PPACA
and Exchange user fees, as described in subdivision (d) of Section
156.80 of Title 45 of the Code of Federal Regulations. The premium
rate for all of the nongrandfathered health benefit plans within the
single risk pool required under paragraph (1) shall use the
applicable marketwide adjusted index rate, subject only to the
adjustments permitted under paragraph (3).
(3) A carrier may vary premium rates for a particular
nongrandfathered health benefit plan from its index rate based only
on the following actuarially justified plan-specific factors:
(A) The actuarial value and cost-sharing design of the health
benefit plan.
(B) The health benefit plan's provider network, delivery system
characteristics, and utilization management practices.
(C) The benefits provided under the health benefit plan that are
in addition to the essential health benefits, as defined pursuant to
Section 1302 of PPACA. These additional benefits shall be pooled with
similar benefits within the single risk pool required under
paragraph (1) and the claims experience from those benefits shall be
utilized to determine rate variations for health benefit plans that
offer those benefits in addition to essential health benefits.
(D) Administrative costs, excluding any user fees required by the
Exchange.
(E) With respect to catastrophic plans, as described in subsection
(e) of Section 1302 of PPACA, the expected impact of the specific
eligibility categories for those plans.
(l) 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.
(m) (1) Except as provided in paragraph (2), this section shall
become inoperative if Section 2702 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-1), as added by Section 1201 of
PPACA, is repealed, in which case, 12 months after the repeal,
carriers subject to this section shall instead be governed by Section
10705 to the extent permitted by federal law, and all references in
this chapter to this section shall instead refer to Section 10705,
except for purposes of paragraph (2).
(2) Paragraph (3) of subdivision (b) of this section shall remain
operative as it relates to health benefit plans offered through the
Exchange.
SEC. 10. Section 10755 of the Insurance Code is amended to read:
10755. As used in this chapter, the following definitions shall
apply:
(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. A benefit plan design
shall not prohibit the pairing of a health coverage product issued by
a carrier to a small employer with a health reimbursement
arrangement or other employer-sponsored method for reimbursing
employees for all or part of their deductibles, copayments, or other
out-of-pocket medical expenses under the policy.
(c) "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.
(d) "Dependent" means the spouse or registered domestic partner,
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 (t).
(e) "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 (t).
(f) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
(g) "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.
(h) "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.
(i) "In force business" means an existing health benefit plan
issued by the carrier to a small employer.
(j) "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 (t), 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 coverage through 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 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 offered
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) In the case of an eligible employee as defined in
paragraph (1) of subdivision (e), 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
eligibility for coverage until the next open enrollment period,
unless the individual meets the criteria specified in paragraph (1),
(2), or (3). This exclusion from eligibility for coverage shall not
be considered a waiting period in violation of Section 10198.7 or
10755.08.
(B) 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 eligibility for coverage until the next open
enrollment period, 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). This
exclusion from eligibility for coverage shall not be considered a
waiting period in violation of Section 10198.7 or 10755.08.
(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, including a plan
offered through the California Health Benefit Exchange, 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, including a plan offered
through the California Health Benefit Exchange, 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.
(k) "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.
(l) "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 health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(8) 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.
(9) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).
(10) 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)).
(m) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than 12
months from the date of issuance or renewal of the health benefit
plan.
(n) "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.
(o) "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 110 percent or less than 90
percent.
(p) "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.
(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.
(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.
(C) One adult and child or children.
(D) Married couple or registered domestic partners and child or
children.
(3) (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.
(q) (1) "Small employer" means either of the following:
(A) 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
benefit plans, 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, a carrier 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 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 in
this chapter, provisions of this chapter 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
subparagraph who purchases coverage through a guaranteed association,
and any employer purchasing coverage for employees through a
guaranteed association. This subparagraph shall be implemented to the
extent consistent with PPACA, except that the minimum requirement of
one employee shall be implemented only to the extent required by
PPACA.
(B) Any guaranteed association, as defined in subdivision (s),
that purchases health coverage for members of the association.
(2) 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 PPACA.
(r) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
(s) "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 subparagraph (A) of paragraph (1) of subdivision (q), (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.
(t) "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.
(u) "Grandfathered health benefit plan" means a health benefit
plan that constitutes a grandfathered health plan.
(v) "Grandfathered health plan" has the meaning set forth in
Section 1251 of PPACA.
(w) "Nongrandfathered health benefit plan" means a health benefit
plan that is not a grandfathered health plan.
(x) "Plan year" has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.
(y) "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.
(z) "Waiting period" means a 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 contract.
(aa) "Registered domestic partner" means a person who has
established a domestic partnership as described in Section 297 of the
Family Code.
(ab) "Health reimbursement arrangement" means an
employer-sponsored method for reimbursing employees for all or part
of their deductibles, copayments, or other out-of-pocket medical
expenses. A health reimbursement arrangement includes, but is not
limited to, arrangements governed under Section 105, 125, or 223 of
the Internal Revenue Code.
SEC. 11. Section 10755.05 of the Insurance Code is amended to
read:
10755.05.
(a) (1) Each carrier, except a self-funded employer, shall fairly and
affirmatively renew all of the carrier's health benefit plans that
are sold to small employers or associations that include small
employers.
(2) 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 (6) 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
(3).
(3) 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.
(4) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (3) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (3) and which, for
the one association, lists all the information required by paragraph
(5).
(5) 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.
(6) For purposes of paragraphs (2) and (3), 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.
(b) Each carrier shall make available to each small employer all
nongrandfathered health benefit plans that the carrier offers or
sells to small employers or to associations that include small
employers. Notwithstanding subdivision (c) of Section 10755, 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.
(c) Each carrier shall do all of the following:
(1) Prepare a brochure that summarizes all of its health benefit
plans and make this summary available to small employers, agents, and
brokers upon request. The summary shall include for each health
benefit plan 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 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.
(2) For each health benefit plan, 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 and 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 employee risk
rates. When requesting this information, small employers and agents
and brokers shall provide the plan with the information the plan
needs to determine the small employer's risk adjusted employee risk
rate.
(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 (c) of Section 10755, 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) 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 (e) of Section 10755, 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 (e) of Section 10755, is
provided in connection with a guaranteed association.
(e) 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.
employees, or because the small employer is or will implement a
health reimbursement arrangement to supplement the benefits of the
health benefit plan for its 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.
employees, or because the small employer is or will implement a
health reimbursement arrangement to supplement the benefits of the
health benefit plan for its employees.
(f) 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. employees, or because the small employer is
or will implement a health reimbursement arrangement to supplement
the benefits of the health benefit plan for its 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. employer, or because the small
employer is or will implement a health reimbursement arrangement to
supplement the benefits of the health benefit plan for its
employees.
(g) A policy or contract that covers a small employer, as defined
in Section 1304(b) of PPACA and in subdivision (q) of Section 10755
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 any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
(h) 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.
SEC. 12. 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.
