Bill Text: CA AB2434 | 2023-2024 | Regular Session | Chaptered
Bill Title: Health care coverage: multiple employer welfare arrangements.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Passed) 2024-09-22 - Chaptered by Secretary of State - Chapter 398, Statutes of 2024. [AB2434 Detail]
Download: California-2023-AB2434-Chaptered.html
Assembly Bill
No. 2434
CHAPTER 398
An act to add and repeal Section 1357.505 of the Health and Safety Code, relating to health care coverage.
[
Approved by
Governor
September 22, 2024.
Filed with
Secretary of State
September 22, 2024.
]
LEGISLATIVE COUNSEL'S DIGEST
AB 2434, Grayson.
Health care coverage: multiple employer welfare 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 federal law, the federal Employee Retirement Income Security Act of 1974 (ERISA), authorizes multiple employer welfare arrangements (MEWAs) in which 2 or more employers join together to provide health care coverage for employees or to their beneficiaries. Existing law authorizes an association of employers to offer a large group health care service plan
contract, consistent with ERISA, if certain requirements are met. Until January 1, 2026, existing law also authorizes an association of employers to offer a large group health care service plan contract to small group employer members of the association, consistent with ERISA, if certain requirements are met, including that the association is headquartered in this state, was established before March 23, 2010, and is the sponsor of a MEWA, and that the contract includes coverage of employees of an association member in the biomedical industry.
This bill would authorize an association of employers to offer a large group health care service plan contract
to small group employer members of the association, consistent with ERISA, if certain requirements are met, including that the association was established before January 1, 1966, and is the sponsor of a MEWA, and that the contract includes coverage of employees of an association member in the engineering, surveying, or design industry. The bill would require an association and MEWA to annually file evidence of ongoing compliance with those requirements in a manner specified by the department. This bill would require the
department,
on or before June 30, 2028, to provide the health policy committees of the Legislature with the most recent filings. The bill would require the department to conduct an analysis of the impacts of MEWAs on the small employer health insurance market, as specified, authorize the department to coordinate with the Department of Insurance for the analysis, require health care service plans, health insurers, and MEWAs to comply with requests for information, and require the department to post a report summarizing its analysis on its internet website on or before July 1, 2026.
The bill, on or after June 1, 2025, would prohibit a plan from marketing, issuing, amending, renewing, or delivering large employer coverage to an association or MEWA that provides a benefit to a resident in this state unless the association and MEWA have registered and are in compliance with the requirements described above, or have filed applications for registration, as specified, that are pending with the department. The bill would authorize the department to issue guidance to health care service plans regarding these requirements, as specified.
Because a willful violation of these provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program.
This bill would repeal these provisions on January 1, 2030.
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.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 1357.505 is added to the Health and Safety Code, to read:1357.505.
(a) Notwithstanding paragraph (2) of subdivision (a) of Section 1357.503, an association of employers may offer a large group health care service plan contract to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:(1) The association was established prior to January 1, 1966, has been in continuous existence since that date, and is a bona fide association or group of employers that may act as an
employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA), as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(2) The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is in full compliance with all applicable state and federal laws.
(3) The MEWA has offered a large group health care service plan contract since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(4) The large group health care service plan contract offers to employees a level of coverage having an actuarial value equivalent to, or
greater than, the platinum level of coverage pursuant to Section 1367.009 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code and provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations pursuant to that section.
(5) The large group health care service plan contract includes coverage of common law employees, and their dependents, who are employed by an association member in the engineering, surveying, or design industry and whose employer has operations in California.
(6) The large group health care service plan offers only fully insured benefits through
a health care service plan contract with a health care service plan licensed by the Department of Managed Health Care.
(7) Association members purchasing health coverage have a minimum of two full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premiums by at least 51 percent.
(8) The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(9) The participating member employers have a commonality of interests from
being in the same industry, unrelated to the provision of health care benefits.
(10) Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health care service plan contract, both in form and substance.
(11) The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly
based on health status or claims of any person. An employer otherwise eligible is not excluded from participating in a MEWA, or offering or renewing the large group health care service plan contract, based on the health status or claims of any employee or dependent.
(12) The MEWA at all times covers at least 101 employees.
(13) The association and the MEWA file applications for registration with the department on or before June 1, 2025.
(A) An association and MEWA that timely register with the department prior to June 1, 2025, and that are found to be in compliance with this subdivision, shall annually file evidence of ongoing compliance with this subdivision with the department, in a form and manner set forth by
the department.
(B) Except as provided in paragraph (3) of subdivision (b), an association and MEWA that do not meet the requirements of subparagraph (A) shall be subject to the restrictions provided in subparagraph (A) of paragraph (2) of subdivision (a) of Section 1357.503.
(C) An association and MEWA that have registered with the department and fail to show ongoing compliance in their annual filing shall be subject to the restrictions in subparagraph (A) of paragraph (2) of subdivision (a) of Section 1357.503.
(D) By June 30, 2026, the
department shall provide the health policy committees of the Legislature with the most recent filings made pursuant to subparagraph (A).
(E) The filings and recommendations to be submitted pursuant to subparagraph (D) shall be submitted in compliance with Section 9795 of the Government Code.
(F) (i) The department shall conduct an analysis of the impacts on the small employer health insurance market in California of health care service
plans and health insurers currently issuing large group contracts and policies to small employers through MEWAs. The purpose of the analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impact on the affordability of and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA. The department may coordinate with the Department of Insurance. Health care service plans, health insurers, and MEWAs shall comply with requests for information from the departments to complete this analysis. The department shall post a report summarizing its analysis on its internet website on or before July 1, 2026.
(ii) The department may contract with a consultant or consultants with expertise to assist the department in its analysis. Contracts entered into pursuant to this subparagraph shall be exempt from Chapter 6 (commencing with Section
14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code, and the State Contract Act (Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of the Public Contract Code).
(b) (1) On or after June 1, 2025, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care service plan coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in subdivision (a), or unless the association and MEWA filed applications for registration pursuant to subdivision (a) and the applications are pending before
the department. The department shall have the authority to determine compliance with the requirements set forth in subdivision (a).
(2) The department may issue guidance to health care service plans, associations, and MEWAs regarding registration and compliance with subdivision (a). The guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(3) Subdivision (a) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(c) This
section shall remain in effect only until January 1,
2030, and as of that date is repealed.
