BILL NUMBER: ABX1 2 CHAPTERED
BILL TEXT
CHAPTER 1
FILED WITH SECRETARY OF STATE MAY 9, 2013
APPROVED BY GOVERNOR MAY 9, 2013
PASSED THE SENATE APRIL 25, 2013
PASSED THE ASSEMBLY APRIL 29, 2013
AMENDED IN SENATE APRIL 1, 2013
AMENDED IN SENATE MARCH 21, 2013
AMENDED IN SENATE MARCH 7, 2013
INTRODUCED BY Assembly Member Pan
JANUARY 29, 2013
An act to amend Sections 10119.1, 10198.7, 10603, 10753, 10753.05,
10753.06.5, 10753.11, 10753.12, 10753.14, and 10954 of, to amend the
heading of Chapter 9.7 (commencing with Section 10950) of Part 2 of
Division 2 of, to amend and add Sections 10113.95 and 10119.2 of, to
add Sections 10127.21 and 10960.5 to, to add Chapter 9.9 (commencing
with Section 10965) to Part 2 of Division 2 of, and to repeal Section
10902.4 of, the Insurance Code, relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 2, Pan. Health care coverage.
(1) Existing federal law, the federal Patient Protection and
Affordable Care Act (PPACA), enacts various health care coverage
market reforms that take effect January 1, 2014. Among other things,
PPACA requires each health insurance issuer that offers health
insurance coverage in the individual or group market in a state to
accept every employer and individual in the state that applies for
that coverage and to renew that coverage at the option of the plan
sponsor or the individual. PPACA prohibits a group health plan and a
health insurance issuer offering group or individual health insurance
coverage from imposing any preexisting condition exclusion with
respect to that plan or coverage. PPACA allows the premium rate
charged by a health insurance issuer offering small group or
individual coverage to vary only by rating area, age, tobacco use,
and whether the coverage is for an individual or family and prohibits
discrimination against individuals based on health status, as
specified. PPACA requires an issuer to consider all enrollees in its
individual market plans to be part of a single risk pool and to
consider all enrollees in its small group market plans to be part of
a single risk pool, as specified. PPACA also requires each state to,
by January 1, 2014, establish an American Health Benefit Exchange
that facilitates the purchase of qualified health plans by qualified
individuals and qualified small employers, as specified.
Existing law provides for the regulation of health insurers by the
Insurance Commissioner. Existing law requires insurers offering
coverage in the individual market to offer coverage for a child
subject to specified requirements. Existing law establishes the
California Health Benefit Exchange (Exchange) to facilitate the
purchase of qualified health plans through the Exchange by qualified
individuals and qualified small employers by January 1, 2014.
This bill would require an insurer, on and after October 1, 2013,
to offer, market, and sell all of the insurer's health benefit plans
that are sold in the individual market for policy years on or after
January 1, 2014, to all individuals and dependents in each service
area in which the insurer provides or arranges for the provision of
health care services, as specified, but would require insurers to
limit enrollment in individual health benefit plans to specified open
enrollment and special enrollment periods. The bill would prohibit
these insurers from imposing any preexisting condition exclusion upon
any individual and from conditioning the issuance or offering of
individual health benefit plans on any health status-related factor,
as specified. The bill would require a health insurer to consider the
claims experience of all insureds of its nongrandfathered individual
health benefit plans offered in the state to be part of a single
risk pool, as specified, would require the insurer to establish a
specified index rate for that market, and would authorize the insurer
to vary premiums from the index rate based only on specified
factors. The bill would authorize insurers to use only age,
geographic region, and family size for purposes of establishing rates
for individual health benefit plans, as specified. The bill would
require insurers to provide specified information regarding the
Exchange to applicants for and subscribers of individual health
benefit plans offered outside the Exchange. The bill would prohibit
an insurer from advertising or marketing an individual grandfathered
health plan for the purpose of enrolling a dependent of the
policyholder in the plan and would also require insurers to annually
issue a specified notice to policyholders enrolled in a grandfathered
plan. The bill would make certain of these provisions inoperative
if, and 12 months after, certain provisions of PPACA are repealed or
amended, as specified.
Existing law requires insurers to guarantee issue their small
employer health benefit plans, as specified. With respect to
nongrandfathered small employer health benefit plans for plan years
on or after January 1, 2014, among other things, existing law
provides certain exceptions from the guarantee issue requirement,
allows the premium for small employer health benefit plans to vary
only by age, geographic region, and family size, as specified, and
requires insurers to provide special enrollment periods and coverage
effective dates consistent with the individual nongrandfathered
market in the state. Existing law provides that these provisions
shall be inoperative if specified provisions of PPACA are repealed.
This bill would modify the small employer special enrollment
periods and coverage effective dates for purposes of consistency with
the individual market reforms described above. The bill would also
modify the exceptions from the guarantee issue requirement and the
manner in which an insurer determines premium rates for a small
employer health benefit plan, as specified. The bill would also
require an insurer to consider the claims experience of all enrollees
of its nongrandfathered small employer health benefit plans offered
in this state to be part of a single risk pool, as specified, would
require the insurer to establish a specified index rate for that
market, and would authorize the insurer to vary premiums from the
index rate based only on specified factors. The bill would make
certain of these provisions inoperative, as specified, if, and 12
months after, specified provisions of PPACA are repealed.
(2) PPACA requires a state or the United States Secretary of
Health and Human Services to implement a risk adjustment program for
the 2014 benefit year and every benefit year thereafter, under which
a charge is assessed on low actuarial risk plans and a payment is
made to high actuarial risk plans, as specified. If a state that
elects to operate an American Health Benefit Exchange elects not to
administer this risk adjustment program, the secretary will operate
the program and issuers will be required to submit data for purposes
of the program to the secretary.
This bill would require that any data submitted by health insurers
to the secretary for purposes of the risk adjustment program also be
submitted to the Department of Insurance, in the same format. The
bill would require the department to use that data for specified
purposes.
(3) Existing law requires insurers to provide a summary of
information about each of their health insurance policies, as
provided, upon the appropriate disclosure form as prescribed by the
Insurance Commissioner.
This bill would provide that, on and after January 1, 2014, a
health insurer issuing the federal uniform summary of benefits and
coverage also complies with the commissioner's disclosure
requirements, but would require that the insurer ensure that all
applicable state law disclosures are made in other documents. The
bill would require the insurer to provide the commissioner a copy of
the federal summary of benefits and coverage form and the
corresponding health insurance policy, as specified.
(4) This bill would become operative only if SB 2 of the 2013-14
First Extraordinary Session is enacted and becomes effective.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10113.95 of the Insurance Code is amended to
read:
10113.95. (a) A health insurer that issues, renews, or amends
individual health insurance policies shall be subject to this
section.
(b) An insurer subject to this section shall have written
policies, procedures, or underwriting guidelines establishing the
criteria and process whereby the insurer makes its decision to
provide or to deny coverage to individuals applying for coverage and
sets the rate for that coverage. These guidelines, policies, or
procedures shall ensure that the plan rating and underwriting
criteria comply with Sections 10140 and 10291.5 and all other
applicable provisions.
(c) On or before June 1, 2006, and annually thereafter, every
insurer shall file with the commissioner a general description of the
criteria, policies, procedures, or guidelines that the insurer uses
for rating and underwriting decisions related to individual health
insurance policies, which means automatic declinable health
conditions, health conditions that may lead to a coverage decline,
height and weight standards, health history, health care utilization,
lifestyle, or behavior that might result in a decline for coverage
or severely limit the health insurance products for which individuals
applying for coverage would be eligible. An insurer may comply with
this section by submitting to the department underwriting materials
or resource guides provided to agents and brokers, provided that
those materials include the information required to be submitted by
this section.
(d) Commencing January 1, 2011, the commissioner shall post on the
department's Internet Web site, in a manner accessible and
understandable to consumers, general, noncompany specific information
about rating and underwriting criteria and practices in the
individual market and information about the California Major Risk
Medical Insurance Program (Part 6.5 (commencing with Section 12700))
and the federal temporary high risk pool established pursuant to Part
6.6 (commencing with Section 12739.5). The commissioner shall
develop the information for the Internet Web site in consultation
with the Department of Managed Health Care to enhance the consistency
of information provided to consumers. Information about individual
health insurance shall also include the following notification:
"Please examine your options carefully before declining group
coverage or continuation coverage, such as COBRA, that may be
available to you. You should be aware that companies selling
individual health insurance typically require a review of your
medical history that could result in a higher premium or you could be
denied coverage entirely."
(e) Nothing in this section shall authorize public disclosure of
company-specific rating and underwriting criteria and practices
submitted to the commissioner.
(f) This section shall not apply to a closed block of business, as
defined in Section 10176.10.
(g) (1) This section shall become inoperative on November 1, 2013,
or the 91st calendar day following the adjournment of the 2013-14
First Extraordinary Session, whichever date is later.
(2) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), this section
shall become operative 12 months after the date of that repeal or
amendment.
SEC. 2. Section 10113.95 is added to the Insurance Code, to read:
10113.95. (a) A health insurer that renews individual
grandfathered health benefit plans shall be subject to this section.
(b) An insurer subject to this section shall have written
policies, procedures, or underwriting guidelines establishing the
criteria and process whereby the insurer makes its decision to
provide or to deny coverage to dependents applying for an individual
grandfathered health benefit plan and sets the rate for that
coverage. These guidelines, policies, or procedures shall ensure that
the plan rating and underwriting criteria comply with Sections 10140
and 10291.5 and all other applicable provisions of state and federal
law.
(c) On or before the June 1 next following the operative date of
this section, and annually thereafter, every insurer shall file with
the commissioner a general description of the criteria, policies,
procedures, or guidelines that the insurer uses for rating and
underwriting decisions related to individual grandfathered health
benefit plans, which means automatic declinable health conditions,
health conditions that may lead to a coverage decline, height and
weight standards, health history, health care utilization, lifestyle,
or behavior that might result in a decline for coverage or severely
limit the health insurance products for which individuals applying
for coverage would be eligible. An insurer may comply with this
section by submitting to the department underwriting materials or
resource guides provided to agents and brokers, provided that those
materials include the information required to be submitted by this
section.
(d) Nothing in this section shall authorize public disclosure of
company-specific rating and underwriting criteria and practices
submitted to the commissioner.
(e) For purposes of this section, the following definitions shall
apply:
(1) "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 pursuant to that law.
(2) "Grandfathered health benefit plan" has the same meaning as
that term is defined in Section 1251 of PPACA.
(f) (1) This section shall become operative on November 1, 2013,
or the 91st calendar day following the adjournment of the 2013-14
First Extraordinary Session, whichever date is later.
(2) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), this section
shall become inoperative 12 months after the date of that repeal or
amendment.
SEC. 3. Section 10119.1 of the Insurance Code is amended to read:
10119.1. (a) This section shall apply to a health insurer that
covers hospital, medical, or surgical expenses under an individual
health benefit plan, as defined in subdivision (a) of Section
10198.6, that is issued, amended, renewed, or delivered on or after
January 1, 2007.
(b) At least once each year, a health insurer shall permit an
individual who has been covered for at least 18 months under an
individual health benefit plan to transfer, without medical
underwriting, to any other individual health benefit plan offered by
that same health insurer that provides equal or lesser benefits as
determined by the insurer.
"Without medical underwriting" means that the health insurer shall
not decline to offer coverage to, or deny enrollment of, the
individual or impose any preexisting condition exclusion on the
individual who transfers to another individual health benefit plan
pursuant to this section.
(c) The insurer shall establish, for the purposes of subdivision
(b), a ranking of the individual health benefit plans it offers to
individual purchasers and post the ranking on its Internet Web site
or make the ranking available upon request. The insurer shall update
the ranking whenever a new benefit design for individual purchasers
is approved.
(d) The insurer shall notify in writing all insureds of the right
to transfer to another individual health benefit plan pursuant to
this section, at a minimum, when the insurer changes the insured's
premium rate. Posting this information on the insurer's Internet Web
site shall not constitute notice for purposes of this subdivision.
The notice shall adequately inform insureds of the transfer rights
provided under this section including information on the process to
obtain details about the individual health benefit plans available to
that insured and advising that the insured may be unable to return
to his or her current individual health benefit plan if the insured
transfers to another individual health benefit plan.
(e) The requirements of this section shall not apply to the
following:
(1) A federally eligible defined individual, as defined in
subdivision (e) of Section 10900, who purchases individual coverage
pursuant to Section 10785.
(2) An individual offered conversion coverage pursuant to Sections
12672 and 12682.1.
(3) An individual enrolled in the Medi-Cal program pursuant to
Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of
the Welfare and Institutions Code.
(4) An individual enrolled in the Access for Infants and Mothers
Program, pursuant to Part 6.3 (commencing with Section 12695).
(5) An individual enrolled in the Healthy Families Program
pursuant to Part 6.2 (commencing with Section 12693).
(f) It is the intent of the Legislature that individuals shall
have more choice in their health care coverage when health insurers
guarantee the right of an individual to transfer to another product
based on the insurer's own ranking system. The Legislature does not
intend for the department to review or verify the insurer's ranking
for actuarial or other purposes.
(g) (1) This section shall become inoperative on January 1, 2014,
or the 91st calendar day following the adjournment of the 2013-14
First Extraordinary Session, whichever date is later.
(2) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), this section
shall become operative 12 months after the date of that repeal or
amendment.
SEC. 4. Section 10119.2 of the Insurance Code is amended to read:
10119.2. (a) Every health insurer that offers, issues, or renews
health insurance under an individual health benefit plan, as defined
in subdivision (a) of Section 10198.6, shall offer to any individual,
who was covered under an individual health benefit plan that was
rescinded, a new individual health benefit plan without medical
underwriting that provides equal benefits. A health insurer may also
permit an individual, who was covered under an individual health
benefit plan that was rescinded, to remain covered under that
individual health benefit plan, with a revised premium rate that
reflects the number of persons remaining on the health benefit plan.
(b) "Without medical underwriting" means that the health insurer
shall not decline to offer coverage to, or deny enrollment of, the
individual or impose any preexisting condition exclusion on the
individual who is issued a new individual health benefit plan or
remains covered under an individual health benefit plan pursuant to
this section.
(c) If a new individual health benefit plan is issued, the insurer
may revise the premium rate to reflect only the number of persons
covered under the new individual health benefit plan.
(d) Notwithstanding subdivisions (a) and (b), if an individual was
subject to a preexisting condition provision or a waiting or
affiliation period under the individual health benefit plan that was
rescinded, the health insurer may apply the same preexisting
condition provision or waiting or affiliation period in the new
individual health benefit plan. The time period in the new individual
health benefit plan for the preexisting condition provision or
waiting or affiliation period shall not be longer than the one in the
individual health benefit plan that was rescinded and the health
insurer shall credit any time that the individual was covered under
the rescinded individual health benefit plan.
(e) The insurer shall notify in writing all insureds of the right
to coverage under an individual health benefit plan pursuant to this
section, at a minimum, when the insurer rescinds the individual
health benefit plan. The notice shall adequately inform insureds of
the right to coverage provided under this section.
(f) The insurer shall provide 60 days for insureds to accept the
offered new individual health benefit plan and this plan shall be
effective as of the effective date of the original individual health
benefit plan and there shall be no lapse in coverage.
(g) This section shall not apply to any individual whose
information in the application for coverage and related
communications led to the rescission.
(h) (1) This section shall become inoperative on January 1, 2014,
or the 91st calendar day following the adjournment of the 2013-14
First Extraordinary Session, whichever date is later.
(2) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), this section
shall become operative 12 months after the date of that repeal or
amendment.
SEC. 5. Section 10119.2 is added to the Insurance Code, to read:
10119.2. (a) Every health insurer that offers, issues, or renews
health insurance under an individual health benefit plan, as defined
in subdivision (a) of Section 10198.6, shall offer to any individual,
who was covered by the insurer under an individual health benefit
plan that was rescinded, a new individual health benefit plan that
provides the most equivalent benefits.
(b) A health insurer that offers, issues, or renews individual
health benefit plans inside or outside the California Health Benefit
Exchange may also permit an individual, who was covered by the
insurer under an individual health benefit plan that was rescinded,
to remain covered under that individual health benefit plan, with a
revised premium rate that reflects the number of persons remaining on
the health benefit plan consistent with Section 10965.9.
(c) If a new individual health benefit plan is issued under
subdivision (a), the insurer may revise the premium rate to reflect
only the number of persons covered on the new individual health
benefit plan consistent with Section 10965.9.
(d) The insurer shall notify in writing all insureds of the right
to coverage under an individual health benefit plan pursuant to this
section, at a minimum, when the insurer rescinds the individual
health benefit plan. The notice shall adequately inform insureds of
the right to coverage provided under this section.
(e) The insurer shall provide 60 days for insureds to accept the
offered new individual health benefit plan under subdivision (a), and
this plan shall be effective as of the effective date of the
original health benefit plan and there shall be no lapse in coverage.
(f) This section shall not apply to any individual whose
information in the application for coverage and related
communications led to the rescission.
(g) This section shall apply notwithstanding subdivision (a) or
(d) of Section 10965.3.
(h) (1) This section shall become operative on January 1, 2014, or
the 91st calendar day following the adjournment of the 2013-14 First
Extraordinary Session, whichever date is later.
(2) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), this section
shall become inoperative 12 months after the date of that repeal or
amendment.
SEC. 6. Section 10127.21 is added to the Insurance Code, to read:
10127.21. Any data submitted by a health insurer to the United
States Secretary of Health and Human Services, or his or her
designee, for purposes of the risk adjustment program described in
Section 1343 of the federal Patient Protection and Affordable Care
Act (42 U.S.C. Sec. 18063) shall be concurrently submitted to the
department and in the same format. The department shall use the
information to monitor federal implementation of risk adjustment in
the state and to ensure that insurers are in compliance with federal
requirements related to risk adjustment.
SEC. 7. Section 10198.7 of the Insurance Code is amended to read:
10198.7. (a) A health benefit plan for group coverage shall not
impose any preexisting condition provision or waivered condition
provision upon any individual.
(b) (1) A nongrandfathered health benefit plan for individual
coverage shall not impose any preexisting condition provision or
waivered condition provision upon any individual.
(2) A grandfathered health benefit plan for individual coverage
shall not exclude coverage on the basis of a waivered condition
provision or preexisting condition provision for a period greater
than 12 months following the individual's effective date of coverage,
nor limit or exclude coverage for a specific insured by type of
illness, treatment, medical condition, or accident, except for
satisfaction of a preexisting condition provision or waivered
condition provision pursuant to this article. Waivered condition
provisions or preexisting condition provisions contained in
individual grandfathered health benefit plans may relate only to
conditions for which medical advice, diagnosis, care, or treatment,
including use of prescription drugs, was recommended or received from
a licensed health practitioner during the 12 months immediately
preceding the effective date of coverage.
(3) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the Public
Health Service Act (42 U.S.C. Sec. 300gg-4), paragraph (1) shall
become inoperative 12 months after the date of that repeal or
amendment and thereafter paragraph (2) shall apply also to
nongrandfathered health benefit plans for individual coverage.
(c) (1) A health benefit plan for group coverage may apply a
waiting period of up to 60 days as a condition of employment if
applied equally to all eligible employees and dependents and if
consistent with PPACA. A waiting period shall not be based on a
preexisting condition of an employee or dependent, the health status
of an employee or dependent, or any other factor listed in Section
10198.9. During the waiting period, the health benefit plan is not
required to provide health care services and no premium shall be
charged to the policyholder or insureds.
(2) A health benefit plan for individual coverage shall not impose
a waiting period.
(d) In determining whether a preexisting condition provision, a
waivered condition provision, or a waiting period applies to a
person, a health benefit plan shall credit the time the person was
covered under creditable coverage, provided that the person becomes
eligible for coverage under the succeeding health benefit plan within
62 days of termination of prior coverage, exclusive of any waiting
period, and applies for coverage under the succeeding plan within the
applicable enrollment period. A plan shall also credit any time that
an eligible employee must wait before enrolling in the plan,
including any postenrollment or employer-imposed waiting period.
However, if a person's employment has ended, the availability of
health coverage offered through employment or sponsored by an
employer has terminated, or an employer's contribution toward health
coverage has terminated, a carrier shall credit the time the person
was covered under creditable coverage if the person becomes eligible
for health coverage offered through employment or sponsored by an
employer within 180 days, exclusive of any waiting period, and
applies for coverage under the succeeding plan within the applicable
enrollment period.
(e) An individual's period of creditable coverage shall be
certified pursuant to Section 2704(e) of Title XXVII of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-3(e)).
SEC. 8. Section 10603 of the Insurance Code is amended to read:
10603. (a) (1) On or before April 1, 1975, the commissioner shall
promulgate a standard supplemental disclosure form for all
disability insurance policies. Upon the appropriate disclosure form
as prescribed by the commissioner, each insurer shall provide, in
easily understood language and in a uniform, clearly organized
manner, as prescribed and required by the commissioner, the summary
information about each disability insurance policy offered by the
insurer as the commissioner finds is necessary to provide for full
and fair disclosure of the provisions of the policy.
(2) On and after January 1, 2014, a disability insurer offering
health insurance coverage subject to Section 2715 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-15) shall satisfy the
requirements of this section and the implementing regulations by
providing the uniform summary of benefits and coverage required under
Section 2715 of the federal Public Health Service Act and any rules
or regulations issued thereunder. An insurer that issues the federal
uniform summary of benefits referenced in this paragraph shall ensure
that all applicable disclosures required in this chapter and its
implementing regulations are met in other documents provided to
policyholders and insureds. An insurer subject to this paragraph
shall provide the uniform summary of benefits and coverage to the
commissioner together with the corresponding health insurance policy
pursuant to Section 10290.
(b) Nothing in this section shall preclude the disclosure form
from being included with the evidence of coverage or certificate of
coverage or policy.
SEC. 9. 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.
(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.
SEC. 10. 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 (d) 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, an
explanation of how creditable coverage is calculated if a waiting
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 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.
(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.
(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.
This subdivision shall not apply with respect to a compensation
arrangement that provides compensation to an agent or broker on the
basis of percentage of premium, provided that the percentage shall
not vary because of the health status, claims experience, industry,
occupation, or geographic area of the small employer.
(j) (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) Each calendar year, 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. The premium rate for all of the
carrier's nongrandfathered health benefit plans shall use the
applicable index rate, as
adjusted for 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, 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. 11. Section 10753.06.5 of the Insurance Code is amended to
read:
10753.06.5. (a) With respect to small employer health benefit
plans offered outside the Exchange, after a small employer submits a
completed application, the carrier shall, within 30 days, notify the
employer of the employer's actual rates in accordance with Section
10753.14. The employer shall have 30 days in which to exercise the
right to buy coverage at the quoted rates.
(b) Except as required under subdivision (c), when a small
employer submits a premium payment, based on the quoted rates, and
that payment is delivered or postmarked, whichever occurs earlier,
within the first 15 days of a month, coverage shall become effective
no later than the first day of the following month. When that payment
is neither delivered nor postmarked until after the 15th day of a
month, coverage shall become effective no later than the first day of
the second month following delivery or postmark of the payment.
(c) (1) With respect to a small employer health benefit plan
offered through the Exchange, a carrier shall apply coverage
effective dates consistent with those required under Section 155.720
of Title 45 of the Code of Federal Regulations and paragraph (2) of
subdivision (e) of Section 10965.3.
(2) With respect to a small employer health benefit plan offered
outside the Exchange for which an individual applies during a special
enrollment period described in paragraph (3) of subdivision (b) of
Section 10753.05, the following provisions shall apply:
(A) Coverage under the plan shall become effective no later than
the first day of the first calendar month beginning after the date
the carrier receives the request for special enrollment.
(B) Notwithstanding subparagraph (A), in the case of a birth,
adoption, or placement for adoption, coverage under the plan shall
become effective on the date of birth, adoption, or placement for
adoption.
(d) During the first 30 days of coverage, the small employer shall
have the option of changing coverage to a different health benefit
plan offered by the same carrier. If a small employer notifies the
carrier of the change within the first 15 days of a month, coverage
under the new health benefit plan shall become effective no later
than the first day of the following month. If a small employer
notifies the carrier of the change after the 15th day of a month,
coverage under the new health benefit plan shall become effective no
later than the first day of the second month following notification.
(e) All eligible employees and dependents listed on a small
employer's completed application shall be covered on the effective
date of the health benefit plan.
SEC. 12. Section 10753.11 of the Insurance Code is amended to
read:
10753.11. (a) To the extent permitted by PPACA, a carrier shall
not be required by the provisions of this chapter to do any of the
following:
(1) Offer coverage to, or accept applications from, a small
employer where the small employer is seeking coverage for eligible
employees and dependents who do not live, work, or reside in a
carrier's service areas.
(2) (A) Offer coverage to, or accept applications from, a small
employer for a benefits plan design within an area if the
commissioner has found all of the following:
(i) The carrier will not have the capacity within the area in its
network of providers to deliver service adequately to the eligible
employees and dependents of that employee because of its obligations
to existing group contractholders and enrollees.
(ii) The carrier is applying this paragraph uniformly to all
employers without regard to the claims experience of those employers,
and their employees and dependents, or any health status-related
factor relating to those employees and dependents.
(iii) The action is not unreasonable or clearly inconsistent with
the intent of this chapter.
(B) A carrier that cannot offer coverage to small employers in a
specific service area because it is lacking sufficient capacity as
described in this paragraph may not offer coverage in the applicable
area to new employer groups until the later of the following dates:
(i) The 181st day after the date that coverage is denied pursuant
to this paragraph.
(ii) The date the carrier notifies the commissioner that it has
regained capacity to deliver services to small employers, and
certifies to the commissioner that from the date of the notice it
will enroll all small groups requesting coverage from the carrier
until the carrier has met the requirements of subdivision (g) of
Section 10753.05.
(C) Subparagraph (B) shall not limit the carrier's ability to
renew coverage already in force or relieve the carrier of the
responsibility to renew that coverage as described in Sections
10273.4 and 10753.13.
(D) Coverage offered within a service area after the period
specified in subparagraph (B) shall be subject to the requirements of
this section.
SEC. 13. Section 10753.12 of the Insurance Code is amended to
read:
10753.12. (a) A carrier shall not be required to offer coverage
or accept applications for benefit plan designs pursuant to this
chapter where the carrier demonstrates to the satisfaction of the
commissioner both of the following:
(1) The acceptance of an application or applications would place
the carrier in a financially impaired condition.
(2) The carrier is applying this subdivision uniformly to all
employers without regard to the claims experience of those employers
and their employees and dependents or any health status-related
factor relating to those employees and dependents.
(b) The commissioner's determination under subdivision (a) shall
follow an evaluation that includes a certification by the
commissioner that the acceptance of an application or applications
would place the carrier in a financially impaired condition.
(c) A carrier that has not offered coverage or accepted
applications pursuant to this chapter shall not offer coverage or
accept applications for any individual or group health benefit plan
until the later of the following dates:
(1) The 181st day after the date that coverage is denied pursuant
to this section.
(2) The date on which the carrier ceases to be financially
impaired, as determined by the commissioner.
(d) Subdivision (c) shall not limit the carrier's ability to renew
coverage already in force or relieve the carrier of the
responsibility to renew that coverage as described in Sections
10273.4, 10273.6, and 10753.13.
(e) Coverage offered within a service area after the period
specified in subdivision (c) shall be subject to the requirements of
this section.
SEC. 14. Section 10753.14 of the Insurance Code is amended to
read:
10753.14. (a) The premium rate for a small employer health
benefit plan issued, amended, or renewed on or after January 1, 2014,
shall vary with respect to the particular coverage involved only by
the following:
(1) Age, pursuant to the age bands established by the United
States Secretary of Health and Human Services and the age rating
curve established by the Centers for Medicare and Medicaid Services
pursuant to Section 2701(a)(3) of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg(a)(3)). Rates based on age shall be
determined using the individual's age as of the date of the plan
issuance or renewal, as applicable, and shall not vary by more than
three to one for like individuals of different age who are 21 years
of age or older as described in federal regulations adopted pursuant
to Section 2701(a)(3) of the federal Public Health Service Act (42
U.S.C. Sec. 300gg(a)(3)).
(2) (A) Geographic region. The geographic regions for purposes of
rating shall be the following:
(i) Region 1 shall consist of the Counties of Alpine, Amador,
Butte, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Lake, Lassen,
Mendocino, Modoc, Nevada, Plumas, Shasta, Sierra, Siskiyou, Sutter,
Tehama, Trinity, Tuolumne, and Yuba.
(ii) Region 2 shall consist of the Counties of Marin, Napa,
Solano, and Sonoma.
(iii) Region 3 shall consist of the Counties of El Dorado, Placer,
Sacramento, and Yolo.
(iv) Region 4 shall consist of the City and County of San
Francisco.
(v) Region 5 shall consist of the County of Contra Costa.
(vi) Region 6 shall consist of the County of Alameda.
(vii) Region 7 shall consist of the County of Santa Clara.
(viii) Region 8 shall consist of the County of San Mateo.
(ix) Region 9 shall consist of the Counties of Monterey, San
Benito, and Santa Cruz.
(x) Region 10 shall consist of the Counties of Mariposa, Merced,
San Joaquin, Stanislaus, and Tulare.
(xi) Region 11 shall consist of the Counties of Fresno, Kings, and
Madera.
(xii) Region 12 shall consist of the Counties of San Luis Obispo,
Santa Barbara, and Ventura.
(xiii) Region 13 shall consist of the Counties of Imperial, Inyo,
and Mono.
(xiv) Region 14 shall consist of the County of Kern.
(xv) Region 15 shall consist of the ZIP Codes in the County of Los
Angeles starting with 906 to 912, inclusive, 915, 917, 918, and 935.
(xvi) Region 16 shall consist of the ZIP Codes in the County of
Los Angeles other than those identified in clause (xv).
(xvii) Region 17 shall consist of the Counties of Riverside and
San Bernardino.
(xviii) Region 18 shall consist of the County of Orange.
(xix) Region 19 shall consist of the County of San Diego.
(B) No later than June 1, 2017, the department, in collaboration
with the Exchange and the Department of Managed Health Care, shall
review the geographic rating regions specified in this paragraph and
the impacts of those regions on the health care coverage market in
California, and submit a report to the appropriate policy committees
of the Legislature. The requirement for submitting a report imposed
under this subparagraph is inoperative June 1, 2021, pursuant to
Section 10231.5 of the Government Code.
(3) Whether the health benefit plan covers an individual or
family, as described in PPACA.
(b) The rate for a health benefit plan subject to this section
shall not vary by any factor not described in this section.
(c) The total premium charged to a small employer pursuant to this
section shall be determined by summing the premiums of covered
employees and dependents in accordance with Section 147.102(c)(1) of
Title 45 of the Code of Federal Regulations.
(d) The rating period for rates subject to this section shall be
no less than 12 months from the date of issuance or renewal of the
health benefit plan.
(e) If Section 2701 of the federal Public Health Service Act (42
U.S.C. Sec. 300gg), as added by Section 1201 of PPACA, is repealed,
this section shall become inoperative 12 months after the repeal
date, in which case rates for health benefit plans subject to this
section shall instead be subject to Section 10714, to the extent
permitted by federal law, and all references to this section shall be
deemed to be references to Section 10714.
SEC. 15. Section 10902.4 of the Insurance Code is repealed.
SEC. 16. The heading of Chapter 9.7 (commencing with Section
10950) of Part 2 of Division 2 of the Insurance Code is amended to
read:
CHAPTER 9.7. CHILD ACCESS TO HEALTH INSURANCE
SEC. 17. Section 10954 of the Insurance Code is amended to read:
10954. (a) A carrier may use the following characteristics of an
eligible child for purposes of establishing the rate of the health
benefit plan for that child, where consistent with federal
regulations under PPACA: age, geographic region, and family
composition, plus the health benefit plan selected by the child or
the responsible party for a child.
(b) From the effective date of this chapter to December 31, 2013,
inclusive, rates for a child applying for coverage shall be subject
to the following limitations:
(1) During any open enrollment period or for late enrollees, the
rate for any child due to health status shall not be more than two
times the standard risk rate for a child.
(2) The rate for a child shall be subject to a 20-percent
surcharge above the highest allowable rate on a child applying for
coverage who is not a late enrollee and who failed to maintain
coverage with any carrier or health care service plan for the 90-day
period prior to the date of the child's application. The surcharge
shall apply for the 12-month period following the effective date of
the child's coverage.
(3) If expressly permitted under PPACA and any rules, regulations,
or guidance issued pursuant to that act, a carrier may rate a child
based on health status during any period other than an open
enrollment period if the child is not a late enrollee.
(4) If expressly permitted under PPACA and any rules, regulations,
or guidance issued pursuant to that act, a carrier may condition an
offer or acceptance of coverage on any preexisting condition or other
health status-related factor for a period other than an open
enrollment period and for a child who is not a late enrollee.
(c) For any individual health benefit plan issued, sold, or
renewed prior to December 31, 2013, the carrier shall provide to a
child or responsible party for a child a notice that states the
following:
"Please consider your options carefully before failing to maintain
or renewing coverage for a child for whom you are responsible. If
you attempt to obtain new individual coverage for that child, the
premium for the same coverage may be higher than the premium you pay
now."
(d) A child who applied for coverage between September 23, 2010,
and the end of the initial enrollment period shall be deemed to have
maintained coverage during that period.
(e) Effective January 1, 2014, except for individual grandfathered
health plan coverage, the rate for any child shall be identical to
the standard risk rate.
(f) Carriers shall not require documentation from applicants
relating to their coverage history.
(g) (1) On and after the operative date of the act adding this
subdivision, and until January 1, 2014, a carrier shall provide the
model notice, as provided in paragraph (3), to all applicants for
coverage under this chapter and to all insureds, or the responsible
party for an insured, renewing coverage under this chapter that
contains the following information:
(A) Information about the open enrollment period provided under
Section 10965.3.
(B) An explanation that obtaining coverage during the open
enrollment period described in Section 10965.3 will not affect the
effective dates of coverage for coverage purchased pursuant to this
chapter unless the applicant cancels that coverage.
(C) An explanation that coverage purchased pursuant to this
chapter shall be effective as required under subdivision (d) of
Section 10951 and that such coverage shall not prevent an applicant
from obtaining new coverage during the open enrollment period
described in Section 10965.3.
(D) Information about the Medi-Cal program, information about the
Healthy Families Program if the Healthy Families Program is accepting
enrollment, and information about subsidies available through the
California Health Benefit Exchange.
(2) The notice described in paragraph (1) shall be in plain
language and 14-point type.
(3) The department shall adopt a uniform model notice to be used
by carriers in order to comply with this subdivision, and shall
consult with the Department of Managed Health Care in adopting that
uniform model notice. Use of the model notice shall not require prior
approval of the department. The adoption of the model notice by the
department for purposes of this section 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).
SEC. 18. Section 10960.5 is added to the Insurance Code, to read:
10960.5. (a) This chapter shall become inoperative on January 1,
2014, or the 91st calendar day following the adjournment of the
2013-14 First Extraordinary Session, whichever date is later.
(b) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), this chapter
shall become operative 12 months after the date of that repeal or
amendment.
SEC. 19. Chapter 9.9 (commencing with Section 10965) is added to
Part 2 of Division 2 of the Insurance Code, to read:
CHAPTER 9.9. INDIVIDUAL ACCESS TO HEALTH INSURANCE
10965. For purposes of this chapter, the following definitions
shall apply:
(a) "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.
(b) "Dependent" means the spouse or registered domestic partner,
or child, of an individual, subject to applicable terms of the health
benefit plan.
(c) "Exchange" means the California Health Benefit Exchange
created by Section 100500 of the Government Code.
(d) "Family" means the policyholder and dependent or dependents.
(e) "Grandfathered health plan" has the same meaning as that term
is defined in Section 1251 of PPACA.
(f) "Health benefit plan" means any individual or group policy of
health insurance, as defined in Section 106. The term does not
include a health insurance policy that provides excepted benefits, as
described in Sections 2722 and 2791 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-21; 42 U.S.C. Sec. 300gg-91),
subject to Section 10965.01 a health insurance policy provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000) of Part
3 of Division 9 of the Welfare and Institutions Code), the Healthy
Families Program (Part 6.2 (commencing with Section 12693) of
Division 2), the Access for Infants and Mothers Program (Part 6.3
(commencing with Section 12695) of Division 2), or the program under
Part 6.4 (commencing with Section 12699.50) of Division 2, or
Medicare supplement coverage, to the extent consistent with PPACA or
a specified disease or hospital indemnity policy, subject to Section
10965.01.
(g) "Policy year" means the period from January 1 to December 31,
inclusive.
(h) "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 pursuant to that law.
(i) "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.
(j) "Rating period" means the calendar year for which premium
rates are in effect pursuant to subdivision (d) of Section 10965.9.
(k) "Registered domestic partner" means a person who has
established a domestic partnership as described in Section 297 of the
Family Code.
10965.01. (a) For purposes of this chapter, "health benefit plan"
does not include policies or certificates of specified disease or
hospital confinement indemnity provided that the carrier offering
those policies or certificates complies with the following:
(1) The carrier files, on or before March 1 of each year, a
certification with the commissioner that contains the statement and
information described in paragraph (2).
(2) The certification required in paragraph (1) shall contain the
following:
(A) A statement from the carrier certifying that policies or
certificates described in this section (i) are being offered and
marketed as supplemental health insurance and not as a substitute for
coverage that provides essential health benefits as defined by the
state pursuant to Section 1302 of PPACA, and (ii) the disclosure
forms as described in Section 10603 contains the following statement
prominently on the first page:
"This is a supplement to health insurance. It is not a substitute
for essential health benefits or minimum essential coverage as
defined in federal law."
(B) A summary description of each policy or certificate described
in this section, including the average annual premium rates, or range
of premium rates in cases where premiums vary by age, gender, or
other factors, charged for the policies and certificates issued or
delivered in this state.
(3) In the case of a policy or certificate that is described in
this section and that is offered in this state on or after January 1,
2014, the carrier files with the commissioner the information and
statement required in paragraph (2) at least 30 days prior to the
date such a policy or certificate is issued or delivered in this
state.
(4) The carrier issuing a policy or certificate of specified
disease or a policy or certificate of hospital confinement indemnity
requires that the person to be insured is covered by an individual or
group policy or contract that arranges or provides medical,
hospital, and surgical coverage not designed to supplement other
private or governmental plans.
(b) As used in this section, "policies or certificates of
specified disease" and "policies or certificates of hospital
confinement indemnity" mean policies or certificates of insurance
sold to an insured to supplement other health insurance coverage as
specified in this section.
10965.1. Except as provided in Section 10965.15, the provisions
of this chapter shall only apply with respect to nongrandfathered
individual health benefit plans offered by a health insurer, and
shall apply in addition to other provisions of this chapter and the
rules adopted thereunder.
10965.3. (a) (1) On and after October 1, 2013, a health insurer
shall fairly and affirmatively offer, market, and sell all of the
insurer's health benefit plans that are sold in the individual market
for policy years on or after January 1, 2014, to all individuals and
dependents in each service area in which the insurer provides or
arranges for the provision of health care services. A health insurer
shall limit enrollment in individual health benefit plans to open
enrollment periods and special enrollment periods as provided in
subdivisions (c) and (d).
(2) A health insurer shall allow the policyholder of an individual
health benefit plan to add a dependent to the policyholder's health
benefit plan at the option of the policyholder, consistent with the
open enrollment, annual enrollment, and special enrollment period
requirements in this section.
(b) An individual health benefit plan issued, amended, or renewed
on or after January 1, 2014, shall not impose any preexisting
condition provision upon any individual.
(c) (1) A health insurer shall provide an initial open enrollment
period from October 1, 2013, to March 31, 2014, inclusive, and annual
enrollment periods for plan years on or after January 1, 2015, from
October 15 to December 7, inclusive, of the preceding calendar year.
(2) Pursuant to Section 147.104(b)(2) of Title 45 of the Code of
Federal Regulations, for individuals enrolled in noncalendar-year
individual health plan contracts, a plan shall provide a limited open
enrollment period beginning on the date that is 30 calendar days
prior to the date the policy year ends in 2014.
(d) (1) Subject to paragraph (2), commencing January 1, 2014, a
health insurer shall allow an individual to enroll in or change
individual health benefit plans as a result of the following
triggering events:
(A) He or she or his or her dependent loses minimum essential
coverage. For purposes of this paragraph, both of the following
definitions shall apply:
(i) "Minimum essential coverage" has the same meaning as that term
is defined in subsection (f) of Section 5000A of the Internal
Revenue Code (26 U.S.C. Sec. 5000A).
(ii) "Loss of minimum essential coverage" includes, but is not
limited to, loss of that coverage due to the circumstances described
in Section 54.9801-6(a)(3)(i) to (iii), inclusive, of Title 26 of the
Code of Federal Regulations and the circumstances described in
Section 1163 of Title 29 of the United States Code. "Loss of minimum
essential coverage" also includes loss of that
coverage for a reason that is not due to the
fault of the individual.
(iii) "Loss of minimum essential coverage" does not include loss
of that coverage due to the individual's failure to pay premiums on a
timely basis or situations allowing for a rescission, subject to
clause (ii) and Sections 10119.2 and 10384.17.
(B) He or she gains a dependent or becomes a dependent.
(C) He or she is mandated to be covered as a dependent pursuant to
a valid state or federal court order.
(D) He or she has been released from incarceration.
(E) His or her health coverage issuer substantially violated a
material provision of the health coverage contract.
(F) He or she gains access to new health benefit plans as a result
of a permanent move.
(G) He or she was receiving services from a contracting provider
under another health benefit plan, as defined in Section 10965 or
Section 1399.845 of the Health and Safety Code for one of the
conditions described in subdivision (a) of Section 10133.56 and that
provider is no longer participating in the health benefit plan.
(H) He or she demonstrates to the Exchange, with respect to health
benefit plans offered through the Exchange, or to the department,
with respect to health benefit plans offered outside the Exchange,
that he or she did not enroll in a health benefit plan during the
immediately preceding enrollment period available to the individual
because he or she was misinformed that he or she was covered under
minimum essential coverage.
(I) He or she is a member of the reserve forces of the United
States military returning from active duty or a member of the
California National Guard returning from active duty service under
Title 32 of the United States Code.
(J) With respect to individual health benefit plans offered
through the Exchange, in addition to the triggering events listed in
this paragraph, any other events listed in Section 155.420(d) of
Title 45 of the Code of Federal Regulations.
(2) With respect to individual health benefit plans offered
outside the Exchange, an individual shall have 60 days from the date
of a triggering event identified in paragraph (1) to apply for
coverage from a health care service plan subject to this section.
With respect to individual health benefit plans offered through the
Exchange, an individual shall have 60 days from the date of a
triggering event identified in paragraph (1) to select a plan offered
through the Exchange, unless a longer period is provided in Part 155
(commencing with Section 155.10) of Subchapter B of Subtitle A of
Title 45 of the Code of Federal Regulations.
(e) With respect to individual health benefit plans offered
through the Exchange, the effective date of coverage required
pursuant to this section shall be consistent with the dates specified
in Section 155.410 or 155.420 of Title 45 of the Code of Federal
Regulations, as applicable. A dependent who is a registered domestic
partner pursuant to Section 297 of the Family Code shall have the
same effective date of coverage as a spouse.
(f) With respect to an individual health benefit plan offered
outside the Exchange, the following provisions shall apply:
(1) After an individual submits a completed application form for a
plan, the insurer shall, within 30 days, notify the individual of
the individual's actual premium charges for that plan established in
accordance with Section 10965.9. The individual shall have 30 days in
which to exercise the right to buy coverage at the quoted premium
charges.
(2) With respect to an individual health benefit plan for which an
individual applies during the initial open enrollment period
described in subdivision (c), when the policyholder submits a premium
payment, based on the quoted premium charges, and that payment is
delivered or postmarked, whichever occurs earlier, by December 15,
2013, coverage under the individual health benefit plan shall become
effective no later than January 1, 2014. When that payment is
delivered or postmarked within the first 15 days of any subsequent
month, coverage shall become effective no later than the first day of
the following month. When that payment is delivered or postmarked
between December 16, 2013, and December 31, 2013, inclusive, or after
the 15th day of any subsequent month, coverage shall become
effective no later than the first day of the second month following
delivery or postmark of the payment.
(3) With respect to an individual health benefit plan for which an
individual applies during the annual open enrollment period
described in subdivision (c), when the individual submits a premium
payment, based on the quoted premium charges, and that payment is
delivered or postmarked, whichever occurs later, by December 15,
coverage shall become effective as of the following January 1. When
that payment is delivered or postmarked within the first 15 days of
any subsequent month, coverage shall become effective no later than
the first day of the following month. When that payment is delivered
or postmarked between December 16 and December 31, inclusive, or
after the 15th day of any subsequent month, coverage shall become
effective no later than the first day of the second month following
delivery or postmark of the payment.
(4) With respect to an individual health benefit plan for which an
individual applies during a special enrollment period described in
subdivision (d), the following provisions shall apply:
(A) When the individual submits a premium payment, based on the
quoted premium charges, and that payment is delivered or postmarked,
whichever occurs earlier, within the first 15 days of the month,
coverage under the plan shall become effective no later than the
first day of the following month. When the premium payment is neither
delivered nor postmarked until after the 15th day of the month,
coverage shall become effective no later than the first day of the
second month following delivery or postmark of the payment.
(B) Notwithstanding subparagraph (A), in the case of a birth,
adoption, or placement for adoption, the coverage shall be effective
on the date of birth, adoption, or placement for adoption.
(C) Notwithstanding subparagraph (A), in the case of marriage or
becoming a registered domestic partner or in the case where a
qualified individual loses minimum essential coverage, the coverage
effective date shall be the first day of the month following the date
the insurer receives the request for special enrollment.
(g) (1) A health insurer shall not establish rules for
eligibility, including continued eligibility, of any individual to
enroll under the terms of an individual health benefit plan based on
any of the following 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 subdivision (c) of Section 10291.5, a health
insurer shall not require an individual applicant or his or her
dependent to fill out a health assessment or medical questionnaire
prior to enrollment under an individual health benefit plan. A health
insurer 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.
(h) (1) A health insurer shall consider as a single risk pool for
rating purposes in the individual market the claims experience of all
insureds and enrollees in all nongrandfathered individual health
benefit plans offered by that insurer in this state, whether offered
as health care service plan contracts or individual health insurance
policies, including those insureds who enroll in individual coverage
through the Exchange and insureds who enroll in individual coverage
outside the Exchange. Student health insurance coverage, as such
coverage is defined at Section 147.145(a) of Title 45 of the Code of
Federal Regulations, shall not be included in a health insurer's
single risk pool for individual coverage.
(2) Each calendar year, a health insurer shall establish an index
rate for the individual market in the state based on the total
combined claims costs for providing essential health benefits, as
defined pursuant to Section 1302 of PPACA, 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. The premium rate for all of the health insurer's health
benefit plans in the individual market shall use the applicable index
rate, as adjusted for 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, subject only
to the adjustments permitted under paragraph (3).
(3) A health insurer may vary premium rates for a particular
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 and Section 10112.27. 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 plans
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.
(i) This section shall only apply with respect to individual
health benefit plans for policy years on or after January 1, 2014.
(j) This section shall not apply to an individual health benefit
plan that is a grandfathered health plan.
(k) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), subdivisions (a),
(b), and (g) shall become inoperative 12 months after the date of
that repeal or amendment and individual health care benefit plans
shall thereafter be subject to Sections 10901.2, 10951, and 10953.
10965.5. (a) Commencing on October 1, 2013, a health insurer or
agent or broker shall not, directly or indirectly, engage in the
following activities:
(1) Encourage or direct an individual to refrain from filing an
application for individual coverage with an insurer because of the
health status, claims experience, industry, occupation, or geographic
location, provided that the location is within the insurer's
approved service area, of the individual.
(2) Encourage or direct an individual to seek individual coverage
from another health care service plan or health insurer or the
California Health Benefit Exchange because of the health status,
claims experience, industry, occupation, or geographic location,
provided that the location is within the insurer's approved service
area, of the individual.
(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.
(b) Commencing on October 1, 2013, a health insurer shall not,
directly or indirectly, enter into any contract, agreement, or
arrangement with a broker or agent that provides for or results in
the compensation paid to a broker or agent for the sale of an
individual health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the individual. This subdivision does not apply to a
compensation arrangement that provides compensation to a broker or
agent 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
individual.
(c) This section shall only apply with respect to individual
health benefit plans for policy years on or after January 1, 2014.
(d) This section shall be enforced in the same manner as Section
790.03, including through Sections 790.05 and 790.035.
10965.7. (a) An individual health benefit plan shall be renewable
at the option of the insured except as permitted to be canceled,
rescinded, or not renewed pursuant to Section 155.430(b) of Title 45
of the Code of Federal Regulations.
(b) Any insurer that ceases to offer for sale new individual
health benefit plans pursuant to Section 10273.6 shall continue to be
governed by this chapter with respect to business conducted under
this chapter.
10965.9. (a) With respect to individual health benefit plans
issued, amended, or renewed on or after January 1, 2014, a health
insurer may use only the following characteristics of an individual,
and any dependent thereof, for purposes of establishing the rate of
the individual health benefit plan covering the individual and the
eligible dependents thereof, along with the health benefit plan
selected by the individual:
(1) Age, pursuant to the age bands established by the United
States Secretary of Health and Human Services and the age rating
curve established by the federal Centers for Medicare and Medicaid
Services pursuant to Section 2701(a)(3) of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg(a)(3)). Rates based on age shall be
determined using the individual's age as of the date of the plan
issuance or renewal, as applicable, and shall not vary by more than
three to one for like individuals of different ages who are 21 years
of age or older as described in federal regulations adopted pursuant
to Section 2701(a)(3) of the federal Public Health Service Act (42
U.S.C. Sec. 300gg(a)(3)).
(2) (A) Geographic region. The geographic regions for purposes of
rating shall be the following:
(i) Region 1 shall consist of the Counties of Alpine, Amador,
Butte, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Lake, Lassen,
Mendocino, Modoc, Nevada, Plumas, Shasta, Sierra, Siskiyou, Sutter,
Tehama, Trinity, Tuolumne, and Yuba.
(ii) Region 2 shall consist of the Counties of Marin, Napa,
Solano, and Sonoma.
(iii) Region 3 shall consist of the Counties of El Dorado, Placer,
Sacramento, and Yolo.
(iv) Region 4 shall consist of the City and County of San
Francisco.
(v) Region 5 shall consist of the County of Contra Costa.
(vi) Region 6 shall consist of the County of Alameda.
(vii) Region 7 shall consist of the County of Santa Clara.
(viii) Region 8 shall consist of the County of San Mateo.
(ix) Region 9 shall consist of the Counties of Monterey, San
Benito, and Santa Cruz.
(x) Region 10 shall consist of the Counties of Mariposa, Merced,
San Joaquin, Stanislaus, and Tulare.
(xi) Region 11 shall consist of the Counties of Fresno, Kings, and
Madera.
(xii) Region 12 shall consist of the Counties of San Luis Obispo,
Santa Barbara, and Ventura.
(xiii) Region 13 shall consist of the Counties of Imperial, Inyo,
and Mono.
(xiv) Region 14 shall consist of the County of Kern.
(xv) Region 15 shall consist of the ZIP Codes in the County of Los
Angeles starting with 906 to 912, inclusive, 915, 917, 918, and 935.
(xvi) Region 16 shall consist of the ZIP Codes in the County of
Los Angeles other than those identified in clause (xv).
(xvii) Region 17 shall consist of the Counties of Riverside and
San Bernardino.
(xviii) Region 18 shall consist of the County of Orange.
(xix) Region 19 shall consist of the County of San Diego.
(B) No later than June 1, 2017, the department, in collaboration
with the Exchange and the Department of Managed Heath Care, shall
review the geographic rating regions specified in this paragraph and
the impacts of those regions on the health care coverage market in
California, and make a report to the appropriate policy committees of
the Legislature.
(3) Whether the plan covers an individual or family, as described
in PPACA.
(b) The rate for a health benefit plan subject to this section
shall not vary by any factor not described in this section.
(c) With respect to family coverage under an individual health
benefit plan, the rating variation permitted under paragraph (1) of
subdivision (a) shall be applied based on the portion of the premium
attributable to each family member covered under the plan. The total
premium for family coverage shall be determined by summing the
premiums for each individual family member. In determining the total
premium for family members, premiums for no more than the three
oldest family members who are under 21 years of age shall be taken
into account.
(d) The rating period for rates subject to this section shall be
from January 1 to December 31, inclusive.
(e) This section shall not apply to an individual health benefit
plan that is a grandfathered health plan.
(f) The requirement for submitting a report imposed under
subparagraph (B) of paragraph (2) of subdivision (a) is inoperative
on June 1, 2021, pursuant to Section 10231.5 of the Government Code.
(g) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-4), this section
shall become inoperative 12 months after the date of that repeal or
the amendment.
10965.11. (a) A health insurer shall not be required to offer an
individual health benefit plan or accept applications for the plan
pursuant to Section 10965.3 in the case of any of the following:
(1) To an individual who does not live or reside within the
insurer's approved service areas.
(2) (A) Within a specific service area or portion of a service
area, if the insurer reasonably anticipates and demonstrates to the
satisfaction of the commissioner both of the following:
(i) It will not have sufficient health care delivery resources to
ensure that health care services will be available and accessible to
the individual because of its obligations to existing insureds.
(ii) It is applying this subparagraph uniformly to all individuals
without regard to the claims experience of those individuals or any
health status-related factor relating to those individuals.
(B) A health insurer that cannot offer an individual health
benefit plan to individuals because it is lacking in sufficient
health care delivery resources within a service area or a portion of
a service area pursuant to subparagraph (A) shall not offer an
individual health benefit plan in that area until the later of the
following dates:
(i) The 181st day after the date coverage is denied pursuant to
this paragraph.
(ii) The date the insurer notifies the commissioner that it has
the ability to deliver services to individuals, and certifies to the
commissioner that from the date of the notice it will enroll all
individuals requesting coverage in that area from the insurer.
(C) Subparagraph (B) shall not limit the insurer's ability to
renew coverage already in force or relieve the insurer of the
responsibility to renew that coverage as described in Section
10273.6.
(D) Coverage offered within a service area after the period
specified in subparagraph (B) shall be subject to this section.
(b) (1) A health insurer may decline to offer an individual health
benefit plan to an individual if the insurer demonstrates to the
satisfaction of the commissioner both of the following:
(A) It does not have the financial reserves necessary to
underwrite additional coverage. In determining whether this
subparagraph has been satisfied, the commissioner shall consider, but
not be limited to, the insurer's compliance with the requirements of
this part and the rules adopted thereunder.
(B) It is applying this subdivision uniformly to all individuals
without regard to the claims experience of those individuals or any
health status-related factor relating to those individuals.
(2) A health insurer that denies coverage to an individual under
paragraph (1) shall not offer coverage before the later of the
following dates:
(A) The 181st day after the date coverage is denied pursuant to
this subdivision.
(B) The date the insurer demonstrates to the satisfaction of the
commissioner that the insurer has sufficient financial reserves
necessary to underwrite additional coverage.
(3) Paragraph (2) shall not limit the insurer's ability to renew
coverage already in force or relieve the insurer of the
responsibility to renew that coverage as described in Section
10273.6.
(C) Coverage offered within a service area after the period
specified in paragraph (2) shall be subject to this section.
(c) Nothing in this chapter shall be construed to limit the
commissioner's authority to develop and implement a plan of
rehabilitation for a health insurer whose financial viability or
organizational and administrative capacity has become impaired, to
the extent permitted by PPACA.
(d) This section shall not apply to an individual health benefit
plan that is a grandfathered plan.
10965.13. (a) A health insurer that receives an application for
an individual health benefit plan outside the Exchange during the
initial open enrollment period, an annual enrollment period, or a
special enrollment period described in Section 10965.3 shall inform
the applicant that he or she may be eligible for lower cost coverage
through the Exchange and shall inform the applicant of the applicable
enrollment period provided through the Exchange described in Section
10965.3.
(b) On or before October 1, 2013, and annually every October 1
thereafter, a health insurer shall issue a notice to a policyholder
enrolled in an individual health benefit plan offered outside the
Exchange. The notice shall inform the policyholder that he or she may
be eligible for lower cost coverage through the Exchange and shall
inform the policyholder of the applicable open enrollment period
provided through the Exchange described in Section 10965.3.
(c) This section shall not apply where the individual health
benefit plan described in subdivision (a) or (b) is a grandfathered
health plan.
10965.15. (a) On or before October 1, 2013, and annually every
October 1 thereafter, a health insurer shall issue the following
notice to all policyholders enrolled in an individual health benefit
plan that is a grandfathered health plan:
New improved health insurance options are available in California.
You currently have health insurance that is not required to follow
many of the new laws. For example, your policy may not provide
preventive health services without you having to pay any cost sharing
(copayments or coinsurance). Also your current policy may be allowed
to increase your rates based on your health status while new
policies cannot. You have the option to remain in your current policy
or switch to a new policy. Under the new rules, a health insurance
company cannot deny your application based on any health conditions
you may have. For more information about your options, please contact
Covered California at ____, the Office of Patient Advocate at ____,
your policy representative or insurance agent, or an entity paid by
Covered California to assist with health coverage enrollment, such as
a navigator or an assister.
(b) Commencing October 1, 2013, a health insurer shall include the
notice described in subdivision (a) in any renewal material of the
individual grandfathered health plan and in any application for
dependent coverage under the individual grandfathered health plan.
(c) A health insurer shall not advertise or market an individual
health benefit plan that is a grandfathered health plan for purposes
of enrolling a dependent of a policyholder into the plan for policy
years on or after January 1, 2014. Nothing in this subdivision shall
be construed to prohibit an individual enrolled in an individual
grandfathered health plan from adding a dependent to that plan to the
extent permitted by PPACA.
10965.16. Except as otherwise provided in this chapter, this
chapter shall be implemented to the extent that it meets or exceeds
the requirements set forth in PPACA.
10965.17. (a) The commissioner may, no later than December 31,
2014, adopt emergency regulations implementing this chapter. The
commissioner may readopt any emergency regulation authorized by this
section that is the same as or substantially equivalent to an
emergency regulation previously adopted under this section.
(b) The initial adoption of emergency regulations implementing
this chapter and the one readoption of emergency regulation
authorized by this section shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. Initial emergency regulations and the one
readoption of emergency regulations authorized by this section shall
be exempt from review by the Office of Administrative Law. The
initial emergency regulations and the one readoption of emergency
regulations authorized by this section shall be submitted to the
Office of Administrative Law for filing with the Secretary of State
and each shall remain in effect for no more than one year, by which
time final regulations may be adopted. The commissioner shall consult
with the Director of the Department of Managed Health Care prior to
adopting any regulations pursuant to this subdivision for the
specific purpose of ensuring, to the extent practical, that there is
consistency of regulations applicable to entities regulated by the
commissioner and those regulated by the Department of Managed Health
Care.
SEC. 20. The Insurance Commissioner may adopt regulations, to
implement the changes made to the Insurance Code by this act,
pursuant 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). The commissioner shall consult with the Director of
the Department of Managed Health Care prior to adopting any
regulations pursuant to this subdivision for the specific purpose of
ensuring, to the extent practical, that there is consistency of
regulations applicable to entities regulated by the commissioner and
those regulated by the Department of Managed Health Care.
SEC. 21. This bill shall become operative only if Senate Bill 2 of
the 2013-14 First Extraordinary Session is enacted and becomes
effective.