BILL NUMBER: AB 1401	CHAPTERED
	BILL TEXT

	CHAPTER  794
	FILED WITH SECRETARY OF STATE  SEPTEMBER 22, 2002
	APPROVED BY GOVERNOR  SEPTEMBER 22, 2002
	PASSED THE ASSEMBLY  AUGUST 31, 2002
	PASSED THE SENATE  AUGUST 28, 2002
	AMENDED IN SENATE  AUGUST 20, 2002
	AMENDED IN SENATE  AUGUST 14, 2002
	AMENDED IN SENATE  JUNE 20, 2002
	AMENDED IN SENATE  JUNE 13, 2002
	AMENDED IN SENATE  MAY 30, 2002
	AMENDED IN SENATE  AUGUST 20, 2001
	AMENDED IN SENATE  JULY 5, 2001
	AMENDED IN SENATE  JUNE 25, 2001
	AMENDED IN ASSEMBLY  APRIL 16, 2001

INTRODUCED BY   Assembly Member Thomson
   (Coauthor:  Assembly Member Nation)

                        FEBRUARY 23, 2001

   An act to amend Section 1366.27, to amend, repeal, and add Section
1373.6 of, to add Sections 1363.06, 1363.07, 1366.29, and 1373.622
to, and to add and repeal Section 1373.62 of, the Health and Safety
Code, and to amend Sections 10128.57, 12711, 12725, 12739, 12739.1,
and 12739.2 of, to add Sections 10113.8, 10127.14, 10127.16,
10128.59, and 12682.1 to, and to add and repeal Sections 10127.15 and
12712.5 of, the Insurance Code, relating to health care coverage,
and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1401, Thomson.  Health benefit coverage.
   (1) The California COBRA Program (Cal-COBRA) and other provisions
of existing law require health care service plans and health insurers
to offer health benefit coverage to specified individuals who are
without that coverage.  Existing law also creates the Managed Risk
Medical Insurance Board which administers the California Major Risk
Medical Insurance Program (MRMIP) to provide major risk medical
coverage to residents who are unable to secure adequate private
health coverage.  Under existing law, designated amounts from the
Cigarette and Tobacco Products Surtax Fund are deposited annually
into the Major Risk Medical Insurance Fund, which is continuously
appropriated to pay for the MRMIP expenses.  Existing law imposes
requirements relating to the obligation of a health insurance issuer
to provide coverage through a converted policy to certain individuals
after they become ineligible for coverage through a group plan.
   This bill would revise certain provisions of Cal-COBRA and other
existing laws that require plans and insurers to offer health benefit
coverage to certain individuals.  The bill, in this regard, would,
effective September 1, 2003, revise coverage requirements for
converted policies and would also require a health care service plan
and a health insurer to offer specified individuals who begin
receiving continuation coverage on or after January 1, 2003, and who
have exhausted their continuation coverage under federal continuation
coverage provisions an opportunity to extend the term of their
coverage to 36 months.  The bill would also extend continuation
coverage for specified individuals under Cal-COBRA to 36 months.
   This bill additionally would establish a 4-year pilot program,
commencing September 1, 2003, and terminating September 1, 2007,
requiring that health care service plans and health insurers offer a
standard benefit plan, based on benefit designs offered through the
MRMIP.  Under the pilot program, plans and insurers would be
precluded from rejecting an application for coverage from an
individual who was previously covered under the MRMIP for a period of
36 consecutive months.  The bill would specify the amount of the
individual or insured contribution required in the pilot program and
would require the board to make payments from the Major Risk Medical
Insurance Fund to plans and insurers for the provision of health care
services under the standard benefit plan.  Because the bill would
authorize the expenditure of funds in a continuously appropriated
fund for a new purpose, it would make an appropriation.
   This bill would require the Legislative Analyst to report to the
Legislature on the effectiveness of these provisions in providing
health benefits to individuals who otherwise are unable to obtain
that coverage.  The bill would authorize the Managed Risk Medical
Insurance Board, the Department of Managed Health Care, and the
Department of Insurance to adopt emergency regulations to implement
the provisions of the bill.
   (2) Under existing law, a violation of the provisions of Cal-COBRA
or the Knox-Keene Health Care Service Plan Act of 1975 which
regulates the operations of health care service plans is punishable
as a misdemeanor offense.
   Because this bill would impose additional requirements with
respect to the Knox-Keene Health Care Service Plan Act of 1975 and
Cal-COBRA, the violation of which would be punishable as a criminal
offense, it would impose a state-mandated local program.
  (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1363.06 is added to the Health and Safety Code,
to read:
   1363.06.  (a) The Department of Managed Health Care and the
Department of Insurance shall compile information as required by this
section and Section 10127.14 of the Insurance Code into two
comparative benefit matrices.  The first matrix shall compare benefit
packages offered pursuant to Section 1373.62 and Section 10127.15 of
the Insurance Code.  The second matrix shall compare benefit
packages offered pursuant to Sections 1366.35, 1373.6, and 1399.804
and Sections 10785, 10901.2, and 12682.1 of the Insurance Code.
   (b) The comparative benefit matrix shall include:
   (1) Benefit information submitted by health care service plans
pursuant to subdivision (d) and by health insurers pursuant to
Section 10127.14 of the Insurance Code.
   (2) The following statements in at least 12-point type at the top
of the matrix:
   (A) "This benefit summary is intended to help you compare coverage
and benefits and is a summary only.  For a more detailed description
of coverage, benefits, and limitations, please contact the health
care service plan or health insurer."
   (B) "The comparative benefit summary is updated annually, or more
often if necessary to be accurate."
   (C) "The most current version of this comparative benefit summary
is available on (address of the plan's or insurer's site)."
   This subparagraph applies only to those plans or insurers that
maintain an Internet Web site.
   (3) The telephone number or numbers that may be used by an
applicant to contact either the department or the Department of
Insurance, as appropriate, for further assistance.
   (c) The Department of Managed Health Care and the Department of
Insurance shall jointly prepare two standardized templates for use by
health care service plans and health insurers in submitting the
information required pursuant to subdivision (d) and subdivision (d)
of Section 10127.14 of the Insurance Code.  The templates shall be
exempt from the provisions of Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code.
   (d) Health care service plans, except specialized health care
service plans, shall submit the following to the department by
January 31, 2003, and annually thereafter:
   (1) A summary explanation of the following for each product
described in subdivision (a).
   (A) Eligibility requirements.
   (B) The full premium cost of each benefit package in the service
area in which the individual and eligible dependents work or reside.

   (C) When and under what circumstances benefits cease.
   (D) The terms under which coverage may be renewed.
   (E) Other coverage that may be available if benefits under the
described benefit package cease.
   (F) The circumstances under which choice in the selection of
physicians and providers is permitted.
   (G) Lifetime and annual maximums.
   (H) Deductibles.
   (2) A summary explanation of coverage for the following, together
with the corresponding copayments and limitations, for each product
described in subdivision (a):
   (A) Professional services.
   (B) Outpatient services.
   (C) Hospitalization services.
   (D) Emergency health coverage.
   (E) Ambulance services.
   (F) Prescription drug coverage.
   (G) Durable medical equipment.
   (H) Mental health services.
   (I) Residential treatment.
   (J) Chemical dependency services.
   (K) Home health services.
   (L) Custodial care and skilled nursing facilities.
   (3) The telephone number or numbers that may be used by an
applicant to access a health care service plan customer service
representative and to request additional information about the plan
contract.
   (4) Any other information specified by the department in the
template.
   (e) Each health care service plan shall provide the department
with updates to the information required by subdivision (d) at least
annually, or more often if necessary to maintain the accuracy of the
information.
   (f) The department and the Department of Insurance shall make the
comparative benefit matrices available on their respective Internet
Web sites and to the health care service plans and health insurers
for dissemination as required by Section 1373.6 and Section 12682.1
of the Insurance Code, after confirming the accuracy of the
description of the matrices with the health care service plans and
health insurers.
   (g) As used in this section and Section 1363.07, "benefit matrix"
shall have the same meaning as benefit summary.
  SEC. 2.  Section 1363.07 is added to the Health and Safety Code, to
read:
   1363.07.  (a) Each health care service plan shall send copies of
the comparative benefit matrix prepared pursuant to Section 1363.06
on an annual basis, or more frequently as the matrix is updated by
the department and the Department of Insurance, to solicitors and
solicitor firms and employers with whom the plan contracts.
   (b) Each health care service plan shall require its
representatives and solicitors and soliciting firms with which it
contracts, to provide a copy of the comparative benefit matrix to
individuals when presenting any benefit package for examination or
sale.
   (c) Each health care service plan that maintains an Internet Web
site shall make a downloadable copy of the comparative benefit matrix
described in Section 1373.06 available through its site and shall
ensure that the most current update of the matrix is available on its
site.
  SEC. 3.  Section 1366.27 of the Health and Safety Code is amended
to read:
   1366.27.  (a) The continuation coverage provided pursuant to this
article shall terminate at the first to occur of the following:
   (1) In the case of a qualified beneficiary who is eligible for
continuation coverage pursuant to paragraph (2) of subdivision (d) of
Section 1366.21, the date 36 months after the date the qualified
beneficiary's benefits under the contract would otherwise have
terminated because of a qualifying event.
   (2) The end of the period for which premium payments were made, if
the qualified beneficiary ceases to make payments or fails to make
timely payments of a required premium, in accordance with the terms
and conditions of the plan contract.  In the case of nonpayment of
premiums, reinstatement shall be governed by the terms and conditions
of the plan contract.
   (3) In the case of a qualified beneficiary who is eligible for
continuation coverage pursuant to paragraph (1), (3), (4), or (5) of
subdivision (d) of Section 1366.21, the date 36 months after the date
the qualified beneficiary's benefits under the contract would
otherwise have terminated by reason of a qualifying event.
   (4) The requirements of this article no longer apply to the
qualified beneficiary pursuant to the provisions of Section 1366.22.

   (5) In the case of a qualified beneficiary who is eligible for
continuation coverage pursuant to paragraph (2) of subdivision (d) of
Section 1366.21, and determined, under Title II or Title XVI of the
Social Security Act, to be disabled at any time during the first 60
days of continuation coverage, and the spouse or dependent who has
elected coverage pursuant to this article, the date 36 months after
the date the qualified beneficiary's benefits under the contract
would otherwise have terminated because of a qualifying event.  The
qualified beneficiary shall notify the plan, or the employer or
administrator that contracts to perform administrative services, of
the social security determination within 60 days of the date of the
determination letter and prior to the end of the original 36-month
continuation coverage period in order to be eligible for coverage
pursuant to this subdivision.  If the qualified beneficiary is no
longer disabled under Title II or Title XVI of the Social Security
Act, the benefits provided in this paragraph shall terminate on the
later of the date provided by paragraph (1), or the month that begins
more than 31 days after the date of the final determination under
Title II or Title XVI of the United States Social Security Act that
the qualified beneficiary is no longer disabled.  A qualified
beneficiary eligible for 36 months of continuation coverage as a
result of a disability shall notify the plan, or the employer or
administrator that contracts to perform the notice and administrative
services, within 30 days of a determination that the qualified
beneficiary is no longer disabled.
   (6) In the case of a qualified beneficiary who is initially
eligible for and elects continuation coverage pursuant to paragraph
(2) of subdivision (d) of Section 1366.21, but who has another
qualifying event, as described in paragraph (1), (3), (4), or (5) of
subdivision (d) of Section 1366.21, within 36 months of the date of
the first qualifying event, and the qualified beneficiary has
notified the plan, or the employer or administrator under contract to
provide administrative services, of the second qualifying event
within 60 days of the date of the second qualifying event, the date
36 months after the date of the first qualifying event.
   (7) The employer, or any successor employer or purchaser of the
employer, ceases to provide any group benefit plan to his or her
employees.
   (8) The qualified beneficiary moves out of the plan's service area
or the qualified beneficiary commits fraud or deception in the use
of plan services.
   (b) If the group contract between the plan and the employer is
terminated prior to the date the qualified beneficiary's continuation
coverage would terminate pursuant to this section, coverage under
the prior plan shall terminate and the qualified beneficiary may
elect continuation coverage under the subsequent group benefit plan,
if any, pursuant to the requirements of subdivision (b) of Section
1366.23 and subdivision (c) of Section 1366.24.
   (c) The amendments made to this section by Assembly Bill 1401 of
the 2001-02 Regular Session shall apply to individuals who begin
receiving continuation coverage under this article on or after
January 1, 2003.
  SEC. 4.  Section 1366.29 is added to the Health and Safety Code, to
read:
   1366.29.  (a) A health care service plan shall offer an enrollee
who has exhausted continuation coverage under COBRA the opportunity
to continue coverage for up to 36 months from the date the enrollee's
continuation coverage began, if the enrollee is entitled to less
than 36 months of continuation coverage under COBRA.  The health care
service plan shall offer coverage pursuant to the terms of this
article, including the rate limitations contained in Section 1366.26.

   (b) Notification of the coverage available under this section
shall be included in the notice of the pending termination of COBRA
coverage that is required to be provided to COBRA beneficiaries and
that is required to be provided under Section 1366.24.
   (c) For purposes of this section, "COBRA" means Section 4980B of
Title 26 of the United States Code, Sections 1161 et seq. of Title 29
of the United States Code, and Section 300bb of Title 42 of the
United States Code.
   (d) This section shall not apply to specialized health care
service plans providing noncore coverage, as defined in subdivision
(g) of Section 1366.21.
   (e) This section shall become operative on September 1, 2003, and
shall apply to individuals who begin receiving COBRA coverage on or
after January 1, 2003.
  SEC. 5.  Section 1373.6 of the Health and Safety Code is amended to
read:
   1373.6.  This section does not apply to a specialized health care
service plan contract or to a plan contract that primarily or solely
supplements Medicare.  The director may adopt rules consistent with
federal law to govern the discontinuance and replacement of plan
contracts that primarily or solely supplement Medicare.
   (a) (1) Every group contract entered into, amended, or renewed on
or after September 1, 2003, that provides hospital, medical, or
surgical expense benefits for employees or members shall provide that
an employee or member whose coverage under the group contract has
been terminated by the employer shall be entitled to convert to
nongroup membership, without evidence of insurability, subject to the
terms and conditions of this section.
   (2) If the health care service plan provides coverage under an
individual health care service plan contract, other than conversion
coverage under this section, it shall offer one of the two plans that
it is required to offer to a federally eligible defined individual
pursuant to Section 1366.35.  The plan shall provide this coverage at
the same rate established under Section 1399.805 for a federally
eligible defined individual.  A health care service plan that is
federally qualified under the federal Health Maintenance Organization
Act (42 U.S.C. Sec. 300e et seq.) may charge a rate for the coverage
that is consistent with the provisions of that act.
   (3) If the health care service plan does not provide coverage
under an individual health care service plan contract, it shall offer
a health benefit plan contract that is the same as a health benefit
contract offered to a federally eligible defined individual pursuant
to Section 1366.35.  The health care service plan may offer either
the most popular health maintenance organization model plan or the
most popular preferred provider organization plan, each of which has
the greatest number of enrolled individuals for its type of plan as
of January 1 of the prior year, as reported by plans that provide
coverage under an individual health care service plan contract to the
department or the Department of Insurance by January 31, 2003, and
annually thereafter.  A health care service plan subject to this
paragraph shall provide this coverage with the same cost-sharing
terms and at the same premium as a health care service plan providing
coverage to that individual under an individual health care service
plan contract pursuant to Section 1399.805.  The health care service
plan shall file the health benefit plan it will offer, including the
premium it will charge and the cost-sharing terms of the plan, with
the Department of Managed Health Care.
   (b) A conversion contract shall not be required to be made
available to an employee or member if termination of his or her
coverage under the group contract occurred for any of the following
reasons:
   (1) The group contract terminated or an employer's participation
terminated and the group contract is replaced by similar coverage
under another group contract within 15 days of the date of
termination of the group coverage or the subscriber's participation.

   (2) The employee or member failed to pay amounts due the health
care service plan.
   (3) The employee or member was terminated by the health care
service plan from the plan for good cause.
   (4) The employee or member knowingly furnished incorrect
information or otherwise improperly obtained the benefits of the
plan.
   (5) The employer's hospital, medical, or surgical expense benefit
program is self-insured.
   (c) A conversion contract is not required to be issued to any
person if any of the following facts are present:
   (1) The person is covered by or is eligible for benefits under
Title XVIII of the United States Social Security Act.
   (2) The person is covered by or is eligible for hospital, medical,
or surgical benefits under any arrangement of coverage for
individuals in a group, whether insured or self-insured.
   (3) The person is covered for similar benefits by an individual
policy or contract.
   (4) The person has not been continuously covered during the
three-month period immediately preceding that person's termination of
coverage.
   (d) Benefits of a conversion contract shall meet the requirements
for benefits under this chapter.
   (e) Unless waived in writing by the plan, written application and
first premium payment for the conversion contract shall be made not
later than 63 days after termination from the group.  A conversion
contract shall be issued by the plan which shall be effective on the
day following the termination of coverage under the group contract if
the written application and the first premium payment for the
conversion contract are made to the plan not later than 63 days after
the termination of coverage, unless these requirements are waived in
writing by the plan.
   (f) The conversion contract shall cover the employee or member and
his or her dependents who were covered under the group contract on
the date of their termination from the group.
   (g) A notification of the availability of the conversion coverage
shall be included in each evidence of coverage.  However, it shall be
the sole responsibility of the employer to notify its employees of
the availability, terms, and conditions of the conversion coverage
which responsibility shall be satisfied by notification within 15
days of termination of group coverage.  Group coverage shall not be
deemed terminated until the expiration of any continuation of the
group coverage.  For purposes of this subdivision, the employer shall
not be deemed the agent of the plan for purposes of notification of
the availability, terms, and conditions of conversion coverage.
   (h) As used in this section, "hospital, medical, or surgical
benefits under state or federal law" do not include benefits under
Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing
with Section 14200) of Part 3 of Division 9 of the Welfare and
Institutions Code, or Title XIX of the United States Social Security
Act.
   (i) Every group contract entered into, amended, or renewed before
September 1, 2003, shall be subject to the provisions of this section
as it read prior to its amendment by Assembly Bill 1401 of the
2001-02 Regular Session.
  SEC. 6.  Section 1373.62 is added to the Health and Safety Code, to
read:
   1373.62.  (a) (1) This section shall apply only to a health care
service plan offering hospital, medical, or surgical benefits in the
individual market in California and shall not apply to a specialized
health care service plan, a health care service plan contract in the
Medi-Cal program (Chapter 7 (commencing with Section 14000) of Part 3
of Division 9 of the Welfare and Institutions Code), a health care
service plan conversion contract offered pursuant to Section 1373.6,
or a health care service plan contract in the Healthy Families
Program (Part 6.2 (commencing with Section 12693) of Division 2 of
the Insurance Code).
   (2) A local initiative, as defined in subdivision (v) of Section
53810 of Title 22 of the California Code of Regulations, that is
awarded a contract by the State Department of Health Services
pursuant to subdivision (b) of Section 53800 of Title 22 of the
California Code of Regulations shall not be subject to the
requirements of this section.
   (b) For the purposes of this section, "program" means the
California Major Risk Medical Insurance Program (Part 6.5 (commencing
with Section 12700) of Division 2 of the Insurance Code).
   (c) (1) Each health care service plan subject to this section
shall offer a standard benefit plan.  The calendar year limit on
benefits under the plan shall be at least two hundred thousand
dollars ($200,000), and the lifetime maximum benefit under the plan
shall be at least seven hundred fifty thousand dollars ($750,000).
No health care service plan is required to provide calendar year
benefits or a lifetime maximum benefit under the plan that exceed
these limits.  In calculating the calendar year and lifetime maximum
benefits for any person receiving coverage through a standard benefit
plan, the health care service plan shall not include any health care
benefits or services that person received while enrolled in the
program.
   (2) The standard benefit plan of a health care service plan
participating in the program shall be the same benefit design it
offers through the program, except for the annual limit required
under paragraph (1).  If the health care service plan offers more
than one benefit design in the program, it shall offer only one of
those benefit designs as its standard benefit plan.
   (3) (A) The standard benefit plan of a health care service plan
that is not a participating health plan within the program shall be
any one benefit design that is offered through the program by a
health care service plan participating in the program, except for the
annual limit required under paragraph (1).
   (B) A health care service plan that is not a participating health
plan in the program that is under common ownership with, is
affiliated with, or files consolidated income tax returns with, a
health insurer that is also an insurer in the individual market may
satisfy the requirements of this section and Section 10127.15 of the
Insurance Code if either the plan or insurer offers a standard
benefit plan.
   (C) A health care service plan that is not a participating health
plan in the program that is under common ownership with, is
affiliated with, or files consolidated income tax returns with, a
health insurer that is in the individual market and that is a
participating health plan in the program is exempt from the
provisions of this section if the insurer meets the requirements of
Section 10127.15 of the Insurance Code in offering a standard benefit
plan.
   (d) (1) A health care service plan may not reject an application
for coverage under its standard benefit plan for an individual who
meets any of the following criteria:  (A) Applies for coverage within
63 days of the termination date of his or her previous coverage
under the program if the individual has had continuous coverage under
the program for a period of 36 consecutive months.
   (B) Has been enrolled in a standard benefit plan, moves to an area
within the state that is not in the service area of the health care
service plan or health insurer he or she has chosen, and applies for
coverage within 63 days of the termination date of his or her
previous coverage.
   (C) Has been enrolled in standard benefit plan that is no longer
available where he or she resides, and applies for coverage within 63
days of the termination date of his or her previous coverage.
   (2) Notwithstanding any other provision of this section, a health
care service plan is not required by this section to accept an
application for coverage under its standard benefit plan for any
individual who is eligible for Part A and Part B of Medicare at the
time of application and who is not on Medicare solely because of
end-stage renal disease.
   (e) The amount paid by an individual for the standard benefit plan
shall be 110 percent of the contribution the individual would pay in
the program for the benefit design providing the same coverage,
using the same methodology in effect on July 1, 2002, for calculating
the rates in the program.  If a health care service plan offers
calendar year and lifetime maximum benefits in its standard benefit
plan that exceed those in the benefit design offered through the
program, it may not increase the amount paid by the individual for
the standard benefit plan.  The limitation on the amount paid by an
individual pursuant to this section for a standard benefit plan shall
not apply to any individual who is eligible for Part A and Part B of
Medicare and who is not on Medicare solely because of end-stage
renal disease.
   (f) (1) Prior to offering a health benefit plan contract pursuant
to this section, every health care service plan shall file a notice
of material modification pursuant to Section 1352.  Prior to renewing
the contract, the plan shall file an amendment or a notice of
material modification, as appropriate, pursuant to Section 1352.
   (2) Prior to making any changes in the premium charged for its
standard benefit plan, the health care service plan shall file an
amendment in accordance with the provisions of Section 1352 and shall
include a statement certifying the plan is in compliance with
subdivision (e).
   (3) All other changes to a plan contract that was previously filed
with the director shall be filed as an amendment in accordance with
the provisions of Section 1352, unless the change otherwise would
require the filing of a material modification.
   (g) (1) Each health care service plan shall report to the Managed
Risk Medical Insurance Board the amount it has expended for health
care services for individuals covered under a standard benefit plan
under this section and the total amount of individual payments it has
charged individuals for the standard benefit plan.  The board shall
establish by regulation the format for these reports.  The report
shall be prepared for each of the following reporting periods and
shall be submitted within 12 months of the final date of the
reporting period:
   (A) September 1, 2003, to December 31, 2003, inclusive.
   (B) January 1, 2004, to December 31, 2004, inclusive.
   (C) January 1, 2005, to December 31, 2005, inclusive.
   (D) January 1, 2006, to December 31, 2006, inclusive.
   (E) January 1, 2007, to August 30, 2007, inclusive.
   (2) "Health care services" means the aggregate health care
expenses paid by the health care service plan or insurer during the
reporting period plus the aggregate value of the standard monthly
administrative fee.  Health care expenses do not include costs that
have been incurred but not reported by the health care service plan.
The calculation of health care expenses shall be consistent with the
methodology used on July 1, 2002, to calculate such expenses for
participating health plans in the program.  The "standard monthly
administrative fee" is the average monthly, per person administrative
fee paid by the program to participating health plans during the
reporting period.
   (3) The "total amount of individual payments" is the aggregate of
the monthly individual payments charged by the health care service
plan during the reporting period.  The calculation of the total
amount of individual payments charged shall be consistent with the
methodology used on July 1, 2002, to calculate subscriber
contributions in the program.  The Managed Risk Medical Insurance
Board shall by regulation establish the format for submitting
documentation of the individual payments.
   (4) The Managed Risk Medical Insurance Board may verify the health
care expenses incurred by a health care service plan and the
individual payments received by the plan.  The verification shall
include assurance that the individual was enrolled in the standard
benefit plan during the reporting period in which the health care
service plan paid health care expenses on the individual's behalf,
and that the expenses reported are consistent with the standard
benefit plan.
                                                         (h) (1) The
program shall pay each health care service plan an amount that is
equal to one-half of the difference between the total aggregate
amount the health care service plan expended for health care services
for individuals covered under a standard benefit plan who have had
36 consecutive months of coverage under the program and the total
aggregate amount of individual payments charged to those individuals
who have had continuous coverage under the program for a period of 36
consecutive months.  For purposes of determining the amount the
program shall pay each health care service plan, the total aggregate
amount the health care service plan expended and the total aggregate
amount of individual payments shall not include amounts paid by or on
behalf of an individual who is eligible for Medicare Part A and
Medicare Part B and who is not on Medicare solely because of
end-stage renal disease.  The program shall make this payment from
the Major Risk Medical Insurance Fund or from any funds appropriated
in the annual Budget Act or by another statute to the program for the
purposes of this section.  The state shall not be liable for any
amount in excess of the moneys in the Major Risk Medical Insurance
Fund or other funds that were appropriated for the purposes of this
section.  If the state fails to expend, pursuant to this section,
sufficient funds for the state's contribution amount to any health
care service plan, the health care service plan may increase the
monthly payments that individuals are required to pay for any
standard benefit plan to the amount that the Managed Risk Medical
Insurance Board would charge without a state subsidy for the same
plan issued to the same individual within the program.
   (2) The Managed Risk Medical Insurance Board shall make a biannual
interim payment to each health care service plan providing coverage
pursuant to this section.  For the first two reporting periods
described in this section, biannual interim payments shall be
calculated for each individual as the product of the average premium
in the program for the period of time the individual was enrolled
during that reporting period and one-half of the difference between
the program's prior calendar year loss ratio and 110 percent.  For
subsequent reporting periods, the Managed Risk Medical Insurance
Board may, by regulation, adopt for each health care service plan a
specific method for calculating biannual interim payments based on
the plan's actual experience in providing the benefits described in
this section.  Each health care service plan shall submit a six-month
interim report of monthly individual enrollment in its standard
benefit plan.  The Managed Risk Medical Insurance Board shall make an
interim payment to each health care service plan pursuant to this
section no later than 45 days after the receipt of the plan's
enrollment reports.  Final payment by the board or refund from the
health care service plan shall be made upon the completion of
verification activities conducted pursuant to this section.
   (i) The provisions of this section constitute a pilot program that
shall terminate on September 1, 2007.
   (j) This section shall become operative on September 1, 2003, and
shall become inoperative on September 1, 2007.  As of January 1,
2008, this section is repealed, unless a later enacted statute, that
becomes operative on or before January 1, 2008, deletes or extends
the dates on which this section becomes inoperative and is repealed.

  SEC. 7.  Section 1373.622 is added to the Health and Safety Code,
to read:
   1373.622.  (a) After the termination of the pilot program under
Section 1373.62, a health care service plan shall continue to provide
coverage under the same terms and conditions specified in Section
1376.62 as it existed on January 1, 2006, including the terms of the
standard benefit plan and the subscriber payment amount, to each
individual who was terminated from the program pursuant to
subdivision (f) of Section 12725 of the Insurance Code during the
term of the pilot program and who enrolled or applied to enroll in a
standard benefit plan within 63 days of termination.  The Managed
Risk Medical Insurance Board shall continue to pay the amount
described in Section 1376.62 for each of those individuals.  A health
care service plan shall not be required to offer the coverage
described in Section 1373.62 after the termination of the pilot
program to individuals not already enrolled in the program.
   (b) If the state fails to expend, pursuant to this section,
sufficient funds for the state's contribution amount to any health
care service plan, the health care service plan may increase the
monthly payments that its subscribers are required to pay for any
standard benefit plan to the amount that the Managed Risk Medical
Insurance Board would charge without a state subsidy for the same
plan issued to the same individual within the program.
  SEC. 8.  Section 10113.8 is added to the Insurance Code, to read:
   10113.8.  (a) Each health insurer that maintains an Internet Web
site shall make a downloadable copy of the comparative benefit matrix
prepared pursuant to Section 10127.14 available through its site and
ensure that the most current update of the matrix is available on
its site.
   (b) Each health insurer shall send copies of the comparative
benefit matrix on an annual basis, or more frequently as the matrix
is updated by the department and the Department of Managed Health
Care, to solicitors and solicitor firms and employers with whom it
contracts.  Each health insurer shall require its representatives and
the solicitors and soliciting firms with which it contracts, to
provide a copy of the comparative benefit matrix to individuals when
presenting any benefit package for examination or sale.
   (c) This section shall not apply to accident-only, specified
disease, hospital indemnity, CHAMPUS supplement, long-term care,
Medicare supplement, dental-only, or vision-only insurance policies.

  SEC. 9.  Section 10127.14 is added to the Insurance Code, to read:

   10127.14.  (a) The department and the Department of Managed Health
Care shall compile information required by this section and Section
1363.06 of the Health and Safety Code into two comparative benefit
matrices.  The first matrix shall compare benefit packages offered
pursuant to Section 1373.62 of the Health and Safety Code and Section
10127.15.  The second matrix shall compare benefit packages offered
pursuant to Sections 1366.35, 1373.6, and 1399.804 of the Health and
Safety Code and Sections 10785, 10901.2, and 12682.1.
   (b) The comparative benefit matrix shall include:
   (1) Benefit information submitted by health care service plans
pursuant to Section 1363.06 of the Health and Safety Code and by
health insurers pursuant to subdivision (d).
   (2) The following statements in at least 12-point type at the top
of the matrix:
   (A) "This benefit summary is intended to help you compare coverage
and benefits and is a summary only.  For a more detailed description
of coverage, benefits, and limitations, please contact the health
care service plan or health insurer."
   (B) "The comparative benefit summary is updated annually, or more
often if necessary to be accurate."
   (C) "The most current version of this comparative benefit summary
is available on (address of the plan's or insurer's site)."
   This subparagraph applies only to those health insurers that
maintain an Internet Web site.
   (3) The telephone number or numbers that may be used by an
applicant to contact either the department or the Department of
Managed Health Care, as appropriate, for further assistance.
   (c) The department and the Department of Managed Health Care shall
jointly prepare two standardized templates for use by health care
service plans and health insurers in submitting the information
required pursuant to subdivision (d) of Section 1363.06 and
subdivision (d).  The templates shall be exempt from the provisions
of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code.
   (d) Health insurers shall submit the following to the department
by January 31, 2003, and annually thereafter:
   (1) A summary explanation of the following for each product
described in subdivision (a):
   (A) Eligibility requirements.
   (B) The full premium cost of each benefit package in the service
area in which the individual and eligible dependents work or reside.

   (C) When and under what circumstances benefits cease.
   (D) The terms under which coverage may be renewed.
   (E) Other coverage that may be available if benefits under the
described benefit package cease.
   (F) The circumstances under which choice in the selection of
physicians and providers is permitted.
   (G) Lifetime and annual maximums.
   (H) Deductibles.
   (2) A summary explanation of the following coverages, together
with the corresponding copayments and limitations, for each product
described in subdivision (a):
   (A) Professional services.
   (B) Outpatient services.
   (C) Hospitalization services.
   (D) Emergency health coverage.
   (E) Ambulance services.
   (F) Prescription drug coverage.
   (G) Durable medical equipment.
   (H) Mental health services.
   (I) Residential treatment.
   (J) Chemical dependency services.
   (K) Home health services.
   (L) Custodial care and skilled nursing facilities.
   (3) The telephone number or numbers that may be used by an
applicant to access a health insurer customer service representative
and to request additional information about the insurance policy.
   (4) Any other information specified by the department in the
template.
   (e) Each health insurer shall provide the department with updates
to the information required by subdivision (d) at least annually, or
more often if necessary to maintain the accuracy of the information.

   (f) The department and the Department of Managed Health Care shall
make the comparative benefit matrices available on their respective
Internet Web sites and to the health care service plans and health
insurers for dissemination as required by Section 1373.6 of the
Health and Safety Code and Section 12682.1, after confirming the
accuracy of the description of the matrices with the health insurers
and health care service plans.
   (g) As used in this section, "benefit matrix" shall have the same
meaning as benefit summary.
   (h) This section shall not apply to accident-only, specified
disease, hospital indemnity, CHAMPUS supplement, long-term care,
Medicare supplement, dental-only, or vision-only insurance policies.

  SEC. 10.  Section 10127.15 is added to the Insurance Code, to read:

   10127.15.  (a) (1) This section shall apply only to a health
insurer offering hospital, medical, or surgical benefits in the
individual market in California and shall not apply to accident-only,
specified disease, long-term care, CHAMPUS supplement, hospital
indemnity, Medicare supplement, dental-only, or vision-only insurance
policies or a health insurance conversion policy issued pursuant to
Part 6.1 (commencing with Section 12670) of the Insurance Code.
   (2) A local initiative, as defined in subdivision (v) of Section
53810 of Title 22 of the California Code of Regulations, that is
awarded a contract by the State Department of Health Services
pursuant to subdivision (b) of Section 53800 of Title 22 of the
California Code of Regulations shall not be subject to the
requirements of this section.
   (b) For the purposes of this section, "program" means the
California Major Risk Medical Insurance Program (Part 6.5 (commencing
with Section 12700)).
   (c) (1) Each health insurer subject to this section shall offer a
standard benefit plan.  The calendar year limit on benefits under the
plan shall be at least two hundred thousand dollars ($200,000), and
the lifetime maximum benefit under the plan shall be at least seven
hundred fifty thousand dollars ($750,000).  No health insurer is
required to provide calendar year benefits or a lifetime maximum
benefit under the plan that exceed these limits.  In calculating the
calendar year and lifetime maximum benefits for any person receiving
coverage through a standard benefit plan, the health insurer shall
not include any health care benefits or services that person received
while enrolled in the program.
   (2) The standard benefit plan of a health insurer participating in
the program shall be the same benefit design it offers through the
program, except for the annual limit required under paragraph (1).
If the health insurer offers more than one benefit design in the
program, it shall offer only one of those benefit designs as its
standard benefit plan.
   (3) (A) The standard benefit plan of a health insurer that is not
a participating health plan within the program shall be any one
benefit design that is offered through the program by a health care
service plan participating in the program except for the annual limit
required under paragraph (1).
   (B) A health insurer that is not a participating health plan
within the program that is under common ownership with, is affiliated
with, or files consolidated income tax returns with, a health care
service plan that is in the individual market, may satisfy the
requirements of this section and Section 1373.62 of the Health and
Safety Code if either the plan or insurer offers a standard benefit
plan.
   (C) A health insurer that is not a participating health plan in
the program that is under common ownership with, is affiliated with,
or files consolidated income tax returns with a health care service
plan that is in the individual market and that is a participating
health plan in the program is exempt from the provisions of this
section if the plan meets the requirements of Section 1373.62 of the
Health and Safety Code in offering a standard benefit plan.
   (d) (1) A health insurer may not reject an application for
coverage under its standard benefit plan for an individual who meets
any of the following criteria:
   (A) Applies for coverage within 63 days of the termination date of
his or her previous coverage under the program if the individual has
had continuous coverage under the program for a period of 36
consecutive months.
   (B) Has been enrolled in a standard benefit plan, moves to an area
within the state that is not in the service area of the health care
service plan or health insurer he or she has chosen, and applies for
coverage within 63 days of the termination date of his or her
previous coverage.
   (C) Has been enrolled in standard benefit plan that is no longer
available where he or she resides, and applies for coverage within 63
days of the termination date of his or her previous coverage.
   (2) Notwithstanding any other provision of this section, a health
insurer is not required by this section to accept an application for
coverage under its standard benefit plan for any individual who is
eligible for Part A and Part B of Medicare at the time of application
and who is not on Medicare.
   (e) The amount paid by an insured for the standard benefit plan
shall be 110 percent of the contribution the insured would pay in the
program for the benefit design providing the same coverage, using
the same methodology in effect on July 1, 2002, for calculating the
rates in the program.  If a health insurer offers calendar year and
lifetime maximum benefits in its standard benefit plan that exceed
those in the benefit design offered through the program, it may not
increase the amount paid by the insured for the standard benefit
plan.  The limitation on the amount paid by an individual pursuant to
this section for a standard benefit plan shall not apply to any
individual who is eligible for Part A and Part B of Medicare and who
is not on Medicare solely because of end-stage renal disease.
   (f) (1) Prior to offering a health insurance policy pursuant to
this section, every insurer shall file a notice of any changes
pursuant to Section 10290 and to Section 2202 of Title 10 of the
California Code of Regulations.  Prior to renewing a policy, the
insurer shall file an amendment or notice of any changes, as
appropriate, pursuant to Section 10290 and to Section 2202 of Title
10 of the California Code of Regulations.
   (2) Prior to making any changes in the premium charged for its
standard benefit policy, the insurer shall file an amendment in
accordance with the provisions of Section 10290 and of Section 2202
of Title 10 of the California Code of Regulations.
   (3) All other changes to an insurance policy that were previously
filed with the commissioner shall be filed as amendments in
accordance with the provisions of Section 10290 and of Section 2202
of Title 10 of the California Code of Regulations.
   (g) (1) Each health insurer shall report to the Managed Risk
Medical Insurance Board the amount it has expended for health care
services for individuals covered under a standard benefit plan under
this section and the total amount of insured payments it has charged
individuals for the standard benefit plan.  The board shall establish
by regulation the format for these reports.  The report shall be
prepared for each of the following reporting periods and shall be
submitted within 12 months of the final date of the reporting period:

   (A) September 1, 2003, to December 31, 2003, inclusive.
   (B) January 1, 2004, to December 31, 2004, inclusive.
   (C) January 1, 2005, to December 31, 2005, inclusive.
   (D) January 1, 2006, to December 31, 2006, inclusive.
   (E) January 1, 2007, to August 30, 2007, inclusive.
   (2) "Health care services" means the aggregate health care
expenses paid by the health insurer during the reporting period plus
the aggregate value of the standard monthly administrative fee.
Health care expenses do not include costs that have been incurred but
not reported by the health insurer.  The calculation of health care
expenses shall be consistent with the methodology used on July 1,
2002, to calculate such expenses for participating health insurers in
the program.  The "standard monthly administrative fee" is the
average monthly, per person administrative fee paid by the program to
participating health insurers during the reporting period.
   (3) The "total amount of insured payments" is the aggregate of the
monthly insured payments charged by the health insurer during the
reporting period.  The calculation of the total amount of insured
payments charged shall be consistent with the methodology used on
July 1, 2002, to calculate subscriber contributions in the program.
The Managed Risk Medical Insurance Board shall by regulation
establish the format for submitting documentation of insured
payments.
   (4) The Managed Risk Medical Insurance Board may verify the health
care expenses incurred by a health insurer and the insured payments
received by the insurer.  The verification shall include assurance
that the insured was covered in the standard benefit plan during the
reporting period in which the health insurer paid health care
expenses on the insured's behalf, and that the expenses reported are
consistent with the standard benefit plan.
   (h) (1) The program shall pay each health insurer an amount that
is equal to one-half of the difference between the total aggregate
amount the health insurer expended for health care services for
individuals covered under a standard benefit plan who have had 36
months of continuous coverage under the program and the total
aggregate amount of insured payments charged to those individuals who
have had continuous coverage under the program for a period of 36
consecutive months.  For purposes of determining the amount the
program shall pay each health insurer, the total aggregate amount the
health insurer expended and the total aggregate amount of individual
payments shall not include amounts paid by or on behalf of an
individual who is eligible for Medicare Part A and Medicare Part B
and who is not on Medicare solely because of end-stage renal disease.
  The program shall make this payment from the Major Risk Medical
Insurance Fund or from any funds appropriated in the annual Budget
Act or by another statute to the program for the purposes of this
section.  The state shall not be liable for any amount in excess of
the Major Risk Medical Insurance Fund or other funds that were
appropriated for the purposes of this section.  If the state fails to
expend, pursuant to this section, sufficient funds for the state's
contribution amount to any health insurer, the health insurer may
increase the monthly payments that its insureds are required to pay
for any standard benefit plan to the amount that the Managed Risk
Medical Insurance Board would charge without a state subsidy for the
same plan issued to the same individual within the program.
   (2) The Managed Risk Medical Insurance Board shall make a biannual
interim payment to each health insurer providing coverage pursuant
to this section.  For the first two reporting periods described in
this section, biannual interim payments shall be calculated for each
insured as the product of the average premium in the program for that
period of time the individual was covered during the reporting
period and one-half of the difference between the program's prior
calendar year loss ratio and 110 percent.  For subsequent reporting
periods, the Managed Risk Medical Insurance Board may, by regulation,
adopt for each health insurer a specific method for calculating
biannual interim payments based on the insurer's actual experience in
providing the benefits described in this section.  Each health
insurer shall submit a six-month interim report of monthly insured
enrollment in its standard benefit plan.  The Managed Risk Medical
Insurance Board shall make an interim payment to each health insurer
pursuant to this section no later than 45 days after receipt of the
insurer's coverage reports.  Final payment by the board or refund
from the insurer shall be made upon the completion of verification
activities conducted pursuant to this section.
   (i) The provisions of this section constitute a pilot program that
shall terminate on September 1, 2007.
   (j) This section shall become operative on September 1, 2003, and
shall become inoperative on September 1, 2007.  As of January 1,
2008, this section is repealed, unless a later enacted statute, that
becomes operative on or before January 1, 2008, deletes or extends
the date on which the section becomes inoperative and is repealed.
  SEC. 11.  Section 10127.16 is added to the Insurance Code, to read:

   10127.16.  (a) After the termination of the pilot program under
Section 10127.15, a health insurer shall continue to provide coverage
under the same terms and conditions specified in Section 10127.15 as
it existed on January 1, 2006, including the terms of the standard
benefit plan and the subscriber payment amount, to each individual
who was terminated from the program, pursuant to subdivision (f) of
Section 12725 of the Insurance Code during the term of the pilot
program and who enrolled or applied to enroll in a standard benefit
plan within 63 days of termination.  The Managed Risk Medical
Insurance Board shall continue to pay the amount described in Section
10127.15 for each of those individuals.  A health insurer shall not
be required to offer the coverage described in Section 10127.15 after
the termination of the pilot program to individuals not already
enrolled in the program.
   (b) If the state fails to expend, pursuant to this section,
sufficient funds for the state's contribution amount to any health
insurer, the health insurer may increase the monthly payments that
its subscribers are required to pay for any standard benefit plan to
the amount that the Managed Risk Medical Insurance Board would charge
without a state subsidy for the same insurance product issued to the
same individual within the program.
  SEC. 12.  Section 10128.57 of the Insurance Code is amended to
read:
   10128.57.  (a) The continuation coverage provided pursuant to this
article shall terminate at the first to occur of the following:
   (1) In the case of a qualified beneficiary who is eligible for
continuation coverage pursuant to paragraph (2) of subdivision (d) of
Section 10128.51, the date 36 months after the date the qualified
beneficiary's benefits under the contract would otherwise have
terminated because of a qualifying event.
   (2) The end of the period for which premium payments were made, if
the qualified beneficiary ceases to make payments or fails to make
timely payments of a required premium, in accordance with the terms
and conditions of the policy or contract.  In the case of nonpayment
of premiums, reinstatement shall be governed by the terms and
conditions of the plan contract.
   (3) In the case of a qualified beneficiary who is eligible to
continuation coverage pursuant to paragraph (1), (3), (4), or (5) of
subdivision (d) of Section 10116.51, the date 36 months after the
date the qualified beneficiary's benefits under the contract would
otherwise have terminated by reason of a qualifying event.
   (4) The requirements of this article no longer apply to the
qualified beneficiary pursuant to the provisions of Section 10128.52.

   (5) In the case of a qualified beneficiary who is eligible for
continuation coverage pursuant to paragraph (2) of subdivision (d) of
Section 10128.51, and determined, under Title II or Title XVI of the
Social Security Act, to be disabled any time during the first 60
days of continuation coverage, and the spouse or dependent who has
elected coverage pursuant to this article, the date 36 months after
the date the qualified beneficiary's benefits under the contract
would otherwise have terminated because of a qualifying event.  The
qualified beneficiary shall notify the insurer, or the employer or
administrator that contracts to perform administrative services, of
the social security determination within 60 days of the date of the
determination letter and prior to the end of the original 36-month
continuation coverage period in order to be eligible for coverage
pursuant to this subdivision.  If the qualified beneficiary is no
longer disabled under Title II or Title XVI of the Social Security
Act, the benefits provided in this paragraph shall terminate on the
later of the date provided by paragraph (1), or the month that begins
more than 31 days after the date of the final determination under
Title II or Title XVI of the United States Social Security Act that
the qualified beneficiary is no longer disabled.  A qualified
beneficiary eligible for 36 months of continuation coverage as a
result of a disability shall notify the insurer, or the employer
                                     or administrator that contracts
to perform the notice and administrative services, within 30 days of
a determination that the qualified beneficiary is no longer disabled.

   (6) In the case of a qualified beneficiary who is initially
eligible for and elects continuation coverage pursuant to paragraph
(2) of subdivision (d) of Section 10128.51, but who has another
qualifying event, as described in paragraph (1), (3), (4), or (5) of
subdivision (d) of Section 10128.51, within 36 months of the date of
the first qualifying event, and has notified the insurer, or employer
or administrator under contract to provide administrative services,
of the second qualifying event within 60 days of the date of the
second qualifying event, the date 36 months after the date of the
first qualifying event.
   (7) The employer, or any successor employer or purchaser of the
employer, ceases to provide any group benefit plan to his or her
employees.
   (8) The qualified beneficiary moves out of the insurer's service
area, or the qualified beneficiary commits fraud or deception in the
use of benefits.
   (b) If the group benefits contracts between the insurer and the
employer is terminated prior to the date the qualified beneficiary's
continuation coverage would terminate pursuant to this section,
coverage under the prior plan shall terminate and the qualified
beneficiary may elect continuation coverage under the subsequent
group benefit plan, if any, pursuant to the requirements of
subdivision (b) of Section 10128.53 and subdivision (c) of Section
10128.54.
   (c) The amendments made to this section by Assembly Bill 1401 of
the 2001-02 Regular Session shall apply to individuals who begin
receiving continuation coverage under this article on or after
January 1, 2003.
  SEC. 13.  Section 10128.59 is added to the Insurance Code, to read:

   10128.59.  (a) A health insurer that provides coverage under a
group benefit plan to an employer shall offer an insured who has
exhausted continuation coverage under COBRA the opportunity to
continue coverage for up to 36 months from the date the insured's
continuation coverage began if the insured is entitled to less than
36 months of continuation coverage under COBRA.  The health insurer
shall offer coverage pursuant to terms of this article, including the
rate limitations contained in Section 10128.56.
   (b) Notification of the coverage available under this section
shall be included in the notice of the pending termination of COBRA
coverage that is required to be provided to COBRA beneficiaries and
that is required to be provided under Section 10128.54.
   (c) For purposes of this section, "COBRA" means Section 4980B of
Title 26 of the United States Code, Sections 1161 et seq. of Title 29
of the United States Code, and Section 300bb of Title 42 of the
United States Code.
   (d) This section shall not apply to accident-only, specified
disease, hospital indemnity, CHAMPUS supplement, long-term care,
Medicare supplement, dental-only, or vision-only insurance policies.

   (e) This section shall become operative on September 1, 2003, and
shall apply to individuals who begin receiving COBRA coverage on or
after January 1, 2003.
  SEC. 14.  Section 12682.1 is added to the Insurance Code, to read:

   12682.1.  This section does not apply to a policy that primarily
or solely supplements Medicare.  The commissioner may adopt rules
consistent with federal law to govern the discontinuance and
replacement of plan policies that primarily or solely supplement
Medicare.
   (a) (1) Every group policy entered into, amended, or renewed on or
after September 1, 2003, that provides hospital, medical, or
surgical expense benefits for employees or members shall provide that
an employee or member whose coverage under the group policy has been
terminated by the employer shall be entitled to convert to nongroup
membership, without evidence of insurability, subject to the terms
and conditions of this section.
   (2) If the health insurer provides coverage under an individual
health insurance policy, other than conversion coverage under this
part, it shall offer one of the two health insurance policies that
the insurer is required to offer to a federally eligible defined
individual pursuant to Section 10785.  The health insurer shall
provide this coverage at the same rate established under Section
10901.3 for a federally eligible defined individual.
   (3) If the health insurer does not provide coverage under an
individual health insurance policy, it shall offer a health benefit
plan contract that is the same as a health benefit contract offered
to a federally eligible defined individual pursuant to Section
1366.35.  The health insurer shall offer the most popular preferred
provider organization plan that has the greatest number of enrolled
individuals for its type of plan as of January 1 of the prior year,
as reported by plans by January 31, 2003, and annually thereafter,
that provide coverage under an individual health care service plan
contract to the department or the Department of Managed Health Care.
A health insurer subject to this paragraph plan shall provide this
coverage with the same cost-sharing terms and at the same premium as
a health care service plan providing coverage to that individual
under an individual health care service plan contract pursuant to
Section 1399.805.  The health insurer shall file the health benefit
plan contract it will offer, including the premium it will charge and
the cost-sharing terms of the contract, with the Department of
Insurance.
   (b) A conversion policy shall not be required to be made available
to an employee or insured if termination of his or her coverage
under the group policy occurred for any of the following reasons:
   (1) The group policy terminated or an employer's participation
terminated and the insurance is replaced by similar coverage under
another group policy within 15 days of the date of termination of the
group coverage or the employer's participation.
   (2) The employee or insured failed to pay amounts due the health
insurer.
   (3) The employee or insured was terminated by the health insurer
from the policy for good cause.
   (4) The employee or insured knowingly furnished incorrect
information or otherwise improperly obtained the benefits of the
policy.
   (5) The employer's hospital, medical, or surgical expense benefit
program is self-insured.
   (c) A conversion policy is not required to be issued to any person
if any of the following facts are present:
   (1) The person is covered by or is eligible for benefits under
Title XVIII of the United States Social Security Act.
   (2) The person is covered by or is eligible for hospital, medical,
or surgical benefits under any arrangement of coverage for
individuals in a group, whether insured or self-insured.
   (3) The person is covered for similar benefits by an individual
policy or contract.
   (4) The person has not been continuously covered during the
three-month period immediately preceding that person's termination of
coverage.
   (d) Benefits of a conversion policy shall meet the requirements
for benefits under this chapter.
   (e) Unless waived in writing by the insurer, written application
and first premium payment for the conversion policy shall be made not
later than 63 days after termination from the group.  A conversion
policy shall be issued by the insurer which shall be effective on the
day following the termination of coverage under the group contract
if the written application and the first premium payment for the
conversion contract are made to the insurer not later than 63 days
after the termination of coverage, unless these requirements are
waived in writing by the insurer.
   (f) The conversion policy shall cover the employee or insured and
his or her dependents who were covered under the group policy on the
date of their termination from the group.
   (g) A notification of the availability of the conversion coverage
shall be included in each evidence of coverage or other legally
required document explaining coverage.  However, it shall be the sole
responsibility of the employer to notify its employees of the
availability, terms, and conditions of the conversion coverage which
responsibility shall be satisfied by notification within 15 days of
termination of group coverage.  Group coverage shall not be deemed
terminated until the expiration of any continuation of the group
coverage.  For purposes of this subdivision, the employer shall not
be deemed the agent of the insurer for purposes of notification of
the availability, terms, and conditions of conversion coverage.
   (h) As used in this section, "hospital, medical, or surgical
benefits under state or federal law" do not include benefits under
Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing
with Section 14200) of Part 3 of Division 9 of the Welfare and
Institutions Code, or Title XIX of the United States Social Security
Act.
   (i) This section shall become operative on September 1, 2003.
  SEC. 15.  Section 12711 of the Insurance Code is amended to read:
   12711.  The board shall have the authority:
   (a) To determine the eligibility of applicants.
   (b) To determine the major risk medical coverage to be provided
program subscribers.
   (c) To research and assess the needs of persons not adequately
covered by existing private and public health care delivery systems
and promote means of assuring the availability of adequate health
care services.
   (d) To approve subscriber contributions, and plan rates, and
establish program contribution amounts.
   (e) To provide major risk medical coverage for subscribers or to
contract with a participating health plan or plans to provide or
administer major risk medical coverage for subscribers.
   (f) To authorize expenditures from the fund to pay program
expenses which exceed subscriber contributions.
   (g) To contract for administration of the program or any portion
thereof with any public agency, including any agency of state
government, or with any private entity.
   (h) To issue rules and regulations to carry out the purposes of
this part.
   (i) To authorize expenditures from the fund or from other moneys
appropriated in the annual Budget Act for purposes relating to
Section 10127.15 of this code or Section 1373.62 of the Health and
Safety Code.
   (j) To exercise all powers reasonably necessary to carry out the
powers and responsibilities expressly granted or imposed upon it
under this part.
  SEC. 16.  Section 12712.5 is added to the Insurance Code, to read:

   12712.5.  (a) For the period commencing on September 1, 2003, to
September 1, 2007, inclusive, the board shall maintain the major risk
medical coverage benefits offered by participating health plans in
the program at a level that is not less than the actuarial equivalent
of the minimum benefits available within the program on September 1,
2002.
   (b) This section shall become operative on September 1, 2003, and
shall become inoperative on September 1, 2007.  As of January 1,
2008, this section is repealed, unless a later enacted statute, that
becomes operative on or before January 1, 2008, deletes or extends
the dates on which the section becomes inoperative and is repealed.
  SEC. 17.  Section 12725 of the Insurance Code is amended to read:
   12725.  (a) Each resident of the state meeting the eligibility
criteria of this section and who is unable to secure adequate private
health coverage is eligible to apply for major risk medical coverage
through the program.  For these purposes, "resident" includes a
member of a federally recognized California Indian tribe.
   (b) To be eligible for enrollment in the program, an applicant
shall have been rejected for health care coverage by at least one
private health plan.  An applicant shall be deemed to have been
rejected if the only private health coverage that the applicant could
secure would do one of the following:
   (1) Impose substantial waivers that the program determines would
leave a subscriber without adequate coverage for medically necessary
services.
   (2) Afford limited coverage that the program determines would
leave the subscriber without adequate coverage for medically
necessary services.
   (3) Afford coverage only at an excessive price, which the board
determines is significantly above standard average individual
coverage rates.
   (c) Rejection for policies or certificates of specified disease or
policies or certificates of hospital confinement indemnity, as
described in Section 10198.61, shall not be deemed to be rejection
for the purposes of eligibility for enrollment.
   (d) The board may permit dependents of eligible subscribers to
enroll in major risk medical coverage through the program if the
board determines the enrollment can be carried out in an actuarially
and administratively sound manner.
   (e) Notwithstanding the provisions of this section, the board
shall by regulation prescribe a period of time during which a
resident is ineligible to apply for major risk medical coverage
through the program if the resident either voluntarily disenrolls
from, or was terminated for nonpayment of the premium from, a private
health plan after enrolling in that private health plan pursuant to
either Section 10127.15 or Section 1373.62 of the Health and Safety
Code.
   (f) For the period commencing September 1, 2003, to September 1,
2007, inclusive, subscribers and their dependents receiving major
risk coverage through the program may receive that coverage for no
more than 36 consecutive months.  Ninety days before a subscriber or
dependent's eligibility ceases pursuant to this subdivision, the
board shall provide the subscriber and any dependents with written
notice of the termination date and written information concerning the
right to purchase a standard benefit plan from any health care
service plan or health insurer participating in the individual
insurance market pursuant to Section 10127.15 or Section 1373.62 of
the Health and Safety Code.  This subdivision shall become
inoperative on September 1, 2007.
  SEC. 18.  Section 12739 of the Insurance Code is amended to read:
   12739.  (a) There is hereby created in the State Treasury a
special fund known as the Major Risk Medical Insurance Fund that is,
notwithstanding Section 13340 of the Government Code, continuously
appropriated to the board for the purposes specified in Sections
10127.15 and 12739.1 and Section 1373.62 of the Health and Safety
Code.
   (b) After June 30, 1991, the following amounts shall be deposited
annually in the Major Risk Medical Insurance Fund:
   (1) Eighteen million dollars ($18,000,000) from the Hospital
Services Account in the Cigarette and Tobacco Products Surtax Fund.
   (2) Eleven million dollars ($11,000,000) from the Physician
Services Account in the Cigarette and Tobacco Products Surtax Fund.
   (3) One million dollars ($1,000,000) from the Unallocated Account
in the Cigarette and Tobacco Products Surtax Fund.
  SEC. 19.  Section 12739.1 of the Insurance Code is amended to read:

   12739.1.  Except as provided in Section 12739.2, the board shall
authorize the expenditure of money in the fund to cover program
expenses, including program expenses that exceed subscriber
contributions, and to cover expenses relating to Section 10127.15, or
to Section 1373.62 of the Health and Safety Code.  The board shall
determine the amount of funds expended for each of these purposes,
taking into consideration the requirements of this part, Section
10127.15, and Section 1373.62 of the Health and Safety Code.
  SEC. 20.  Section 12739.2 of the Insurance Code is amended to read:

   12739.2.  From money appropriated by the Legislature to the fund,
the board may expend sufficient funds to carry out the purposes of
this part and of Section 10127.15 and Section 1373.62 of the Health
and Safety Code.
   However, the state shall not be liable beyond the assets of the
fund for any obligations incurred, or liabilities sustained, in the
operation of the California Major Risk Medical Insurance Program or
for the expenditures described in Section 10127.15 and Section
1373.62 of the Health and Safety Code.
  SEC. 21.  The Managed Risk Medical Insurance Board, the Department
of Managed Health Care, and the Department of Insurance shall have
the authority to issue rules and to adopt regulations to implement
the provisions of this act and to exercise all powers reasonably
necessary to carry out the powers and responsibilities expressly
granted or imposed upon it under this act.  Until July 1, 2004, any
rules and regulations issued by the board pertaining to the
implementation of this act may be adopted as emergency regulations in
accordance with the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code).  The adoption and one readoption of these
regulations shall be deemed to be an emergency and necessary for the
immediate preservation of the public peace, health, and safety, or
general welfare and shall be exempt from review by the Office of
Administrative Law.  Any emergency regulations authorized by this
section shall be submitted to the Office of Administrative Law for
filing with the Secretary of State and publication in the California
Code of Regulations and shall remain in effect for no more than 180
days.  The regulations shall become effective immediately upon filing
with the Secretary of State.
  SEC. 22.  (a) The Legislative Analyst shall study and evaluate the
provisions of this act, including the pilot program described in
Section 1373.62 of the Health and Safety Code and Section 10127.15 of
the Insurance Code, to determine their effectiveness in providing
coverage to individuals who are otherwise unable to obtain health
benefits and the act's impact on the accessibility and affordability
of health benefits.  The evaluation shall include, based on
information provided by the Managed Risk Medical Insurance Board,
health care service plans and health insurers, all of the following:

   (1) The number, age, and gender of individuals receiving coverage
under the California Major Risk Medical Insurance Program pursuant to
the provisions of this act by calendar year compared with the
enrollment in the program in the four calendar years prior to the
enactment of this act.
   (2) The number, age, and gender of individuals receiving coverage
under the provisions of this act after leaving the California Major
Risk Medical Insurance Program.
   (3) The number, age, and gender of individuals receiving
conversion coverage under the provisions of this act.
   (4) The number, age, and gender of individuals receiving Cal-COBRA
coverage under the provisions of this act.
   (5) The number, age, and gender of individuals receiving coverage
under the provisions of the Health Insurance Portability and
Accountability Act of 1996 and the provisions of Article 4.6
(commencing with Section 1366.35) and Article 10.5 (commencing with
Section 1399.801) of Chapter 2.2 of Division 2 of the Health and
Safety Code, and the provisions of Chapter 8.5 (commencing with
Section 10785) and Chapter 9.5 (commencing with Section 10900) of
Part 2 of Division 2 of the Insurance Code, and Section 10844 of the
Insurance Code.
   (6) Whether the cost of coverage under the California Major Risk
Medical Insurance Program and for individuals leaving the program for
guaranteed issue coverage should be changed.
   (7) Whether the level of benefits provided under the California
Major Risk Medical Insurance Program and for individuals leaving the
program for guaranteed issue coverage should be changed.
   (8) The effect of this act on the affordability and accessibility
of health insurance in the health insurance market for individuals
receiving coverage under this act.
   (b) The Legislative Analyst shall report the results of the study
and evaluation to the appropriate policy and fiscal committees of the
Legislature on or before October 30, 2005, and shall include in the
report any recommendations for changes to the pilot program,
including whether it should continue beyond its designated
termination date.
  SEC. 23.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.