BILL NUMBER: AB 3048 CHAPTERED 09/21/02 CHAPTER 760 FILED WITH SECRETARY OF STATE SEPTEMBER 21, 2002 APPROVED BY GOVERNOR SEPTEMBER 20, 2002 PASSED THE ASSEMBLY AUGUST 31, 2002 PASSED THE SENATE AUGUST 28, 2002 AMENDED IN SENATE AUGUST 26, 2002 AMENDED IN SENATE MAY 23, 2002 INTRODUCED BY Committee on Health (Thomson (Chair), Bates, Cohn, Dickerson, Frommer, Goldberg, Koretz, Negrete McLeod, Runner, Salinas, Strom-Martin, Washington, Wayne, and Zettel) MARCH 14, 2002 An act to amend Sections 1345, 1367.22, 1371.2, and 1374.9 of the Health and Safety Code, and to amend Section 12726 of the Insurance Code, relating to health care. LEGISLATIVE COUNSEL'S DIGEST AB 3048, Committee on Health. Health care. Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensing and regulation of health care service plans by the Department of Managed Health Care. This bill would correct various obsolete references. Existing law provides for the regulation of disability insurers by the Insurance Commissioner. Existing law, the California Major Risk Medical Insurance Program, provides major medical insurance coverage to subscribers who may not otherwise qualify for coverage due to a preexisting medical condition and provides that the Managed Risk Medical Insurance Board shall administer the program. Existing law authorizes the exclusion of coverage or benefits during the subscriber's first 6 months of participation in the program for any condition that an ordinary person would have sought diagnosis, care, or treatment for or for which medical advice, care, or treatment was recommended or received during the 6 months immediately preceding the subscriber's enrollment in the program. Existing law, however, prohibits exclusion of coverage for a preexisting condition if the subscriber has satisfied a specified waiting period for prior health insurance that was involuntarily terminated if the subscriber has applied to enroll in the program no later than 31 days after the involuntary termination of the prior coverage. This bill would instead authorize the exclusion of coverage or benefits for a preexisting condition during the subscriber's first 6 months of participation in the program only for any condition for which medical advice, diagnosis, care, or treatment was recommended or received during the 6 months immediately preceding the subscriber' s enrollment in the program. The bill would prohibit the exclusion of coverage for a preexisting condition if the subscriber was covered under any creditable coverage, as defined, that was terminated if the subscriber applies to enroll in the program no later than 63 days after termination of the prior coverage or within 180 days of termination of the prior coverage if the subscriber lost his or her creditable coverage for specified reasons. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1345 of the Health and Safety Code is amended to read: 1345. As used in this chapter: (a) "Advertisement" means any written or printed communication or any communication by means of recorded telephone messages or by radio, television, or similar communications media, published in connection with the offer or sale of plan contracts. (b) "Basic health care services" means all of the following: (1) Physician services, including consultation and referral. (2) Hospital inpatient services and ambulatory care services. (3) Diagnostic laboratory and diagnostic and therapeutic radiologic services. (4) Home health services. (5) Preventive health services. (6) Emergency health care services, including ambulance and ambulance transport services and out-of-area coverage. "Basic health care services" includes ambulance and ambulance transport services provided through the "911" emergency response system. (7) Hospice care pursuant to Section 1368.2. (c) "Enrollee" means a person who is enrolled in a plan and who is a recipient of services from the plan. (d) "Evidence of coverage" means any certificate, agreement, contract, brochure, or letter of entitlement issued to a subscriber or enrollee setting forth the coverage to which the subscriber or enrollee is entitled. (e) "Group contract" means a contract which by its terms limits the eligibility of subscribers and enrollees to a specified group. (f) "Health care service plan" or "specialized health care service plan" means either of the following: (1) Any person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees. (2) Any person, whether located within or outside of this state, who solicits or contracts with a subscriber or enrollee in this state to pay for or reimburse any part of the cost of, or who undertakes to arrange or arranges for, the provision of health care services that are to be provided wholly or in part in a foreign country in return for a prepaid or periodic charge paid by or on behalf of the subscriber or enrollee. (g) "License" means, and "licensed" refers to, a license as a plan pursuant to Section 1353. (h) "Out-of-area coverage," for purposes of paragraph (6) of subdivision (b), means coverage while an enrollee is anywhere outside the service area of the plan, and shall also include coverage for urgently needed services to prevent serious deterioration of an enrollee's health resulting from unforeseen illness or injury for which treatment cannot be delayed until the enrollee returns to the plan's service area. (i) "Provider" means any professional person, organization, health facility, or other person or institution licensed by the state to deliver or furnish health care services. (j) "Person" means any person, individual, firm, association, organization, partnership, business trust, foundation, labor organization, corporation, limited liability company, public agency, or political subdivision of the state. (k) "Service area" means a geographical area designated by the plan within which a plan shall provide health care services. (l) "Solicitation" means any presentation or advertising conducted by, or on behalf of, a plan, where information regarding the plan, or services offered and charges therefor, is disseminated for the purpose of inducing persons to subscribe to, or enroll in, the plan. (m) "Solicitor" means any person who engages in the acts defined in subdivision (l). (n) "Solicitor firm" means any person, other than a plan, who through one or more solicitors engages in the acts defined in subdivision (l). (o) "Specialized health care service plan contract" means a contract for health care services in a single specialized area of health care, including dental care, for subscribers or enrollees, or which pays for or which reimburses any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees. (p) "Subscriber" means the person who is responsible for payment to a plan or whose employment or other status, except for family dependency, is the basis for eligibility for membership in the plan. (q) Unless the context indicates otherwise, "plan" refers to health care service plans and specialized health care service plans. (r) "Plan contract" means a contract between a plan and its subscribers or enrollees or a person contracting on their behalf pursuant to which health care services, including basic health care services, are furnished; and unless the context otherwise indicates it includes specialized health care service plan contracts; and unless the context otherwise indicates it includes group contracts. (s) All references in this chapter to financial statements, assets, liabilities, and other accounting items mean those financial statements and accounting items prepared or determined in accordance with generally accepted accounting principles, and fairly presenting the matters which they purport to present, subject to any specific requirement imposed by this chapter or by the director. SEC. 2. Section 1367.22 of the Health and Safety Code is amended to read: 1367.22. (a) A health care service plan contract, issued, amended, or renewed on or after July 1, 1999, that covers prescription drug benefits shall not limit or exclude coverage for a drug for an enrollee if the drug previously had been approved for coverage by the plan for a medical condition of the enrollee and the plan's prescribing provider continues to prescribe the drug for the medical condition, provided that the drug is appropriately prescribed and is considered safe and effective for treating the enrollee's medical condition. Nothing in this section shall preclude the prescribing provider from prescribing another drug covered by the plan that is medically appropriate for the enrollee, nor shall anything in this section be construed to prohibit generic drug substitutions as authorized by Section 4073 of the Business and Professions Code. For purposes of this section, a prescribing provider shall include a provider authorized to write a prescription, pursuant to subdivision (a) of Section 4059 of the Business and Professions Code, to treat a medical condition of an enrollee. (b) This section does not apply to coverage for any drug that is prescribed for a use that is different from the use for which that drug has been approved for marketing by the federal Food and Drug Administration. Coverage for different-use drugs is subject to Section 1367.21. (c) This section shall not be construed to restrict or impair the application of any other provision of this chapter, including, but not limited to, Section 1367, which includes among its requirements that plans furnish services in a manner providing continuity of care and demonstrate that medical decisions are rendered by qualified medical providers unhindered by fiscal and administrative management. (d) This section does not prohibit a health care service plan from charging a subscriber or enrollee a copayment or a deductible for prescription drug benefits or from setting forth, by contract, limitations on maximum coverage of prescription drug benefits, provided that the copayments, deductibles, or limitations are reported to, and held unobjectionable by, the director and set forth to the subscriber or enrollee pursuant to the disclosure provisions of Section 1363. SEC. 3. Section 1371.2 of the Health and Safety Code is amended to read: 1371.2. No health care service plan, including a specialized health care service plan, shall request reimbursement for overpayment or reduce the level of payment to a provider based solely on the allegation that the provider has entered into a contract with any other licensed health care service plan for participation in a benefit plan that has been approved by the director. SEC. 4. Section 1374.9 of the Health and Safety Code is amended to read: 1374.9. For violations of Section 1374.7, the director may, after appropriate notice and opportunity for hearing, by order, levy administrative penalties as follows: (a) Any health care service plan that violates Section 1374.7, or that violates any rule or order adopted or issued pursuant to this section, is liable for administrative penalties of not less than two thousand five hundred dollars ($2,500) for each first violation, and of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000) for each second violation, and of not less than fifteen thousand dollars ($15,000) and not more than one hundred thousand dollars ($100,000) for each subsequent violation. (b) The administrative penalties shall be paid to the Managed Health Care Fund. (c) The administrative penalties available to the director pursuant to this section are not exclusive, and may be sought and employed in any combination with civil, criminal, and other administrative remedies deemed advisable by the director to enforce the provisions of this chapter. SEC. 8. Section 12726 of the Insurance Code is amended to read: 12726. The board may permit the exclusion of coverage or benefits for charges or expenses incurred by a subscriber during the first six months of enrollment in the program for any condition for which, during the six months immediately preceding enrollment in the program medical advice, diagnosis, care, or treatment was recommended or received as to the condition during that period. However, the exclusion from coverage of this section shall be waived to the extent to which the subscriber was covered under any creditable coverage, as defined in Section 10900, that was terminated, provided the subscriber has applied for enrollment in the program not later than 63 days following termination of the prior coverage, or within 180 days of termination of coverage if the subscriber lost his or her previous creditable coverage because the subscriber's employment ended, the availability of health coverage offered through employment or sponsored by an employer terminated, or an employer's contribution toward health coverage terminated. The exclusion from coverage of this section shall also be waived as to any condition of a subscriber previously receiving coverage under a plan of another state similar to the program established by this part if the subscriber was eligible for benefits under that other-state coverage for the condition. The board may establish alternative mechanisms applicable to enrollment in health plans described in subdivision (c) or (d) of Section 12723. These mechanisms may include, but are not limited to, a postenrollment waiting period.