BILL NUMBER: AB 2 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 28, 2007
INTRODUCED BY Assembly Member Dymally
DECEMBER 4, 2006
An act to amend Sections 1367.15, 1373.6, and 1373.62 of,
to amend, repeal, and add Section 1366.35 of, and to add Sections
1356.2, 1373.63, An act to amend Section 1373.62 of,
and to add Sections 1356.2, 1373.63, and 1399.819 to, the
Health and Safety Code, to amend Sections 10127.15,
10176.10, 12682.1, 12700, 12705, 12711, 12712.5, 12723, and
12739 of, to amend, repeal, and add Sections 10785,
12712, 12718, 12725, and 12726 of, to add Sections 1827.86,
10127.19, 10901.10, 12714.1, 12714.2, 12734, and
and 12714.1 to, and to add Chapter 9 (commencing with
Section 12739.5) of to Part 6.5 of
Division 2 of, the Insurance Code, relating to health care coverage,
and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 2, as amended, Dymally. Health care coverage.
(1) Existing law establishes the California Major Risk Medical
Insurance Program (MRMIP) that is administered by the Managed Risk
Medical Insurance Board (MRMIB) to provide major risk medical
coverage to persons who, among other matters, have been rejected for
coverage by at least one private health plan. Existing law, the
Knox-Keene Health Care Service Plan Act of 1975, provides for the
licensure and regulation of health care service plans by the
Department of Managed Health Care and makes a willful violation of
the act a crime. Existing law also provides for the regulation of
health insurers by the Department of Insurance. Under a pilot program
ending on December 31, 2007, existing law requires a health care
service plan and a health insurer to offer a standard benefit plan to
certain individuals, and requires MRMIB to make payments from the
Major Risk Medical Insurance Fund, a continuously appropriated fund,
to health care service plans and insurers for the provision of health
services under those standard benefit plans.
This bill would extend the provisions of the pilot program until
July 1 June 30 , 2008. The bill would,
on and after July 1, 2008, create a contribution program that would
require health care service plans and health insurers, as specified,
to contribute their market share, as determined by MRMIB, of MRMIP's
costs by either becoming a participating health plan in MRMIP or
paying a fee. Because the fee would be deposited in the fund, the
bill would make an appropriation by increasing the amount of revenue
in a continuously appropriated fund. The bill would revise the
eligibility criteria for MRMIP by requiring rejection by 2
private health plans and establishing new categories of
eligibility. The bill would make related changes to
provisions that pertain to federally eligible defined individuals and
conversion rights.
The bill would require MRMIB to establish a task force
prior to February 1, 2008, to develop recommendations for quality and
cost control strategies for MRMIP. The bill would require MRMIB to
report to the Legislature prior to April 1, 2008, on those matters.
The bill would also require MRMIB to appoint a panel to
advise it regarding implementation of the fees under the contribution
program.
The bill would authorize MRMIP to pay an insurance agent or
insurance broker under specified conditions for assisting an
individual to apply for MRMIP and would require MRMIP to pay an
insurance agent or insurance broker for assisting a federally
eligible defined individual to apply for MRMIP.
(2) Existing law authorizes MRMIB to adopt rules and regulations,
as specified.
This bill would require MRMIB to perform specified duties,
including establishing guidelines for disease management, case
management, care management, and other cost management strategies.
The bill would make a provision inoperative on July 1, 2008, that
ensures that MRMIP subsidy amounts not exceed the amounts deposited
annually into the fund.
(3) Existing law requires MRMIP to contract with a specified group
of participating health plans, which includes statewide service
benefit plans, indemnity benefit plans, and other plans.
This bill would instead , on and after July 1, 2008,
require MRMIP to contract with licensed health care service
plans and health insurers.
(4) Existing law requires specified amounts to be deposited in the
fund from the Cigarette and Tobacco Products Surtax Fund.
This bill would increase those amounts, thereby making an
appropriation.
The bill would make related changes, and would exempt the MRMIB,
the Department of Managed Health Care, and the Department of
Insurance from certain procedural requirements necessary to adopt
rules and regulations.
(5) Because the bill would extend the time during which MRMIB
would make payments from the fund, the bill would make an
appropriation. The bill would also impose a state-mandated local
program by imposing new requirements on health care service plans,
the willful violation of which would be a crime.
(6) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature hereby finds and declares all of the
following:
(a) For coverage of health care costs and expenses, Californians
rely on a private health care coverage market where private health
care service plans and health insurers make health care coverage
available to individual and group purchasers.
(b) An essential feature of a market-based approach to the
provision of health care coverage is that willing buyers are able to
purchase coverage.
(c) Underwriting and product rating practices in the private
individual health care coverage market result in thousands of
individuals who are unable to purchase health care coverage at any
price.
(d) The underwriting and rating practices of health care service
plans and health insurers that deny health care coverage to group
purchasers on the basis of potential risk or increase the premiums
for group purchasers on the basis of potential risk, result in groups
without health care coverage, causing thousands of employed
individuals to seek individual health care coverage.
(e) When uninsurable persons cannot purchase health care coverage
and cannot pay for the costs of their health care, it increases the
level of uncompensated care in the state. These uncompensated care
costs are ultimately borne by public and private providers and result
in a cost shift to all purchasers of health care coverage.
(f) Since 1991, California has provided a mechanism for
individuals without group coverage, who are not otherwise eligible
for publicly sponsored health care coverage, to purchase subsidized
health care coverage if they have been denied coverage or offered
only high-cost individual coverage because of industry rating and
underwriting practices. The Major Risk Medical Insurance Program
(MRMIP), administered by the Managed Risk Medical Insurance Board,
offers coverage to medically uninsurable persons through willing
private health plans participating in the program on a voluntary
basis. MRMIP offers comprehensive coverage for uninsurable
individuals at premium rates significantly higher than standard
market rates and subsidizes the costs of coverage not paid by
subscriber premiums through an allocation of state funds.
(g) California is one of only three states that fund high-risk
pools solely with subscriber premiums and state funds, resulting in
caps on pool enrollment. Other states address the problem of
uninsurable persons through various regulatory means, including
requiring health care plans and health insurers to guarantee coverage
to individuals regardless of their health status, often at regulated
rates, or by establishing an insurer of last resort that must accept
all individuals for coverage. Thirty-two states establish a
high-risk pool that provides coverage for such persons, similar to
MRMIP, and of those, 27 impose regulatory fees on health insurers to
fund all or part of the costs of the high-risk pools.
(h) Since MRMIP's earliest days, the demand for coverage through
MRMIP has exceeded state funding available, often leaving thousands
of persons on lengthy waiting lists. California established a pilot
project, in Chapter 794 of the Statutes of 2002, to reduce waiting
lists by limiting enrollment in MRMIP to 36 months and requiring
guaranteed private coverage of individuals leaving MRMIP coverage
after 36 months by health care service plans and health insurers
selling individual coverage. This pilot project established a
mechanism for health care service plans and health insurers to share
in the costs of covering uninsurable persons by requiring individual
market health care service plans and health insurers to absorb 50
percent of any health care costs above the premiums paid by these
individuals.
(i) During the pilot project period, state costs for MRMIP and the
followup private market pilot project have grown significantly,
further reducing the number of individuals who can be enrolled in
MRMIP and requiring the imposition of a waiting list for new
applicants. In addition, during the pilot project, some carriers
participating in MRMIP have borne a disproportionate share of costs
for the followup guaranteed private coverage.
(j)
(h) It is therefore the intent of the Legislature to
establish MRMIP as the state-sponsored health care coverage program
for all high-risk and medically uninsurable persons and to provide
coverage through MRMIP for all individuals otherwise unable to obtain
private health care coverage due to a preexisting health condition
who are willing to voluntarily pay premiums and enroll in MRMIP. The
Legislature also intends to end the pilot program established by
Chapter 794 of the Statutes of 2002, and include in MRMIP persons
covered under the pilot project as of June 30, 2008, who are eligible
for MRMIP. The Legislature further intends to include in
MRMIP those persons who, on or after July 1, 2008, are eligible for
guaranteed individual coverage pursuant to Section 300-gg-41 of Title
42 of the United States Code or who would otherwise have been
eligible for guaranteed conversion coverage pursuant to Section
1373.6 of the Health and Safety Code or Section 12682.1 of the
Insurance Code. The Legislature further intends to
eliminate the need for waiting lists in MRMIP and to spread the risk
and costs of health care coverage for high-risk and medically
uninsurable persons broadly within the health care coverage market.
To accomplish these goals, the Legislature intends to require that
every licensed health care service plan and health insurer doing
business in California share in the costs of coverage for high-risk
and medically uninsurable persons based on their share of California'
s health care coverage market by either participating in MRMIP as a
participating health plan or by electing instead to directly pay to
the state its share of MRMIP's costs in order that the state may
arrange for, and subsidize the costs of, health care coverage for
those persons who are unable to obtain private health care coverage
because of their health history, health status, or health condition.
(k)
(i) It is not the intent of the Legislature to provide
coverage through MRMIP for persons able to obtain adequate health
care coverage in the private market.
SEC. 2. Section 1356.2 is added to the Health and Safety Code, to
read:
1356.2. (a) In addition to the other fees and reimbursements
required to be paid under this chapter, each licensed health care
service plan, except for a specialized health care service plan,
electing to pay the fee under Chapter 9 (commencing with Section
12739.5) of Part 6.5 of Division 2 of the Insurance Code, shall pay
the fee to the director in the amount as determined by the Managed
Risk Medical Insurance Board. The timely payment of the fee and the
timely submission of information pursuant to Section 12739.7 of the
Insurance Code shall be deemed to be among the prerequisites for
obtaining and retaining a license as a health care service plan. The
director shall transmit fees collected pursuant to this section to
the Managed Risk Medical Insurance Board, in a manner determined by
that board, within 30 days after the date on which the director
receives those fees. The director shall permit health care service
plans subject to the fee to remit payment on a quarterly basis.
(b) A health care service plan that has elected not to pay its
share of program costs pursuant to Chapter 9 (commencing with Section
12739.5) of Part 6.5 of Division 2 of the Insurance Code, shall
demonstrate to the satisfaction of the director that it is in
compliance with subdivision (a) of Section 1373.63.
SEC. 3. Section 1366.35 of the Health and
Safety Code is amended to read:
1366.35. (a) A health care service plan providing coverage for
hospital, medical, or surgical benefits under an individual health
care service plan contract may not, with respect to a federally
eligible defined individual desiring to enroll in individual health
insurance coverage, decline to offer coverage to, or deny enrollment
of, the individual or impose any preexisting condition exclusion with
respect to the coverage.
(b) For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
(1) Has had 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002).
(2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.
(3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.
(4) If offered continuation coverage under COBRA or Cal-COBRA, has
elected and exhausted that coverage.
(c) Every health care service plan shall comply with applicable
federal statutes and regulations regarding the provision of coverage
to federally eligible defined individuals, including any relevant
application periods.
(d) A health care service plan shall offer the following health
benefit plan contracts under this section that are designed for, made
generally available to, are actively marketed to, and enroll,
individuals: (1) either the two most popular products as defined in
Section 300gg-41(c)(2) of Title 42 of the United States Code and
Section 148.120(c)(2) of Title 45 of the Code of Federal Regulations
or (2) the two most representative products as defined in Section
300gg-41(c)(3) of the United States Code and Section 148.120(c)(3) of
Title 45 of the Code of Federal Regulations, as determined by the
plan in compliance with federal law. A health care service plan that
offers only one health benefit plan contract to individuals,
excluding health benefit plans offered to Medi-Cal or Medicare
beneficiaries, shall be deemed to be in compliance with this article
if it offers that health benefit plan contract to federally eligible
defined individuals in a manner consistent with this article.
(e) (1) In the case of a health care service plan that offers
health insurance coverage in the individual market through a network
plan, the plan may do both of the following:
(A) Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
(B) Within the service area of the plan, deny coverage to
individuals if the plan has demonstrated to the director that the
plan will not have the capacity to deliver services adequately to
additional individual enrollees because of its obligations to
existing group contractholders and enrollees and individual
enrollees, and that the plan is applying this paragraph uniformly to
individuals without regard to any health status-related factor of the
individuals and without regard to whether the individuals are
federally eligible defined individuals.
(2) A health care service plan, upon denying health insurance
coverage in any service area in accordance with subparagraph (B) of
paragraph (1), may not offer coverage in the individual market within
that service area for a period of 180 days after the coverage is
denied.
(f) (1) A health care service plan may deny health insurance
coverage in the individual market to a federally eligible defined
individual if the plan has demonstrated to the director both of the
following:
(A) The plan does not have the financial reserves necessary to
underwrite additional coverage.
(B) The plan is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible individuals.
(2) A health care service plan, upon denying individual health
insurance coverage in any service area in accordance with paragraph
(1), may not offer that coverage in the individual market within that
service area for a period of 180 days after the date the coverage is
denied or until the issuer has demonstrated to the director that the
plan has sufficient financial reserves to underwrite additional
coverage, whichever is later.
(g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health insurance
coverage offered by a health care service plan in the individual
market in the same manner as it applies to a health care service plan
in connection with a group health benefit plan.
(h) A health care service plan shall compensate a life agent or
fire and casualty broker-agent whose activities result in the
enrollment of federally eligible defined individuals in the same
manner and consistent with the renewal commission amounts as the plan
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan contract.
(i) Every health care service plan shall disclose as part of its
COBRA or Cal-COBRA disclosure and enrollment documents, an
explanation of the availability of guaranteed access to coverage
under the Health Insurance Portability and Accountability Act of
1996, including the necessity to enroll in and exhaust COBRA or
Cal-COBRA benefits in order to become a federally eligible defined
individual.
(j) No health care service plan may request documentation as to
whether or not a person is a federally eligible defined individual
other than is permitted under applicable federal law or regulations.
(k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.
() This section shall apply to health care service plan contracts
offered, delivered, amended, or renewed on or after January 1, 2001.
(m) This section shall become inoperative on July 1, 2008, and, as
of January 1, 2009, is repealed, unless a later enacted statute,
that is enacted before January 1, 2009, deletes or extends the dates
on which it becomes inoperative and is repealed.
SEC. 4. Section 1366.35 is added to the Health
and Safety Code, to read:
1366.35. (a) A health care service plan providing coverage for
hospital, medical, or surgical benefits under an individual health
care service plan contract may not, with respect to a federally
eligible defined individual desiring to enroll in individual health
insurance coverage, decline to offer coverage to, or deny enrollment
of, the individual or impose any preexisting condition exclusion with
respect to the coverage.
(b) For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
(1) Has had 18 or more months of creditable coverage, and the
individual's most recent prior creditable coverage was under a group
health plan, a federal governmental plan maintained for federal
employees, or a governmental plan or church plan as defined in the
federal Employee Retirement Income Security Act of 1974 (29 U.S.C.
Sec. 1002).
(2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.
(3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.
(4) If offered continuation coverage under COBRA or Cal-COBRA, has
elected and exhausted that coverage.
(c) Every health care service plan shall comply with applicable
federal statutes and regulations regarding the provision of coverage
to federally eligible defined individuals, including any relevant
application periods.
(d) A health care service plan shall offer the following health
benefit plan contracts under this section that are designed for, made
generally available to, are actively marketed to, and enroll,
individuals: (1) either the two most popular products as defined in
Section 300gg-41(c)(2) of Title 42 of the United States Code and
Section 148.120(c)(2) of Title 45 of the Code of Federal Regulations
or (2) the two most representative products as defined in Section
300gg-41(c)(3) of the United States Code and Section 148.120(c)(3) of
Title 45 of the Code of Federal Regulations, as determined by the
plan in compliance with federal law. A health care service plan that
offers only one health benefit plan contract to individuals,
excluding health benefit plans offered to Medi-Cal or Medicare
beneficiaries, shall be deemed to be in compliance with this article
if it offers that health benefit plan contract to federally eligible
defined individuals in a manner consistent with this article.
(e) (1) In the case of a health care service plan that offers
health insurance coverage in the individual market through a network
plan, the plan may do both of the following:
(A) Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
(B) Within the service area of the plan, deny coverage to
individuals if the plan has demonstrated to the director that the
plan will not have the capacity to deliver services adequately to
additional individual enrollees because of its obligations to
existing group contractholders and enrollees and individual
enrollees, and that the plan is applying this paragraph uniformly to
individuals without regard to any health status-related factor of the
individuals and without regard to whether the individuals are
federally eligible defined individuals.
(2) A health care service plan, upon denying health insurance
coverage in any service area in accordance with subparagraph (B) of
paragraph (1), may not offer coverage in the individual market within
that service area for a period of 180 days after the coverage is
denied.
(f) (1) A health care service plan may deny health insurance
coverage in the individual market to a federally eligible defined
individual if the plan has demonstrated to the director both of the
following:
(A) The plan does not have the financial reserves necessary to
underwrite additional coverage.
(B) The plan is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible individuals.
(2) A health care service plan, upon denying individual health
insurance coverage in any service area in accordance with paragraph
(1), may not offer that coverage in the individual market within that
service area for a period of 180 days after the date the coverage is
denied or until the issuer has demonstrated to the director that the
plan has sufficient financial reserves to underwrite additional
coverage, whichever is later.
(g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health insurance
coverage offered by a health care service plan in the individual
market in the same manner as it applies to a health care service plan
in connection with a group health benefit plan.
(h) A health care service plan shall compensate a life agent or
fire and casualty broker-agent whose activities result in the
enrollment of federally eligible defined individuals in the same
manner and consistent with the renewal commission amounts as the plan
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan contract.
(i) Every health care service plan shall disclose as part of its
COBRA or Cal-COBRA disclosure and enrollment documents, an
explanation of the availability of guaranteed access to coverage
under the Health Insurance Portability and Accountability Act of
1996, including the necessity to enroll in and exhaust COBRA or
Cal-COBRA benefits in order to become a federally eligible defined
individual.
(j) No health care service plan may request documentation as to
whether or not a person is a federally eligible defined individual
other than is permitted under applicable federal law or regulations.
(k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.
(l) This section shall apply to health care service plan contracts
offered, delivered, amended, or renewed on or after July 1, 2008.
(m) Notwithstanding any other provision of this article or of
Article 11.5 (commencing with Section 1399.801), a health care
service plan is not required to offer coverage pursuant to
subdivision (a) or (d) to an individual who qualifies as a federally
eligible defined individual on or after July 1, 2008.
(n) (1) A health care service plan shall inform all individuals
applying for coverage pursuant to this section or Section 300gg-41 of
Title 42 of the United States Code that, if they are eligible for
such coverage, it will be provided through the Major Risk Medical
Insurance Program (Part 6.5 (commencing with Section 12700) of
Division 2 of the Insurance Code) and that they are required to apply
for that coverage within 63 days of becoming eligible for it.
(2) A health care service plan shall disclose, as part of its
COBRA or Cal-COBRA disclosure and enrollment documents, an
explanation of the availability of guaranteed access to coverage
under the Major Risk Medical Insurance Program pursuant to paragraph
(2) of subdivision (b) of Section 12725 of the Insurance Code.
(o) Subdivisions (m) and (n) shall be operative only if the state
receives a waiver from the federal Centers for Medicare and Medicaid
Services, or any other applicable federal agency, permitting the
state to operate an acceptable alternative mechanism pursuant to
Section 2744 of the Public Health Service Act (42 U.S.C. Sec.
300gg-44 (c)(2)) by enrolling federally defined eligible individuals
into the Major Risk Medical Insurance Program in lieu of coverage
described in subdivisions (a) and (d).
(p) Nothing in this section shall be construed to permit a health
care service plan to terminate coverage for an otherwise eligible
individual enrolled in a health benefit plan pursuant to this
section.
(q) This section shall become operative on July 1, 2008.
SEC. 5. Section 1367.15 of the Health and
Safety Code is amended to read:
1367.15. (a) This section shall apply to individual health care
service plan contracts and plan contracts sold to employer groups
with fewer than two eligible employees as defined in subdivision (b)
of Section 1357 covering hospital, medical, or surgical expenses,
which is issued, amended, delivered, or renewed on or after January
1, 1994.
(b) As used in this section, "block of business" means individual
plan contracts or plan contracts sold to employer groups with fewer
than two eligible employees as defined in subdivision (b) of Section
1357, with distinct benefits, services, and terms. A "closed block of
business" means a block of business for which a health care service
plan ceases to actively offer or sell new plan contracts.
(c) No block of business shall be closed by a health care service
plan unless the plan takes either of the following actions:
(1) The plan permits an enrollee to receive health care services
from any block of business that is not closed and that provides
comparable benefits, services, and terms, with no additional
underwriting requirement.
(2) The plan pools the experience of the closed block of business
with all appropriate blocks of business that are not closed for the
purpose of determining the premium rate of any plan
contract within the closed block, with no
rate penalty or surcharge beyond that which reflects the experience
of the combined pool.
(d) A block of business shall be presumed closed if either of the
following is applicable:
(1) There has been an overall reduction in that block of 12
percent in the number of in force plan contracts for a period of 12
months.
(2) That block has less than 1,000 enrollees in this state. This
presumption shall not apply to a block of business initiated within
the previous 24 months, but notification of that block shall be
provided to the director pursuant to subdivision (e).
The fact that a block of business does not meet one of the
presumptions set forth in this subdivision shall not preclude a
determination that it is closed as defined in subdivision (b).
(e) A health care service plan shall notify the director in
writing within 30 days of its decision to close a block of business
or, in the absence of an actual decision to close a block of
business, within 30 days of its determination that a block of
business is within the presumption set forth in subdivision (d). When
the plan decides to close a block, the written notice shall fully
disclose all information necessary to demonstrate compliance with the
requirements of subdivision (c). When the plan determines that a
block is within the presumption, the written notice shall fully
disclose all information necessary to demonstrate that the
presumption is applicable. In the case of either notice, the plan
shall provide additional information within 15 days after any request
of the director.
(f) A health care service plan shall preserve for a period of not
less than five years in an identified location and readily accessible
for review by the director all books and records relating to any
action taken by a plan pursuant to subdivision (c).
(g) No health care service plan shall offer or sell any contract,
or provide misleading information about the active or closed status
of a block of business, for the purpose of evading this section.
(h) A health care service plan shall bring any blocks of business
closed prior to the effective date of this section into compliance
with the terms of this section no later than December 31, 1994.
(i) This section shall not apply to health care service plan
contracts providing small employer health coverage to individuals or
employer groups with fewer than two eligible employees if that
coverage is provided pursuant to Article 3.1 (commencing with Section
1357) and, with specific reference to coverage for individuals or
employer groups with fewer than two eligible employees, is approved
by the director pursuant to Section 1357.15, provided a plan electing
to sell coverage pursuant to this subdivision shall do so until such
time as the plan ceases to market coverage to small employers and
complies with subdivision (c) of Section 1357.11.
(j) This section shall not apply to coverage of Medicare services
pursuant to contracts with the United States government, Medicare
supplement, dental, vision, or conversion coverage, or to persons
enrolled in a health care service plan pursuant to Section 300gg-41
of Title 42 of the United States Code prior to July 1, 2008, or to
persons enrolled in a health care service plan for continuation
coverage pursuant to Sections 1373.6 to 1373.621, inclusive, prior to
July 1, 2008.
SEC. 6. 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 or 1399.819 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 or 1399.819. 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. On
and after July 1, 2008, the notification required by this subdivision
shall explain that, in lieu of conversion coverage provided by the
health care service plan, an individual eligible for conversion
coverage is entitled to receive that coverage through the Major Risk
Medical Insurance Program pursuant to Section 12725 of the Insurance
Code.
(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.
(j) On and after July 1, 2008, a health care service plan shall
not be subject to the requirements described in subdivisions (a),
(d), and (f) insofar as those subdivisions require the health care
service plan to offer and sell coverage to an individual who would
otherwise become eligible for that coverage under this section.
SEC. 7. SEC. 3. Section 1373.62 of
the Health and Safety Code is amended 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 Care 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 a 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 December 31, 2007, inclusive.
(F) January 1, 2008, to June 30, 2008, 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 those 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.
(3) The Managed Risk Medical Insurance Board shall not make
payments to health care service plans pursuant to this subdivision
for health care services provided on or after July 1, 2008.
(i) (1) On or before March 1, 2008, a health care service plan
with one or more individuals enrolled in a standard benefit plan
pursuant to subdivision (c) shall send all enrolled individuals the
notice and certification developed by the Managed Risk Medical
Insurance Board pursuant to paragraph (2) of subdivision (g) of
Section 12725 of the Insurance Code.
(2) A health care service plan shall provide the notice and
certification developed by the Managed Risk Medical Insurance Board
pursuant to paragraph (2) of subdivision (g) of Section 12725 of the
Insurance Code to any individual who enrolls in a standard benefit
plan pursuant to subdivision (c) after the plan has provided notice
to all enrollees pursuant to paragraph (1).
(j) The provisions of this section constitute a pilot program that
shall terminate on June 30, 2008.
SEC. 8. SEC. 4. Section 1373.63 is
added to the Health and Safety Code, to read:
1373.63. (a) On and after July 1, 2008, except as provided in
subdivision (b), every health care service plan licensed in
California, except for a specialized health care service plan and a
Medicare supplement contract, shall participate in the California
Major Risk Medical Insurance Program (Part 6.5 (commencing with
Section 12700) of Division 2 of the Insurance Code), referred to as
the program in this section, as a participating health plan and
satisfy the following requirements:
(1) Comply with all contract requirements, quality standards,
enrollment processes, reporting requirements, and any other
requirements imposed on participating health plans by the program.
(2) Provide coverage for, or reimburse, all covered health care
services for program subscribers who are enrolled in the health care
service plan, consistent with the coverage and benefits established
by the Managed Risk Medical Insurance Board, applicable state laws,
and the health care service plan's contract with the Managed Risk
Medical Insurance Board.
(3) Report to the Managed Risk Medical Insurance Board on an
annual basis and at other times it prescribes, the costs of coverage
for its enrolled subscribers to facilitate the annual reconciliation
of program costs pursuant to Chapter 9 (commencing with Section
12739.5) of Part 6.5 of Division 2 of the Insurance Code.
(4) Fairly and affirmatively offer, market, and sell coverage
through the program to all eligible persons, as prescribed by the
Managed Risk Medical Insurance
Board and the plan's contract with the Managed Risk Medical
Insurance Board.
(5) Cover the costs of health care services for program
subscribers enrolled in the health care service plan in an amount
equivalent to the plan's share of program costs as calculated by the
Managed Risk Medical Insurance Board based on market share, pursuant
to Chapter 9 (commencing with Section 12739.5) of Part 6.5 of
Division 2 of the Insurance Code.
(6) Enroll a number of subscribers through the program that is at
least equal to the health care service plan's market share as
calculated under Chapter 9 (commencing with Section 12739.5) of Part
6.5 of Division 2 of the Insurance Code.
(b) A health care service plan shall not be subject to the
requirements of subdivision (a) if it instead elects to pay its share
of program costs under Chapter 9 (commencing with Section 12739.5)
of Part 6.5 of Division 2 of the Insurance Code. A health care
service plan that has elected not to pay its share of program costs
pursuant to Section 12739.5 of the Insurance Code shall demonstrate
to the satisfaction of the director that the plan is in compliance
with subdivision (a).
(c) The director may take all action authorized under this
chapter, including, but not limited to, the imposition of fines or
penalties, against a health care service plan that does not comply
with this section or Section 1356.2.
SEC. 9. SEC. 5. Section 1399.819 is
added to the Health and Safety Code, to read:
1399.819. On and after July 1, 2008, the premiums for a health
care service plan contract that offers services through a preferred
provider arrangement pursuant to this article or Article 4.6
(commencing with Section 1366.35) shall be calculated as otherwise
described in this article, except that it shall be based on the
benefit design for the Major Risk Medical Insurance Program in effect
on December 31, 2007.
SEC. 10. SEC. 6. Section 1827.86 is
added to the Insurance Code, to read:
1827.86. (a) Except as provided in subdivision (b), every
1827.86. (a) Every
admitted health insurer that provides health insurance and that
elects to pay the fee under Chapter 9 (commencing with Section
12739.5) of Part 6.5 shall pay the fee to the commissioner in the
amount as determined by the Managed Risk Medical Insurance Board. The
commissioner shall permit health insurers subject to the fee to
remit payment on a quarterly basis. The timely payment of the fee and
the timely submission of information pursuant to Section 12739.7
shall be deemed to be among the prerequisites for obtaining and
retaining a certificate of authority or license issued by the
commissioner, and in addition, deficiencies with respect to the
timely payment or submission of information shall be grounds for the
imposition of sanctions or the institution of disciplinary
proceedings by the commissioner. The commissioner shall transmit fees
collected pursuant to this section to the Managed Risk Medical
Insurance Board, in a manner determined by that board, within 30 days
after the date on which the commissioner receives those fees.
(b) A health insurer that has elected not to pay its share of
program costs pursuant to Chapter 9 (commencing with Section 12739.5)
of Part 6.5, shall demonstrate to the satisfaction of the
commissioner that it is in compliance with subdivision (a) of Section
10127.19.
(c) The requirements of this section shall not apply to a Medicare
supplement, vision-only, dental-only, or Champus-supplement
CHAMPUS-supplement insurance or to hospital
indemnity, hospital-only, accident-only, or specified disease
insurance that does not pay benefits on a fixed benefit, cash payment
only basis or to short-term limited duration health insurance.
SEC. 11. SEC. 7. Section 10127.15 of
the Insurance Code, as amended by Section 2 of Chapter 683 of the
Statutes of 2006, is amended 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).
(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 Care 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 a 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 December 31, 2007, inclusive.
(F) January 1, 2008, to June 30, 2008, 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 those 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.
(3) The Managed Risk Medical Insurance Board shall not make
payments to health insurers pursuant to this subdivision for health
care services provided on or after July 1, 2008.
(i) (1) On or before March 1, 2008, a health insurer with one or
more individuals enrolled in a standard benefit plan pursuant to
subdivision (c) shall send all enrolled individuals the notice and
certification developed by the Managed Risk Medical Insurance Board
pursuant to paragraph (2) of subdivision (g) of Section 12725.
(2) A health insurer shall provide the notice and certification
developed by the Managed Risk Medical Insurance Board pursuant to
paragraph (2) of subdivision (g) of Section 12725 to any individual
who enrolls in a standard benefit plan pursuant to subdivision (c)
after the carrier has provided notice to all enrollees pursuant to
paragraph (1).
(j) The provisions of this section constitute a pilot program that
shall terminate on July 1, June 30,
2008.
SEC. 12. SEC. 8. Section 10127.19 is
added to the Insurance Code, to read:
10127.19. (a) On and after July 1, 2008, except as provided in
subdivisions (b) and (c), every health insurer that provides health
insurance to residents of this state shall participate in the
California Major Risk Medical Insurance Program (Part 6.5 (commencing
with Section 12700), referred to as the program in this section, as
a participating health plan and satisfy the following requirements:
(1) Comply with all contract requirements, quality standards,
enrollment processes, reporting requirements, and any other
requirements imposed on participating health plans by the program.
(2) Provide coverage for, or reimburse, all covered health care
services for program subscribers who are enrolled with the insurer,
consistent with the coverage and benefits established by the Managed
Risk Medical Insurance Board, applicable state laws, and the insurer'
s contract with the Managed Risk Medical Insurance Board.
(3) Report to the Managed Risk Medical Insurance Board on an
annual basis, and at other times it prescribes, the costs of coverage
for its insureds who are enrolled subscribers in the program to
facilitate the annual reconciliation of program costs pursuant to
Chapter 9 (commencing with Section 12739.5) of Part 6.5.
(4) Fairly and affirmatively offer, market, and sell coverage
through the program to all eligible persons, as prescribed by the
Managed Risk Medical Insurance Board and the insurer's contract with
the Managed Risk Medical Insurance Board.
(5) Cover the costs of health care services for program
subscribers enrolled with the insurer in an amount equivalent to the
insurer's share of program costs as calculated by the Managed Risk
Medical Insurance Board based on market share, pursuant to Chapter 9
(commencing with Section 12739.5) of Part 6.5.
(6) Enroll a number of subscribers through the program at least
equal to the health insurer's market share, as calculated under
Chapter 9 (commencing with Section 12739.5) of Part 6.5.
(b) An insurer shall not be subject to the requirements of
subdivision (a) if it instead elects to pay its share of program
costs under Chapter 9 (commencing with Section 12739.5) of Part 6.5.
An insurer that has elected not to pay its share of program costs
pursuant to Section 12739.5, shall demonstrate to the satisfaction of
the commissioner that the insurer is in compliance with subdivision
(a).
(c) The requirements of this section shall not apply to a Medicare
supplement, vision-only, dental-only, or Champus-supplement
CHAMPUS-supplement insurance or to hospital
indemnity, hospital-only, accident-only, or specified disease
insurance that does not pay benefits on a fixed benefit, cash payment
only basis or to short-term limited duration health insurance.
(d) The commissioner may take all enforcement actions under this
code against a health insurer that does not comply with this section
or Section 1827.86.
SEC. 13. Section 10176.10 of the Insurance Code
is amended to read:
10176.10. (a) On or after January 1, 1994, no disability insurer
issuing policies covering hospital, surgical, or medical expenses
delivered or renewed in this state or certificates of group
disability insurance delivered or renewed in this state pursuant to a
master group policy delivered or renewed in another state, to
individuals, or to employer groups with fewer than two eligible
employees, as defined in subdivision (g) of Section 10700, shall
close a block of business without complying with this section.
(b) As used in this section, "block of business" means individual,
group, or blanket disability insurance contracts covering hospital,
medical, or surgical expenses of a particular policy form that has
distinct benefits or marketing methods. "Closed block of business"
means a block of business for which an insurer ceases to actively
market and sell new contracts under a particular policy form in this
state.
(c) Notwithstanding subdivision (b), a block of business shall be
presumed closed if either of the following applies:
(1) There has been an overall reduction of 12 percent in the
number of in force policies of a particular form for a period of 12
months.
(2) The block has less than 2,000 insured nationally or 1,000
insureds in California. This presumption shall not apply to a block
of business initiated within the previous 24 months, but notification
of that block shall be provided to the commissioner. The
notification shall not be subject to the approval required by
subdivision (d).
An insurer may present evidence for consideration by the
commissioner that the presumption in the particular case is
incorrect. Should the determination be made that the block is closed,
the insurer shall be given those remedy options contained in
subdivision (d). The fact that a block of business does not meet one
of the presumptions set forth in this subdivision shall not preclude
a determination that it is closed as defined in subdivision (b).
(d) An insurer shall notify the commissioner within 30 days of its
decision to close a block or, in the absence of an actual decision
to close a block of business, within 30 days of its determination
that the block is within the presumptions set forth in subdivision
(c). The commissioner may notify an insurer that he or she has
determined that the presumptions contained in subdivision (c) apply
to a block. No insurer providing disability insurance covering
hospital, medical, or surgical expenses shall close a policy form or
group certificate without notification to the commissioner. That
notification shall include a plan to permit an insured to move to any
open block, providing comparable benefits with no additional
underwriting requirement or, alternatively, the insurer shall be
required to pool the closed block's experience with all appropriate
open forms for purposes of renewal rate determination, with no rate
penalty or surcharge, beyond that which reflects the experience of
the combined pool. When the insurer chooses to pool, the notice shall
include the insurer's plan for pooling the closed block's
experience. The insurer may implement the pooling plan if 30 days
expire after the submission is filed without written notice from the
commissioner specifying the reasons for his or her opinion that the
pooling plan does not comply with the requirements of this section,
or, prior to that time, if the commissioner provides the insurer
written notice that the pooling plan complies with the requirements
of this section.
The approval shall be based upon consideration of the accumulative
recent and expected future experience of the closed form and those
with which the closed form is to be combined.
(e) No insurer shall offer or sell any form nor provide misleading
information about the active or closed status of its business for
the purpose of evading this section.
(f) An insurer shall bring any blocks of business closed prior to
the effective date of this section into compliance with the terms of
this section no later than December 31, 1994.
(g) This section shall not apply to small employer carriers
providing small employer health insurance to individuals or employer
groups with fewer than two eligible employees if that coverage is
provided pursuant to Chapter 8 (commencing with Section 10700), and
with specific reference to coverage for individuals or employer
groups with fewer than two eligible employees, is approved by the
commissioner pursuant to Section 10705, provided a carrier electing
to sell coverage pursuant to this subdivision shall continue to do so
until such time as the carrier ceases to market coverage to small
employers and complies with subdivision (c) of Section 10713.
(h) This section shall not apply to accident-only coverage,
coverage of Medicare services pursuant to contracts with the United
States government, Medicare supplement coverage, long-term care
insurance, dental, vision, or conversion coverage, coverage issued as
a supplement to liability insurance, or automobile medical payment
insurance, or to coverage provided pursuant to Section 300gg-41 of
Title 42 of the United States Code prior to July 1, 2008, or to
continuation coverage provided pursuant to Part 6.1 (commencing with
Section 12670) prior to July 1, 2008.
SEC. 14. Section 10785 of the Insurance Code is
amended to read:
10785. (a) A disability insurer that covers hospital, medical, or
surgical expenses under an individual health benefit plan as defined
in subdivision (a) of Section 10198.6 may not, with respect to a
federally eligible defined individual desiring to enroll in
individual health insurance coverage, decline to offer coverage to,
or deny enrollment of, the individual or impose any preexisting
condition exclusion with respect to the coverage.
(b) For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
(1) Has had 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002).
(2) Is not eligible
for coverage under a group health plan, Medicare, or Medi-Cal, and
does not have other health insurance coverage.
(3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.
(4) If offered continuation coverage under COBRA or Cal-COBRA, has
elected and exhausted that coverage.
(c) Every disability insurer that covers hospital, medical, or
surgical expenses shall comply with applicable federal statutes and
regulations regarding the provision of coverage to federally eligible
defined individuals, including any relevant application periods.
(d) A disability insurer shall offer the following health benefit
plans under this section that are designed for, made generally
available to, are actively marketed to, and enroll, individuals: (1)
either the two most popular products as defined in Section 300gg-41
(c)(2) of Title 42 of the United States Code and Section 148.120(c)
(2) of Title 45 of the Code of Federal Regulations or (2) the two
most representative products as defined in Section 300gg-41(c)(3) of
the United States Code and Section 148.120(c)(3) of Title 45 of the
Code of Federal Regulations, as determined by the insurer in
compliance with federal law. An insurer that offers only one health
benefit plan to individuals, excluding health benefit plans offered
to Medi-Cal or Medicare beneficiaries, shall be deemed to be in
compliance with this chapter if it offers that health benefit plan
contract to federally eligible defined individuals in a manner
consistent with this chapter.
(e) (1) In the case of a disability insurer that offers health
benefit plans in the individual market through a network plan, the
insurer may do both of the following:
(A) Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
(B) Within the service area covered by the health benefit plan,
deny coverage to individuals if the insurer has demonstrated to the
commissioner that the insured will not have the capacity to deliver
services adequately to additional individual insureds because of its
obligations to existing group policyholders, group contractholders
and insureds, and individual insureds, and that the insurer is
applying this paragraph uniformly to individuals without regard to
any health status-related factor of the individuals and without
regard to whether the individuals are federally eligible defined
individuals.
(2) A disability insurer, upon denying health insurance coverage
in any service area in accordance with subparagraph (B) of paragraph
(1), may not offer health benefit plans through a network in the
individual market within that service area for a period of 180 days
after the coverage is denied.
(f) (1) A disability insurer may deny health insurance coverage in
the individual market to a federally eligible defined individual if
the insurer has demonstrated to the commissioner both of the
following:
(A) The insurer does not have the financial reserves necessary to
underwrite additional coverage.
(B) The insurer is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible defined individuals.
(2) A disability insurer, upon denying individual health insurance
coverage in any service area in accordance with paragraph (1), may
not offer that coverage in the individual market within that service
area for a period of 180 days after the date the coverage is denied
or until the insurer has demonstrated to the commissioner that the
insurer has sufficient financial reserves to underwrite additional
coverage, whichever is later.
(g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health benefits
plans offered by a disability insurer in the individual market in the
same manner as it applies to an insurer in connection with a group
health benefit plan policy or group health benefit plan contract.
(h) A disability insurer shall compensate a life agent or fire and
casualty broker-agent whose activities result in the enrollment of
federally eligible defined individuals in the same manner and
consistent with the renewal commission amounts as the insurer
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan.
(i) Every disability insurer shall disclose as part of its COBRA
or Cal-COBRA disclosure and enrollment documents, an explanation of
the availability of guaranteed access to coverage under the Health
Insurance Portability and Accountability Act of 1996, including the
necessity to enroll in and exhaust COBRA or Cal-COBRA benefits in
order to become a federally eligible defined individual.
(j) No disability insurer may request documentation as to whether
or not a person is a federally eligible defined individual other than
is permitted under applicable federal law or regulations.
(k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.
() This section shall apply to policies or contracts offered,
delivered, amended, or renewed on or after January 1, 2001.
(m) This section shall become inoperative on July 1, 2008, and, as
of January 1, 2009, is repealed, unless a later enacted statute,
that is enacted before January 1, 2009, deletes or extends the dates
on which it becomes inoperative and is repealed.
SEC. 15. Section 10785 is added to the
Insurance Code, to read:
10785. (a) A disability insurer that covers hospital, medical, or
surgical expenses under an individual health benefit plan as defined
in subdivision (a) of Section 10198.6 may not, with respect to a
federally eligible defined individual desiring to enroll in
individual health insurance coverage, decline to offer coverage to,
or deny enrollment of, the individual or impose any preexisting
condition exclusion with respect to the coverage.
(b) For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
(1) Has had 18 or more months of creditable coverage, and the
individual's most recent prior creditable coverage was under a group
health plan, a federal governmental plan maintained for federal
employees, or a governmental plan or church plan as defined in the
federal Employee Retirement Income Security Act of 1974 (29 U.S.C.
Sec. 1002).
(2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.
(3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.
(4) If offered continuation coverage under COBRA or Cal-COBRA, has
elected and exhausted that coverage.
(c) Every disability insurer that covers hospital, medical, or
surgical expenses shall comply with applicable federal statutes and
regulations regarding the provision of coverage to federally eligible
defined individuals, including any relevant application periods.
(d) A disability insurer shall offer the following health benefit
plans under this section that are designed for, made generally
available to, are actively marketed to, and enroll, individuals: (1)
either the two most popular products as defined in Section 300gg-41
(c)(2) of Title 42 of the United States Code and Section 148.120(c)
(2) of Title 45 of the Code of Federal Regulations or (2) the two
most representative products as defined in Section 300gg-41(c)(3) of
the United States Code and Section 148.120(c)(3) of Title 45 of the
Code of Federal Regulations, as determined by the insurer in
compliance with federal law. An insurer that offers only one health
benefit plan to individuals, excluding health benefit plans offered
to Medi-Cal or Medicare beneficiaries, shall be deemed to be in
compliance with this chapter if it offers that health benefit plan
contract to federally eligible defined individuals in a manner
consistent with this chapter.
(e) (1) In the case of a disability insurer that offers health
benefit plans in the individual market through a network plan, the
insurer may do both of the following:
(A) Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
(B) Within the service area covered by the health benefit plan,
deny coverage to individuals if the insurer has demonstrated to the
commissioner that the insured will not have the capacity to deliver
services adequately to additional individual insureds because of its
obligations to existing group policyholders, group contractholders
and insureds, and individual insureds, and that the insurer is
applying this paragraph uniformly to individuals without regard to
any health status-related factor of the individuals and without
regard to whether the individuals are federally eligible defined
individuals.
(2) A disability insurer, upon denying health insurance coverage
in any service area in accordance with subparagraph (B) of paragraph
(1), may not offer health benefit plans through a network in the
individual market within that service area for a period of 180 days
after the coverage is denied.
(f) (1) A disability insurer may deny health insurance coverage in
the individual market to a federally eligible defined individual if
the insurer has demonstrated to the commissioner both of the
following:
(A) The insurer does not have the financial reserves necessary to
underwrite additional coverage.
(B) The insurer is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible defined individuals.
(2) A disability insurer, upon denying individual health insurance
coverage in any service area in accordance with paragraph (1), may
not offer that coverage in the individual market within that service
area for a period of 180 days after the date the coverage is denied
or until the insurer has demonstrated to the commissioner that the
insurer has sufficient financial reserves to underwrite additional
coverage, whichever is later.
(g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health benefits
plans offered by a disability insurer in the individual market in the
same manner as it applies to an insurer in connection with a group
health benefit plan policy or group health benefit plan contract.
(h) A disability insurer shall compensate a life agent or fire and
casualty broker-agent whose activities result in the enrollment of
federally eligible defined individuals in the same manner and
consistent with the renewal commission amounts as the insurer
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan.
(i) Every disability insurer shall disclose as part of its COBRA
or Cal-COBRA disclosure and enrollment documents, an explanation of
the availability of guaranteed access to coverage under the Health
Insurance Portability and Accountability Act of 1996, including the
necessity to enroll in and exhaust COBRA or Cal-COBRA benefits in
order to become a federally eligible defined individual.
(j) No disability insurer may request documentation as to whether
or not a person is a federally eligible defined individual other than
is permitted under applicable federal law or regulations.
(k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.
() This section shall apply to policies or contracts offered,
delivered, amended, or renewed on or after July 1, 2008.
(m) Notwithstanding any other provision of this chapter, a health
insurer is not required to offer coverage pursuant to subdivision (a)
or (d) to an individual who qualifies as a federally eligible
defined individual on or after July 1, 2008.
(n) (1) A health insurer shall inform all individuals applying for
coverage pursuant to this section or Section 300gg-41 of Title 42 of
the United States Code that, if they are eligible for such coverage,
it will be provided through the Major Risk Medical Insurance Program
(Part 6.5 (commencing with Section 12700)) and that they are
required to apply for that coverage within 63 days of becoming
eligible for it.
(2) A health insurer shall disclose, as part of its CORBA or
Cal-CORBA disclosure and enrollment documents, an explanation of the
availability of guaranteed access to coverage under the Major Risk
Medical Insurance Program pursuant to paragraph (2) of subdivision
(b) of Section 12725.
(o) Subdivisions (m) and (n) shall be operative only if the state
receives a waiver from the federal Centers for Medicare and Medicare
Services, or any other applicable federal agency, permitting the
state to operate an acceptable alternative mechanism pursuant to
Section 2744 of the Public Health Service Act (42 U.S.C. Sec.
300gg-44(c)(2)) by enrolling federally defined eligible individuals
into the Major Risk Medical Insurance Program in lieu of coverage
described in subdivisions (a) and (d).
(p) Nothing in this section shall be construed to permit a health
insurer to terminate coverage for an otherwise eligible individual
enrolled in a health insurance policy pursuant to this section.
(q) This section shall become operative on July 1, 2008.
SEC. 16. SEC. 9. Section 10901.10 is
added to the Insurance Code, to read:
10901.10. On and after July 1, 2008, the premiums for a health
insurance policy that offers services through a preferred provider
arrangement pursuant to this chapter or Article 4.6 (commencing with
Section 1366.35) of Chapter 2.2 of Division 2 of the Health and
Safety Code shall be calculated as otherwise described in this
chapter, except that it shall be based on the benefit design for the
Major Risk Medical Insurance Program in effect on December 31, 2007.
SEC. 17. Section 12682.1 of the Insurance Code
is amended 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 or Section
10901.10.
(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 10785.
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 10901.3 or 10901.10. 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. On and
after July 1, 2008, the notification required by this subdivision
shall explain that, in lieu of conversion coverage provided by the
insurer, an individual eligible for conversion coverage is entitled
to receive that coverage through the Major Risk Medical Insurance
Program pursuant to Section 12725.
(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.
(j) On and after July 1, 2008, a health insurer shall not be
subject to the requirements described in subdivisions (a), (d), and
(f) insofar as those subdivisions require the health insurer to offer
and sell coverage to an individual who would otherwise become
eligible for that coverage under this section.
SEC. 18. SEC. 10. Section 12700 of
the Insurance Code is amended to read:
12700. The Legislature finds and declares all of the following:
(a) That many Californians do not have employer-sponsored group
health care coverage and are unable to secure adequate health
care coverage for themselves and their dependents because of
preexisting medical conditions, and a number of employer-sponsored
groups have difficulty obtaining or maintaining their health care
coverage because some members of the group either have, or are viewed
as being at risk for having, high medical costs.
(b) That, even where uninsured persons with preexisting conditions
are able to secure coverage, the cost of coverage is prohibitively
high or is secured only by waiving coverage for the preexisting
conditions for which they are most likely to need care.
(c) That adverse selection precludes private health plans
regulated by the State of California from enrolling medically
uninsurable persons in the face of the escalating health care costs,
and a highly competitive market.
(d) That left to face the cost of major medical care without
health care coverage, all but the extremely affluent uninsured
persons must ultimately look to publicly funded programs including
the Medi-Cal program or MISP the Medically
Indigent Services Program in the event of severe illness or
injury.
(e) That one prudent means of making comprehensive major medical
coverage available to individuals who are unable to purchase
health care coverage because of their health risk or health status
is to arrange for, and subsidize, their purchase of private health
care coverage through a combination of public and private funding.
to purchase private health care coverage when they are
denied that coverage because of their health risk, health history,
or health status, is to arrange for, and subsidize, private coverage
using a combination of public and private funding.
(f) That enrollment in affordable, comprehensive health care
coverage products compatible with their medical needs should be
available for purchase by all Californians, including those who are,
or are viewed by carriers as being, at high risk because of
preexisting medical conditions, and that information about these
coverage options should be readily available to consumers.
(g) That the structure of coverage for medically uninsurable
persons should encourage broad participation of private health care
service plans and health insurers in providing that coverage and
should, at a minimum, not create a disincentive for
health care service plans and health
insurers to participate in the state's program for high-risk and
uninsurable persons.
(h) That on and after July 1, 2008, sufficient funding from a
combination of public and private sources shall be available so that
the program can provide health care coverage to all eligible persons
willing to pay premiums and without the need for waiting lists.
SEC. 19. SEC. 11. Section 12705 of
the Insurance Code is amended to read:
12705. The following definitions apply for the purposes of this
part:
(a) "Applicant" means an individual who applies for major risk
medical coverage through the program.
(b) "Board" means the Managed Risk Medical Insurance Board.
(c) "Fund" means the Major Risk Medical Insurance Fund, from which
the program may authorize expenditures to pay for medically
necessary services that exceed subscribers' contributions, and for
administration of the program.
(d) "Major risk medical coverage" means the payment for
comprehensive, medically necessary services compatible with the
medical needs of medically uninsurable persons, provided by
institutional and professional providers and structured in a manner
that does not provide a disincentive for accessing needed health
care.
(e) "Participating health plan" means a health insurer holding a
valid outstanding certificate of authority from the Insurance
Commissioner or a health care service plan as defined under
subdivision (f) of Section 1345 of the Health and Safety Code, that
contracts with the board to administer major risk medical coverage to
program subscribers and pursuant to the terms of its contract with
the board, provides, arranges, pays for, or reimburses the costs of
health services.
(f) "Payor" means an entity described in Section 1373.63 of the
Health and Safety Code or Section 10127.19 that elects to pay its
share of program costs, as described in Chapter 9 (commencing with
Section 12739.5).
(g) "Plan rates" means the total monthly amount charged by a
participating health plan for a category of risk.
(h) "Program" means the California Major Risk Medical Insurance
Program.
(i) "Program costs" means the anticipated costs of operating the
program for the year, including, but not limited to, the cost of
providing covered benefits to all prospective eligible subscribers;
administrative costs, including the costs of staff and overhead
operations for the program; and a reasonable amount to establish and
maintain a prudent reserve for the program. For purposes of this
section, administrative costs for the program may not be expended to
support any other program administered by the board.
(j) "Subscriber" means an individual who is eligible for and
receives major risk medical coverage through the program, and
includes a member of a federally recognized California Indian tribe.
(k) "Subscriber contribution" means the portion of participating
health plan rates paid by the subscriber, or paid on behalf of the
subscriber by a federally recognized California Indian tribal
government. If a federally recognized California Indian tribal
government makes a contribution on behalf of a member of the tribe,
the tribal government shall ensure that the subscriber is made aware
of all the health plan options available in the county where the
member resides.
SEC. 20. SEC. 12. Section 12711 of
the Insurance Code is amended to read:
12711. The board shall have the following authority:
(a) To determine the eligibility of applicants.
(b) To determine the major risk medical coverage to be provided to
program subscribers. The major risk medical coverage shall comply
with the provisions of Section 12718.
(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 ensuring
the availability of adequate health care services.
(d) To approve subscriber contributions and
, to plan rates and establish program contribution amounts
and the types of covered lives that shall be reported by plans
and insurers, and to determine and administer fees
imposed pursuant to Chapter 9 (commencing with Section 12739.5).
(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 apply for any federal funding the board determines to be
cost effective, and to negotiate with the federal Centers for
Medicare and Medicaid Services to secure the federal funding.
(k) To contract with a reinsurer to obtain reinsurance or
stop-loss coverage for the program.
(l) To establish reasonable participation requirements for
subscribers.
(m) To exercise all powers reasonably necessary to carry out the
powers and responsibilities expressly granted or imposed upon it
under this part.
SEC. 21. SEC. 13. Section 12712 of
the Insurance Code is amended to read:
12712. The board shall perform the following functions:
(a) Establish the scope and content of adequate major medical
coverage to be offered by the program, including guidelines, as
appropriate, for disease management, case management, care management
or other cost management strategies to ensure cost-effective,
high-quality health care services for subscribers.
(b) Determine reasonable minimum standards for participating
health plans.
(c) Determine the time, manner, method, and procedures for
withdrawing program approval from a plan or limiting subscriber
enrollment in a participating health plan.
(d) Research and assess the needs of persons without adequate
health coverage, and promote means of assuring
ensuring the availability of adequate health care
services.
(e) Administer the program so as to ensure that the program
subsidy amount does not exceed amounts transferred to the fund
pursuant to Chapter 8 (commencing with Section 12739).
(f) Issue appropriate rules and regulations for matters it may be
authorized or required to provide for by this part. In adopting these
rules and regulations, the board shall be guided by the needs and
welfare of persons unable to secure adequate health coverage for
themselves and their dependents, and prevailing practices among
private health plans.
(g) This section shall become inoperative on July 1, 2008, and, as
of January 1, 2009, is repealed, unless a later enacted statute that
is enacted before January 1, 2009, deletes or extends the dates on
which it becomes inoperative and is repealed.
SEC. 22. SEC. 14. Section 12712 is
added to the Insurance Code, to read:
12712. The board shall perform the following functions:
(a) Establish the scope and content of adequate major medical
coverage to be offered by the program, including guidelines, as
appropriate, for disease management, case management, care
management, or other cost management strategies to ensure
cost-effective, high-quality health care services for subscribers.
(b) Determine reasonable minimum standards for participating
health plans.
(c) Determine the time, manner, method, and procedures for
withdrawing program approval from a plan or limiting subscriber
enrollment in a participating health plan.
(d) Research and assess the needs of persons without adequate
health coverage, and promote means of assuring
ensuring the availability of adequate health care
services.
(e) Issue appropriate rules and regulations for matters it may be
authorized or required to provide for by this part. In adopting these
rules and regulations, the board shall be guided by the needs and
welfare of persons unable to secure adequate health coverage for
themselves and their dependents, and prevailing practices among
private health plans.
(f) Implement strategies to ensure program integrity and to ensure
that the program serves the target population of uninsurable
individuals. Strategies may include, but are not limited to, ensuring
that applicants have provided adequate evidence of their inability
to obtain health care coverage and requiring subscribers to attest
that they do not have health care coverage that meets their medical
needs and is less costly than coverage available to them in the
program.
(g) This section shall become operative on July 1, 2008.
SEC. 23. SEC. 15. Section 12712.5 of
the Insurance Code is amended to read:
12712.5. For the period commencing on September 1, 2003, to June
30, 2008, 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.
SEC. 24. SEC. 16. Section 12714.1 is
added to the Insurance Code, to read:
12714.1. (a) The board shall appoint an eight-member panel to
advise it regarding implementation of the fees established pursuant
to Chapter 9 (commencing with Section 12739.5). Appointments to the
panel shall be completed, and the panel shall be prepared to perform
its duties, prior to April 1, 2008.
(b) The membership of the panel shall be composed of all of the
following persons:
(1) Four representatives of health care service plans and health
insurers, including at least one representative from either a health
care service plan or a health insurer that is a payor and not a
participating health plan.
(2) Two representatives of medically uninsurable consumers.
(3) One physician and surgeon.
(4) One representative of the business community.
(c) The Director of the Department of Managed Health Care, or his
or her designee, and the commissioner, or his or her designee, shall
participate in the panel as nonvoting members.
(d) The panel members shall have demonstrated expertise in the
provision of health-related services to medically uninsurable
individuals.
(e) The initial term of the panel members shall be staggered, with
four members being appointed for a two-year term and four members
being appointed for a four-year term. Upon the expiration of the
initial term, all panel members shall be appointed for a four-year
term.
(f) The panel shall elect, from among its members, its chair who
shall regularly report to the board, during the board's public
meetings, on behalf of the panel.
(g) The panel shall have all of the following powers and duties:
(1) To advise the board on all policies, regulations, and program
operations that affect the fee described in Chapter 9 (commencing
with Section 12739.5).
(2) To review the budget for the program and advise the board on
appropriate fee amounts.
(3) To review program operations and make recommendations to
improve the quality and cost-effectiveness of health care provided to
subscribers in the program.
(4) To meet at least quarterly, unless deemed unnecessary by the
chair.
(h) The panel shall provide written recommendations to the board.
The board shall consider recommendations of the panel at its next
meeting following submission of the recommendations and respond to
the panel in writing when it rejects a written recommendation made by
the panel.
(i) All members of the advisory panel shall serve without
compensation. The representatives of medically uninsurable consumers
and the business community and the physician and surgeon member shall
be reimbursed for all necessary travel expenses associated with the
activities of the panel.
SEC. 25. Section 12714.2 is added to the
Insurance Code, to read:
12714.2. (a) Prior to February 1, 2008, the board shall establish
a task force that shall develop recommendations to submit to the
Legislature and the board on quality and cost containment strategies
for the program. The task force shall include, at a minimum,
representatives from health care service plans, health insurers,
health care providers, agents and brokers, consumer organizations,
and subscribers.
(b) In developing the recommendations, the task force shall review
disease management, case management and quality monitoring programs
and strategies, and provider rate limits or discounts, including
those implemented in high-risk programs in other states. The task
force shall also evaluate the following matters:
(1) Appropriate strategies to encourage program enrollment on an
ongoing basis by medically uninsurable persons, rather than
individuals applying for coverage only when the need for health care
services arises.
(2) The costs and benefits of establishing incentives for
subscribers to enroll in the program that may include, but are not
limited to, offering additional benefit options in the program that
satisfy federal requirements for tax-favored, individual health
plans. In considering any proposed benefit design, the task force
shall consider the following: the health care needs of subscribers in
the program, affordability for subscribers, avoiding incentives for
participation by consumers who are not medically uninsurable, and the
impact of any benefit design on program costs and the fees assessed
pursuant to Chapter 9 (commencing with Section 12739.5).
(3) Strategies to ensure the program solely services medically
uninsurable persons and not persons who can otherwise obtain
comprehensive health care coverage in the private health care market.
(c) The board shall report to the Legislature prior to April 1,
2008, on the recommendations developed by the task force and on the
specific policy and program changes the board will implement on or
after July 1, 2008.
SEC. 26. SEC. 17. Section 12718 of
the Insurance Code is amended to read:
12718. (a) Benefits under this chapter or Chapter 5 (commencing
with Section 12720) shall be subject to required subscriber
copayments and deductibles as the board may authorize. Any authorized
copayments shall not exceed 25 percent and any authorized deductible
shall not exceed an annual household deductible amount of five
hundred dollars ($500). However, health plans not utilizing a
deductible may be authorized to charge an office visit copayment of
up to twenty-five dollars ($25). If the board contracts with
participating health plans pursuant to Chapter 5 (commencing with
Section 12720), copayments or deductibles shall be authorized in a
manner consistent with the basic method of operation of the
participating health plans. The aggregate amount of deductible and
copayments payable annually under this section shall not exceed two
thousand five hundred dollars ($2,500) for an individual and four
thousand dollars ($4,000) for a family.
(b) This section shall become inoperative on July 1, 2008, and, as
of January 1, 2009, is repealed, unless a later enacted statute that
is enacted before January 1, 2009, deletes or extends the dates on
which it becomes inoperative and is repealed.
SEC. 27. SEC. 18. Section 12718 is
added to the Insurance Code, to read:
12718. (a) Benefits under this chapter or Chapter 5 (commencing
with Section 12720) shall be subject to required subscriber
copayments and deductibles as the board may authorize.
(b) Any authorized copayments shall not exceed 25 percent and any
authorized deductible shall not exceed an annual household deductible
amount of five hundred dollars ($500). However, health plans not
utilizing a deductible may be authorized to charge an office visit
copayment of up to twenty-five dollars ($25). If the board contracts
with participating health plans pursuant to Chapter 5 (commencing
with Section 12720), copayments or deductibles shall be authorized in
a manner consistent with the basic method of operation of the
participating health plans. The aggregate amount of deductible and
copayments payable annually under this section shall not exceed two
thousand five hundred dollars ($2,500) for an individual and four
thousand dollars ($4,000) for a family.
(c) On and after July 1, 2008, major risk medical coverage in the
program shall meet all of the following requirements:
(1) Have no annual limits on total coverages.
(2) Have a limit on covered benefits over the lifetime of each
subscriber of no greater than one million dollars ($1,000,000). The
board may increase the lifetime limit on an annual basis to reflect
inflation in health care costs.
(3) Include a maximum annual deductible for health care services,
excluding prevention services, of not more than five
hundred dollars ($500) per subscriber per year. The board shall
define prevention services for these purposes. The board may
establish a higher annual deductible in the program or offer
additional program benefit designs with a higher annual deductible if
the board determines, in consultation with the advisory committee
established pursuant to Section 12714.1, that such coverage will
sufficiently reduce the amount of a subscriber's contribution or
costs, and it is consistent with providing quality, comprehensive
coverage appropriate for high-risk individuals.
(d) This section shall become operative on July 1, 2008.
SEC. 28. SEC. 19. Section 12723 of
the Insurance Code is amended to read:
12723. The participating health plans with which the program
shall contract shall be either health insurers holding valid,
outstanding certificates of authority from the commissioner, or
health care service plans licensed under the Knox-Keene Health Care
Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340)
of Division 2 of the Health and Safety Code).
SEC. 29. SEC. 20. 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 April
30, March 31, 2008, inclusive, subscribers and
their dependents receiving major risk coverage through the program
may receive that coverage for no more than 36 consecutive months. In
order to maximize continuity of coverage for subscribers enrolled in
the program, the board may enter into arrangements with health care
service plans and health insurers to obtain funding from the health
care service plans and health insurers equivalent to that described
in Section 1373.62 of the Health and Safety Code and Section 10127.15
of this code without automatically disenrolling subscribers from the
program who reach 36 months of consecutive coverage during the
period beginning January 1, 2007, to April 30,
March 31, 2008, inclusive.
(g) (1) On or before March 1,
2008, the board shall notify all individuals who have been or will
be disenrolled pursuant to subdivision (f), by writing to them at
their last known addresses that, whether or not they are currently
enrolled in coverage pursuant to Section 1373.62 of the Health and
Safety Code or Section 10127.15 of this code, they may reenroll in
the program through an abbreviated process developed by the board.
(2) The board shall also develop the notice and certification to
be sent by all health care service plans and insurers pursuant to
subdivision (i) of Section 1373.62 of the Health and Safety Code, and
subdivision (i) of Section 10127.15, to all individuals enrolled in
standard benefit plans. The notice and certification shall provide
the language and form in which health care service plans and insurers
shall inform individuals enrolled in standard benefit plans about
the expiration of coverage under Section 1373.62 of the Health and
Safety Code and Section 10127.15, shall provide them with evidence of
having been enrolled in standard benefit plans for purposes of
reenrollment in the program, and shall describe the process for
applying to reenroll in the program.
(h) This section shall become inoperative on July 1, 2008, and, as
of January 1, 2009, is repealed, unless a later enacted statute,
that is enacted before January 1, 2009, deletes or extends the dates
on which it becomes inoperative and is repealed.
SEC. 30. SEC. 21. Section 12725 is
added to the Insurance Code, 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 meet at least one of the following criteria:
(1) Has been rejected for health care coverage by at least
two on e private health
plans plan within the 12-month period
prior to application to the program. An applicant shall be deemed to
have been rejected if the only private health care coverage that the
applicant could secure would do one of the following:
(A) Impose substantial waivers that the program determines would
leave the applicant without adequate coverage for medically necessary
services.
(B) Afford limited coverage that the program determines would
leave the applicant without adequate coverage for medically necessary
services.
(C) Afford coverage at a premium rate that exceeds the amount of
the subscriber contribution the applicant would pay for the model
type of participating health plan that is most similar to the model
type of coverage the individual applied for in the individual market.
For purposes of this section, an individual who applied for health
maintenance organization coverage in the individual market shall be
eligible for the program if the premium rate quoted for the
individual coverage exceeds the subscriber contribution for the
health maintenance organizations in the program, and an individual
who applied for preferred provider organization coverage in the
individual market shall be eligible if the premium rate quoted for
the individual coverage exceeds the subscriber contribution for the
preferred provider organizations in the program.
(2) Is eligible for, or enrolled in, guaranteed individual
coverage pursuant to Section 300gg-41 of Title 42 of the United
States Code.
(3) Has exhausted federal and state COBRA benefits under a group
health care service plan contract or a group health insurance policy
and is eligible for, or enrolled in, conversion coverage pursuant to
Section 1373.6 of the Health and Safety Code or Section 12682.1.
(4) Has a health condition or diagnosis that meets the criteria
for automatic eligibility as established by the board. The board, in
consultation with the advisory panel established pursuant to Section
12714.1, shall establish a list of serious health
conditions or diagnoses making an applicant automatically eligible
for the program based on common underwriting and rating practices of
health care service plans and health insurers selling individual
coverage in California, to the extent known and available to the
board.
(5) Was enrolled in coverage that had been provided pursuant to
Section 1373.62 of the Health and Safety Code or Section 10127.15 of
this code pursuant to the pilot project established by Chapter 794 of
the Statutes of 2002.
(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 participating health plan. The
period of ineligibility established by the board pursuant to this
subdivision shall be not less than 12 months, unless the board
determines that an applicant had good cause for disenrolling from a
participating health plan and reapplying for coverage in the program.
(f) This section shall become operative on July 1, 2008.
SEC. 31. SEC. 22. 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 participating health plans
that do not utilize a preexisting condition provision. These
mechanisms may include, but are not limited to, a postenrollment
waiting period.
This section shall become inoperative on July 1, 2008, and, as of
January 1, 2009, is repealed, unless a later enacted statute, that is
enacted before January 1, 2009, deletes or extends the dates on
which it becomes inoperative and is repealed.
SEC. 32. SEC. 23. Section 12726 is
added to the Insurance Code, to read:
12726. (a) The board shall 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.
(b) 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, or under the federal Health
Insurance Portability and Accountability Act of 1996, or under other
creditable coverage as defined by the board that was terminated, if
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 not apply to a subscriber who is
eligible for the program under paragraph (2) or (3) of subdivision
(b) of Section 12725. 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.
(c) The board shall allow a participating health plan that does
not utilize a preexisting condition provision to impose a waiting or
affiliation period, not to exceed 90 days, before the coverage it
issued shall become effective. During the waiting or affiliation
period a subscriber shall not be required to make the contribution
for program coverage. The waiting or affiliation period shall not
apply to a subscriber who is eligible for the program under paragraph
(2) or (3) of subdivision (b) of Section 12725.
(d) This section shall become operative on July 1, 2008.
SEC. 33. Section 12734 is added to the
Insurance Code, to read:
12734. (a) If authorized by the board, the program shall pay an
insurance agent, as defined in Section 31, or an insurance broker, as
defined in Section 33, for assisting an individual in completing the
application form for the program, if the following conditions are
met:
(1) The individual is enrolled as a result of the application.
(2) The agent or broker requests such payment in writing.
(3) The request accompanies the application and includes the name,
license number, tax identification number or social security number,
telephone number, and fax number (if available), signature, and
address of the agent or broker.
(b) The program shall pay an insurance agent or insurance broker
who assists a federally eligible defined individual pursuant to
Section 300gg-41 of Title 42 of the United States Code to complete
the application for the program a one-time payment of 2 percent of
the subscriber contribution for the first 12-month period of
enrollment in the program. In order to qualify for the payment, the
agent or broker shall submit documentation, as the board may require,
to demonstrate that the individual is a federally eligible defined
individual.
SEC. 34. SEC. 24. 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 Chapter 9 (commencing with Section 12739.5)
and Section 1373.62 of the Health and Safety Code.
(b) After January 1, 2008, the following amounts shall be
deposited annually in the Major Risk Medical Insurance Fund:
(1) Twenty-four million three hundred ninety-three thousand
dollars ($24,393,000) from the Hospital Services Account in the
Cigarette and Tobacco Products Surtax Fund.
(2) Fourteen million six hundred seven thousand dollars
($14,607,000) 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.
(4) Funds received as a result of the collection of the fees
imposed pursuant to Chapter 9 (commencing with Section 12739.5).
(c) Notwithstanding any other provision of law, any money in the
fund that is attributable to monetary penalties imposed pursuant to
this part shall not be continuously appropriated and shall be
available for expenditure as provided in this chapter only upon
appropriation by the Legislature.
SEC. 35. SEC. 25. Chapter 9
(commencing with Section 12739.5) is added to Part 6.5 of Division 2
of the Insurance Code, to read:
CHAPTER 9. CONTRIBUTION REQUIREMENTS
12739.5. No later than February 1 of each year, commencing
February 1, 2008, each health care service plan subject to Section
1373.63 of the Health and Safety Code and each health insurer subject
to Section 10127.19 shall notify the board of its election either to
contract with the board as a participating health plan or to be a
payor. The board shall notify the Director of Managed Health Care and
the commissioner of the entities that have elected to be a payor and
the amount of the fee each entity is required to pay.
12739.6. (a) No later than March 31 of each year, beginning in
2008, the board shall establish for the year, the anticipated program
costs and the share of those program costs that health care service
plans and health insurers shall contribute to the program as
participating health plans or payors, as required by Section 1373.63
of the Health and Safety Code and Section 10127.19.
(b) The board shall complete the following actions pursuant to
subdivision (a):
(1) Estimate the anticipated cost of operating the program during
the next state fiscal year, including, but not limited to, the cost
of providing all covered benefits to all prospective eligible
subscribers; administrative costs, including the board's staff and
overhead for the program; and a reasonable sum to establish and
maintain a prudent reserve.
(2) Estimate the total revenue anticipated to be available for
program operation during the next state fiscal year. The estimate
shall include anticipated state appropriations, subscriber
contributions, and revenue from all other sources, but shall exclude
revenue anticipated to be received from payors and participating
health plans pursuant to this chapter.
(3) Subtract the estimate described in paragraph (2) from the
estimate described in paragraph (1). The difference between the two
estimates shall be the total aggregate amount of program costs to be
contributed by payors and participating health plans.
(c) Notwithstanding Section 12737, in calculating the costs of the
program under subdivision (b), the board may consider adjusting
subscriber contributions to reflect the subscriber's ability
to pay, to the extent federal funds or additional state funds are
available for this purpose. In implementing this subdivision, the
board may reduce a subscriber's contribution to not less than 115
percent of market rates if the subscriber has an annual household
income at or below 200 percent of the federal poverty level. For
purposes of this section, the board may require applicants and
subscribers to provide information on their income to the board.
to pay.
12739.7. (a) On or before March 1 of each year, beginning in
2008, each health care service plan subject to Section 1373.63 of the
Health and Safety Code and each health insurer subject to Section
10127.19 shall report to the board the following information:
(1) The total number of covered lives as of the preceding
December 31. For purposes of this chapter, "covered lives" include
individuals who receive health care coverage provided, indemnified,
or administered by a health care service plan or health insurer
subject to this chapter and individuals who receive health care
services pursuant to an agreement by which the health care service
plan or health insurer rents or leases a contracted network of
providers. Each named enrollee, insured, or covered person, including
primary subscribers or policyholders, covered spouses, domestic
partners, and each covered dependent shall count separately as a
covered life. Covered lives shall not include persons covered under
the Medi-Cal program, Medicare, the Healthy Families Program, this
program, the Access for Infants and Mothers Program pursuant to Part
6.3 (commencing with Section 12695), the California Children and
Families Act of 1998 (Division 108 (commencing with Section 130100)
of the Health and Safety Code), accident-only, specified disease,
long-term care, CHAMPUS supplement, hospital indemnity, Medicare
supplement, dental-only, or vision-only insurance policies or
specified disease insurance that does not pay benefits on a fixed
benefit, cash payment only basis or short-term limited duration
health insurance, or by a local, nonprofit program or county serving
children whose annual household income is below 400 percent of the
federal poverty level who are under the age of 18 and who are not
eligible for the Medi-Cal program, the Access for Infants and Mothers
Program, or the Healthy Families Program.
(2) For purposes of
this chapter, covered lives shall include individual coverage,
conversion coverage, guaranteed issue coverage pursuant to the
federal Health Insurance Portability and Accountability Act of 1996,
small group coverage, other group coverage, government employee
coverage, other government coverage, association coverage, services
provided by an administrator of health benefits coverage, and other
coverage. For purposes of this section, "administrator of health
benefits coverage" means a licensed health insurer or health care
service plan, or any person or entity affiliated with, or a
subsidiary of, a health insurer or health care service plan, that
collects any charge or premium from, or who adjusts or settles claims
on behalf of, residents of the state or who leases contracted
provider networks to purchasers. December 31, as
determined by the board.
(3)
(2) Other related information as the board, in
consultation with the advisory panel established by Section 12714.1,
may require to implement and administer this chapter. The board may
specify form, format, and other requirements for this report, in
consultation with the advisory panel established pursuant to Section
12714.1. The absence of these specifications by the board does not
relieve a health care service plan or health insurer from reporting
the information in a timely fashion.
(b) The board may determine, at its discretion, an amount of
program costs to be covered by a health care service plan or health
insurer subject to this section that fails to report to the board by
March 1 of any year, the number of covered lives as required by this
section.
12739.8. (a) The board shall calculate the share of program costs
to be covered each year, beginning in 2008, for the year 2008, by a
health care service plan and a health insurer subject to this chapter
on a per covered life basis, based on its share of the health care
coverage market, but in no event shall a health care service plan or
a health insurer cover program costs in excess of one dollar
and thirty-five cents ($1.35) ____ per covered
life per month, unless a higher amount is approved by the
Legislature. The requirements of this subdivision shall only apply to
a health care service plan that does not meet the criteria under
paragraph (6) of subdivision (a) of Section 1373.63 of the Health and
Safety Code and to a health insurer that does not meet the criteria
of paragraph (6) of subdivision (a) of Section 10127.19.
(b) The board shall calculate the share of program costs required
by each health care service plan and health insurer by multiplying
the estimate, described in paragraph (3) of subdivision (b) of
Section 12739.6 by a fraction, the numerator of which shall be the
number of covered lives reported by March 1 of that year by the plan
or insurer and the denominator of which shall be the total number of
covered lives reported by March 1 of that year by all plans and
insurers. The product shall be the market share for the plan or
insurer.
(c) Between March 1 and June 1 of each year, the board shall
produce a schedule showing the share of the total program costs for
each plan and insurer based on its market share as determined under
subdivision (b). Each plan and insurer shall have the affirmative
duty of obtaining that schedule from the board no later than June 10
of each year, beginning in 2008.
12739.9. (a) A health care service plan and a health
insure insurer shall either contract with the
board as a participating health plan or be a payor, as elected
pursuant to Section 12739.5.
(b) A health care service plan that is a payor and a health
insurer that is a payor shall pay its share of program costs
calculated under Section 12739.8 prior to August 1 of each year,
beginning in 2008. A health care service plan shall make its payment
to the Director of Managed Health Care, and a health insurer shall
make its payment to the commissioner.
(c) For a health care service plan or health insurer that is a
participating health plan, the board shall annually establish the
minimum number of program subscribers that each participating health
plan shall enroll, based on the participating health plan's market
share as calculated under Section 12739.8. If a participating health
plan enrolls fewer program subscribers than its market share, the
participating health plan shall pay the difference between its
enrollment and its market share, based on the per covered life
estimate of program costs as calculated under Section 12739.8. The
amount due from the participating health plan pursuant to this
section shall become a fee payable pursuant to Section 1356.2 of the
Health and Safety Code or Section 1827.86. A participating health
plan may enroll more subscribers than its market share. A
participating health plan that enrolls more subscribers than its
market share shall be reimbursed for costs exceeding the market share
pursuant to Section 12739.10.
12739.10. (a) Pursuant to procedures developed in consultation
with the advisory panel established pursuant to Section 12714.1, the
board shall conduct a reconciliation of each year's program costs and
health care services expenses paid by each participating health
plan. The board shall conduct the reconciliation at timeframes it
determines.
(b) For purposes of the reconciliation, each participating health
plan shall report to the board its health care services expenses for
program subscribers as prescribed and required by the board. "Health
care services expenses" means the total health care expenses paid by
the participating health plan that were incurred during the reporting
period or the prior reporting period plus the total value of the
monthly administrative fees, as determined by the board. Health care
services expenses do not include costs that were incurred but not
reported by the participating health plan. Health care services
expenses for program subscribers shall be consistent with the rates,
methods, and coverage practices generally applicable to health care
coverage for individuals in the private health coverage market.
(c) The board shall verify the health care services expenses
incurred by the participating health plan. The verification shall
include assurance that the individual for whom the expenses were
incurred by the participating health plan was enrolled in, and
eligible for, the program at the time the individual received health
care services for which the participating health plan paid or covered
on the individual's behalf and that the expenses are consistent with
the program benefit plan.
(d) The board shall subtract subscriber contributions from the
health care services expenses reported by the participating health
plan to calculate the participating health plan's net health care
services expenses. The board shall reimburse the participating health
plan by first determining the amount by which the participating
health plan's enrollment exceeds the participating health plan's
market share as calculated in Section 12739.8. The board shall
multiply net health care services expenses by the excess market share
in order to determine the reimbursement amount. Final payment by the
board, subject to the availability of funds to the board, shall be
made within 30 days after the completion of verification activities
conducted pursuant to this section. If a participating health plan's
enrollment is less than its market share calculated under Section
12739.8, the board shall collect a remittance from the participating
health plan for the difference between its net health care
services expenses and its share of program costs.
12739.11. If the board determines that the costs for the
operation of the program exceed or are likely to exceed the estimate
it made pursuant to Section 12739.6, the board, in consultation with
the advisory panel established by Section 12714.1, may adjust the
amount of program costs required from a payor and a participating
plan by multiplying the amount of the insufficiency by the fraction
described in Section 12739.8. The numerator and denominator of the
fraction shall be based on information submitted by the plan or
insurer pursuant to Section 12739.7 for the preceding March 1.
12739.12. Each payor's share of any fee imposed by the board
pursuant to this section shall constitute a fee payable in accordance
with Section 1356.2 of the Health and Safety Code, for payors
licensed by the Department of Managed Health Care, or Section
1827.86, for payors having a certificate of authority or license
issued by the commissioner.
12739.13. If revenues collected pursuant to this chapter exceed
the amount actually required for the operation of the program for any
fiscal year after reconciliation pursuant to Section 12739.10 has
been completed for that year, the excess shall be retained in the
fund and shall be used by the board to reduce the share of program
costs paid by health care service plans and health insurers in the
subsequent fiscal year.
12739.14. (a) In consultation with the advisory panel established
by Section 12714.1, the board shall develop a risk adjustment
mechanism that considers the health status of program subscribers who
enroll in participating health plans.
(b) In developing the risk adjustment mechanism, the board shall
adopt a widely utilized risk adjustment methodology that is
appropriate to program subscribers and that does not discourage
effective and efficient management of health care services by
participating health plans. The board shall consider the ease of
administration and data gathering capabilities of participating
health plans necessary to implement and effect the risk adjustment
methodology. Any risk adjustment methodology adopted by the board
shall take into consideration, at a minimum, the age, gender, and
demographics of the enrollees of each participating health plan as
well as hospital inpatient diagnoses, hospital outpatient diagnoses
, and physician-reported ambulatory care diagnoses.
(c) The board shall annually adjust payments to participating
health plans to reflect the relative risk enrolled by each
participating health plan. "Relative risk" shall be calculated by the
lower amount of the market share or the high-risk pool market share
times the difference in risk times the total aggregated claims for
all carriers. "Total aggregate claims" shall not include
administrative expenses.
SEC. 36. SEC. 26. The adoption and
one readoption of any rules and regulations issued by the Managed
Risk Medical Insurance Board, the Department of Managed Health Care,
or the Department of Insurance to implement this act shall be deemed
to be an emergency and necessary for the immediate preservation of
the public peace, health and safety, or general welfare for purposes
of Sections 11346.1 and 11349.6 of the Government Code, and the
Managed Risk Medical Insurance Board, the Department of Managed
Health Care, and the Department of Insurance are hereby exempted from
the requirements to describe specific facts showing the need for
immediate action and from review by the Office of Administrative Law.
For purposes of subdivision (e) of Section 11346.1 of the Government
Code, the 120-day period, as applicable to the effective period of
an emergency regulation and submission of specified materials to the
Office of Administrative Law, is hereby extended to 180 days.
SEC. 37. SEC. 27. 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.