BILL NUMBER: AB 2 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 26, 2008
PASSED THE ASSEMBLY AUGUST 30, 2008
AMENDED IN SENATE AUGUST 21, 2008
AMENDED IN SENATE AUGUST 14, 2008
AMENDED IN SENATE JULY 14, 2008
AMENDED IN SENATE SEPTEMBER 7, 2007
AMENDED IN SENATE SEPTEMBER 5, 2007
AMENDED IN SENATE JULY 18, 2007
AMENDED IN SENATE JULY 3, 2007
AMENDED IN ASSEMBLY MARCH 28, 2007
INTRODUCED BY Assembly Member Dymally
DECEMBER 4, 2006
An act to add Sections 1356.2, 1373.623, 1373.63, and 1399.807 to
the Health and Safety Code, and to amend Sections 12700, 12705,
12711, 12712, 12718, 12723, 12725, and 12726 of, to amend, repeal,
and add Section 12739 of, to add Sections 1827.86, 10127.165,
10127.19, 10903, 12711.3, 12714.1, 12714.5, and 12738 to, to add
Chapter 9 (commencing with Section 12739.5) to Part 6.5 of Division 2
of, and to repeal and add Section 12737 of, the Insurance Code,
relating to health care coverage, and making an appropriation
therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 2, 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. Existing law requires
a health care service plan and a health insurer to continue to
provide coverage to certain individuals who were members of a pilot
program that ended on December 31, 2007, 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 to those individuals.
This bill would require a health care service plan and a health
insurer to elect to either accept for coverage at specified rates and
under specified conditions persons eligible for MRMIP that have been
assigned to the plan or insurer by MRMIB regardless of health status
or previous health care claims experience, or to alternatively pay a
fee based on its market share, as specified. The fee would be set at
specified amounts and could be passed along on an equal basis to
individual plan subscribers or policyholders of the plan or insurer.
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 authorize MRMIB, with
the approval of the Department of Finance, to obtain loans from the
General Fund for expenses related to administration of the fund.
This bill would, as of January 1, 2010, or earlier, require a
person to have been rejected for coverage by at least 2 private
health plans to be eligible for MRMIP, require MRMIB to establish a
voluntary reenrollment program for persons enrolled in the former
pilot program, and implement benefit changes for MRMIP, as specified.
The bill would require MRMIB to appoint a panel to advise it on
MRMIP would authorize MRMIB to apply for federal funding and take
other actions, as specified, and would require MRMIB to report to the
Legislature on or before July 1, 2011, as specified. The bill would
require MRMIB to report and make recommendations to the Legislature
by September 1, 2009, regarding the status of benefits and premiums
provided to federally eligible defined individuals, based on data
provided by plans and insurers, as specified. The bill would enact
other related provisions. By imposing new requirements on health care
service plans, the willful violation of which would be a crime, the
bill would impose a state-mandated local program.
(2) 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, effective July 1, 2009,
thereby making an appropriation.
The bill would make related changes, and would, until January 1,
2011, exempt MRMIB, the Department of Managed Health Care, and the
Department of Insurance from certain procedural requirements
necessary to adopt rules and regulations.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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) Research has consistently revealed that lack of access to
health care coverage can result in serious health effects for
individuals. According to the Kaiser Family Foundation, about
one-quarter of uninsured adults go without needed care each year due
to cost. The uninsured are less likely than those with insurance to
receive preventive care and services for major health conditions. The
uninsured often face unaffordable medical bills when they do seek
care. The uninsured pay for more than one-third of their care
out-of-pocket and are often charged higher amounts for their care
than the insured. These bills can quickly translate into unaffordable
levels of medical debt since most of the uninsured have low or
moderate incomes and have little, if any, savings.
(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 insurers 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) It is therefore the intent of the Legislature to establish
MRMIP as the state-sponsored health care coverage program for
high-risk and medically uninsurable persons and to improve and expand
coverage through MRMIP for 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 intends to establish meaningful coverage options in this
state for individuals who have been denied private individual health
care coverage. The Legislature intends for every health care service
plan or health insurer offering, issuing, or renewing individual
coverage to also serve as an insurer of last resort and accept for
coverage MRMIP-eligible persons assigned to them by the Managed Risk
Medical Insurance Board and provide benefits determined by the board
at the rates established by this act. The Legislature further intends
that health care service plans and health insurers may elect,
instead, to pay a fee to the state so that the state may arrange for
and subsidize the costs of health care coverage for those persons who
are denied private health care coverage because of their health
history, health status, or health condition.
(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.
(c) The fees paid pursuant to this section and Section 12739.7 of
the Insurance Code shall not be considered administrative costs for
the purposes of Section 1300.78 of Title 28 of the California Code of
Regulations or for purposes of calculating any medical loss ratio
imposed on health plans by statute or regulation.
(d) If a health care service plan elects to charge the purchasers
of individual coverage any portion of the fee paid pursuant to this
section and Section 12739.7 of the Insurance Code, the health care
service plan shall charge all individual purchasers on an equal
basis.
SEC. 3. Section 1373.623 is added to the Health and Safety Code,
to read:
1373.623. (a) Commencing January 1, 2009, at least annually
thereafter, and at such other times as the Managed Risk Medical
Insurance Board shall request, health care service plans providing
continuation coverage pursuant to Section 1373.622 shall report to
the Managed Risk Medical Insurance Board the number of covered lives
remaining in the continuation coverage and such related information
as the board may require to implement subdivision (g) of Section
12725 of the Insurance Code.
(b) Health care service plans providing continuation coverage
shall provide to enrollees in continuation coverage the notice
developed by the Managed Risk Medical Insurance Board pursuant to
subdivision (g) of Section 12725 of the Insurance Code.
SEC. 4. Section 1373.63 is added to the Health and Safety Code,
to read:
1373.63. (a) On and after January 1, 2009, except as provided in
subdivision (e), every health care service plan, except for a
specialized health care service plan or a Medicare-only or
Medicare-supplement-only health care service plan, licensed in
California, that provides individual coverage, shall accept for
coverage persons eligible pursuant to Section 12725 of the Insurance
Code for the Major Risk Medical Insurance Program, according to the
assignment of eligible persons by the Managed Risk Medical Insurance
Board pursuant to Section 12712 of the Insurance Code, regardless of
the individual's health status or previous health care claims
experience.
(b) Health care service plans subject to this section shall
provide coverage to persons assigned by the board with the same level
of benefits as the Major Risk Medical Insurance Program, as
determined by the Managed Risk Medical Insurance Board, and charge
premium rates at no more than 110 percent of the health care service
plan's standard rate for comparable individual coverage.
(c) For persons assigned for coverage to the health care service
plan, the health care service plan may impose only those coverage
exclusions or waiting periods as provided by the board in regulation
and pursuant to Section 12726 of the Insurance Code.
(d) Health plan contracts issued pursuant to this section shall be
guaranteed renewable.
(e) A health care service plan shall not be subject to the
requirements of this section if it instead elects to pay the fee
under Section 12739.5 of the Insurance Code.
(f) 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. 5. Section 1399.807 is added to the Health and Safety Code,
to read:
1399.807. On or before March 1, 2009, health care service plans
that offer, issue, or renew individual coverage pursuant to this
article shall provide to the department such data and information as
the department determines, in consultation with the Managed Risk
Medical Insurance Board and the Insurance Commissioner, are necessary
to be provided to the Managed Risk Medical Insurance Board for
purposes of the study required under Section 12714.5 of the Insurance
Code.
SEC. 6. Section 1827.86 is added to the Insurance Code, to read:
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 Medicare
supplement, specialized health, or 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 fees paid pursuant to this section and Section 12739.7
shall not be considered administrative costs for the purposes of
Section 1300.78 of Title 28 of the California Code of Regulations or
for purposes of calculating any medical loss ratio imposed on health
insurers by statute or regulation.
(e) If a health insurer elects to charge the purchasers of
individual coverage any portion of the fee paid pursuant to this
section, the health insurer shall charge all individual purchasers on
an equal basis.
SEC. 7. Section 10127.165 is added to the Insurance Code, to read:
10127.165. (a) Commencing January 1, 2009, at least annually
thereafter, and at such other times as the Managed Risk Medical
Insurance Board shall request, health insurers providing continuation
coverage pursuant to Section 10127.16 shall report to the Managed
Risk Medical Insurance Board the number of covered lives remaining in
the continuation coverage and such related information as the board
may require to implement subdivision (g) of Section 12725.
(b) Health insurers providing continuation coverage shall provide
to insureds in continuation coverage the notice developed by the
Managed Risk Medical Insurance Board pursuant to subdivision (g) of
Section 12725.
SEC. 8. Section 10127.19 is added to the Insurance Code, to read:
10127.19. (a) On and after January 1, 2009, except as provided in
subdivision (e), every health insurer that provides individual
health insurance as defined in Section 106 to residents of this state
shall accept for coverage persons eligible pursuant to Section 12725
for the Major Risk Medical Insurance Program, according to the
assignment of eligible persons by the Managed Risk Medical Insurance
Board, pursuant to Section 12712, regardless of the individual's
health status or previous health care claims experience.
(b) Health insurers subject to this section shall provide coverage
to persons assigned by the board with the same level of benefits as
the Major Risk Medical Insurance Program, as determined by the
Managed Risk Medical Insurance Board, and charge premium rates at no
more than 110 percent of the health insurer's standard rate for
comparable individual coverage.
(c) For persons assigned for coverage to the insurer, the insurer
may impose only those coverage exclusions or waiting periods as
provided by the board in regulation and pursuant to Section 12726.
(d) Health insurance policies issued pursuant to this section
shall be guaranteed renewable.
(e) A health insurer shall not be subject to the requirements of
this section if it instead elects to pay the fee under Section
12739.5.
(f) The commissioner may take all action authorized under this
chapter, including, but not limited to, the imposition of fines or
penalties against a health insurer that does not comply with this
section or Section 1827.86.
(g) The requirements of this section shall not apply to Medicare
supplement, specialized health, or 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. 9. Section 10903 is added to the Insurance Code, to read:
10903. On or before March 1, 2009, health insurers that offer,
issue, or renew individual coverage pursuant to this chapter shall
provide to the commissioner such data and information as the
commissioner determines, in consultation with the Managed Risk
Medical Insurance Board and the Department of Managed Health Care,
are necessary to be provided to the Managed Risk Medical Insurance
Board for purposes of the study required under Section 12714.5.
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 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 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 January 1, 2009, sufficient funding from a
combination of public and private sources shall be available so that
the program can provide health care coverage to eligible persons
willing to pay premiums and without the need for waiting lists.
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) "Payer" 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. 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 ensuring the availability of adequate health
care services.
(d) To approve subscriber contributions and plan rates, to
establish program contribution amounts and the types of covered lives
that shall be reported by plans and insurers, and to 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 assign persons eligible for the program pursuant to Section
12725 among health plans subject to Section 1373.63 of the Health
and Safety Code and health insurers subject to Section 10127.19,
except for plans and insurers that have elected instead to pay the
fee pursuant to those sections.
(n) To exercise all powers reasonably necessary to carry out the
powers and responsibilities expressly granted or imposed upon it
under this part.
SEC. 13. Section 12711.3 is added to the Insurance Code, to read:
12711.3. The board, subject to the approval of the Department of
Finance, may obtain loans from the General Fund for all necessary and
reasonable expenses related to the administration of the fund. The
board shall repay principal and interest, using the pooled money
investment account rate of interest, to the General Fund no later
than January 1, 2016.
SEC. 14. 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 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) 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 in the program.
(h) Administer the program in a manner to maximize the program's
eligibility for any federal funds available for high-risk health
insurance pools consistent with the purposes of this part. The board
shall apply for or otherwise seek any available federal funds
consistent with the purposes of this part.
(i) In order to reduce or eliminate any waiting list for coverage
in the program, and to ensure the availability of a coverage option
for persons who have been denied private individual health coverage,
develop a process for and implement assignment of persons eligible
for the program to obtain their health coverage from health care
service plans subject to Section 1373.63 of the Health and Safety
Code and health insurers subject to Section 10127.19. The board shall
determine the benefit design that shall be provided by health care
service plans and health insurers to eligible persons assigned to
them by the board, consistent with the benefits provided to
subscribers. In developing the assignment process, the
board shall take into account the
geographic service area of health plans and health insurers who are
available for assignment and the geographic area where potential
enrollees and insureds reside. To the greatest extent possible, the
board shall provide eligible persons with a choice of health plan or
health insurer. The board shall not assign any eligible persons to
health plans or health insurers that have elected instead to pay the
fee pursuant to Section 1373.63 of the Health and Safety Code or
Section 10127.19. The board shall determine how many eligible persons
it shall assign to health care service plans subject to Section
1373.63 of the Health and Safety Code and health insurers subject to
Section 10127.19, consistent with the purposes of this part, taking
into consideration the costs of providing coverage in the program and
the fees paid by health care service plans and health insurers who
elect to pay the fee pursuant to Section 1373.63 of the Health and
Safety Code or Section 10127.19 of this code.
SEC. 15. Section 12714.1 is added to the Insurance Code, to read:
12714.1. (a) The board shall appoint an 11-member panel to advise
the board on the program. Appointments to the panel shall be
completed, and the panel shall be prepared to perform its duties,
prior to February 1, 2009.
(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 that provide health coverage in the individual health
insurance market, at least three of which shall be health plans
participating in the program.
(2) Two program subscribers.
(3) Two health care providers with expertise in the care and
treatment of chronic diseases, at least one of which shall be a
physician and surgeon.
(4) Three representatives of organizations representing the
interests of health care consumers and medically uninsurable persons.
(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
six members being appointed for a two-year term and five 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 do all of the following:
(1) Make recommendations to improve the quality of health care
provided to subscribers in the program.
(2) Advise the board on policies and program operations.
(3) Make recommendations to ensure the affordability of coverage
for subscribers, especially low-income subscribers.
(4) Make recommendations to ensure the cost-effectiveness of
health care provided to subscribers in the program.
(5) Meet at least quarterly, unless deemed unnecessary by the
chair.
(h) The board shall consider all written recommendations of the
panel and respond to the panel in writing when the board rejects a
written recommendation made by the panel.
(i) All members of the advisory panel shall serve without
compensation. Members of the panel shall be reimbursed for all
necessary travel expenses associated with the activities of the
panel. Consumer representatives on the panel may receive per diem
compensation if they are otherwise economically unable to attend and
participate in panel activities.
SEC. 16. Section 12714.5 is added to the Insurance Code, to read:
12714.5. (a) On or before September 1, 2009, the board shall
report and make recommendations to the appropriate fiscal and policy
committees of the Legislature regarding the status of benefits and
premiums provided to federally eligible defined individuals under
Article 11.5 (commencing with Section 1399.801) of Chapter 2.2 of
Division 2 of the Health and Safety Code, and Chapter 9.5 (commencing
with Section 10900) of Part 2 of this division. The board shall
consult with the advisory panel established pursuant to Section
12714.1, the Department of Managed Health Care, and the Department of
Insurance in the preparation of this report.
(b) The board shall assess the products provided to federally
eligible defined individuals, and the premiums charged, in comparison
to coverage and subscriber contributions within the program, and
shall analyze the impact that any changes to benefits and subscriber
contributions in the program have had on coverage and premiums for
federally eligible defined individuals. The board shall obtain an
actuarial analysis and comparison between benefits and premiums in
the program and those in the individual market for federally eligible
defined individuals. The board shall make recommendations as to the
need for policy changes related to the premiums that health plans and
health insurers are required to charge for coverage to federally
eligible defined individuals, in relationship to the contributions of
subscribers in the program, and shall discuss the impact of any
changes in the program on premium rates and coverage for federally
eligible defined individuals.
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. Benefits in
the program shall provide comprehensive coverage, including,
effective January 1, 2010, lower subscriber cost sharing for primary
and preventive health care services and the medications necessary and
appropriate for the treatment and management of chronic health
conditions. Benefits, subscriber cost sharing, and out-of-pocket
costs shall be appropriate for a program serving high-risk and
medically uninsurable persons. To the greatest extent possible, the
board shall establish benefits that are compatible with comprehensive
coverage products available in the individual health insurance
market, but in no event shall the benefits for the program be less
than the minimum benefits required to be offered by health 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) plus coverage for prescription drugs. The
board may offer more than one benefit design option with different
subscriber cost sharing in the form of copayments, deductibles, and
annual out-of-pocket costs. 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) Effective January 1, 2010, major risk medical coverage in the
program shall have no annual limits on total coverage or benefits and
shall not have a limit on covered benefits over the lifetime of each
subscriber of less than one million dollars ($1,000,000). If the
board determines that there are sufficient funds available, it shall
implement the benefit changes described in this subdivision effective
January 1, 2009.
SEC. 18. Section 12723 of the Insurance Code is amended to read:
12723. If the board contracts with participating health plans or
insurers to provide or administer major risk coverage, the board
shall contract with 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. 19. 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. Effective January 1, 2010, to be eligible for
enrollment in the program, an applicant shall have been rejected for
health care coverage by at least two private health plans. If the
board determines that there are sufficient funds available to
undertake the necessary administrative and systems changes, it shall
implement the requirement that an applicant be rejected for health
care coverage by at least two private health plans effective January
1, 2009. 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 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. On
and after January 1, 2009, the board shall not apply the regulation
it adopted pursuant to this subdivision.
(f) Notwithstanding the provisions of this section, the board may
by regulation prescribe a period of time during which an individual
is ineligible to apply for major risk medical coverage through the
program if the individual either voluntarily disenrolls from a
participating health plan or was terminated from a participating
health plan for nonpayment of the premium, unless the board
determines that an individual applying for the program had good cause
for disenrolling from a participating health plan and reapplying for
coverage in the program.
(g) Notwithstanding the provisions of this section, the board
shall by regulation establish a process of eligibility and voluntary
reenrollment in the program for persons enrolled in guaranteed
coverage under the guaranteed issue pilot project established by
Chapter 794 of the Statutes of 2002. Individuals shall be voluntarily
enrolled in the program providing all of the following conditions
are met:
(1) There are currently no individuals on a waiting list for the
program because of insufficient funds available for the program.
(2) Persons are made eligible by the board under this subdivision
as funds allow, based on the date they were disenrolled from the
program pursuant to the pilot project, with those disenrolled first
made eligible first, and on a first-come-first-served basis.
(3) The program determines the maximum number of individuals who
may voluntarily reenroll from each health plan providing pilot
project coverage consistent with the proportion of pilot project
enrollees enrolled in each health plan as reported by the health
plans and health insurers pursuant to Section 1373.623 of the Health
and Safety Code and Section 10127.165 of this code.
(4) The board develops a notice that carriers participating in the
pilot project must provide to persons enrolled in the guaranteed
issue pilot program notifying the individuals of potential
eligibility for the program and option to be reenrolled.
SEC. 20. Section 12726 of the Insurance Code is amended to read:
12726. 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.
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 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 issued becomes effective. During the waiting or
affiliation period a subscriber shall not be required to make the
contribution for program coverage.
SEC. 21. Section 12737 of the Insurance Code is repealed.
SEC. 22. Section 12737 is added to the Insurance Code, to read:
12737. (a) The board shall establish program contribution amounts
for coverage provided by each participating health plan.
(b) Subscriber contributions shall be established at no more than
125 percent of the standard average individual rate for comparable
coverage, as determined by the board. The board may establish lower
contributions for subscribers at or below 300 percent of the federal
poverty level, but in no case shall the subscriber contribution be
lower than 110 percent of the standard average individual rate for
comparable individual coverage. In implementing subdivision (b) of
Section 12718, the board shall exclude from the subscriber
contribution that portion of the standard average individual rate
attributable to the elimination of an annual or lifetime benefit
maximum.
SEC. 23. Section 12738 is added to the Insurance Code, to read:
12738. (a) On or before July 1, 2011, the board shall report to
the Legislature on the implementation of this chapter, including the
number and type of persons enrolled in the program, program costs and
revenues, average per capita costs for program subscribers, and
annual increases in the costs of coverage provided to program
subscribers as a reflection of rate changes in the individual market.
(b) The board shall also include in the report an implementation
and transition plan for an alternative approach to ensuring quality
coverage for high risk, potentially high cost individuals, other than
a segregated high risk pool, that may include a reinsurance
mechanism or a risk adjustment mechanism, or both. The transition
plan shall outline the steps the board will need to take in order to
replace the program with an alternative mechanism by January 1, 2013,
and shall take into account changes in costs and coverage in the
individual market. The plan developed by the board shall also take
into account any subsequent state or federal program that provides
broad-based or universal coverage and that includes guaranteed
coverage for high-risk or medically uninsurable persons.
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 Section 1373.62 of the Health and Safety
Code.
(b) After June 30, 1991, the following amounts shall be deposited
annually in the Major Risk Medical Insurance Fund:
(1) Eighteen million dollars ($18,000,000) from the Hospital
Services Account in the Cigarette and Tobacco Products Surtax Fund.
(2) (A) Eleven million dollars ($11,000,000) from the Physician
Services Account in the Cigarette and Tobacco Products Surtax Fund.
(B) Notwithstanding subparagraph (A), for the 2007-08 fiscal year
only, the Controller shall reduce the amount deposited into the Major
Risk Medical Insurance Fund from the Physician Services Account in
the Cigarette and Tobacco Products Surtax Fund to one million dollars
($1,000,000).
(3) One million dollars ($1,000,000) from the Unallocated Account
in the Cigarette and Tobacco Products Surtax Fund.
(c) This section shall become inoperative on July 1, 2009, and, as
of January 1, 2010, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2010, deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 25. Section 12739 is added to the Insurance Code, 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) 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.
(d) This section shall become operative on July 1, 2009.
SEC. 26. 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, 2009, 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 to either
accept for coverage all eligible persons assigned to the health plan
or health insurer by the board in compliance with the rating
requirements and limitations of Section 1373.63 of the Health and
Safety Code or Section 10127.19, as applicable, or to be a payer. The
board shall notify the Director of the Department of Managed Health
Care and the commissioner of the entities that have elected to be a
payer and, no later than May 1 of each year, the amount of the fee
each entity is required to pay.
12739.6. The board shall establish fees to be paid by health
plans and health insurers who have elected to be payers pursuant to
Section 1373.63 of the Health and Safety Code and Section 10127.19 on
a per covered life per month basis. Commencing in 2009, each health
plan and each health insurer shall annually pay the fee determined by
the board based on the plan's or insurer's relative number of
covered lives. The fee charged by the board shall be implemented
according to the following schedule:
(a) Beginning July 1, 2009, the fee shall be set at 50 cents
($0.50) per covered life per month.
(b) Beginning July 1, 2010, the fee shall be set at 75 cents
($0.75) per covered life per month.
(c) Beginning July 1, 2011, the fee shall be set at one dollar
($1) per covered life per month.
12739.7. (a) On or before March 1 of each year, beginning in
2009, 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, as determined by the board.
For purposes of this chapter, "covered lives" shall mean
individuals who receive health care coverage provided or indemnified
through an individual health care service plan contract or individual
health insurance policy. 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 (Part 6.2 (commencing with Section 12693)), this program,
continuation coverage related to the pilot program established by
Chapter 794 of the Statutes of 2002 that sunsetted on December 31,
2007, the Access for Infants and Mothers Program (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 years and who are
not eligible for the Medi-Cal program, the Access for Infants and
Mothers Program, or the Healthy Families Program.
(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. No later than May 1 of each year, the board shall
produce a schedule showing the total fee due and payable for each
plan and insurer based on the fee level set by the board and the
number of covered lives reported by the health plan or health insurer
to the board. Each health plan and health insurer shall have the
affirmative duty to obtain that schedule from the board.
12739.9. (a) A health care service plan and a health insurer
shall either accept for coverage all persons eligible for the program
and assigned to the health plan or health insurer by the board as
required in Section 1373.63 of the Health and Safety Code or Section
10127.19 or be a payer, as elected pursuant to Section 12739.5.
(b) A health care service plan that is a payer and a health
insurer that is a payer shall pay the fee no later than June 1 of
each year. A health care service plan shall make its payment to the
Director of the Department of Managed Health Care, and a health
insurer shall make its payment to the commissioner.
12739.12. Each payer's fee imposed by the board pursuant to this
chapter shall constitute a fee payable in accordance with Section
1356.2 of the Health and Safety Code, for payers licensed by the
Department of Managed Health Care, or Section 1827.86, for payers
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, 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.
SEC. 27. Until January 1, 2011, the adoption and 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.
SEC. 28. 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.