BILL NUMBER: AB 8	ENROLLED
	BILL TEXT

	PASSED THE SENATE  SEPTEMBER 10, 2007
	PASSED THE ASSEMBLY  SEPTEMBER 10, 2007
	AMENDED IN SENATE  SEPTEMBER 7, 2007
	AMENDED IN SENATE  SEPTEMBER 5, 2007
	AMENDED IN SENATE  AUGUST 20, 2007
	AMENDED IN SENATE  JULY 18, 2007
	AMENDED IN SENATE  JULY 3, 2007
	AMENDED IN ASSEMBLY  MAY 17, 2007
	AMENDED IN ASSEMBLY  MAY 1, 2007
	AMENDED IN ASSEMBLY  APRIL 18, 2007
	AMENDED IN ASSEMBLY  MARCH 29, 2007

INTRODUCED BY   Assembly Member Nunez
   (Principal coauthor: Senator Perata)
   (Coauthors: Assembly Members Bass, Berg, De Leon, DeSaulnier,
Dymally, Eng, Hayashi, Hernandez, Jones, and Solorio)
   (Coauthor: Senator Alquist)

                        DECEMBER 4, 2006

   An act to amend Section 11126 of, and to add Sections 6254.28,
12803.1, and 12803.2 to, the Government Code, to amend Sections 1357,
1357.12, 1363, and 1378 of, to add Section 1347 to, to add Article
3.11 (commencing with Section 1357.20) and Article 4.1 (commencing
with Section 1366.10) to Chapter 2.2 of Division 2 of, and to add
Chapter 4 (commencing with Section 128850) to Part 5 of Division 107
of, the Health and Safety Code, to amend Sections 10607, 10700,
10714, 12693.43, 12693.70, 12693.73, 12693.755, and 12693.76 of, to
add Sections 10293.5, 12693.57, 12693.58, 12693.59, 12693.621, and
12711.1 to, to add Chapter 1.6 (commencing with Section 10199.10) and
Chapter 8.1 (commencing with Section 10760) to Part 2 of Division 2
of, and to add Part 6.45 (commencing with Section 12699.201) to
Division 2 of, the Insurance Code, to amend Section 144 of, to add
Sections 131.1, 683.5, and 1095.1 to, and to add Division 1.2
(commencing with Section 4800) to, the Unemployment Insurance Code,
and to amend Sections 14005.23, 14005.30, 14005.31, 14005.32, and
14008.85 of, to amend and repeal Section 14011.16 of, to add Sections
14005.301, 14005.331, 14005.82, and 14131.01 to, and to add Article
7 (commencing with Section 14199.10) to Chapter 7 of Part 3 of
Division 9 of, the Welfare and Institutions Code, relating to health
care coverage, and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 8, Nunez. Health care.
   (1) Existing law creates the California Health and Human Services
Agency.
   This bill would require the agency to encourage fitness, wellness,
and health promotion programs and to establish a program to track
and assess the health care reforms implemented by the bill's
provisions. The bill would create an advisory body, chaired by the
secretary of the agency, to guide the assessment and would require
annual reports to the Legislature relating to the assessment. The
bill would also require the agency, in consultation with the Board of
Administration of the Public Employees' Retirement System (PERS) to
assume lead agency responsibility for professional review and
development of best practice standards for high-cost chronic diseases
that state health care programs would be required to implement upon
their adoption. The bill would additionally require the agency, in
consultation with PERS and health provider groups, to develop health
care provider performance measurement benchmarks, as specified.
   (2) Existing law does not provide a system of health care coverage
for all California residents. Existing law does not require
employers to provide health care coverage for employees and
dependents, other than coverage provided as part of the workers'
compensation system for work-related employee injuries, and does not
require individuals to maintain health care coverage. Existing law
provides for the creation of various programs to provide health care
coverage to persons who have limited incomes and meet various
eligibility requirements. These programs include the Healthy Families
Program, administered by the Managed Risk Medical Insurance Board,
and the Medi-Cal program, administered by the State Department of
Health Care Services and county welfare departments. Existing law
provides for the regulation of health care service plans by the
Department of Managed Health Care and health insurers by the
Department of Insurance.
   This bill would, as of January 1, 2009, create the California
Cooperative Health Insurance Purchasing Program (Cal-CHIPP), which
would function as a statewide purchasing pool for health care
coverage by employers and be administered by the Managed Risk Medical
Insurance Board. The bill would generally require employers to elect
prior to July 1, 2009, to make health expenditures, as specified, in
an amount that is equivalent, at a minimum, to 7.5%, subject to
adjustment by the board, of the employer's total social security
wages for its full-time or part-time employees, or both, or,
alternatively, to pay an employer fee of that minimum amount for the
applicable group of employees. The bill would require an employer to
commence paying the employer fee or making the health expenditures on
October 1, 2009. The bill would make it unlawful for an employer to
take certain actions for the purpose of avoiding this requirement.
The bill would require employers to provide the Employment
Development Department with specified wage and health expenditures
information and comply with other specified requirements. The bill
would authorize the department to assess a penalty against an
employer who failed to comply with those requirements or failed to
remit the employer fees and employee premium payments. The bill would
require employers to set up a pretax Section 125 account under
federal law for each employee to pay health insurance premiums.
Revenues from the employer fees and penalties and employee premiums
would be collected by the Employment Development Department for
deposit in the California Health Trust Fund created by the bill, and
moneys in the fund, other than penalty revenues, would be
continuously appropriated to the board for the purposes of the bill.
The bill would require the board to offer Cal-CHIPP enrollees a
choice of various health plans and would require certain health care
service plans to submit a good faith bid to be a participating plan
through Cal-CHIPP. The bill would allow employees to decline
employer-provided health expenditures or health care coverage under
Cal-CHIPP if the employee premium cost exceeds specified amounts. The
bill would exempt certain writings of the board from disclosure
under the Public Records Act and would specify that the board may
meet in closed session to develop rates and contracting strategy
pursuant to Cal-CHIPP.
   The bill, subject to future appropriation of funds, would expand
the number of children eligible for coverage under the Healthy
Families Program. The bill would also expand the number of persons
eligible for the Medi-Cal program. The bill would delete as an
eligibility requirement for a child under the Healthy Families
Program and the Medi-Cal program that the child must meet citizen and
immigration status requirements applicable to the program under
federal law, thereby creating a state-only element of the programs.
The bill would additionally, on and after July 1, 2008, disregard all
income over 250% but less than or equal to 300% of the federal
poverty level and would apply Medi-Cal program income deductions to a
family income greater than 300% of the federal poverty level in
determining eligibility for the Healthy Families Program. The bill
would require the State Department of Health Care Services to seek
any necessary federal approval to enable the state to receive federal
Medicaid funds for specified persons who could otherwise be made
eligible for Medi-Cal benefits, with the state share of funds to be
provided from the California Health Trust Fund. The bill would enact
other related provisions. Because each county is required to
determine eligibility for the Medi-Cal program, expansion of program
eligibility would impose a state-mandated local program. The bill
would provide that the board may implement the provisions of the bill
expanding the Healthy Families Program only to the extent that funds
are appropriated for these purposes in the annual Budget Act or in
another statute.
   (3) The bill would enact various health insurance market reforms,
to be operative on specified dates, including requirements for
guarantee issue of individual health care service plan contracts and
health insurance policies, simplified benefit designs, modified small
employer coverage, modified disclosures, and other related changes.
The bill would prohibit the application, on and after January 1,
2010, of a risk adjustment factor to plans and contracts issued to
employers with not more than 100 employees. The bill would require
health care service plans and health insurers offering group plans on
and after January 1, 2010, with respect to employees electing to
obtain employer-provided coverage through a Cal-CHIPP Medi-Cal plan
or a Cal-CHIPP Healthy Families plan, as specified, to collect
premiums from employers and transmit them to the Managed Risk Medical
Insurance Board. The bill would require the Director of the
Department of Managed Health Care and the Insurance Commissioner to
adopt regulations by July 1, 2008, to require at least 85% of
full-service health care service plan dues, fees, and other periodic
payments and health insurance premiums to be spent on health care
services and not on administrative costs. Because a willful violation
of the bill's requirements relative to health care service plans
would be a crime, the bill would impose a state-mandated local
program. The bill would also state the intent of the Legislature that
all health care service plans and health insurers and providers
shall adopt standard electronic medical records by January 1, 2012.
   (4) Existing law, the California Major Risk Medical Insurance
Program, administered by the Managed Risk Medical Insurance Board,
provides major risk medical coverage for state residents meeting
specified eligibility requirements.
   This bill would require the board to establish a list of
conditions or diagnoses making an applicant automatically eligible
for the program and to develop a standardized questionnaire for
carriers in the individual market to identify persons eligible for
the program. The bill would prohibit a health insurer and a health
care service plan from denying coverage to an individual, except for
those who are automatically eligible for the program.
   (5) The bill, effective July 1, 2008, would also create the
California Health Care Cost and Quality Transparency Commission in
the Health and Human Services Agency, with various powers and duties,
including the development of a health care cost and quality
transparency plan. The bill would authorize the commission to impose
fees on data sources and data users, as specified, and to impose
penalties on data sources that fail to file any report required by
the commission. The bill would transfer certain data collection
responsibilities from the Office of Statewide Health Planning and
Development to the commission on July 1, 2009.
   (6) The bill would create the California Health Benefits Service
within the Health and Human Services Agency, with various powers and
duties relative to creation of joint ventures between certain
county-organized health plans and various other entities. The bill
would require these joint ventures to be licensed as health care
service plans.
   (7) 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 with regard to certain mandates no
reimbursement is required by this act for a specified reason.
   With regard to any other mandates, this bill would provide that,
if the Commission on State Mandates determines that the bill contains
costs so mandated by the state, reimbursement for those costs shall
be made pursuant to the statutory provisions noted above.
   Appropriation: yes.


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

  SECTION 1.  This act shall be known and may be cited as the
California Health Care Reform and Cost Control Act.
  SEC. 2.  It is the intent of the Legislature to accomplish the goal
of universal health care for all California residents. To accomplish
this goal, the Legislature proposes to take all of the following
steps:
   (a) Ensure that all Californians have access to affordable,
comprehensive health care.
   (b) Leverage available federal funds to the greatest extent
possible through existing federal programs.
   (c) Maintain and strengthen the health insurance system and
improve availability and affordability of private health care
coverage for all purchasers through (1) insurance market reforms; (2)
enhanced access to effective primary and preventive services,
including management of chronic illnesses; (3) promotion of
cost-effective health technologies; and (4) implementation of
meaningful, systemwide cost containment strategies.
   (d) Engage in early and systematic evaluation at each step of the
implementation process to identify the impacts on state costs, the
costs of coverage, employment and insurance markets, health delivery
systems, quality of care, and overall progress in moving toward
universal coverage.
  SEC. 2.5.  Section 12803.1 is added to the Government Code, to
read:
   12803.1.  (a) The California Health Benefits Service is hereby
created within the California Health and Human Services Agency.
   (1) The California Health Benefits Service (CHBS) shall be
governed by a nine member board appointed by the Governor, the Senate
Committee on Rules, and the Speaker of the Assembly. The Governor
shall appoint a representative of local initiatives authorized under
the Welfare and Institutions Code, a representative of county
organized health systems, and a representative of health care
purchasers. The Senate Committee on Rules shall appoint a
representative of local initiatives authorized under the Welfare and
Institutions Code, a representative of county organized health
systems, and a representative of health care consumers. The Speaker
of the Assembly shall appoint a representative of local initiatives
authorized under the Welfare and Institutions Code, a representative
of health care providers, and a representative of organized labor.
Terms of appointment shall be four years. The members of the board
shall elect a board chair from among the nine appointed members.
   (2) The board shall appoint an executive director for the board,
who shall serve at the pleasure of the board. The executive director
shall receive the salary established by the Department of Personnel
Administration for exempt officials. The executive director shall
administer the affairs of the board as directed by the board and
shall direct the staff of the board. The executive director may
appoint, with the approval of the board, staff necessary to carry out
the provisions of this section.
   (b) The Health and Human Services Agency shall convene a working
group with the collaboration of the Department of Managed Health
Care, the State Department of Health Care Services, and the Managed
Risk Medical Insurance Board. This working group shall assist CHBS in
identifying statutory, regulatory, or financial barriers or
incentives that must be addressed before CHBS can facilitate the
establishment and maintenance of one or more joint ventures between
health plans that contract with, or are governed, owned, or operated
by, a county board of supervisors, a county special commission, or
county health authority authorized by Section 14018.7, 14087.31,
14087.35, 14087.36, 14087.38, or 14087.96 of the Welfare and
Institutions Code. The working group shall also assist CHBS in
identifying statutory, regulatory, or financial barriers or
incentives that must be addressed before CHBS can enter into
contracts with providers to provide health care services in counties
in which there is not a prepaid health plan that contracts with, or
is governed, owned, or operated by, a county board of supervisors, a
county special commission, or a county health authority authorized by
Section 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, or 14087.96
of the Welfare and Institutions Code. The working group shall, no
later than April 1, 2008, report its findings to the executive
director, the CHBS governing board, and the committees of
jurisdiction in the Senate and Assembly.
   (c) To the extent permitted under existing law, CHBS is authorized
to solicit and assist prepaid health plans that contract with, or
are governed, owned, or operated by, a county board of supervisors, a
county special commission or county health authority authorized by
Section 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, or 14087.96
of the Welfare and Institutions Code in forming joint ventures to
create integrated networks of public health plans that pool risk and
share networks. CHBS may, upon agreement of participating health
plans, administer those joint ventures. Consistent with the
recommendations pursuant to subdivision (b), and existing law, CHBS
is authorized to develop networks to provide health care services in
counties in which there is not a prepaid health plan that contracts
with, or is governed, owned, or operated by, a county board of
supervisors, a county special commission, or a county health
authority authorized by Section 14018.7, 14087.31, 14087.35,
14087.36, 14087.38, or 14087.96 of the Welfare and Institutions Code.

   (1) In forming joint ventures, CHBS and participating health plans
shall seek to contract with the 22 designated public hospitals,
county health clinics, and community clinics.
   (2) All joint ventures established pursuant to this section shall
seek licensure as a health care service plan consistent with the
Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of the Health and Safety Code). Prior
to commencement of enrollment, the joint venture shall be licensed
pursuant to that chapter.
   (d) By March 1, 2009, and annually thereafter, CHBS shall submit a
report to the committees of jurisdiction in the Senate and Assembly
on implementation of this section and make recommendations on
resources, regulatory, and legislative changes necessary to implement
this section. The report shall also include recommendations on
resources, policy, and legislative changes necessary to build and
implement a system of health coverage throughout California.
  SEC. 3.  Section 12803.2 is added to the Government Code, to read:
   12803.2.  (a) The California Health and Human Services Agency
shall encourage fitness, wellness, and health promotion programs that
promote safe workplaces, healthy employer practices, and individual
efforts to improve health.
   (b) (1) The Secretary of California Health and Human Services
shall establish and administer a program to track and assess the
effects of health care reform as set forth in the California Health
Care Reform and Cost Control Act. The secretary shall either complete
the assessment or contract for its preparation. If the secretary
determines to contract for the preparation of the assessment, he or
she shall seek a partnership and contract with independent, nonprofit
groups or foundations, academic institutions, or governmental
entities providing grants for health-related activities. The
secretary may seek other sources of funding, including grants, to
fund the assessment. The assessment shall include, at minimum, the
following components:
   (A) An assessment of the sustainability and solvency of the
California Cooperative Health Insurance Purchasing Program
(Cal-CHIPP) (Part 6.45 (commencing with Section 12699.201) of
Division 2 of the Insurance Code). This assessment shall include the
number of persons purchasing health care coverage through Cal-CHIPP
by income bracket and by the size and type of their employer.
   (B) An assessment of the cost and affordability of health care in
California. This assessment shall include the cost of health care
coverage products for individuals and families obtained through
employers, city and county governments, the Medi-Cal program, the
Public Employees' Medical and Hospital Care Act, Medicare Advantage
plans, and the individual market.
   (C) An assessment of the health care coverage market in
California, including a review of the various insurers and health
care service plans, their offering and underwriting practices, their
efficiency in providing health care services, and their financial
conditions, including their medical loss ratios. This assessment
shall also include an assessment of risk selection by the plans and
insurers.
   (D) An assessment of the effect on employers and employment,
including employer administrative costs, employee turnover rate, and
wages categorized by the type of employer and the size of the
business.
   (E) An assessment of employer-based health care coverage,
including the number of employers providing coverage and the number
paying into Cal-CHIPP categorized by employer characteristic.
   (F) An assessment of the change in access and availability of
health care throughout the state, including tracking the availability
of health care coverage products in rural and other underserved
areas of the state and assessing the adequacy of the health care
delivery infrastructure to meet the need for health care services.
This assessment shall include a more in-depth review of areas of the
state that were determined to be medically underserved in 2007.
   (G) An assessment of the impact on the county health care safety
net system, including a review of the amount of uncompensated care
and emergency room use.
   (H) An assessment of health care coverage as compiled in the
California Health Interview Survey or other applicable surveys.
   (I) An assessment of the wellness and health status of
Californians as compiled in the California Health Interview Survey or
other applicable surveys.
   (J) An assessment of the capacity of the various health care
professions to provide care to the population included in health care
reform, identifying the number of each profession and their location
in the state.
   (K) An assessment of the quality of the health care services, as
determined by recognized measures, provided in California.
   (L) An assessment of the availability and potential for increasing
federal funding for health care services and coverage in California.

   (M) Any other assessments as determined necessary by the advisory
board established pursuant to paragraph (2).
   (2) An advisory body of individuals with knowledge and expertise
in health care policy reflecting the broad range of interests in
health policy that is chaired by the Secretary of California Health
and Human Services shall guide the assessment of health care reform.
The Governor shall appoint five members to the advisory body, the
Senate Committee on Rules shall appoint two members, and the Speaker
of the Assembly shall appoint two members.
   (3) To the extent possible, the assessment shall maximize the use
of current surveys and databases, and the secretary shall seek
partnerships with independent, nonprofit groups or foundations or
academic institutions that administer or provide grants for
health-related surveys and data collection activities to build on
these current surveys and databases.
   (4) To the extent feasible, in order to track the effect of health
care reform on ongoing trends in the health care field, the
assessments shall include data from years prior to the enactment of
the California Health Care Reform and Cost Control Act.
   (5) The Secretary of California Health and Human Services and the
advisory body shall establish a timeline for reporting information to
the appropriate policy and fiscal committees of the Legislature. At
a minimum, the reporting timeline shall include the release of annual
data to serve as a benchmark for the assessment of the health care
reform. These annual benchmarks shall include the employer compliance
rate and the cost of health care coverage in the state. In addition,
the timeline shall include more in-depth reports addressing the
items listed under paragraph (1).
   (c) The California Health and Human Services Agency, in
consultation with the Board of Administration of the Public Employees'
Retirement System, and after consultation with affected health care
provider groups, shall develop health care provider performance
measurement benchmarks and incorporate these benchmarks into a common
pay for performance model to be offered in every state-administered
health care program, including, but not limited to, the Public
Employees' Medical and Hospital Care Act, the Healthy Families
Program, the Major Risk Medical Insurance Program, the Medi-Cal
program, and Cal-CHIPP. These benchmarks shall be developed to
advance a common statewide framework for health care quality
measurement and reporting, including, but not limited to, measures
that have been approved by the National Quality Forum (NQF) such as
the Health Plan Employer Data and Information Set (HEDIS) and the
Joint Commission on Accreditation of Health Care Organizations
(JCAHO), and that have been adopted by the Hospitals Quality Alliance
and other national and statewide groups concerned with quality.
   (d) The California Health and Human Services Agency, in
consultation with the Board of Administration of the Public Employees'
Retirement System, shall assume lead agency responsibility for
professional review and development of best practice standards in the
care and treatment of patients with high-cost chronic diseases, such
as asthma, diabetes, and heart disease. In developing the best
practice standards, the agency shall consider the use of an annual
health assessment for patients. Upon adoption of the standards, each
state health care program, including, but not limited to, programs
offered under the Public Employees' Medical and Hospital Care Act,
the Medi-Cal program, the Healthy Families Program, the Major Risk
Medical Insurance Program, and the California Cooperative Health
Insurance Purchasing Program, shall implement those standards.
  SEC. 3.5.  Section 1347 is added to the Health and Safety Code, to
read:
   1347.  The director shall provide regulatory and program
flexibilities as may be necessary to facilitate new, modified, or
combined licenses of local initiatives, county organized health
systems, or the California Health Benefits Service, created pursuant
to Section 12803.1 of the Government Code, seeking licensure for
regional or statewide networks for the purposes of contracting with
the Managed Risk Medical Insurance Board as a participating plan in
the California Cooperative Health Insurance Purchasing Program by
January 1, 2010, or for the purposes of providing coverage in the
individual and group coverage markets. In providing those
flexibilities, the director shall ensure that the health plans
established pursuant to this section meet essential financial,
capacity, and consumer protection requirements of this chapter.
  SEC. 4.  Section 1357 of the Health and Safety Code is amended to
read:
   1357.  As used in this article:
   (a) "Dependent" means the spouse or child of an eligible employee,
subject to applicable terms of the health care plan contract
covering the employee, and includes dependents of guaranteed
association members if the association elects to include dependents
under its health coverage at the same time it determines its
membership composition pursuant to subdivision (o).
   (b) "Eligible employee" means either of the following:
   (1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of at least 30 hours, at the small employer's regular
places of business, who has met any statutorily authorized
applicable waiting period requirements. The term includes sole
proprietors or partners of a partnership, if they are actively
engaged on a full-time basis in the small employer's business and
included as employees under a health care plan contract of a small
employer, but does not include employees who work on a part-time,
temporary, or substitute basis. It includes any eligible employee, as
defined in this paragraph, who obtains coverage through a guaranteed
association. Employees of employers purchasing through a guaranteed
association shall be deemed to be eligible employees if they would
otherwise meet the definition except for the number of persons
employed by the employer. Permanent employees who work at least 20
hours but not more than 29 hours are deemed to be eligible employees
if all four of the following apply:
   (A) They otherwise meet the definition of an eligible employee
except for the number of hours worked.
   (B) The employer offers the employees health coverage under a
health benefit plan.
   (C) All similarly situated individuals are offered coverage under
the health benefit plan.
   (D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The health care service plan may request any
necessary information to document the hours and time period in
question, including, but not limited to, payroll records and employee
wage and tax filings.
   (2) Any member of a guaranteed association as defined in
subdivision (o).
   (c) "In force business" means an existing health benefit plan
contract issued by the plan to a small employer.
   (d) "Late enrollee" means an eligible employee or dependent who
has declined enrollment in a health benefit plan offered by a small
employer at the time of the initial enrollment period provided under
the terms of the health benefit plan and who subsequently requests
enrollment in a health benefit plan of that small employer, provided
that the initial enrollment period shall be a period of at least 30
days. It also means any member of an association that is a guaranteed
association as well as any other person eligible to purchase through
the guaranteed association when that person has failed to purchase
coverage during the initial enrollment period provided under the
terms of the guaranteed association's plan contract and who
subsequently requests enrollment in the plan, provided that the
initial enrollment period shall be a period of at least 30 days.
However, an eligible employee, any other person eligible for coverage
through a guaranteed association pursuant to subdivision (o), or an
eligible dependent shall not be considered a late enrollee if any of
the following is applicable:
   (1) The individual meets all of the following requirements:
   (A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, or no share-of-cost Medi-Cal
coverage at the time the individual was eligible to enroll.
   (B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, or no share-of-cost Medi-Cal coverage was the
reason for declining enrollment, provided that, if the individual was
covered under another employer health plan, the individual was given
the opportunity to make the certification required by this
subdivision and was notified that failure to do so could result in
later treatment as a late enrollee.
   (C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the individual
or of a person through whom the individual was covered as a
dependent, termination of the other plan's coverage, cessation of an
employer's contribution toward an employee or dependent's coverage,
death of the person through whom the individual was covered as a
dependent, legal separation, divorce, loss of coverage under the
Healthy Families Program as a result of exceeding the program's
income or age limits, or loss of no share-of-cost Medi-Cal coverage.
   (D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan.
   (2) The employer offers multiple health benefit plans and the
employee elects a different plan during an open enrollment period.
   (3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
   (4) (A) In the case of an eligible employee, as defined in
paragraph (1) of subdivision (b), the plan cannot produce a written
statement from the employer stating that the individual or the person
through whom the individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed, acknowledgment of an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the plan to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
coverage for a period of 12 months as well as a six-month preexisting
condition exclusion, unless the individual meets the criteria
specified in paragraph (1), (2), or (3).
   (B) In the case of an association member who did not purchase
coverage through a guaranteed association, the plan cannot produce a
written statement from the association stating that the association
sent a written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from coverage for a period of 12 months as well as a
six-month preexisting condition exclusion unless the member can
demonstrate that he or she meets the requirements of subparagraphs
(A), (C), and (D) of paragraph (1) or meets the requirements of
paragraph (2) or (3).
   (C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for enrollment was made within 30
days of the change.
   (5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 1373.621 shall apply.
   (6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program as a result of exceeding the program's income or age
limits or no share-of-cost Medi-Cal coverage and requests enrollment
within 30 days after notification of this loss of coverage.
   (7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
   (8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan at the time of the previous
enrollment period. That individual may enroll himself or herself or
his or her dependents for plan coverage during a special open
enrollment opportunity if his or her dependents have lost or will
lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
   (e) "New business" means a health care service plan contract
issued to a small employer that is not the plan's in force business.
   (f) "Preexisting condition provision" means a contract provision
that excludes coverage for charges or expenses incurred during a
specified period following the employee's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
   (g) "Creditable coverage" means:
   (1) Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any
liability insurance policy or equivalent self-insurance.
   (2) The federal Medicare program pursuant to Title XVIII of the
Social Security Act.
   (3) The Medicaid program pursuant to Title XIX of the Social
Security Act.
   (4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A state health benefits risk pool.
   (8) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
   (9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the Public Health Service Act,
as amended by Public Law 104-191, the Health Insurance Portability
and Accountability Act of 1996.
   (10) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C. Sec. 2504(e)).
   (11) Any other creditable coverage as defined by subdivision (c)
of Section 2701 of Title XXVII of the federal Public Health Services
Act (42 U.S.C. Sec. 300gg(c)).
   (h) "Rating period" means the period for which premium rates
established by a plan are in effect and shall be no less than six
months.
   (i) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
   (j) "Risk adjustment factor" means the percentage adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
cost of services. This factor may not be more than 120 percent or
less than 80 percent until July 1, 1996. Effective July 1, 1996, this
factor may not be more than 110 percent or less than 90 percent. On
and after January 1, 2010, no risk adjustment factor shall be
applied.
   (k) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family composition of
the employee, plus the health benefit plan selected by the small
employer.
   (1) No more than the following age categories may be used in
determining premium rates:
   Under 30
   30-39
   40-49
   50-54
   55-59
   60-64
   65 and over
   However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the plan
contract will be primary or secondary to benefits provided by the
federal Medicare program pursuant to Title XVIII of the federal
Social Security Act.
   (2) Small employer health care service plans shall base rates to
small employers using no more than the following family size
categories:
   (A) Single.
   (B) Married couple.
   (C) One adult and child or children.
   (D) Married couple and child or children.
   (3) (A) In determining rates for small employers, a plan that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
divide no county into more than two regions. Plans shall be deemed to
be operating statewide if their coverage area includes 90 percent or
more of the state's population. Geographic regions established
pursuant to this section shall, as a group, cover the entire state,
and the area encompassed in a geographic region shall be separate and
distinct from areas encompassed in other geographic regions.
Geographic regions may be noncontiguous.
   (B) (i) In determining rates for small employers, a plan that does
not operate statewide shall use no more than the number of
geographic regions in the state that is determined by the following
formula: the population, as determined in the last federal census, of
all counties that are included in their entirety in a plan's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No plan
shall have less than one geographic area.
   (ii) If the formula in clause (i) results in a plan that operates
in more than one county having only one geographic region, then the
formula in clause (i) shall not apply and the plan may have two
geographic regions, provided that no county is divided into more than
one region.
   Nothing in this section shall be construed to require a plan to
establish a new service area or to offer health coverage on a
statewide basis, outside of the plan's existing service area.
   (l) "Small employer" means either of the following:
   (1) Any person, firm, proprietary or nonprofit corporation,
partnership, public agency, or association that is actively engaged
in business or service, that, on at least 50 percent of its working
days during the preceding calendar quarter or preceding calendar
year, employed at least two, but no more than 50, eligible employees,
the majority of whom were employed within this state, that was not
formed primarily for purposes of buying health care service plan
contracts, and in which a bona fide employer-employee relationship
exists. In determining whether to apply the calendar quarter or
calendar year test, a health care service plan shall use the test
that ensures eligibility if only one test would establish
eligibility. However, for purposes of subdivisions (a), (b), and (c)
of Section 1357.03, the definition shall include employers with at
least three eligible employees until July 1, 1997, and two eligible
employees thereafter. In determining the number of eligible
employees, companies that are affiliated companies and that are
eligible to file a combined tax return for purposes of state taxation
shall be considered one employer. Subsequent to the issuance of a
health care service plan contract to a small employer pursuant to
this article, and for the purpose of determining eligibility, the
size of a small employer shall be determined annually. Except as
otherwise specifically provided in this article, provisions of this
article that apply to a small employer shall continue to apply until
the plan contract anniversary following the date the employer no
longer meets the requirements of this definition. It includes any
small employer as defined in this paragraph who purchases coverage
through a guaranteed association, and any employer purchasing
coverage for employees through a guaranteed association.
   (2) Any guaranteed association, as defined in subdivision (n),
that purchases health coverage for members of the association.
   (m) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
   (n) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria, and that (1) includes one or more small
employers as defined in paragraph (1) of subdivision (l), (2) does
not condition membership directly or indirectly on the health or
claims history of any person, (3) uses membership dues solely for and
in consideration of the membership and membership benefits, except
that the amount of the dues shall not depend on whether the member
applies for or purchases insurance offered to the association, (4) is
organized and maintained in good faith for purposes unrelated to
insurance, (5) has been in active existence on January 1, 1992, and
for at least five years prior to that date, (6) has included health
insurance as a membership benefit for at least five years prior to
January 1, 1992, (7) has a constitution and bylaws, or other
analogous governing documents that provide for election of the
governing board of the association by its members, (8) offers any
plan contract that is purchased to all individual members and
employer members in this state, (9) includes any member choosing to
enroll in the plan contracts offered to the association provided that
the member has agreed to make the required premium payments, and
(10) covers at least 1,000 persons with the health care service plan
with which it contracts. The requirement of 1,000 persons may be met
if component chapters of a statewide association contracting
separately with the same carrier cover at least 1,000 persons in the
aggregate.
   This subdivision applies regardless of whether a contract issued
by a plan is with an association or a trust formed for, or sponsored
by, an association to administer benefits for association members.
   For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
   (o) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
also may include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include these persons as members of the
guaranteed association, the association shall make that election in
advance of purchasing a plan contract. Health care service plans may
require an association to adhere to the membership composition it
selects for up to 12 months.
   (p) "Affiliation period" means a period that, under the terms of
the health care service plan contract, must expire before health care
services under the contract become effective.
  SEC. 5.  Section 1357.12 of the Health and Safety Code is amended
to read:
   1357.12.  Premiums for contracts offered or delivered by plans on
or after the effective date of this article shall be subject to the
following requirements:
   (a) (1) The premium for new business shall be determined for an
eligible employee in a particular risk category after applying a risk
adjustment factor to the plan's standard employee risk rates. The
risk adjusted employee risk rate may not be more than 120 percent or
less than 80 percent of the plan's applicable standard employee risk
rate until July 1, 1996. Effective July 1, 1996, this factor may not
be more than 110 percent or less than 90 percent. On and after
January 1, 2010, no risk adjustment factor shall be applied.
   (2) The premium charged a small employer for new business shall be
equal to the sum of the risk adjusted employee risk rates.
   (3) The standard employee risk rates applied to a small employer
for new business shall be in effect for no less than six months.
   (b) (1) The premium for in force business shall be determined for
an eligible employee in a particular risk category after applying a
risk adjustment factor to the plan's standard employee risk rates.
The risk adjusted employee risk rates may not be more than 120
percent or less than 80 percent of the plan's applicable standard
employee risk rate until July 1, 1996. Effective July 1, 1996, this
factor may not be more than 110 percent or less than 90 percent. The
factor effective July 1, 1996, shall apply to in force business at
the earlier of either the time of renewal or July 1, 1997. The risk
adjustment factor applied to a small employer may not increase by
more than 10 percentage points from the risk adjustment factor
applied in the prior rating period. The risk adjustment factor for a
small employer may not be modified more frequently than every 12
months. On and after January 1, 2010, no risk adjustment factor shall
be applied.
   (2) The premium charged a small employer for in force business
shall be equal to the sum of the risk adjusted employee risk rates.
The standard employee risk rates shall be in effect for no less than
six months.
   (3) For a contract that a plan has discontinued offering, the risk
adjustment factor applied to the standard employee risk rates for
the first rating period of the new contract that the small employer
elects to purchase shall be no greater than the risk adjustment
factor applied in the prior rating period to the discontinued
contract. However, the risk adjusted employee risk rate may not be
more than 120 percent or less than 80 percent of the plan's
applicable standard employee risk rate until July 1, 1996. Effective
July 1, 1996, this factor may not be more than 110 percent or less
than 90 percent. The factor effective July 1, 1996, shall apply to in
force business at the earlier of either the time of renewal or July
1, 1997. The risk adjustment factor for a small employer may not be
modified more frequently than every 12 months. On and after January
1, 2010, no risk adjustment factor shall be applied.
   (c) (1) For any small employer, a plan may, with the consent of
the small employer, establish composite employee and dependent rates
for either new business or renewal of in force business. The
composite rates shall be determined as the average of the risk
adjusted employee risk rates for the small employer, as determined in
accordance with the requirements of subdivisions (a) and (b). The
sum of the composite rates so determined shall be equal to the sum of
the risk adjusted employee risk rates for the small employer.
   (2) The composite rates shall be used for all employees and
dependents covered throughout a rating period of no less than six
months nor more than 12 months, except that a plan may reserve the
right to redetermine the composite rates if the enrollment under the
contract changes by more than a specified percentage during the
rating period. Any redetermination of the composite rates shall be
based on the same risk adjusted employee risk rates used to determine
the initial composite rates for the rating period. If a plan
reserves the right to redetermine the rates and the enrollment
changes more than the specified percentage, the plan shall
redetermine the composite rates if the redetermined rates would
result in a lower premium for the small employer. A plan reserving
the right to redetermine the composite rates based upon a change in
enrollment shall use the same specified percentage to measure that
change with respect to all small employers electing composite rates.
   (d) Nothing in this section shall be construed to prevent a plan
from changing the standard employee risk rates applied to a small
employer in order to ensure that the plan's rates for a standard
benefit plan design sold pursuant to Section 1357.21 are not less
than the plan's rates for the same benefit plan design sold through
the California Cooperative Health Insurance Purchasing Program (Part
6.45 (commencing with Section 12699.201) of Division 2 of the
Insurance Code).
  SEC. 6.  Article 3.11 (commencing with Section 1357.20) is added to
Chapter 2.2 of Division 2 of the Health and Safety Code, to read:

      Article 3.11.  Insurance Market Reform


   1357.20.  Effective July 1, 2008, every full-service health care
service plan that offers, markets, and sells health plan contracts to
individuals and conducts medical underwriting to determine whether
to issue coverage to a specific individual shall use a standardized
health questionnaire developed by the Managed Risk Medical Insurance
Board in consultation with the Department of Insurance and the
Department of Managed Health Care. A health care service plan subject
to this section may not exclude a potential enrollee from any
individual coverage on the basis of an actual or expected health
condition, type of illness, treatment, medical condition, or
accident, or for a preexisting condition, except as provided by the
board pursuant to Section 12711.1 of the Insurance Code.
   1357.21.  The department, in consultation with the Department of
Insurance, shall require each health care service plan with one
million or more enrollees in California, based on the plan's
enrollment in the prior year, to submit a good faith bid to the
Managed Risk Medical Insurance Board in order to be a participating
plan through the California Cooperative Health Insurance Purchasing
Program (Cal-CHIPP) pursuant to Part 6.45 (commencing with Section
12699.201) of Division 2 of the Insurance Code.
   1357.22.  It is the intent of the Legislature that all health care
providers shall participate in an Internet-based personal health
record system under which patients have access to their own health
care records. A patient's personal health care record shall only be
accessible to that patient or other individual as authorized by the
patient. It is the intent of the Legislature that all health care
service plans and providers shall adopt standard electronic medical
records by January 1, 2012.
   1357.23.  Effective July 1, 2008, all requirements in Article 3.1
(commencing with Section 1357) applicable to offering, marketing, and
selling health care service plan contracts to small employers as
defined in that article, including, but not limited to, the
obligation to fairly and affirmatively offer, market, and sell all of
the plan's contracts to all employers, guaranteed renewal of all
health care service plan contracts, use of the risk adjustment
factor, and the restriction of risk categories to age, geographic
region, and family composition as described in that article, shall be
applicable to all health care service plan contracts offered to all
employers with 100 or fewer eligible employees, except as follows:
   (a) For small employers with 2 to 50, inclusive, eligible
employees, all requirements in that article shall apply.
   (b) For employers with 51 to 100, inclusive, eligible employees,
all requirements in that article shall apply, except that the health
care service plan may develop health care coverage benefit plan
designs to fairly and affirmatively market only to employer groups of
51 to 100, inclusive, eligible employees.
   (c) On and after January 1, 2010, no risk adjustment factor shall
be applied to a plan contract offered to an employer with 51 to 100,
inclusive, eligible employees.
   1357.24.  (a) For employees and, if applicable, dependents who are
currently enrolled in or determined eligible for coverage through
the Healthy Families Program or the Medi-Cal program and who are
offered group coverage, the group health care service plan shall
collect the employer's applicable dollar premium contribution for
those employees and, if applicable, dependents and transmit that
amount to the board towards the cost of the applicable Cal-CHIPP
plan.
   (b) The department, in consultation with the board, may issue
regulations, as necessary pursuant to the Administrative Procedure
Act, to implement the requirements of this section. Until January 1,
2012, the adoption and readoption of regulations pursuant to this
section shall be deemed to be an emergency and necessary for the
immediate preservation of public peace, health and safety, or general
welfare.
   (c) As used in this section, the following terms have the
following meanings:
   (1) "Board" means the Managed Risk Medical Insurance Board.
   (2) "California Cooperative Health Insurance Purchasing Program"
or "Cal-CHIPP" shall have the same meaning as in subdivision (c) of
Section 12699.201 of the Insurance Code.
   (3) "Cal-CHIPP Healthy Families plan" shall have the same meaning
as in Section 12699.201 of the Insurance Code.
   (4)  "Cal-CHIPP Medi-Cal plan" shall mean a plan providing the
same amount, duration, scope, and level of coverage provided through
the Medi-Cal program (Chapter 7 (commencing with Section 14000) of
Part 3 of Division 9 of the Welfare and Institutions Code).
   (d) This section shall apply to health care service plan contracts
issued, amended, or renewed on or after January 1, 2010.
   1357.25.  The requirements of this article shall not apply to a
specialized health care service plan or a Medicare supplement
contract.
   1357.26.  This article shall become operative on July 1, 2008.
  SEC. 7.  Section 1363 of the Health and Safety Code is amended to
read:
   1363.  (a) The director shall require the use by each plan of
disclosure forms or materials containing information regarding the
benefits, services, and terms of the plan contract as the director
may require, so as to afford the public, subscribers, and enrollees
with a full and fair disclosure of the provisions of the plan in
readily understood language and in a clearly organized manner. The
director may require that the materials be presented in a reasonably
uniform manner so as to facilitate comparisons between plan contracts
of the same or other types of plans. Nothing contained in this
chapter shall preclude the director from permitting the disclosure
form to be included with the evidence of coverage or plan contract.
   The disclosure form shall provide for at least the following
information, in concise and specific terms, relative to the plan,
together with additional information as may be required by the
director, in connection with the plan or plan contract:
   (1) The principal benefits and coverage of the plan, including
coverage for acute care and subacute care.
   (2) The exceptions, reductions, and limitations that apply to the
plan.
   (3) The full premium cost of the plan.
   (4) Any copayment, coinsurance, or deductible requirements that
may be incurred by the member or the member's family in obtaining
coverage under the plan.
   (5) The terms under which the plan may be renewed by the plan
member, including any reservation by the plan of any right to change
premiums.
   (6) A statement that the disclosure form is a summary only, and
that the plan contract itself should be consulted to determine
governing contractual provisions. The first page of the disclosure
form shall contain a notice that conforms with all of the following
conditions:
   (A) (i) States that the evidence of coverage discloses the terms
and conditions of coverage.
   (ii) States, with respect to individual plan contracts, small
group plan contracts, and any other group plan contracts for which
health care services are not negotiated, that the applicant has a
right to view the evidence of coverage prior to enrollment, and, if
the evidence of coverage is not combined with the disclosure form,
the notice shall specify where the evidence of coverage can be
obtained prior to enrollment.
   (B) Includes a statement that the disclosure and the evidence of
coverage should be read completely and carefully and that individuals
with special health care needs should read carefully those sections
that apply to them.
   (C) Includes the plan's telephone number or numbers that may be
used by an applicant to receive additional information about the
benefits of the plan or a statement where the telephone number or
numbers are located in the disclosure form.
   (D) For individual contracts, and small group plan contracts as
defined in Article 3.1 (commencing with Section 1357), the disclosure
form shall state where the health plan benefits and coverage matrix
is located.
   (E) Is printed in type no smaller than that used for the remainder
of the disclosure form and is displayed prominently on the page.
   (7) A statement as to when benefits shall cease in the event of
nonpayment of the prepaid or periodic charge and the effect of
nonpayment upon an enrollee who is hospitalized or undergoing
treatment for an ongoing condition.
   (8) To the extent that the plan permits a free choice of provider
to its subscribers and enrollees, the statement shall disclose the
nature and extent of choice permitted and the financial liability
that is, or may be, incurred by the subscriber, enrollee, or a third
party by reason of the exercise of that choice.
   (9) A summary of the provisions required by subdivision (g) of
Section 1373, if applicable.
   (10) If the plan utilizes arbitration to settle disputes, a
statement of that fact.
   (11) A summary of, and a notice of the availability of, the
process the plan uses to authorize, modify, or deny health care
services under the benefits provided by the plan, pursuant to
Sections 1363.5 and 1367.01.
   (12) A description of any limitations on the patient's choice of
primary care physician, specialty care physician, or nonphysician
health care practitioner, based on service area and limitations on
the patient's choice of acute care hospital care, subacute or
transitional inpatient care, or skilled nursing facility.
   (13) General authorization requirements for referral by a primary
care physician to a specialty care physician or a nonphysician health
care practitioner.
   (14) Conditions and procedures for disenrollment.
   (15) A description as to how an enrollee may request continuity of
care as required by Section 1373.96 and request a second opinion
pursuant to Section 1383.15.
   (16) Information concerning the right of an enrollee to request an
independent review in accordance with Article 5.55 (commencing with
Section 1374.30).
   (17) A notice as required by Section 1364.5.
   (b) (1) As of July 1, 1999, the director shall require each plan
offering a contract to an individual or small group to provide with
the disclosure form for individual and small group plan contracts a
uniform health plan benefits and coverage matrix containing the plan'
s major provisions in order to facilitate comparisons between plan
contracts. The uniform matrix shall include the following category
descriptions together with the corresponding copayments and
limitations in the following sequence:
   (A) Deductibles.
   (B) Lifetime maximums.
   (C) Professional services.
   (D) Outpatient services.
   (E) Hospitalization services.
   (F) Emergency health coverage.
   (G) Ambulance services.
   (H) Prescription drug coverage.
   (I) Durable medical equipment.
   (J) Mental health services.
   (K) Chemical dependency services.
          (L) Home health services.
   (M) Other.
   (2) The following statement shall be placed at the top of the
matrix in all capital letters in at least 10-point boldface type:

THIS MATRIX IS INTENDED TO BE USED TO HELP YOU COMPARE COVERAGE
BENEFITS AND IS A SUMMARY ONLY. THE EVIDENCE OF COVERAGE AND PLAN
CONTRACT SHOULD BE CONSULTED FOR A DETAILED DESCRIPTION OF COVERAGE
BENEFITS AND LIMITATIONS.

   (c) Nothing in this section shall prevent a plan from using
appropriate footnotes or disclaimers to reasonably and fairly
describe coverage arrangements in order to clarify any part of the
matrix that may be unclear.
   (d) All plans, solicitors, and representatives of a plan shall,
when presenting any plan contract for examination or sale to an
individual prospective plan member, provide the individual with a
properly completed disclosure form, as prescribed by the director
pursuant to this section for each plan so examined or sold.
   (e) In the case of group contracts, the completed disclosure form
and evidence of coverage shall be presented to the contractholder
upon delivery of the completed health care service plan agreement.
   (f) Group contractholders shall disseminate copies of the
completed disclosure form to all persons eligible to be a subscriber
under the group contract at the time those persons are offered the
plan. If the individual group members are offered a choice of plans,
separate disclosure forms shall be supplied for each plan available.
Each group contractholder shall also disseminate or cause to be
disseminated copies of the evidence of coverage to all applicants,
upon request, prior to enrollment and to all subscribers enrolled
under the group contract.
   (g) In the case of conflicts between the group contract and the
evidence of coverage, the provisions of the evidence of coverage
shall be binding upon the plan notwithstanding any provisions in the
group contract that may be less favorable to subscribers or
enrollees.
   (h) In addition to the other disclosures required by this section,
every health care service plan and any agent or employee of the plan
shall, when presenting a plan for examination or sale to any
individual purchaser or the representative of a group, disclose in
writing the ratio of premium costs to health services paid for plan
contracts with individuals and with groups of the same or similar
size for the plan's preceding fiscal year. A plan may report that
information by geographic area, provided the plan identifies the
geographic area and reports information applicable to that geographic
area.
   (i) Subdivision (b) shall not apply to any coverage provided by a
plan for the Medi-Cal program or the Medicare program pursuant to
Title XVIII and Title XIX of the Social Security Act.
  SEC. 8.  Article 4.1 (commencing with Section 1366.10) is added to
Chapter 2.2 of Division 2 of the Health and Safety Code, to read:

      Article 4.1.  California Individual Coverage Guarantee Issue


   1366.10.  It is the intent of the Legislature to do both of the
following:
   (a) Guarantee the availability and renewability of health coverage
through the private health insurance market to individuals.
   (b) Require that health care service plans and health insurers
issuing coverage in the individual market compete on the basis of
price, quality, and service, and not on risk selection.
   1366.104.  (a) On or before September 1, 2008, the director and
the Insurance Commissioner shall jointly adopt regulations governing
five classes of individual health benefit plans that health care
service plans and health insurers shall make available.
   (b) Within 90 days of the adoption of the regulations required by
subdivision (a), the director and the Insurance Commissioner shall
jointly approve five classes of individual health benefit plans for
each health care service plan and health insurer participating in the
individual market, with each class having an increased level of
benefits beginning with the lowest class. Within each class, the
director and the Insurance Commissioner shall jointly approve one
baseline HMO and one baseline PPO, to be issued by health care
service plans and health insurers in the individual market. The
classes of benefits jointly approved by the director and the
Insurance Commissioner shall reflect a reasonable continuum between
the class with the lowest level of benefits and the class with the
highest level of benefits, shall permit reasonable benefit variation
that will allow for a diverse market within each class, and shall be
enforced consistently between health care service plans and health
insurers in the same marketplace regardless of licensure.
   (c) In approving the five classes of plans filed by health care
service plans and health insurers, the director and the Insurance
Commissioner shall do both of the following:
   (1) Jointly determine that the plans provide reasonable benefit
variation, allowing a diverse market.
   (2) Jointly require either (A) that benefits within each class are
standard and uniform across all plans and insurers, or (B) that
benefits offered in each class are actuarially equivalent across all
plans and insurers.
   1366.105.  On and after January 1, 2009, health care service plans
and health insurers participating in the individual market shall,
except as provided in Section 12711.1 of the Insurance Code,
guarantee issue the five classes of approved health benefit plans and
shall, at the same time, discontinue offering and selling health
benefit plans other than those within the five approved classes of
benefit plans in the individual market.
   1366.106.  (a) Individuals may purchase a health benefit plan from
one of the five classes of approved plans on a guaranteed issue
basis. After selecting and purchasing a health benefit plan within a
class of benefits, an individual may change plans only as set forth
in this section. For individuals enrolled as a family, the subscriber
may change classes for himself or herself, or for all dependents:
   (1) Annually in the month of the subscriber's birth, an individual
may select a different individual plan from another health care
service plan or insurer, within the same class of benefits or the
next higher class of benefits.
   (2) Annually in the month of the subscriber's birth, an individual
may move up one class of benefits offered by the same health care
service plan or health insurer.
   (3) At any time a subscriber may move to a lower class of
benefits.
   (4) At significant life events, the enrollee may move up to a
higher class of benefits as follows:
   (A) Upon marriage or entering into a domestic partnership.
   (B) Upon divorce.
   (C) Upon the death of a spouse or domestic partner, on whose
health coverage an individual was a dependent.
   (D) Upon the birth or adoption of a child.
   (5) A dependent child may terminate coverage under a parent's
plan, and select coverage for his or her own account following his or
her 18th birthday.
   (6) If a subscriber becomes eligible for group benefits, Medicare,
or other benefits, and selects those benefits in lieu of his or her
individual coverage, the dependent spouse or domestic partner may
become the subscriber. If there is no dependent spouse or domestic
partner enrolled in the plan, the oldest child may become the
subscriber.
   (b) This section shall not apply to an individual included within
the group of the 3 to 5 percent of individuals identified pursuant to
Section 12711.1 of the Insurance Code as the most expensive to
treat.
   1366.107.  At the time an individual applies for health coverage
from a health care service plan or health insurer participating in
the individual market, an individual shall provide information as
required by a standardized health status questionnaire to assist
plans and insurers in identifying persons in need of disease
management. Health care service plans and health insurers may not use
information provided on the questionnaire to decline coverage or to
limit an individual's choice of health care benefit plan, except as
provided in Section 12711.1 of the Insurance Code.
   1366.108.  Health benefit plans shall become effective within 31
days of receipt of the individual's application, standardized health
status questionnaire, and premium payment.
   1366.109.  Health care service plans and health insurers may
reject an application for health care benefits if the individual does
not reside or work in a plan's or insurer's approved service area.
   1366.110.  The director or the Insurance Commissioner, as
applicable, may require a health care service plan or health insurer
to discontinue the offering of health care benefits, or acceptance of
applications from individuals, upon a determination by the director
or commissioner that the plan or insurer does not have sufficient
financial viability, or organizational and administrative capacity,
to ensure the delivery of health care benefits to its enrollees or
insureds.
   1366.111.  All health care benefits offered to individuals shall
be renewable with respect to all individuals and dependents at the
option of the subscriber, except:
   (a) For nonpayment of the required premiums by the subscriber.
   (b) When the plan or insurer withdraws from the individual health
care market, subject to rules and requirements jointly approved by
the director and the Insurance Commissioner.
   1366.112.  No health care service plan or health insurer shall,
directly or indirectly, enter into any contract, agreement, or
arrangement with a solicitor that provides for or results in the
compensation paid to a solicitor for the sale of a health care
service plan contract or health insurance policy to be varied because
of the health status, claims experience, occupation, or geographic
location of the individual, provided the geographic location is
within the plan's or insurer's approved service area.
   1366.113.  This article shall not apply to individual health plan
contracts for coverage of Medicare services pursuant to contracts
with the United States Government, Medi-Cal contracts with the State
Department of Health Care Services, Healthy Family contracts with the
Managed Risk Medical Insurance Board, high risk pool contracts with
the Major Risk Medical Insurance Program, Medicare supplement
policies, long-term care policies, specialized health plan contracts,
or contracts issued to individuals who secure coverage from
Cal-CHIPP.
   1366.114.  (a) A health care service plan or health insurer may
rate its entire portfolio of health benefit plans in accordance with
expected costs or other market considerations, but the rate for each
plan or insurer shall be set in relation to the balance of the
portfolio as certified by an actuary. Each benefit plan shall be
priced as determined by each health care service plan or health
insurer to reflect the difference in benefit variation, or the
effectiveness of a provider network, but may not adjust the rate for
a specific plan for risk selection. A health care service plan's or
health insurer's rates shall use the same rating factors for age,
family size, and geographic location for each individual health care
benefit plan it issues. Rates for health care benefits may vary from
applicant to applicant only by any of the following:
   (1) Age of the subscriber, as determined by the director and the
Insurance Commissioner.
   (2) Family size in categories determined by the director and the
Insurance Commissioner.
   (3) Geographic rate regions as determined by the director and the
Insurance Commissioner.
   (4) Health improvement discounts. A health care service plan or
health insurer may reduce copayments or offer premium discounts for
nonsmokers, individuals demonstrating weight loss through a
measurable health improvement program, or individuals actively
participating in a disease management program, provided discounts are
approved by the director and the Insurance Commissioner.
   (b) The director and Insurance Commissioner shall take into
consideration the age, family size, and geographic region rating
categories applicable to small group coverage contracts pursuant to
Section 1357 of this code and Section 10700 of the Insurance Code in
implementing this section.
   1366.115.  The first term of each health benefit plan contract or
policy issued shall be from the effective date through the last day
of the month immediately preceding the subscriber's next birthday.
Contracts or policies may be renewed by the subscriber as set forth
in this article.
  SEC. 9.  Section 1378 of the Health and Safety Code is amended to
read:
   1378.  No plan shall expend for administrative costs in any fiscal
year an excessive amount of the aggregate dues, fees and other
periodic payments received by the plan for providing health care
services to its subscribers or enrollees. The term "administrative
costs," as used herein, includes costs incurred in connection with
the solicitation of subscribers or enrollees for the plan. The
director shall adopt regulations no later than July 1, 2008,
requiring that at least 85 percent of aggregate dues, fees, and other
periodic payments received by a full-service plan be spent on health
care services. The regulations shall also define "health care
services." This section shall not apply to Medicare supplement
contracts.
   This section shall not preclude a plan from expending additional
sums of money for administrative costs provided such money is not
derived from revenue obtained from subscribers or enrollees of the
plan.
  SEC. 9.5.  Chapter 4 (commencing with Section 128850) is added to
Part 5 of Division 107 of the Health and Safety Code, to read:
      CHAPTER 4.  HEALTH CARE COST AND QUALITY TRANSPARENCY



      Article 1.  General Provisions


   128850.  The Legislature hereby finds and declares that:
   (a) The steady rise in health costs is eroding health access,
undermining wages and pensions, straining public health and finance
systems, and placing an undue burden on the state's economy. Health
care that costs more is not necessarily health care that improves
life expectancy, reduces death rates, improves health or minimizes
illness and chronic conditions.
   (b) Although there are existing voluntary efforts to report on
health care quality at various levels of the health care system in
California, the collection of performance data on a voluntary basis
is inconsistent and incomplete and does not meet the needs of
policymakers, purchasers, consumers, or the health industry for
reliable comparisons of provider cost and quality.
   (c) Data that is collected through existing state programs is not
collected or analyzed with the goal of reducing health care costs in
the system, monitoring performance, or ensuring quality patient
outcomes.
   (d) The present day overall lack of transparency of health
outcomes and the factors affecting health care costs limits the
ability of consumers, purchasers, and policymakers to seek out and
reward high quality providers, or to make quality improvements where
they are needed.
   (e) The effective use and distribution of health care data and
meaningful analysis of that data will lead to greater transparency in
the health care system resulting in improved health care quality and
outcomes, more cost-effective care and improvements in life
expectancy, reduced death rates, and improved overall public health.
   (f) Hospitals, physicians, health care providers, and health
insurers who have access to systemwide performance data can use the
information to improve patient safety, efficiency of health care
delivery, and quality of care, leading to quality improvement and
costs savings throughout the health care system.
   (g) Without comprehensive, systemwide data that is adequately
analyzed and reported widely, the Legislature cannot effectively
evaluate the health care system, establish appropriate regulatory
standards, or identify the most effective use and value for state
health care dollars. Moreover, consumers and purchasers cannot
exercise informed choice in the market or identify the most
cost-effective quality providers and services.
   (h) The State of California is uniquely positioned to collect,
analyze, and report all payer data on health care utilization,
quality, and costs in the state in order to facilitate value-based
purchasing of health care and to support and promote continuous
quality improvement among health care plans and providers.
   (i) It is therefore the intent of the Legislature to assume a
leadership role in measuring performance and value in the health care
system. By establishing statewide data and common measurement and
analyses of health care costs, quality, and outcomes, and by
establishing a statewide leadership organization with sufficient
revenues to adequately analyze and report meaningful performance
measures related to health care costs and quality, the Legislature
intends to promote competition, identify appropriate health care
utilization, and ensure the highest quality of health care services
for all Californians.
   (j) The Legislature further intends to reduce duplication and
inconsistency in the collection, analysis, and dissemination of
health care performance information within state government and among
both public and private entities by establishing one state-level
commission with primary responsibility for coordinating health care
data development, collection, analysis, evaluation, and
dissemination.
   (k) The Legislature intends for the commission to ensure the
availability of reliable data to measure and compare performance
within the health care system along each of the domains identified by
the Institute of Medicine: safety, timeliness, effectiveness,
efficiency, equity and patient-centeredness.
   (l) It is further the intent of the Legislature that the data
collected be used for the transparent public reporting of quality and
cost efficiency information regarding all levels of the health care
system, including health care service plans and health insurers,
hospitals and other health facilities, and medical groups and
physicians, so that health care plans and providers can improve their
performance and deliver safer, better health care more affordably;
so that purchasers can know which health care services reduce
morbidity, mortality, and other adverse health outcomes; so that
consumers can choose whether and where to have health care provided;
and so that the Legislature can effectively regulate and monitor the
health care delivery system to ensure quality and value for all
purchasers and consumers.
   128851.  As used in this chapter, the following terms have the
following meanings:
   (a) "Administrative claims data" means data that is submitted
electronically or otherwise to, or collected by, health insurers,
health care service plans, administrators, or other payers of health
care services, and which are submitted to, or collected for, the
purposes of payment to any physician, physician group, laboratory,
pharmacy, hospital of any type, imaging center, or any other facility
or person that is requesting payment for the provision of medical
care.
   (b) "Ambulatory surgery center" means a facility where procedures
are performed on an outpatient basis in general operating rooms,
ambulatory surgery rooms, endoscopy units, or cardiac catheterization
laboratories of a hospital or a freestanding ambulatory surgery
clinic.
   (c) "Commission" means the California Health Care Cost and Quality
Transparency Commission.
   (d) "Data source" means any physician, physician group, health
facility, health care service plan, health insurer, any state agency
providing or paying for health care or collecting health care data or
information, or any other payer for health care services in
California.
   (e) "Encounter data" means data relating to treatment or services
rendered by providers to patients which may be reimbursed on a
fee-for-service or capitation basis.
   (f) "Group" or "physician group" means an affiliation of
physicians and other health care professionals, whether a
partnership, corporation, or other legal form, with the primary
purpose of providing medical care.
   (g) "Healthcare-associated infection" means a localized or
systemic condition that (1) results from adverse reaction to the
presence of an infectious agent or its toxin and (2) was not present
or incubating at the time of admission to the hospital.
   (h) "Health care provider" means a physician, physician group, or
health facility.
   (i) "Health facility" or "health facilities" means health
facilities required to be licensed pursuant to Chapter 2 (commencing
with Section 1250) of Division 2.
   (j) "Office" means the Office of Statewide Health Planning and
Development.
   (k) "Risk-adjusted outcomes" means the clinical outcomes of
patients grouped by diagnoses or procedures that have been adjusted
for demographic and clinical factors.
   128852.  Notwithstanding the provisions of Chapter 1 (commencing
with Section 128675), commencing July 1, 2009, the responsibilities
of the office with respect to determining the data to be collected
and the analysis and reporting of the data collected pursuant to
Chapter 1 (commencing with Section 128675) shall be transferred to
the commission, as determined by the commission and as reported to
the Secretary of Health and Welfare and the Legislature no later than
January 1, 2009. Any limitations on the collection, analysis, and
use of data in that chapter shall be inapplicable to the extent
determined necessary by the commission to implement its
responsibilities under this chapter. All data collected by the office
shall be available to the commission for the purposes of carrying
out its responsibilities under this chapter. During the initial
development of the data plan pursuant to Section 128675, the office
shall make available to the commission any and all data files,
information, and staff resources as may be necessary to assist in and
support the plan's development.
   128853.  This chapter shall be operative on July 1, 2008.

      Article 2.  Health Care Cost and Quality Transparency
Commission


   128855.  There is hereby created in the Health and Human Services
Agency, the California Health Care Cost and Quality Transparency
Commission composed of 13 members, each of whom shall have
demonstrated knowledge and experience in the measurement and analysis
of health care quality or cost data, in deploying that data on
behalf of consumers and purchasers, or in health care or other issues
relevant to the commission's responsibilities. The appointments
shall be made as follows:
   (a) The Governor shall appoint seven members as follows:
   (1) One academic with experience in health care data and cost
efficiency research.
   (2) One representative of hospitals.
   (3) One representative of an integrated multispecialty medical
group.
   (4) One representative of physician and surgeons.
   (5) One representative of large employers that purchase group
health care coverage for employees and that is not also a supplier or
broker in health care coverage.
   (6) One representative of a labor union.
   (7) One representative of employers that purchase group health
care coverage for their employees or a representative of a nonprofit
organization that demonstrates experience working with employers to
enhance value and affordability of health care coverage.
   (b) The Senate Committee on Rules shall appoint three members as
follows:
   (1) One representative of a labor union.
   (2) One representative of consumers with a demonstrated record of
advocating health care issues on behalf of consumers.
   (3) One representative of health insurers or health care service
plans.
   (c) The Assembly Speaker shall appoint three members as follows:
   (1) One representative of consumers with a demonstrated record of
advocating health care issues on behalf of consumers.
   (2) One representative of small employers that purchase group
health care coverage for employees and that is not also a supplier or
broker in health care coverage.
   (3) One representative of a nonprofit labor-management purchaser
coalition that has a demonstrated record of working with employers
and employee associations to enhance value and affordability in
health care.
   (d) The following members shall serve in an ex officio, nonvoting
capacity:
   (1) The Secretary of Health and Human Services or a designee.
   (2) A designee of the California Public Employees' Retirement
System.
   (3) The Director of the Department of Managed Health Care or a
designee.
   (4) The executive director of the Managed Risk Medical Insurance
Board or a designee.
   (5) The Insurance Commissioner or a designee.
   (e) The Governor shall designate a member to serve as chairperson
for a two-year term. No member may serve more than two, two-year
terms as chairperson. All appointments shall be for four-year terms;
provided, however, that the initial term shall be two years for
members initially filling the positions set forth in paragraphs 1, 2,
4, and 6 of subdivision (a), paragraph 2 of subdivision (b), and
paragraph 2 of subdivision (c).
   128856.  The commission shall meet at least once every two months,
or more often if necessary to fulfill its duties.
   128857.  The members of the commission shall receive a per diem of
one hundred dollars ($100) for each day actually spent in the
discharge of official duties and shall be reimbursed for any actual
and necessary expenses incurred in connection with their duties as
members of the commission.
   128858.  The commission shall appoint an executive director, who
shall serve at the pleasure of the commission. The executive director
shall receive the salary established by the Department of Personnel
Administration for exempt officials. The executive director shall
administer the affairs of the commission as directed by the
commission and shall direct the staff of the commission. The
executive director may appoint, with the approval of the commission,
staff necessary to carry out the functions and duties of the
commission.
   128859.  The commission shall be authorized to do the following:
   (a) Enter into contracts.
   (b) Sue and be sued.
   (c) Employ necessary staff.
   (d) Authorize expenditures from the fund or from other moneys
appropriated in the annual Budget Act or other public or private
revenues as necessary to carry out its responsibilities under this
chapter.
   (e) Adopt, amend, and rescind such regulations, forms, and orders
as are necessary to carry out its responsibilities under this
chapter.
   (f) Require any data source to submit data necessary to implement
the health care cost and quality transparency plan, provided the
health care cost and quality transparency plan
                    is adopted by regulation, pursuant to Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2
of the Government Code.
   (g) Determine the data elements to be collected, the reporting
formats for data submitted, and the use and reporting by the
commission of any data submitted.
   (h) Audit the accuracy of all data submitted and require entities
submitting financial data for the purposes of this part to submit
proof that financial data submitted has been audited in accordance
with generally accepted auditing principles.
   (i) Exercise all powers reasonably necessary to carry out the
powers and responsibilities expressly granted or imposed upon it
under this chapter.
   128860.  The commission shall have no authority to disclose any
confidential information concerning contracted rates between health
care providers and any data source, but nothing in this section shall
prevent the commission from publicly disclosing information on the
relative or comparative cost to payers or purchasers of health care
or the costs for a specific course of treatment or episode, as
applicable for the reporting.
   128861.  (a) No later than January 1, 2009, the commission shall
determine the functions currently performed by the office that are
necessary to the commission's activities and report to the Secretary
of Health and Welfare and the Legislature those functions that shall
be transferred to the commission effective July 1, 2009.
   (b) All regulations adopted by the office that relate to functions
vested in the commission and that are in effect immediately
preceding July 1, 2009, shall remain in effect and shall be fully
enforceable unless and until readopted, amended, or repealed by the
commission.
   (c) The commission may use the unexpended balance of funds
available for use in connection with the performance of the functions
of the office transferred to the commission.
   (d) All officers and employees of the office who, on July 1, 2009,
are serving in the state civil service, other than as temporary
employees, and engaged in the performance of a function vested in the
commission shall be transferred to the commission. The status,
positions, and rights of these persons shall not be affected by the
transfer except as to positions exempted from civil service.
   (e) The commission shall have possession and control of all
records, papers, offices, equipment, supplies, moneys, funds,
appropriations, land or other property, real or personal, held for
the benefit or use of the office for the performance of functions
transferred to the commission.
   128862.  The functions and duties of the commission shall include
the following:
   (a) Develop, implement, and periodically update a health care
quality and cost containment plan, including data collection,
performance measurement, and reporting methods, that provides for
effective measurement of the safety and quality of an array of health
care services provided to Californians.
   (b) Determine the data to be collected, and method of collection,
to implement the data collection and reporting requirements set forth
in this chapter.
   (c) Determine the measures necessary to implement the reporting
requirements in the plan developed pursuant to 128864 in a manner
that is cost-effective and reasonable for data sources and timely,
relevant, and reliable for consumers and purchasers.
   (d) Determine the reports and data to be made available to the
public in order to accomplish the purposes of this chapter, including
conducting studies and reporting the results of the studies.
   (e) Seek to establish agreements for voluntary reporting of health
care claims and data from any and all health care payers who are not
subject to mandatory reporting to the commission pursuant to this
chapter, and its subsequent regulations, in order to ensure
availability of the most comprehensive, systemwide data on health
care costs and quality.
   (f) Collect, aggregate, and timely distribute performance data on
quality, health outcomes, cost, utilization, and pricing in a manner
accessible for purchasers, consumers, and policymakers.
   (g) Fully protect patient privacy, in compliance with state and
federal medical privacy laws, while preserving the ability to analyze
data using date of birth, ethnicity, and sex where the disclosure of
this information will not identify an individual.
   (h) Create technical advisory committees and clinical advisory
committees, as necessary, to advise the commission on technical or
clinical issues.
   (i) Annually report to the Governor and the Legislature, on or
before March 1, on the status of implementing this chapter, the
resources necessary to fully implement this chapter, and any
recommendations for statutory changes that would advance the purposes
of this chapter.
   (j) Provide state leadership and coordination of public and
private health care quality and performance measurements to ensure
efficiency, cost-effectiveness, transparency, and informed choice by
purchasers and consumers.
   128863.  (a) The commission shall appoint at least one technical
advisory committee, and may appoint additional technical advisory
committees as the commission deems appropriate, and shall include on
each such committee academic and professional experts with expertise
related to the activities of the commission.
   (b) The commission shall appoint at least one clinical advisory
committee and may appoint additional advisory committees specific to
issues that require additional or different clinical expertise. Each
clinical advisory committee shall include clinicians and others with
expertise related to the activities of the commission and any issue
under consideration.
   (c) The commission shall, as appropriate, refer technical and
clinical issues, including issues related to risk adjustment
methodology, to an advisory committee for recommendation. The
advisory committee shall, within the time period specified by the
commission, issue to the commission a written recommendation
concerning the issue referred to the advisory committee. The
commission shall consider the recommendation of the advisory
committee. If the commission rejects the recommendation, it shall
issue a written finding and rationale for rejecting the
recommendation. If the advisory committee fails to issue a
recommendation within the time period prescribed by the commission,
the commission may appoint another advisory committee or take such
other action it deems necessary to obtain the needed technical or
clinical information required to carry out its responsibilities.
   (d) The members of the technical and clinical advisory committees
appointed by the commission shall receive no compensation, but shall
be reimbursed for any actual and necessary expenses incurred in
connection with their duties as members of the advisory committee.
   (e) The commission shall provide opportunities for participation
from consumers, purchasers, and providers at all advisory committee
meetings.
   128864.  The commission shall develop and implement a
conflict-of-interest policy applicable to all employees, contractors,
and advisory committee members that will ensure, at a minimum, that
persons advising the commission disclose any material financial
interest in the outcome of the work performed on behalf of the
commission.

      Article 3.  Health Care Cost and Quality Transparency Plan


   128865.  (a) The commission shall, by December 1, 2009, develop
and, by regulation adopt, a health care cost and quality transparency
plan that will, when implemented, result in the transparent public
reporting of safety, quality, and cost efficiency information at all
levels of the health care system. The plan shall:
   (1) Include specific strategies to measure and collect data
related to health care safety and quality, utilization, cost to
payers, and health outcomes and shall focus on data elements that
foster quality improvement and peer group comparisons.
   (2) Facilitate value-based, cost-effective purchasing of health
care services by public and private purchasers.
   (3) Result in usable information that allows health care
purchasers, consumers, and data sources to identify and compare
health plans and insurers as well as individual health facilities,
physicians, and other health care providers, on the extent to which
they provide safe, cost-effective, high quality health care services.

   (4) Be designed to measure each of the performance domains
identified by the Institute of Medicine: safety, timeliness,
effectiveness, efficiency, equity and patient-centeredness.
   (5) Use and build on existing data collection standards and
methods to the greatest extent possible to accomplish the goals of
the commission in a cost-effective manner, which may include, but not
be limited to, collecting and disseminating one or more nationally
recognized methodologies for measuring and quantifying provider
quality, cost and service effectiveness, and implementing systemwide
mandatory collection of data elements otherwise being collected in
existing voluntary public and private reporting programs in
California.
   (6) Incorporate and utilize administrative claims data to the
extent it is the most cost-efficient method of collecting data in
order to minimize the cost and administrative burden on data sources.
The commission may incorporate and utilize data other than
administrative claims data, provided it is necessary to measure and
analyze a significant health care quality, safety, or cost issue that
cannot be adequately measured with the use of administrative claims
data.
   (b) The plan shall include all of the following:
   (1) The reports, analyses, and data that will be made available to
data sources, purchasers, and consumers on the performance of health
plans and insurers, medical groups, health facilities, and
physicians, the format in which the reports and data will be made
available, and the planned implementation dates.
   (2) The data elements necessary to produce the reports and data to
be made available. The plan shall address the extent to which
standardized electronic reporting of administrative claims data can
provide the information necessary for the purposes of this chapter,
and the most efficient, least burdensome method of collecting other
necessary data, including systemwide encounter data.
   (3) The data elements to be collected and how they will be
collected.
   (4) A unique patient identifier to permit analysis of health care
utilization patterns that indicate inadequate quality of care, such
as hospital readmissions and repetitive service utilization.
   (5) The manner in which patient confidentiality will be maintained
in compliance with state and federal medical and patient privacy
laws.
   (6) The administration of data collection, quality assurance, and
reporting functions.
   (7) The funding necessary to implement the plan and
recommendations for revenue sources to provide that funding.
   (8) A review of existing public and private health performance
data collection and reporting standards and practices, at the state
and federal level, and strategies for incorporating or coordinating
with existing mandatory and voluntary measurement and reporting
activities as the commission determines necessary to accomplish the
goal of this chapter in a cost-effective manner. The review of state
programs shall include, at a minimum, review of data collection
programs administered by the office and the Office of the Patient
Advocate.
   (9) The timeline for implementation of the plan and a specific
timeline and process for updating the plan on a regular basis.
   128866.  The commission may contract with a qualified public or
private agency or academic institution to assist in the review of
existing data collection programs or to conduct other research or
analysis the commission deems necessary to complete and implement the
plan required pursuant to Section 128865 or to meet any of its
obligations under this chapter.
   128867.  The commission shall review and, where appropriate,
incorporate into the plan required by Section 128865 health care data
collection and reporting required under other state laws, including,
but not limited to, Chapter 1 (commencing with Section 128675),
Article 3.5 (commencing with Section 1288.10) of Chapter 2 of
Division 2, and Sections 1279.1, 1279.3, and 1368.02, and shall
recommend any modification of these statutes necessary to be
consistent with the plan developed pursuant to Section 128865. Data
collection and reporting required by these provisions shall not be
delayed pending the development and implementation of the plan.
   128868.  (a) No later than December 1, 2008, and annually
thereafter, the commission shall publicly report the federal Agency
for Healthcare Research and Quality Patient Safety Indicators and
Inpatient Quality Indicators for each acute care hospital licensed in
California using administrative discharge data that hospitals report
pursuant to this part.
   (b) No later than July 1, 2010, the commission shall publish an
initial report of health care associated infection rates in general
acute care hospitals. The types of infection to be included and the
methods to be used shall be determined by the commission, in
consultation with the State Department of Public Health and the
committee established pursuant to Section 1288.5. The report shall be
based on data collected for a period of 12 months, and thereafter
shall be updated quarterly.

      Article 4.  Fees


   128870.  (a) The commission shall, to the extent possible, recover
the cost of implementing this chapter from fees charged to data
sources and data users. As part of the plan adopted pursuant to
Article 3 (commencing with Section 128865), the commission shall
promulgate a schedule of fees that will, to the extent possible,
recover the cost of implementing centralized data collection,
effective analysis, and reporting activities under this chapter. The
schedule of fees shall be based on the relative need to collect and
analyze information from various data sources, and the relative value
to data sources and users, in order to correct the adverse health
effects that have resulted from the lack of transparency of health
care cost and quality information. The fee schedule shall ensure
appropriate access to data at a reasonable cost for academic
researchers. Notwithstanding this section, the commission shall not
fail to publish reports for the public consistent with the plan and
shall not otherwise charge members of the public for access to the
reports generated and published by the commission.
   (b) The commission may seek and accept contributions to support
the work of the commission from any foundation or other public or
private entity that does not have a financial interest in the outcome
of the work of the commission, as defined in the
conflict-of-interest policy adopted pursuant to Section 128864.
   128871.  There is hereby established in the State Treasury, the
Health Care Cost and Quality Transparency Fund to support the work of
the commission. All fees and contributions collected by the
commission pursuant to Section 128870 shall be deposited in this fund
and used to support the work of the commission.

      Article 5.  Penalties


   128875.  (a) Any data source that fails to file any report as
required by this chapter or by the health care cost and quality
transparency plan adopted pursuant to this chapter, shall be liable
for a civil penalty of one hundred dollars ($100) to one thousand
dollars ($1,000) per day. The commission shall, as part of the plan
developed pursuant to Section 128865, promulgate a schedule of civil
penalties that will be assessed for reporting violations that varies
from one hundred dollars ($100) per day for the least serious
violation, up to one thousand dollars ($1,000) for the most serious
violation.
   (b) Civil penalties shall be assessed and recovered in a civil
action brought by the commission in the name of the people of the
State of California. Assessment of a civil penalty may, at the
request of a health care provider, be reviewed on appeal and the
penalty may be reduced or waived by the commission for good cause.
   (c) Any money received by the commission pursuant to this section
shall be paid into the General Fund.
  SEC. 10.  Chapter 1.6 (commencing with Section 10199.10) is added
to Part 2 of Division 2 of the Insurance Code, to read:
      CHAPTER 1.6.  CALIFORNIA INDIVIDUAL COVERAGE GUARANTEE ISSUE


   10199.10.  It is the intent of the Legislature to do both of the
following:
   (a) Guarantee the availability and renewability of health coverage
through the private health insurance market to individuals.
   (b) Require that health care service plans and health insurers
issuing coverage in the individual market compete on the basis of
price, quality, and service, and not on risk selection.
   10199.104.  (a) On or before September 1, 2008, the commissioner
and the Director of the Department of Managed Health Care shall
jointly adopt regulations governing five classes of individual health
benefit plans that health care service plans and health insurers
shall make available.
   (b) Within 90 days of the adoption of the regulations required by
subdivision (a), the commissioner and the Director of the Department
of Managed Health Care shall jointly approve five classes of
individual health benefit plans for each health care service plan and
health insurer participating in the individual market, with each
class having an increased level of benefits beginning with the lowest
class. Within each class, the commissioner and the Director of the
Department of Managed Health Care shall jointly approve one baseline
HMO and one baseline PPO, to be issued by health care service plans
and health insurers in the individual market. The classes of benefits
jointly approved by the commissioner and the Director of the
Department of Managed Health Care shall reflect a reasonable
continuum between the class with the lowest level of benefits and the
class with the highest level of benefits, shall permit reasonable
benefit variation that will allow for a diverse market within each
class, and shall be enforced consistently between health care service
plans and health insurers in the same marketplace regardless of
licensure.
   (c) In approving the five classes of plans filed by health care
service plans and health insurers, the commissioner and the Director
of the Department of Managed Health Care shall do both of the
following:
   (1) Jointly determine that the plans provide reasonable benefit
variation, allowing a diverse market.
   (2) Jointly require either (A) that benefits within each class are
standard and uniform across all plans and insurers, or (B) that
benefits offered in each class are actuarially equivalent across all
plans and insurers.
   10199.105.  On and after January 1, 2009, health care service
plans and health insurers participating in the individual market
shall, except as provided in Section 12711.1, guarantee issue the
five classes of approved health benefit plans and shall, at the same
time, discontinue offering and selling health benefit plans other
than those within the five approved classes of benefit plans in the
individual market.
   10199.106.  (a) Individuals may purchase a health benefit plan
from one of the five classes of approved plans on a guaranteed issue
basis. After selecting and purchasing a health benefit plan within a
class of benefits, an individual may change plans only as set forth
in this section. For individuals enrolled as a family, the subscriber
may change classes for himself or herself, or for all dependents:
   (1) Annually in the month of the subscriber's birth, an individual
may select a different individual plan from another health care
service plan or insurer, within the same class of benefits or the
next higher level of benefits.
   (2) Annually in the month of the subscriber's birth, an individual
may move up one class of benefits offered by the same health care
service plan or health insurer.
   (3) At any time a subscriber may move to a lower class of
benefits.
   (4) At significant life events, the insured may move up to a
higher class of benefits as follows:
   (A) Upon marriage or entering into a domestic partnership.
   (B) Upon divorce.
   (C) Upon the death of a spouse or domestic partner, on whose
health coverage an individual was a dependent.
   (D) Upon the birth or adoption of a child.
   (5) A dependent child may terminate coverage under a parent's
plan, and select coverage for his or her own account following his or
her 18th birthday.
   (6) If a subscriber becomes eligible for group benefits, Medicare,
or other benefits, and selects those benefits in lieu of his or her
individual coverage, the dependent spouse or domestic partner may
become the subscriber. If there is no dependent spouse or domestic
partner enrolled in the plan, the oldest child may become the
subscriber.
   (b) This section shall not apply to an individual included within
the group of the 3 to 5 percent of individuals identified pursuant to
Section 12711.1 as the most expensive to treat.
   10199.107.  At the time an individual applies for health coverage
from a health care service plan or health insurer participating in
the individual market, an individual shall provide information as
required by a standardized health status questionnaire to assist
plans and insurers in identifying persons in need of disease
management. Health care service plans and health insurers may not use
information provided on the questionnaire to decline coverage, or to
limit an individual's choice of health care benefit plan, except as
provided in Section 12711.1.
   10199.108.  Health benefit plans shall become effective within 31
days of receipt of the individual's application, standardized health
status questionnaire, and premium payment.
   10199.109.  Health care service plans and health insurers may
reject an application for health care benefits if the individual does
not reside or work in a plan's or insurer's approved service area.
   10199.110.  The commissioner or the Director of the Department of
Managed Health Care, as applicable, may require a health care service
plan or health insurer to discontinue the offering of health care
benefits, or acceptance of applications from individuals, upon a
determination by the director or commissioner that the plan or
insurer does not have sufficient financial viability, or
organizational and administrative capacity, to ensure the delivery of
health care benefits to its enrollees or insureds.
   10199.111.  All health care benefits offered to individuals shall
be renewable with respect to all individuals and dependents at the
option of the subscriber, except:
   (a) For nonpayment of the required premiums by the subscriber.
   (b) When the plan or insurer withdraws from the individual health
care market, subject to rules and requirements jointly adopted by the
director and the Insurance Commissioner.
   10199.112.  No health care service plan or health insurer shall,
directly or indirectly, enter into any contract, agreement, or
arrangement with a solicitor that provides for or results in the
compensation paid to a solicitor for the sale of a health care
service plan contract or health insurance policy to be varied because
of the health status, claims experience, occupation, or geographic
location of the individual, provided the geographic location is
within the plan's or insurer's approved service area.
   10199.113.  This chapter shall not apply to individual health plan
contracts for coverage of Medicare services pursuant to contracts
with the United States Government, Medi-Cal contracts with the State
Department of Health Care Services, Healthy Family contracts with the
Managed Risk Medical Insurance Board, high-risk pool contracts with
the Major Risk Medical Insurance Program, Medicare supplement
policies, long-term care policies, specialized health plan contracts,
or contracts issued to individuals who secure coverage from
Cal-CHIPP.
   10199.114.  (a) A health care service plan or health insurer may
rate its entire portfolio of health benefit plans in accordance with
expected costs or other market considerations, but the rate for each
plan or insurer shall be set in relation to the balance of the
portfolio as certified by an actuary. Each benefit plan shall be
priced as determined by each health care service plan or health
insurer to reflect the difference in benefit variation, or the
effectiveness of a provider network, but may not adjust the rate for
a specific plan for risk selection. A health care service plan's or
health insurer's rates shall use the same rating factors for age,
family size, and geographic location for each individual health care
benefit plan it issues. Rates for health care benefits may vary from
applicant to applicant only by any of the following:
   (1) Age of the subscriber, as determined by the commissioner and
the Director of the Department of Managed Health Care.
   (2) Family size in categories determined by the commissioner and
the Director of the Department of Managed Health Care.
   (3) Geographic rate regions as determined by the commissioner and
the Director of the Department of Managed Health Care.
   (4) Health improvement discounts. A health care service plan or
health insurer may reduce copayments or offer premium discounts for
nonsmokers, individuals demonstrating weight loss through a
measurable health improvement program, or individuals actively
participating in a disease management program, provided discounts are
approved by the commissioner and the Director of the Department of
Managed Health Care.
   (b) The commissioner and the Director of the Department of Managed
Health Care shall take into consideration the age, family size, and
geographic region rating categories applicable to small group
coverage contracts pursuant to Section 1357 of the Health and Safety
Code and Section 10700 of this code in implementing this section.
   10199.115.  The first term of each health benefit plan contract or
policy issued shall be from the effective date through the last day
of the month immediately preceding the subscriber's next birthday.
Contracts or policies may be renewed by the subscriber as set forth
in this chapter.
  SEC. 11.  Section 10293.5 is added to the Insurance Code, to read:
   10293.5.  (a) The commissioner shall adopt regulations no later
than July 1, 2008, requiring that at least 85 percent of health
insurance premium revenue received by a health insurer be spent on
health care services. The regulations shall also define "health care
services."
                                  (b) As used in this section, health
insurance shall have the same meaning as in subdivision (b) of
Section 106.
   (c) The requirements of this chapter shall not apply to a Medicare
supplement, vision-only, dental-only, 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.
  SEC. 12.  Section 10607 of the Insurance Code is amended to read:
   10607.  In addition to the other disclosures required by this
chapter, every insurer and their employees or agents shall, when
presenting a plan for examination or sale to any individual or the
representative of a group, disclose in writing the ratio of incurred
claims to earned premiums (loss-ratio) for the insurer's preceding
calendar year for policies with individuals and with groups of the
same or similar size for the insurer's preceding fiscal year.
  SEC. 13.  Section 10700 of the Insurance Code is amended to read:
   10700.  As used in this chapter:
   (a) "Agent or broker" means a person or entity licensed under
Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.
   (b) "Benefit plan design" means a specific health coverage product
issued by a carrier to small employers, to trustees of associations
that include small employers, or to individuals if the coverage is
offered through employment or sponsored by an employer. It includes
services covered and the levels of copayment and deductibles, and it
may include the professional providers who are to provide those
services and the sites where those services are to be provided. A
benefit plan design may also be an integrated system for the
financing and delivery of quality health care services which has
significant incentives for the covered individuals to use the system.

   (c) "Board" means the Major Risk Medical Insurance Board.
   (d) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans that
cover the employees of small employers, regardless of the situs of
the contract or master policyholder. For the purposes of Articles 3
(commencing with Section 10719) and 4 (commencing with Section
10730), "carrier" also includes health care service plans.
   (e) "Dependent" means the spouse or child of an eligible employee,
subject to applicable terms of the health benefit plan covering the
employee, and includes dependents of guaranteed association members
if the association elects to include dependents under its health
coverage at the same time it determines its membership composition
pursuant to subdivision (z).
   (f) "Eligible employee" means either of the following:
   (1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of at least 30 hours, in the small employer's regular
place of business, who has met any statutorily authorized applicable
waiting period requirements. The term includes sole proprietors or
partners of a partnership, if they are actively engaged on a
full-time basis in the small employer's business, and they are
included as employees under a health benefit plan of a small
employer, but does not include employees who work on a part-time,
temporary, or substitute basis. It includes any eligible employee as
defined in this paragraph who obtains coverage through a guaranteed
association. Employees of employers purchasing through a guaranteed
association shall be deemed to be eligible employees if they would
otherwise meet the definition except for the number of persons
employed by the employer. A permanent employee who works at least 20
hours but not more than 29 hours is deemed to be an eligible employee
if all four of the following apply:
   (A) The employee otherwise meets the definition of an eligible
employee except for the number of hours worked.
   (B) The employer offers the employee health coverage under a
health benefit plan.
   (C) All similarly situated individuals are offered coverage under
the health benefit plan.
   (D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The insurer may request any necessary information
to document the hours and time period in question, including, but not
limited to, payroll records and employee wage and tax filings.
   (2) Any member of a guaranteed association as defined in
subdivision (z).
   (g) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
   (h) "Financially impaired" means, for the purposes of this
chapter, a carrier that, on or after the effective date of this
chapter, is not insolvent and is either:
   (1) Deemed by the commissioner to be potentially unable to fulfill
its contractual obligations.
   (2) Placed under an order of rehabilitation or conservation by a
court of competent jurisdiction.
   (i) "Fund" means the California Small Group Reinsurance Fund.
   (j) "Health benefit plan" means a policy or contract written or
administered by a carrier that arranges or provides health care
benefits for the covered eligible employees of a small employer and
their dependents. The term does not include accident only, credit,
disability income, coverage of Medicare services pursuant to
contracts with the United States government, Medicare supplement,
long-term care insurance, dental, vision, coverage issued as a
supplement to liability insurance, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
   (k) "In force business" means an existing health benefit plan
issued by the carrier to a small employer.
   (l) "Late enrollee" means an eligible employee or dependent who
has declined health coverage under a health benefit plan offered by a
small employer at the time of the initial enrollment period provided
under the terms of the health benefit plan, and who subsequently
requests enrollment in a health benefit plan of that small employer,
provided that the initial enrollment period shall be a period of at
least 30 days. It also means any member of an association that is a
guaranteed association as well as any other person eligible to
purchase through the guaranteed association when that person has
failed to purchase coverage during the initial enrollment period
provided under the terms of the guaranteed association's health
benefit plan and who subsequently requests enrollment in the plan,
provided that the initial enrollment period shall be a period of at
least 30 days. However, an eligible employee, another person eligible
for coverage through a guaranteed association pursuant to
subdivision (z), or an eligible dependent shall not be considered a
late enrollee if any of the following is applicable:
   (1) The individual meets all of the following requirements:
   (A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, or no share-of-cost Medi-Cal
coverage at the time the individual was eligible to enroll.
   (B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, or no share-of-cost Medi-Cal coverage was the
reason for declining enrollment provided that, if the individual was
covered under another employer health plan, the individual was given
the opportunity to make the certification required by this
subdivision and was notified that failure to do so could result in
later treatment as a late enrollee.
   (C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the
individual, or of a person through whom the individual was covered as
a dependent, the termination of the other plan's coverage, cessation
of an employer's contribution toward an employee or dependent's
coverage, death of the person through whom the individual was covered
as a dependent, legal separation, divorce, loss of coverage under
the Healthy Families Program as a result of exceeding the program's
income or age limits, or loss of no share-of-cost Medi-Cal coverage.
   (D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan.
   (2) The individual is employed by an employer who offers multiple
health benefit plans and the individual elects a different plan
during an open enrollment period.
   (3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
   (4) (A) In the case of an eligible employee as defined in
paragraph (1) of subdivision (f), the carrier cannot produce a
written statement from the employer stating that the individual or
the person through whom an individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed acknowledgment of, an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the carrier to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
coverage for a period of 12 months as well as a six-month preexisting
condition exclusion unless the individual meets the criteria
specified in paragraph (1), (2), or (3).
   (B) In the case of an eligible employee who is a guaranteed
association member, the plan cannot produce a written statement from
the guaranteed association stating that the association sent a
written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from coverage for a period of 12 months as well as a
six-month preexisting condition exclusion unless the member can
demonstrate that he or she meets the requirements of subparagraphs
(A), (C), and (D) of paragraph (1) or meets the requirements of
paragraph (2) or (3).
   (C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for coverage was made within 30
days of the change.
   (5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 1373.621 shall apply.
   (6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program as a result of exceeding the program's income or age
limits or no share-of-cost Medi-Cal coverage and requests enrollment
within 30 days after notification of this loss of coverage.
   (7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf, and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
   (8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan at the time of the previous
enrollment period. That individual may enroll himself or herself or
his or her dependents for plan coverage during a special open
enrollment opportunity if his or her dependents have lost or will
lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
   (m) "New business" means a health benefit plan issued to a small
employer that is not the carrier's in force business.
   (n) "Participating carrier" means a carrier that has entered into
a contract with the program to provide health benefits coverage under
this part.
   (o) "Plan of operation" means the plan of operation of the fund,
including articles, bylaws and operating rules adopted by the fund
pursuant to Article 3 (commencing with Section 10719).
   (p) "Program" means the Health Insurance Plan of California.
   (q) "Preexisting condition provision" means a policy provision
that excludes coverage for charges or expenses incurred during a
specified period following the insured's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
   (r) "Creditable coverage" means:
   (1) Any individual or group policy, contract, or program, that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
   (2) The federal Medicare program pursuant to Title XVIII of the
Social Security Act.
   (3) The Medicaid program pursuant to Title XIX of the Social
Security Act.
   (4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A state health benefits risk pool.
   (8) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
   (9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the Public Health Service Act,
as amended by Public Law 104-191, the Health Insurance Portability
and Accountability Act of 1996.
   (10) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C. Sec. 2504(e)).
   (11) Any other creditable coverage as defined by subdivision (c)
of Section 2701 of Title XXVII of the federal Public Health Services
Act (42 U.S.C. Sec. 300gg(c)).
   (s) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than six
months.
   (t) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
   (u) "Risk adjustment factor" means the percent adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
claims. This factor may not be more than 120 percent or less than 80
percent until July 1, 1996. Effective July 1, 1996, this factor may
not be more than 110 percent or less than 90 percent. On and after
January 1, 2010, no risk adjustment factor shall be applied.
   (v) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family size of the
employee, plus the benefit plan design selected by the small
employer.
   (1) No more than the following age categories may be used in
determining premium rates:
   Under 30
   30-39
   40-49
   50-54
   55-59
   60-64
   65 and over
   However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the health
benefit plan will be primary or secondary to benefits provided by the
federal Medicare program pursuant to Title XVIII of the federal
Social Security Act.
   (2) Small employer carriers shall base rates to small employers
using no more than the following family size categories:
   (A) Single.
   (B) Married couple.
   (C) One adult and child or children.
   (D) Married couple and child or children.
   (3) (A) In determining rates for small employers, a carrier that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county and
shall divide no county into more than two regions. Carriers shall be
deemed to be operating statewide if their coverage area includes 90
percent or more of the state's population. Geographic regions
established pursuant to this section shall, as a group, cover the
entire state, and the area encompassed in a geographic region shall
be separate and distinct from areas encompassed in other geographic
regions. Geographic regions may be noncontiguous.
   (B) In determining rates for small employers, a carrier that does
not operate statewide shall use no more than the number of geographic
regions in the state than is determined by the following formula:
the population, as determined in the last federal census, of all
counties which are included in their entirety in a carrier's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No
carrier shall have less than one geographic area.
   (w) "Small employer" means either of the following:
   (1) Any person, proprietary or nonprofit firm, corporation,
partnership, public agency, or association that is actively engaged
in business or service that, on at least 50 percent of its working
days during the preceding calendar quarter, or preceding calendar
year, employed at least two, but not more than 50, eligible
employees, the majority of whom were employed within this state, that
was not formed primarily for purposes of buying health insurance and
in which a bona fide employer-employee relationship exists. In
determining whether to apply the calendar quarter or calendar year
test, the insurer shall use the test that ensures eligibility if only
one test would establish eligibility. However, for purposes of
subdivisions (b) and (h) of Section 10705, the definition shall
include employers with at least three eligible employees until July
1, 1997, and two eligible employees thereafter. In determining the
number of eligible employees, companies that are affiliated companies
and that are eligible to file a combined income tax return for
purposes of state taxation shall be considered one employer.
Subsequent to the issuance of a health benefit plan to a small
employer pursuant to this chapter, and for the purpose of determining
eligibility, the size of a small employer shall be determined
annually. Except as otherwise specifically provided, provisions of
this chapter that apply to a small employer shall continue to apply
until the health benefit plan anniversary following the date the
employer no longer meets the requirements of this definition. It
includes any small employer as defined in this paragraph who
purchases coverage through a guaranteed association, and any employer
purchasing coverage for employees through a guaranteed association.
   (2) Any guaranteed association, as defined in subdivision (y),
that purchases health coverage for members of the association.
   (x) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
   (y) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria which (1) includes one or more small employers as
defined in paragraph (1) of subdivision (w), (2) does not condition
membership directly or indirectly on the health or claims history of
any person, (3) uses membership dues solely for and in consideration
of the membership and membership benefits, except that the amount of
the dues shall not depend on whether the member applies for or
purchases insurance offered by the association, (4) is organized and
maintained in good faith for purposes unrelated to insurance, (5) has
been in active existence on January 1, 1992, and for at least five
years prior to that date, (6) has been offering health insurance to
its members for at least five years prior to January 1, 1992, (7) has
a constitution and bylaws, or other analogous governing documents
that provide for election of the governing board of the association
by its members, (8) offers any benefit plan design that is purchased
to all individual members and employer members in this state, (9)
includes any member choosing to enroll in the benefit plan design
offered to the association provided that the member has agreed to
make the required premium payments, and (10) covers at least 1,000
persons with the carrier with which it contracts. The requirement of
1,000 persons may be met if component chapters of a statewide
association contracting separately with the same carrier cover at
least 1,000 persons in the aggregate.
   This subdivision applies regardless of whether a master policy by
an admitted insurer is delivered directly to the association or a
trust formed for or sponsored by an association to administer
benefits for association members.
   For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
   (z) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
may also include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include those persons as members of the
guaranteed association, the association must so elect in advance of
purchasing coverage from a plan. Health plans may require an
association to adhere to the membership composition it selects for up
to 12 months.
   (aa) "Affiliation period" means a period that, under the terms of
the health benefit plan, must expire before health care services
under the plan become effective.
  SEC. 14.  Section 10714 of the Insurance Code is amended to read:
   10714.  Premiums for benefit plan designs written, issued, or
administered by carriers on or after the effective date of this act,
shall be subject to the following requirements:
   (a) (1) The premium for new business shall be determined for an
eligible employee in a particular risk category after applying a risk
adjustment factor to the carrier's standard employee risk rates. The
risk adjusted employee risk rate may not be more than 120 percent or
less than 80 percent of the carrier's applicable standard employee
risk rate until July 1, 1996. Effective July 1, 1996, the risk
adjusted employee risk rate may not be more than 110 percent or less
than 90 percent. On and after January 1, 2010, no risk adjustment
factor shall be applied.
   (2) The premium charged a small employer for new business shall be
equal to the sum of the risk adjusted employee risk rates.
   (3) The standard employee risk rates applied to a small employer
for new business shall be in effect for no less than six months.
   (b) (1) The premium for in force business shall be determined for
an eligible employee in a particular risk category after applying a
risk                                                   adjustment
factor to the carrier's standard employee risk rates. The risk
adjusted employee risk rates may not be more than 120 percent or less
than 80 percent of the carrier's applicable standard employee risk
rate until July 1, 1996. Effective July 1, 1996, the risk adjusted
employee risk rate may not be more than 110 percent or less than 90
percent. The factor effective July 1, 1996, shall apply to in force
business at the earlier of either the time of renewal or July 1,
1997. The risk adjustment factor applied to a small employer may not
increase by more than 10 percentage points from the risk adjustment
factor applied in the prior rating period. The risk adjustment factor
for a small employer may not be modified more frequently than every
12 months. On and after January 1, 2010, no risk adjustment factor
shall be applied.
   (2) The premium charged a small employer for in force business
shall be equal to the sum of the risk adjusted employee risk rates.
The standard employee risk rates shall be in effect for no less than
six months.
   (3) For a benefit plan design that a carrier has discontinued
offering, the risk adjustment factor applied to the standard employee
risk rates for the first rating period of the new benefit plan
design that the small employer elects to purchase shall be no greater
than the risk adjustment factor applied in the prior rating period
to the discontinued benefit plan design. However, the risk adjusted
employee rate may not be more than 120 percent or less than 80
percent of the carrier's applicable standard employee risk rate until
July 1, 1996. Effective July 1, 1996, the risk adjusted employee
risk rate may not be more than 110 percent or less than 90 percent.
The factor effective July 1, 1996, shall apply to in force business
at the earlier of either the time of renewal or July 1, 1997. The
risk adjustment factor for a small employer may not be modified more
frequently than every 12 months. On and after January 1, 2010, no
risk adjustment factor shall be applied.
   (c) (1) For any small employer, a carrier may, with the consent of
the small employer, establish composite employee and dependent rates
for either new business or renewal of in force business. The
composite rates shall be determined as the average of the risk
adjusted employee risk rates for the small employer, as determined in
accordance with the requirements of subdivisions (a) and (b). The
sum of the composite rates so determined shall be equal to the sum of
the risk adjusted employee risk rates for the small employer.
   (2) The composite rates shall be used for all employees and
dependents covered throughout a rating period of no less than six
months, nor more than 12 months, except that a carrier may reserve
the right to redetermine the composite rates if the enrollment under
the health benefit plan changes by more than a specified percentage
during the rating period. Any redetermination of the composite rates
shall be based on the same risk adjusted employee risk rates used to
determine the initial composite rates for the rating period. If a
carrier reserves the right to redetermine the rates and the
enrollment changes more than the specified percentage, the carrier
shall redetermine the composite rates if the redetermined rates would
result in a lower premium for the small employer. A carrier
reserving the right to redetermine the composite rates based upon a
change in enrollment shall use the same specified percentage to
measure that change with respect to all small employers electing
composite rates.
   (d) Nothing in this section shall be construed to prevent an
insurer from changing the standard employee risk rates applied to a
small employer in order to ensure that the insurer's rates for a
standard benefit plan design sold pursuant to Section 10761 are not
less than the insurer's rates for the same benefit plan design sold
through the California Cooperative Health Insurance Purchasing
Program (Part 6.45 (commencing with Section 12699.201)).
  SEC. 15.  Chapter 8.1 (commencing with Section 10760) is added to
Part 2 of Division 2 of the Insurance Code, to read:
      CHAPTER 8.1.  INSURANCE MARKET REFORM


   10760.  Effective July 1, 2008, every insurer that offers,
markets, and sells health insurance to individuals and conducts
medical underwriting to determine whether to issue coverage to a
specific individual shall use a standardized health questionnaire
developed by the Managed Risk Medical Insurance Board. A health
insurer subject to this section may not exclude a potential insured
from any individual coverage on the basis of an actual or expected
health condition, type of illness, treatment, medical condition, or
accident, or for a preexisting condition, except as provided by the
board pursuant to Section 12711.1.
   10761.  The department, in consultation with the Department of
Managed Health Care, shall require each health insurer with one
million or more insureds in California, based on the insurer's
enrollment in the prior year, to submit a good faith bid to the
Managed Risk Medical Insurance Board in order to be a participating
plan through the California Cooperative Health Insurance Purchasing
Program (Cal-CHIPP) pursuant to Part 6.45 (commencing with Section
12699.201).
   10762.  It is the intent of the Legislature that all health care
providers shall participate in an Internet-based personal health
record system under which patients have access to their own health
care records. A patient's personal health care record shall only be
accessible to that patient or other individual as authorized by the
patient. It is the intent of the Legislature that all health insurers
and providers shall adopt standard electronic medical records by
January 1, 2012.
   10763.  On and after July 1, 2008, all requirements in Chapter 8
(commencing with Section 10700) applicable to offering, marketing,
and selling health benefit plans to small employers as defined in
that chapter, including, but not limited to, the obligation to fairly
and affirmatively offer, market, and sell all of the carrier's
health benefit plan designs to all employers, guaranteed renewal of
all health benefit plan designs, use of the risk adjustment factor,
and the restriction of risk categories to age, geographic region, and
family composition as described in that chapter, shall be applicable
to all health benefit plan designs offered to all employers with 100
or fewer eligible employees, except as follows:
   (a) For small employers with 2 to 50, inclusive, eligible
employees, all requirements in that chapter shall apply.
   (b) For employers with 51 to 100, inclusive, eligible employees,
all requirements in that chapter shall apply, except that the carrier
may develop health care coverage benefit plan designs to fairly and
affirmatively market only to employer groups of 51 to 100 eligible
employees.
   (c) On and after January 1, 2010, no risk adjustment factor shall
be applied to a policy offered to an employer with 51 to 100,
inclusive, eligible employees.
   10764.  (a) For employees and, if applicable, dependents who are
currently enrolled in or determined eligible for coverage through the
Healthy Families Program or the Medi-Cal program and who are offered
group coverage, the group health insurer shall collect the employer'
s applicable dollar premium contribution for those employees and, if
applicable, dependents and transmit that amount to the board toward
the premium cost of the applicable Cal-CHIPP plan.
   (b) The department, in consultation with the board, may issue
regulations, as necessary pursuant to the Administrative Procedure
Act, to implement the requirements of this section. Until January 1,
2012, the adoption and readoption of regulations pursuant to this
chapter shall be deemed to be an emergency and necessary for the
immediate preservation of public peace, health and safety, or general
welfare.
   (c) As used in this section, the following terms have the
following meanings:
   (1) "Board" means the Managed Risk Medical Insurance Board.
   (2) "California Cooperative Health Insurance Purchasing Program"
or "Cal-CHIPP" shall have the same meaning as in subdivision (c) of
Section 12699.201.
   (3) "Cal-CHIPP Healthy Families plan" shall have the same meaning
as in Section 12699.201.
   (4) "Cal-CHIPP Medi-Cal plan" shall mean a health insurance policy
providing the same amount, duration, scope, and level of coverage
provided through the Medi-Cal program (Chapter 7 (commencing with
Section 14000) of Part 3 of Division 9 of the Welfare and
Institutions Code).
   (d) This section shall apply to health insurance policies issued,
amended, or renewed on or after January 1, 2010.
   10765.  (a) As used in this chapter, "health insurance" shall have
the same meaning as in subdivision (b) of Section 106.
   (b) The requirements of this chapter shall not apply to a Medicare
supplement, vision-only, dental-only, 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.
   10766.  This chapter shall become operative on July 1, 2008.
  SEC. 16.  Section 12693.43 of the Insurance Code is amended to
read:
   12693.43.  (a) Applicants applying to the purchasing pool shall
agree to pay family contributions, unless the applicant has a family
contribution sponsor. Family contribution amounts consist of the
following two components:
   (1) The flat fees described in subdivision (b) or (d).
   (2) Any amounts that are charged to the program by participating
health, dental, and vision plans selected by the applicant that
exceed the cost to the program of the highest cost family value
package in a given geographic area.
   (b) In each geographic area, the board shall designate one or more
family value packages for which the required total family
contribution is:
   (1) Seven dollars ($7) per child with a maximum required
contribution of fourteen dollars ($14) per month per family for
applicants with annual household incomes up to and including 150
percent of the federal poverty level.
   (2) Nine dollars ($9) per child with a maximum required
contribution of twenty-seven dollars ($27) per month per family for
applicants with annual household incomes greater than 150 percent and
up to and including 200 percent of the federal poverty level and for
applicants on behalf of children described in clause (ii) of
subparagraph (A) of paragraph (6) of subdivision (a) of Section
12693.70.
   (3) On and after July 1, 2005, fifteen dollars ($15) per child
with a maximum required contribution of forty-five dollars ($45) per
month per family for applicants with annual household income to which
subparagraph (B) of paragraph (6) of subdivision (a) of Section
12693.70 is applicable. Notwithstanding any other provision of law,
if an application with an effective date prior to July 1, 2005, was
based on annual household income to which subparagraph (B) of
paragraph (6) of subdivision (a) of Section 12693.70 is applicable,
then this paragraph shall be applicable to the applicant on July 1,
2005, unless subparagraph (B) of paragraph (6) of subdivision (a) of
Section 12693.70 is no longer applicable to the relevant family
income. The program shall provide prior notice to any applicant for
currently enrolled subscribers whose premium will increase on July 1,
2005, pursuant to this paragraph and, prior to the date the premium
increase takes effect, shall provide that applicant with an
opportunity to demonstrate that subparagraph (B) of paragraph (6) of
subdivision (a) of Section 12693.70 is no longer applicable to the
relevant family income.
   (4) On and after July 1, 2008, twenty-five dollars ($25) per child
with a maximum required contribution of seventy-five dollars ($75)
per month per family for applicants with annual household incomes
greater than 250 percent and up to and including 300 percent of the
federal poverty level.
   (c) Combinations of health, dental, and vision plans that are more
expensive to the program than the highest cost family value package
may be offered to and selected by applicants. However, the cost to
the program of those combinations that exceeds the price to the
program of the highest cost family value package shall be paid by the
applicant as part of the family contribution.
   (d) The board shall provide a family contribution discount to
those applicants who select the health plan in a geographic area that
has been designated as the Community Provider Plan. The discount
shall reduce the portion of the family contribution described in
subdivision (b) to the following:
   (1) A family contribution of four dollars ($4) per child with a
maximum required contribution of eight dollars ($8) per month per
family for applicants with annual household incomes up to and
including 150 percent of the federal poverty level.
   (2) Six dollars ($6) per child with a maximum required
contribution of eighteen dollars ($18) per month per family for
applicants with annual household incomes greater than 150 percent and
up to and including 200 percent of the federal poverty level and for
applicants on behalf of children described in clause (ii) of
subparagraph (A) of paragraph (6) of subdivision (a) of Section
12693.70.
   (3) On and after July 1, 2005, twelve dollars ($12) per child with
a maximum required contribution of thirty-six dollars ($36) per
month per family for applicants with annual household income to which
subparagraph (B) of paragraph (6) of subdivision (a) of Section
12693.70 is applicable. Notwithstanding any other provision of law,
if an application with an effective date prior to July 1, 2005, was
based on annual household income to which subparagraph (B) of
paragraph (6) of subdivision (a) of Section 12693.70 is applicable,
then this paragraph shall be applicable to the applicant on July 1,
2005, unless subparagraph (B) of paragraph (6) of subdivision (a) of
Section 12693.70 is no longer applicable to the relevant family
income. The program shall provide prior notice to any applicant for
currently enrolled subscribers whose premium will increase on July 1,
2005, pursuant to this paragraph and, prior to the date the premium
increase takes effect, shall provide that applicant with an
opportunity to demonstrate that subparagraph (B) of paragraph (6) of
subdivision (a) of Section 12693.70 is no longer applicable to the
relevant family income.
   (4) On and after July 1, 2008, twenty-two dollars ($22) per child
with a maximum required contribution of sixty-six dollars ($66) per
month per family for applicants with annual household incomes greater
than 250 percent and up to and including 300 percent of the federal
poverty level.
   (e) Applicants, but not family contribution sponsors, who pay
three months of required family contributions in advance shall
receive the fourth consecutive month of coverage with no family
contribution required.
   (f) Applicants, but not family contribution sponsors, who pay the
required family contributions by an approved means of electronic fund
transfer shall receive a 25-percent discount from the required
family contributions.
   (g) It is the intent of the Legislature that the family
contribution amounts described in this section comply with the
premium cost sharing limits contained in Section 2103 of Title XXI of
the Social Security Act. If the amounts described in subdivision (a)
are not approved by the federal government, the board may adjust
these amounts to the extent required to achieve approval of the state
plan.
   (h) The adoption and one readoption of regulations to implement
paragraph (3) of subdivision (b) and paragraph (3) of subdivision (d)
shall be deemed to be an emergency and necessary for the immediate
preservation of public peace, health, and safety, or general welfare
for purposes of Sections 11346.1 and 11349.6 of the Government Code,
and the board is hereby exempted from the requirement that it
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
regulatory action and submission of specified materials to the
Office of Administrative Law, is hereby extended to 180 days.
  SEC. 17.  Section 12693.57 is added to the Insurance Code, to read:

   12693.57.  Every person administering or providing benefits under
the program shall perform his or her duties in such a manner as to
secure for every subscriber the amount of assistance to which the
subscriber is entitled, without attempting to elicit any information
that is not required to carry out the provisions of law applicable to
the program.
  SEC. 18.  Section 12693.58 is added to the Insurance Code, to read:

   12693.58.  (a) All types of information, whether written or oral,
concerning an applicant, subscriber, or household member, made or
kept by any public officer or agency in connection with the
administration of any provision of this part shall be confidential,
and shall not be open to examination other than for purposes directly
connected with the administration of the Healthy Families Program or
the Medi-Cal program.
   (b) Except as provided in this section and to the extent permitted
by federal law or regulation, all information about applicants,
subscribers, and household members to be safeguarded as provided for
in subdivision (a) includes, but is not limited to, names and
addresses, medical services provided, social and economic conditions
or circumstances, agency evaluation of personal information, and
medical data, including diagnosis and past history of disease or
disability.
   (c) Purposes directly connected with the administration of the
Healthy Families Program or the Medi-Cal program encompass all
activities and responsibilities in which the Managed Risk Medical
Insurance Board or State Department of Health Care Services and their
agents, officers, trustees, employees, consultants, and contractors
engage to conduct program operations.
   (d) Nothing in this section shall be construed to prohibit the
disclosure of information about the applicant, subscriber, or
household member when the applicant, subscriber, or household member
to whom the information pertains or the parent or adult with legal
custody provides express written authorization.
   (e) Nothing in this part shall prohibit the disclosure of
protected health information as provided in 45 C.F.R. 164.512.
  SEC. 19.  Section 12693.59 is added to the Insurance Code, to read:

   12693.59.  Nothing in this part shall preclude the board from
soliciting voluntary participation by applicants and subscribers in
communicating with the board, or with any other party, concerning
their needs as well as the needs of others who are not adequately
covered by existing private and public health care delivery systems
or concerning means of ensuring the availability of adequate health
care services. The board shall inform applicants and subscribers that
their participation is voluntary and shall inform them of the uses
for which the information is intended.
  SEC. 20.  Section 12693.621 is added to the Insurance Code, to
read:
   12693.621.  On and after January 1, 2010, the coverage under this
part for a child who is a dependent of an employee of an employer
electing to make a payment to the California Health Trust Fund in
lieu of making health expenditures pursuant to Section 4802.1 of the
Unemployment Insurance Code, shall be provided through a Cal-CHIPP
Healthy Families plan under Part 6.45 (commencing with Section
12699.201). The requirement that an individual enroll in a Cal-CHIPP
Healthy Families plan shall apply to an individual enrolled in the
Healthy Families Program at the individual's next annual
redetermination of eligibility for the Healthy Families Program, or
earlier upon request.
  SEC. 21.  Section 12693.70 of the Insurance Code is amended to
read:
   12693.70.  To be eligible to participate in the program, an
applicant shall meet all of the following requirements:
   (a) Be an applicant applying on behalf of an eligible child, which
means a child who is all of the following:
   (1) Less than 19 years of age. An application may be made on
behalf of a child not yet born up to three months prior to the
expected date of delivery. Coverage shall begin as soon as
administratively feasible, as determined by the board, after the
board receives notification of the birth. However, no child less than
12 months of age shall be eligible for coverage until 90 days after
the enactment of the Budget Act of 1999.
   (2) Not eligible for no-cost full-scope Medi-Cal or Medicare
coverage at the time of application.
   (3) In compliance with Sections 12693.71 and 12693.72.
   (4) (Reserved).
   (5) A resident of the State of California pursuant to Section 244
of the Government Code; or, if not a resident pursuant to Section 244
of the Government Code, is physically present in California and
entered the state with a job commitment or to seek employment,
whether or not employed at the time of application to or after
acceptance in, the program.
   (6) (A) In either of the following:
   (i) In a family with an annual or monthly household income equal
to or less than 200 percent of the federal poverty level.
   (ii) When implemented by the board, subject to subdivision (b) of
Section 12693.765 and pursuant to this section, a child under the age
of two years who was delivered by a mother enrolled in the Access
for Infants and Mothers Program as described in Part 6.3 (commencing
with Section 12695). Commencing July 1, 2007, eligibility under this
subparagraph shall not include infants during any time they are
enrolled in employer-sponsored health insurance or are subject to an
exclusion pursuant to Section 12693.71 or 12693.72, or are enrolled
in the full scope of benefits under the Medi-Cal program at no share
of cost. For purposes of this clause, any infant born to a woman
whose enrollment in the Access for Infants and Mothers Program begins
after June 30, 2004, shall be automatically enrolled in the Healthy
Families Program, except during any time on or after July 1, 2007,
that the infant is enrolled in employer-sponsored health insurance or
is subject to an exclusion pursuant to Section 12693.71 or 12693.72,
or is enrolled in the full scope of benefits under the Medi-Cal
program at no share of cost. Except as otherwise specified in this
section, this enrollment shall cover the first 12 months of the
infant's life. At the end of the 12 months, as a condition of
continued eligibility, the applicant shall provide income
information. The infant shall be disenrolled if the gross annual
household income exceeds the income eligibility standard that was in
effect in the Access for Infants and Mothers Program at the time the
infant's mother became eligible, or following the two-month period
established in Section 12693.981 if the infant is eligible for
Medi-Cal with no share of cost. At the end of the second year,
infants shall again be screened for program eligibility pursuant to
this section, with income eligibility evaluated pursuant to clause
(i), subparagraphs (B) and (C), and paragraph (2) of subdivision (a).

   (B) All income over 200 percent of the federal poverty level but
less than or equal to 250 percent of the federal poverty level shall
be disregarded in calculating annual or monthly household income. On
and after July 1, 2008, all income over 250 percent of the federal
poverty level but less than or equal to 300 percent of the federal
poverty level shall be disregarded in calculating annual or monthly
household income.
   (C) In a family with an annual or monthly household income greater
than 250 percent of the federal poverty level, any income deduction
that is applicable to a child under Medi-Cal shall be applied in
determining the annual or monthly household income. If the income
deductions reduce the annual or monthly household income to 250
percent or less of the federal poverty level, subparagraph (B) shall
be applied.
   (D) On and after July 1, 2008, in a family with an annual or
monthly household income greater than 300 percent of the federal
poverty level, any income deduction that is applicable to a child
under the Medi-Cal program shall be applied in determining the annual
or monthly household income. If the income deductions reduce the
annual or monthly household income to 300 percent or less of the
federal poverty level, subparagraph (B) shall apply.
   (b) The applicant shall agree to remain in the program for six
months, unless other coverage is obtained and proof of the coverage
is provided to the program.
   (c) An applicant shall enroll all of the applicant's eligible
children in the program.
   (d) In filing documentation to meet program eligibility
requirements, if the applicant's income documentation cannot be
provided, as defined in regulations promulgated by the board, the
applicant's signed statement as to the value or amount of income
shall be deemed to constitute verification.
   (e) An applicant shall pay in full any family contributions owed
in arrears for any health, dental, or vision coverage provided by the
program within the prior 12 months.
   (f) By January 2008, the board, in consultation with stakeholders,
shall implement processes by which applicants for subscribers may
certify income at the time of annual eligibility review, including
rules concerning which applicants shall be permitted to certify
income and the circumstances in which supplemental information or
documentation may be required. The board may terminate using these
processes not sooner than 90 days after providing notification to the
Chair of the Joint Legislative Budget Committee. This notification
shall articulate the specific reasons for the termination and shall
include all relevant data elements that are applicable to document
the reasons for the termination. Upon the request of the Chair of the
Joint Legislative Budget Committee, the board shall promptly provide
any additional clarifying information regarding implementation of
the processes required by this subdivision.
  SEC. 22.  Section 12693.73 of the Insurance Code is amended to
read:
   12693.73.  Notwithstanding any other provision of law, children
excluded from coverage under Title XXI of the Social Security Act are
not eligible for coverage under the program, except as specified in
clause (ii) of subparagraph (A) of paragraph (6) of subdivision (a)
of Section 12693.70 and Section 12693.76, or except children who
otherwise meet eligibility requirements for the program but for their
immigration status.
                   SEC. 23.  Section 12693.755 of the Insurance Code
is amended to read:
   12693.755.  (a) Subject to subdivision (b), but no later than July
1, 2008, the board shall expand eligibility under this part to
uninsured parents of, and as defined by the board, adults responsible
for, children enrolled to receive coverage under this part whose
income does not exceed 300 percent of the federal poverty level,
before applying the income disregard provided for in subparagraph (B)
of paragraph (6) of subdivision (a) of Section 12693.70.
   (b) (1) The board shall implement a program to provide coverage
under this part to any uninsured parent or responsible adult who is
eligible pursuant to subdivision (a), pursuant to the waiver or
approval identified in paragraph (2).
   (2) The program shall be implemented only in accordance with a
State Child Health Insurance Program waiver or other federal approval
pursuant to Section 1397gg(e)(2)(A) of Title 42 of the United States
Code, or pursuant to the Deficit Reduction Act of 2005, Section 6044
of Public Law 109-171, to provide coverage to uninsured parents and
responsible adults, and shall be subject to the terms, conditions,
and duration of the waiver or other federal approval. The services
shall be provided under the program only if the waiver or other
federal approval is approved by the federal Centers for Medicare and
Medicaid Services, and, except as provided under the terms and
conditions of the waiver or other federal approval, only to the
extent that federal financial participation is available and funds
are appropriated specifically for this purpose.
   (c) The coverage under this section for a person who is an
employee or, if applicable, an adult dependent of an employee, of an
employer electing to make a payment to the California Health Trust
Fund in lieu of making health expenditures pursuant to Section 4802.1
of the Unemployment Insurance Code, shall be provided through a
Cal-CHIPP Healthy Families plan under Part 6.45 (commencing with
Section 12699.201).
  SEC. 24.  Section 12693.76 of the Insurance Code is amended to
read:
   12693.76.  (a) Notwithstanding any other provision of law, a child
shall not be determined ineligible solely on the basis of his or her
date of entry into the United States.
   (b) Notwithstanding any other provision of law, subdivision (a)
may only be implemented to the extent provided in the annual Budget
Act.
   (c) Notwithstanding any other provision of law, any uninsured
parent or responsible adult who is a qualified alien, as defined in
Section 1641 of Title 8 of the United States Code, shall not be
determined to be ineligible solely on the basis of his or her date of
entry into the United States.
   (d) Notwithstanding any other provision of law, subdivision (c)
may only be implemented to the extent of funding provided in the
annual Budget Act.
   (e) Notwithstanding any other provision of law, a child who is
otherwise eligible to participate in the program shall not be
determined ineligible solely on the basis of his or her immigration
status.
  SEC. 25.  Part 6.45 (commencing with Section 12699.201) is added to
Division 2 of the Insurance Code, to read:

      PART 6.45.  THE CALIFORNIA COOPERATIVE HEALTH INSURANCE
PURCHASING PROGRAM


      CHAPTER 1.  GENERAL PROVISIONS


   12699.201.  For the purposes of this part, the following terms
have the following meanings:
   (a) "Benefit plan design" means a specific health coverage product
offered for sale and includes services covered and the levels of
copayments, deductibles, and annual out-of-pocket expenses, and may
include the professional providers who are to provide those services
and the sites where those services are to be provided. A benefit plan
design may also be an integrated system for the financing and
delivery of quality health care services that has significant
incentives for the covered individuals to use the system.
   (b) "Board" means the Managed Risk Medical Insurance Board.
   (c) "California Cooperative Health Insurance Purchasing Program"
or "Cal-CHIPP" means the statewide purchasing pool established
pursuant to this part and administered by the board.
   (d) "Dependent" shall have the same meaning as in Section 4800.02
of the Unemployment Insurance Code.
   (e) "Enrollee" means an individual who is eligible for, and
participates in, Cal-CHIPP.
   (f) "Fund" means the California Health Trust Fund established
pursuant to Section 12699.212.
   (g) "Cal-CHIPP Healthy Families plan" shall mean health care
coverage provided through a health care service plan or a health
insurer that provides either of the following:
   (1) For individuals less than 19 years of age, the same amount,
duration, scope, and level of coverage provided through the Healthy
Families Program established pursuant to Part 6.2 (commencing with
Section 12693) of Division 2.
   (2) For individuals eligible pursuant to Section 12693.755 or
Section 14005.301 of the Welfare and Institutions Code, coverage that
meets the requirements of federal law and that, at a minimum,
provides the same covered services and benefits required 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 prescription drugs.
   (h) "Cal-CHIPP Medi-Cal plan" shall mean health care coverage
provided through a health care service plan or health insurer that
provides the same amount, duration, scope, and level of coverage
provided through the Medi-Cal program (Chapter 7 (commencing with
Section 14000) of Part 3 of Division 9 of the Welfare and
Institutions Code).
   (i) "Participating dental plan" means either a dental insurer
holding a valid certificate of authority from the commissioner or a
specialized health care service plan, as defined by subdivision (o)
of Section 1345 of the Health and Safety Code, that contracts with
the board to provide dental coverage to enrollees.
   (j) "Participating health plan" means either a private health
insurer holding a valid outstanding certificate of authority from the
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 provide coverage in Cal-CHIPP and,
pursuant to its contract with the board, provides, arranges, pays
for, or reimburses the costs of health services for Cal-CHIPP
enrollees.
   (k) "Participating vision care plan" means either an insurer
holding a valid certificate of authority from the commissioner that
issues vision-only coverage or a specialized health care service
plan, as defined by subdivision (o) of Section 1345 of the Health and
Safety Code, that contracts with the board to provide vision
coverage to enrollees.
      CHAPTER 2.  ADMINISTRATION


   12699.202.  (a) The board shall be responsible for establishing
Cal-CHIPP and administering this part.
   (b) The board may do all of the following consistent with the
standards of this part:
   (1) Determine eligibility and enrollment criteria and processes
for Cal-CHIPP consistent with the eligibility standards in Chapter 3
(commencing with Section 12699.211).
   (2) Determine the participation requirements for enrollees.
   (3) Determine the participation requirements and the standards and
selection criteria for participating health, dental, and vision care
plans, including reasonable limits on a plan's administrative costs
to ensure that a plan expends on patient care not less than 85
percent of aggregate dues, fees, and other periodic payments received
by the plan.
   (4) Determine when an enrollee's coverage commences and the extent
and scope of coverage.
   (5) Determine premium schedules, collect the premiums, and
administer subsidies to eligible enrollees.
   (6) Determine rates paid to participating health, dental, and
vision care plans.
   (7) Provide, or make available, coverage through participating
health plans in Cal-CHIPP.
   (8) Provide, or make available, coverage through participating
dental and vision care plans in Cal-CHIPP.
   (9) Provide for the processing of applications and the enrollment
of enrollees.
   (10) Determine and approve the benefit designs and copayments for
participating health, dental, and vision care plans.
   (11) Enter into contracts.
   (12) Sue and be sued.
   (13) Employ necessary staff.
   (14) Authorize expenditures, as necessary, from the fund to pay
program expenses that exceed enrollee contributions and to administer
Cal-CHIPP.
   (15) Issue rules and regulations, as necessary.
   (16) Maintain enrollment and expenditures to ensure that
expenditures do not exceed the amount of revenue available in the
fund, and if sufficient revenue is not available to pay the estimated
expenditures, the board shall institute appropriate measures to
ensure fiscal solvency. This paragraph shall not be construed to
allow the board to deny enrollment of a person who otherwise meets
the eligibility requirements of Chapter 3 (commencing with Section
12699.211) in order to ensure the fiscal solvency of the fund.
   (17) Establish the criteria and procedures through which employers
direct employees' premium dollars, withheld under the terms of
cafeteria plans pursuant to Section 4809 of the Unemployment
Insurance Code, to Cal-CHIPP to be credited against the employees'
premium obligations.
   (18) Share information obtained pursuant to this part with the
Employment Development Department solely for the purpose of the
administration and enforcement of this part.
   (19) Exercise all powers reasonably necessary to carry out the
powers and responsibilities expressly granted or imposed by this
part.
   12699.203.  The board shall develop and offer a variety of benefit
plan designs, including low-cost plans for Cal-CHIPP enrollees who
are adults with family incomes below 300 percent of the federal
poverty level who are ineligible for coverage through the Healthy
Families Program or the Medi-Cal program. In addition to these
benefit plan designs, each participating health plan and health
insurer shall offer a Cal-CHIPP Healthy Families plan and a Cal-CHIPP
Medi-Cal plan, and the board shall limit enrollment in these plans
only to eligible individuals. For purposes of the Cal-CHIPP Medi-Cal
plan, the board shall enter into an agreement with the State
Department of Health Care Services for the provision of the Cal-CHIPP
Medi-Cal plan by the Medi-Cal program. The benefit plan designs
shall include varying benefit levels, deductibles, coinsurance
factors, or copayments, and annual limits on out-of-pocket expenses.
In developing the benefit plan designs, the board shall comply with
all of the following:
   (a) The board shall take into consideration the levels of health
care coverage provided in the state and medical economic factors as
may be deemed appropriate. The board shall include coverage and
design elements that are reflective of and commensurate with health
insurance coverage provided through a representative number of large
insured employers in the state.
   (b) All benefit plan designs shall meet the requirements of 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) and shall include prescription drug benefits, combined with
enrollee cost-sharing levels that promote prevention and health
maintenance, including appropriate cost sharing for physician office
visits, diagnostic laboratory services, and maintenance medications
to manage chronic diseases, such as asthma, diabetes, and heart
disease.
   (c) In determining the enrollee and dependent deductibles,
coinsurance, and copayment requirements, the board shall consider
whether those costs would deter an enrollee or his or her dependents
from obtaining appropriate and timely care, including those enrollees
with a low- or moderate-family income. The board shall also consider
the impact of these costs on an enrollee's ability to afford health
care services.
   (d) The board shall consult with the Insurance Commissioner, the
Director of the Department of Managed Health Care, and the Director
of the Department of Health Care Services.
   12699.204.  (a) The board may adjust premiums at a public meeting
of the board after providing, at minimum, 30 days' public notice of
the adjustment. In making the adjustment, the board shall take into
account the costs of health care typically paid for by employers and
employees in California.
   (b) Notwithstanding subdivision (a), the amount of the premium
paid by an employee with a household income at or below 300 percent
of the federal poverty level shall not exceed 0 to 5 percent of the
household income, depending on the income, after taking into account
the tax savings the employee is able to realize by using the
cafeteria plan made available by his or her employer pursuant to
Section 4809 of the Unemployment Insurance Code.
   (c) An employer may pay all, or a portion of, the premium payment
required of its employees enrolled in Cal-CHIPP.
   (d) Employees and dependents receiving coverage through the
Medi-Cal program or the Healthy Families Program pursuant to this
part shall make premium payments, if any, as determined by the board,
and pay other cost sharing amounts that do not exceed premium
payments and cost sharing levels for enrollment in those programs
required under the applicable state laws governing those programs.
The board shall consider using the process in effect on January 1,
2008, for determining eligibility for the Medi-Cal program including
the eligibility determination made by the counties.
   12699.205.  The board, in its contract with a participating health
plan, shall require that the plan utilize efficient practices to
improve and control costs. These practices shall include, but are not
limited to, the following:
   (a) Preventive care.
   (b) Care management for chronic diseases.
   (c) Promotion of health information technology.
   (d) Standardized billing practices.
   (e) Reduction of medical errors.
   (f) Incentives for healthy lifestyles.
   (g) Patient cost-sharing to encourage the use of preventive and
appropriate care.
   (h) Rational use of new technology.
   12699.206.  (a) The board shall negotiate with Medi-Cal managed
care plans to obtain affordable coverage for eligible enrollees.
   (b) The board shall implement the requirements for a Cal-CHIPP
Medi-Cal plan or a Cal-CHIPP Healthy Families plan as required
pursuant to Section 1357.24 of the Health and Safety Code and Section
10764, and shall limit enrollment in these plans only to eligible
individuals.
   (c) The board, in consultation with the State Department of Health
Care Services, shall take all reasonable steps necessary to maximize
federal funding and support federal claiming in the administration
of the purchasing pool created pursuant to this part.
   12699.206.1.  (a) To provide prescription drug coverage for
Cal-CHIPP enrollees, the board may take any of the following actions:

   (1) Contract directly with health care service plans or health
insurers for prescription drug coverage as a component of a health
care service plan contract or a health insurance policy.
   (2) Contract with a pharmacy benefits manager (PBM) if the PBM
meets transparency and disclosure requirements established by the
board.
   (3) Procure products directly through the prescription drug
purchasing program established pursuant to Chapter 12 (commencing
with Section 14977) of Part 5.5 of Division 3 of Title 2 of the
Government Code.
   (b) The board may engage in any of the activities described in
subdivision (a), or in any cost-effective combination of those
activities.
   (c) If the board enters into a prescription drug purchasing
arrangement pursuant to paragraph (2) or (3) of subdivision (a), the
board may allow any of the following entities to participate in that
arrangement:
   (1) Any state, district, county, city, municipal, or other public
agency or governmental entity.
   (2) A board or administrator responsible for providing or
delivering health care coverage pursuant to a collective bargaining
agreement, memorandum of understanding, or other similar agreement
with a labor organization.
   12699.206.2.  (a) All information, whether written or oral,
concerning an applicant to Cal-CHIPP, an enrollee in Cal-CHIPP, or a
household member of the applicant or enrollee, created or maintained
by a public officer or agency in connection with the administration
of this part shall be confidential and shall not be open to
examination other than for purposes directly connected with the
administration of this part. "Purposes directly connected with the
administration of this part" includes all activities and
responsibilities in which the board or the State Department of Health
Care Services and their agents, officers, trustees, employees,
consultants, and contractors engage to conduct program operations.
   (b) Information subject to the provisions of this section
includes, but is not limited to, names and addresses, medical
services provided to an enrollee, social and economic conditions or
circumstances, agency evaluation of personal information, and medical
data, such as diagnosis and health history.
   (c) Nothing in this section shall be construed to prohibit the
disclosure of information about applicants and enrollees, or their
household members, if express written authorization for the
disclosure has been provided by the person to whom the information
pertains or, if that person is a minor, authorization has been
provided by the minor's parent or other adult with legal custody of
the minor.
   (d) Nothing in this part shall prohibit the disclosure of
protected health information as provided in Section 164.152 of Title
45 of the Code of Federal Regulations.
   12699.207.  (a) Notwithstanding any other provision of law, the
board shall not be subject to licensure or regulation by the
Department of Insurance or the Department of Managed Health Care.
   (b) Participating health, dental, and vision care plans that
contract with the board shall be regulated by either the Insurance
Commissioner or the Department of Managed Health Care and shall be
licensed and in good standing with their respective licensing agency.
In their application to Cal-CHIPP and upon request by the board, the
participating health, dental, and vision care plans shall provide
assurance of their licensure and standing with the appropriate
licensing agency.
   12699.208.  The board shall collect and disseminate, as
appropriate and to the extent possible, information on the quality of
participating health, dental, and vision care plans and each plan's
cost-effectiveness to assist enrollees in selecting a plan.
   12699.209.  The board shall establish a working group for the
purpose of developing recommendations to broaden access to Cal-CHIPP
to all self-employed individuals and submit the recommendations to
the Legislature on or before January 1, 2009.
   12699.210.  The provisions of Section 12693.54 shall apply to a
contract entered into pursuant to this part.
      CHAPTER 3.  ELIGIBILITY


   12699.211.  (a) To be eligible to enroll in Cal-CHIPP, an
individual shall meet all of the following requirements:
   (1) Is a resident of the state pursuant to Section 244 of the
Government Code or is physically present in the state, having entered
the state with an employment commitment or to obtain employment,
whether or not employed at the time of application to Cal-CHIPP or
after enrollment in Cal-CHIPP.
   (2) Is an employee or a dependent of an employee of an employer
who elected to pay into the California Health Trust Fund in lieu of
making health expenditures pursuant to Section 4802.1 of the
Unemployment Insurance Code. To the extent an employer elects to pay
into the California Health Trust Fund only for either the employer's
part-time or full-time employees, only employees and dependents in
the category of employees for which the employer has elected to pay
shall be eligible to enroll in Cal-CHIPP.
   (b) Notwithstanding paragraph (2) of subdivision (a), eligible
employees and, if applicable, dependents of eligible employees,
eligible for coverage through a Cal-CHIPP Medi-Cal plan or Cal-CHIPP
Healthy Families plan pursuant to paragraph (2) of subdivision (b)
and paragraph (2) of subdivision (c) of Section 1357.24 of the Health
and Safety Code or paragraph (2) of subdivision (b) and paragraph
(2) of subdivision (c) of Section 10764 are eligible for Cal-CHIPP.
These employees and, if applicable, their dependents shall be limited
to the choice of a Cal-CHIPP Medi-Cal plan or a Cal-CHIPP Healthy
Families plan and shall not have access to other benefit plan options
available to Cal-CHIPP enrollees pursuant to Section 12699.203.
   12699.211.01.  (a) The failure of an employer to continue to pay
the fee required by Section 4802.1 of the Unemployment Insurance Code
shall not make an enrollee employed by that employer and the
employee's dependents, if any, ineligible for participation in
Cal-CHIPP until the last day of the second month following the month
in which the employer failed to make the fee payment.
   (b) If an employer fails to make the fee payment by the 15th day
of each month, the board shall notify the employer and its employees
enrolled in Cal-CHIPP of the following information within 15 days of
the employer's failure to make the required fee payment:
   (1) The employer's failure to pay the fee by the 15th day of the
month.
   (2) The coverage of the employee and his or her dependents, if
any, will terminate on the last day of the second month following the
month in which the employer failed to make the fee payment, and the
employee and his or her dependents, if any, shall be ineligible for
Cal-CHIPP.
   (3) Their rights and remedies under law.
   (c) The board may, through regulations adopted pursuant to Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code, allow an employee and his or her
dependents, if any, whose employer failed to pay the fee required by
Section 4802.1 of the Unemployment Insurance Code, to continue
coverage for up to 36 months from the date of ineligibility described
in subdivision (b) if the employee pays the entire cost for the
coverage. Subject to the availability of funds, the board may, upon
appropriation by the Legislature, use revenue in the penalty account
in the fund to subsidize the cost of coverage under this subdivision.

      CHAPTER 4.  FISCAL


   12699.212.  (a) The California Health Trust Fund is hereby created
in the State Treasury. Notwithstanding Section 13340 of the
Government Code, the moneys in the fund shall be continuously
appropriated to the board, without regard to fiscal year, for the
purposes of providing health care coverage pursuant to this part. Any
moneys in the fund that are unexpended or unencumbered at the end of
a fiscal year, may be carried forward to the next succeeding fiscal
year.
   (b) The board shall establish a prudent reserve in the fund.
   (c) Notwithstanding Section 16305.7 of the Government Code, all
interest earned on the moneys that have been deposited into the fund
shall be retained in the fund.
   12699.213.  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.
   12699.214.  The board shall authorize, for the purposes of this
part, the expenditure from the fund of any state or federal revenue
or other revenue received from any source.
   12699.215.  The board may solicit and accept gifts, contributions,
and grants from any source, public or private, to administer the
program and shall deposit all revenue from those sources into the
fund.
   12699.216.  The board, subject to federal approval pursuant to
Section 14199.10 of the Welfare and Institutions Code, shall pay the
nonfederal share of cost from the fund for employees and dependents
eligible under that federal approval.
   12699.217.  This part shall become operative on January 1, 2009.
The board shall provide health coverage pursuant to this part on and
after January 1, 2010.
  SEC. 26.  Section 12711.1 is added to the Insurance Code, to read:
   12711.1.  (a) The board shall establish a list of serious health
conditions or diagnoses making an applicant automatically eligible
for the program based on the standardized health questionnaire
developed pursuant to subdivision (b). In developing the list of
conditions, the board shall consult with the Director of the
Department of Managed Health Care and the commissioner to identify
common health plan and insurer underwriting criteria.
   (b) The board shall develop a standardized health questionnaire to
be used by all health plans and insurers that offer and sell
individual coverage. The questionnaire shall provide for an objective
evaluation of a person's health status by assigning a discrete
measure, such as a system of point scoring, to each person. The
questionnaire shall be designed to identify the 3 to 5 percent of
persons who are the most expensive to treat if covered under an
individual health care service plan or an individual health insurance
policy, and the board shall obtain from an actuary a certification
that the standard health questionnaire meets this requirement. The
questionnaire shall be designed to collect only that information
necessary to identify if a person is eligible for coverage in the
program pursuant to subdivision (a). Consistent with Section 1357.21
of the Health and Safety Code and Section 10761, health plans and
insurers shall not deny coverage for any individual except for those
who qualify for automatic eligibility for the program as determined
by the board pursuant to this section.
   (c) This section shall become operative on July 1, 2008.
  SEC. 27.  Section 131.1 is added to the Unemployment Insurance
Code, to read:
   131.1.  "Contributions" also means the money payments to the
California Health Trust Fund that are required by Division 1.2
(commencing with Section 4800).
  SEC. 28.  Section 144 of the Unemployment Insurance Code is amended
to read:
   144.  "Worker contributions," "contributions by workers,"
"employee contributions," or "contributions by employees" mean
contributions to the Disability Fund or to the California Health
Trust Fund.
  SEC. 28.5.  Section 683.5 is added to the Unemployment Insurance
Code, to read:
   683.5.  (a) Commencing January 1, 2010, for the purposes of
Division 1.2 (commencing with Section 4800),"employer" means the
employer of record established by each county pursuant to Section
12302.25 of the Welfare and Institutions Code.
                     (b) Notwithstanding any other provision of law,
recipients of in-home supportive services under Article 7 (commencing
with Section 12300) of Chapter 3 of Part 3 of Division 9 of the
Welfare and Institutions Code shall not be the employer for the
purposes of Division 1.2 (commencing with Section 4800).
  SEC. 29.  Section 1095.1 is added to the Unemployment Insurance
Code, to read:
   1095.1.  The director shall permit the use of any information in
his or her possession to the extent necessary to provide information
obtained in the administration and enforcement of the California
Health Insurance Purchasing Pool Program (Division 1.2 (commencing
with Section 4800)) to the Managed Risk Medical Insurance Board for
the purpose of administering the California Health Care Reform and
Cost Control Act, and may require reimbursement for all direct costs
incurred in providing any and all information specified in this
section.
  SEC. 30.  Division 1.2 (commencing with Section 4800) is added to
the Unemployment Insurance Code, to read:

      DIVISION 1.2.  California Health Insurance Purchasing Pool
Program


      CHAPTER 1.  ADMINISTRATION AND GENERAL PROVISIONS


   4800.  The Employment Development Department shall administer and
enforce this division. The department, in conjunction with other
state entities, shall establish a process to resolve complaints
regarding the administration of this division, including a toll-free
telephone hotline number and an Internet Web site for employers,
employees, and their dependents to access information and file
complaints.
   4800.01.  The following provisions of this code shall apply to any
amount required to be reported and paid under this division:
   (a) Sections 301, 305, 306, 310, 311, 317, and 318, relating to
general administrative powers of the department.
   (b) Sections 403 to 413, inclusive, Section 1336, and Chapter 8
(commencing with Section 1951) of Part 1 of Division 1, relating to
appeals and hearing procedures.
   (c) Article 7 (commencing with Section 1110) of Chapter 4 of Part
1 of Division 1 relating to making of returns or payment of reported
contributions.
   (d) Article 8 (commencing with Section 1126) of Chapter 4 of Part
1 of Division 1, relating to assessments.
   (e) Article 9 (commencing with Section 1176), except Section 1176,
of Chapter 4 of Part 1 of Division 1, relating to refunds and
overpayments.
   (f) Article 10 (commencing with Section 1206) of Chapter 4 of Part
1 of Division 1, relating to notice.
   (g) Article 11 (commencing with Section 1221) of Chapter 4 of Part
1 of Division 1, relating to administrative appellate review.
   (h) Article 12 (commencing with Section 1241) of Chapter 4 of Part
1 of Division 1, relating to judicial review.
   (i) Chapter 7 (commencing with Section 1701) of Part 1 of Division
1, relating to collections.
   (j) Chapter 10 (commencing with Section 2101) of Part 1 of
Division 1, relating to violations.
   4800.02.  For the purposes of this division, the following
definitions apply:
   (a) "Board" means the Managed Risk Medical Insurance Board.
   (b) "California Cooperative Health Insurance Purchasing Program"
or "Cal-CHIPP" shall have the same meaning as in Section 12699.201 of
the Insurance Code.
   (c) "Department" means the Employment Development Department.
   (d) "Dependent" means any of the following persons:
   (1) The spouse or registered domestic partner of an employee.
   (2) (A) An unmarried child under 23 years of age who is the
natural child of the employee or an adopted child or a stepchild of
the employee, as described in subparagraph (B), and who meets either
of the following criteria:
   (i) Lives with the employee.
   (ii) Is economically dependent upon the employee.
   (B) (i) A child shall be considered to be adopted from the date on
which the adoptive child's birth parents, or other appropriate legal
authority, sign a written document, including, but not limited to, a
health facility minor release report, a medical authorization form,
or a relinquishment form, granting the employee, or the spouse of the
employee, the right to control health care for the adoptive child
or, absent this written document, on the date evidence exists of the
right of the employee, or the spouse of the employee, to control the
health care of the child placed for adoption.
   (ii) A child shall be considered a stepchild upon the employee's
marriage to the natural or adopted stepchild's parent.
   (3) An unmarried child 23 years of age or older who is an adopted
child or stepchild, as described in subparagraph (B) of paragraph
(2), of the enrollee or a natural child of the enrollee and who at
the time of attaining 23 years of age was incapable of self-support
because of a physical or mental disability that existed continuously
from a date prior to the child's attainment of 23 years of age.
   (e) "Director" means the Director of Employment Development.
   (f) "Employee" has the same meaning as set forth in Article 1.5
(commencing with Section 621).
   (g) "Employer" has the same meaning as set forth in Article 3
(commencing with Section 675) of Chapter 3 of Part 1 of Division 1.
   (h) (1) "Employer fee" means the payment required of an employer
electing to pay an equivalent amount into the fund pursuant to
subdivision (a) of Section 4802.1.
   (2) For purposes of Part 1 (commencing with Section 100) of
Division 1 and Division 6, "employer fee" also means "employer
contributions" or "contributions."
   (i) "Employing unit" has the same meaning as set forth in Section
135.
   (j) "Employment" has the same meaning as set forth in Article 1
(commencing with Section 601) of Chapter 3 of Part 1 of Division 1.
Employment does not include services provided pursuant to Sections
629 to 657, inclusive.
   (k) "Fund" means the California Health Trust Fund established
pursuant to Section 12699.212 of the Insurance Code.
   (l) (1) "Health expenditures" means any amount paid by an employer
subject to this division to, or on behalf of, its employees and
their dependents, if applicable, to provide health care or
health-related services or to reimburse the costs of those services,
including, but not limited to, any of the following:
   (A) Contributions to a health savings account as defined by
Section 223 of the Internal Revenue Code or any other account having
substantially the same purpose or effect.
   (B) Reimbursement by the employer to its employees, and their
dependents, if applicable, for incurred health care expenses, if
those recipients have no entitlement to that reimbursement under any
plan, fund, or program maintained by the employer. As used in this
subparagraph, "health care expenses" includes, but is not limited to,
an expense for which payment is deductible from personal income
under Section 213(d) of the Internal Revenue Code.
   (C) Programs to assist employees to attain and maintain healthy
lifestyles, including, but not limited to, onsite wellness programs,
reimbursement for attending offsite wellness programs, onsite health
fairs and clinics, and financial incentives for participating in
health screenings and other wellness activities.
   (D) Disease management programs.
   (E) Pharmacy benefit management programs.
   (F) Care rendered to employees and their dependents by health care
providers employed by or under contract to employers, such as
employer-sponsored primary care clinics.
   (G) Contributions made pursuant to Section 302(c)(5) of the Labor
Management Relations Act, under a collective bargaining agreement.
   (H) Purchasing health care coverage from a health care service
plan or a health insurer.
   (2) "Health expenditures" does not include a payment made directly
or indirectly for workers' compensation, Medicare benefits, or any
other health benefit cost or taxes, penalties, or assessment that the
employer is required to pay by state or federal law, other than as
required by Section 4802.1. "Health expenditures" does not include
penalties imposed pursuant to this division.
   (m) "Public program" means publicly funded health care coverage
that is defined as creditable coverage in paragraphs (2) to (10),
inclusive, of subdivision (g) of Section 1357 of the Health and
Safety Code.
   (n) "Wages" means all remuneration, as defined in Section 13009.5.
Wages paid to an employee that are in excess of the applicable
contribution and benefit base, as determined under Section 230 of the
Social Security Act (42 U.S.C. Sec. 430), for the calendar year
shall be excluded for the purposes of Section 4802.1.
   (o) The definitions set forth in Sections 126, 127, 129, 133, and
134 shall apply to this division.
   4800.03.  The board shall annually publish information describing
health plan choices in Cal-CHIPP for the department to disseminate to
all employers making employer fee payments to the fund. The employer
shall provide this information to all of its employees.
   4800.04.  The director shall provide to each employer a notice
pursuant to Section 1089 and the employer shall post and distribute
it in accordance with Section 1089 to inform employees and their
dependents of the requirements of this division.
   4800.05.  The department shall provide information obtained in the
administration and enforcement of this division to the board for the
purpose of administering Cal-CHIPP.
   4800.06.  The department shall adopt rules and regulations to
implement the provisions of this division.
   4800.07.  An employer shall file all forms required by this
division by electronic means and shall remit all moneys owed pursuant
to this division by electronic funds transfer. If an employer
demonstrates to the director's satisfaction that undue hardship would
be imposed on it by this section, the director may authorize an
exemption from this requirement. The director may assess a penalty of
twenty-five dollars ($25) for each remittance that is not filed
electronically.
      CHAPTER 2.  EMPLOYER ELECTION


   4802.1.  (a) (1) Each employer shall elect to take one of the
following actions:
   (A) Make health expenditures as provided in subparagraph (A) of
paragraph (3) for its full-time employees, and, if applicable, their
dependents.
   (B) Pay an equivalent amount into the fund.
   (2) Each employer also shall elect to take one of the following
actions:
   (A) Make health expenditures as provided in subparagraph (B) of
paragraph (3) for its part-time employees, and, if applicable, their
dependents.
   (B) Pay an equivalent amount into the fund.
   (3) (A) An employer's cumulative amount of health expenditures for
the employer's full-time employees working 120 or more hours per
month shall be equivalent, at a minimum, to 7.5 percent of wages paid
by the employer to its full-time employees. In computing this
amount, wages paid to an employee that are in excess of the
applicable contribution and benefit base, as determined under Section
230 of the Social Security Act (42 U.S.C. Sec. 430), for the
calendar year shall be excluded.
   (B) An employer's cumulative amount of health expenditures for the
employer's part-time employees working less than 120 hours per month
shall be equivalent, at a minimum, to 7.5 percent of wages paid by
the employer to its part-time employees. In computing this amount,
wages paid to an employee that are in excess of the applicable
contribution and benefit base, as determined under Section 230 of the
Social Security Act (42 U.S.C. Sec. 430), for the calendar year
shall be excluded.
   (b) (1) The amount payable to the fund by an employer electing to
pay shall be deposited into the fund.
   (2) The department, in consultation with the board, shall ensure
that the employer fees paid pursuant to this section are deposited in
the fund and are available to ensure the timely enrollment of
eligible employees and their dependents, if any, in Cal-CHIPP.
   (c) Notwithstanding subparagraphs (A) and (B) of paragraph (3) of
subdivision (a), the board may adjust the health expenditure amounts
required by those subparagraphs. The adjustments shall be made by the
board at a public meeting of the board. On or before October 31 of
each year, the board shall prepare a statement, which shall be a
public record, setting forth the adjustments for the next calendar
year and shall promptly notify the department of those adjustments.
   4802.2.  (a) If an employer is required by a collective bargaining
agreement to make health expenditures on behalf of bargaining unit
employees pursuant to Section 302(c)(5) of the Labor Management
Relations Act that, in the aggregate, equal or exceed the percentage
of wages set forth in paragraph (3) of subdivision (a) of Section
4802.1 for those bargaining unit employees, the employer shall be
deemed to have satisfied the requirements of subdivision (a) of
Section 4802.1 with respect to those bargaining unit employees.
   (b) For purposes of the health expenditures requirement in
subdivision (a) of Section 4802.1, the department shall not accept
any employer fees made to the fund by an employer on behalf of
bargaining unit employees represented by a labor organization for
purposes of collective bargaining if notified by the labor
organization that the expenditures were made without express written
mutual agreement of the employer and the applicable labor
organization.
   (c) An employer with employees represented by a labor organization
for purposes of collective bargaining shall participate in the
elections required by subdivision (a) of Section 4802.1 separately
for each bargaining unit unless otherwise provided for in the
collective bargaining agreement.
   (d) For all nonbargaining unit employees, the employer shall
participate in the elections as set forth in subdivision (a) of
Section 4802.1.
   4802.3.  (a) An employee of an employer that elects, pursuant to
Section 4802.1, to pay an employer fee in lieu of making health
expenditures shall be required to enroll in Cal-CHIPP to receive
coverage under Cal-CHIPP. To the extent an employer elects, pursuant
to Section 4802.1, to pay an employer fee only for either the
employer's part-time or full-time employees, only employees and
dependents in the category of employees for which the employer has
elected to pay shall be required to enroll in Cal-CHIPP.
   (b) (1) Notwithstanding subdivision (a), an employee is exempt
from enrolling in Cal-CHIPP if the employee is able to demonstrate
that he or she is covered by individual coverage that is in force on
the effective date of this section, a public program, or other group
health care coverage. An employee who is exempt under this
subdivision from enrolling in Cal-CHIPP may choose to enroll in that
program, however.
   (2) Notwithstanding subdivision (a), an employee is exempt from
enrolling in Cal-CHIPP if the cost of coverage through Cal-CHIPP
exceeds 5 percent of wages paid by the electing employer for coverage
with a maximum out-of-pocket cost of one thousand five hundred
dollars ($1,500).
   (c) (1) An employee of an employer that elects, pursuant to
Section 4802.1, to make health expenditures shall accept the health
expenditures made by the employer. However, for any employee earning
wages equivalent to 300 percent of the federal poverty level or less,
if accepting an employer's health expenditures would result in
annual health expenditures by that employee in excess of 5 percent of
his or her wages paid by the electing employer, that employee shall
be exempt from the requirement to accept health expenditures made by
his or her employer. For an employee earning wages equivalent to more
than 300 percent of the federal poverty level, if accepting an
employer's health expenditures would result in annual health
expenditures by that employee in excess of 5 percent of his or her
wages paid by the electing employer, the employee shall be exempt
from the requirement to accept health expenditures made by his or her
employer.
   (2) An employee that shows evidence of other group health care
coverage or is covered by individual coverage that is in force on the
effective date of this section shall not be required to accept
health expenditures made by his or her employer.
   4803.  (a) Each employer, prior to July 1, 2009, shall make an
election pursuant to subdivision (a) of Section 4802.1 for its
full-time employees and its part-time employees and notify the
department of its election. An employer that fails to make an
election by August 1, 2009, shall, within 30 days of that date be
deemed to be an employer electing to pay an employer fee into the
fund, unless the employer is able to demonstrate to the satisfaction
of the department good cause for failure to make the election and
that it is making health expenditures as described in Section 4802.1.

   (b) After January 1, 2010, each employer shall notify the
department on or before September 15 of each year of its election
pursuant to subdivision (a) of Section 4802.1 for the subsequent
calendar year, if different from the current year, on a form and in a
format required by the department.
   (c) A new employer, on and after July 1, 2009, within 30 days of
paying total wages of one hundred dollars ($100) or more, shall make
an election pursuant to subdivision (a) of Section 4802.1 for its
full-time employees and its part-time employees. For purposes of this
subdivision, "new employer" shall have the same meaning as set forth
in Section 675. A new employer that fails to make an election shall,
within 30 days of the date of paying total wages of one hundred
dollars ($100) or more, be deemed to be an employer electing to pay
an employer fee into the fund, unless the new employer is able to
demonstrate to the satisfaction of the department good cause for
failure to make the election and that it is making health
expenditures as described in Section 4802.1.
   4804.  (a) On and after October 1, 2009, an employer electing to
pay an employer fee into the fund pursuant to subdivision (a) of
Section 4802.1 shall complete all of the following actions:
   (1) File a monthly return with the department by the 15th day of
each month based on wages paid in the prior month. If an employer
paid no wages, the employer shall file a no payroll return with the
department.
   (2) File with the department an annual return by January 31 of
each year on wages paid that month and in the prior calendar year.
   (3) Remit the employer fee required by Section 4802.1 to the
department by the 15th day of each month based on wages paid in the
prior month.
   (4) Notify all employees annually through a written notice to each
employee of the requirement in Section 4802.3 to enroll in Cal-CHIPP
and advise employees of the exemption from that requirement under
that section.
   (5) Notify employees annually, through a written notice to each
employee, of the right to apply to the board to determine eligibility
for a subsidy under Cal-CHIPP.
   (6) Comply with the requirements of Section 4807.
   (b) An employer shall use the format developed by the department
for making the returns required by paragraphs (1) and (2) of
subdivision (a) and the remittance of the employer fee required by
paragraph (3) of subdivision (a).
   4805.  An employer that elects to pay an employer fee into the
fund pursuant to subdivision (a) of Section 4802.1 shall not change
that election for, at minimum, 24 months from the date of its first
payment into the fund.
   4806.  (a) On and after October 1, 2009, an employer electing to
make health expenditures pursuant to subdivision (a) of Section
4802.1 shall complete the following actions:
   (1) File a quarterly return with the department on April 15, July
15, October 15, and January 15 of each year, reporting its wages and
health expenditures for the prior quarter.
   (2) File an annual return with the department by January 31 of
each year reporting wages and health expenditures paid in the prior
calendar year.
   (3) Notify all employees annually through a written notice to each
employee that employees with a family income at or below 300 percent
of the federal poverty level are eligible to apply for the Medi-Cal
program or the Healthy Families Program, including instructions on
the application process for those programs.
   (4) Comply with the requirements of subdivisions (a) and (b) of
Section 4807.
   (b) An employer shall use the format developed by the department
to make the returns required by paragraphs (1) and (2) of subdivision
(a).
   4807.  (a) An employer shall notify its employees of its election
pursuant to subdivision (a) of Section 4802.1 to make health
expenditures or to pay an employer fee into the fund within five
business days of making the election and shall notify an employee
hired after the date of that notification within five days of the
employee's date of hire.
   (b) The employer shall notify its employees within five business
days of the date it makes a change to its election decision.
   (c) (1) An employer electing pursuant to subdivision (a) of
Section 4802.1 to pay an employer fee shall within five business days
of making that election notify its employees of the following:
   (A) The employee's requirement to enroll in Cal-CHIPP pursuant to
Section 4802.3 and the exemption from enrollment in that section.
   (B) The employee's right to apply for a subsidy under Cal-CHIPP.
   (2) The employer shall provide the notice required by this
subdivision to an employee hired after the timeframe described in
paragraph (1), within five business days of the employee's date of
hire.
      CHAPTER 3.  CAFETERIA PLAN


   4809.  (a) Unless provided otherwise by state or federal law, each
employer in this state during a calendar year shall adopt and retain
a cafeteria plan, within the meaning of Section 125 of the Internal
Revenue Code, to allow employees to pay premiums for health care
coverage, to the extent those payments are excludable from the gross
income of the employee under Section 106 of the Internal Revenue
Code.
   (b) An employer that fails to adopt and retain a cafeteria plan is
subject to a penalty of one hundred dollars ($100) for each of its
employees during the calendar year unless the employer establishes,
to the department's satisfaction, good cause for the failure to adopt
and retain the plan. An employer who willfully fails to adopt and
retain a cafeteria plan is subject to a penalty of five hundred
dollars ($500) for each of its employees during the calendar year.
      CHAPTER 4.  ENFORCEMENT


   4811.  (a) An employer that without good cause, as determined by
the department, fails to complete any of the following actions shall
be subject to assessment of a penalty as described in subdivision
(b):
   (1) Notify the department of its election pursuant to Section
4803.
   (2) File returns required by Sections 4804 and 4806.
   (3) Provide notices to its employees as required by Sections 4804,
4806, and 4807.
   (b) The amount of the penalty for a first violation shall be
twenty-five dollars ($25) for each of the employer's employees at the
time of the violation. The amount of the penalty for a second
violation shall be fifty dollars ($50) for each of the employer's
employees at the time of the violation. The amount of the penalty for
all subsequent violations shall be one hundred dollars ($100) for
each of the employer's employees at the time of the violation.
   (c) The amount of the penalty described in subdivision (b) shall
be increased by 10 percent if the employer without good cause, as
determined by the department, fails to complete any of the actions
described in subdivision (a) within 60 days of the date it is
required to be completed.
   (d) (1) An employer that, without good cause, as determined by the
department, fails to make any payments required of it or of its
employees within the time required by this division, shall be
assessed a penalty equaling 10 percent of the amount of the payment
it failed to make or equaling 10 percent of the unpaid payment
amount, if the employer failed to make the payment in its entirety.
   (2) The amount of the penalty described in paragraph (1) shall be
increased by 10 percent if the employer without good cause, as
determined by the department, fails to make the payment required by
this division within 60 days of the date the employer is required to
make the payment.
   (e) An employer that fails to file the annual return required by
Sections 4804 and 4806 within 30 days of the date the employer was
notified of its failure to file the return shall, in addition to any
other penalties imposed by this code, be assessed an additional
penalty of up to one hundred dollars ($100) for each of its employees
at the time the return was due, unless the employer demonstrates, to
the department's satisfaction, good cause for its failure to file
the return.
   4812.  If the director determines a return made by an employer
inaccurately reports the amount of health expenditures or the amount
of its employer fee payment required pursuant to Section 4802.1, he
or she shall assess a penalty. The penalty amount shall be determined
by the director based on the facts contained in the return or on his
or her estimate of the correct amount of health expenditures or
employer fees based on any information in his or her possession or
that may come into his or her possession. If any part of the
deficiency in the health expenditures or employer fee amount is due
to negligence or intentional disregard of this division or the
regulations adopted pursuant to it, the penalty shall be increased by
an amount equaling 10 percent of the amount of the deficiency in the
amount of the health expenditures or employer fees.
   4813.  If the employer's failure to file a return or to make a
payment within the time required by this division, and the
regulations adopted pursuant to it, is due to fraud or to an intent
to evade the provisions of this division, or of the regulations
adopted pursuant to it, a penalty equaling 50 percent of the amount
of the payment or of the health expenditures the employer was
required to make shall be assessed against the employer.
   4814.  (a) An employer that elects to pay the employer fee and
fails to withhold premium payment amounts authorized by an employee
pursuant to Section 12699.203 of the Insurance Code and Section 4809
of this code is subject to a penalty equaling 200 percent of the
amount the employer failed to withhold.
   (b) An employer that fails to remit premium payment amounts it
withheld as authorized by an employee is subject to a penalty
equaling 200 percent of the amount the employer failed to remit.
   (c) In addition to the penalties set forth in subdivisions (a) and
(b), the employer shall reimburse the employee for any health care
expenses incurred by the employee and his or her dependents because
of a                                          lapse or cancellation
of health care coverage resulting from the employer's failure to
withhold or remit the employee's premium payment amounts.
   4815.  (a) An employer electing to make health expenditures
pursuant to Section 4802.1 that fails to make expenditures in the
amount required by that section shall be subject to a penalty in an
amount equaling 10 percent of the balance between the amount required
by Section 4802.1 and the amount of the health expenditures made by
the employer and shall be subject to a penalty in an amount equaling
20 percent of that balance amount if the amount of health
expenditures made by the employer is less than 80 percent of the
amount required by Section 4802.1.
   (b) If the employer fails to pay the penalty assessed pursuant to
subdivision (a) within 60 days of its assessment date, an additional
penalty shall be assessed against the employer in an amount equaling
10 percent of the penalty assessed under subdivision (a).
   (c) Notwithstanding subdivisions (a) and (b), an employer that
demonstrates good cause, as determined by the department, for its
failure to make the health expenditures amount required by Section
4802.1 is not subject to a penalty under this section.
   (d) Penalties shall be assessed under this section pursuant to an
annual reconciliation and review process by the department.
   4817.  It shall be unlawful for an employer to take any of the
following actions if a purpose for the action is to avoid the
requirements of this division:
   (a) Designate an employee as a temporary employee.
   (b) Reduce the number of hours of work of an employee.
   (c) Terminate and rehire an employee.
   4818.  It is unlawful for a person to take any of the following
actions.
   (a) Willfully misclassify an employee as an independent contractor
which misclassification results in avoiding the requirements of this
division.
   (b) Procure, counsel, advise, or coerce another to willfully make
a false statement or representation or to knowingly fail to disclose
a material fact in order to avoid the requirements of this division.
   4819.  An employer that takes any of the actions described in
Section 4818 shall, in addition to any other fees or penalties
imposed pursuant to this code, pay a penalty equaling 50 percent of
the amount of all employer fees that would be required by this
division if the employer elected to pay the employer fee or a penalty
equaling 50 percent of the amount of all health expenditures that
would be required by this division if the employer elected to make
health care expenditures.
   4821.  (a) The director shall provide to each service recipient,
as defined in paragraph (1) of subdivision (b) of Section 1088.8, a
notice informing each service provider, as defined in paragraph (2)
of subdivision (b) of Section 1088.8, of their rights,
responsibilities, and the differences in workplace benefit coverage
as an independent contractor, including their right to file for a
status determination with the department. This notice shall be given
by every service recipient required pursuant to Section 1088.8 to
report payments equal to, or in excess of, six hundred dollars ($600)
in any year to a service provider when the first payment is made.
   (b) In order to ensure the proper implementation of this division,
the department shall adopt regulations for accelerating the appeal
process for issues relating to misclassification of an employee as an
independent contractor pursuant to this division.
   4822.  The penalties and remedies provided pursuant to this
division are cumulative and in addition to any other penalties or
remedies provided by law.
      CHAPTER 5.  FISCAL


   4823.  The department shall deposit all employer fees and employee
premium payments into the fund. The department shall deposit all
fines, penalties, and interest collected pursuant to this division
into a penalty account within the fund. Notwithstanding the
provisions of Section 12699.212 of the Insurance Code, the revenue in
the penalty account shall not be continuously appropriated to the
board and shall be available for expenditure only upon appropriation
by the Legislature.
   4824.  The department is authorized to obtain a loan from the
General Fund for all necessary and reasonable expenses incurred prior
to January 1, 2011, related to implementing this division and
administering its provisions. The proceeds of the loan are subject to
appropriation in the annual Budget Act. The department shall repay
principal and interest, using the pooled money investment account
rate of interest, to the General Fund no later than January 1, 2016.
      CHAPTER 6.  OPERATIVE PROVISIONS


   4829.  This division shall become operative on January 1, 2009.
  SEC. 31.  Section 14005.23 of the Welfare and Institutions Code is
amended to read:
   14005.23.  (a) To the extent federal financial participation is
available, the department shall, when determining eligibility for
children under Section 1396a()(1)(D) of Title 42 of the United States
Code, designate a birth date by which all children who have not
attained the age of 19 years will meet the age requirement of Section
1396a()(1)(D) of Title 42 of the United States Code.
   (b) Commencing July 1, 2008, to the extent federal financial
participation is available, the department shall apply a less
restrictive income deduction described in Section 1396a(r) of Title
42 of the United States Code when determining eligibility for the
children identified in subdivision (a). The amount of this deduction
shall be the difference between 133 percent and 100 percent of the
federal poverty level applicable to the size of the family.
   (c) For children enrolled in the Healthy Families Program as of
July 1, 2008, the income limit in subdivision (b) shall be applied in
determining eligibility at the next annual redetermination for that
program, or earlier upon request of the beneficiary. The coverage
under this section for a child who is a dependent of an employee of
an employer electing to make a payment to the California Health Trust
Fund in lieu of making health expenditures pursuant to Section
4802.1 of the Unemployment Insurance Code, shall be provided through
a Cal-CHIPP Medi-Cal plan under Part 6.45 (commencing with Section
12699.201) of Division 2 of the Insurance Code.
  SEC. 32.  Section 14005.30 of the Welfare and Institutions Code is
amended to read:
   14005.30.  (a) (1) To the extent that federal financial
participation is available, Medi-Cal benefits under this chapter
shall be provided to individuals eligible for services under Section
1396u-1 of Title 42 of the United States Code, including any options
under Section 1396u-1(b)(2)(C) made available to and exercised by the
state.
   (2) The department shall exercise its option under Section 1396u-1
(b)(2)(C) of Title 42 of the United States Code to adopt less
restrictive income and resource eligibility standards and
methodologies to the extent necessary to allow all recipients of
benefits under Chapter 2 (commencing with Section 11200) to be
eligible for Medi-Cal under paragraph (1).
   (3) To the extent federal financial participation is available,
the department shall exercise its option under Section 1396u-1(b)(2)
(C) of Title 42 of the United States Code authorizing the state to
disregard all changes in income or assets of a beneficiary until the
next annual redetermination under Section 14012. The department shall
implement this paragraph only if, and to the extent that the State
Child Health Insurance Program waiver described in Section 12693.755
of the Insurance Code extending Healthy Families Program eligibility
to parents and certain other adults is approved and implemented.
   (b) To the extent that federal financial participation is
available, the department shall exercise its option under Section
1396u-1(b)(2)(C) of Title 42 of the United States Code as necessary
to simplify eligibility for Medi-Cal under subdivision (a) by
exempting all resources for applicants and recipients.
   (c) To the extent federal financial participation is available,
the department shall, commencing March 1, 2000, adopt an income
disregard for applicants equal to the difference between the income
standard under the program adopted pursuant to Section 1931(b) of the
federal Social Security Act (42 U.S.C. Sec. 1396u-1) and the amount
equal to 100 percent of the federal poverty level applicable to the
size of the family. A recipient shall be entitled to the same
disregard, but only to the extent it is more beneficial than, and is
substituted for, the earned income disregard available to recipients.

   (d) Commencing July 1, 2008, the department shall adopt an income
disregard for applicants equal to the difference between the income
standard under the program adopted pursuant to Section 1931(b) of the
federal Social Security Act (42 U.S.C. Sec. 1396u-1(b)) and the
amount equal to 133 percent of the federal poverty level applicable
to the size of the family. A recipient shall be entitled to the same
disregard, but only to the extent it is more generous than, and is
substituted for, the earned income disregard available to recipients.
Implementation of this subdivision is contingent upon federal
financial participation. Upon implementation of this subdivision, the
income disregard described in subdivision (c) shall no longer apply.

   (e) For purposes of calculating income under this section during
any calendar year, increases in social security benefit payments
under Title II of the federal Social Security Act (42 U.S.C. Sec. 401
and following) arising from cost-of-living adjustments shall be
disregarded commencing in the month that these social security
benefit payments are increased by the cost-of-living adjustment
through the month before the month in which a change in the federal
poverty level requires the department to modify the income disregard
pursuant to subdivision (c) and in which new income limits for the
program established by this section are adopted by the department.
   (f) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department shall implement, without taking regulatory action,
subdivisions (a) and (b) of this section by means of an all county
letter or similar instruction. Thereafter, the department shall adopt
regulations in accordance with the requirements of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code. Beginning six months after the effective date
of this section, the department shall provide a status report to the
Legislature on a semiannual basis until regulations have been
adopted.
  SEC. 33.  Section 14005.31 of the Welfare and Institutions Code is
amended to read:
   14005.31.  (a) (1) Subject to paragraph (2), for any person whose
eligibility for benefits under Section 14005.30 has been determined
with a concurrent determination of eligibility for cash aid under
Chapter 2 (commencing with Section 11200), loss of eligibility or
termination of cash aid under Chapter 2 (commencing with Section
11200) shall not result in a loss of eligibility or termination of
benefits under Section 14005.30 absent the existence of a factor that
would result in loss of eligibility for benefits under Section
14005.30 for a person whose eligibility under Section 14005.30 was
determined without a concurrent determination of eligibility for
benefits under Chapter 2 (commencing with Section 11200).
   (2) Notwithstanding paragraph (1), a person whose eligibility
would otherwise be terminated pursuant to that paragraph shall not
have his or her eligibility terminated until the transfer procedures
set forth in Section 14005.32 or the redetermination procedures set
forth in Section 14005.37 and all due process requirements have been
met.
   (b) The department, in consultation with the counties and
representatives of consumers, managed care plans, and Medi-Cal
providers, shall prepare a simple, clear, consumer-friendly notice to
be used by the counties, to inform Medi-Cal beneficiaries whose
eligibility for cash aid under Chapter 2 (commencing with Section
11200) has ended, but whose eligibility for benefits under Section
14005.30 continues pursuant to subdivision (a), that their benefits
will continue. To the extent feasible, the notice shall be sent out
at the same time as the notice of discontinuation of cash aid, and
shall include all of the following:
   (1) A statement that Medi-Cal benefits will continue even though
cash aid under the CalWORKs program has been terminated.
   (2) A statement that continued receipt of Medi-Cal benefits will
not be counted against any time limits in existence for receipt of
cash aid under the CalWORKs program.
   (3) A statement that the Medi-Cal beneficiary does not need to
fill out monthly status reports in order to remain eligible for
Medi-Cal, but shall be required to submit a semiannual status report
and annual reaffirmation forms, except that the semiannual status
report shall no longer be required on and after July 1, 2008. The
notice shall remind individuals whose cash aid ended under the
CalWORKs program as a result of not submitting a status report that
he or she should review his or her circumstances to determine if
changes have occurred that should be reported to the Medi-Cal
eligibility worker.
   (4) A statement describing the responsibility of the Medi-Cal
beneficiary to report to the county, within 10 days, significant
changes that may affect eligibility.
   (5) A telephone number to call for more information.
   (6) A statement that the Medi-Cal beneficiary's eligibility worker
will not change, or, if the case has been reassigned, the new worker'
s name, address, and telephone number, and the hours during which the
county's eligibility workers can be contacted.
   (c) This section shall be implemented on or before July 1, 2001,
but only to the extent that federal financial participation under
Title XIX of the federal Social Security Act (Title 42 U.S.C. Sec.
1396 and following) is available.
   (d) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department shall, without taking any regulatory action, implement
this section by means of all county letters or similar instructions.
Thereafter, the department shall adopt regulations in accordance with
the requirements of Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code. Comprehensive
implementing instructions shall be issued to the counties no later
than March 1, 2001.
  SEC. 34.  Section 14005.32 of the Welfare and Institutions Code is
amended to read:
   14005.32.  (a) (1) If the county has evidence clearly
demonstrating that a beneficiary is not eligible for benefits under
this chapter pursuant to Section 14005.30, but is eligible for
benefits under this chapter pursuant to other provisions of law, the
county shall transfer the individual to the corresponding Medi-Cal
program. Eligibility under Section 14005.30 shall continue until the
transfer is complete.
   (2) The department, in consultation with the counties and
representatives of consumers, managed care plans, and Medi-Cal
providers, shall prepare a simple, clear, consumer-friendly notice to
be used by the counties, to inform beneficiaries that their Medi-Cal
benefits have been transferred pursuant to paragraph (1) and to
inform them about the program to which they have been transferred. To
the extent feasible, the notice shall be issued with the notice of
discontinuance from cash aid, and shall include all of the following:

   (A) A statement that Medi-Cal benefits will continue under another
program, even though aid under Chapter 2 (commencing with Section
11200) has been terminated.
   (B) The name of the program under which benefits will continue,
and an explanation of that program.
   (C) A statement that continued receipt of Medi-Cal benefits will
not be counted against any time limits in existence for receipt of
cash aid under the CalWORKs program.
   (D) A statement that the Medi-Cal beneficiary does not need to
fill out monthly status reports in order to remain eligible for
Medi-Cal, but shall be required to submit a semiannual status report
and annual reaffirmation forms, except that the semiannual status
report shall no longer be required on and after July 1, 2008. In
addition, if the person or persons to whom the notice is directed has
been found eligible for transitional Medi-Cal as described in
Section 14005.8, 14005.81, or 14005.85, the statement shall explain
the reporting requirements and duration of benefits under those
programs, and shall further explain that, at the end of the duration
of these benefits, a redetermination, as provided for in Section
14005.37 shall be conducted to determine whether benefits are
available under any other provision of law.
   (E) A statement describing the beneficiary's responsibility to
report to the county, within 10 days, significant changes that may
affect eligibility or share of cost.
   (F) A telephone number to call for more information.
   (G) A statement that the beneficiary's eligibility worker will not
change, or, if the case has been reassigned, the new worker's name,
address, and telephone number, and the hours during which the county'
s Medi-Cal eligibility workers can be contacted.
   (b) No later than September 1, 2001, the department shall submit a
federal waiver application seeking authority to eliminate the
reporting requirements imposed by transitional medicaid under Section
1925 of the federal Social Security Act (Title 42 U.S.C. Sec.
1396r-6).
   (c) This section shall be implemented on or before July 1, 2001,
but only to the extent that federal financial participation under
Title XIX of the federal Social Security Act (Title 42 U.S.C. Sec.
1396 and following) is available.
   (d) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department shall, without taking any regulatory action, implement
this section by means of all county letters or similar instructions.
Thereafter, the department shall adopt regulations in accordance with
the requirements of Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code. Comprehensive
implementing instructions shall be issued to the counties no later
than March 1, 2001.
  SEC. 35.  Section 14005.301 is added to the Welfare and
Institutions Code, to read:
   14005.301.  (a) Notwithstanding Section 14005.30, to the extent
that federal financial participation is available, Medi-Cal benefits
under a Cal-CHIPP Healthy Families plan as permitted under Section
6044 of the federal Deficit Reduction Act of 2005 (42 U.S.C. Sec.
1396u-7) shall be provided to a population composed of parents and
other caretaker relatives with a household income at or below 300
percent of the federal poverty level who are not otherwise eligible
for full scope benefits with no share of cost.
   (b) The Cal-CHIPP Healthy Families plan referenced in subdivision
(a) shall be health plan coverage provided through a health care
service plan or a health insurer that meets the requirements of
federal law and that provides the same covered services and benefits
required 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 prescription drugs.
   (c) The eligibility determination under this section shall not
include an asset test.
   (d) To the extent necessary to implement this section, the
department shall seek federal approval to modify the definition of
"unemployed parent" in Section 14008.85.
   (e) The department shall implement this section by means of a
state plan amendment. If this section cannot be implemented by a
state plan amendment, the department shall seek a waiver or a waiver
and a state plan amendment necessary to accomplish the intent of this
section.
   (f) This section shall become operative on July 1, 2008.
  SEC. 36.  Section 14005.331 is added to the Welfare and
Institutions Code, to read:
   14005.331.  (a) All children under 19 years of age who meet the
state residency requirements of the Medi-Cal program or the Healthy
Families Program shall be eligible for health care coverage in
accordance with subdivision (b) if they either (1) live in families
with countable household income at or below 300 percent of the
federal poverty level, or (2) meet the income and resource
requirements of Section 14005.7 of the Welfare and Institutions Code
or the income requirements of Section 14005.30 of the Welfare and
Institutions Code. The children described in this section include all
children for whom federal financial participation under Title XIX of
the federal Social Security Act (42 U.S.C. Sec. 1396 et seq.) or
Title XXI of the federal Social Security Act (42 U.S.C. Sec. 1397 et
seq.) is not available due to their immigration status or date of
entry into the United States, but does not include children who are
ineligible for Title XIX and Title XXI funds based on other grounds.
Nothing in this section shall be construed to limit a child's right
to Medi-Cal eligibility under existing law.
   (b) Children described in subdivision (a) in families whose
household income would render them ineligible for no-cost Medi-Cal,
and who are in compliance with Sections 12693.71 and 12693.72 of the
Insurance Code, shall be eligible for the Healthy Families Program
and shall also be eligible for Medi-Cal with a share of cost in
accordance with Section 14005.7 of the Welfare and Institutions Code.
Other children described in this section shall be eligible for
Medi-Cal with no share of cost.
   (c) On and after January 1, 2010, the coverage under this section
for a child who is an employee or, if applicable, a dependent of an
employee of an employer electing to make a payment to the California
Health Trust Fund in lieu of making health expenditures pursuant to
Section 4802.1 of the Unemployment Insurance Code, shall be provided
through a Cal-CHIPP Medi-Cal plan under Part 6.45 (commencing with
Section 12699.201) of Division 2 of the Insurance Code.
  SEC. 37.  Section 14005.82 is added to the Welfare and Institutions
Code, to read:
   14005.82.  (a) The department shall exercise its options under
Section 1906 of Title 19 of the federal Social Security Act (42
U.S.C. Sec. 1396e) to require, as a condition of an individual
becoming or remaining eligible for the Medi-Cal program, that the
individual, or if a child, the child's parent, offered the option of
enrolling in a Cal-CHIPP Medi-Cal plan pursuant to Section 1357.24 of
the Health and Safety Code or Section 10764 of the Insurance Code
enroll in that Cal-CHIPP Medi-Cal plan. If the individual is eligible
for the Medi-Cal program under Section 14005.301 and the individual
is offered the option of enrolling in a Cal-CHIPP Healthy Families
plan pursuant to Section 1357.24 of the Health and Safety Code or
Section 10764 of the Insurance Code, the individual shall, as a
condition of the individual becoming or remaining eligible for the
Medi-Cal program, enroll in the Cal-CHIPP Healthy Families plan.
   (b) The requirement that an individual enroll in a Cal-CHIPP
Medi-Cal plan or a Cal-CHIPP Healthy Families plan, as described in
subdivision (a), shall apply to an individual enrolled in the
Medi-Cal program or in the Healthy Families Program at the individual'
s next annual redetermination of eligibility for the Medi-Cal program
or the Healthy Families Program, or before that time if requested by
the beneficiary or subscriber.
  SEC. 38.  Section 14008.85 of the Welfare and Institutions Code is
amended to read:
   14008.85.  (a) To the extent federal financial participation is
available, a parent who is the principal wage earner shall be
considered an unemployed parent for purposes of establishing
eligibility based upon deprivation of a child where any of the
following applies:
   (1) The parent works less than 100 hours per month as determined
pursuant to the rules of the Aid to Families with Dependent Children
program as it existed on July 16, 1996, including the rule allowing a
temporary excess of hours due to intermittent work.
   (2) The total net nonexempt earned income for the family is not
more than 100 percent of the federal poverty level as most recently
calculated by the federal government. The department may adopt
additional deductions to be taken from a family's income.
   (3) The parent is considered unemployed under the terms of an
existing federal waiver of the 100-hour rule for recipients under the
program established by Section 1931(b) of the federal Social
Security Act (42 U.S.C. Sec. 1396u-1).
   (b) The department shall seek any federal approval required to
waive or to increase the income limit in paragraph (2) of subdivision
(a) to the extent necessary to implement Sections 14005.30 and
14005.301.
   (c) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department shall implement this section by means of an all county
letter or similar instruction without taking regulatory action.
Thereafter, the department shall adopt regulations in accordance with
the requirements of Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code.
  SEC. 39.  Section 14011.16 of the Welfare and Institutions Code is
amended to read:
   14011.16.  (a) Commencing August 1, 2003, the department shall
implement a requirement for beneficiaries to file semiannual status
reports as part of the department's procedures to ensure that
beneficiaries make timely and accurate reports of any change in
circumstance that may affect their eligibility. The department shall
develop a simplified form to be used for this purpose. The department
shall explore the feasibility of using a form that allows a
beneficiary who has not had any changes to so indicate by checking a
box and signing and returning the form.
   (b) Beneficiaries who have been granted continuous eligibility
under Section 14005.25 shall not be required to submit semiannual
status reports. To the extent federal financial participation is
available, all children under 19 years of age shall be exempt from
the requirement to submit semiannual status reports.
   (c) Beneficiaries whose eligibility is based on a determination of
disability or on their status as aged or blind shall be exempt from
the semiannual status report requirement described in subdivision
(a). The department may exempt other groups from the semiannual
status report requirement as necessary for simplicity of
administration.
                                                     (d) When a
beneficiary has completed, signed, and filed a semiannual status
report that indicated a change in circumstance, eligibility shall be
redetermined.
   (e) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department shall implement this section by means of all county
letters or similar instructions without taking regulatory action.
Thereafter, the department shall adopt regulations in accordance with
the requirements of Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code.
   (f) This section shall be implemented only if and to the extent
federal financial participation is available.
   (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. 40.  Section 14131.01 is added to the Welfare and Institutions
Code, to read:
   14131.01.  On and after January 1, 2010, the coverage under this
chapter to a person who is an employee or, if applicable, a dependent
of an employee, of an employer electing to make a payment to the
California Health Trust Fund in lieu of making health expenditures
pursuant to Section 4802.1 of the Unemployment Insurance Code, shall
be provided through a Cal-CHIPP Medi-Cal plan under Part 6.45
(commencing with Section 12699.201) of the Insurance Code.
  SEC. 41.  Article 7 (commencing with Section 14199.10) is added to
Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code, to read:

      Article 7.  Coordination with the California Health Trust Fund


   14199.10.  The department shall seek any necessary federal
approval to enable the state to receive federal funds for coverage
provided through the California Cooperative Health Insurance
Purchasing Program (Cal-CHIPP) to persons who would be eligible for
the Medi-Cal program if the state expanded eligibility to a
population composed of parents and other caretaker relatives with a
household income at or below 300 percent of the federal poverty level
who are not otherwise eligible for full scope benefits with no share
of cost. Revenues in the California Health Trust Fund created
pursuant to Section 12699.212 of the Insurance Code shall be used as
state matching funds for receipt of federal funds resulting from the
implementation of this section. All federal funds received pursuant
to that federal approval shall be deposited in the California Health
Trust Fund.
  SEC. 42.  Section 6254.28 is added to the Government Code, to read:

   6254.28.  (a) Nothing in this chapter or any other provision of
law shall require the disclosure of records of the Managed Risk
Medical Insurance Board relating to activities governed by Part 6.45
(commencing with Section 12699.201) of Division 2 of the Insurance
Code, and that reveal the deliberative processes, discussions,
communications, or any other portion of the negotiations with
entities contracting or seeking to contract with the board, or the
impressions, opinions, recommendations, meeting minutes, research,
work product, theories, or strategy of the board or its staff, or
records that provide instructions, advice, or training to employees.
   (b) (1) Except for the portion of a contract that contains the
rates of payment, contracts entered into pursuant to Part 6.45
(commencing with Section 12699.201) of Division 2 of the Insurance
Code on or after January 1, 2008, shall be open to inspection one
year after they have been fully executed.
   (2) If a contract entered into pursuant to Part 6.45 (commencing
with Section 12699.201) of Division 2 of the Insurance Code is
amended, the amendment shall be open to inspection one year after the
amendment has been fully executed.
   (c) Three years after a contract or amendment is open to
inspection pursuant to this section, the portion of the contract or
amendment containing the rates of payment shall be open to
inspection.
   (d) Notwithstanding any other provision of law, the entire
contract or amendments to a contract shall be open to inspection by
the Joint Legislative Audit Committee and the Legislative Analyst's
Office. The committee and the office shall maintain the
confidentiality of the contracts and amendments thereto until the
contract or amendments to a contract are open to inspection pursuant
to subdivision (b) or (c).
  SEC. 43.  Section 11126 of the Government Code is amended to read:
   11126.  (a) (1) Nothing in this article shall be construed to
prevent a state body from holding closed sessions during a regular or
special meeting to consider the appointment, employment, evaluation
of performance, or dismissal of a public employee or to hear
complaints or charges brought against that employee by another person
or employee unless the employee requests a public hearing.
   (2) As a condition to holding a closed session on the complaints
or charges to consider disciplinary action or to consider dismissal,
the employee shall be given written notice of his or her right to
have a public hearing, rather than a closed session, and that notice
shall be delivered to the employee personally or by mail at least 24
hours before the time for holding a regular or special meeting. If
notice is not given, any disciplinary or other action taken against
any employee at the closed session shall be null and void.
   (3) The state body also may exclude from any public or closed
session, during the examination of a witness, any or all other
witnesses in the matter being investigated by the state body.
   (4) Following the public hearing or closed session, the body may
deliberate on the decision to be reached in a closed session.
   (b) For the purposes of this section, "employee" does not include
any person who is elected to, or appointed to a public office by, any
state body. However, officers of the California State University who
receive compensation for their services, other than per diem and
ordinary and necessary expenses, shall, when engaged in that
capacity, be considered employees. Furthermore, for purposes of this
section, the term employee includes a person exempt from civil
service pursuant to subdivision (e) of Section 4 of Article VII of
the California Constitution.
   (c) Nothing in this article shall be construed to do any of the
following:
   (1) Prevent state bodies that administer the licensing of persons
engaging in businesses or professions from holding closed sessions to
prepare, approve, grade, or administer examinations.
   (2) Prevent an advisory body of a state body that administers the
licensing of persons engaged in businesses or professions from
conducting a closed session to discuss matters that the advisory body
has found would constitute an unwarranted invasion of the privacy of
an individual licensee or applicant if discussed in an open meeting,
provided the advisory body does not include a quorum of the members
of the state body it advises. Those matters may include review of an
applicant's qualifications for licensure and an inquiry specifically
related to the state body's enforcement program concerning an
individual licensee or applicant where the inquiry occurs prior to
the filing of a civil, criminal, or administrative disciplinary
action against the licensee or applicant by the state body.
   (3) Prohibit a state body from holding a closed session to
deliberate on a decision to be reached in a proceeding required to be
conducted pursuant to Chapter 5 (commencing with Section 11500) or
similar provisions of law.
   (4) Grant a right to enter any correctional institution or the
grounds of a correctional institution where that right is not
otherwise granted by law, nor shall anything in this article be
construed to prevent a state body from holding a closed session when
considering and acting upon the determination of a term, parole, or
release of any individual or other disposition of an individual case,
or if public disclosure of the subjects under discussion or
consideration is expressly prohibited by statute.
   (5) Prevent any closed session to consider the conferring of
honorary degrees, or gifts, donations, and bequests that the donor or
proposed donor has requested in writing to be kept confidential.
   (6) Prevent the Alcoholic Beverage Control Appeals Board from
holding a closed session for the purpose of holding a deliberative
conference as provided in Section 11125.
   (7) (A) Prevent a state body from holding closed sessions with its
negotiator prior to the purchase, sale, exchange, or lease of real
property by or for the state body to give instructions to its
negotiator regarding the price and terms of payment for the purchase,
sale, exchange, or lease.
   (B) However, prior to the closed session, the state body shall
hold an open and public session in which it identifies the real
property or real properties that the negotiations may concern and the
person or persons with whom its negotiator may negotiate.
   (C) For purposes of this paragraph, the negotiator may be a member
of the state body.
   (D) For purposes of this paragraph, "lease" includes renewal or
renegotiation of a lease.
   (E) Nothing in this paragraph shall preclude a state body from
holding a closed session for discussions regarding eminent domain
proceedings pursuant to subdivision (e).
   (8) Prevent the California Postsecondary Education Commission from
holding closed sessions to consider matters pertaining to the
appointment or termination of the Director of the California
Postsecondary Education Commission.
   (9) Prevent the Council for Private Postsecondary and Vocational
Education from holding closed sessions to consider matters pertaining
to the appointment or termination of the Executive Director of the
Council for Private Postsecondary and Vocational Education.
   (10) Prevent the Franchise Tax Board from holding closed sessions
for the purpose of discussion of confidential tax returns or
information the public disclosure of which is prohibited by law, or
from considering matters pertaining to the appointment or removal of
the Executive Officer of the Franchise Tax Board.
   (11) Require the Franchise Tax Board to notice or disclose any
confidential tax information considered in closed sessions, or
documents executed in connection therewith, the public disclosure of
which is prohibited pursuant to Article 2 (commencing with Section
19542) of Chapter 7 of Part 10.2 of the Revenue and Taxation Code.
   (12) Prevent the Board of Corrections from holding closed sessions
when considering reports of crime conditions under Section 6027 of
the Penal Code.
   (13) Prevent the State Air Resources Board from holding closed
sessions when considering the proprietary specifications and
performance data of manufacturers.
   (14) Prevent the State Board of Education or the Superintendent of
Public Instruction, or any committee advising the board or the
Superintendent, from holding closed sessions on those portions of its
review of assessment instruments pursuant to Chapter 5 (commencing
with Section 60600) of, or pursuant to Chapter 8 (commencing with
Section 60850) of, Part 33 of the Education Code during which actual
test content is reviewed and discussed. The purpose of this provision
is to maintain the confidentiality of the assessments under review.
   (15) Prevent the California Integrated Waste Management Board or
its auxiliary committees from holding closed sessions for the purpose
of discussing confidential tax returns, discussing trade secrets or
confidential or proprietary information in its possession, or
discussing other data, the public disclosure of which is prohibited
by law.
   (16) Prevent a state body that invests retirement, pension, or
endowment funds from holding closed sessions when considering
investment decisions. For purposes of consideration of shareholder
voting on corporate stocks held by the state body, closed sessions
for the purposes of voting may be held only with respect to election
of corporate directors, election of independent auditors, and other
financial issues that could have a material effect on the net income
of the corporation. For the purpose of real property investment
decisions that may be considered in a closed session pursuant to this
paragraph, a state body shall also be exempt from the provisions of
paragraph (7) relating to the identification of real properties prior
to the closed session.
   (17) Prevent a state body, or boards, commissions, administrative
officers, or other representatives that may properly be designated by
law or by a state body, from holding closed sessions with its
representatives in discharging its responsibilities under Chapter 10
(commencing with Section 3500), Chapter 10.3 (commencing with Section
3512), Chapter 10.5 (commencing with Section 3525), or Chapter 10.7
(commencing with Section 3540) of Division 4 of Title 1 as the
sessions relate to salaries, salary schedules, or compensation paid
in the form of fringe benefits. For the purposes enumerated in the
preceding sentence, a state body may also meet with a state
conciliator who has intervened in the proceedings.
   (18) (A) Prevent a state body from holding closed sessions to
consider matters posing a threat or potential threat of criminal or
terrorist activity against the personnel, property, buildings,
facilities, or equipment, including electronic data, owned, leased,
or controlled by the state body, where disclosure of these
considerations could compromise or impede the safety or security of
the personnel, property, buildings, facilities, or equipment,
including electronic data, owned, leased, or controlled by the state
body.
   (B) Notwithstanding any other provision of law, a state body, at
any regular or special meeting, may meet in a closed session pursuant
to subparagraph (A) upon a two-thirds vote of the members present at
the meeting.
   (C) After meeting in closed session pursuant to subparagraph (A),
the state body shall reconvene in open session prior to adjournment
and report that a closed session was held pursuant to subparagraph
(A), the general nature of the matters considered, and whether any
action was taken in closed session.
   (D) After meeting in closed session pursuant to subparagraph (A),
the state body shall submit to the Legislative Analyst written
notification stating that it held this closed session, the general
reason or reasons for the closed session, the general nature of the
matters considered, and whether any action was taken in closed
session. The Legislative Analyst shall retain for no less than four
years any written notification received from a state body pursuant to
this subparagraph.
   (d) (1) Notwithstanding any other provision of law, any meeting of
the Public Utilities Commission at which the rates of entities under
the commission's jurisdiction are changed shall be open and public.
   (2) Nothing in this article shall be construed to prevent the
Public Utilities Commission from holding closed sessions to
deliberate on the institution of proceedings, or disciplinary actions
against any person or entity under the jurisdiction of the
commission.
   (e) (1) Nothing in this article shall be construed to prevent a
state body, based on the advice of its legal counsel, from holding a
closed session to confer with, or receive advice from, its legal
counsel regarding pending litigation when discussion in open session
concerning those matters would prejudice the position of the state
body in the litigation.
   (2) For purposes of this article, all expressions of the
lawyer-client privilege other than those provided in this subdivision
are hereby abrogated. This subdivision is the exclusive expression
of the lawyer-client privilege for purposes of conducting closed
session meetings pursuant to this article. For purposes of this
subdivision, litigation shall be considered pending when any of the
following circumstances exist:
   (A) An adjudicatory proceeding before a court, an administrative
body exercising its adjudicatory authority, a hearing officer, or an
arbitrator, to which the state body is a party, has been initiated
formally.
   (B) (i) A point has been reached where, in the opinion of the
state body on the advice of its legal counsel, based on existing
facts and circumstances, there is a significant exposure to
litigation against the state body.
   (ii) Based on existing facts and circumstances, the state body is
meeting only to decide whether a closed session is authorized
pursuant to clause (i).
   (C) (i) Based on existing facts and circumstances, the state body
has decided to initiate or is deciding whether to initiate
litigation.
   (ii) The legal counsel of the state body shall prepare and submit
to it a memorandum stating the specific reasons and legal authority
for the closed session. If the closed session is pursuant to
paragraph (1), the memorandum shall include the title of the
litigation. If the closed session is pursuant to subparagraph (A) or
(B), the memorandum shall include the existing facts and
circumstances on which it is based. The legal counsel shall submit
the memorandum to the state body prior to the closed session, if
feasible, and in any case no later than one week after the closed
session. The memorandum shall be exempt from disclosure pursuant to
Section 6254.25.
   (iii) For purposes of this subdivision, "litigation" includes any
adjudicatory proceeding, including eminent domain, before a court,
administrative body exercising its adjudicatory authority, hearing
officer, or arbitrator.
   (iv) Disclosure of a memorandum required under this subdivision
shall not be deemed as a waiver of the lawyer-client privilege, as
provided for under Article 3 (commencing with Section 950) of Chapter
4 of Division 8 of the Evidence Code.
   (f) In addition to subdivisions (a), (b), and (c), nothing in this
article shall be construed to do any of the following:
   (1) Prevent a state body operating under a joint powers agreement
for insurance pooling from holding a closed session to discuss a
claim for the payment of tort liability or public liability losses
incurred by the state body or any member agency under the joint
powers agreement.
   (2) Prevent the examining committee established by the State Board
of Forestry and Fire Protection, pursuant to Section 763 of the
Public Resources Code, from conducting a closed session to consider
disciplinary action against an individual professional forester prior
to the filing of an accusation against the forester pursuant to
Section 11503.
   (3) Prevent an administrative committee established by the
California Board of Accountancy pursuant to Section 5020 of the
Business and Professions Code from conducting a closed session to
consider disciplinary action against an individual accountant prior
to the filing of an accusation against the accountant pursuant to
Section 11503. Nothing in this article shall be construed to prevent
an examining committee established by the California Board of
Accountancy pursuant to Section 5023 of the Business and Professions
Code from conducting a closed hearing to interview an individual
applicant or accountant regarding the applicant's qualifications.
   (4) Prevent a state body, as defined in subdivision (b) of Section
11121, from conducting a closed session to consider any matter that
properly could be considered in closed session by the state body
whose authority it exercises.
   (5) Prevent a state body, as defined in subdivision (d) of Section
11121, from conducting a closed session to consider any matter that
properly could be considered in a closed session by the body defined
as a state body pursuant to subdivision (a) or (b) of Section 11121.
   (6) Prevent a state body, as defined in subdivision (c) of Section
11121, from conducting a closed session to consider any matter that
properly could be considered in a closed session by the state body it
advises.
   (7) Prevent the State Board of Equalization from holding closed
sessions for either of the following:
   (A) When considering matters pertaining to the appointment or
removal of the Executive Secretary of the State Board of
Equalization.
   (B) For the purpose of hearing confidential taxpayer appeals or
data, the public disclosure of which is prohibited by law.
   (8) Require the State Board of Equalization to disclose any action
taken in closed session or documents executed in connection with
that action, the public disclosure of which is prohibited by law
pursuant to Sections 15619 and 15641 of this code and Sections 833,
7056, 8255, 9255, 11655, 30455, 32455, 38705, 38706, 43651, 45982,
46751, 50159, 55381, and 60609 of the Revenue and Taxation Code.
   (9) Prevent the California Earthquake Prediction Evaluation
Council, or other body appointed to advise the Director of the Office
of Emergency Services or the Governor concerning matters relating to
volcanic or earthquake predictions, from holding closed sessions
when considering the evaluation of possible predictions.
   (g) This article does not prevent either of the following:
   (1) The Teachers' Retirement Board or the Board of Administration
of the Public Employees' Retirement System from holding closed
sessions when considering matters pertaining to the recruitment,
appointment, employment, or removal of the chief executive officer or
when considering matters pertaining to the recruitment or removal of
the Chief Investment Officer of the State Teachers' Retirement
System or the Public Employees' Retirement System.
   (2) The Commission on Teacher Credentialing from holding closed
sessions when considering matters relating to the recruitment,
appointment, or removal of its executive director.
   (h) This article does not prevent the Board of Administration of
the Public Employees' Retirement System from holding closed sessions
when considering matters relating to the development of rates and
competitive strategy for plans offered pursuant to Chapter 15
(commencing with Section 21660) of Part 3 of Division 5 of Title 2.
   (i) This article does not prevent the Managed Risk Medical
Insurance Board from holding closed sessions when considering matters
related to the development of rates and contracting strategy for
entities contracting or seeking to contract with the board pursuant
to Part 6.45 (commencing with Section 12699.201) of Division 2 of the
Insurance Code.
  SEC. 44.  The State Department of Health Care Services, in
consultation with the Managed Risk Medical Insurance Board, shall
take all reasonable steps that are required to obtain the maximum
amount of federal funds and to support federal claiming procedures in
the administration of this act.
  SEC. 45.  Notwithstanding Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code,
during the period January 1, 2008, to December 31, 2011, inclusive,
the State Department of Health Care Services may implement this act
by means of all county letters or similar instructions without taking
regulatory action. After December 31, 2011, the department shall
adopt all necessary regulations in accordance with the requirements
of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code.
  SEC. 46.  The Legislature finds and declares that Section 42 of
this act, which adds Section 6254.28 to the Government Code, and
Section 43, which amends Section 11126 of the Government Code, impose
a limitation on the public's right of access to the meetings of
public bodies or the writings of public officials and agencies within
the meaning of Section 3 of Article I of the California
Constitution. Pursuant to that constitutional provision, the
Legislature makes the following findings to demonstrate the interest
protected by this limitation and the need for protecting that
interest:
   In order to maximize the ability of the Managed Risk Medical
Insurance Board to implement agreements with health plans and to
provide a wide choice of plans at minimal cost under the California
Cooperative Health Insurance Purchasing Program created pursuant to
Part 6.45 (commencing with Section 12699.201) of Division 2 of the
Insurance Code, it is necessary and appropriate to provide limited
confidentiality to certain writings developed in that regard and
meetings related thereto.
  SEC. 47.  Notwithstanding any other provision of law, the Managed
Risk Medical Insurance Board may implement the provisions of this act
expanding the Healthy Families Program only to the extent that funds
are appropriated for those purposes in the annual Budget Act or in
another statute.
  SEC. 48.  During the period from January 1, 2008 to December 31,
2011, inclusive, the adoption of regulations pursuant to this act by
the Managed Risk Medical Insurance Board shall be deemed to be an
emergency and necessary for the immediate preservation of public
peace, health, and safety, or the general welfare.
  SEC. 49.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution for
certain costs that may be incurred by a local agency or school
district because, in that regard, 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.
   However, if the Commission on State Mandates determines that this
act contains other costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division 4 of
Title 2 of the Government Code.