BILL NUMBER: ABX1 2	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  NOVEMBER 8, 2007

INTRODUCED BY   Assembly Member  Nunez   ______

    (   Principal coauthor: 
 Senator   Perata   )


                        SEPTEMBER 11, 2007

    An act relating to health care.   An act to
amend Sections 650, 2069, 2836.1, and 3516 of, to add Sections 650.5,
2838, 4040.1, 4071.2, 4071.3, and 4071.4 to, and to repeal Section
3516.1 of, the Business and Professions Code, to add Section 49452.9
to the Education Code, to add Sections 12803.2, 22830.5, and 22830.6
to, and to add Chapter 15 (commencing with Section 8899.50) to
Division 1 of Title 2 of, the Government Code, to amend Sections
1357.54 and 1365 of, to add Sections 1262.9, 1342.9, 1356.2, 1367.16,
1367.205, 1367.38, 1368.025, 1378.1, 1395.2, 104376, 128745.1, and
130545 to, to add Article 11.6 (commencing with Section 1399.821) to
Chapter 2.2 of Division 2 of, to add Article 1 (commencing with
Section 104250) to Chapter 4 of Part 1 of Division 103 of, to 
 add Article 3 (commencing with Section 104705) to Chapter 2 of
Part 3 of Division 103 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 10273.6, 12693.43, 12693.70, and 12693.76 of,
to add Sections 10113.10, 10113.11, 10123.56, 10176.15, 12693.56,
12693.58, 12693.766, 12694.5, 12885, 12886, and 12887 to, to add
Chapter 9.6 (commencing with Section 10920) 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 add Sections 96.8 and 96.81 to
the Labor Code, to amend Sections 17072, 17131.4, 17131.5, 17215,
17215.1, 17215.4, and 19184 of, and to add Sections 17052, 17138.5,
17138.6, and 17216 to, the Revenue and Taxation Code,   to
add Section 1120 to, and to add Division 1.2 (commencing with Section
4800) to, the Unemployment Insurance Code, to amend Sections
14005.30, 14008.85, and 14011.16 of, to add Sections 14005.01,
14005.301, 14005.305, 14005.306,   14005.310, 14005.311,
14005.331, 14005.332, 14011.16.1, 14074.5, 14100.3, 14132.105,
14132.23, and 14155 to, to add Article 2.96 (commencing with Section
14092.5), Article 5.22 (commencing with Section 14167.22), and
Article 7 (commencing with Section 14199.10) to Chapter 7 of Part 3
of Division 9 of, and to add and repeal Article 5.21 (commencing with
Section 14167.1) of Chapter 7 of Part 3 of Division 9 of, the
Welfare and Institutions Code, relating to health care, and making an
appropriation therefor. 



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2, as amended,  Nunez   ______  .
Health care reform. 
   (1) 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 individuals 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, under the Knox-Keene Health Care
Service Plan Act of 1975, and health insurers by the Department of
Insurance. Existing law sets forth various provisions governing
individual contracts for health care coverage.  
   This bill would, on and after July 1, 2010, require all California
residents, as defined, to obtain minimum health care coverage, as
defined, and would require the Secretary of California Health and
Human Services, subject to an appropriation of funds therefor, to
establish methods to inform individuals of that requirement and to
enforce the requirement by entering into an agreement with the
Franchise Tax Board and through other specified means. However,
compliance with the requirement to obtain minimum health care
coverage would not be required until the provisions relating to
enforcement are implemented. The bill would also require the
Secretary of California Health and Human Services to, among other
things, track and assess the effects of this act, as specified. 

   The bill would require health care service plans and health
insurers offering individual contracts and policies to offer
individual contracts and policies that provide minimum health care
coverage, as established by the Secretary of California Health and
Human Services, and would require the Department of Managed Health
Care and the Department of Insurance to jointly develop a system to
categorize those contracts into 5 coverage choice categories. The
bill would enact various health insurance market reforms, to be
operative on specified dates, including requirements for guarantee
issue and guarantee renewability of individual health care service
plan contracts and individual health insurance policies. However,
these requirements would only become operative when the provisions
relating to enforcement of the requirement for individuals to obtain
minimum health care coverage are implemented. The bill would require,
on and after July 1, 2010, a health care service plan and a health
insurer, as specified, to expend for health care benefits, as
defined, 85% of certain payments they receive. The bill would require
the Department of Insurance and the Department of Managed Health
Care to jointly adopt regulations to establish uniform reporting by
plans and insurers to determine compliance with this requirement, as
specified.  
   The bill would require specified group health care service plan
contracts and group health insurance policies offered, amended, or
renewed on or after January 1, 2009, to offer at least one benefit
design that includes a Healthy Action Incentives and Rewards Program,
as specified. The bill would also authorize an employer to provide
health coverage that includes a Healthy Action Incentives and Rewards
Program to his or her employees.  
   The bill would also, as of January 1, 2009, require the Managed
Risk Medical Insurance Board to establish and administer the Health
Care Security and Cost Reduction Program to make subsidized and
unsubsidized health care coverage meeting or exceeding the
requirements for minimum health care coverage available effective
July 1, 2010. The bill would also authorize the board, upon making
certain determinations, to make available unsubsidized dental and
vision coverage. The bill would establish the premiums applicable to
and the eligibility criteria needed to purchase that coverage. The
bill would provide for the appeal of certain decisions and enact
related provisions. The bill would also create the California Health
Trust Fund in the State Treasury and continuously appropriate moneys
in that fund to the board to provide health care coverage and for the
program's expenses, as specified.  
   In addition, the bill would make it an unfair labor practice for
an employer to refer an employee, or his or her dependent, to the
Health Care Security and Cost Reduction Program or to arrange for
their application to that program to separate them from group
coverage provided through the employment relationship, and for an
employer to change the share-of-cost ratio or modify coverage in
order for an employee or his or her dependents to enroll in that
program. Because an unfair labor practice may be punishable as a
crime, the bill would impose a state-mandated local program. 

   (2) Existing law requires health care service plans to collect and
report to the Department of Managed Health Care specified
information from providers and requires the department to conduct
periodic onsite medical surveys of the health delivery system of each
plan.  
   The bill would make a plan that provides services to a beneficiary
of the Medi-Cal program, as specified, subject only to the filing,
reporting, monitoring, and survey requirements for the Medi-Cal
managed care program for designated subjects. The bill would require
the department and the State Department of Health Care Services to
develop a joint filing and review process for medical quality
surveys.  
   (3) Existing law requires health care service plans that provide
prescription drug benefits and maintain one or more drug formularies
to provide members of the public, upon request, with a copy of the
most current list of prescription drugs on the plan formulary, as
specified.  
   This bill would require a health care service plan providing
prescription drug benefits and maintaining a drug formulary to,
commencing on or before January 1, 2010, make the most current
formularies available electronically to prescribers and pharmacies.
 
   (4) Under existing law, a willful violation of the Knox-Keene
Health Care Service Plan Act of 1975 is a crime.  
   Because a willful violation of the requirements described above
relative to health care services plans would be a crime, this bill
would impose a state-mandated local program.  
   (5) Existing law provides for the licensure and regulation of
health facilities by the State Department of Public Health. Existing
law requires a noncontracting hospital to contact an enrollee's
health care service plan to obtain the enrollee's medical record
information prior to admitting the enrollee for inpatient
poststabilization care, as defined, or prior to transferring the
enrollee, if certain conditions apply. Existing law prohibits the
hospital from billing the enrollee for poststabilization care if it
is required to, and fails to, contact the enrollee's health care
services plan. Under existing law, a violation of any of these
provisions is punishable as a misdemeanor.  
   This bill would prohibit a noncontracting hospital, as defined,
from billing a covered patient for nonemergency health care services
and poststabilizing care except for applicable copayments and cost
shares. By changing the definition of an existing crime, this bill
would impose a state-mandated local program.  
   (6) Existing law imposes various responsibilities and duties on
the State Department of Public Health relating to tobacco use and
prevention programs, including administering funding for programs
relating to smoking cessation, such as the California Smokers'
Helpline.  
   This bill would require the department, to the extent that funds
are available and appropriated for this purpose, to increase the
capacity of effective smoking cessation services available from, and
expand the awareness of services available through, the California
Smokers' Helpline, as prescribed. The bill would require the
department, in consultation with the Department of Managed Health
Care, the State Department of Health Care Services, the Managed Risk
Medical Insurance Board, and the Department of Insurance, to annually
identify the 10 largest providers of health care coverage in the
state, to ascertain and summarize the smoking cessation benefits
provided by those coverage providers, to publish the benefit summary
on the department's Web site, to include the benefit summary as part
of its preventive health education against tobacco use campaign, and
to evaluate any changes in connection with the smoking cessation
benefits provided by the coverage providers, as provided.  
   The bill would also create the Community Makeover Grant program
that would be administered by the department and would require it to
award grants to local health departments in cities and counties,
which would serve as the local lead agencies in administering the
program, for the purpose of developing new programs or improving
existing programs that promote active living and healthy eating. The
bill would require the department to issue guidelines and to specify
data reporting requirements for local lead agencies to comply with
various requirements relating to the administration of the program.
The bill would also require the department to develop a sustained
media campaign to educate the public about the importance of obesity
prevention.  
   (7) Existing law establishes the Healthy Families Program,
administered by the Managed Risk Medical Insurance Board, to arrange
for the provision of health, dental, and vision services to eligible
children. Existing law provides for the Healthy Families Fund, which
is continuously appropriated to the board for the purposes of funding
the Healthy Families Program. Eligibility requirements for the
program include being a child in a family with a household income
equal to or less than 200% of the federal poverty level. Existing law
also requires applicants applying to the purchasing pool to agree to
pay family contributions, unless the applicant has a family
contribution sponsor. Existing law further requires the board to
determine eligibility for the Healthy Families Program, and prohibits
a child who is a qualified alien, as defined under federal law, from
being determined ineligible for the Healthy Families Program solely
on the basis of his or her date of entry into the United States.
 
   This bill would, on July 1, 2010, revise the contribution amounts
required to be paid under the Healthy Families Program. To the extent
the bill would increase amounts deposited in a continuously
appropriated fund, it would make an appropriation. Commencing on July
1, 2010, this bill would also expand coverage under the Healthy
Families Program to include a child in a family with a household
income that is equal to or less than 300% of the federal poverty
level. This bill would, on July 1, 2010, notwithstanding any other
provision of law, prohibit a child who is otherwise eligible for
services under the Healthy Families Program from being determined
ineligible solely on the basis of his or her immigration status.
 
   This bill would also, upon implementation of a specified
provision, authorize each county department that is required to make
eligibility determinations for the Medi-Cal program to also make the
eligibility determinations for the Healthy Families Program and for
the subsidized coverage made available in the Health Care Security
and Cost Reduction Program.  
   In addition, this bill would establish confidentiality procedures
applicable to information concerning applicants, subscribers, and
household members made or kept in connection with the administration
of the Healthy Families Program and would require the Managed Risk
Medical Insurance Board to develop documentation procedures for
certain program applicants.  
   (8) Existing law provides for the Medi-Cal program, which is
administered by the State Department of Health Care Services, and
under which qualified low-income persons receive health care
benefits. Existing law requires the State Department of Health Care
Services to exercise its option under federal law to expand Medi-Cal
eligibility by establishing the amount of countable resources
individuals and families are allowed to retain at the same amount
medically needy individuals and families, as defined, are allowed to
retain, as specified.  
   This bill would require the department to exercise its federal
option as necessary to simplify Medi-Cal eligibility by exempting all
resources for applicants and recipients, commencing July 1, 2010.
The bill would provide Medi-Cal benefits to, among others,
individuals under 19 years of age who would be eligible for
full-scope benefits without a share of cost, but for their
immigration status, as specified. The bill would also expand
eligibility under the Medi-Cal program, commencing July 1, 2010, by,
among other things, requiring the department to provide Medi-Cal
benefits to specified populations, including parents and caretaker
relatives, and individuals 19 and 20 years of age who meet designated
eligibility requirements. The bill would require certain of these
individuals to receive their benefits in the form of a benchmark
package, which would be the subsidized benefit package or packages
established under the Health Care Security and Cost Reduction
Program. The bill would provide for the benchmark benefits to be
administered by the Managed Risk Medical Insurance Board, pursuant to
a cooperative agreement with the department. The bill would exempt
designated categories of beneficiaries from mandatory enrollment in
the benchmark package. The bill would make these provisions subject
to federal financial participation and approval, as specified. 

   Because each county is required to determine eligibility for the
Medi-Cal program, this bill would, by expanding program eligibility,
impose a state-mandated local program.  
   In addition, the bill would create the Local Coverage Options
program and authorize the Director of Health Care Services to
contract with specified counties to provide the benchmark package
benefits discussed above to county residents who, among other
requirements, have a family income at or below 100% of the federal
poverty level and are not eligible for Medi-Cal. The bill would
require the department to request for applications from those
counties, would specify the information required to be included in
the applications, and would enact other related provisions. The bill
would make implementation of these provisions contingent on the
establishment of certain requirements under which counties pay a
share of cost for persons enrolled in the Medi-Cal program or the
Health Care Security and Cost Reduction Program, as specified. 

   (9) Existing law requires the State Department of Health Care
Services to implement a requirement for beneficiaries of the Medi-Cal
program to file semiannual status reports, as specified.  
   This bill would instead require the department, commencing July 1,
2010, to implement a requirement for any beneficiary who is not
required to make premium payments to file a semiannual address
verification report. The bill would exempt certain beneficiaries from
this requirement, and would suspend operation of the semiannual
status report requirement during the implementation of the address
verification report requirement. The bill would also make various
conforming changes.  
   (10) Existing law requires that funds for the administration of
the Medi-Cal program be advanced to the counties for the costs of
administering the program, and provides that such advances may be
made to counties for the costs of care under the program.  
   This bill would declare the Legislature's findings that counties
would benefit from the bill's provisions and should contribute to the
cost of providing health care coverage to persons who were without
private coverage and ineligible for state coverage. The bill would
declare the intent of the Legislature to establish a mechanism
through which counties are required to contribute to the cost of
providing health care coverage to individuals currently relying on
counties for medical services.  
   (11) Existing law authorizes the California Medical Assistance
Commission to negotiate selective provider contracts with eligible
hospitals to provide inpatient hospital services to Medi-Cal
beneficiaries. Under existing law, the Medi-Cal Hospital/Uninsured
Care Demonstration Project Act, specified hospital reimbursement
methodologies are applied in order to maximize the use of federal
funds consistent with federal Medicaid law and stabilize the
distribution of funding for hospitals that provide care to Medi-Cal
beneficiaries and uninsured patients. Funding for the demonstration
project comes from, in part, the Health Care Support Fund, which is a
continuously appropriated fund in the State Treasury consisting of
federal safety net care pool funds, as defined, that are claimed and
received by the department.  
   This bill would enact the Medi-Cal Hospital Rate Stabilization
Act, which would revise the methodology by which safety net care pool
funds are paid to designated public hospitals. The bill would
require the State Department of Health Care Services to determine new
methods and standards for payments for outpatient services, as
defined, and to determine an inpatient base rate, as defined. The
bill would authorize a designated public hospital, or governmental
entity with which it is affiliated, that operates a nonhospital
clinic or that provides other health care services other than
hospital services, to receive from the Health Care Support Fund, to
the extent funds are available, an amount equal to the federal funds
derived from the certification of all or a portion of the hospital's
or entity's uncompensated costs for providing services to the
uninsured. If, for any fiscal year, the amount payable from the
Health Care Support Fund pursuant to the act's provisions is
insufficient, this bill would require each designated public hospital
or governmental entity to receive a pro rata share of these funds,
as determined in accordance with a specified formula. The bill would
also, commencing July 1, 2010, establish specified reimbursement rate
methodologies under the Medi-Cal program for hospital services, as
defined, that are rendered by designated public hospitals, as
specified. The bill would specify, for the 2010-11 fiscal year, that
the nonfederal share of payments for inpatient hospital services be
made from appropriations in the annual Budget Act and would also
specify, for the 2011-12 fiscal year and thereafter, the computation
methodology for those payments. The bill would make implementation of
these provisions contingent on the establishment of certain
requirements under which counties pay a share of cost for persons
enrolled in the Medi-Cal program or the Health Care Security and Cost
Reduction Program, as specified, and the imposition of a 4% fee on
the net patient revenue of acute care hospitals.  
   This bill would also enact the Medi-Cal Physician Services Rate
Increase Act, which would establish, with respect to services
rendered to Medi-Cal beneficiaries on and after July 1, 2010,
increased reimbursements for physicians, physician groups,
podiatrists, and nonphysician medical practitioners, as defined, that
are enrolled Medi-Cal providers eligible to receive payments for
Medi-Cal services. The bill would permit some of these rate increases
to be linked to specified performance measures, and would provide
that these rate increases would only be implemented to the extent
that state funds are appropriated for the nonfederal share of these
increases. The bill would require the Director of Health Care
Services to seek federal approval of the rate methodology set forth
in the act and would prohibit the methodology from being implemented
if federal approval is not obtained.  
   (12) Existing law specifies certain covered benefits under the
Medi-Cal program.  
   This bill would require the State Department of Health Care
Services to establish a Healthy Action Incentives and Rewards
Program, as specified, to be provided as a covered benefit under the
Medi-Cal program to the extent allowed under federal law and to the
extent that federal financial participation is provided for that
purpose.  
   The bill would also establish, as a Medi-Cal benefit, the
Comprehensive Diabetes Services Program to provide, to the extent
allowed under federal law and to the extent federal participation is
available and obtained for this purpose, comprehensive diabetes
prevention and management services to individuals that meet specified
eligibility criteria. The bill would require the State Department of
Health Care Services to develop and implement incentives for
fee-for-service eligible beneficiaries and providers who participate
in the program, as provided.  
   The bill would require the department, in consultation with the
California Diabetes Program, which this bill would also create within
the State Department of Public Health, to contract with an
independent organization to evaluate and report health outcomes and
cost savings in connection to the Comprehensive Diabetes Services
Program. The bill would require the California Diabetes Program to
provide information on diabetes prevention to the public and
technical assistance to the Medi-Cal program and the State Department
of Health Care Services provided that funds are appropriated for
those purposes, as specified.  
   (13) Under existing federal law, a cafeteria plan is a written
plan through which employees choose among 2 or more benefits
consisting of cash and qualified benefits. Existing federal law
provides that, except as specified, no amount is included in the
gross income of a participant in a cafeteria plan solely because the
participant may choose among the benefits of the plan.  
   This bill would, beginning January 1, 2010, require an employer,
as defined, of 2 or more full-time equivalent employees in the state
to adopt and maintain a cafeteria plan to allow employees to pay
premiums for health care coverage to the extent amounts for that
coverage are excludable from the gross income of the employee, as
specified. The bill would require an employer who fails to establish
or maintain a cafeteria plan to pay a penalty of $100 or $500 per
employee, as specified.  
   (14) Existing law, the Personal Income Tax Law, authorizes various
deductions in computing income that is subject to tax under that law
and also authorizes various credits against the taxes imposed by
that law.  
   This bill would, for taxable years beginning on or after January
1, 2010, allow a deduction in connection with health savings accounts
in conformity with federal law. In general, the deduction would be
an amount equal to the aggregate amount paid in cash during the
taxable year by or on behalf of an eligible individual, as defined,
                                        to a health savings account
of that individual, as provided. This bill would provide related
conformity to federal law with respect to treatment of the account as
a tax-exempt trust, the allowance of rollovers from the Archer
Medical Savings Accounts to a health savings account, and penalties
in connection therewith. The bill would also declare the intent of
the Legislature to establish a tax credit to enhance the
affordability of health care coverage for persons and families not
eligible for enrollment in publicly subsidized coverage, as
specified, and would set forth the intended structure of that tax
credit.  
   (15) Existing law provides for the certification and regulation of
nurses, including nurse practitioners and nurse-midwives, by the
Board of Registered Nursing and for the licensure and regulation of
physician assistants by the Physician Assistant Committee of the
Medical Board of California. Existing law provides that a medical
assistant may administer medication upon the specific authorization
and supervision of a licensed physician and surgeon or licensed
podiatrist or, in specified clinic settings, upon the specific
authorization and supervision of a nurse practitioner, nurse-midwife,
or physician assistant.  
   This bill would remove the requirement that a medical assistant's
administration of medication upon the specific authorization and
supervision of a nurse practitioner, nurse-midwife, or physician
assistant occur in specified clinic settings, and would make related
changes.  
   (16) Existing law, the Nursing Practice Act, provides for the
licensure and regulation of nurse practitioners by the Board of
Registered Nursing which is within the Department of Consumer
Affairs. Under existing law, a physician and surgeon is prohibited
from supervising more than 4 nurse practitioners at one time. 

   This bill would instead prohibit a physician and surgeon from
supervising more than 6 nurse practitioners at one time. The bill
would create the Task Force on Nurse Practitioner Scope of Practice
that would consist of specified members appointed by the Governor,
the Speaker of the Assembly, and the Senate Committee on Rules. The
bill would make the task force responsible for developing a
recommended scope of practice for nurse practitioners and would
require the task force to report the recommended scope of practice to
the Governor and the Legislature on or before June 30, 2009. The
bill would require the Director of Consumer Affairs, on or before
July 1, 2010, to promulgate regulations that adopt the recommended
scope of practice. The bill would require the aforementioned boards
to pay the state administrative costs of implementing these
provisions.  
   (17) Existing law, the Physician Assistant Practice Act, provides
for the licensure and regulation of physician assistants by the
Physician Assistant Committee of the Medical Board of California.
Existing law prohibits a physician from supervising more than 2
physician assistants at one time, except as specified.  
   This bill would instead prohibit a physician and surgeon from
supervising more than 6 physician assistants at one time.  
   (18) Existing law relative to insurance fraud makes it a crime for
healing arts practitioners to receive money or other consideration
for, or to engage in various related activities with respect to, the
referral of patients, clients, or customers to any person. Existing
law exempts from this provision specified entities that receive
nonmonetary remuneration necessary and used solely to receive and
transmit electronic prescription information, with regard to
specified drugs.  
   This bill would include all drugs covered by the Medi-Cal program
as drugs eligible for the exemptions, and would exempt from the
prohibition pharmacists or pharmacies participating in the network of
a Medi-Cal managed care organization and health care professionals
receiving such remuneration from Medi-Cal managed care organizations.
 
   The bill would also define electronic prescribing, and would
require electronic prescribing and electronic prescribing systems to
meet specified standards and requirements, including the sharing of
specified information. The bill would require a prescriber or
prescriber's authorized agent to give patients a written receipt
containing specified information, including the patient's name and
the drug prescribed, and would require the State Department of Health
Care Services to develop a pilot program to foster the adoption and
use of electronic prescribing by health care providers that contract
with Medi-Cal, as specified. The bill would require every licensed
prescriber, or prescriber's authorized agent, or pharmacy operating
in California to, on or before January 1, 2010, have the ability to
transmit and receive prescriptions by electronic data transmission.
 
   (19) Existing law, the Public Employees' Medical and Hospital Care
Act, authorizes the Board of Administration of the Public Employees'
Retirement System to contract with carriers of health benefit plans
and major medical plans for employees and annuitants, as defined, and
approve other specified plans.  
   This bill would require the board to provide or arrange for the
provision of a Healthy Action Incentives and Rewards Program, as
specified, to all enrollees. The bill would also authorize the Public
Employees' Retirement System, the Medi-Cal program, and the Healthy
Families Program to provide or arrange for the provision of an
electronic personal health record meeting specified requirements for
enrollees receiving health care benefits, to the extent that funds
are appropriated for that purpose. The bill would require that system
or software that pertains to the personal health record to adhere to
accepted national standards for interoperability, privacy, and data
exchange, or be certified by a nationally recognized certifying body,
and comply with applicable state and federal confidentiality and
data security requirements.  
   (20) Existing law provides for the Office of Statewide Health
Planning and Development, which has specified powers and duties.
Existing law requires the office to publish specified reports. 

   This bill would require the office to publish risk-adjusted
outcome reports for percutaneous coronary interventions, commencing
January 1, 2010, and would require the office to establish a clinical
data collection program to collect data on percutaneous coronary
interventions and establish by regulation the data to be reported by
each hospital.  
   This bill would also create the Health Care Cost and Quality
Transparency Committee to be composed of 7 members to be appointed by
the Governor, the Senate Committee on Rules, and the Speaker of the
Assembly, as specified. The bill would require the committee to meet
at least monthly and to, within one year of its first meeting,
develop and present to the Secretary of California Health and Human
Services a health care cost quality and transparency plan consisting
of specified strategies in order to, among other things, assist in
efforts to reduce health care costs in the health care system. The
bill would provide for the abolition of the committee on January 1,
2011.  
   The bill would also require that a lead agency, as defined,
provide administrative support to the committee. The bill would
specify the authority and responsibilities of the lead agency,
including, but not limited to, the responsibility to determine the
data to be collected and the authority to appoint advisory committees
and to contract with a qualified agency or public academic
institution, as specified. The bill would require the lead agency to
provide the Secretary of California Health and Human Services with a
proposal that would identify possible financial resources to
implement these provisions.  
   (21) Existing law requires the governing board of any school
district to make rules for the physical examination of pupils that
will ensure proper care of the pupils and proper secrecy with regard
to any defects noted.  
   This bill would authorize each school district, on and after
January 1, 2010, to provide an information sheet developed by the
State Department of Education, in consultation with the State
Department of Health Care Services and the Managed Risk Medical
Insurance Board, to the parent or legal guardian of specified pupils.
The information sheet would be required to include, among other
information, an explanation of the minimum health care coverage
requirements imposed by this act, as specified.  
   (22) This bill would give the Director of Health Care Services, in
consultation with the Department of Finance, authority to take
various actions as necessary to implement the bill, including
promoting flexibility of implementation and maximizing federal
financial participation. The bill would require the director to
notify the Chair of the Joint Legislative Budget Committee prior to
exercising this flexibility. The bill would declare the intent of the
Legislature to implement the bill to harmonize and best effectuate
the purposes and intent of the bill.  
   (23) The bill would make its provisions operative upon the date
that the Director of Finance files a finding with the Secretary of
State that, among other circumstances, sufficient state resources
will exist to implement those provisions. The bill would also require
the director to transmit that finding to the Chief Clerk of the
Assembly, the Secretary of the Senate, and the chairs of the
appropriate committees of the Legislature at least 90 days prior to
implementation of its provisions. The bill would express the
Legislature's intent that the act's provisions be financed by
contributions from public and private sources, including fees paid by
acute care hospitals and by employers.  
   (24) 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. 

   Existing law does not provide for a health care system for all
California residents. Existing law provides for the creation of
various programs to provide health care services 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.
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 state that it is the intent of the Legislature to
enact comprehensive health care reform. 
   Vote: majority. Appropriation:  no   yes
 . Fiscal committee:  no   yes  .
State-mandated local program:  no   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 Health Care Security and Cost Reduction Act. 
   SEC. 2.    Section 650 of the Business and
Professions Code, as amended by Chapter 483 of the Statutes of 2007,
is amended to read: 
   650.  (a) Except as provided in Chapter 2.3 (commencing with
Section 1400) of Division 2 of the Health and Safety Code, the offer,
delivery, receipt, or acceptance by any person licensed under this
division or the Chiropractic Initiative Act of any rebate, refund,
commission, preference, patronage dividend, discount, or other
consideration, whether in the form of money or otherwise, as
compensation or inducement for referring patients, clients, or
customers to any person, irrespective of any membership, proprietary
interest or coownership in or with any person to whom these patients,
clients, or customers are referred is unlawful.
   (b) The payment or receipt of consideration for services other
than the referral of patients which is based on a percentage of gross
revenue or similar type of contractual arrangement shall not be
unlawful if the consideration is commensurate with the value of the
services furnished or with the fair rental value of any premises or
equipment leased or provided by the recipient to the payer.
   (c) The offer, delivery, receipt, or acceptance of any
consideration between a  federally- qualified 
federally qualified  health center, as defined in Section 1396d
(l)(2)(B) of Title 42 of the United States Code, and any individual
or entity providing goods, items, services, donations, loans, or a
combination thereof, to the health center entity pursuant to a
contract, lease, grant, loan, or other agreement, if that agreement
contributes to the ability of the health center entity to maintain or
increase the availability, or enhance the quality, of services
provided to a medically underserved population served by the health
center, shall be permitted only to the extent sanctioned or permitted
by federal law.
   (d) Except as provided in Chapter 2.3 (commencing with Section
1400) of Division 2 of the Health and Safety Code and in Sections
654.1 and 654.2, it shall not be unlawful for any person licensed
under this division to refer a person to any laboratory, pharmacy,
clinic (including entities exempt from licensure pursuant to Section
1206 of the Health and Safety Code), or health care facility solely
because the licensee has a proprietary interest or coownership in the
laboratory, pharmacy, clinic, or health care facility; provided,
however, that the licensee's return on investment for that
proprietary interest or coownership shall be based upon the amount of
the capital investment or proportional ownership of the licensee
which ownership interest is not based on the number or value of any
patients referred. Any referral excepted under this section shall be
unlawful if the prosecutor proves that there was no valid medical
need for the referral.
   (e) (1) Except as provided in Chapter 2.3 (commencing with Section
1400) of Division 2 of the Health and Safety Code and in Sections
654.1 and 654.2, it shall not be unlawful to provide nonmonetary
remuneration, in the form of hardware, software, or information
technology and training services, necessary and used solely to
receive and transmit electronic prescription information in
accordance with the standards set forth in Section 1860D-4(e) of the
Medicare Prescription Drug, Improvement and Modernization Act of 2003
(42 U.S.C. Sec. 1395w-104) in the following situations:
   (A) In the case of a hospital, by the hospital to members of its
medical staff.
   (B) In the case of a group medical practice, by the practice to
prescribing health care professionals that are members of the
practice.
   (C) In the case of Medicare prescription drug plan sponsors or
Medicare Advantage organizations, by the sponsor or organization to
pharmacists and pharmacies participating in the network of the
sponsor or organization and to prescribing health care professionals.

   (D) In the case of a Medi-Cal managed care organization, by the
organization to pharmacists and pharmacies participating in the
network of the organization and to prescribing health care
professionals. 
   (2) The exceptions set forth in this subdivision are adopted to
conform state law with the provisions of Section 1860D-4(e)(6) of the
Medicare Prescription Drug, Improvement and Modernization Act of
2003 (42 U.S.C. Sec. 1395w-104) and are limited to drugs covered
under Part D of the federal Medicare Program that are prescribed to
Part D eligible individuals (42 U.S.C. Sec. 1395w-101)  and drugs
covered by the Medi-Cal program  .
   (3) The exceptions set forth in this subdivision shall not be
operative until the regulations required to be adopted by the
Secretary of the United States Department of Health and Human
Services, pursuant to Section 1860D-4(e) of the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (42 U.S.C. Sec.
1395W-104) are effective. If the California Health and Human Services
Agency determines that regulations are necessary to ensure that
implementation of the provisions of paragraph (1) is consistent with
the regulations adopted by the Secretary of the United States
Department of Health and Human Services, it shall adopt emergency
regulations to that effect.
    (f)     Notwithstanding  
subdivision (c) of Section 4040, "electronic prescribing" or "e-p
  rescribing" means a prescription or prescription-related
information transmitted between the point of care and the pharmacy
using electronic media. Pharmacies and prescribers shall share, when
available, patient eligibility information, drug formularies, drug
costs including generic alternatives, the patient's medical history
including other prescribed medications and allergies, and medication
reference information between a prescriber, dispenser, pharmacy
benefit manager, or health plan, either directly or through an
intermediary, including an electronic prescribing network. 

   (f) 
    (g)   "Health care facility" means a general
acute care hospital, acute psychiatric hospital, skilled nursing
facility, intermediate care facility, and any other health facility
licensed by the State Department of Public Health under Chapter 2
(commencing with Section 1250) of Division 2 of the Health and Safety
Code. 
   (g) 
    (h)  A violation of this section is a public offense and
is punishable upon a first conviction by imprisonment in the county
jail for not more than one year, or by imprisonment in the state
prison, or by a fine not exceeding fifty thousand dollars ($50,000),
or by both that imprisonment and fine. A second or subsequent
conviction is punishable by imprisonment in the state prison or by
imprisonment in the state prison and a fine of fifty thousand dollars
($50,000).
   SEC. 3.    Section 650.5 is added to the  
Business and Professions Code   , to read:  
   650.5.  (a) Notwithstanding Section 650 or any other provision of
law, the provision by a health care provider, or his or her agent, of
legally recognized incentives and rewards delivered for the purposes
of and in accordance with the criteria and requirements established
under Section 1367.38 of the Health and Safety Code, Section 10123.56
of the Insurance Code, Section 96.8 of the Labor Code, or Sections
14132.23 and 14132.105 of the Welfare and Institutions Code shall not
be considered or construed as an unlawful practice, act, kickback,
bribe, rebate, remuneration, offer, payment, or any other form of
compensation made directly or indirectly, overtly or covertly, in
exchange for another to obtain, participate, or otherwise undergo or
receive health care services.
   (b) This section shall only be implemented if and to the extent
allowed under federal law. If any portion of this section is held to
be invalid, as determined by a final judgment of a court of competent
jurisdiction, this section shall become inoperative. 
   SEC. 4.    Section 2069 of the   Business
and Professions Code   is amended to read: 
   2069.  (a) (1) Notwithstanding any other provision of law, a
medical assistant may administer medication only by intradermal,
subcutaneous, or intramuscular injections and perform skin tests and
additional technical supportive services upon the specific
authorization and supervision of a licensed physician and surgeon
 ,   nurse practitioner, nurse-midwife, physician
assistant,  or  a  licensed podiatrist.
 A medical assistant may also perform all these tasks and
services in a clinic licensed pursuant to subdivision (a) of Section
1204 of the Health and Safety Code upon the specific authorization of
a physician assistant, a nurse practitioner, or a nurse-midwife.

   (2) The  supervising physician and surgeon at a clinic
described in paragraph (1)   licensed physician and
surgeon, nurse practitioner, nurse-midwife, physician assistant, or
licensed podiatrist  may, at his or her discretion,  in
consultation with the nurse practitioner, nurse-midwife, or physician
assistant  provide written instructions to be followed by a
medical assistant in the performance of tasks or supportive
services. These written instructions may provide that the 
supervisory function for the medical assistant for these tasks or
supportive services may be delegated to the nurse practitioner,
nurse-midwife, or physician assistant within the standardized
procedures or protocol, and that  tasks may be performed
when the  supervising physician and surgeon  
licensed physician and surgeon, nurse practitioner, nurse-midwife,
physician assistant, or li   censed podiatrist  is not
onsite, so long as the following apply:
   (A) The nurse practitioner or nurse-midwife is functioning
pursuant to standardized procedures, as defined by Section 2725, or
protocol. The standardized procedures or protocol shall be developed
and approved by the supervising physician and surgeon, the nurse
practitioner or nurse-midwife, and the facility administrator or his
or her designee.
   (B) The physician assistant is functioning pursuant to regulated
services defined in Section 3502 and is approved to do so by the
supervising physician or surgeon.
   (b) As used in this section and Sections 2070 and 2071, the
following definitions shall apply:
   (1) "Medical assistant" means a person who may be unlicensed, who
performs basic administrative, clerical, and technical supportive
services in compliance with this section and Section 2070 for a
licensed physician and surgeon or a licensed podiatrist, or group
thereof, for a medical  , nursing,  or podiatry corporation,
for a physician assistant, a nurse practitioner, or a nurse-midwife
as provided in subdivision (a), or for a health care service plan,
who is at least 18 years of age, and who has had at least the minimum
amount of hours of appropriate training pursuant to standards
established by the Division of Licensing. The medical assistant shall
be issued a certificate by the training institution or instructor
indicating satisfactory completion of the required training. A copy
of the certificate shall be retained as a record by each employer of
the medical assistant.
   (2) "Specific authorization" means a specific written order
prepared by the  supervising physician and surgeon or the
supervising podiatrist, or the physician assistant, the nurse
practitioner, or the nurse-midwife as provided in subdivision (a),
  licensed physician and surgeon, nurse practitioner,
nurse-midwife, physician assistant, or licensed podiatrist 
authorizing the procedures to be performed on a patient, which shall
be placed in the patient's medical record, or a standing order
prepared by the  supervising physician and surgeon or the
supervising podiatrist, or the physician assistant, the nurse
practitioner, or the nurse-midwife as provided in subdivision (a),
  licensed physician and surgeon, nurse practitioner,
nurse-midwife, physician assistant, or licensed podiatrist, 
authorizing the procedures to be performed, the duration of which
shall be consistent with accepted medical practice. A notation of the
standing order shall be placed on the patient's medical record.
   (3) "Supervision" means the supervision of procedures authorized
by this section by the following practitioners, within the scope of
their respective practices, who shall be physically present in the
treatment facility during the performance of those procedures:
   (A) A licensed physician and surgeon.
   (B) A licensed podiatrist.
   (C) A physician assistant, nurse practitioner, or nurse-midwife
 as provided in subdivision (a)  .
   (4) "Technical supportive services" means simple routine medical
tasks and procedures that may be safely performed by a medical
assistant who has limited training and who functions under the
supervision of a licensed physician and surgeon  or 
 ,  a licensed podiatrist,  or  a
physician assistant, a nurse practitioner, or a nurse-midwife
 as provided in subdivision (a)  .
   (c) Nothing in this section shall be construed as authorizing the
licensure of medical assistants. Nothing in this section shall be
construed as authorizing the administration of local anesthetic
agents by a medical assistant. Nothing in this section shall be
construed as authorizing the division to adopt any regulations that
violate the prohibitions on diagnosis or treatment in Section 2052.
   (d) Notwithstanding any other provision of law, a medical
assistant may not be employed for inpatient care in a licensed
general acute care hospital as defined in subdivision (a) of Section
1250 of the Health and Safety Code.
   (e) Nothing in this section shall be construed as authorizing a
medical assistant to perform any clinical laboratory test or
examination for which he or she is not authorized by Chapter 3
(commencing with Section 1200). Nothing in this section shall be
construed as authorizing a nurse practitioner, nurse-midwife, or
physician assistant to be a laboratory director of a clinical
laboratory, as those terms are defined in paragraph (7) of
subdivision (a) of Section 1206 and subdivision (a) of Section 1209.
   SEC. 5.    Section 2836.1 of the   Business
and Professions Code   is amended to read: 
   2836.1.  Neither this chapter nor any other provision of law shall
be construed to prohibit a nurse practitioner from furnishing or
ordering drugs or devices when all of the following apply:
   (a) The drugs or devices are furnished or ordered by a nurse
practitioner in accordance with standardized procedures or protocols
developed by the nurse practitioner and the supervising physician and
surgeon when the drugs or devices furnished or ordered are
consistent with the practitioner's educational preparation or for
which clinical competency has been established and maintained.
   (b) The nurse practitioner is functioning pursuant to standardized
procedure, as defined by Section 2725, or protocol. The standardized
procedure or protocol shall be developed and approved by the
supervising physician and surgeon, the nurse practitioner, and the
facility administrator or the designee.
   (c) (1) The standardized procedure or protocol covering the
furnishing of drugs or devices shall specify which nurse
practitioners may furnish or order drugs or devices, which drugs or
devices may be furnished or ordered, under what circumstances, the
extent of physician and surgeon supervision, the method of periodic
review of the nurse practitioner's competence, including peer review,
and review of the provisions of the standardized procedure.
   (2) In addition to the requirements in paragraph (1), for Schedule
II controlled substance protocols, the provision for furnishing
Schedule II controlled substances shall address the diagnosis of the
illness, injury, or condition for which the Schedule II controlled
substance is to be furnished.
   (d) The furnishing or ordering of drugs or devices by a nurse
practitioner occurs under physician and surgeon supervision.
Physician and surgeon supervision shall not be construed to require
the physical presence of the physician, but does include (1)
collaboration on the development of the standardized procedure, (2)
approval of the standardized procedure, and (3) availability by
telephonic contact at the time of patient examination by the nurse
practitioner.
   (e) For purposes of this section, no physician and surgeon shall
supervise more than  four   six  nurse
practitioners at one time.
   (f) (1) Drugs or devices furnished or ordered by a nurse
practitioner may include Schedule II through Schedule V controlled
substances under the California Uniform Controlled Substances Act
(Division 10 (commencing with Section 11000) of the Health and Safety
Code) and shall be further limited to those drugs agreed upon by the
nurse practitioner and physician and surgeon and specified in the
standardized procedure.
   (2) When Schedule II or III controlled substances, as defined in
Sections 11055 and 11056, respectively, of the Health and Safety
Code, are furnished or ordered by a nurse practitioner, the
controlled substances shall be furnished or ordered in accordance
with a patient-specific protocol approved by the treating or
supervising physician. A copy of the section of the nurse
practitioner's standardized procedure relating to controlled
substances shall be provided, upon request, to any licensed
pharmacist who dispenses drugs or devices, when there is uncertainty
about the nurse practitioner furnishing the order.
   (g) (1) The board has certified in accordance with Section 2836.3
that the nurse practitioner has satisfactorily completed (1) at least
six month's physician and surgeon-supervised experience in the
furnishing or ordering of drugs or devices and (2) a course in
pharmacology covering the drugs or devices to be furnished or ordered
under this section.
   (2) Nurse practitioners who are certified by the board and hold an
active furnishing number, who are authorized through standardized
procedures or protocols to furnish Schedule II controlled substances,
and who are registered with the United States Drug Enforcement
Administration, shall complete, as part of their continuing education
requirements, a course including Schedule II controlled substances
based on the standards developed by the board. The board shall
establish the requirements for satisfactory completion of this
subdivision.
   (h) Use of the term "furnishing" in this section, in health
facilities defined in Section 1250 of the Health and Safety Code,
shall include (1) the ordering of a drug or device in accordance with
the standardized procedure and (2) transmitting an order of a
supervising physician and surgeon.
   (i) "Drug order" or "order" for purposes of this section means an
order for medication which is dispensed to or for an ultimate user,
issued by a nurse practitioner as an individual practitioner, within
the meaning of Section 1306.02 of Title 21 of the Code of Federal
Regulations. Notwithstanding any other provision of law, (1) a drug
order issued pursuant to this section shall be treated in the same
manner as a prescription of the supervising physician; (2) all
references to "prescription" in this code and the Health and Safety
Code shall include drug orders issued by nurse practitioners; and (3)
the signature of a nurse practitioner on a drug order issued in
accordance with this section shall be deemed to be the signature of a
prescriber for purposes of this code and the Health and Safety Code.

   SEC. 6.    Section 2838 is added to the  
Business and Professions Code   , to read:  
   2838.  (a) The Task Force on Nurse Practitioner Scope of Practice
is hereby created and shall consist of the following members:
   (1) The Director of Consumer Affairs, who shall serve as an ex
officio member of the task force and shall cast the deciding vote in
any matter voted upon by the task force that results in a tie vote.
   (2) Three members of the Medical Board of California, two of whom
shall be appointed to the task force by the Governor, and one of whom
shall be appointed to the task force by the Speaker of the Assembly.

   (3) Three members of the Board of Registered Nursing, two of whom
shall be appointed to the task force by the Governor, and one of whom
shall be appointed to the task force by the Senate Committee on
Rules.
   (4) Two representatives of an institution of higher education, who
shall be appointed to the task force by the Governor as nonvoting
members.
   (b) The duty of the task force shall be to develop a recommended
scope of practice for nurse practitioners.
   (c) The task force shall report its recommended scope of practice
for nurse practitioners to the Governor and the Legislature on or
before June 30, 2009.
   (d) On or before July 1, 2010, the Director of Consumer Affairs
shall promulgate regulations that adopt the task force's recommended
scope of practice.
   (e) The Medical Board of California and the Board of Registered
Nursing shall pay the state administrative costs of implementing this
section. 
  SEC. 7.    Section 3516 of the   Business and
Professions Code   is amended to read: 
   3516.  Notwithstanding any other provision of law,  any
  a  physician assistant licensed by the committee
shall be eligible for employment or supervision by any physician
approved by the board to supervise physician assistants, except that:

   (a) No physician  and surgeon  shall supervise more than
 two   six  physician assistants at any one
time, except as provided in  Sections   Section
 3502.5  , 3516.1, and 3516.5  .
   (b) The board may restrict  physicians   a
physician and surgeon  to supervising specific types of
physician assistants  ,  including, but not limited to,
restricting  physicians   a physician and
surgeon  from supervising physician assistants outside of the
 physician's  field of specialty  of the
physician and surgeon  .
   SEC. 8.    Section 3516.1 of the   Business
and Professions Code   is repealed.  
   3516.1.  (a) (1) Notwithstanding any other provision of law, a
physician who provides services in a medically underserved area may
supervise not more than four physician assistants at any one time.
   (2) As used in this section, "medically underserved area" means a
"health professional(s) shortage area" (HPSA) as defined in Part 5
(commencing with Section 5.1) of Chapter 1 of Title 42 of the Code of
Federal Regulations or an area of the state where unmet priority
needs for physicians exist as determined by the California Healthcare
Workforce Policy Commission pursuant to Section 128225 of the Health
and Safety Code.
   (b) This section shall become inoperative on July 1, 2011, and, as
of January 1, 2012, is repealed, unless a later enacted statute that
is enacted before January 1, 2012, deletes or extends the dates on
which it becomes inoperative and is repealed. 
   SEC. 9.    Section 4040.1 is added to the  
Business and Professions Code   , to read:  
   4040.1.  Electronic prescribing shall not interfere with a patient'
s existing freedom to choose a pharmacy, and shall not interfere with
the prescribing decision at the point of care. 
   SEC. 10.    Section 4071.2 is added to the  
Business and Professions Code   , to read:  
   4071.2.  (a) On or before January 1, 2010, every licensed
prescriber, prescriber's authorized agent, or pharmacy operating in
California shall have the ability to transmit and receive
prescriptions by electronic data transmission.
   (b) The Medical Board of California, the State Board of Optometry,
the Bureau of Naturopathic Medicine, the Dental Board of California,
the Osteopathic Medical Board of California, the Board of Registered
Nursing, and the Physician Assistant Committee shall have authority
with the California State Board of Pharmacy to ensure compliance with
this section, and those boards are specifically charged with the
enforcement of this section with respect to their respective
licensees.
   (c) Nothing in this section shall be construed to diminish or
modify any requirements or protections provided for in the
prescription of controlled substances as otherwise established by
this chapter or by the California Uniform Controlled Substances Act
(Division 10 (commencing with Section 11000) of the Health and Safety
Code). 
   SEC. 11.    Section 4071.3 is added to the  
Business and Professions Code   , to read:  
   4071.3.  Every electronic prescription system shall meet all of
the following requirements:
   (a) Comply with nationally recognized or certified standards for
data exchange or be accredited by a recognized accreditation
organization.
   (b) Allow real-time verification of an individual's eligibility
for benefits and whether the prescribed medication is a covered
benefit.
   (c) Comply with applicable state and federal confidentiality and
data security requirements.
   (d) Comply with applicable state record retention and reporting
requirements. 
   SEC. 12.    Section 4071.4 is added to the  
Business and Professions Code   , to read:  
   4071.4.  A prescriber or prescriber's authorized agent using an
electronic prescription system shall offer patients a written receipt
of the information that has been transmitted electronically to the
pharmacy. The receipt shall include the patient's name, the dosage
and drug prescribed, the name of the pharmacy where the electronic
prescription was sent, and shall indicate that the receipt cannot be
used as a duplicate order for
            the same medicine. 
   SEC. 13.    Section 49452.9 is added to the 
 Education Code   , to read:  
   49452.9.  (a) On and after January 1, 2010, the school district
may provide an information sheet regarding health insurance
requirements to the parent or guardian of all of the following:
   (1) A pupil enrolled in kindergarten.
   (2) A pupil enrolled in first grade if the pupil was not
previously enrolled in kindergarten.
   (3) A pupil enrolled during the course of the year in the case of
children who have recently arrived, and intend to remain, in
California.
   (b) The information sheet described in subdivision (a) shall
include all of the following:
   (1) An explanation of the health insurance requirements under
Section 8899.50 of the Government Code.
   (2) Information on the important relationship between health and
learning.
   (3) A toll-free telephone number to request an application for
Healthy Families, Medi-Cal, or other government-subsidized health
insurance programs.
   (4) Contact information for county public health departments.
   (5) A statement of privacy applicable under state and federal laws
and regulations.
   (c) By January 1, 2010, the State Department of Education shall,
in consultation with the State Department of Health Care Services and
the Managed Risk Medical Insurance Board, develop a standardized
template for the information sheet required by this section. To the
extent possible, the information provided pursuant to this section
shall be consolidated with the information listed in subdivision (c)
of Section 49452.8 into one document. The State Department of
Education shall make the template available on its Internet Web site
and shall, upon request, provide written copies of the template to a
school district. 
   SEC. 14.    Chapter 15 (commencing with Section
8899.50) is added to Division 1 of Title 2 of the  
Government Code   , to read:  
      CHAPTER 15.  MINIMUM HEALTH CARE COVERAGE


   8899.50.  (a) On and after July 1, 2010, every California resident
shall be enrolled in and maintain at least minimum health care
coverage.
   (b) On and after July 1, 2010, a subscriber shall obtain at least
minimum health care coverage for any individual who qualifies as his
or her dependent, as defined by Section 152 of the United States
Internal Revenue Code, as applicable for purposes of Part 10 of the
Revenue and Taxation Code (commencing with Section 17001).
   (c) Notwithstanding subdivisions (a) and (b), compliance with
those subdivisions shall not be required until Section 8899.52 is
implemented.
   8899.51.  For purposes of this chapter, the following definitions
shall apply:
   (a) "Minimum health care coverage" means enrollment in any of the
following:
   (1) A health plan contract that provides at least the minimum
health care coverage pursuant to Section 1399.824 of the Health and
Safety Code.
   (2) A health insurance policy that provides at least the minimum
health care coverage pursuant to Section 10923 of the Insurance Code.

   (3) The federal Medicare Program pursuant to Title XVIII of the
federal Social Security Act if the scope of services covered is
equivalent to that covered by Medicare Parts A and B.
   (4) The Medicaid Program pursuant to Title XIX of the Social
Security Act, but only if the individual has full scope coverage with
either (A) no share of cost or (B) a share of cost but eligibility
was established on the basis of his or her status as aged, blind, or
disabled.
   (5) The Healthy Families Program pursuant to Part 6.2 (commencing
with Section 12693) of Division 2 of the Insurance Code.
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A health plan offered under Chapter 9 (commencing with Section
8901) of Title 5 of the United States Code (Federal Employees Health
Benefits Program (FEHBP)).
   (8) 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.
   (9) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C. Sec. 2504(e)).
   (10) Subsidized or unsubsidized health care coverage made
available in the program established pursuant to Part 6.45
(commencing with Section 12699.201) of Division 2 of the Insurance
Code.
   (11) County-sponsored health care coverage that includes both
inpatient and outpatient care for low-income persons not otherwise
eligible for subsidized coverage.
   (12) Employer-sponsored health care coverage.
   (13) Group health care coverage that is provided pursuant to
Chapter 2.2 (commencing with Section 1340) of Division 2 of the
Health and Safety Code, and that provides at least minimum health
care coverage as defined in Section 1399.824 of the Health and Safety
Code.
   (14) Group health insurance, as defined by subdivision (b) of
Section 106 of the Insurance Code, that covers hospital, surgical,
and medical care expenses and that provides at least minimum health
care coverage as defined in Section 10923 of the Insurance Code. For
the purposes of this section, group health insurance shall not
include Medicare supplement, vision-only, dental-only, behavioral
health-only, pharmacy-only, CHAMPUS-supplement or Tricare supplement,
hospital indemnity, hospital-only, accident-only, or specified
disease insurance that does not pay benefits on a fixed benefit,
cash-payment-only basis.
   (15) A Taft-Hartley health and welfare fund or any other lawful
collective bargaining agreement that provides for health and welfare
coverage for collective bargaining unit employees or other employees
thereby covered.
   (16) An employer-sponsored group health plan meeting the
requirements of the federal Employee Retirement Income Security Act
of 1974.
   (17) A multiple employer welfare arrangement that holds a valid
certificate of compliance under Section 742.20 of the Insurance Code.

   (18) Health coverage provided under the Public Employees' Medical
and Hospital Care Act (Part 5 (commencing with Section 22850) of
Division 5 of Title 2).
   (19) Health coverage provided under the Major Risk Medical
Insurance Program (Part 6.5 (commencing with Section 12700) of
Division 2 of the Insurance Code).
   (20) Health care coverage through CHAMPUS or Tricare or health
care coverage for veterans.
   (21) Health care coverage for students through a group or blanket
health plan or health insurance policy issued to an institution of
higher education that is accredited by an accreditation agency.
   (b) "California resident" means an individual who is a resident of
the state pursuant to Section 244 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
for health care coverage or after acceptance.
   (c) "Subscriber" means the individual who is responsible for
payment to a health care service plan or to a health insurer or whose
employment or other status, except for family dependency, is the
basis for eligibility for membership in the plan.
   8899.52.  (a) The Secretary of California Health and Human
Services shall establish methods by which individuals who have not
obtained health care coverage will be informed of the method
available to obtain affordable coverage through public programs, the
program established pursuant to Part 6.45 (commencing with Section
12699.201) of Division 2 of the Insurance Code, and commercial
coverage. The secretary may also establish methods to ensure that
uninsured individuals obtain the minimum required coverage. The
secretary may pay the cost of health care coverage on behalf of an
uninsured individual enrolled in minimum health care coverage and may
establish methods by which funds advanced for coverage may be
recouped by the state from individuals for whom coverage is
purchased. The recoupment may include interest. The secretary may
enter into an agreement with the Franchise Tax Board to use the board'
s civil authority and procedures in compliance with notice and other
due process requirements imposed by law to collect funds owed to the
state that were advanced to individuals.
   (b) To the extent possible, activities undertaken pursuant to this
section shall be based on existing reporting processes employed
throughout the state to report on the employment and tax status of
individuals and other existing mechanisms. The Franchise Tax Board,
the Employment Development Department, the Department of Motor
Vehicles, and other appropriate state agencies shall cooperate with
the secretary and other responsible entities in undertaking these
activities and implementing this section.
   (c) The secretary may enter into, or authorize entities within the
agency to enter into, agreements with other agencies or departments
to perform the activities required under this section. In addition,
the secretary may contract with private vendors to accomplish the
purposes of this section.
   (d) The Secretary shall adopt regulations, as appropriate, to
implement this section.
   (e) Implementation of this section shall be contingent on the
appropriation of funds for the purposes of this section in the annual
Budget Act or another statute. 
   SEC. 15.    Section 12803.2 is added to the 
 Government Code   , to read: 
   12803.2.  (a) (1) The Secretary of California Health and Human
Services, in collaboration with other relevant state agencies, shall
track and assess the effects of health care reform as set forth in
the act enacting this section. The secretary shall either complete
the assessment or contract for its preparation. 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
program established pursuant to Part 6.45 (commencing with Section
12699.201) of Division 2 of the Insurance Code. This assessment shall
include data regarding persons purchasing health care coverage
through that program.
   (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
Healthy Families 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 offerings, their efficiency in providing
health care services, and their financial conditions, including their
medical loss ratios.
   (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 the change in access and availability of
health care coverage 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.
   (F) 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.
   (G) An overall assessment of health care coverage.
   (H) An assessment of the capacity of the various health care
professions and facilities to provide care to Californians.
   (2) An advisory body of individuals with knowledge and expertise
in health care policy and financing shall provide input on the
assessment described in paragraph (1). 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 described in paragraph
(1) shall maximize the use of 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
assessment described in paragraph (1) shall include data from years
prior to the enactment of the program established pursuant to Part
6.45 (commencing with Section 12699.201) of Division 2 of the
Insurance Code.
   (5) The Secretary of California Health and Human Services shall
submit the assessment described in paragraph (1) to the appropriate
policy and fiscal committees of the Legislature on or before March 1,
2012. The secretary shall update the assessment biennially.
   (b) 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 may 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, programs pursuant to the Public Employees' Medical and Hospital
Care Act, the Healthy Families Program, the Major Risk Medical
Insurance Program, the Medi-Cal program, and the Health Care Security
and Cost Reduction Program. 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.

   SEC. 16.    Section 22830.5 is added to the 
 Government Code   , to read:  
   22830.5.  (a) On or before January 1, 2009, the board shall
provide or arrange for the provision of an electronic personal health
record for enrollees receiving health care benefits. The record
shall be provided for the purpose of providing enrollees with
information to assist them in understanding their coverage benefits
and managing their health care.
   (b) At a minimum, the personal health record shall provide access
to real-time, patient-specific information regarding eligibility for
covered benefits and cost sharing requirements. Such access can be
provided through the use of an Internet-based system.
   (c) In addition to the data required pursuant to subdivision (b),
the board may determine that the personal health record shall also
incorporate additional data, such as laboratory results, prescription
history, claims history, and personal health information authorized
or provided by the enrollee. Inclusion of this additional data shall
be at the option of the enrollee.
   (d) Systems or software that pertain to the personal health record
shall adhere to accepted national standards for interoperability,
privacy, and data exchange, or shall be certified by a nationally
recognized certification body.
   (e) The personal health record shall comply with applicable state
and federal confidentiality and data security requirements. 
   SEC. 17.    Section 22830.6 is added to the 
 Government Code   , to read:  
   22830.6.  On or before January 1, 2009, the board shall provide or
arrange for the provision of a Healthy Action Incentives and Rewards
Program, as described in subdivision (c) of Section 1367.38 of the
Health and Safety Code, to all enrollees. 
   SEC. 18.    Section 1262.9 is added to the  
Health and Safety Code   , to read:  
   1262.9.  (a) If a patient has coverage for emergency health care
services and poststabilizing care, a noncontracting hospital shall
not bill the patient for emergency health care services and
poststabilizing care, except for applicable copayments and cost
shares.
   (b) The noncontracting hospital and the health care service plan
or health insurer shall each retain their right to pursue all
currently available legal remedies they may have against each other,
including the right to determine the final payment due.
   (c) For the purposes of this section:
   (1) "Noncontracting hospital" means a general acute care hospital
as defined in subdivision (a) of Section 1250 that has a special
permit to operate an emergency medical service and does not have a
contract with a health care service plan or a health insurer for the
provision of emergency health care services and poststabilizing care
to the patient, who is one of that health care service plan's or
health insurer's enrollees, members, or insureds.
   (2) "Emergency health care services and poststabilizing care"
means emergency services and out-of-area urgent services provided in
an emergency department and a hospital through discharge in
compliance with Sections 1262.8 and 1317 and, in the case of health
care service plans, the services required to be covered pursuant to
paragraph (6) of subdivision (b) of Section 1345, subdivision (i) of
Section 1367, Sections 1371.4, and 1371.5, of this code, and Sections
1300.67(g) and 1300.71.4 of Title 28 of the California Code of
Regulations. 
   SEC. 19.    Section   1342.9 is added to the
  Health and Safety Code   , to read:  
   1342.9.  (a) Notwithstanding any other provision of this chapter,
a health care service plan that provides services to a beneficiary of
the Medi-Cal program pursuant to Article 2.7 (commencing with
Section 14087.3) of, Article 2.8 (commencing with Section 14087.5)
of, or Article 2.91 (commencing with Section 14089) of, Chapter 7 of,
or Article 1 (commencing with Section 14200) or Article 7
(commencing with Section 14490) of Chapter 8 of, Part 3 of Division 9
of the Welfare and Institutions Code shall, regarding coverage for
participants in a Medi-Cal managed care program, be subject solely to
the filing, reporting, monitoring, and survey requirements
established by the State Department of Health Care Services for the
Medi-Cal managed care program as those requirements pertain to the
following subjects: advertising and marketing; member materials,
including member handbooks, evidences of coverage, and disclosure
forms; and product design, including its scope and limitations. A
health care service plan that satisfies any of the foregoing filing,
reporting, monitoring, or survey requirements shall be deemed in
compliance with corresponding provisions, if any, of this chapter.
   (b) The department and the State Department of Health Care
Services shall develop a joint filing and review process for medical
quality surveys required pursuant to Section 1380 and pursuant to
Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of
the Welfare and Institutions Code. 
   SEC. 20.    Section 1356.2 is added to the  
Health and Safety Code   , to read:  
   1356.2.  It is the intent of the Legislature to establish a
mechanism by which the state may defray the costs of an enrollee's
public program participation by taking advantage of other
opportunities for coverage available to that enrollee. 
   SEC. 21.    Section 1357.54 of the   Health
and Safety Code   is amended to read: 
   1357.54.  All individual health benefit plans, except for
short-term limited duration insurance, shall be renewable with
respect to all eligible individuals or dependents at the option of
the individual except as follows:
   (a) For nonpayment of the required premiums or contributions by
the individual in accordance with the terms of the health insurance
coverage or the timeliness of the payments.
   (b) For fraud or intentional misrepresentation of material fact
under the terms of the coverage by the individual.
   (c) Movement of the individual contractholder outside the service
area, but only if the coverage is terminated uniformly without regard
to any health status-related factor of covered individuals.
   (d) If the plan ceases to provide or arrange for the provision of
health care services for new individual health benefit plans in this
state; provided, however, that the following conditions are
satisfied:
   (1) Notice of the decision to cease new or existing individual
health benefit plans in the state is provided to the director and to
the individual at least 180 days prior to discontinuation of that
coverage.
   (2) Individual health benefit plans shall not be canceled for 180
days after the date of the notice required under paragraph (1) and
for that business of a plan that remains in force, any plan that
ceases to offer for sale new individual health benefit plans shall
continue to be governed by this section with respect to business
conducted under this section.
   (3) A plan that ceases to write new individual health benefit
plans in this state after the effective date of this section shall be
prohibited from offering for sale individual health benefit plans in
this state for a period of five years from the date of notice to the
director.
   (e) If the plan withdraws an individual health benefit plan from
the market; provided, that the plan notifies all affected individuals
and the director at least 90 days prior to the discontinuation of
these plans, and that the plan makes available to the individual all
health benefit plans that it makes available to new individual
business without regard to any health status-related factor of
enrolled individuals or individuals who may become eligible for the
coverage. 
   This section shall become inoperative on the date that Section
1399.829 becomes operative. 
   SEC. 22.    Section 1365 of the   Health and
Safety Code   is amended to read: 
   1365.  (a) An enrollment or a subscription may not be canceled or
not renewed except for the following:
   (1) Failure to pay the charge for such coverage if the subscriber
has been duly notified and billed for the charge and at least 15 days
has elapsed since the date of notification.
   (2) Fraud or deception in the use of the services or facilities of
the plan or knowingly permitting such fraud or deception by another.

   (3) Such other good cause as is agreed upon in the contract
between the plan and a group or the subscriber.
   (b) An enrollee or subscriber who alleges that an enrollment or
subscription has been canceled or not renewed because of the enrollee'
s or subscriber's health status or requirements for health care
services may request a review by the director. If the director
determines that a proper complaint exists under the provisions of
this section, the director shall notify the plan. Within 15 days
after receipt of such notice, the plan shall either request a hearing
or reinstate the enrollee or subscriber. If, after hearing, the
director determines that the cancellation or failure to renew is
contrary to subdivision (a), the director shall order the plan to
reinstate the enrollee or subscriber. A reinstatement pursuant to
this subdivision shall be retroactive to the time of cancellation or
failure to renew and the plan shall be liable for the expenses
incurred by the subscriber or enrollee for covered health care
services from the date of cancellation or nonrenewal to and including
the date of reinstatement.
   (c) This section shall not abrogate any preexisting contracts
entered into prior to the effective date of this chapter between a
subscriber or enrollee and a health care service plan or a
specialized health care service plan including, but not limited to,
the financial liability of  such   that 
plan, except that each plan shall, if directed to do so by the
director,                                            exercise its
authority, if any, under any such preexisting contracts to conform
them to the provisions of subdivision (a). 
   (d) On and after the date that Section 1399.829 becomes operative,
this section shall not apply to individual health plan contracts.

   SEC. 23.    Section 1367.16 is added to the 
 Health and Safety Code   , to read:  
   1367.16.  For purposes of subdivision (c) of Section 1367.15,
"comparable benefits" means any health plan contract in the same
coverage choice category, as determined by the department and the
Department of Insurance pursuant to Section 1399.832, that a closed
block of business would have been in, had that block of business not
been closed. If the coverage benefits provided in the closed block of
business do not meet or exceed the minimum health care coverage
requirements of Section 1399.824, they shall be deemed comparable to
the lowest coverage choice category. 
   SEC. 24.    Section 1367.205 is added to the 
 Health and Safety Code   , to read:  
   1367.205.  Commencing on or before January 1, 2010, a health care
service plan that provides prescription drug benefits and maintains
one or more drug formularies shall make the most current formularies
available electronically to prescribers and pharmacies. 
   SEC. 25.    Section 1367.38 is added to the 
 Health and Safety Code   , to read:  
   1367.38.  (a) A full-service health care service plan, except for
a Medicare supplement plan, that offers, delivers, amends, or renews
a contract on or after January 1, 2009, that covers hospital,
medical, or surgical expenses on a group basis shall offer at least
one benefit design that includes a Healthy Action Incentives and
Rewards Program as described in subdivision (c). Any plan subject to
this section shall communicate the availability of the Healthy Action
Incentives and Rewards Program coverage to all group subscribers and
to all prospective group subscribers with whom they are negotiating.

   (b) In addition to benefit designs offered pursuant to subdivision
(a), every health care service plan contract offered, delivered,
amended, or renewed on or after January 1, 2009, that offers coverage
on a group basis shall offer a Healthy Action Incentives and Rewards
Program, as described in subdivision (c), as a supplement to every
contract that covers hospital, medical, or surgical expenses and that
does not include a Healthy Action Incentives and Rewards Program as
part of the overall benefit design.
   (c) For purposes of this section, benefits for a Healthy Action
Incentives and Rewards Program shall provide for all of the
following:
   (1) Health risk appraisals to be used to assess an individual's
overall health status and to identify risk factors, including, but
not limited to, smoking and smokeless tobacco use, alcohol abuse,
drug use, and nutrition and physical activity practices.
   (2) A followup appointment with a licensed health care
professional acting within his or her scope of practice to review the
results of the health risk appraisal and discuss any recommended
actions.
   (3) Incentives or rewards for enrollees to become more engaged in
their health care and to make appropriate choices that support good
health, including obtaining health risk appraisals, screening
services, immunizations, or participating in healthy lifestyle
programs and practices. These programs and practices may include, but
need not be limited to, smoking cessation, physical activity, or
nutrition. Incentives may include, but need not be limited to, health
premium reductions, differential copayment or coinsurance amounts,
and cash payments. Rewards may include, but need not be limited to,
nonprescription pharmacy products or services not otherwise covered
under an enrollee's health plan contract, exercise classes, gym
memberships, and weight management programs. If a health care service
plan elects to offer an incentive in the form of a reduction in the
premium amount, the premium reduction shall be standardized and
uniform for all groups and subscribers and shall be offered only
after the successful completion of the specified program or practice
by the enrollee or subscriber.
   (d) In order to demonstrate compliance with this section, a health
care service plan may file an amendment to its application for
licensure pursuant to subdivision (a) of Section 1352.
   (e) This section is in addition to, and does not replace, any
other section in this chapter concerning requirements for plans to
provide health care screening services, childhood immunizations,
adult immunizations, and preventive care services.
   (f) (1) Notwithstanding any other provision of law, the provision
of healthy incentives and rewards pursuant to this section by a
health care provider, or his or her agent, that meets the requirement
of this section, shall not be considered or construed as an unlawful
practice, act, kickback, bribe, rebate, remuneration, offer, coupon,
product, payment, or any other form of compensation by a provider or
his or her agent, directly or indirectly, overtly or covertly, in
exchange for another to obtain, participate, or otherwise undergo or
receive health care services.
   (2) Notwithstanding any other provision of law, incentives
authorized pursuant to this section are not subject to the penalties,
discipline, limitations, or sanctions imposed under law to preclude
or prohibit, as an unlawful practice, bribe, kickback, or other act,
the offering or delivery of a rebate, remuneration, offer, coupon,
product, rebate, payment, or any other form of compensation by the
provider, or his or her agent, directly or indirectly, overtly or
covertly, in exchange for another to obtain, participate, or
otherwise undergo or receive health care services.
   (3) Notwithstanding any other provision of law, the provision of
healthy incentives and rewards pursuant to this section by a health
care provider, or his or her agent, that meets the requirements of
this section shall not be considered or construed as an inducement to
enroll.
   (g) This section shall only be implemented if and to the extent
allowed under federal law. If any portion of this section is held to
be invalid, as determined by a final judgment of a court of competent
jurisdiction, this section shall become inoperative. 
   SEC. 26.    Section 1368.025 is added to the 
 Health and Safety Code   , to read:  
   1368.025.  In addition to the duties listed in paragraph (3) of
subdivision (c) of Section 1368.02, the duties of the Office of
Patient Advocate shall include providing access to the public to
reports and data obtained by the lead agency pursuant to Section
128862 in a format and through mechanisms, including, but not limited
to, the Internet, that allow the public to use the information to
assist them in making informed selections of health plans, hospitals,
medical groups, nursing homes, and other providers about whom the
office has collected information. 
   SEC. 27.    Section 1378.1 is added to the  
Health and Safety Code   , to read:  
   1378.1.  (a) Except as provided in subdivision (f), a full-service
health care service plan shall, on and after July 1, 2010, expend in
the form of health care benefits no less than 85 percent of the
aggregate dues, fees, premiums, or other periodic payments received
by the plan during the plan fiscal year. For purposes of this
section, the plan may deduct from the aggregate dues, fees, premiums,
or other periodic payments received by the plan during the plan
fiscal year the amount of income taxes or other taxes that the plan
expensed for the same fiscal year. For purposes of this section,
"health care benefits" shall mean health care services that are
either provided by or reimbursed by the plan or its contracted
providers as plan benefits.
   (b) (1) Health care benefits shall include:
   (A) The costs of programs or activities, including training and
the provision of informational materials which improve the provision
of quality care, improve health care outcomes, and encourage the use
of evidence-based medicine.
   (B) Disease management expenses based using cost-effective
evidence-based guidelines.
   (C) Plan medical advice by telephone.
   (D) Payments to providers as risk pool payments of
pay-for-performance initiatives.
   (2) Health care benefits shall not include administrative costs
listed in Section 1300.78 of Title 28 of the California Code of
Regulations in effect on January 1, 2007.
   (c) To assess compliance with this section, a plan may average its
total costs across all health care service plan contracts approved
for sale in California by the department, and all health insurance
policies of its affiliated disability insurers approved for sale in
California, except for those policies listed in subdivision (f) of
Section 10113.10 of the Insurance Code.
   (d) The department and the Department of Insurance shall jointly
adopt and amend regulations to implement this section and Section
10113.10 of the Insurance Code to establish uniform reporting by
plans and insurers of the information necessary to determine
compliance with this section. These regulations may include
additional elements in the definition of health care benefits not
identified in paragraph (1) of subdivision (b).
   (e) The department may exclude from the determination of
compliance with the requirement of subdivision (a) any new health
care service plan contracts for up to the first two years that these
contracts are offered for sale in California.
   (f) This section shall not apply to Medicare supplement plans or
to coverage offered by specialized health care service plans,
including, but not limited to, ambulance, dental, vision, behavioral
health, chiropractic, and naturopathic.
   SEC. 28.    Section 1395.2 is added to the  
Health and Safety Code   , to read:  
   1395.2.  (a) A health care service plan may provide notice by
electronic transmission and shall be deemed to have fully complied
with the specific statutory or regulatory requirements to provide
notice by United States mail to an applicant, enrollee, or
subscriber, if it complies with all of the following requirements:
   (1) Obtains written authorization from the applicant, enrollee, or
subscriber to provide notices by electronic transmission and to
cease providing notices by United States mail. The authorization
shall be renewed by the enrollee or subscriber on an annual basis. If
the health care service plan obtains an application for coverage by
electronic transmission, it may obtain authorization by electronic
transmission from the applicant, enrollee, or subscriber to provide
notices by electronic transmission.
   (2) Uses an authorization form, approved by the department, in
which the applicant, enrollee, or subscriber confirms understanding
of the type of notice that will be provided by electronic
transmission.
   (3) Complies with the specific statutory or regulatory
requirements as to the content of the notices it sends by electronic
transmission.
   (4) Provides for the privacy of the notice as required by state
and federal laws and regulations.
   (5) Allows the applicant, enrollee, or subscriber at any time to
terminate the authorization to provide notices by electronic
transmission and receive the notices through the United States mail.
   (6) Sends the electronic transmission of a notice to the last
known electronic address of the applicant, enrollee, or subscriber.
If the electronic transmission fails to reach its intended recipient
twice, the health care service plan shall resume sending all notices
to the last known United States mail address of the applicant,
enrollee, or subscriber.
   (7) Maintains an Internet Web site where the applicant, enrollee,
or subscriber may access the notices sent by electronic transmission.

   (b) A health care service plan shall not use the electronic mail
address of an applicant, enrollee, or subscriber that it obtained for
the purposes of providing notice pursuant to subdivision (a) for any
purpose other than sending a notice as described in subdivision (a).

   (c) No person other than the applicant, enrollee, or subscriber to
whom the medical information in the notice pertains or a
representative lawfully authorized to act on behalf of the applicant,
enrollee, or subscriber, may authorize the transmission of medical
information by electronic transmission. "Medical information" for
these purposes shall have the meaning set forth in subdivision (g) of
Section 56.05 of the Civil Code.
   (d) A notice transmitted electronically pursuant to this section
is a private and confidential communication, and it shall constitute
a violation of this chapter for a person, other than the applicant,
enrollee, or subscriber to whom the notice is addressed, to read or
otherwise gain access to the notice without the express, specific
permission of the notice's addressee. This subdivision shall not
apply to a provider of an applicant, enrollee, or subscriber if the
provider is authorized to have access to the medical information
pursuant to the Confidentiality of Medical Information Act (Part 2.6
(commencing with Section 56) of Division 1 of the Civil Code).
   (e) A health care service plan shall not impose additional fees or
a differential if an applicant, enrollee, or subscriber elects not
to receive notices by electronic transmission.
   (f) "Notice" for purposes of this section includes an explanation
of benefits; responses to inquiries from an applicant, enrollee, or
subscriber; underwriting decisions; distribution of plan contracts,
including evidence of coverage and disclosure forms pursuant to
Sections 1300.63.1 and 1300.63.2 of Title 28 of the California Code
of Regulations; a list of contracting providers pursuant to Section
1367.26; and changes in rates or coverage pursuant to Sections
1374.21, 1374.22, and 1374.23. 
   SEC. 29.    Article 11.6 (commencing with Section
1399.821) is added to Chapter 2.2 of Division 2 of the  
Health and Safety Code   , to read:  

      Article 11.6.  Individual Market Reform and Guarantee Issue


   1399.821.  For purposes of this article, the following terms shall
have the following meanings:
   (a) "Anniversary date" means the calendar date an individual has
enrolled in a health plan contract.
   (b) "Coverage choice category" means the category of health plan
contracts and health insurance policies established by the department
and the Department of Insurance pursuant to Section 1399.832.
   (c) "Dependent" means the spouse, child, or registered domestic
partner of an individual, subject to applicable terms of the health
plan contract covering the individual.
   (d) "Health insurance policy" means an individual disability
insurance policy that provides coverage for hospital, medical, or
surgical benefits. The term shall not include any of the following
kinds of insurance:
   (1) Accidental death and accidental death and dismemberment.
   (2) Disability insurance, including hospital indemnity, accident
only, and specified disease insurance that pays benefits on a fixed
benefit, cash payment only basis.
   (3) Credit disability, as defined in Section 779.2 of the
Insurance Code.
   (4) Coverage issued as a supplement to liability insurance.
   (5) Disability income, as defined in subdivision (i) of Section
799.01 of the Insurance Code.
   (6) 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.
   (7) Insurance arising out of a workers' compensation or similar
law.
   (8) Long-term care coverage.
   (9) Dental coverage.
   (10) Vision coverage.
   (11) Medicare supplement, CHAMPUS-supplement or Tricare
supplement, behavioral health-only, pharmacy-only, hospital
indemnity, hospital-only, accident-only, or specified disease
insurance that does not pay benefits on a fixed benefit,
cash-payment-only basis.
   (e) "Health insurer" means a disability insurer that offers and
sells health insurance.
   (f) "Health plan" means a health care service plan, as defined in
subdivision (f) of Section 1345, that is lawfully engaged in
providing, arranging, paying for, or reimbursing the cost of health
care services and is offering or selling health care service plan
contracts in the individual market. A health plan shall not include a
specialized health care service plan.
   (g) "Health plan contract" means a health care service plan
contract offered, sold, amended, or renewed to individuals and their
dependents. The term shall not include accident only, credit,
disability income, long-term care insurance, 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. In addition, the term shall not include a specialized
health care service plan contract, as defined in subdivision (o) of
Section 1345.
   (h) "Purchasing pool" means the program established under Part
6.45 (commencing with Section 12699.201) of Division 2 of the
Insurance Code.
   (i) "Rating period" means the period for which premium rates
established by a plan are in effect and shall be no less than 12
months beginning on the effective date of the subscriber's health
plan contract.
   (j) "Risk adjustment factor" means the percentage adjustment to be
applied to the standard risk rate for a particular individual, based
upon any expected deviations from standard claims due to the health
status of the individual.
   (k) "Risk category" means the following characteristics of an
individual: age, geographic region, and family composition of the
individual, plus the health plan contract selected by the individual.

   (1) No more than the following age categories may be used in
determining premium rates:
   Under 1
   1-18
   19-24
   25-29
   30-34
   35-39
   40-44
   45-49
   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
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) Health plans shall determine rates using no more than the
following family size categories:
   (A) Single.
   (B) More than one child 18 years of age or below and no adults.
   (C) Married couple or registered domestic partners.
   (D) One adult and child.
   (E) One adult and children.
   (F) Married couple and child or children, or registered domestic
partners and child or children.
   (3) (A) In determining rates for individuals, a health 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. Health 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 individuals, 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 health plan
shall have less than one geographic area.
   (ii) If the formula in clause (i) results in a health plan that
operates in more than one county having only one geographic region,
then the formula in clause (i) shall not apply and the health 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 health
plan to establish a new service area or to offer health coverage on a
statewide basis, outside of the health plan's existing service area.

   (4) A health plan may rate its entire portfolio of health plan
contracts in accord with expected costs or other market
considerations, but the rate for each health plan contract shall be
set in relation to the balance of the portfolio, as certified by an
actuary.
   (5) Each health plan contract shall be priced as determined by
each health plan to reflect the difference in benefit variation, or
the effectiveness of a provider network, and each health plan may
adjust the rate for a specific plan contract for risk selection only
to the extent permitted by subdivision (d) of Section 1399.840.
   (l) "Standard risk rate" means the rate applicable to an
individual in a particular risk category.
   (m) "Subscriber" means the individual who is enrolled in a health
plan contract, is the basis for eligibility for enrollment in the
contract, and is responsible for payment to the health plan.
   1399.823.  On and after July 1, 2009, a health plan shall not
offer to an individual a health plan contract that provides less than
minimum health care coverage.
   1399.824.  (a) Minimum heath care coverage that must be maintained
by an individual pursuant to Section 8899.50 of the Government Code
shall be established by the Secretary of California Health and Human
Services through the adoption of regulations pursuant to this
section. That coverage shall include hospital, medical, and
preventive services.
   (b) In determining the scope of services, and the enrollee and
dependent deductible, coinsurance, and copayment requirements, the
secretary shall consider whether those costs would deter an enrollee
or his or her dependents from obtaining appropriate and timely care,
including consideration of preventive services outside any
deductible.
   (c) In determining the scope of services, and the enrollee and
dependent deductible, coinsurance, and copayment requirements, and
any coverage of services outside the deductible, the secretary shall
consider whether the resulting premium cost would prevent an enrollee
from obtaining coverage at a reasonable price.
   (d) The secretary shall consult with the Insurance Commissioner
and the Director of the Department of Managed Health Care in the
development of these regulations.

(e) The secretary shall adopt regulations establishing the minimum
healthcare coverage pursuant to subdivision (a) on or before March 1,
2009. Upon adoption, these regulations shall not be amended unless
expressly permitted by a subsequent statute.
   (f) The secretary may designate an administrative entity within
the agency to accomplish the requirements of this section.
   1399.825.  (Reserved)
   1399.826.  (a) Notwithstanding Chapter 15 (commencing with Section
8899.50) of Division 1 of Title 2 of the Government Code and Section
1399.823, an individual enrolled in any individual health plan
contract prior to March 1, 2009, may maintain coverage in that health
plan contract indefinitely. An individual who maintains coverage in
a health plan contract pursuant to this section shall be deemed to be
in compliance with Section 8899.50 of the Government Code.
   (b) A health plan shall not cease to renew coverage in an
individual health plan contract described in subdivision (a) except
as permitted pursuant to Section 1367.15.
   (c) On and after March 1, 2009, the director shall not approve for
offer and sale in this state any benefit design that was not
approved prior to that date that does not meet or exceed the minimum
health care coverage requirements of Section 1399.824.
   (d) This section shall become operative on January 1, 2009.
   1399.827.  A health plan shall, in addition to complying with this
chapter and the rules of the director, comply with this article.
   1399.828.  This article shall not apply to health plan contracts
for coverage of Medicare services pursuant to contracts with the
United States government, Medicare supplement, Medi-Cal contracts
with the State Department of Health Care Services, Healthy Families
Program contracts with the Managed Risk Medical Insurance Board,
long-term care coverage, specialized health care service plan
contracts, as defined in subdivision (o) of Section 1345, or the
purchasing pool established under Part 6.45 (commencing with Section
12699.201) of Division 2 of the Insurance Code.
   1399.829.  (a) Except for the health plan contracts described in
subdivision (a) of Section 1399.826, a health plan shall fairly and
affirmatively offer, market, and sell all of the plan's contracts
that are sold to individuals to all individuals in each service area
in which the health plan provides or arranges for the provision of
health care services.
   (b) A health plan may not reject an application from an
individual, or his or her dependents, for a health plan contract, or
refuse to renew an individual health plan contract, if all of the
following requirements are met:
   (1) The individual agrees to make the required premium payments.
   (2) The individual and his or her dependents who are to be covered
by the health plan contract work or reside in the service area in
which the health plan provides or otherwise arranges for the
provision of health care services.
   (3) The individual provides the information requested on the
application to determine the appropriate rate.
   (c) Notwithstanding subdivision (b), if an individual, or his or
her dependents, applies for a health plan contract in a coverage
choice category for which he or she is not eligible pursuant to
Section 1399.837, the health plan may reject that application
provided that the plan also offers the individual and his or her
dependents coverage in the appropriate coverage choice category.
   (d) Notwithstanding subdivision (b), a health plan is not required
to renew an individual health plan contract if any of the conditions
listed in subdivision (a) of Section 1399.839 are met.
   (e) Notwithstanding any other provision of this chapter or of a
health plan contract, every health plan shall comply with the
requirements of Chapter 7 (commencing with Section 3750) of Part 1 of
Division 9 of the Family Code and Section 14124.94 of the Welfare
and Institutions Code.
   (f) A health plan may request an individual to provide information
on his or her health status or health history, or that of his or her
dependents, in the application for enrollment to the extent required
to apply the risk adjustment factor permitted pursuant to
subdivision (d) of Section 1399.840. After the health plan contract's
effective date of coverage, a health plan may request that the
subscriber provide information voluntarily on his or her health
history or health status, or that of his or her dependents, for
purposes of providing care management services, including disease
management services.
   (g) Notwithstanding Section 1399.846, this section shall not
become operative until the authority under Section 8899.52 of the
Government Code is implemented.
   1399.830.  (Reserved)
   1399.831.  A health plan shall not impose any preexisting
condition exclusions, waivered conditions, or postenrollment waiting
or affiliation periods on any health plan contract issued, amended,
or renewed pursuant to this article.
   1399.832.  (a) On or before April 1, 2009, the department and the
Department of Insurance shall jointly, by regulation, develop a
system to categorize all health plan contracts and health insurance
polices offered and sold to individuals pursuant to this article and
Chapter 9.6 (commencing with Section 10920) of Part 2 of Division 2
of the Insurance Code into five coverage choice categories. These
coverage choice categories shall do all of the following:
   (1) Reflect a reasonable continuum between the coverage choice
category with the lowest level of health care benefits and the
coverage choice category with the highest level of health care
benefits.
   (2) Permit reasonable benefit variation that will allow for a
diverse market within each coverage choice category.
   (3) Be enforced consistently between health plans and health
insurers in the same marketplace regardless of licensure.
   (b) All health plans shall submit filings required pursuant to
Section 1399.842 no later than October 1, 2009, for all individual
health plan contracts to be offered or sold on or after July 1, 2010,
to comply with this article, and thereafter any additional health
plan contracts shall be filed pursuant to Section 1399.842. The
director shall categorize each health plan contract offered by a
health plan into the appropriate coverage choice category on or
before March 31, 2010.
   (c) All health plans that offer coverage on an individual basis
shall offer at least one health plan contract in each coverage choice
category.
   (d) If a health plan offers a specific type of health plan
contract in one coverage choice category, it must offer that specific
type of health plan contract in each coverage choice category. A
"type of health plan contract" includes a preferred provider
organization, an exclusive provider organization model plan, a point
of service model plan, and a health maintenance organization model
plan.
   (e) Health plans shall have flexibility in establishing provider
networks, provided that access to care standards pursuant to this
chapter are met, and provided that the provider network offered for
one health plan contract in one coverage choice category is offered
for at least one health plan contract in each coverage choice
category.
   (f) A health plan shall establish prices for its products that
reflect a reasonable continuum between the products offered in the
coverage choice category with the lowest level of benefits and the
products offered in the coverage choice category with the highest
level of benefits. A health plan shall not establish a standard risk
rate for a product in a coverage choice category at a lower rate than
a product offered in a lower coverage choice category.
   (g) The coverage choice category with the lowest level of benefits
shall include the benefits specified in Section 1399.824.
   1399.833.  A health plan shall offer coverage for a Healthy Action
Incentives and Rewards Program that complies with the requirements
of subdivision (c) of Section 1367.38 in at least one health plan
contract in every coverage choice category.
   1399.834.  The Office of the Patient Advocate shall develop and
maintain on its Internet Web site a uniform benefits matrix of all
available individual health plan contracts and individual health
insurance policies arranged by coverage choice category. This uniform
benefit matrix shall include all of the following:
   (a) Benefit information submitted by health plans pursuant to
Section 1399.843 and by health insurers pursuant to Section 10940 of
the Insurance Code, including, but not limited to, the following
category descriptions:
   (1) Deductibles.
   (2) Copayments or coinsurance, as applicable.
   (3) Annual out-of-pocket maximums.
   (4) Professional services.
   (5) Outpatient services.
   (6) Preventive services.
   (7) Hospitalization services.
   (8) Emergency health services.
   (9) Ambulance services.
   (10) Prescription drug coverage.
   (11) Durable medical equipment.
   (12) Mental health and substance abuse services.
   (13) Home health services.
   (14) Other.
   (b) The telephone number or numbers that may be used by an
applicant to contact either the department or the Department of
Insurance, as appropriate, for additional assistance.
   1399.835.  When an individual submits a premium payment, based on
the quoted premium charges, and that payment is delivered or
postmarked, whichever occurs earlier, within the first 15 days of the
month, coverage under the health plan contract shall become
effective no later than the first day of the following month. When
that payment is either delivered or postmarked after the 15th day of
a month, coverage shall become effective no later than the first day
of the second month following delivery or postmark of the payment.
   1399.836.  Except as provided in Section 1399.829, a health plan
is not required to offer an individual health plan contract and may
reject an application for an individual health plan contract in the
case of any of the following:
   (a) The individual and dependents who are to be covered by the
health plan contract do not work or reside in a health plan's
approved service area.
   (b) (1) Within a specific service area or portion of a service
area, if a health plan reasonably anticipates and demonstrates to the
satisfaction of the director that it will not have sufficient health
care delivery resources to assure that health care services will be
available and accessible to the eligible individual and dependents of
the individual because of its obligations to existing enrollees.
   (2) A health plan that cannot offer a health plan contract to
individuals because it is lacking in sufficient health care delivery
resources within a service area or a portion of a service area may
not offer a health plan contract in the area in which the health plan
is not offering coverage to individuals until the health plan
notifies the director that it has the ability to deliver services to
new enrollees, and certifies to the director that from the date of
the notice it will enroll all individuals and groups requesting
coverage in that area from the health plan.
   (c) A social health maintenance organization, as described in
subdivision (a) of Section 2355 of the federal Deficit Reduction Act
of 1984 (Public Law 98-369), that, as of December 31 of the prior
year, had a total enrollment of fewer than 100,000 and has 50 percent
or more of the organization's total enrollment premiums paid by the
Medi-Cal program or Medicare programs, or by a combination of
Medi-Cal and Medicare. In no event shall this exemption be based upon
enrollment in Medicare supplement contracts, as described in Article
3.5 (commencing with Section 1358).
   1399.837.  (a) If an individual disenrolls from a health plan
contract or health insurance policy or if the individual's health
plan contract or health insurance policy is canceled pursuant to
Section 1399.839 or Section 10936 of the Insurance Code prior to the
anniversary date of the health plan contract or health insurance
policy, subsequent enrollment in any individual product shall be in
the same coverage choice category the individual was enrolled in
prior to disenrollment or cancellation.
   (b) (1) An individual may change to a health plan contract in a
different coverage choice category only on the anniversary date of
the subscriber or upon a qualifying event.
   (2) In no case, however, may an individual move up more than one
coverage choice category on the anniversary date of the subscriber
unless there is also a qualifying event.
   (c) An individual health plan contract described in subdivision
(a) of Section 1399.826 that does not meet or exceed the minimum
health care coverage requirements of Section 1399.824 shall be deemed
to be the lowest coverage choice category for purposes of this
section.
   (d) On and after January 1, 2011, an individual who fails to
comply with the provisions of Chapter 15 (commencing with Section
8899.50) of Division 1 of Title 2 of the Government Code for more
than 30 days may only enroll in a health plan contract or health
insurance policy in the lowest coverage choice category. Upon the
individual's anniversary date, the individual may move to a higher
coverage choice category pursuant to subdivision (b).
   (e) For purposes of this section, a qualifying event occurs upon
any of the following:
   (1) Upon the death of the subscriber, on whose qualifying coverage
an individual was a dependent.
   (2) Upon marriage of the subscriber or entrance by the subscriber
into a domestic partnership pursuant to Section 298.5 of the Family
Code.
   (3) Upon divorce or legal separation of an individual from the
subscriber.
   (4) Upon loss of dependent status by a dependent enrolled in group
health care coverage through a health care service plan or a health
insurer.
   (5) Upon the birth or adoption of a child.
   (6) Upon the loss of minimum health care coverage as defined in
paragraphs (3) to (19), inclusive, of subdivision (a) of Section
8899.51 of the Government Code.
   1399.838.  The director may require a health plan to discontinue
the offering of contracts or acceptance of applications from any
individual upon a determination by the director that the health plan
does not have sufficient financial viability, or organizational and
administrative capacity to assure the delivery of health care
services to its enrollees.
   1399.839.  (a) All health plan contracts offered pursuant to this
article shall be renewable with respect to all individuals and
dependents at the option of the subscriber and shall not be cancelled
except for the following reasons:
   (1) Failure to pay any charges for coverage provided pursuant to
the contract if the subscriber has been duly notified and billed for
those charges and at least 15 days has elapsed since the date of
notification.
   (2) Fraud or intentional misrepresentation of material fact under
the terms of the health plan contract by the individual.
   (3) Fraud or deception in the use of the services or facilities of
the plan or knowingly permitting such fraud or deception by another.

   (4) Movement of the subscriber outside the health plan's service
area.
   (5) If the health plan ceases to provide or arrange for the
provision of health care services for new or existing individual
health plan contracts in this state; provided, however, that the
following conditions are satisfied:
   (A) Notice of the decision to cease new or existing individual
health plan contracts in the state is provided to the director and to
the individual at least 180 days prior to discontinuation of that
coverage.
   (B) Individual health plan contracts shall not be canceled for 180
days after the date of the notice required under subparagraph (A)
and for that business of a health plan that remains in force, any
health plan that ceases to offer for sale new individual health plan
contracts shall continue to be governed by this article with respect
to business conducted under this article.
   (C) A health plan that ceases to write new individual health plan
contracts in this state after the effective date of this section
shall be prohibited from offering for sale individual health plan
contracts in this state for a period of five years from the date of
notice to the director. The director may permit a health plan to
offer and sell individual health plan contracts in this state before
the five-year time period has expired if the director determines that
it is in the best interest of the state and necessary to preserve
the integrity of the health care market.
   (6) If the health plan withdraws an individual health plan
contract from the market, provided that the health plan notifies all
affected individuals and the director at least 90 days prior to the
discontinuation of these health plan contracts, and that the health
plan makes available to the individual all health plan contracts with
comparable benefits that it makes available to new individual
business.
   (b) On or after July 1, 2010, a health plan shall not rescind the
health plan contract of any individual.
   (c) Nothing in this article shall limit any other remedies
available at law to a health plan.
   1399.840.  Premiums for health plan contracts offered or delivered
by health plans on or after the effective date of this article shall
be subject to the following requirements:
   (a) The premium for new or existing business shall be the standard
risk rate for an individual in a particular risk category.
   (b) The premium rates shall be in effect for no less than 12
months from the date of the health plan contract.
   (c) When determining the premium rate for more than one covered
individual, the health plan shall determine the rate based on the
standard risk rate for the subscriber. If more than one individual is
a subscriber, the premium rate shall be based on the age of the
youngest spouse or registered domestic partner.
   (d) (1) Notwithstanding subdivision (a), for the first three years
following the implementation of this section, a health plan may
apply a risk adjustment factor to the standard risk rate that may not
be more than 120 percent or less than 80 percent of the applicable
standard risk rate.
   (2) After the first three years following the implementation of
this section, the adjustments applicable under paragraph (1) shall
not be more than 110 percent or less than 90 percent of the standard
risk rate.
   (3) Upon the renewal of any contract, the risk adjustment factor
applied to the individual's rate may not be more than 10 percentage
points different than the factor applied to that rate prior to
renewal. The same limitation shall be applied to individuals with
respect to the risk adjustment factor applicable for the purchase of
a new product where the individual's prior health plan has
discontinued that product.
   (4) After the first six years following the implementation of this
section, a health plan shall base rates on the standard risk rate.
However, the director and the Insurance Commissioner may jointly
delay implementation of this paragraph for one year if required to
ensure availability of coverage in the individual market. At the end
of that year, the director and the Insurance Commissioner shall
review the necessity for the delay and may extend the delay for an
additional year.
   (e) The director and the Insurance Commissioner shall jointly
establish a maximum limit on the ratio between the standard risk
rates for contracts for individuals in the 60 to 64 years of age
category and contracts for individuals in the 30 to 35 years of age
category.
   1399.841.  (a) In connection with the offering for sale of any
health plan contract to an individual, each health plan shall make a
reasonable disclosure, as part of its solicitation and sales
materials, of all of the following:
   (1) The provisions concerning the health plan's right to change
premium rates on an annual basis and the factors other than provision
of services experience that affect changes in premium rates.
   (2) Provisions relating to the guaranteed issue and renewal of
health plan contracts.
   (3) Provisions relating to the individual's right to obtain any
health plan contract the individual is eligible to enroll in pursuant
to Sections 1399.829 and 1399.837.
   (4) The availability, upon request, of a listing of all the health
plan's contracts, including the rates for each health plan contract.

   (b) Every solicitor or solicitor firm contracting with one or more
health plans to solicit enrollments or subscriptions from
individuals shall, when providing information on health plan
contracts to an individual but making no specific recommendations on
particular health plan contracts, do both of the following:
   (1) Advise the individual of the health plan's obligation to sell
to any individual any health plan contract it offers to individuals
and provide him or her, upon request, with the actual rates that
would be charged to that individual for a given health plan contract.

   (2) Notify the individual that the solicitor or solicitor firm
will procure rate and benefit information for the individual on any
health plan contract offered by a health plan whose contract the
solicitor sells.
   (c) Prior to filing an application for a particular individual
health plan contract, the health plan may obtain a signed statement
from the individual acknowledging that the individual has received
the disclosures required by this section.
   1399.842.  (a) At least 20 business days prior to offering a
health plan contract subject to this article, all health plans shall
file a notice of material modification with the director in
accordance with the provisions of Section 1352. The notice of
material modification shall include a statement certifying that the
health plan is in compliance with subdivision (k) of Section 1399.821
and Section 1399.840. The certified statement shall set forth the
standard risk rate for each risk category that will be used in
setting the rates at which the contract will be offered. Any action
by the director, as permitted under Section 1352, to disapprove,
suspend or postpone the health plan's use of a health plan contract
shall be in writing, specifying the reasons that the health plan
contract does not comply with the requirements of this article.
   (b) Prior to making any changes in the standard risk rates filed
with the director pursuant to subdivision (a), the health plan shall
file as an amendment a statement setting forth the changes and
certifying that the health plan is in compliance with subdivision (k)
of Section 1399.821 and Section 1399.840. If the standard risk rate
is being changed, a health plan may commence offering health plan
contracts utilizing the changed standard risk rate upon filing the
certified statement unless the director disapproves the amendment by
written notice.
   (c) Periodic changes to the standard risk rate that a health plan
proposes to implement over the course of up to 12 consecutive months
may be filed in conjunction with the certified statement filed under
subdivision (a) or (b).
                                                 (d) Each health plan
shall maintain at its principal place of business all of the
information required to be filed with the director pursuant to this
article.
   (e) This section shall become operative on July 1, 2009.
   1399.843.  (a) A health plan shall include all of the following in
the material modification notice filed pursuant to subdivision (a)
of Section 1399.842:
   (1) A summary explanation of the following for each health plan
contract offered to individuals:
   (A) Eligibility requirements.
   (B) The full premium cost of each health plan contract in each
risk category, as defined in subdivision (k) of Section 1399.821.
   (C) When and under what circumstances benefits cease.
   (D) Other coverage that may be available if benefits under the
described health plan contract cease.
   (E) The circumstances under which choice in the selection of
physicians and providers is permitted.
   (F) Deductibles.
   (G) Annual out-of-pocket maximums.
   (2) A summary explanation of coverage for the following, together
with the corresponding copayments, coinsurance, and applicable
limitations for each health plan contract offered to individuals:
   (A) Professional services.
   (B) Outpatient services.
   (C) Preventive services.
   (D) Hospitalization services.
   (E) Emergency health coverage.
   (F) Ambulance services.
   (G) Prescription drug coverage.
   (H) Durable medical equipment.
   (I) Mental health and substance abuse services.
   (J) Home health services.
   (3) The telephone number or numbers that may be used by an
applicant to access a health plan customer service representative to
request additional information about the health plan contract.
   (b) The department shall share the information provided by health
plans pursuant to this chapter with the Office of the Patient
Advocate for purposes of the development, creation, and maintenance
of the comparative benefits matrix.
   1399.844.  (a) The Director of the Department of Managed Health
Care shall, in consultation with the Insurance Commissioner, an
outside actuarial firm, and health plans and insurers participating
in the individual market, no later than July 1, 2010, develop and
implement mechanisms to assist health plans and health insurers in
managing the risk of providing health coverage in the individual
market on a guarantee issue basis to the extent that these mechanisms
can improve access to individual coverage.
   (b) The mechanisms required under subdivision (a) shall include
methods for collecting information regarding the enrollment, prices,
rate variance, and any other information that may be required to
monitor the condition of the individual market, the risk exposure of
individual health plans and insurers, and to implement subdivisions
(c) and (d).
   (c) (1) The mechanisms developed pursuant to subdivision (a) shall
include a method by which an assessment is made of the health status
risk mix of a plan's guarantee issue products in the individual
market. To the extent any plan's risk mix is disproportionately high
compared to the overall risk mix of all enrollees in guarantee issue
products in the individual market, the mechanisms developed pursuant
to subdivision (a) shall include provisions designed to normalize the
risk between plans.
   (2) The director and the commissioner shall jointly adopt
regulations identifying health plans and insurers that are required
to participate in the mechanisms established pursuant to this
subdivision.
   (d) (1) The director and commissioner shall also develop as part
of the mechanisms under subdivision (a) a method for the provision of
reinsurance for health plans or insurers offering guarantee issue
products in the individual market. This reinsurance mechanism shall
be based on a uniform standard set of service payment levels based on
a methodology to be determined by the director and commissioner.
   (2) This subdivision shall be implemented on July 1, 2010, or the
operative date of this section, whichever is later, and shall
continue to be implemented until one year after the implementation of
paragraph (4) of subdivision (d) of Section 1399.840.
   (3) Notwithstanding paragraph (2), implementation of this
subdivision is contingent on the appropriation of funds for its
purposes.
   (e) The director and the commissioner may contract with a
qualified actuarial firm or other entities to accomplish the
requirements of this section.
   1399.845.  (a) The director may issue regulations that are
necessary to carry out the purposes of this article.
   (b) Nothing in this article shall be construed as providing the
director with rate regulation authority.
   1399.846.  Sections 1399.824, 1399.826, and 1399.832 shall become
operative on January 1, 2009, and Section 1399.842 shall become
operative on July 1, 2009. The remaining sections in this article
shall become operative on July 1, 2010. 
   SEC. 30.    Article 1 (commencing with Section
104250) is added to Chapter 4 of Part 1 of Division 103 of the 
 Health and Safety Code   , to read:  

      Article 1.  California Diabetes Program


   104250.  The State Department of Public Health shall maintain the
California Diabetes Program, including, but not limited to, the
following:
   (a) Provide information on diabetes prevention and management to
the public, including health care providers.
   (b) Provide technical assistance to the Medi-Cal program,
including participating providers and Medi-Cal managed care plans,
regarding the proper scope of benefits to be provided to eligible
individuals under Section 14132.23 of the Welfare and Institutions
Code. The assistance may include, but shall not be limited to, all of
the following:
   (1) Provide information on evidence-based screening guidelines,
tools, and protocols, including the distribution of these guidelines,
tools, and protocols.
   (2) Develop, with assistance from the Department of Health Care
Services, the Comprehensive Diabetes Services Program operational
screening guidelines and protocols, utilizing the most current
American Diabetes Association screening criteria for diabetes testing
in adults.
   (3) Provide the Comprehensive Diabetes Services Program
operational screening guidelines, tools, and protocols, including the
distribution of those guidelines, tools, and protocols.
   (4) Provide screening service criteria for diabetes and
prediabetes in accordance with the guidelines developed for the
Comprehensive Diabetes Services Program.
   (5) Provide information regarding culturally and linguistically
appropriate lifestyle coaching and self-management training for
eligible adults with prediabetes and diabetes, in accordance with
evidence-based interventions to avoid unhealthy blood sugar levels
that contribute to the progression of diabetes and its complications.

   (c) Provide technical assistance to the State Department of Health
Care Services, including assistance on data collection and
evaluation of the Medi-Cal Program's Comprehensive Diabetes Services
Program, established pursuant to Section 14132.23 of the Welfare and
Institutions Code.
   (d) This section shall be implemented only to the extent funds are
appropriated for purposes of this section in the annual Budget Act
or in another statute. 
   SEC. 31.    Section 104376 is added to the  
Health and Safety Code   , to read:  
   104376.  (a) (1) The department, in consultation with the
Department of Managed Health Care, the State Department of Health
Care Services, the Managed Risk Medical Insurance Board, and the
Department of Insurance, shall annually identify, on the basis of the
number of persons insured, the 10 largest providers of health care
coverage, including both public and private entities, and ascertain
the smoking cessation benefits provided by each of these coverage
providers.
   (2) The department shall summarize the smoking cessation benefit
information gathered under this subdivision and make the benefit
summary available on the Internet, including the department's Web
site.
   (b) The department shall, where appropriate, include the smoking
cessation benefit information as part of its educational efforts to
prevent tobacco use that it renders to the public and to health care
providers.
   (c) The department shall conduct an evaluation, commencing one
year following the publication of the smoking cessation benefit
information on the department's Web site as provided in this section,
to assess all of the following:
   (1) Any changes in the awareness of the beneficiaries of the 10
largest providers of health care coverage as to the availability of
smoking cessation benefits.
   (2) Any changes in the awareness of health care providers as to
the availability of smoking cessation benefits.
   (3) The extent to which smoking cessation benefits are utilized by
beneficiaries of the 10 largest providers of health care coverage,
and any changes in the utilization rate of these benefits as
determined by a comparison with any available preexisting
information.
   (4) Smoking-related indicators available through the Health Plan
Employer Data and Information Set.
   (5) Any changes to the smoking cessation benefit coverage of the
10 largest providers of health care coverage.
   (6) The impact on smoking rates based on the expansion of
counseling services and the direct provision of tobacco cessation
pharmacotherapy by the California Smokers' Helpline.
   (d) To the extent funds are appropriated for these purposes, the
department shall increase its efforts to do all of the following:
   (1) Reduce smoking by increasing the capacity of effective
cessation services available from the California Smokers' Helpline,
including tobacco cessation pharmacotherapy.
   (2) Expand public awareness about the services that are available
through the California Smokers' Helpline.
   (3) Expand public awareness and use of existing cessation benefits
that are available to California smokers through their public and
private providers of health care coverage. 
   SEC. 32.    Article 3 (commencing with Section
104705) is added to Chapter 2 of Part 3 of Division 103 of the 
 Health and Safety Code   , to read:  

      Article 3.  Community Makeover Grants


   104705.  (a) The Community Makeover Grant program is hereby
created and shall be administered by the department. The department
shall award grants to local health departments to serve as local lead
agencies in accordance with this article.
   (b) For purposes of determining the amount of each grant awarded
under this article, local health departments shall be allocated, at a
minimum, base funding in proportion to total available funding.
   (c) Except as provided in subdivision (b), local health
departments shall receive an allocation based on each county's or
city's proportion of the statewide population, to be expended for
purposes that include, but need not be limited to:
   (1) Creating a community infrastructure that promotes active
living and healthy eating.
   (2) Coordinating with, at minimum, city, county, and school
partners to facilitate community level, multisector collaboration for
the development and implementation of strategies to facilitate
active living and healthy eating.
   (3) Conducting competitive grant application processes to support
local grants. These local grants may be used to develop new programs
and improve existing programs to promote physical activity for
children, improve access to healthy foods, and better utilize
community recreation facilities.
   (4) Preparing program interventions and materials that will be
available in accessible, and culturally and linguistically
appropriate, formats.
   (d) The department shall issue guidelines for local lead agencies
on how to prepare a local plan for a comprehensive community
intervention program that includes changes to promote active living
and healthy eating, and to prevent obesity and other related chronic
diseases.
   (e) The department shall specify data reporting requirements for
local lead agencies and their subcontractors.
   (f) (1) The department shall conduct a fiscal and program review
on a regular basis.
   (2) If the department determines that any local lead agency is not
in compliance with any provision of this article, the local lead
agency shall submit to the department, within 60 days, a plan for
complying with this article.
   (3) The department may withhold funds allocated under this section
from local lead agencies that are not in compliance with this
article.
   (g) For purposes of this article, "department" means the State
Department of Public Health.
   104710.  (a) The department may provide a variety of training,
consultation, and technical assistance to support local programs.
   (b) Notwithstanding any other provision of law, the department may
use a request for proposal process or may directly award contracts
to provide the assistance described in subdivision (a) to another
state, federal, or auxiliary organization.
   (c) Any organization awarded a contract under this section shall
demonstrate the ability to provide statewide assistance to accelerate
progress, and to ensure the long-term impact of local obesity
prevention programs.
   104715.  (a) The department shall track and evaluate obesity
related measures, including, but not limited to, active living,
healthy eating, and community environment indicators. These tracking
and evaluation activities shall utilize scientifically appropriate
methods, and may include, but need not be limited to, the following:
   (1) Track statewide health indicators.
   (2) Evaluate funded projects, determining baseline measures and
progress toward goals, as well as capturing successes and emerging
models.
   (3) Compare the effectiveness of individual programs to inform
funding decisions and program modifications.
   (4) Incorporate other aspects into the evaluation that have been
identified by the department in consultation with state and local
advisory groups, local health departments, and other interested
parties.
   (5) Forecast health and economic cost consequences associated with
obesity.
   (6) Funds permitting, utilize a sample size that is adequate to
produce county-, ethnic-, and disability-specific estimates.
   (b) The purpose of the evaluation shall be to direct the most
efficient allocation of resources appropriated under this article to
accomplish the maximum reduction of obesity rates. The comprehensive
evaluation shall be designed to measure the extent to which programs
funded pursuant to this article promote the goals identified in the
California Obesity Prevention Plan.
   104720.  The department shall develop a campaign to educate the
public about the importance of obesity prevention that frames active
living and healthy eating as "California living." The
campaign-centered efforts shall be closely linked with
community-level program change efforts and shall be available in
accessible and culturally and linguistically appropriate formats.
   104721.  The department shall provide assistance and other support
for schools to promote the availability and consumption of fresh
fruits and vegetables and foods with whole grains.
   104725.  The department shall provide technical assistance to help
employers integrate wellness policies and programs into employee
benefit plans and worksites.
   104726.  Notwithstanding any other provision of law, this article
shall be implemented only to the extent funds are appropriated for
purposes of this article in the annual Budget Act or in another
statute. 
   SEC. 33.    Section 128745.1 is added to the 
 Health and Safety Code   , to read:  
   128745.1.  (a) In addition to any other established and pending
reports, commencing January 1, 2010, and every year thereafter, the
office shall publish risk-adjusted outcome reports for percutaneous
coronary interventions, including, but not limited to, the use of
angioplasty or stents. In each year, the reports shall compare
risk-adjusted outcomes by hospital, and in at least every other year,
by hospital and physician. Upon the recommendation of the technical
advisory committee based on statistical and technical considerations,
information on individual hospitals and surgeons may be excluded
from the reports.
   (b) The office shall establish a clinical data collection program
to collect data on percutaneous coronary interventions, including,
but not limited to, the use of angioplasty or stents, performed in
hospitals. The office shall establish by regulation the data to be
reported by each hospital at which percutaneous coronary
interventions are performed. In establishing the data to be reported,
the office shall consult with the clinical panel established
pursuant to Section 128748. 
   SEC. 34.    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 all of the
following:
   (a) The steady rise in health costs is eroding health access,
straining public health and finance systems, and placing an undue
burden on the state's economy.
   (b) 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.
   (c) 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.
   (d) 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 plans and providers.
   (e) Establishing statewide data and common measurement and
analyses of health care costs, quality, and outcomes will identify
appropriate health care utilization and ensure the highest quality of
health care services for all Californians.
   128851.  As used in this chapter, the following terms have the
following meanings:
   (a) "Administrative claims data" means data that are submitted
electronically or otherwise to, or collected by, health insurers,
health care service plans, administrators, or other payers of health
care services and that are submitted to, or collected for, the
purposes of payment to any licensed health professional, medical
provider group, laboratory, pharmacy, hospital, imaging center, or
any other facility or person who is requesting payment for the
provision of medical care.
   (b) "Data source" means any licensed health professional, medical
provider group, health facility, health care service plan licensed by
the Department of Managed Health Care, health insurer certificated
by the Insurance Commissioner to sell health insurance, 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.
   (c) "Encounter data" means data relating to treatment or services
rendered by licensed health professionals to patients and that may be
reimbursed on a fee-for-service or capitation basis.
   (d) "Group" or "medical provider 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.
   (e) "Health facility" or "health facilities" means health
facilities required to be licensed pursuant to Chapter 2 (commencing
with Section 1250) of Division 2.
   (f) "Lead agency" means the administrative entity designated by
the secretary to undertake the duties specified by this chapter.
   (g) "Risk-adjusted outcomes" means the clinical outcomes of
patients grouped by diagnoses or procedures that have been adjusted
for demographic and clinical factors.
   (h) "Secretary" is the Secretary of California Health and Human
Services.

      Article 2.  Health Care Cost and Quality Transparency Committee



   128852.  There is hereby created the Health Care Cost and Quality
Transparency Committee composed of seven members. The committee shall
be charged with providing information and recommendations to the
secretary on the measurement and reporting of public and private
health care quality and performance measures to promote efficiency,
cost-effectiveness, transparency, and informed choice by purchasers
and consumers. The lead agency shall provide administrative support
to the committee. The appointments shall be made as follows:
   (a) The Governor shall appoint five 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 physicians and surgeons.
   (4) One representative of employers that purchase group health
care for employees and who is not also a supplier or broker of health
care services or coverage.
   (5) One representative of health insurers or health care service
plans.
   (b) The Senate Committee or Rules shall appoint one member who is
a representative of consumers.
   (c) The Speaker of the Assembly shall appoint one member who is a
leader of an organization that represents employees.
   (d) The following members shall serve in an ex officio capacity:
   (1) The Executive Officer of the California Public Employees'
Retirement System or a designee.
   (2) The Director of the Department of Managed Health Care or a
designee.
   (3) The Insurance Commissioner or a designee.
   128853.  The committee shall meet at least once every month until
the plan developed pursuant to Section 128865 has been submitted to
the secretary. The committee shall be abolished on January 1, 2011.
   128854.  The members of the committee shall receive reimbursement
for any actual and necessary expenses incurred in connection with
their duties as members of the committee.
   128855.  (a) In fulfilling the duties associated with the Health
Care Cost and Quality Transparency Committee, the lead agency may
appoint at least one technical advisory committee, and may appoint
additional technical advisory committees as the lead agency deems
appropriate, and may include on each committee academic and
professional experts with expertise related to the activities of the
committee.
   (b) In fulfilling the duties associated with the Health Care Cost
and Quality Transparency Committee, the lead agency may 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 committee.
   (c) The lead agency may, 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 lead agency, issue a
written recommendation to the lead agency concerning the issue
referred to the advisory committee.
   (d) The members of the technical and clinical advisory committees
appointed by the lead agency shall be reimbursed for any actual and
necessary expenses incurred in connection with their duties as
members of the advisory committee.
   (e) The lead agency shall provide opportunities for participation
from consumers, purchasers, and providers at all advisory committee
meetings.
   128856.  The committee and advisory members shall be subject to
the lead agency's conflict-of-interest policy.

      Article 3.  Health Care Cost and Quality Transparency Plan


   128860.  (a) The Health Care Cost and Quality Transparency
Committee shall, within one year after its first meeting, develop a
health care cost and quality transparency plan. The purpose of the
plan shall be to assist in efforts to reduce health care costs in the
system, improve health system performance, and promote quality
patient outcomes. The plan shall be presented to the secretary. After
review of the plan, the secretary, in consideration of the
recommendations contained in the plan, may implement strategies and
timelines for the implementation of this article.
   (b) The plan shall include, but not be limited to, recommended
strategies to:
   (1) Measure and collect data related to health care safety and
quality, utilization, health outcomes, and cost of health care
services from health plans and insurers, medical groups, health
facilities, and licensed health professionals.
   (2) Measure each of the performance domains, including, but not
limited to, safety, timeliness, effectiveness, efficiency, quality,
and other domains as appropriate.
   (3) Develop a valid methodology for collecting and reporting cost
and quality information to ensure the integrity of the data and
reflect the intensity, cost, and scope of services provided.
   (4) Use and build on existing data collection standards and
methods to the greatest extent possible to accomplish the goals of
this article in an efficient and effective manner.
   (5) Incorporate and utilize administrative claims data to the
extent it is the most efficient method of collecting data.
   (6) Improve coordination of data collection, state and federal
reporting practices and standards, and existing mandatory and
voluntary measurement and reporting activities by existing public and
private entities.
   (7) Provide reports, analyses, and data on the health care quality
and performance measures of health plans and insurers, medical
groups, health facilities, and licensed health professionals.
   (8) Maintain patient confidentiality consistent with state and
federal medical and patient privacy laws.
   (9) Review existing data gathering, reporting activities, and
related entities within state government and recommend areas to
coordinate and streamline data collection.

      Article 4.  Implementation of Strategies to Improve Health Care
Quality and Transparency


   128861.  (a) At the direction of the secretary, the lead agency
shall implement strategies to improve health care quality and
performance measures consistent with the intent of this chapter. The
authority and responsibilities of the lead agency shall include, but
not be limited to, the following:
   (1) Determine the data to be collected, and the methods of
collection to implement this chapter.
   (2) Determine the measures necessary to implement the reporting
requirements in a manner that is cost-effective and reasonable for
data sources and is timely, relevant, and reliable.
   (3) Collect the data consistent with the data reporting
requirements recommended and approved by the secretary, including,
but not limited to, data on quality, health outcomes, cost,
utilization, and pricing.
   (4) Audit, as necessary, the accuracy of any or all data submitted
to the lead agency pursuant to this chapter.
   (5) Seek to establish agreements for voluntary reporting of health
care claims and data from any and all health care payers that are
not subject to mandatory reporting pursuant to this chapter, and
subsequent regulations, in order to ensure availability of the most
comprehensive systemwide data on heath care costs and quality.
   (6) Fully protect patient privacy and confidentiality, in
compliance with state and federal privacy laws, while preserving the
lead agency's ability to analyze data. Any individual patient
information obtained pursuant to this chapter shall be exempt from
the disclosure requirements of the Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code).
   (b) All state agencies shall cooperate with the lead agency to
implement strategies to improve health care quality and performance
measures consistent with the direction of the secretary.
   (c) The lead agency shall adopt regulations as are necessary to
carry out the intent of this chapter.
   128862.  The lead agency 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 secretary, with the advice of the committee, deems
necessary to complete and implement the plan required pursuant to
Section 128865 or to meet any of its obligations under this chapter.
   128863.  The lead agency shall provide the secretary with a
proposal that will, to the extent possible, identify possible
financial resources for the implementation of this chapter and allow
for the recovery of costs of implementing centralized data
collection, and effective analysis and reporting activities under
this chapter. The lead agency shall also provide fiscal information
to the secretary relative to the need to collect and analyze
information from various data sources, and the relative value to data
sources and users. 
   SEC. 35.    Section 130545 is added to the  
Health and Safety Code   , to read:  
   130545.  (a) The State Department of Health Care Services shall
identify best practices related to e-prescribing modalities and
standards and shall make recommendations for statewide adoption of
e-prescribing on or before January 1, 2009.
   (b) The State Department of Health Care Services shall develop a
pilot program to foster the adoption and use of electronic
prescribing by health care providers that contract with Medi-Cal. The
implementation of this Medi-Cal pilot is contingent upon the
availability of FFP or federal grant funds. The department may
provide electronic prescribing technology, including equipment and
software, to participating Medi-Cal prescribers. 
   SEC. 36.    Section 10113.10 is added to the 
 Insurance Code   , to read:  
   10113.10.  (a) Notwithstanding Section 10270.95 and except as
provided in subdivision (f), a disability insurer selling health
insurance shall, on and after July 1, 2010, expend in the form of
health care benefits no less than 85 percent of the aggregate dues,
fees, premiums, or other periodic payments received by the insurer
during the insurer's fiscal year. For purposes of this section, the
insurer may deduct from the aggregate dues, fees, premiums, or other
periodic payments received by the insurer during the insurer's fiscal
year the amount of income taxes or other taxes that the insurer
expensed for the same fiscal year. For purposes of this section,
"health care benefits" shall mean health care services that are
either provided or reimbursed by the insurer or its contracted
providers as benefits to its policyholders and insurers.
   (b) (1) Health care benefits shall include:
   (A) The costs of programs or activities, including training and
the provision of informational materials which improve the provision
of quality care, improve health care outcomes, and encourage the use
of evidence-based medicine.
   (B) Disease management expenses based using cost-effective
evidence-based guidelines.
   (C) Plan medical advice by telephone.
   (D) Payments to providers as risk pool payments of
pay-for-performance initiatives.
   (2) Health care benefits shall not include administrative costs
listed in Section 1300.78 of Title 28 of the California Code of
Regulations in effect on January 1, 2007.
   (c) To assess compliance with this section, an insurer may average
its total costs across all health insurance policies approved for
sale in California, and all health care service plan contracts of its
affiliated health care service plan providers approved for sale in
California by the Department of Managed Health Care, except for those
contracts listed in subdivision (f) of Section 1378.1 of the Health
and Safety Code.
   (d) The department and the Department of Managed Health Care shall
jointly adopt and amend regulations to implement this section and
Section 1378.1 of the Health and Safety Code to establish uniform
reporting by health care service plans and insurers of the
information necessary to determine compliance with this section.
These regulations may include additional elements in the definition
of health care benefits not identified in paragraph (1) of
subdivision (b).
   (e) The department may exclude from the determination of
compliance with the requirement of subdivision (a) any new health
insurance policies for up to the first two years that these policies
are offered for sale in California.
   (f) This section shall not apply to Medicare supplement policies,
short-term limited duration health insurance policies, vision-only,
dental-only, behavioral health only, pharmacy only policies,
CHAMPUS-supplement or Tricare supplement insurance policies, or to
hospital indemnity, hospital-only, accident-only, or specified
disease insurance policies that do not pay benefits on a fixed
benefit, cash payment only basis. 
   SEC. 37.    Section 10113.11 is added to the 
 Insurance Code   , to read:  
   10113.11.  (a) A health insurer may provide notice by electronic
transmission and shall be deemed to have fully complied with the
specific statutory or regulatory requirements to provide notice by
United States mail to an applicant or insured if it complies with all
of the following requirements:
   (1) Obtains written authorization from the applicant or insured to
provide notices by electronic transmission and to cease providing
notices by United States mail. The authorization shall be renewed by
the insured on an annual basis. If the health insurer obtains an
application for coverage by electronic transmission, it may obtain
authorization by electronic transmission from the applicant or
insured to provide notices by electronic transmission.
   (2) Uses an authorization form, approved by the department, in
which the applicant or insured confirms understanding of the type of
notice that will be provided by electronic transmission.
   (3) Complies with the specific statutory or regulatory
requirements as to the content of the notices it sends by electronic
transmission.
   (4) Provides for the privacy of the notice as required by state
and federal laws and regulations.
   (5) Allows the applicant or insured at any time to terminate the
authorization to provide notices by electronic transmission and
receive the notices through the United States mail.
   (6) Sends the electronic transmission of a notice to the last
known electronic address of the applicant or insured. If the
electronic transmission of the notice fails to reach its intended
recipient twice, the health insurer shall resume sending all notices
to the last known United States mail address of the applicant or
insured.
   (7) Maintains an Internet Web site where the applicant or insured
may access the notices sent by electronic transmission.
   (b) A health insurer shall not use the electronic mail address of
an applicant or insured that it obtained for the purposes of
providing notice pursuant to subdivision (a) for any purpose other
than sending a notice as described in subdivision (a).
   (c) No person other than the applicant or insured to whom the
medical information in the notice pertains or a representative
lawfully authorized to act on behalf of the applicant or insured, may
authorize the transmission of medical information by electronic
transmission. "Medical information" for these purposes shall have the
meaning set forth in subdivision (g) of Section 56.05 of the Civil
Code.
   (d) A notice transmitted electronically pursuant to this section
is a private and confidential communication, and it shall be unlawful
for a person, other than the applicant or insured to whom the notice
is addressed, to read or otherwise gain access to the notice without
the express, specific permission of the notice's addressee. This
subdivision shall not apply to a provider of an applicant or insured
if the provider is authorized to have access to the medical
information pursuant to the Confidentiality of Medical Information
Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil
Code).
   (e) A health insurer may not impose additional fees or a
differential if an applicant or insured elects not to receive notices
by electronic transmissions.
   (f) "Notice" for purposes of this section includes explanation of
benefits; distribution of the insurer's policies and certificates of
coverage; a list of contracting providers; responses to inquiries
from insureds; changes in rates pursuant to Sections 10113.7 and
10901.3; and notices related to underwriting decisions pursuant to
Section 791.10. 
   SEC. 38.    Section 10123.56 is added to the 
 Insurance Code   , to read:  
   10123.56.  (a) Every policy of group health insurance that is
offered, delivered, amended, or renewed on or after January 1, 2009,
that covers hospital, medical, or surgical expenses shall offer
coverage that includes a Healthy Action Incentives and Rewards
Program as described in subdivision (c). Every insurer shall
communicate the availability of this coverage to all group
policyholders and to all prospective group policyholders with whom
they are negotiating.
   (b) Every policy of insurance that is offered, delivered, amended,
or renewed on or after January 1, 2009, that covers hospital,
medical, or surgical expenses on an individual basis shall offer
individuals at least one coverage choice that includes a Healthy
Action Incentives and Rewards Program that meets the requirements
described in subdivision (c).
   (c) For purposes of this section, benefits for a Healthy Action
Incentives and Rewards Program shall provide for all of the
following:
   (1) Health risk appraisals that collect information from
individuals to assess overall health status and to identify risk
factors, including, but not limited to, smoking and smokeless tobacco
use, alcohol abuse, drug use, and nutrition and physical activity
practices.
   (2) A followup appointment with a licensed health care
professional acting within his or her scope of practice to review the
results of the health risk appraisal and discuss any recommended
actions.
   (3) Incentives or rewards for policyholders to became more engaged
in their health care and to make appropriate choices that support
good health, including obtaining health risk appraisals, screening
services, immunizations, or participating in healthy lifestyle
programs or practices. These programs or practices may include, but
need not be limited to, smoking cessation, physical activity, or
nutrition. Incentives may include, but need not be limited to, health
premium reductions, differential copayment or coinsurance amounts,
and cash payments. Rewards may include, but need not be limited to,
nonmedical pharmacy products or services not otherwise covered under
a policyholder's health insurance contract, gym memberships, and
weight management programs. If an insurer elects to offer an
incentive in the form of a reduction in the premium amount, the
premium reduction shall be standardized and uniform for all groups
and policyholders and shall be offered only after the successful
completion of the specified program or practice by the insured or
policyholder.
   (d) This section is in addition to, and does not replace, any
other section in this code concerning requirements for insurers to
provide health care screening services, childhood immunizations,
adult immunizations, and preventive care services.
   (e) (1) Notwithstanding any other provision of law, the provision
of healthy incentives and rewards pursuant to this section by a
health care provider, or his or her agent, that meets the
requirements of this section, Section 1367.38 of the Health and
Safety Code, or Section 14132.105 of the Welfare and Institutions
Code shall not be considered or construed as an unlawful practice,
act, kickback, bribe, rebate, remuneration, offer, coupon, product,
payment, or any other form of compensation by a provider or his or
her agent, directly or indirectly, overtly or covertly, in exchange
for another to obtain, participate, or otherwise undergo or receive
health care services.
   (2) Notwithstanding any other provision of law, incentives
authorized pursuant to this section are not subject to the penalties,
discipline, limitations, or sanctions imposed under law to preclude
or prohibit, as an unlawful practice, bribe, kickback or other act,
the offering or delivery of a rebate, remuneration, offer, coupon,
product, rebate, payment, or any other form of compensation by the
provider, or his or her agent, directly or indirectly, overtly or
covertly, in exchange for another to obtain, participate, or
otherwise undergo or receive health care services.
   (3) Notwithstanding any other provision of law, the provision of
healthy incentives and rewards pursuant to this section by a health
care provider, or his or her agent, that meets the requirements of
this section shall not be considered or construed as an inducement to
enroll.
   (f) This section shall only be implemented if and to the extent
allowed under federal law. If any portion of this section is held to
be invalid, as determined by a final judgment of a court of competent
jurisdiction, this section shall become inoperative. 
   SEC. 39.    Section 10176.15 is added to the 
 Insurance Code   , to read:  
   10176.15.  For purposes of subdivision (d) of Section 10176.10,
"comparable benefits" means any health insurance policy in the same
coverage choice category, as determined by the department and the
Department of Managed Health Care pursuant to Section 10930, that a
closed block of business would have been in had that block of
business not been closed. If the coverage benefits provided in the
closed block of business do not meet or exceed the minimum health
care coverage requirements of Section 10923, they shall be deemed
comparable to the lowest coverage choice category.
   SEC. 40.    Section 10273.6 of the  
Insurance Code   is amended to read: 
   10273.6.  All individual health benefit plans, except for
short-term limited duration insurance, shall be renewable with
respect to all eligible individuals or dependents at the option of
the individual except as follows:
   (a) For nonpayment of the required premiums or contributions by
the individual in accordance with the terms of the health insurance
coverage or the timeliness of the payments.
   (b) For fraud or intentional misrepresentation of material fact
under the terms of the coverage by the individual.
   (c) Movement of the individual contractholder outside the service
area but only if coverage is terminated uniformly without regard to
any health status-related factor of covered individuals.
   (d) If the disability insurer ceases to provide or arrange for the
provision of health care services for new individual health benefit
plans in this state; provided, however, that the following conditions
are satisfied:
   (1) Notice of the decision to cease new or existing individual
health benefit plans in this state is provided to the commissioner
and to the individual policy or contractholder at least 180 days
prior to discontinuation of that coverage.
   (2) Individual health benefit plans shall not be canceled for 180
days after the date of the notice required under paragraph (1) and
for that business of a disability insurer that remains in force, any
disability insurer that ceases to offer for sale new individual
health benefit plans shall continue to be governed by this section
with respect to business conducted under this section.
   (3) A disability insurer that ceases to write new individual
health benefit plans in this state after the effective date of this
section shall be prohibited from offering for sale individual health
benefit plans in this state for a period of five years from the date
of notice to the commissioner.
   (e) If the disability insurer withdraws an individual health
benefit plan from the market; provided, that the disability insurer
notifies all affected individuals and the commissioner at least 90
days prior to the discontinuation of these plans, and that the
disability insurer makes available to the individual all health
benefit plans that it makes available to new individual businesses
without regard to a health status-related factor of enrolled
individuals or individuals who may become eligible for the coverage.

   (f) This section shall become inoperative on the date that Section
10937 becomes operative. 
   SEC. 41.    Chapter 9.6 (commencing with Section
10920) is added to Part 2 of Division 2 of the   Insurance
Code   , to read:  
      CHAPTER 9.6.  INDIVIDUAL MARKET REFORM AND GUARANTEE ISSUE


   10920.  For purposes of this chapter, the following terms shall
have the following meanings:
   (a) "Anniversary date" means the calendar date an individual has
enrolled in a health insurance policy.
   (b) "Coverage choice category" means the category of health
insurance policies and health plan contracts established by the
department and the Department of Managed Health Care pursuant to
Section 10930.
   (c) "Dependent" means the spouse, child, or registered domestic
partner of an individual, subject to applicable terms of the health
insurance policy covering the individual.
   (d) "Health insurance policy" means an individual disability
insurance policy that provides coverage for hospital, medical, or
surgical benefits. The term shall not include any of the following
kinds of insurance:
   (1) Accidental death and accidental death and dismemberment.
   (2) Disability insurance, including hospital indemnity, accident
only, and specified disease insurance that pays benefits on a fixed
benefit, cash payment only basis.
   (3) Credit disability, as defined in Section 779.2.
   (4) Coverage issued as a supplement to liability insurance.
   (5) Disability income, as defined in subdivision (i) of Section
799.01.
   (6) 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.
   (7) Insurance arising out of a workers' compensation or similar
law.
   (8) Long-term care coverage.
   (9) Dental coverage.
   (10) Vision coverage.
   (11) Medicare supplement, CHAMPUS-supplement or Tricare
supplement, behavioral health-only, pharmacy-only, hospital
indemnity, hospital-only, accident-only, or specified disease
insurance that does not pay benefits on a fixed benefit,
cash-payment-only basis.
   (e) "Health insurer" means a disability insurer that offers and
sells health insurance.
   (f) "Health plan" means a health care service plan, as defined in
subdivision (f) of Section 1345 of the Health and Safety Code, that
is lawfully engaged                                           in
providing, arranging, paying for, or reimbursing the cost of health
care services and is offering or selling health care service plan
contracts in the individual market. A health plan shall not include a
specialized health care service plan.
   (g) "Health plan contract" means a health care service plan
contract offered, sold, amended, or renewed to individuals and their
dependents. The term shall not include accident only, credit,
disability income, long-term care insurance, 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. In addition, the term shall not include a specialized
health care service plan contract, as defined in subdivision (o) of
Section 1345 of the Health and Safety Code.
   (h) "Purchasing pool" means the program established under Part
6.45 (commencing with Section 12699.201).
   (i) "Rating period" means the period for which premium rates
established by an insurer are in effect and shall be no less than 12
months beginning on the effective date of the subscriber's health
insurance policy.
   (j) "Risk adjustment factor" means the percentage adjustment to be
applied to the standard risk rate for a particular individual, based
upon any expected deviations from standard claims due to the health
status of the individual.
   (k) "Risk category" means the following characteristics of an
individual: age, geographic region, and family composition of the
individual, plus the health insurance policy selected by the
individual.
   (1) No more than the following age categories may be used in
determining premium rates:
   Under 1
   1-18
   19-24
   25-29
   30-34
   35-39
   40-44
   45-49
   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
insurance policy will be primary or secondary to benefits provided by
the federal Medicare program pursuant to Title XVIII of the federal
Social Security Act.
   (2) Health insurers shall determine rates using no more than the
following family size categories:
   (A) Single.
   (B) More than one child 18 years of age or below and no adults.
   (C) Married couple or registered domestic partners.
   (D) One adult and child.
   (E) One adult and children.
   (F) Married couple and child or children, or registered domestic
partners and child or children.
   (3) (A) In determining rates for individuals, a health insurer
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. Health
insurers 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 individuals, a health insurer
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 health insurer'
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 health insurer shall have less than one geographic
area.
   (ii) If the formula in clause (i) results in a health insurer that
operates in more than one county having only one geographic region,
then the formula in clause (i) shall not apply and the health insurer
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 health
insurer to establish a new service area or to offer health insurance
on a statewide basis, outside of the health insurer's existing
service area.
   (4) A health insurer may rate its entire portfolio of health
insurance policies in accord with expected costs or other market
considerations, but the rate for each health insurance policy shall
be set in relation to the balance of the portfolio, as certified by
an actuary.
   (5) Each health insurance policy shall be priced as determined by
each health insurer to reflect the difference in benefit variation,
or the effectiveness of a provider network, and each insurer may
adjust the rate for a specific policy for risk selection only to the
extent permitted by subdivision (d) of Section 10937.
   (l) "Standard risk rate" means the rate applicable to an
individual in a particular risk category.
   (m) "Subscriber" means the individual who is enrolled in a health
insurance policy, is the basis for eligibility for enrollment in the
policy, and is responsible for payment to the health insurer.
   10922.  On and after July 1, 2009, a health insurer shall not
offer to an individual a health insurance policy that provides less
than minimum health care coverage.
   10923.  (a) Minimum heath care coverage that must be maintained by
an individual pursuant to Section 8899.50 of the Government Code
shall be established by the Secretary of California Health and Human
Services through the adoption of regulations pursuant to this
section. That coverage shall include hospital, medical, and
preventive services.
   (b) In determining the scope of services, and the insured and
dependent deductible, coinsurance, and copayment requirements, the
secretary shall consider whether those costs would deter an insured
or his or her dependents from obtaining appropriate and timely care,
including consideration of preventive services outside any
deductible.
   (c) In determining the scope of services and the insured and
dependent deductible, coinsurance, and copayment requirements, and
any coverage of services outside the deductible, the secretary shall
consider whether the resulting premium cost would prevent an insured
from obtaining coverage at a reasonable price.
   (d) The secretary shall consult with the Insurance Commissioner
and the Director of the Department of Managed Health Care in the
development of these regulations.
   (e) The secretary shall adopt regulations establishing the minimum
coverage pursuant to subdivision (a) on or before March 1, 2009.
Upon adoption, these regulations shall not be amended unless
expressly permitted by a subsequent statute.
   (f) The secretary may designate an administrative entity within
the agency to accomplish the requirements of this section.
   10924.  (Reserved)
   10925.  (a) Notwithstanding Chapter 15 (commencing with Section
8899.50) of Division 1 of Title 2 of the Government Code and Section
10922, an individual enrolled in any individual health insurance
policy prior to March 1, 2009, may maintain coverage in that health
insurance policy indefinitely. An individual who maintains coverage
in a health insurance policy pursuant to this section shall be deemed
to be in compliance with Section 8899.50 of the Government Code.
   (b) A health insurer shall not cease to renew coverage in an
individual health insurance policy described in subdivision (a)
except as permitted pursuant to Section 10176.10.
   (c) On and after March 1, 2009, the commissioner shall not approve
for offer and sale in this state any benefit design that was not
approved prior to that date that does not meet or exceed the minimum
health care coverage requirements of Section 10923.
   (d) This section shall become operative on January 1, 2009.
   10926.  A health insurer shall, in addition to complying with the
applicable provisions of this code and the applicable rules of the
commissioner, comply with this chapter.
   10927.  This chapter shall not apply to health insurance policies
for coverage of Medicare services pursuant to contracts with the
United States government, Medicare supplement, Medi-Cal contracts
with the State Department of Health Care Services, Healthy Families
Program contracts with the Managed Risk Medical Insurance Board,
long-term care coverage, specialized health care service plan
contracts, as defined in subdivision (o) of Section 1345 of the
Health and Safety Code, or the purchasing pool established under Part
6.45 (commencing with Section 12699.201).
   10928.  (a) Except for the health insurance policies described in
subdivision (a) of Section 10925, a health insurer shall fairly and
affirmatively offer, market, and sell all of the insurer's policies
that are sold to individuals to all individuals in each service area
in which the health insurer provides or arranges for the provision of
health care services.
   (b) A health insurer may not reject an application from an
individual, or his or her dependents, for an individual health
insurance policy, or refuse to renew an individual health insurance
policy, if all of the following requirements are met:
   (1) The individual agrees to make the required premium payments.
   (2) The individual and his or her dependents who are to be covered
by the health insurance policy work or reside in the service area in
which the health insurer provides or otherwise arranges for the
provision of health care services.
   (3) The individual provides the information requested on the
application to determine the appropriate rate.
   (c) Notwithstanding subdivision (b), if an individual, or his or
her dependents, applies for a health insurance policy in a coverage
choice category for which he or she is not eligible pursuant to
Section 10934, the health insurer may reject that application
provided that the insurer also offers the individual and his or her
dependents coverage in the appropriate coverage choice category.
   (d) Notwithstanding subdivision (b), a health insurer is not
required to renew an individual health insurance policy if any of the
conditions listed in subdivision (a) of Section 10936 are met.
   (e) Notwithstanding any other provision of this chapter or of a
health insurance policy, every health insurer shall comply with the
requirements of Chapter 7 (commencing with Section 3750) of Part 1 of
Division 9 of the Family Code and Section 14124.94 of the Welfare
and Institutions Code.
   (f) A health insurer may request an individual to provide
information on his or her health status or health history, or that of
his or her dependents, in the application for enrollment to the
extent required to apply the risk adjustment factor permitted
pursuant to subdivision (d) of Section 10937. After the individual
health insurance policy's effective date of coverage, a health
insurer may request that the enrollee provide information voluntarily
on his or her health history or health status, or that of his or her
dependents, for purposes of providing care management services,
including disease management services.
   (g) Notwithstanding Section 10944, this section shall not become
operative until the authority under Section 8899.52 of the Government
Code is implemented.
   10929.  A health insurer shall not impose any preexisting
condition exclusions, waivered conditions, or postenrollment waiting
or affiliation periods on any health insurance policy issued,
amended, or renewed pursuant to this chapter.
   10930.  (a) On or before April 1, 2009, the department and the
Department of Managed Health Care shall jointly, by regulation,
develop a system to categorize all health insurance polices and
health plan contracts offered and sold to individuals pursuant to
this chapter and Article 11.6 (commencing with Section 1399.821) of
Chapter 2.2 of Division 2 of the Health and Safety Code into five
coverage choice categories. These coverage choice categories shall do
all of the following:
   (1) Reflect a reasonable continuum between the coverage choice
category with the lowest level of health care benefits and the
coverage choice category with the highest level of health care
benefits.
   (2) Permit reasonable benefit variation that will allow for a
diverse market within each coverage choice category.
   (3) Be enforced consistently between health insurers and health
plans in the same marketplace regardless of licensure.
   (b) All health insurers shall submit the filings required pursuant
to Section 10939 no later than October 1, 2009, for all individual
health insurance policies to be sold on or after July 1, 2010, to
comply with this chapter, and thereafter any additional health
insurance policies shall be filed pursuant to Section 10939. The
commissioner shall categorize each health insurance policy offered by
a health insurer into the appropriate coverage choice category on or
before March 31, 2010.
   (c) All health insurers that offer coverage on an individual basis
shall offer at least one health insurance policy in each coverage
choice category.
   (d) If a health insurer offers a specific type of health insurance
policy in one coverage choice category, it must offer that specific
type of health insurance policy in each coverage choice category. A
"type of health insurance policy" includes a health maintenance
organization model, a preferred provider organization model, an
exclusive provider organization model, a traditional indemnity model,
and a point of service model.
   (e) Health insurers shall have flexibility in establishing
provider networks, provided that access to care standards pursuant to
Section 10133.5 are met, and provided that the provider network
offered for one health insurance policy in one coverage choice
category is offered for at least one health insurance policy in each
coverage choice category.
   (f) A health insurer shall establish prices for its products that
reflect a reasonable continuum between the products offered in the
coverage choice category with the lowest level of benefits and the
products offered in the coverage choice category with the highest
level of benefits. A health plan shall not establish a standard risk
rate for a product in a coverage choice category at a lower rate than
a product offered in a lower coverage choice category.
   (g) The coverage choice category with the lowest level of benefits
shall include the benefits specified in Section 10923.
   10931.  A health insurer shall offer coverage for a Healthy Action
Incentives and Rewards Program that complies with the requirements
of subdivision (c) of Section 10123.56 in at least one health
insurance policy in every coverage choice category.
   10932.  When an individual submits a premium payment, based on the
quoted premium charges, and that payment is delivered or postmarked,
whichever occurs earlier, within the first 15 days of the month,
coverage under the health insurance policy shall become effective no
later than the first day of the following month. When that payment is
either delivered or postmarked after the 15th day of a month,
coverage shall become effective no later than the first day of the
second month following delivery or postmark of the payment.
   10933.  Except as provided in Section 10928, a health insurer is
not required to offer an individual health insurance policy and may
reject an application for an individual health insurance policy in
the case of either of the following:
   (a) The individual and dependents who are to be covered by the
health insurance policy do not work or reside in a health insurer's
approved service area.
   (b) (1) Within a specific service area or portion of a service
area, if a health insurer reasonably anticipates and demonstrates to
the satisfaction of the commissioner that it will not have sufficient
health care delivery resources to assure that health care services
will be available and accessible to the eligible individual and
dependents of the individual because of its obligations to existing
enrollees.
   (2) A health insurer that cannot offer a health insurance policy
to individuals because it is lacking in sufficient health care
delivery resources within a service area or a portion of a service
area may not offer a health insurance policy in the area in which the
health insurer is not offering coverage to individuals until the
health insurer notifies the commissioner that it has the ability to
deliver services to new enrollees, and certifies to the commissioner
that from the date of the notice it will enroll all individuals and
groups requesting coverage in that area from the health insurer.
   10934.  (a) If an individual disenrolls from a health insurance
policy or health plan contract or if the individual's health
insurance policy or health plan contract is cancelled pursuant to
Section 10936 or Section 1399.839 of the Health and Safety Code prior
to the anniversary date of the health insurance policy or health
plan contract, subsequent enrollment shall be in the same coverage
choice category the individual was enrolled in prior to disenrollment
or cancellation.
   (b) (1) An individual may change to a health insurance policy in a
different coverage choice category only on the anniversary date of
the subscriber or upon a qualifying event.
   (2) In no case, however, may an individual move up more than one
coverage choice category on the anniversary date of the subscriber
unless there is also a qualifying event.
   (c) An individual health insurance policy described in subdivision
(a) of Section 10925 that does not meet or exceed the minimum health
care coverage requirements of Section 10923 shall be deemed to be
the lowest coverage choice category for purposes of this section.
   (d) On and after January 1, 2011, an individual who fails to
comply with the provisions of Chapter 15 (commencing with Section
8899.50) of Division 1 of Title 2 of the Government Code for more
than 30 days may only enroll in a health insurance policy or health
plan contract in the lowest coverage choice category. Upon the
individual's anniversary date, the individual may move to a higher
coverage choice category pursuant to subdivision (b).
   (e) For purposes of this section, a qualifying event occurs upon
any of the following:
   (1) Upon the death of the subscriber, on whose qualifying coverage
an individual was a dependent.
   (2) Upon marriage of the subscriber or entrance by the subscriber
into a domestic partnership pursuant to Section 298.5 of the Family
Code.
   (3) Upon divorce or legal separation of an individual from the
subscriber.
   (4) Upon loss of dependent status by a dependent enrolled in group
health care coverage through a health care service plan or a health
insurer.
   (5) Upon the birth or adoption of a child.
   (6) Upon loss of minimum health care coverage as defined in
paragraphs (3) to (19), inclusive, of subdivision (a) of Section
8899.51 of the Government Code.
   10935.  The commissioner may require a health insurer to
discontinue the offering of policies or acceptance of applications
from any individual upon a determination by the commissioner that the
health insurer does not have sufficient financial viability, or
organizational and administrative capacity to assure the delivery of
health care services to its enrollees.
   10936.  (a) All health insurance policies offered pursuant to this
chapter shall be renewable with respect to all individuals and
dependents at the option of the subscriber and shall not be cancelled
except for the following reasons:
   (1) Failure to pay any charges for coverage provided pursuant to
the contract if the subscriber has been duly notified and billed for
those charges and at least 15 days has elapsed since the date of
notification.
   (2) Fraud or intentional misrepresentation of material fact under
the terms of the health insurance policy by the individual.
   (3) Fraud or deception in the use of the services or facilities of
the health insurer or knowingly permitting such fraud or deception
by another.
   (4) Movement of the subscriber outside the health insurer's
service area.
   (5) If the health insurer ceases to provide or arrange for the
provision of health care services for new or existing individual
health insurance policies in this state; provided, however, that the
following conditions are satisfied:
   (A) Notice of the decision to cease new or existing individual
health insurance policies in the state is provided to the
commissioner and to the individual at least 180 days prior to
discontinuation of that coverage.
   (B) Individual health insurance policies shall not be canceled for
180 days after the date of the notice required under subparagraph
(A) and for that business of a health insurer that remains in force,
any health insurer that ceases to offer for sale new individual
health insurance policies shall continue to be governed by this
chapter with respect to business conducted under this chapter.
   (C) A health insurer that ceases to write new individual health
insurance policies in this state after the effective date of this
section shall be prohibited from offering for sale individual health
insurance policies in this state for a period of five years from the
date of notice to the commissioner. The commissioner may permit a
health insurer to offer and sell individual health insurance policies
in this state before the five-year time period has expired if the
commissioner determines that it is in the best interest of the state
and necessary to preserve the integrity of the health care market.
   (6) If the health insurer withdraws an individual health insurance
policy from the market, provided that the health insurer notifies
all affected individuals and the commissioner at least 90 days prior
to the discontinuation of these health insurance policies, and that
the health insurer makes available to the individual all health
insurance policies with comparable benefits that it makes available
to new individual business.
   (b) On and after July 1, 2010, a health insurer shall not rescind
the health insurance policy of any individual.
   (c) Nothing in this chapter shall limit any other remedies
available at law to a health insurer.
   10937.  Premiums for health insurance policies offered or
delivered by health insurers on or after the effective date of this
chapter shall be subject to the following requirements:
   (a) The premium for new or existing business shall be the standard
risk rate for an individual in a particular risk category.

(b) The premium rates shall be in effect for no less than 12 months
from the date of the health insurance policy.
   (c) When determining the premium rate for more than one covered
individual, the health insurer shall determine the rate based on the
standard risk rate for the subscriber. If more than one individual is
a subscriber, the premium rate shall be based on the age of the
youngest spouse or registered domestic partner.
   (d) (1) Notwithstanding subdivision (a), for the first three years
following the implementation of this section, a health insurer may
apply a risk adjustment factor to the standard risk rate that may not
be more than 120 percent or less than 80 percent of the applicable
standard risk rate.
   (2) After the first three years following the implementation of
this section, the adjustments applicable under paragraph (1) shall
not be more than 110 percent or less than 90 percent of the standard
risk rate.
   (3) Upon the renewal of any contract the risk adjustment factor
applied to the individual's rate may not be more than 10 percentage
points different than the factor applied to that rate prior to
renewal. The same limitation shall be applied to individuals with
respect to the risk adjustment factor applicable for the purchase of
a new product where the individual's prior health insurer has
discontinued that product.
   (4) After the first six years following the implementation of this
section, a health insurer shall base rates on the standard risk
rate. However, the commissioner and the Director of the Department of
Managed Health Care may jointly delay implementation of this
paragraph for one year if required to ensure availability of coverage
in the individual market. At the end of that year, the commissioner
and the director shall review the necessity for the delay and may
extend the delay for an additional year.
   (e) The commissioner and the Director of the Department of Managed
Health Care shall jointly establish a maximum limit on the ratio
between the standard risk rates for contracts for individuals in the
60 to 64 years of age category and contracts for individuals in the
30 to 35 years of age category.
   10938.  (a) In connection with the offering for sale of any health
insurance policy to an individual, each health insurer shall make a
reasonable disclosure, as part of its solicitation and sales
materials, of all of the following:
   (1) The provisions concerning the health insurer's right to change
premium rates on an annual basis and the factors other than
provision of services experience that affect changes in premium
rates.
   (2) Provisions relating to the guaranteed issue and renewal of
individual health insurance policies.
   (3) Provisions relating to the individual's right to obtain any
health insurance policy the individual is eligible to enroll in
pursuant to Sections 10928 and 10934.
   (4) The availability, upon request, of a listing of all the
individual health insurance policies offered by the health insurer,
including the rates for each health insurance policy.
   (b) Every solicitor or solicitor firm contracting with one or more
health insurers to solicit enrollments or subscriptions from
individuals shall, when providing information on health insurance
policies to an individual but making no specific recommendations on
particular health insurance policies, do both of the following:
   (1) Advise the individual of the health insurer's obligation to
sell to any individual any health insurance policy it offers to
individuals and provide him or her, upon request, with the actual
rates that would be charged to that individual for a given health
insurance policy.
   (2) Notify the individual that the solicitor or solicitor firm
will procure rate and benefit information for the individual on any
health insurance policy offered by a health insurer whose policy the
solicitor sells.
   (c) Prior to filing an application for a particular individual
health insurance policy, the health insurer may obtain a signed
statement from the individual acknowledging that the individual has
received the disclosures required by this section.
   10939.  (a) At least 20 business days prior to offering a health
insurance policy subject to this chapter, all health insurers shall
file with the commissioner a statement certifying that the health
insurer is in compliance with subdivision (k) of Section 10920 and
Section 10937. The certified statement shall set forth the standard
risk rate for each risk category that will be used in setting the
rates at which the contract will be offered. Any action by the
commissioner to disapprove, suspend, or postpone the health insurer's
use of a health insurance policy shall be in writing, specifying the
reasons that the health insurance policy does not comply with the
requirements of this chapter.
   (b) Prior to making any changes in the standard risk rates filed
with the commissioner pursuant to subdivision (a), the health insurer
shall file as an amendment a statement setting forth the changes and
certifying that the health insurer is in compliance with subdivision
(k) of Section 10920 and Section 10937. If the standard risk rate is
being changed, a health insurer may commence offering health
insurance policies utilizing the changed standard risk rate upon
filing the certified statement unless the commissioner disapproves
the amendment by written notice.
   (c) Periodic changes to the standard risk rate that a health
insurer proposes to implement over the course of up to 12 consecutive
months may be filed in conjunction with the certified statement
filed under subdivision (a) or (b).
   (d) Each health insurer shall maintain at its principal place of
business all of the information required to be filed with the
commissioner pursuant to this chapter.
   (e) This section shall become operative on July 1, 2009.
   10940.  (a) A health insurer shall include all of the following in
the statement filed pursuant to subdivision (a) of Section 10939:
   (1) A summary explanation of the following for each health
insurance policy offered to individuals:
   (A) Eligibility requirements.
   (B) The full premium cost of each health insurance policy in each
risk category, as defined in subdivision (k) of Section 10920.
   (C) When and under what circumstances benefits cease.
   (D) Other coverage that may be available if benefits under the
described health insurance policy cease.
   (E) The circumstances under which choice in the selection of
physicians and providers is permitted.
   (F) Deductibles.
   (G) Annual out-of-pocket maximums.
   (2) A summary explanation of coverage for the following, together
with the corresponding copayments, coinsurance, and applicable
limitations for each health insurance policy offered to individuals:
   (A) Professional services.
   (B) Outpatient services.
   (C) Preventive services.
   (D) Hospitalization services.
   (E) Emergency health coverage.
   (F) Ambulance services.
   (G) Prescription drug coverage.
   (H) Durable medical equipment.
   (I) Mental health and substance abuse services.
   (J) Home health services.
   (3) The telephone number or numbers that may be used by an
applicant to access a health insurer customer service representative
to request additional information about the health insurance policy.
   (b) If any information provided pursuant to subdivision (a)
changes, the health insurer shall provide to the commissioner, on an
annual basis, an update of that information.
   10941.  The commissioner shall share the information provided by
health insurers pursuant to this chapter with the Office of the
Patient Advocate for purposes of the development, creation, and
maintenance of the comparative benefits matrix described in Section
1399.834 of the Health and Safety Code.
   10943.  (a) The commissioner may issue regulations that are
necessary to carry out the purposes of this chapter.
   (b) Nothing in this chapter shall be construed as providing the
commissioner with rate regulation authority.
   10944.  Sections 10923, 10925, and 10930 shall become operative on
January 1, 2009, and Section 10939 shall become operative on July 1,
2009. All remaining sections of this chapter shall become operative
on July 1, 2010. 
   SEC. 42.    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 subparagraph 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 subparagraph 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.  On and after July 1, 2010, this
paragraph shall only apply to individuals to which clause (i), but
not clause (ii), of subparagraph (B) of paragraph (6) of subdivision
(a) of Section 12693.70 is applicable.  
   (4) On and after July 1, 2010, 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 income to
which clause (ii) of subparagraph (B) of paragraph (6) of subdivision
(a) of Section 12693.70 is applicable. 
   (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 subparagraph 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 subparagraph 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.  On and after July 1, 2010, this
paragraph shall only apply to individuals to which clause (i) but not
clause (ii) of subparagraph (B) of paragraph (6) of subdivision (a)
of Section 12693.70 is applicable.  
   (4) On and after July 1, 2010, twenty-two dollars ($22) with a
maximum required contribution of sixty-six dollars ($66) per month
per family for applicants with annual household income to which
clause (ii) of subparagraph (B) of paragraph (6) of subdivision (a)
of Section 12693.70 is applicable. 
   (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 purpose 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. 43.    Section 12693.56 is added to the 
 Insurance Code   , to read:  
   12693.56.  (a) The board may provide or arrange for the provision
of an electronic personal health record for enrollees receiving
health care benefits, to the extent funds are appropriated for this
purpose. The record shall be provided for the purpose of providing
enrollees with information to assist them in understanding their
coverage benefits and managing their health care.
   (b) At a minimum, the personal health record shall provide access
to real-time, patient-specific information regarding eligibility for
covered benefits and cost sharing requirements. The access may be
provided through the use of an Internet-based system.
   (c) In addition to the data required pursuant to subdivision (b),
the board may determine that the personal health record shall also
incorporate additional data, including, but not limited to,
laboratory results, prescription history, claims history, and
personal health information authorized or provided by the enrollee.
Inclusion of this additional data shall be at the option of the
enrollee.
   (d) Systems or software that pertain to the personal health record
shall adhere to accepted national standards for interoperability,
privacy, and data exchange, or shall be certified by a nationally
recognized certification body.
   (e) The personal health record shall comply with applicable state
and federal confidentiality and data security requirements. 
   SEC. 44.    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 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, 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 encompass all activities and
responsibilities in which the Managed Risk Medical Insurance Board
and its agents, officers, trustees, employees, consultants, and
contractors are engaged to conduct program operations. Purposes
directly connected with the administration of the Medi-Cal program
encompass all activities and responsibilities in which the State
Department of Health Care Services and its agents, officers,
trustees, employees, consultants, and contractors are engaged 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 for that disclosure.
   (e) Nothing in this part shall prohibit the disclosure of
protected health information as provided in Section 164.512 of Title
45 of the Code of Federal Regulations. 
   SEC. 45.    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) A child who meets citizenship and immigration status
requirements that are applicable to persons participating in the
program established by Title XXI of the Social Security Act, except
as specified in Section 12693.76.
   (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)  (i)    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. 
   (ii) On and after July 1, 2010, all income over 250 percent of the
federal poverty level but less than or equal to 300 percent of the
federal poverty level shall also 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  before July 1,
2010, or to 300 percent or less of the federal poverty level on and
after July 1, 2010  , subparagraph (B) shall be applied.
   (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. 46.    Section 12693.76 of the  
Insurance Code   is amended to read: 
   12693.76.  (a) Notwithstanding any other provision of law, a child
who is a qualified alien as defined in Section 1641 of Title 8 of
the United States Code Annotated 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, commencing July 1,
2010, a child who is otherwise eligible for services under this
article shall not be determined ineligible solely on the basis of his
or her immigration status. 
   SEC. 47.    Section 12693.766 is added to the 
 Insurance Code   , to read: 
   12693.766.  In order to comply with federal requirements and to
maximize federal funding, the board shall develop documentation
requirements for individuals applying for benefits under subdivision
(e) of Section 12693.76. 
   SEC. 48.    Section 12694.5 is added to the 
 Insurance Code   , to read:  
   12694.5.  Upon implementation of Section 14005.311 of the Welfare
and Institutions Code, a county may make determinations of
eligibility for the Healthy Families Program and for the subsidized
coverage provided by the program established pursuant to Part 6.45
(commencing with Section 12699.201). 
   SEC. 49.    Part 6.45 (commencing with Section
12699.201) is added to Division 2 of the   Insurance Code
  , to read:  

      PART 6.45.  THE HEALTH CARE SECURITY AND COST REDUCTION 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) "Enrollee" means an individual who is eligible for, and
participates in, the program.
   (d) "Fund" means the California Health Trust Fund established
pursuant to Section 12699.215.
   (e) "Health Care Security and Cost Reduction Program" or "program"
means the statewide purchasing pool established pursuant to this
part and administered by the board.
   (f) "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 or sell dental coverage to enrollees.
   (g) "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 or sell coverage in the program
and, pursuant to its contract with the board, provides, arranges,
pays for, or reimburses the costs of health services for program
enrollees.
   (h) "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 or sell vision
coverage to enrollees.
      CHAPTER 2.  ADMINISTRATION


   12699.202.  (a) The board shall be responsible for establishing
the program and administering this part.
   (b) The board may do all of the following consistent with the
standards of this part:
   (1) Determine eligibility, enrollment, and disenrollment criteria
and processes for the program 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.
   (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 facilitate coverage for subscribers, or contract
with participating health plans to provide or administer coverage in
the program.
   (8) Provide or facilitate coverage for subscribers, or contract
with participating dental and vision plans to provide or administer
coverage in the program.
   (9) Provide for or facilitate the processing of applications and
the enrollment and disenrollment 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) Issue rules and regulations, as necessary.
   (15) 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.
   (16) Establish the criteria and procedures through which employers
direct employees' premium dollars, withheld under the terms of
cafeteria plans pursuant to Section 4801 of the Unemployment
Insurance Code, to the program to be credited against the employees'
premium obligations.
   (17) Share information obtained pursuant to this part with the
Employment Development Department solely for the purpose of the
administration and enforcement of this part.
   (18) Exercise all powers reasonably necessary to carry out the
powers and responsibilities expressly granted or imposed by this
part.
   12699.202.1.  In order for an otherwise eligible individual to be
eligible for subsidized benefits through the program, the individual
shall be required to meet all of the minimum federal requirements
necessary for federal claiming by furnishing all necessary
information and providing all necessary documentation.
   12699.203.  (a) The board shall establish the program to make the
following benefits available to California residents through the
program effective July 1, 2010.
   (1) Subsidized, comprehensive health coverage for individuals
eligible for subsidized coverage under this part. The benefits
provided through that coverage shall be structured so that the
coverage meets or exceeds the criteria for coverage under Section
1399.824 of the Health and Safety Code.
   (2) Unsubsidized coverage providing at least minimum health care
coverage described in Section 1399.824 of the Health and Safety Code,
for individuals eligible for such coverage under this part.
   (b) The board may make available, through the program,
unsubsidized dental and vision coverage for individuals eligible for
and enrolled in other health benefit coverage through the pool under
this part, if the board makes all of the following determinations:
   (1) Making that coverage available will provide a significant
benefit for the health coverage marketplace in the state.
   (2) Making that coverage available will be cost effective.
   (3) The board can make that coverage available on a guarantee
issue basis without undue risk of adverse selection.
   (c) The board shall negotiate rates and other contract terms with
participating health, dental, and vision plans that offer benefits
through contracts that provide benefits to enrollees.
   12699.203.1.  The board shall consult and coordinate with the
State Department of Health Care Services in seeking federal financial
support, pursuant to Article 7 (commencing with Section 14199.10) of
Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code, for subsidized health care coverage provided pursuant to
Section 12699.203. To the extent that the state obtains federal
financial support for that subsidized coverage, the coverage will be
subject to the terms, conditions, and duration of any applicable
state plan amendment or waiver. To the extent required to obtain
federal financial support, the board shall apply the citizenship,
immigration, and identity documentation standards required in Title
XIX of the federal Social Security Act.
   12699.203.2.  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.
   (b) The subsidized benefit plan design 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.
   (c) For unsubsidized coverage, the board shall make available, at
a minimum, one product that offers the same benefits as the minimum
health care coverage defined in Section 10923 and one product each
from coverage choice categories 3 and 5, established pursuant to
Section 10930. Notwithstanding Section 1399.828 of the Health and
Safety Code and Section 10927, this coverage shall be subject to the
same rules as set forth in Article 11.6 (commencing with Section
1399.821) of Chapters 2.2 of Division 2 of the Health and Safety Code
or as set forth in Chapter 9.6 (commencing with Section 10920) of
Part 2.
   (d) In determining the enrollee and dependent deductibles,
coinsurance, and copayment requirements for the subsidized coverage,
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.
   (e) The board shall consult with the Insurance Commissioner, the
Director of the Department of Managed Health Care, and the Director
of Health Care Services.
   12699.204.  The following premiums shall apply to coverage under
this part:
   (a) For subsidized, comprehensive health care coverage made
available pursuant to paragraph (1) of subdivision (a) of Section
12699.203:
   (1) For individuals with family incomes less than or equal to 150
percent of the federal poverty level, no premiums or out-of-pocket
costs shall be allowed.
   (2) For individuals with family incomes above 150 percent but less
than or equal to 250 percent of the federal poverty level, premiums
shall not exceed 5 percent of family income net of applicable
deductions.
   (b) For unsubsidized health care coverage made available pursuant
to paragraph (2) of subdivision (a) of Section 12699.203, and for
unsubsidized dental and vision coverage made available pursuant to
subdivision (b) of Section 12699.203, the applicable premiums shall
be commensurate with the cost of obtaining the coverage from
participating health plans and the administrative cost associated
with providing the coverage.
   (c) Premiums paid by an individual for coverage under the Healthy
Families Program shall be included when calculating the premium
limitations specified in subdivision (a).
   12699.205.  The board, in a contract with a participating health
plan to provide benefits to enrollees, shall require that the plan
utilize efficient practices to improve and control costs. These
practices may 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) Evidence-based use of new technology.
   12699.206.  (a) All information, whether written or oral,
concerning an applicant to the program, an enrollee in the program,
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" means all activities and
responsibilities in which the board or the State Department of Health
Care Services and its agents, officers, trustees, employees,
consultants, and contractors are engaged 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) With regard to Medi-Cal beneficiaries, use and disclosure of
information concerning an applicant or enrollee in the program who is
a Medi-Cal applicant or enrollee shall be strictly limited to the
circumstances provided for in Section 14100.2 of the Welfare and
Institutions Code.
   (e) Except as provided in subdivision (d), nothing in this section
shall prohibit the disclosure of protected health information as
provided in Section 164.512 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 Department
of Insurance or the Department of Managed Health Care and shall be
licensed and in good standing with their respective licensing agency.
In their application to the program 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.
   12699.210.  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 subsidized,
comprehensive health care coverage made available pursuant to
paragraph (1) of subdivision (a) of Section 12699.203, 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 the program or
after enrollment in the program.
   (2) Is a citizen or national of the United States or a qualified
alien without regard to date of entry.
   (3) Is 19 years of age or older and is ineligible for Medicare
Parts A and B.
   (4) Has family income, less applicable deductions, greater than
100 percent of the federal poverty level but less than or equal to
250 percent of the federal poverty level.
   (5) Is either ineligible for Medi-Cal or eligible to participate
in a benchmark package pursuant to Section 14005.306 of the Welfare
and Institutions Code.
   (6) Does not have access to employer-sponsored health care
coverage. However, this provision shall not apply to a person with
coverage under Section 14005.301 or 14005.305 of the Welfare and
Institutions Code.
   (b) (1) Implementation of this section is contingent on the
establishment of the requirement as described in Section 14155 of the
Welfare and Institutions Code.
   (2) The provisions of paragraph (1) shall not apply to a person
with coverage under Section 14005.301 or 14005.305 of the Welfare and
Institutions Code.
   12699.212.  (a) To be eligible to enroll in unsubsidized,
comprehensive health care coverage made available pursuant to
paragraph (2) of subdivision (a) of Section 12699.203, an individual
shall meet the requirements in paragraphs (1) and (2), except as
provided in subdivision (b):
   (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 the program or
after enrollment in the program.
   (2) (A) Is an employee paying the full cost of health care
coverage through in an employee cafeteria plan established pursuant
to Section 4801 of the Unemployment Insurance Code, where the
employer designates the Health Care Security and Cost Reduction
Program in the cafeteria plan, (B) is eligible for a state tax credit
made available based on the cost of health insurance and
administered by the board, or (C) is an employee of an employer that
does not offer employment-based health coverage with some portion of
the cost borne by the employer.
   (b) To be eligible to purchase unsubsidized dental and vision
coverage made available pursuant to subdivision (b) of Section
12699.203, an individual shall be enrolled in other health care
coverage through the program pursuant to this part.
   12699.213.  (a) The following program decisions may be appealed to
the board:
   (1) A decision that an individual is not qualified to participate
or continue to participate in the program.
   (2) A decision that an individual is not eligible for enrollment
or continuing enrollment in the program.
   (3) A decision as to the effective date of coverage.
   (b) An applicant or subscriber who appeals one of the decisions
listed in subdivision (a) shall be accorded an opportunity for an
administrative hearing. The hearing shall be conducted, insofar as
practicable, pursuant to Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of the Government Code.
   (c) To the extent required by law, the board shall implement this
section consistent with applicable federal law.
      CHAPTER 4.  FISCAL


   12699.215.  (a) The California Health Trust Fund is hereby created
in the State Treasury and, notwithstanding Section 13340 of the
Government Code, is continuously appropriated to the board for the
purpose of providing health coverage under this part. Interest earned
on deposits in the fund shall be retained in the fund.
   (b) Amounts deposited in the fund shall be used only for the
purposes specified in this part.
   (c) The board shall authorize the expenditure from the fund of any
state funds, federal funds, or other money transferred into the fund
to cover program expenses for health coverage, including program
expenses that exceed enrollee premiums.
   (d) From money in the fund, the board may expend sufficient
amounts for expenses incurred in carrying out this part.
   12699.216.  The board, subject to federal approval pursuant to
Sections 14005.301 and 14005.305, shall pay the nonfederal share of
cost from the fund for individuals eligible under that federal
approval.
   12699.217.  This part shall become operative on January 1, 2009.
The board shall provide health care coverage pursuant to this part
beginning on July 1, 2010, or on the date that the authority under
Section 8899.52 of the Government Code is implemented, whichever is
later. 
   SEC. 50.    Section 12885 is added to the  
Insurance Code   , to read:  
   12885.  It is the intent of the Legislature to establish a
mechanism by which the state may defray the costs of an enrollee's
public program participation by taking advantage of the other
opportunities for coverage available to that enrollee. 
   SEC. 51.    Section 12886 is added to the  
Insurance Code   , to read:  
   12886.  It shall constitute an unfair labor practice contrary to
public policy, and enforceable under Section 95 of the Labor Code,
for an employer to refer an individual employee or employee's
dependent to the program established pursuant to Part 6.45
(commencing with Section 12699.201), or to arrange for an individual
employee or employee's dependent to apply to that program, for the
purpose of separating that employee or employee's dependent from
group health coverage provided in connection with the employee's
employment. An employer who pays the premium for the employee in the
program established pursuant to Part 6.45 (commencing with Section
12699.201) shall not, on the basis of that action, be deemed to be in
violation of this section. 
   SEC. 52.    Section 12887 is added to the  
Insurance Code   , to read:  
   12887.  It shall constitute an unfair labor practice contrary to
public policy and enforceable under Section 95 of the Labor Code for
an employer to change the employee-employer share-of-cost ratio based
upon the employee's wage base or job classification or to make any
modification of                                          coverage for
employees and employees' dependents in order that the employees or
employees' dependents enroll in the program established pursuant to
Part 6.45 (commencing with Section 12699.201). 
   SEC. 53.    Section 96.8 is added to the  
Labor Code   , to read:  
   96.8.  (a) Notwithstanding any other provision in this chapter, an
employer may provide health coverage that includes a Healthy Action
Incentives and Rewards Program that meets the requirements of Section
1367.38 of the Health and Safety Code, or Section 10123.56 of the
Insurance Code, to the employer's employees.
   (b) A Healthy Action Incentives and Rewards Program offered
pursuant to this section may include, but need not be limited to,
monetary incentives and health coverage premium cost reductions for
employees for nonsmokers and smoking cessation. 
   SEC. 54.    Section 96.81 is added to the  
Labor Code   , to read:  
   96.81.  (a) (1) Notwithstanding any other provision of law, the
delivery or provision of Healthy Action Incentives and Rewards
Program benefits or coverage by the employer or the employer's agents
to employees for the purposes of and in accordance with the criteria
and requirements established under Section 96.8 shall not be
considered or construed as an unlawful practice, act, kickback,
bribe, rebate, remuneration, offer, payment, or any other form of
compensation made directly or indirectly, overtly or covertly, in
exchange for another to obtain, participate, or otherwise undergo or
receive health care services.
   (2) Notwithstanding any other provision of law, the delivery or
provision of Healthy Action Incentives and Rewards Program benefits
or coverage by the employer or the employer's agents to employees for
the purposes of and in accordance with the criteria and requirements
established under Section 96.8 is not subject to the penalties,
discipline, limitations, or sanctions imposed under state law to
preclude or prohibit, as an unlawful practice, bribe, kickback, or
other act, the offering or delivery of a rebate, remuneration, offer,
coupon, product, rebate, payment, or any other form of compensation
made directly or indirectly, overtly or covertly, in exchange for
another to obtain, participate, or otherwise undergo or receive
health care services.
   (b) This section shall only be implemented if and to the extent
allowed under federal law. If any portion of this section is held to
be invalid, as determined by a final judgment of a court of competent
jurisdiction, this section shall become inoperative. 
   SEC. 55.    Section 17052 is added to the  
Revenue and Taxation Code   , to read:  
   17052.  (a) It is the intent of the Legislature to establish a tax
credit to enhance the affordability of health care coverage for
individuals and families not eligible for enrollment in publicly
subsidized coverage. The provisions of the tax credit would be
structured such that:
   (1) For each taxable year beginning on or after January 1, 2010,
there would be allowed as a credit against the "net tax," as defined
in Section 17039, an amount equal to those qualified health care plan
premium costs that are in excess of 5 percent of the qualified
taxpayer's adjusted gross income for that taxable year.
   (2) No credit would be allowed under this provision to a qualified
taxpayer with adjusted gross income in excess of 350 percent of the
federal poverty level.
   (3) (A) In the case of any taxpayer who is not a qualified
taxpayer for the entire taxable year, the allowable credit under
paragraph (1) would be computed by first dividing the total adjusted
gross income of the qualified taxpayer by 12, and then multiplying
that amount by the number of months during the taxable year that the
taxpayer is a qualified taxpayer.
   (B) The provisions of paragraphs (2) and (3) would apply to any
taxpayer described in subparagraph (A), without the adjustment
required under subparagraph (A).
   (b) For purposes of this section:
   (1) "Adjusted gross income" means adjusted gross income as
computed for purposes of Section 17072.
   (2) "MRMIB" means the Managed Risk Medical Insurance Board in its
capacity in administering the program established pursuant to Part
6.45 (commencing with Section 12699.201) of Division 2 of the
Insurance Code.
   (3) "Federal poverty level" has the same meaning as poverty
guidelines updated periodically in the Federal Register by the United
States Department of Health and Human Services under the authority
of 42 U.S.C. Section 9902(2).
   (4) "Premium for minimum coverage" means the standard risk rate,
on July 1, 2010, for unsubsidized health care coverage that has the
same benefits as minimum health care coverage as defined in Section
10923 of the Insurance Code available through the MRMIB, updated
annually, based on the United States Consumer Price Index-Medical.
   (5) "Qualified health care plan" means unsubsidized coverage
purchased through the MRMIB that provides health care coverage for
the qualified taxpayers, their spouse, and their dependents.
   (6) "Qualified health care plan premium cost" means amounts paid
by the qualified taxpayer during the taxable year for a qualified
health care plan that are equal to the lesser of:
   (A) The qualified premiums paid during the taxable year by the
qualified taxpayer.
   (B) The premium for minimum coverage, divided by 12, and
multiplied by the number of months during the taxable year that the
taxpayer is a qualified taxpayer.
   (7) "Qualified premiums" means the amounts paid by a qualified
taxpayer to purchase a qualified health care plan through the MRMIB.
Any premium credit advance, as described in subdivision (d), used by
the MRMIB to pay all or a portion of premiums payable with respect to
qualified health care plan costs of a qualified taxpayer are
considered "qualified premiums."
   (8) (A) "Qualified taxpayer" means any taxpayer whose adjusted
gross income for the taxable year is at least 250 percent but not in
excess of 350 percent of the federal poverty level applicable for the
calendar year that begins in the taxable year for which the credit
is claimed.
   (B) Any taxpayer that is eligible to receive coverage under a
group health plan that is available through the taxpayer's employment
or through the employment of the taxpayer's spouse is not a
qualified taxpayer under subparagraph (A) during any period that the
taxpayer would be eligible to receive coverage as described in this
subparagraph.
   (c) In the case where the credit allowed under this section would
exceed the qualified taxpayer's tax liability computed under this
part, the excess would be credited against other amounts due, if any,
by the qualified taxpayer and the balance, if any, would be refunded
to the qualified taxpayer.
   (d) The term "premium credit advance" means, with respect to any
taxable year, the amount determined by the MRMIB, to approximate the
amount of the credit that would be allowed to a qualified taxpayer
pursuant to this section.
   (e) The premium credit advance would always be paid on behalf of a
qualified taxpayer by the MRMIB for the purpose of paying all or a
portion of the cost of the qualified taxpayer's qualified premiums
and in no event shall any premium credit advance be paid directly to
the qualified taxpayer.
   (f) If any premium credit advance is to be paid by the MRMIB on
behalf of a qualified taxpayer during the calendar year, then the tax
imposed by this part for the qualified taxpayer's taxable year
beginning in that calendar year would be increased by the aggregate
amount of those advances.
   (g) Every qualified taxpayer for whom a premium credit advance is
paid by the MRMIB would file a return with the Franchise Tax Board
under subdivision (a) of Section 18501, notwithstanding any other
provision in Section 18501 that would otherwise exempt that taxpayer
from being required to file a return. 
   SEC. 56.    Section 17072 of the   Revenue
and Taxation Code   is amended to read: 
   17072.  (a) Section 62 of the Internal Revenue Code, relating to
adjusted gross income defined, shall apply, except as otherwise
provided.
   (b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to
certain expenses of elementary and secondary school teachers, shall
not apply. 
   (c) The deduction allowed by Section 17216, relating to health
savings accounts, is allowed in computing adjusted gross income.
 
   (d) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2010. 
   SEC. 57.    Section 17131.4 of the   Revenue
and Taxation Code   is amended to read: 
   17131.4.   (a)    Section 106(d) of the Internal
Revenue Code, relating to contributions to health savings accounts,
shall not apply. 
   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2010. 
   SEC. 58.    Section 17131.5 of the   Revenue
and Taxation Code   is amended to read: 
   17131.5.   (a)    Section 125(d)(2)(D) of the
Internal Revenue Code, relating to the exception for health savings
accounts, shall not apply. 
   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2010. 
   SEC. 59.    Section 17138.5 is added to the 
 Revenue and Taxation Code   , to read:  
   17138.5.  For each taxable year beginning on or after January 1,
2009, Section 106 of the Internal Revenue Code, as amended by Section
302 of the Tax Relief and Health Care Act (TRHCA) of 2006 (Public
Law 109-432), relating to health savings accounts, shall apply,
except as otherwise provided. 
   SEC. 60.    Section 17138.6 is added to the 
 Revenue and Taxation Code   , to read:  
   17138.6.  For each taxable year beginning on or after January 1,
2009, Section 125 of the Internal Revenue Code, as amended by Section
1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to health
savings accounts, shall apply, except as otherwise provided.
   SEC. 61.    Section 17215 of the   Revenue
and Taxation Code   is amended to read: 
   17215.  (a) Section 220(a) of the Internal Revenue Code, relating
to deduction allowed, is modified to provide that the amount allowed
as a deduction shall be an amount equal to the amount allowed to that
individual as a deduction under Section 220 of the Internal Revenue
Code, relating to medical savings accounts, on the federal income tax
return filed for the same taxable year by that individual.
   (b) Section 220(f)(4) of the Internal Revenue Code, relating to
additional tax on distributions not used for qualified medical
expenses, is modified by substituting "10 percent" in lieu of "15
percent." 
   (c) Section 220(f)(5) of the Internal Revenue Code, as amended by
Section 1201(c) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to permitted
rollovers from Archer Medical Savings Accounts, shall apply, except
as otherwise provided.  
   (d) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2010. 
   SEC. 62.    Section 17215.1 of the   Revenue
and Taxation Code   is amended to read: 
   17215.1.   (a)    Section 220(f)(5) of the
Internal Revenue Code, relating to rollover contributions, shall not
apply. 
   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2010. 
   SEC. 63.    Section 17215.4 of the   Revenue
and Taxation Code   is amended to read: 
   17215.4.   (a)    Section 223 of the Internal
Revenue Code, relating to health savings accounts, shall not apply.

   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2010. 
   SEC. 64.    Section 17216 is added to the  
Revenue and Taxation Code   , to read:  
   17216.  For each taxable year beginning on or after January 1,
2010, all of the following shall apply:
   (a) Section 223 of the Internal Revenue Code, as added by Section
1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), and as amended by
Title III of the Tax Relief and Health Care Act (TRHCA) of 2006
(Public Law 109-432), relating to health savings accounts, shall
apply, except as otherwise provided.
   (b) Section 223(e)(1) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), shall be modified by
substituting the phrase "Section 17651" for the phrase "Section 511
(relating to imposition of tax of unrelated business income of
charitable, etc., organizations)," contained therein.
   (c) Section 223(f)(4)(A) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), shall be modified by
substituting the phrase "21/2 percent" for "10 percent," contained
therein. 
   SEC. 65.    Section 19184 of the   Revenue
and Taxation Code   is amended to read: 
   19184.  (a) A penalty of fifty dollars ($50) shall be imposed for
each failure, unless it is shown that the failure is due to
reasonable cause, by any person required to file who fails to file a
report at the time and in the manner required by any of the following
provisions:
   (1) Subdivision (c) of Section 17507, relating to individual
retirement accounts.
   (2) Section 220(h) of the Internal Revenue Code, relating to
medical savings accounts for taxable years beginning on or after
January 1, 1997. 
   (3) Section 223(h) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to health
savings accounts.  
   (3) 
    (4)  Subdivision (b) of Section 17140.3 or subdivision
(b) of Section 23711 relating to qualified tuition programs. 

   (4) 
    (5)  Subdivision (e) of Section 23712, relating to
Coverdell education savings accounts.
   (b) (1) Any individual who:
   (A) Is required to furnish information under Section 17508 as to
the amount designated nondeductible contributions made for any
taxable year, and
   (B) Overstates the amount of those contributions made for that
taxable year, shall pay a penalty of one hundred dollars ($100) for
each overstatement unless it is shown that the overstatement is due
to reasonable cause.
   (2) Any individual who fails to file a form required to be filed
by the Franchise Tax Board under Section 17508 shall pay a penalty of
fifty dollars ($50) for each failure unless it is shown that the
failure is due to reasonable cause.
   (c) Article 3 (commencing with Section 19031) of this chapter
(relating to deficiency assessments) shall not apply in respect of
the assessment or collection of any penalty imposed under this
section. 
   (d) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2010. 
   SEC. 66.    Section 1120 is added to the  
Unemployment Insurance Code   , to read:  
   1120.  Any employer who fails to establish or maintain a cafeteria
plan as required by Section 4801 shall pay a penalty of one hundred
dollars ($100) per employee for the failure to establish or maintain
a cafeteria plan without good cause, or five hundred dollars ($500)
per employee if the failure to establish or maintain a cafeteria plan
is willful. 
   SEC. 67.    Division 1.2 (commencing with Section
4800) is added to the   Unemployment Insurance Code 
 , to read:  

      DIVISION 1.2.  HEALTH CARE CAFETERIA PLAN


   4800.  This division shall be known and may be cited as the Health
Care Cafeteria Plan.
   4801.  (a) Each employer of two or more full-time equivalent
employees in this state shall, beginning January 1, 2010, adopt and
maintain 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 amounts for that coverage are excludable
from the gross income of the employee under Section 106 of the
Internal Revenue Code.
   (b) The establishment or maintenance of a cafeteria plan shall
neither be inconsistent with Section 125 of Title 26 of the United
States Code, nor require any employer to take any action that would
violate Section 125 of Title 26 of the United States Code.
   (c) For the purposes of this division, the following definitions
apply:
   (1) "Employee" means an employee as defined in Article 1.5
(commencing with Section 621) of Chapter 3 of Part 1 of Division 1.
   (2) "Employer" means an employer as defined in Article 3
(commencing with Section 675) of Chapter 3 of Part 1 of Division 1,
except as described in subdivision (a) of Section 683 and in
subdivision (a) of Section 685.
   (3) "Employing unit" means an " employing unit" as defined in
Section 135.
   (4) "Employment" means employment as defined in Article 1
(commencing with Section 601) of Chapter 3 of Part 1 of Division 1.
"Employment" does not include services excluded under Section 632,
subdivision (c) of Section 634.5, and Sections 640, 641, 643, 644,
and 644.5.
   (5) "Full-time equivalent employees" means the number of employees
expressed as the number of hours worked by all employees during a
calendar quarter divided by 455.
   (d) The department shall promulgate rules and regulations to
implement the provisions of this division. 
   SEC. 68.    Section 14005.01 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.01.  (a) Notwithstanding any other provision of law, the
department may make statewide determinations and redeterminations of
eligibility and may contract with a county or counties to perform
these functions on its behalf regardless of whether the applicant or
beneficiary is a resident of the county making the determination.
   (b) The department may apply subdivision (a) to any group or
subgroup of applicants or recipients, provided that the eligibility
of that group or subgroup is not based on its status as aged, blind,
or disabled.
   (c) The department may contract with an agent or agents to make
preliminary eligibility determinations and redeterminations under
this section. 
   SEC. 69.    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)  (1)    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 expand eligibility for Medi-Cal under subdivision
(a) by establishing the amount of countable resources individuals or
families are allowed to retain at the same amount medically needy
individuals and families are allowed to retain, except that a family
of one shall be allowed to retain countable resources in the amount
of three thousand dollars ($3,000).  This paragraph shall not be
operative during implementation of paragraph (2).  
   (2) 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, commencing
July 1, 2010. 
   (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) 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.

   (e) Subdivision (b) shall be applied retroactively to January 1,
1998.  
   (f) 
    (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, 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. 70.    Section 14005.301 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.301.  (a) The department shall provide benefits pursuant to
Section 14005.306 to a population composed of parents and other
caretaker relatives who meet all of the following requirements:
   (1) Net family income is at or below 250 percent of the federal
poverty level.
   (2) The individual is not otherwise eligible for full-scope
benefits under Section 14005.30 but would be eligible for these
benefits if family income were at or below 100 percent of the federal
poverty level.
   (3) The individual is a citizen, national, or qualified alien
without regard to date of entry.
   (b) The eligibility determination under this section shall not
include an asset test.
   (c) The department shall implement this section by means of a
state plan amendment under Section 1902(a)(10)(A)(ii)(I) of the
federal Social Security Act (Title 42 U.S.C. Sec. 1396a(a)(10)(A)(ii)
(I)), or by any other state plan amendment or waiver, or combination
thereof, as is necessary to accomplish the intent of this section.
   (d) The department shall seek federal approval to utilize the same
premiums and copayments for the population described in this section
as are applied to the subsidized purchasing pool population
established pursuant to Section 12699.204 of the Insurance Code.
   (e) To the extent necessary
            to implement this section, the department shall seek
federal approval to modify the definition of unemployed parent
provided in Section 14008.85.
   (f) This section shall be implemented only if and to the extent
that federal approval to provide benchmark benefits in a manner
consistent with Section 14005.306 has been obtained.
   (g) The income test for eligibility determinations under this
section shall be the same test used for the federal poverty level
programs, but shall not include any income disregards available under
those programs.
   (h) This section shall become operative on July 1, 2010, or on the
date that the authority under Section 8899.52 of the Government Code
is implemented, whichever is later. 
   SEC. 71.    Section 14005.305 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.305.  (a) The department shall provide benefits to a
population composed of individuals who are either 19 or 20 years of
age and who meet all of the following requirements:
   (1) Net family income is at or below 250 percent of the federal
poverty level.
   (2) The individual is not otherwise eligible for full-scope
benefits in one of the federal poverty level programs for children,
but would be eligible for those benefits if he or she were under 19
years of age with income at or below 100 percent of the federal
poverty level.
   (3) The individual is a citizen, national, or qualified alien
without regard to date of entry.
   (b) The eligibility determination under this section shall not
include an asset test.
   (c) The department shall implement this section by means of a
state plan amendment under Section 1902(a)(10)(A)(ii)(I) of the
federal Social Security Act (Title 42 U.S.C. Sec. 1396a(a)(10)(A)(ii)
(I)), or by any other state plan amendment or waiver, or combination
thereof, as is necessary to accomplish the intent of this section.
   (d) The department shall seek federal approval to utilize the same
premiums and copayments for the population to whom this section
applies as are applied to the subsidized purchasing pool population
established pursuant to Section 12699.204 of the Insurance Code.
   (e) This section shall be implemented only if, and to the extent
that federal approval has been obtained to provide benchmark benefits
for individuals made eligible under this section with net income
over 100 percent of the federal poverty level in a manner consistent
with Section 14005.306.
   (f) The income methodology for eligibility determinations under
this section shall be the methodology used for the federal poverty
level programs, but shall not include any income disregards available
under those programs.
   (g) This section shall become operative on July 1, 2010, or on the
date that the authority under Section 8899.52 of the Government Code
is implemented, whichever is later, but only to the extent federal
financial participation is available. 
   SEC. 72.    Section 14005.306 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.306.  (a) Subject to the limitations provided in
subdivisions (b) and (c), a Medi-Cal beneficiary with a net family
income above 100 percent of the federal poverty level whose
eligibility is based on Section 14005.301 or Section 14005.305 and
who is otherwise eligible for full-scope benefits, shall receive his
or her benefits by means of a benchmark package pursuant to Section
1937 of the federal Social Security Act. This package shall be the
subsidized benefit package or packages established for the program
established pursuant to Part 6.45 (commencing with Section 12699.201)
of Division 2 of the Insurance Code.
   (b) To the extent required by federal law, the categories of
beneficiaries listed in Section 1937(a)(2)(B) of the federal Social
Security Act (Title 42 U.S.C. Sec. 1396u-7(a)(2)(B)), are exempt from
mandatory enrollment in the benchmark package described in
subdivision (a).
   (c) The department, with the concurrence of the Managed Risk
Medical Insurance Board, may identify groups of otherwise exempt
individuals that will be allowed a choice, at the beneficiary's
option, to participate in a benchmark package.
   (d) The department, with concurrence of the Managed Risk Medical
Insurance Board, may exempt other groups or categories of
beneficiaries from the requirements provided in subdivision (a).
   (e) To the extent federal approval is obtained, the appeals
process for issues relating to receipt of benefits through the
benchmark package shall be the process prescribed by the Managed Risk
Medical Insurance Board for the program established pursuant to Part
6.45 (commencing with Section 12699.201) of Division 2 of the
Insurance Code.
   (f) This section shall be implemented only if and to the extent
that federal financial participation is available and all necessary
federal approvals have been obtained.
   (g) The department shall accomplish the intent of this section by
means of a state plan amendment or by a waiver. If this section is
implemented in whole or in part by means of a state plan amendment,
all applicable federal requirements not otherwise waived, including,
but not limited to, requirements related to cost sharing, shall
apply. 
   SEC. 73.    Section 14005.310 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.310.  The department shall seek federal approval to utilize
an interval of one year in determining the cost amounts specified in
Section 12699.204 of the Insurance Code for persons receiving
benchmark benefits pursuant to Sections 14005.301 and 14005.305.

   SEC. 74.    Section 14005.311 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.311.  (a) The department and the Managed Risk Medical
Insurance Board shall enter into a cooperative agreement under which
the board shall have authority and responsibility for administering
benchmark benefits under Sections 14005.301 and 14005.305 and for
prescribing all rules and procedures necessary for administering
these benefits subject to the single state agency oversight
responsibilities of the department.
   (b) This section shall be implemented only to the extent that
federal financial participation is not jeopardized. 
   SEC. 75.    Section 14005.331 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.331.  (a) An individual under the age of 19 years who would
be eligible for full-scope Medi-Cal benefits without a share of cost,
if not for his or her immigration status, shall be eligible for
full-scope Medi-Cal services under this section.
   (b) In order to support federal claiming and to maximize federal
funding, the department shall develop documentation requirements for
an individual applying for benefits under subdivision (a).
   (c) Any individual applying for benefits under subdivision (a) who
does not comply with subdivision (b) shall receive only the benefits
that are available for individuals who cannot demonstrate
eligibility for federally funded full-scope benefits.
   (d) This section shall become operative on July 1, 2010, or on the
date that the authority under Section 8899.52 of the Government Code
is implemented, whichever is later. 
   SEC. 76.    Section 14005.332 is added to the 
 Welfare and Institutions Code   , to read:  
   14005.332.  (a) The department shall design and implement a
program to provide the benefits described in subdivision (d) to the
population described in subdivision (c).
   (b) The department shall seek to maximize the availability of
federal funding for this section under the terms of any existing
waiver, through amendment of any existing waiver, or by means of a
new waiver, or any combination thereof.
   (c) The population eligible to receive benefits under this section
shall consist of all residents 21 years of age or older who meet all
of the following requirements.
   (1) Their family income is at or below 100 percent of the federal
poverty level.
   (2) They are not otherwise eligible for Medi-Cal.
   (3) They would be eligible for full-scope Medi-Cal without a share
of cost if they had a categorical linkage.
   (4) They are citizens, nationals, or qualified aliens without
regard to date of entry.
   (5) They do not have access to employer-sponsored health care
coverage.
   (d) Benefits available under this section shall consist of a
benefit package that is designed by the department and is equivalent
to the subsidized coverage made available in the program established
pursuant to Part 6.45 (commencing with Section 12699.201) of Division
2 of the Insurance Code. To the extent that specific services are
excluded from the subsidized package, these services shall not be
provided under this section to the population described under
subdivision (c). These excluded services shall include, but are not
limited to, long-term care services, nursing home care, personal care
services, in-home supportive services, and home- and community-based
or other waiver services.
   (e) In determining eligibility for benefits under this section,
the department shall use the application requirements and the income
methodology of the federal poverty level programs for pregnant women
and children, but shall not include any income disregards available
under those programs.
   (f) Notwithstanding Section 14007.2 or any other provision of law,
this section creates no right or entitlement for any individual to
receive any service including any emergency service, unless that
individual has been determined to meet all of the eligibility
requirements in subdivision (c) and the documentation and
verification requirements in subdivision (g).
   (g) In order for an otherwise eligible individual to be eligible
for, or to receive, any service, including, but not limited to, any
emergency service under this section, the individual shall be
required to meet all of the minimum federal requirements necessary
for federal claiming by furnishing all necessary information and
providing all necessary documentation.
   (h) Except to the extent required by the terms of any applicable
federal waiver, federal Medicaid rights, including the right to
retroactive eligibility, do not apply to persons or services under
this section.
   (i) Nothing in this section is intended to affect or modify the
availability of the eligibility category described in Section 14052
or the application process, documentation requirements, methodology,
or benefits available pursuant to that section.
   (j) Implementation of this section is contingent on the
establishment of the requirement as described in Section 14155.
   (k) This section shall become operative on July 1, 2010, or on the
date that the authority under Section 8899.52 of the Government Code
is implemented, whichever is later. 
   SEC. 77.    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 14005.301 and
14005.305.  
   (b) 
    (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. 
   (c) 
    (d)  This section shall become operative March 1, 2000.
   SEC. 78.    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 upon implementation of
Section 14011.16.1, and shall remain inoperative for as long as that
section continues to be implemented. 
   SEC. 79.    Section 14011.16.1 is added to the 
 Welfare and Institutions Code   , to read:  
   14011.16.1.  (a) Commencing July 1, 2010, the department shall
implement a requirement for any beneficiary who is not required to
make premium payments to file a semiannual address verification
report. The department shall develop a simplified form to be used for
this purpose so that a beneficiary who has not had a change of
address can so indicate by checking a box and returning the form.
   (b) When a beneficiary who is required to complete and return the
form described in subdivision (a) fails to do so, the county shall
follow up by attempting to contact the individual using the last
known phone number or numbers. If the attempted phone contact fails
to resolve the issue by providing confirmation of the current
address, the county shall search available files to determine if an
alternate or new address has been used by the beneficiary and shall
send a form to that address that is required to be returned. In the
absence of a new or alternate address, a form shall be sent to the
last known address. If the form is not returned, or if it is returned
under circumstances indicating that the individual no longer resides
at the address last provided by the individual and no forwarding
address is provided, eligibility shall be terminated for loss of
contact.
   (c) Whenever Medi-Cal eligibility is terminated based on a loss of
contact as described in this section, the entity responsible for
redeterminations of eligibility for the affected beneficiary shall
document the facts causing the eligibility termination in the
beneficiary's file. Following this written certification, a notice of
action specifying that Medi-Cal eligibility was terminated based on
loss of contact shall be sent to the beneficiary.
   (d) A beneficiary whose eligibility is based on a determination of
disability or on his or her status as aged or blind shall be exempt
from the requirements of subdivision (a).
   (e) Children under 19 years of age and pregnant women shall be
exempt from the requirements of this section.
   (f) The department may exempt categories or groups of individuals
from the requirement to file an address verification as necessary for
simplicity of administration.
   (g) This section shall be implemented only if and to the extent
that its implementation does not jeopardize federal financial
participation. 
   SEC. 80.    Section 14074.5 is added to the 
Welfare and Institutions Code   , to read:  
   14074.5.  The department shall seek to maximize the availability
of federal funding for the costs of providing subsidized health care
coverage to non-Medi-Cal beneficiaries through the program
established pursuant to Part 6.45 (commencing with Section 12699.201)
of Division 2 of the Insurance Code. To achieve this purpose, the
department may utilize or amend existing federal waivers, and may
also seek new waivers. 
   SEC. 81.    Article 2.96 (commencing with Section
14092.5) is added to Chapter 7 of Part 3 of Division 9 of the 
 Welfare and Institutions Code   , to read:  

      Article 2.96.  Local Coverage Options


   14092.5.  (a) There is hereby established the Local Coverage
Options (LCO) program to expand health care coverage to certain
low-income uninsured individuals in California.
   (b) The department may implement this article by means of federal
waiver as necessary to accomplish the intent of this article. The
department shall seek to maximize the availability of federal funding
for this article under the terms of any existing waiver, through
amendment of any existing waiver, or by means of a new waiver, or any
combination thereof. The LCO program shall thereafter operate under
the terms and conditions set forth in any applicable waiver.
   (c) The population eligible to receive benefits under this article
shall consist of residents of a county that contracts with the
department pursuant to subdivision (d) and who are made eligible for
services pursuant to Section 14005.332.
   (d) The director may enter into a full-risk contract with any
county that has a county hospital located to provide services to,
arrange for, or case manage the care of Medi-Cal beneficiaries
described under subdivision (c). County participation in the LCO
program is voluntary.
   (e) Services provided under the LCO program shall be those
benefits described in Section 14005.306 and shall be made available
to those eligible individuals described in subdivision (c) enrolled
in the LCO program. The LCO program shall enroll and provide services
to residents of the participating county that meet the eligibility
requirements set forth in subdivision (c).
   (f) The department shall develop rates using actuarial methods for
LCO programs that contract with the department pursuant to this
article. Those actuarial methods shall develop rates that compensate
the LCO program for the projected cost of providing care to the
population served. Rates determined for the LCO program pursuant to
this article shall use the methodology set forth in Article 3
(commencing with Section 14301.1) of Chapter 8, and may include
establishing LCO or county specific rates by utilizing a county and
model specific rate methodology.
   (g) Eligible counties shall contract with safety net hospitals in
their county and provide them with rates equal to Medi-Cal rates.
   (h) Eligible counties shall contract with federally qualified
health centers in their county.
   14092.51.  The LCO program shall be designed and implemented to
achieve all of the following outcomes:
   (a) Expand the number of Californians who have health care
coverage.
   (b) Strengthen and build upon the local health care safety net
system, including disproportionate share hospitals, county clinics,
and community clinics.
   (c) Improve access to high quality health care and health outcomes
for individuals.
   (d) Create efficiencies in the delivery of health services that
could lead to savings in health care costs.
   14092.52.  (a) The department shall issue a request for
applications from applicable counties for the LCO program. The
department shall approve applications based on the criteria in this
section, and shall select a LCO only from those counties that have a
county hospital. Applicable counties may only submit one application
to be a LCO under this article.
   (b) LCO programs must meet the requirements and desired outcomes
set forth in this article.
   (c) The following elements shall be used in evaluating the
applications:
   (1) Enrollment processes, with an identification system to
demonstrate enrollment of the uninsured into the program.
   (2) Use of a medical record system, which may include electronic
medical records.
   (3) Designation of a medical home and assignment of eligible
individuals to a primary care provider. For purposes of this
paragraph, "medical home" means a single provider or facility that
maintains an individual's medical information. The primary care
provider shall be a provider from which the enrollee can access
primary and preventive care.
   (4) Provision of a benefit package of services as described
Section 14005.306.
   (5) Quality monitoring processes to assess the health care
outcomes of individuals enrolled in the LCO program.
   (6) Promotion of the use of preventive services and early
intervention.
   (7) Screening and enrollment processes for individuals who may
qualify for enrollment into Medi-Cal, the Healthy Families Program,
or the program established pursuant to Part 6.45 (commencing with
Section 12699.201) of Division 2 of the Insurance Code prior to
enrollment into the LCO program.
   (8) The ability to demonstrate how the LCO program will promote
the viability of the existing safety net health care system.
   (9) Demonstration of how the program will provide consumer
assistance to individuals applying to, participating in, or accessing
services in the program.
   (10) The ability to meet the requirements described in
subdivisions (g) and (h) of Section 14092.5.
   14092.53.  Applications submitted to the department shall include,
but not be limited to, each of the following:
   (a) A description of the proposed LCO program.
   (b) Screening and enrollment processes that include point of
service enrollment into the LCO program for eligible individuals, and
that will identify individuals who may qualify for enrollment into
Medi-Cal, the Healthy Families Program, or the Health Care Security
and Cost Reduction Program.
   (c) A description of the population to be served.
   (d) A list of health care providers who have agreed to participate
in the LCO program.
   (e) A description of the organized health care delivery systems to
be used for the LCO program, including, but not limited to,
designation of a medical home and processes used to assign eligible
individuals to a primary care provider.

          (f) A list of the benefits to be provided, including the
preventive, specialty, and primary care services.
   (g) A description of the care management services to be provided,
and the providers of those services.
   (h) A description of how the proposed LCO program will strengthen
the local health care safety net system.
   (i) Use of a reliable medical record system that may include, but
need not be limited to, existing electronic medical records.
   (j) A description of the quality monitoring system to be
implemented with the LCO program.
   14092.54.  (a) Commencing with the implementation of a LCO program
in a designated county, an eligible beneficiary shall have a choice
of primary care providers within the LCO.
   (b) If an eligible beneficiary does not choose a primary care
provider or clinic, or does not select any primary care provider who
is available, the LCO program assigned to the beneficiary shall
ensure that the beneficiary selects a primary care provider or clinic
within 30 days after enrollment or is assigned to a primary care
provider within 40 days after enrollment.
   (c) Any beneficiary dissatisfied with the primary care provider
shall be allowed to select or be assigned to another primary care
provider within the LCO program.
   (d) The LCO shall notify a primary care provider when it has been
assigned to or selected by a beneficiary, and shall notify the
beneficiary of the assignment or acknowledge the beneficiary's
selection.
   14092.55.  (a) The provider network for LCO programs shall center
around the local public hospital system, including inpatient and
outpatient services. The provider network shall also include
community health centers.
   (b) Each LCO shall contract with safety net providers, including,
but not limited to, disproportionate share hospitals and other
providers as needed, and offer the scope of benefits applicable to
the LCO program's eligible population as described in Section
14005.332.
   (c) A LCO program shall offer the scope of benefits described in
Section 14005.332.
   (d) The administrative structure of LCO programs may vary by
county, based upon requirements set by the department for
establishing an LCO, and may include, but are not limited to, having
the LCO program administered by a local initiative two-plan model
plan, a county organized health system plan, or a county entity plan.

   (e) As a condition of contract award, a LCO shall agree to include
in its health delivery system any federally qualified health center
physically located and operating in the county that is willing to
agree to provide services under the same terms and conditions that a
LCO requires of any other similar provider to be included in a health
care delivery system. Payments to federally qualified health centers
shall be consistent with federal law.
   (f) A LCO program shall provide reimbursement for emergency
services provided anywhere in the country by noncontracting
providers.
   14092.56.  (a) Newly enrolled Medi-Cal beneficiaries described in
subdivision (c) of Section 14092.5 shall be enrolled in either the
LCO program or the county organized health system (COHS) or the
two-plan contractor in the county.
   (b) Notwithstanding any other provision of law, a LCO shall have
the ability to inquire into the eligibility of a patient seeking care
at its facility and enroll persons meeting the eligibility standards
for coverage described in subdivision (c) of Section 14092.5 into
coverage under Medi-Cal and directly into the LCO.
   (c) For the first three years of coverage, the county organized
health system or local initiative within the county where a county
hospital resides shall, as a condition of its contract with the
state, contract with the LCO for provision of services to persons
described in subdivision (c) of Section 14092.5 and provide rates
using actuarial methods that reflect the cost for the LCO to provide
care to the beneficiaries.
   (d) During the three years after the date of implementation of a
LCO health plan in a designated county, the COHS or the local
initiative shall ensure that within county hospitals and clinics, the
ratio of patients enrolled in coverage under Section 14005.332 to
the total number of patients eligible for, but not enrolled in,
coverage under that section is the same as the ratio of residents in
that county enrolled in coverage under Section 14005.332 to the
estimated number of persons in that county who are eligible for, but
not enrolled in, coverage under that section.
   (e) After three years from the first date of operations, the LCO
program may compete with other managed care model plans in the
geographic area for all eligible consumers. From that date forward,
Medi-Cal eligible beneficiaries as defined in subdivision (c) of
Section 14092.5 that do not choose another available managed care
plan shall be assigned to the LCO. A LCO shall not receive default
assignments of Medi-Cal beneficiaries other than those defined in
subdivision (c) of Section 14092.5.
   (f) LCO programs shall be required by the department to meet
monitoring and quality of care guidelines and requirements in order
to ensure that individuals are receiving high quality care through a
coordinated system of care. The department shall establish standards
related to all of the following:
   (1) Provision of basic health care services.
   (2) Adequacy of provider networks for primary, specialty,
hospital, and outpatient care, including compliance with linguistic
access and timely access requirements.
   (3) Provider contracts demonstrated to ensure the above.
   (4) Utilization management capacity.
   (5) Independent medical review and grievance processes.
   (6) Quality assurance.
   (7) Timely and accurate claims payment.
   (8) Solvency and reserve requirements.
   (9) Fraud and abuse.
   If a LCO fails to meet the guidelines, requirements, and standards
set forth by the department, the department shall take appropriate
action. The department may, at its sole discretion, suspend mandatory
assignment set forth in subdivision (a).
   (g) Cost and utilization data shall be provided by all LCO
programs to the department in a form and manner required by the
department and all applicable law, and as provided to the department
by other Medi-Cal managed care plans.
   14092.57.  (a) A LCO shall meet federal requirements for a managed
care organization.
   (b) After a LCO has been in operation for three years, the LCO
shall be licensed by the Director of the Department of Managed Health
Care pursuant to 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). If a LCO fails to meet this licensing
requirement, it shall cease to be eligible to participate in the LCO
program.
   (c) Sections 14408, 14409, 14410, and 14411 relating to enrollment
practices shall apply to LCO programs.
   14092.58.  (a) To the extent necessary to implement this article,
the department shall submit to the federal Centers for Medicare and
Medicaid Services proposed waiver amendments on the structure of, and
eligibility and benefits under, the LCO program.
   (b) The request for applications, including any part of the
process described herein for selecting entities to operate the health
care coverage programs, and any agreements entered into with a
county, city and county, consortium of counties, or health authority
pursuant to this article shall be exempt and shall not be subject to
Part 2 (commencing with Section 10100) of Division 2 of the Public
Contract Code, Chapter 2 (commencing with Section 10290) of Part 2 of
Division 2 of the Public Contract Code, or the requirement of
Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of
Division 5 of the Government Code.
   (c) If any provision of this article is in conflict with any other
provision of this chapter or any provision of Chapter 8 (commencing
with Section 14200), or in any regulations promulgated therefrom, the
provisions of this article shall be deemed to be controlling and
shall supersede that other provision or regulation.
   (d) The department shall consult with interested parties and
appropriate stakeholders regarding the implementation and ongoing
administration of this article.
   14092.59.  Implementation of this article is contingent on the
establishment of a requirement as described in Section 14155. 
   SEC. 82.    Section 14100.3 is added to the 
 Welfare and Institutions Code   , to read:  
   14100.3.  (a) The department may provide or arrange for the
provision of an electronic personal health record for enrollees
receiving health care benefits, to the extent funds are appropriated
for this purpose. The purpose of the record shall be to provide
enrollees with information to assist them in understanding their
coverage benefits and managing their health care.
   (b) At a minimum, the personal health record shall provide access
to real-time, patient-specific information regarding eligibility for
covered benefits and cost sharing requirements. The access can be
provided through the use of an Internet-based system.
   (c) In addition to the data required pursuant to subdivision (b),
the department may determine that the personal health record shall
also incorporate additional data such as laboratory results,
prescription history, claims history, and personal health information
authorized or provided by the enrollee. Inclusion of this additional
data shall be at the option of the enrollee.
   (d) Systems or software that pertain to the personal health record
shall adhere to accepted national standards for interoperability,
privacy, and data exchange, or be certified by a nationally
recognized certification body.
   (e) The personal health record shall comply with applicable state
and federal confidentiality and data security requirements. 
   SEC. 83.    Section 14132.105 is added to the 
 Welfare and Institutions Code   , to read:  
   14132.105.  (a) (1) The department shall establish a Healthy
Action Incentives and Rewards Program to be provided as a covered
benefit under the Medi-Cal program.
   (2) The benefits described in this section shall only be provided
under the terms and conditions determined by the department, and
shall meet all the requirements described in subdivision (b).
   (b) For purposes of this section, the Healthy Action Incentives
and Rewards Program shall include, but need not be limited to, all of
the following:
   (1) Health risk appraisals that collect information from eligible
beneficiaries to assess overall health status and identify risk
factors, including, but not limited to, smoking and smokeless tobacco
use, alcohol abuse, drug use, nutrition, and physical activity
practices.
   (2) A followup appointment with a licensed health care
professional acting within his or her scope of practice to review the
results of the health risk appraisal and discuss any recommended
actions.
   (3) Incentives or rewards or both for eligible beneficiaries to
become more engaged in their health care and to make appropriate
choices that support good health, including obtaining health risk
appraisals, screening services, immunizations, or participating in
health lifestyle programs or practices. These programs or practices
may include, but need not be limited to, smoking cessation, physical
activity, or nutrition. Incentives may include, but need not be
limited to, nonmedical pharmacy products or services not otherwise
covered under this chapter, gym memberships, and weight management
programs.
   (c) The department shall seek and obtain federal financial
participation and secure all federal approvals, including all
required state plan amendments or waivers, necessary to implement and
fund the services authorized under this section.
   (d) This section shall be implemented only if and to the extent
that federal financial participation is available and has been
obtained.
   (e) (1) Notwithstanding any other provision of law, the provision
of healthy incentives and rewards pursuant to this section by a
health care provider, or his or her agent, that meets the
requirements of this section, Section 1367.38 of the Health and
Safety Code, or Section 10123.56 of the Insurance Code shall not be
considered or construed as an unlawful practice, act, kickback,
bribe, rebate, remuneration, offer, coupon, product, payment, or any
other form of compensation by a provider or his or her agent,
directly or indirectly, overtly or covertly, in exchange for another
to obtain, participate, or otherwise undergo or receive health care
services.
   (2) Notwithstanding any other provision of law, incentives
authorized pursuant to this section are not subject to the penalties,
discipline, limitations, or sanctions imposed under law to preclude
or prohibit, as an unlawful practice, bribe, kickback or other act,
the offering or delivery of a rebate, remuneration, offer, coupon,
product, rebate, payment, or any other form of compensation by the
provider, or his or her agent, directly or indirectly, overtly or
covertly, in exchange for another to obtain, participate, or
otherwise undergo or receive health care services.
   (3) Notwithstanding any other provision of law, the provision of
healthy incentives and rewards pursuant to this section by a health
care provider, or his or her agent, the meets the requirements of
this section shall not be considered or construed as an inducement to
enroll.
   (f) This section shall only be implemented if, and to the extent,
allowed under federal law. If any portion of this section is found to
be invalid, as determined by a final judgment of a court of
complaint jurisdiction, this section shall become inoperative. 
   SEC. 84.    Section 14132.23 is added to the 
 Welfare and Institutions Code   , to read:  
   14132.23.  (a) (1) There is hereby established in the department
the Comprehensive Diabetes Services Program to provide comprehensive
diabetes prevention and management services to any individual who
meets the requirements set forth in paragraph (2). For purposes of
this subdivision, "comprehensive diabetes prevention and management
services" shall be defined by the department based on consultation
pursuant to subdivision (b). Services may include, but need not be
limited to, all of the following:
   (A) Screening for diabetes and prediabetes in accordance with the
operational screening guidelines and protocols developed for the
Comprehensive Diabetes Services Program utilizing the most current
American Diabetes Association criteria for diabetes in adults.
   (B) Providing visits by certified practitioners in accordance with
the operational protocols developed for the Comprehensive Diabetes
Service Program for eligible beneficiaries who have been diagnosed
with prediabetes.
   (C) Providing culturally and linguistically appropriate life-style
coaching and self-management training for eligible adult
beneficiaries with prediabetes and diabetes, in accordance with
evidence-based interventions, to avoid unhealthy blood sugar levels
that contribute to the progression of diabetes and its complications.

   (D) Conducting regular and timely laboratory evaluations, by the
primary care physician of the eligible beneficiary, in conjunction
with a program of blood sugar level self-management education and
training for eligible adult beneficiaries who have been diagnosed
with prediabetes and diabetes.
   (2) A beneficiary is eligible for services pursuant to this
section if he or she is all of the following:
   (A) Between 18 and 64 years of age.
   (B) Not dually enrolled in the Medi-Cal program and the federal
Medicare Program.
   (C) Diagnosed with prediabetes or diabetes.
   (D) Otherwise eligible for full scope of benefits under this
chapter but not enrolled in a Medi-Cal managed care plan.
   (b) The department shall seek and obtain federal financial
participation and secure all federal approvals, including all
required state plan amendments or waivers, necessary to implement and
fund the services authorized under this section.
   (c) For the purposes of implementation of this section, the
director may enter into contracts for the purposes of providing the
benefits offered under the Comprehensive Diabetes Services Program.
   (d) This section shall be implemented only if and to the extent
that federal financial participation is available and has been
obtained.
   (e) The Comprehensive Diabetes Services Program shall be developed
and implemented only to the extent that state funds are appropriated
annually for the services provided under this section.
   (f) The department shall develop and implement incentives for
Medi-Cal fee-for-service eligible beneficiaries who participate in
the Comprehensive Diabetes Services Program and are compliant with
program requirements for screening and self-management activities.
   (g) The department shall develop and implement financial
incentives for Medi-Cal fee-for-service providers who participate in
the Comprehensive Diabetes Services Program and are compliant with
program requirements in the screening and management of eligible
beneficiaries who have been diagnosed with prediabetes and diabetes.
   (h) The department shall collect data including, but not be
limited to, laboratory values from screening and diagnostic tests for
the individual beneficiaries participating in the Comprehensive
Diabetes Services Program and monitor the health outcomes of the
participating individual beneficiaries.
   (i) (1) Notwithstanding any other provision of law, the provision
of incentives pursuant to this section by a health care provider, or
his or her agent, that meets the requirements of this section,
Section 1367.38 of the Health and Safety Code, or Section 10123.56 of
the Insurance Code shall not be considered or construed as an
unlawful practice, act, kickback, bribe, rebate, remuneration, offer,
coupon, product, payment, or any other form of compensation by a
provider or his or her agent, directly or indirectly, overtly or
covertly, in exchange for another to obtain, participate, or
otherwise undergo or receive health care services.
   (2) Notwithstanding any other provision of law, incentives
authorized pursuant to this section are not subject to the penalties,
discipline, limitations, or sanctions imposed under law to preclude
or prohibit, as an unlawful practice, bribe, kickback or other act,
the offering or delivery of a rebate, remuneration, offer, coupon,
product, rebate, payment, or any other form of compensation by the
provider, or his or her agent, directly or indirectly, overtly or
covertly, in exchange for another to obtain, participate, or
otherwise undergo or receive health care services.
   (j) This section shall only be implemented if, and to the extent,
allowed under federal law. If any portion of this section is found to
be invalid, as determined by a final judgment of a court of
complaint jurisdiction, this section shall become inoperative.
   (k) The department shall, in consultation with the California
Diabetes Program in the State Department of Public Health, contract
with an independent organization to:
   (1) Evaluate and report the health outcomes and cost savings of
the Comprehensive Diabetes Services program.
   (2) Estimate the short- and long-term cost savings of expanding
the strategies of the Comprehensive Diabetes Services Program
statewide through the private or commercial insurance markets. 
   SEC. 85.    Section 14155 is added to the  
Welfare and Institutions Code   , to read:  
   14155.  The Legislature finds and declares all of the following:
   (a) Chapters 85, 87, 89, and 91 of the Statutes of 1991 and
Chapter 100 of the Statutes of 1993 established state-local
responsibilities for a variety of health and mental health programs.
   (b) The California Health Interview Survey estimated that there
were 4,856,000 Californians without health care coverage in 2005. The
Legislature finds that these Californians without health care
coverage frequently access the health care system through the
services provided pursuant to Chapters 85, 87, 89, and 91 of the
Statutes of 1991 and Chapter 100 of the Statutes of 1993.
   (c) The health care reform provided by the act adding this
section, including the expansion of eligibility for the Medi-Cal
program and the provision of subsidies for low-income persons, is
estimated to significantly reduce the number of Californians without
health care coverage beginning in the 2010-11 fiscal year and
continuing in subsequent years.
   (d) For these reasons, the Legislature finds that counties would
derive significant fiscal benefits from the health care reform
provided by the act adding this section and should contribute toward
the cost of providing health care coverage to Californians who
previously were without private coverage and ineligible for state
coverage, by paying a participation payment related to the cost of
providing coverage to each person.
   (e) It is the intent of the Legislature to establish a mechanism
whereby counties shall contribute to the cost of providing coverage
to individuals currently relying on counties for medical services.
Expansion of coverage to these individuals provided through Section
14005.332 and Section 12699.211 of the Insurance Code, except for
persons eligible for coverage under Section 14005.301 or 14005.305,
shall be contingent upon the implementation of a county contribution
as specified in Section 14005.332 and Section 12699.211 of the
Insurance Code. 
   SEC. 86.    Article 5.21 (commencing with Section
14167.1) is added to Chapter 7 of Part 3 of Division 9 of the 
 Welfare and Institutions Code   , to read:  

      Article 5.21.  Medi-Cal Hospital Rate Stabilization Act


   14167.1.  For purposes of this article, the following definitions
shall apply:
   (a) "Acute inpatient day" means a fee-for-service day, as defined
for purposes of the Office of Statewide Health Planning and
Development reporting by hospitals, for which the hospital has been
paid by the Medi-Cal program where the Medi-Cal program is the
primary payer.
   (b) "Base period" means the 12-month period ending on the base
period ending date. However, in the case of a hospital that
terminates a contract for the provision of hospital inpatient
services negotiated with the California Medical Assistance Commission
after the date this article is effective and prior to the base
period ending date, the base period shall be the 12-calendar months
prior to the contract termination date.
   (c) "Base period ending date" means the last day of the sixth
month immediately preceding the implementation date.
   (d) "Contract hospital" means a hospital that has a written
contract with a managed health care plan to provide hospital services
to the plan's subscribers or enrollees.
   (e) "Designated public hospital" means any one of the following
hospitals:
   (1) UC Davis Medical Center.
   (2) UC Irvine Medical Center.
   (3) UC San Diego Medical Center.
   (4) UC San Francisco Medical Center.
   (5) UC Los Angeles Medical Center, including Santa Monica/UCLA
Medical Center.
   (6) LA County Harbor/UCLA Medical Center.
   (7) LA County Olive View UCLA Medical Center.
                                              (8) LA County Rancho
Los Amigos National Rehabilitation Center.
   (9) LA County University of Southern California Medical Center.
   (10) Alameda County Medical Center.
   (11) Arrowhead Regional Medical Center.
   (12) Contra Costa Regional Medical Center.
   (13) Kern Medical Center.
   (14) Natividad Medical Center.
   (15) Riverside County Regional Medical Center.
   (16) San Francisco General Hospital.
   (17) San Joaquin General Hospital.
   (18) San Mateo Medical Center.
   (19) Santa Clara Valley Medical Center.
   (20) Ventura County Medical Center.
   (f) "Federal upper payment limit" means the upper payment limit on
the applicable category of hospitals pursuant to federal law that
will be allowed for purposes of federal financial participation. The
federal upper payment limit for hospital outpatient services is as
set forth in Section 447.321 of Title 42 of the Code of Federal
Regulations. The federal upper payment limit for hospital inpatient
services is as set forth in Section 447.272 of Title 42 of the Code
of Federal Regulations.
   (g) "Hospital community" means the California Hospital Association
and any other hospital industry organization or system that
represents children's hospitals, nondesignated public hospitals,
designated public hospitals, private safety net hospitals, and other
public or private hospitals.
   (h) "Hospital inpatient services" means all services covered under
the Medi-Cal program and furnished by hospitals to patients who are
admitted as hospital inpatients and reimbursed on a fee-for-service
basis by the department directly or through its fiscal intermediary.
Hospital inpatient services include outpatient services furnished by
a hospital to a patient who is admitted to that hospital within 24
hours of the provision of the outpatient services that are related to
the condition for which the patient is admitted. Hospital inpatient
services include physician services only if the service is furnished
to a hospital inpatient, the physician is compensated by the hospital
for the service, and the service is billed to the Medi-Cal program
by the hospital under a provider number assigned to the hospital.
Hospital inpatient services do not include inpatient mental health
services for which a county is financially responsible or services
furnished under a managed health care plan.
   (i) "Hospital outpatient services" means all services covered
under the Medi-Cal program furnished by hospitals to patients who are
registered as hospital outpatients and reimbursed by the department
on a fee-for-service basis directly or through its fiscal
intermediary. Hospital outpatient services include physician services
only if the service is furnished to a hospital outpatient, the
physician is compensated by the hospital for the service, and the
service is billed to the Medi-Cal program by the hospital under a
provider number assigned to the hospital. Hospital outpatient
services do not include outpatient mental health services for which a
county is financially responsible or services furnished under a
managed health care plan.
   (j) "Implementation date" means the first day on which hospitals
provide health care services to Medi-Cal beneficiaries that are
reimbursed under this article.
   (k) "Inpatient base rate" means the per diem rate, or per
discharge rate if used by the department, established pursuant to
Section 14167.4.
   (l) "Managed health care plan" means a health care delivery system
that manages the provision of health care and receives prepaid
capitated payments from the state in return for providing services to
Medi-Cal beneficiaries. Managed health care plans include, but are
not limited to, county organized health systems and entities
contracting with the department to provide services pursuant to
two-plan models, geographic managed care, and prepaid plans. Entities
providing these services contract with the department pursuant to
Article 2.7 (commencing with Section 14087.3), Article 2.8
(commencing with Section 14087.5), or Article 2.91 (commencing with
Section 14089) of Chapter 7, or Article 1 (commencing with Section
14200) or Article 7 (commencing with Section 14490) of Chapter 8.
   (m) "Market basket index" means the hospital market basket index
used by the Medicare Program for the purpose of determining payment
rates for acute care inpatient hospital services.
   (n) "Medi-Cal fee-for-service payments" means all payments made by
the Medi-Cal program to hospitals as reimbursement for hospital
inpatient services furnished with respect to acute inpatient days,
including payments for both routine and ancillary services, and
payments described in subdivision (e) of Section 14167.4, but
excluding payments described in subdivision (f) of Section 14167.4.
   (o) "New hospital" means a hospital that did not provide hospital
inpatient services to Medi-Cal beneficiaries under current or prior
ownership and has no history of Medi-Cal reimbursement.
   (p) "Nondesignated public hospital" means a public hospital that
is licensed under subdivision (a) of Section 1250 of the Health and
Safety Code and is defined in paragraph (25) of subdivision (a) of
Section 14105.98, excluding designated public hospitals.
   (q) "Outpatient base rates" means the Medi-Cal payment rates for
hospital outpatient services in effect on the date immediately
preceding the implementation date.
   (r) "Private hospital" means a hospital licensed under subdivision
(a) of Section 1250 of the Health and Safety Code that is a
nonpublic hospital, nonpublic-converted hospital, or converted
hospital as those terms are defined in paragraphs (26) to (28),
inclusive, respectively, of subdivision (a) of Section 14105.98.
   (s) "Safety net care pool" means the federal funds available to
ensure continued government support for the provision of health care
services to uninsured populations, as described in subdivision (k) of
Section 14166.1.
   14167.2.  (a) The department shall determine outpatient base rates
for hospital outpatient services furnished by nondesignated public
hospitals based on the payment methodology in effect on the day
immediately preceding the implementation date until the department
has developed new methods and standards for payment of hospital
outpatient services under subdivision (b). The department shall
increase the outpatient base rates by the percentage the department
determines is necessary to comply with subdivision (c) so that each
outpatient base rate is increased by the same percentage, except as
may be necessary to avoid exceeding any applicable federal upper
payment limit or to otherwise comply with federal law.
   (b) The department, in consultation with the hospital community,
and with input from others as deemed necessary and appropriate, shall
develop new methods and standards of payment for hospital outpatient
services. These new methods and standards shall comply with the
provisions of subdivision (c) and take into consideration factors
such as acuity and the cost incurred by hospitals in providing
services.
   (c) Medi-Cal rates for hospital outpatient services furnished by
nondesignated public hospitals during a fiscal year shall be set to
result in aggregate payments equal to the federal upper payment
limit.
   (d) The department shall establish rates of payment pursuant to
this section prior to the implementation date and prior to the
beginning of each state fiscal year commencing on or after the
implementation date. The department shall monitor payments during the
fiscal year and may make adjustments as may be necessary to comply
with subdivision (c).
   14167.3.  (a) The department shall determine outpatient base rates
for hospital outpatient services furnished by private hospitals
based on the payment methodology in effect on the day immediately
preceding the implementation date until the department has developed
new methods and standards for payment of hospital outpatient services
under subdivision (b). The department shall increase the outpatient
base rates by the percentage the department determines is necessary
to comply with subdivision (c) so that each outpatient base rate is
increased by the same percentage, except as may be necessary to avoid
exceeding any applicable federal upper payment limit or to otherwise
comply with federal law.
   (b) The department, in consultation with the hospital community,
and with input from others as deemed necessary and appropriate, shall
develop new methods and standards of payments for hospital
outpatient services. These new methods and standards shall comply
with the provisions of subdivision (c) and take into consideration
factors such as acuity and the cost incurred by hospitals in
providing services.
   (c) Medi-Cal rates for hospital outpatient services furnished by
private hospitals during a fiscal year shall be set to result in
aggregate payments equal to the federal upper payment limit.
   (d) The department shall establish rates of payment pursuant to
this section prior to the implementation date and prior to the
beginning of each state fiscal year commencing on or after the
implementation date. The department shall monitor payments during the
fiscal year and may make adjustments as may be necessary to comply
with subdivision (c).
   14167.4.  (a) The department shall determine an inpatient base
rate for each private hospital and nondesignated public hospital.
   (b) The inpatient base rate shall be an estimate of the hospital's
Medi-Cal fee-for-service payments per acute inpatient day, or per
acute inpatient discharge if used by the department, as of the day
immediately preceding the implementation date.
   (c) Each hospital's inpatient base rate shall be determined as
follows:
   (1) The department shall determine the hospital's total Medi-Cal
fee-for-service payments for services furnished during the base
period.
   (2) The department shall determine the hospital's total Medi-Cal
acute inpatient days, or the number of acute inpatient discharges if
used by the department, for the base period.
   (3) The department shall divide the result of paragraph (1) by the
result of paragraph (2).
   (4) The department shall adjust the result of paragraph (3) by the
rate of increase in the market basket index from the midpoint of the
base period to the implementation date. The result shall be the
hospital's inpatient base rate.
   (d) The department shall make available a paid claims summary for
each hospital that sets forth all of the Medi-Cal fee-for-service
payments made for services furnished during the hospital's base
period and the hospital's fee-for-service Medi-Cal acute inpatient
days for the base period, and any other data the department may
require to determine each hospital's base rate. The Medi-Cal
fee-for-service payments for hospitals reimbursed on a cost basis
shall be the hospital's interim payments. The department shall use
this data to compute the inpatient base rate.
   (e) The department shall add to each hospital's Medi-Cal
fee-for-service payments set forth in the paid claims summary
prepared pursuant to subdivision (d) the supplemental payments under
Section 14166.12 or Section 14166.17 made by the department to the
hospital with respect to the state fiscal year ending during the base
period.
   (f) In determining each hospital's inpatient base rate, the
department shall exclude payments made pursuant to Sections 14085.5,
14166.11, 14166.16, 14166.21, and 14166.23, payments by a managed
health care plan or one of its contractors, payments resulting from
an intergovernmental transfer, or payments made where the Medi-Cal
program is not the primary payer, such as services covered under
Medicare Part A and Part B where the individual receiving the
services is a Medi-Cal beneficiary.
   (g) The department shall make available a preliminary list of each
hospital's inpatient base rate and provide each hospital with the
data used to compute its base rate no later than ninety days before
the implementation date. The department shall make available a final
list of each hospital's inpatient base rate thirty days prior to the
implementation date.
   (h) A hospital's base rate shall be corrected if it demonstrates
any of the following:
   (1) The department made a mathematical error.
   (2) The data used by the department is inaccurate based on the
data in the possession of the department or its fiscal intermediary
at the time the paid claims summary under subdivision (d) was
prepared. Payments made after the date of the preparation of the paid
claims summary under subdivision (d) shall not be a ground for
correction.
   (3) The department failed to include payments described in
subdivision (e).
   (4) The department included payments described in subdivision (f).

   (i) The impatient base rate for a new hospital shall be the median
base rate of hospitals in the peer group to which the new hospital
is assigned by the department. The peer groups are those groupings of
hospitals described in Section 51553 of Title 22 of the California
Code of Regulations.
   (j) The department shall review and issue a determination
concerning a hospital's request for a correction under subdivision
(h) within 30 days of receipt of the request. Any correction that is
made shall be applied prospectively, beginning the first day of the
first calendar quarter beginning after the date of the department's
determination. However, if the department receives a hospital's
request for a correction no later than thirty days after the
department publishes the preliminary list under subdivision (g), any
correction shall be effective as of the implementation date.
   (k) The department shall develop an informal process for reviewing
and making decisions promptly concerning disputes by hospitals of
the department's action or proposed action under this section or
Section 14167.5, consistent with the provisions of this section and
Section 14167.5. The process shall be exempt from the provisions of
the Administrative Procedure Act.
   (l) Notwithstanding any other provision of law, no change to a
hospital's base rate shall be applied to payments for services
rendered prior to the effective date of the change to the base rate.
   14167.5.  To the extent feasible, the department shall develop a
case mix adjustment factor to apply to inpatient base rates for
private and nondesignated public hospitals. If developed, the
department shall take all of the following steps:
   (a) Each private and nondesignated public hospital's inpatient
base rate shall be adjusted to reflect changes in the hospital's
Medi-Cal case mix for fee-for-service Medi-Cal inpatients as compared
to the base period.
   (b) Case mix adjustments shall be applied prospectively at the
beginning of each state fiscal year beginning with the first state
fiscal year that begins no less than 12 months after the
implementation date.
   (c) The department shall compute a case mix adjustment factor for
each hospital for each state fiscal year. The case mix adjustment
factor shall be the hospital's case mix index for the most recent
calendar year divided by the case mix index for the base period.
   (d) The department, in consultation with the hospital community,
and with input from others as deemed necessary and appropriate, shall
develop the methodology for computing the case mix index, including
the data to be used and the sources of the data. In developing the
case mix index methodology, the department shall consider, at
minimum, the following factors:
   (1) The development of a methodology that reasonably measures the
relative cost that would be expected to be incurred in treating
different types of cases.
   (2) The use of an approach using diagnosis related groups and
relative weights for such groups used by the Medicare Program under
the Medicare inpatient prospective payment system.
   (3) The accuracy of applying weights used by the Medicare Program
for the purpose of measuring the Medi-Cal case mix.
   (4) The available data.
   (5) The comparability of the data available for the base period
and the data available for later years.
   (6) The development of accurate measures of relative case mix for
pediatric patients.
   (e) No later than 90 days prior to the beginning of the fiscal
period to which a case mix adjustment factor is applied, the
department shall determine each hospital's case mix adjustment
factor, advise each hospital of its case mix adjustment factor and
the case mix index factors used to compute the case mix adjustment
factor, and provide each hospital with the data used to compute the
case mix adjustment factor.
   (f) The department shall correct a hospital's case mix adjustment
factor if the hospital demonstrates any of the following:
   (1) The department made a mathematical error.
   (2) The data used by the department is inaccurate.
   (3) More accurate data is available.
   (g) The department shall review and issue a determination
concerning a hospital's request for a correction under subdivision
(f) within 30 days of receipt of the request. Any correction that is
made shall be applied prospectively, beginning the first day of the
first calendar quarter beginning after the date of the department's
determination.
   (h) (1) The department may make adjustments to a hospital's base
rate to take into account an event or series of events that may
significantly affect a hospital's costs of furnishing hospital
inpatient services that is not reflected in the case mix adjustment,
such as a merger or consolidation of hospitals, a substantial change
in the types of services furnished by a hospital, or a substantial
change in the acuity of the hospital's patients. An event or series
of events shall be deemed to significantly affect a hospital's costs
only if the department determines that the hospital's cost per day
has increased or decreased by 10 percent or more as a result of the
event or series of events. Events that are generally applicable to
multiple hospitals, such as a market basket increase in the costs of
goods or services purchased by hospitals, shall not be a basis for an
adjustment under this subdivision.
   (2) The department shall notify the hospital in writing of any
adjustment it proposes to make under this subdivision. The notice
shall include an explanation of the department's reasons for making
the adjustment, the computation of the adjustment, and the data
relied on by the department in making the adjustment. The hospital
may dispute an adjustment within 30 days after receipt of the notice
described in this paragraph by providing written notice to the person
identified by the department in the notice. The hospital shall
include in the written notice of dispute the reasons the hospital
believes the adjustment should not be made as proposed by the
department, including all data supporting the hospital's position.
The department may not implement any adjustment under this
subdivision until it makes a final determination concerning a notice
of dispute.
   (3) Any adjustment under this subdivision shall be made
prospectively beginning the first day of the calendar quarter
beginning no sooner than 60 days after the department issues a notice
to the hospital of the proposed adjustment. However, if the hospital
timely disputes the proposed adjustment, as specified in paragraph
(2), the proposed adjustment shall not be implemented until the first
day of the first calendar quarter beginning after the department
issues its decision concerning the dispute.
   14167.6.  (a) The department shall determine inpatient base rates
pursuant to Section 14167.4 for hospital inpatient services provided
by nondesignated public hospitals based on the payment methodologies
in effect on the day immediately preceding the implementation date
until the department has developed new methods and standards under
subdivision (b). The department shall increase each hospital's
inpatient base rate by the percentage the department determines is
necessary to comply with subdivision (c), taking into account the
additional payments made pursuant to subdivision (e), so that each
hospital's inpatient base rate is increased by the same percentage,
except as may be necessary to avoid exceeding any applicable federal
upper payment limit or to otherwise comply with federal law. The
department shall pay each nondesignated public hospital for hospital
inpatient services provided prior to the implementation of new
methods and standards of payment developed pursuant to subdivision
(b) based on its inpatient base rate as increased pursuant to this
subdivision.
   (b) The department, in consultation with the hospital community,
and with input from others as deemed necessary and appropriate, shall
develop new methods and standards of payments for hospital inpatient
services provided by nondesignated public hospitals. These new
methods and standards shall comply with the provisions of subdivision
(c) and take into consideration factors such as patient acuity, the
cost incurred by hospitals in providing services, and equitable
payment for outlier patients.
   (c) Medi-Cal rates for hospital inpatient services furnished by
nondesignated public hospitals during a state fiscal year shall be
set at an amount that results in aggregate payments equal to the
federal upper payment limit.
   (d) The department shall establish rates of payment pursuant to
this section prior to the implementation date and prior to the
beginning of each state fiscal year beginning on or after the
implementation date. The department shall monitor payments during the
fiscal year, and may make adjustments that may be necessary to
comply with subdivision (c).
   (e) The department shall develop a reimbursement methodology to
equitably compensate nondesignated public hospitals for the delivery
of Medi-Cal acute inpatient psychiatric services.
   14167.7.  (a) The department shall determine inpatient base rates
pursuant to Section 14167.4 for hospital inpatient services provided
by private hospitals based on the payment methodologies in effect on
the day immediately preceding the implementation date until the
department has developed new methods and standards under subdivision
(b). The department shall increase each hospital's inpatient base
rate by the percentage the department determines is necessary to
comply with subdivision (c), taking into account the additional
payments made under subdivision (f), so that each hospital's
inpatient base rate is increased by the same percentage, except as
may be necessary to avoid exceeding any applicable federal upper
payment limit or to otherwise comply with federal law. The department
shall pay each private hospital for hospital impatient services
provided prior to the implementation of new methods and standards of
payment developed pursuant to subdivision (b) based on its inpatient
base rate as increased pursuant to this subdivision.
   (b) The department, in consultation with the hospital community,
and with input from others as deemed necessary and appropriate, shall
develop new methods and standards of payments for hospital inpatient
services provided by private hospitals. These new methods and
standards shall comply with the provisions of subdivision (c) and
take into consideration factors such as patient acuity, the
                                 cost incurred by hospitals in
providing services, and equitable payment for outlier patients.
   (c) Medi-Cal rates for hospital inpatient services furnished by
private hospitals during a state fiscal year shall be set to result
in aggregate payments equal to the federal upper payment limit.
   (d) The department shall establish rates of payment pursuant to
this section prior to the implementation date and prior to the
beginning of each state fiscal year beginning on or after the
implementation date. The department shall monitor payments during the
fiscal year and may make such adjustments as may be necessary to
comply with subdivision (c).
   (e) The department shall establish rates of payment to major
teaching institutions that have a formal academic affiliation with a
designated public hospital that covers the cost of services.
   (f) The department shall develop a reimbursement methodology to
equitably compensate private hospitals for the delivery of Medi-Cal
acute inpatient psychiatric services.
   14167.8.  (a) The amount of any increased payments made under this
article to private hospitals in excess of the payments that would
have been made under the payment rates in effect on the day
immediately prior to the implementation date, including the amount of
increased payments to hospitals by managed health care plans
pursuant to Section 14167.9, shall not be included in the calculation
of the numerator or denominator of the low-income percent of the
OBRA limit for purposes of the disproportionate share hospital
replacement fund payments pursuant to Section 14166.11.
   (b) The department shall continue to make payments to private and
nondesignated public hospitals pursuant to Sections 14085.5,
14105.17, 14105.97, 14166.11, and 14166.16, in addition to other
payments made under this article. The department shall take all of
these payments into account in determining whether an applicable
federal upper payment limit is satisfied only if, and to the extent,
required by federal law.
   (c) Each private and nondesignated public hospital, as a condition
of receiving reimbursement under this section, shall keep, maintain,
and have readily accessible, any records specified by the department
to fully support reimbursement amounts to which the hospital is
entitled, and any other records required by the federal Centers for
Medicare and Medicaid Services.
   14167.9.  (a) The director shall increase reimbursement rates to
managed health care plans by the actuarial equivalent amount
necessary to ensure that managed health care plans make payments to
providers under their contracts at the same level as is paid on a
fee-for-service basis to the hospitals whose rates are governed by
this article, subject to the limitations of federal law.
   (b) Subject to subdivision (c), the department shall further
increase payments to managed health care plans, in addition to any
increased payments made under subdivision (a), as may be necessary to
ensure that the total amount of the revenue resulting from payments
of a fee from private hospitals and nondesignated public hospitals
for patient days in a fiscal year is expended after making the
expenditures for the payments under Sections 14167.2, 14167.3,
14167.6, and 14167.7.
   (c) (1) The amount of increased payments under this section shall
not exceed either of the following limits:
   (A) The maximum amount, if any, for which federal financial
participation may be claimed.
   (B) The sum of available revenue derived from a fee, as described
in subdivision (k) of Section 14167.19, plus interest, penalties, and
federal financial participation.
   (2) The revenue derived from a fee, as described in subdivision
(k) of Section 14167.19, that is made available for purposes of this
section shall be 23.29 percent of the total fees that are assessed on
nondesignated public and private hospitals with respect to any
fiscal year.
   (d) A Medi-Cal managed care plan shall equitably expend, in the
form of increased rates to all private and nondesignated public
hospitals for providing services to Medi-Cal patients, 100 percent of
any rate increase it receives under this section. Managed health
care plans shall submit such documentation as the department may
require to demonstrate compliance with the provisions of this
subdivision.
   14167.10.  (a) Notwithstanding Article 5.2 (commencing with
Section 14166), for the period of time during which this article is
operative, safety net care pool funds, as defined in subdivision (s)
of Section 14167.1, shall be paid to the designated public hospitals,
as defined in subdivision (e) of Section 14167.1, in accordance with
this section, to the extent that those funds are available.
   (b) (1) Each designated public hospital, or the governmental
entity with which it is affiliated, that operates nonhospital clinics
or provides other health care services that are not identified as
hospital services, may report and certify, in accordance with Section
14166.8, all or a portion of its uncompensated costs of the services
furnished to the uninsured. Each designated public hospital, or the
governmental entity with which it is affiliated, shall receive from
the Health Care Support Fund, for each fiscal year, an amount equal
to the federal funds derived from the certification of uncompensated
care costs pursuant to the preceding sentence. The maximum amount
payable pursuant to this paragraph shall be one hundred million
dollars ($100,000,000).
   (2) If, for any fiscal year, the amount payable from the Health
Care Support Fund is insufficient for purposes of the payments
described in paragraph (1), each designated public hospital, or
governmental entity with which it is affiliated, shall receive a pro
rata share of the amount specified in paragraph (1). The pro rata
amount determined for purposes of this paragraph shall be based on
the percentage that each designated public hospital's certified
uncompensated medical care costs of medical services provided to
uninsured individuals bears to the total amount of the costs
certified by all of the participating designated public hospitals or
governmental entity with which it is affiliated.
   (3) Subdivision (a) of Section 14166.21 shall remain operative for
the period of time during which this article is operative, but
subdivision (b) of Section 14166.21 shall be inoperative for the
period of time during which this article is operative.
   (c) Except as provided in subdivision (b), subdivision (g) of
Section 14166.8 shall be inoperative for the period of time during
which this article is operative. The department shall seek Medicaid
federal financial participation from the safety net care pool based
on qualifying expenditures from the designated public hospitals or
governmental entity with which it is affiliated.
   (d) Payments and funding described in this section shall be
subject to the availability of federal funds through a demonstration
project approved by the federal government pursuant to Section 1115
of the federal Social Security Act.
   (e) The director may suspend, modify, or adjust any methodology or
computation required by Article 5.2 (commencing with Section 14166)
that is necessary to implement this section.
   (f) Implementation of this section is contingent on the
establishment of the requirement as described in Section 14155.
   14167.11.  (a) (1) Commencing July 1, 2010, designated public
hospitals shall receive Medi-Cal reimbursement as specified in this
section.
   (2) For purposes of this section, "hospital services" means
inpatient services and services rendered in the outpatient department
of the hospital, excluding services rendered by a hospital-based
federally qualified health center for which reimbursement is received
pursuant to Section 14132.100.
   (b) Notwithstanding Article 2.6 (commencing with Section 14081),
Sections 14166.35 to 14166.9, inclusive, and any other provision of
law, each of the designated public hospitals shall be paid for those
hospital services provided to Medi-Cal beneficiaries on a
fee-for-service basis during any fiscal year as follows:
   (1) Except as provided in paragraph (5), each of the designated
public hospitals shall receive, as payment for inpatient hospital
services provided to Medi-Cal beneficiaries during any fiscal year,
amounts based on the hospital's allowable costs incurred in providing
those services. These costs shall be determined annually by the
department making use of the data provided pursuant to subdivision
(c).
   (2) Except as provided in paragraph (5), for the 2010-11 fiscal
year, and each fiscal year thereafter, each of the designated public
hospitals shall receive a reimbursement rate for the cost of
inpatient and outpatient hospital services rendered to Medi-Cal
beneficiaries based upon claims filed by the hospital in accordance
with the claiming process set forth in Division 3 (commencing with
Section 50000) of Title 22 of the California Code of Regulations.
Inpatient hospital rates may be on a per diem or per discharge basis.

   (3) The nonfederal share of the reimbursement specified in
paragraph (2) shall consist of state appropriations made in the
annual Budget Act, which shall be limited for fiscal year 2010-11,
and each fiscal year thereafter, to the full cost incurred by the
particular hospital in fiscal year 2006-07, increased annually by the
percentage increase in the rate of payments made to private
hospitals or at the annual rate of growth in cost by that hospital,
whichever is less.
   (4) For the 2010-11 fiscal year, and each fiscal year thereafter,
each designated public hospital shall receive supplemental federal
reimbursement pursuant to Section 14105.96, in addition to the
reimbursement received by each hospital for outpatient services
pursuant to paragraph (2).
   (5) Reimbursement paid to Federally Qualified Health Centers shall
continue pursuant to Section 14132.100 for those hospitals that were
designated by the state as Federally Qualified Health Centers as of
July 1, 2007.
   (6) The cost data and the resulting estimated costs as described
in paragraph (1) shall be certified as accurate by the unit of
government that owns or operates the hospital submitting the
estimated costs. The appropriate public official shall provide the
certification required by this paragraph.
   (7) (A) To the extent that the amount of the estimated allowable
costs for each designated public hospital determined pursuant to
paragraph (1) exceeds the amounts actually paid pursuant to paragraph
(2), the hospital shall receive a quarterly supplemental payment
equal to the federal reimbursement received as a result of the
amounts claimed by the department to the federal government based on
the total amounts certified pursuant to paragraph (4).
   (B) The supplemental Medi-Cal reimbursement provided by this
paragraph shall be distributed quarterly under a payment methodology
based on inpatient services provided to Medi-Cal patients at the
eligible facility, either on a per-visit basis, per-procedure basis,
or any other federally permissible basis.
   (C) Payments made pursuant to this paragraph shall be subject to
reconciliation pursuant to subdivision (f), and pursuant to any other
applicable requirement of state or federal law.
   (c) (1) Within five months after the end of each fiscal year, each
designated public hospital shall submit to the department both of
the following reports:
   (A) The hospital's Medi-Cal cost report for the fiscal year.
   (B) Other cost reporting and statistical data necessary for the
determination of amounts due the hospital, as requested by the
department.
   (2) For each fiscal year, the reports shall identify the costs
incurred in providing inpatient hospital services to Medi-Cal
beneficiaries on a fee-for-service basis.
   (3) Reports submitted under this subdivision shall include all
allowable costs.
   (d) Designated public hospitals shall receive disproportionate
share hospital payments pursuant to Section 14166.6.
   (e) In the event of a conflict between the provisions of this
section and any provision of Article 5.2 (commencing with Section
14166), the provisions of this section shall govern. In addition to
direct conflicts, if continuing the implementation or application of
any of the provisions of Article 5.2 (commencing with Section 14166)
leads to results that are inconsistent with the payment methodology
established in this section, after consultation with representatives
of the designated public hospitals, the director shall not implement
or apply any provision of Article 5.2 (commencing with Section 14166)
that the director determines has those results.
   (f) No later than April 1 following the end of the fiscal year,
the department shall undertake an interim reconciliation of payments
made pursuant to this section based on the hospitals' Medi-Cal cost
reports and other cost and statistical data submitted by the
hospitals for the fiscal year and shall adjust payments to each
hospital accordingly.
   (g) Implementation of this section is contingent on the
establishment of the requirement as described in Section 14155.
   14167.19.  (a) The department shall consult with the hospital
community, and shall receive input from others as deemed necessary
and appropriate, in developing and implementing any and all payment
methodologies developed or implemented for purposes of this article.
The consultation, with input from others as deemed necessary and
appropriate, shall occur sufficiently in advance of the publication
of any proposed regulation pertaining to any such payment methodology
so as to allow the hospital community, and others as deemed
necessary and appropriate, to have meaningful participation and offer
comments as well as to allow the department an opportunity to
consider additional information and engage in follow-up discussions.
   (b) The director shall seek federal approval of each payment
methodology set forth in this article. The director, in consultation
with the hospital community, and with input from others as deemed
necessary and appropriate, may alter any methodology specified in
this article to the extent necessary to meet the requirements of
federal law or regulations or to obtain federal approval. If, after
seeking federal approval, federal approval is not obtained, that
methodology shall not be implemented.
   (c) Payments made pursuant to this article are contingent on the
receipt of federal reimbursement.
   (d) In implementing this article, the department may utilize the
services of the Medi-Cal fiscal intermediary through a change order
to the fiscal intermediary contract to administer this program,
consistent with the requirements of Sections 14104.6, 14104.7,
14104.8, and 14104.9. Contracts entered into with any Medicare fiscal
intermediary shall not be subject to Part 2 (commencing with Section
10100) of Division 2 of the Public Contract Code.
   (e) Except as otherwise provided in this article, Sections
14166.11 to 14166.14, inclusive, Sections 14166.17 to 14166.20,
inclusive, and Sections 14166.22 and 14166.23, shall be inoperative
for the period of time during which this article is operative.
   (f) This article shall become inoperative five years after the
implementation date of this article and as of January 1, 2016, is
repealed, unless a later enacted statute that is enacted on or before
January 1, 2016, extends or deletes the dates on which it becomes
inoperative and is repealed.
   (g) This article shall be applicable to services rendered to
Medi-Cal beneficiaries on and after July 1, 2010. For services that
are paid under this article, any other provider rate methodology,
including those established by the California Medical Assistance
Commission pursuant to Article 2.6 (commencing with Section 14081),
shall become inoperative for those services on and after that date.
   (h) This article shall not apply to any service furnished prior to
the effective date of any federal approvals that may be required to
ensure the availability of federal financial participation for
expenditures made pursuant to this article.
   (i) This article shall become inoperative in the event, and on the
effective date, of a final judicial determination by any court of
appellate jurisdiction or a final determination by the federal
Department of Health and Human Services or the Centers for Medicare
and Medicaid Services that any element of this article cannot be
implemented.
   (j) The department shall implement this article only to the extent
that state funds are appropriated for the nonfederal share of the
rate increases provided in this article.
   (k) If this article becomes inoperative, hospitals shall be paid
the rates that were in effect on June 30, 2010, including the rates
paid pursuant to the provision of Article 2.6 (commencing with
Section 14081).
   (l) This article shall not be implemented unless and until a 4
percent fee is imposed on the net patient revenue of acute care
hospitals. 
   SEC. 87.    Article 5.22 (commencing with Section
14167.22) is added to Chapter 7 of Part 3 of Division 9 of the 
 Welfare and Institutions Code   , to read:  

      Article 5.22.  Medi-Cal Physician Services Rate Increase Act


   14167.22.  (a) The director shall seek federal approval of the
rate methodology set forth in this article. The director may alter
any methodology specified in this article, to the extent necessary to
meet the requirements of federal law or regulations or to obtain
federal approval. If, after seeking federal approval, federal
approval is not obtained, that methodology shall not be implemented.
   (b) Payments made pursuant to this article are contingent on the
receipt of federal reimbursement. Unless otherwise expressly provided
in this article, nothing in this article shall create an obligation
on the part of the department to fund any payment from state funds in
the absence of, or on account of a shortfall in, federal funding.
   (c) It is the intent of the Legislature that, to the extent
practicable, the director increase reimbursement rates to managed
health care plans by the actuarial equivalent amount necessary to
ensure that managed health care plans make payments to the classes of
providers whose rates are governed by this article at the same level
as are made pursuant to this article.
   14167.23.  For purposes of this article, the following definitions
shall apply:
   (a) "Nonphysician medical practitioner" means a physician's
assistant, a certified nurse midwife, or a nurse practitioner,
including a certified family nurse practitioner and a certified
pediatric nurse practitioner, who provides primary care services, as
defined in Section 51170.5 of Title 22 of the California Code of
Regulations, who is an enrolled Medi-Cal provider eligible to receive
Medi-Cal payments, and who provides physician services to Medi-Cal
beneficiaries. Primary care physician services rendered by
nonphysician medical practitioners are covered as physician services
to the extent permitted by applicable licensing statutes and
regulations and as set forth in Section 51240 of Title 22 of the
California Code of Regulations. The terms "physician's assistant,"
"nurse midwife," and "nurse practitioner" are defined for purposes of
this article in Sections 51170.1, 51170.2, and 51170.3 of Title 22
of the California Code of Regulations, respectively.
   (b) "Physician" means a practitioner meeting the requirements of
Section 51228 of Title 22 of the California Code of Regulations who
is an enrolled Medi-Cal provider eligible to receive Medi-Cal
payments and who provides physician services to Medi-Cal
beneficiaries.
   (c) "Physician group" means two or more physicians legally
organized as a partnership, professional corporation, foundation,
not-for-profit corporation, or similar association that meets the
requirements of Section 51000.16 of Title 22 of the California Code
of Regulations and that is an enrolled Medi-Cal provider eligible to
receive Medi-Cal payments and provides physician services to Medi-Cal
beneficiaries.
   (d) "Physician services" means those services as described in
Section 51305 of Title 22 of the California Code of Regulations.
   (e) "Podiatrist" means a person as defined in Section 51075 of
Title 22 of the California Code of Regulations who is an enrolled
Medi-Cal provider eligible to receive Medi-Cal payments and who
provides physician services to Medi-Cal beneficiaries.
   14167.24.  (a) A physician, physician group, podiatrist, or
nonphysician medical practitioner shall receive Medi-Cal
reimbursement to the extent provided in this section.
   (b) Physician services, including those rendered by physicians,
physician groups, podiatrists, and nonphysician medical
practitioners, shall be calculated and paid as follows:
   (1) Except as provided under Section 14167.25, commencing on July
1, 2010, reimbursement shall not be less than 80 percent of the
amount that the federal Medicare Program would pay for the same
physician service rendered on the same date. In determining the
amounts to be paid pursuant to this paragraph, the department shall
ensure that the equivalent Medicare rate to be used takes into
account all of the factors, supplemental payments, and other
variables that are used to determine the Medicare rate.
   (2) The supplemental rate augmentation paid for physician services
in California Children Services, as established in the annual Budget
Act, shall continue and be paid in addition to the rate established
in this section.
   (3) The department shall establish a rate for physician services
for which Medicare does not provide a comparable physician service,
or for which the Medicare payment for the physician service cannot be
separately determined, which shall be the department's best estimate
of a rate that is not less than 80 percent of what Medicare would
pay for that physician service.
   (4) Physician services that are reimbursable under this section
may be provided in any service location except for hospitals,
federally qualified health centers, and rural health centers.
   (5) Claims for payment of services rendered by a nonphysician
medical practitioner, where the rate is established pursuant to this
section, shall comply with the provisions of subdivision (d) of
Section 51503.1 of Title 22 of the California Code of Regulations.
   (c) As a condition of receiving reimbursement under this section,
a physician, physician group, podiatrist, or nonphysician medical
practitioner shall keep, maintain, and have readily retrievable, any
records specified by the department to fully disclose reimbursement
amounts to which the physician, physician group, podiatrist, or
nonphysician medical practitioner is entitled, and any other records
required by the federal Centers for Medicare and Medicaid Services.
   (d) This section shall apply to all services specified in this
section that are rendered to Medi-Cal beneficiaries on and after July
1, 2010. With respect to all services that are paid under this
section, any other provider rate methodology that is inconsistent or
duplicative of the rates paid pursuant to this section shall become
inoperative for those services to the extent that the rates are
inconsistent or duplicative.
                                 14167.25.  (a) (1) Notwithstanding
Section 14105 or any other provision of law, on or after July 1,
2010, the director may designate a percentage of the rate increase
paid to Medi-Cal fee-for-service providers pursuant to subdivision
(b) of Section 14167.24, to be directly linked to performance
measures developed pursuant to subdivisions (c) and (d), including a
demonstrated showing of continued performance improvement.
   (2) For purposes of paragraph (1), the percentage of the rate that
is linked to performance measures shall be established by the
director such that physicians, physician groups, podiatrists, and
nonphysician medical practitioners will be sufficiently reimbursed
for implementing performance measures, including continued
performance improvement.
   (b) The performance measures shall be developed by the department
in consultation with stakeholders, including, but not limited to,
representatives of patients, physicians, podiatrists, nonphysician
medical practitioners, managed care plans, payers, and other
appropriate stakeholders.
   (c) The department, in consultation with the stakeholders
identified in subdivision (b), shall develop a comprehensive list of
performance measures relying, in part, on existing quality and
performance measures endorsed by national organizations, such as the
Ambulatory Quality Alliance, the Hospital Quality Alliance, and the
National Quality Forum (NQF).
   (d) At a minimum, all of the following performance measures shall
be used in determining the appropriate percentage rate increases:
   (1) Reporting of health care outcomes, including the cost of that
health care.
   (2) Improvements in health care efficiency.
   (3) Improvements in health care safety.
   (4) The efficient exchange of health information data through
technology.
   (5) The quality assurance requirements set forth in Section
1300.70 of Title 28 of the California Code of Regulations.
   (6) Efforts to promote healthy behaviors among Medi-Cal
beneficiaries pursuant to the Healthy Incentives and Rewards Program
described in Section 14132.105.
   (7) The extent to which purchasers, payers, providers, and
consumers are able to monitor the quality and cost of health care
utilizing public reporting information published by the Office of the
Patient Advocate.
   (8) The extent to which physicians, physician groups, podiatrists,
and nonphysician medical practitioners that provide services to
Medi-Cal beneficiaries on a fee-for-service basis implement
activities, such as telemedicine, electronic prescribing and the
electronic exchange of health information among various payers and
providers for the purpose of attaining health care safety and quality
improvements, informed clinical care decisions, the increased use of
interoperable platforms for the exchange of relevant health care
data, and more accurate and timely diagnosis and treatment.
   (9) Compliance with the federal Health Insurance Portability and
Accountability Act (HIPAA) (42 U.S.C. Sec. 300gg).
   (e) The department shall consult with stakeholders, including, but
not limited to, representatives of patients, physicians, managed
care plans, payers, and other appropriate stakeholders, to determine
the means to measure and document implementation by each physician,
physician group, podiatrist, and nonphysician medical practitioner of
the performance measures developed pursuant to subdivisions (c) and
(d).
   (f) The department may exempt classes of physicians, physician
groups, podiatrists, and nonphysician medical practitioners and
specific services from this section, if necessary to comply with the
requirements of federal law or regulations.
   (g) The department may file one or more state plan amendments to
implement this section.
   (h) The department shall seek necessary federal approvals for
implementation of this section. The department shall implement this
section only in a manner that is consistent with federal Medicaid law
and regulations. This section shall be implemented only to the
extent that federal approval is obtained and federal financial
participation is available.
   (i) The department shall implement this section only to the extent
that state funds are appropriated for the nonfederal share of the
rate increases provided under this section. 
   SEC. 88.    Article 7 (commencing with Section
14199.10) is added to Chap   ter 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 program established pursuant to Part 6.45
(commencing with Section 12699.201) of Division 2 of the Insurance
Code, 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 250
percent of the federal poverty level who are not otherwise eligible
for full-scope benefits, including benchmark benefits, with no share
of cost. Revenues in the California Health Trust Fund created
pursuant to Section 12699.215 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. 89.    (a) In order to achieve the purposes of
this act, the Director of Health Care Services, after consultation
with the Department of Finance, may utilize either state plan
amendments or waivers, or combination thereof, as necessary to
implement this act, to maximize the availability of federal financial
participation, and to maximize the number of persons for whom that
federal financial participation is available to cover the cost of
health care services.  
   (b) The flexibility authorized by this act shall include
modification of the requirements, standards, and methodologies for
expansion categories or populations created by this act in order to
maximize the availability of federal financial participation. When
exercising this flexibility, the State Department of Health Care
Services shall not make changes that would do any of the following:
 
   (1) Make otherwise eligible individuals ineligible for health
coverage under the Medi-Cal program and the Healthy Families Program.
 
   (2) Increase cost-sharing amounts beyond levels established in
this act.  
   (3) Reduce benefits below those provided for in this act. 

   (4) Otherwise disadvantage applicants or recipients in a way not
contemplated by this act.  
   (c) The department shall take all reasonable steps necessary to
maximize federal financial participation and to support federal
claiming in the implementation of this act.  
   (d) It is the intent of the Legislature that the provisions of
this act shall be implemented  simultaneously to the extent possible
in order to harmonize and best effectuate the purposes and intent of
this act.  
   (e) The director shall notify the Chair of the Joint Legislative
Budget Committee in any case when it is necessary to exercise the
flexibility provided under this section. This notification shall be
provided 30 days prior to exercising that flexibility. 
   SEC. 90.    It is the intent of the Legislature that
provisions of this act shall be financed by contributions from
employers; individuals; federal, state, and local governments; and
health care providers. Specifically financial support shall include:
 
   (a) Federal financial participation through the federal Medicaid
and S-CHIP programs.  
   (b) Revenue from counties, based on the approach identified in
Section 14155 of the Welfare and Institutions Code, to support the
cost of enrolling persons otherwise entitled to county-funded care.
 
   (c) Fees paid by acute care hospitals at a rate of 4 percent of
net patient revenues.  
   (d) Fees paid by employers not expending an equivalent amount for
health care services at a rate ranging from 0 to 4 percent of total
payroll, based on social security wages and excluding any gratuity as
defined in Section 350 of the Labor Code. The fee level shall vary
based on each employer's size. Employers with a total annual payroll
up to one hundred thousand dollars ($100,000) shall be exempt from
payment of this fee. Employers with a total annual payroll of one
hundred thousand dollars ($100,000) to two hundred thousand dollars
($200,000), inclusive, shall pay a fee of 2 percent of their total
annual payroll, and employers with a total annual payroll of more
than two hundred thousand dollars ($200,000) shall pay a fee of 4
percent of their total annual payroll.  
   (e) Premium contributions from currently offering employers when
employees, eligible for employer-based coverage, choose to enroll in
Medi-Cal or the Health Care Security and Cost Reduction Program.
 
   (f) Premium payments for individuals enrolled in publicly
subsidized coverage and coverage purchased in the individual market.
 
   (g) Additional public funds obtained through licensing the State
Lottery.  
   (h) Other state funds made available through savings generated
through reduced demand for existing health care programs. 
   SEC. 91.    (a) Notwithstanding any other provision
of this act, the implementation of the provisions of this act other
than this section, including, but not limited to, the expansion of
eligibility for publicly funded or subsidized health care coverage,
the increase in the Medi-Cal program's provider rates, the
requirements imposed on the offering and sale of health plan
contracts or health insurance policies in the state, and the
requirement that individuals enroll in and maintain health care
coverage, shall be contingent on a finding by the Director of Finance
under subdivision (b) that the financial resources necessary to
implement those provisions are available.  
   (b) Except as otherwise provided in subdivision (d), this act
shall become operative upon the date that the Director of Finance
files a finding with the Secretary of State that all of the following
circumstances exist:  
   (1) Based on reasonable financial projections, sufficient state
resources will exist to implement the act. This determination shall
be based on the projected amounts of revenue that will be available
to support the act and the projected costs required by the act. These
projections shall consider the sufficiency of resources that will be
available during the first three years of operation under the act.
 
   (2) The required federal approvals for program changes under the
act have been obtained or can reasonably be expected to be obtained
by the time those programs are implemented.  
   (3) Required federal resources will be available to implement the
act based on the anticipated schedule of review and approval of state
plan amendments and waivers applicable to the act.  
   (c) At least 90 days prior to filing the finding with the
Secretary of State, the Director of Finance shall transmit the
finding described in subdivision (b) to the Chief Clerk of the
Assembly, the Secretary of the Senate, and the chairs of the
appropriate committees of the Legislature.  
   (d) If any operative date specified in this act is later than the
date of the filing of the finding described in subdivision (b), that
later date shall apply.  
   (e) Nothing in this section shall be construed to prevent the
appropriation of funds for the support of the activities necessary to
prepare for the implementation of this act prior to the filing of
the finding described in subdivision (b). 
   SEC. 92.    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.  
  SECTION 1.    It is the intent of the Legislature
to enact comprehensive health care reform.