BILL NUMBER: AB 2470 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 17, 2010
AMENDED IN SENATE JUNE 16, 2010
INTRODUCED BY Assembly Member De La Torre
FEBRUARY 19, 2010
An act to add Sections 1389.9, 1389.10, 1389.11, 1389.13,
1389.14, 1389.15, 1389.16, 1389.17, 1389.18, 1389.19, 1389.20,
1389.22, 1389.23, and 1389.24 to the Health and Safety Code, and to
add Sections 10384.12, 10384.14, 10384.16, 10384.18, 10384.2,
10384.22, 10384.24, 10384.26, 10384.28, 10384.29, 10384.3, 10384.32,
10384.34, and 10396 to, the Insurance Code, relating to health care
coverage, and declaring the urgency thereof, to take effect
immediately. An act to amend Sections 1365, 1367.15,
1389.21, and 1389.3 of, and to repeal Sections 1357.11, 1357.53, and
1357.54 of, the Health and Safety Code, and to amend Sections
10176.10, 10273.5, 10384, and 10384.17 of, to repeal Sections 10273.6
and 10713 of, and to repeal and add Section 10273.4 of, the
Insurance Code, relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 2470, as amended, De La Torre. Individual health care
coverage. Health care coverage: cancellation:
rescission.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and regulation of health care service
plans by the Department of Managed Health Care, and makes a willful
violation of its provisions a crime. Existing law provides for the
regulation of health insurers by the Department of Insurance.
Existing law prohibits the Director of the Department of
Managed Health Care and the Insurance Commissioner from approving a
health care service plan contract or health insurance policy without
a finding that the application for the contract or policy conforms to
specified requirements. Existing law prohibits the cancellation or
nonrenewal of an enrollment or subscription by a health care service
plan except in specified circumstances, including failure to pay the
charge for the coverage, fraud or deception in the use of services or
facilities, or other good cause as agreed upon in the contract.
Existing law prohibits the cancellation or
nonrenewal of individual or group health benefit plans by
a health care service plan or a health insurer except in
specified circumstances, including for nonpayment of premiums or for
fraud or intentional misrepresentation of
material fact , as specified, and gives an enrollee
of a health care service plan contract a right to appeal a
cancellation or nonrenewal to the Director of the Department of
Managed Health Care . Existing law prohibits a plan
or insurer from engaging in postclaims underwriting, as defined, and
from rescinding an individual contract or policy for any reason, or
canceling the contract or policy due to misrepresentation, as
specified, after 24 months following issuance of the contract or
policy .
Existing law subjects health care service plans to various fines
and administrative penalties for failing to comply with specified
provisions of the act and requires that certain fines and
administrative penalties be deposited in the Managed Care
Administrative Fines and Penalties Fund. Under existing law, the
Managed Risk Medical Insurance Board manages the California Major
Risk Medical Insurance Program (MRMIP) to provide health care
coverage to eligible persons who have been rejected for coverage by
at least one private health plan. Existing law creates the Major Risk
Medical Insurance Fund, and continuously appropriates the fund to
the board for purposes of the program.
This bill would make that 24-month limit apply to all health
care service plan contracts and health insurance policies and would
consolidate various cancellation and nonrenewal provisions. The bill
would also prohibit a plan or insurer from canceling
or rescinding an individual health care service plan
contract or individual health insurance policy because of
misrepresentation unless specified conditions are met and would
require that plan or insurer decisions to cancel or rescind pursuant
to that provision be reviewed by an independent review process that
the bill would establish in the Department of Managed Health Care and
the Department of Insurance commencing March 31, 2011. The bill
would require plans and insurers to provide specified notices to
subscribers, enrollees, policyholders, and insureds concerning
potential rescissions or cancellations and the independent review
process and would also require a plan or insurer to annually report
to the department the total number of individual health care service
plan contracts or individual health insurance policies issued,
canceled, or rescinded pursuant to these provisions during the
preceding calendar year. The bill would require affected plans and
insurers, as specified, to pay the cost of the independent review
system pursuant to an assessment fee system established by the
Director of Managed Health Care and the Insurance Commissioner. The
bill would also impose administrative penalties upon a plan or
insurer that engages in any conduct that has the effect of prolonging
an independent review process or that fails to implement an
independent review process decision. The bill would require that
penalties collected from plans be deposited into the Managed Care
Administrative Fines and Penalties Fund, and that penalties collected
from insurers be deposited into the Major Risk Medical Insurance
Fund for purposes of MRMIP, subject to appropriation by the
Legislature. The bill would exempt certain types of plans and
policies from the bill's requirements and would enact related
provisions. , or limiting any of the
provisions of the contract or policy, once an enrollee or insured is
covered under the contract or policy unless the plan or insurer can
demonstrate that the enrollee or insured has performed an act or
practice constituting fraud or made an intentional misrepresentation
of material fact as prohibited by the terms of the contract or
policy. The bill would require a plan or insurer to send a notice to
the enrollee or subscriber or policyholder or insured at least 30
days prior to the effective date of the rescission containing
specified information. The bill would modify the cancellation and
nonrenewal appeal rights that apply to health care service plans and
would make those appeal rights apply to health insurers and
rescissions, as specified. The bill would make other related changes.
Because this bill would impose additional requirements on health
care service plans, the willful violation of which would be a crime,
it would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3 majority . Appropriation:
no. Fiscal committee: yes. State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1357.11 of the
Health and Safety Code is repealed.
1357.11. All health care service plan contracts offered to a
small employer shall be renewable with respect to all eligible
employees or dependents at the option of the contractholder or small
employer except:
(a) For nonpayment of the required premiums by the contractholder
or small employer.
(b) For fraud or misrepresentation by the contractholder or small
employer or, with respect to coverage of individuals, the individuals
or their representatives.
(c) For noncompliance with a plan's participation or employer
contribution requirements at the time of renewal.
(d) When the plan ceases to provide or arrange for the provision
of health care services for new small employer health care service
plan contracts in this state; provided, however, that the following
conditions are satisfied:
(1) Notice of the decision to cease new or existing small employer
health benefits plans in this state is provided to the director and
to either the contractholder or small employer at least 180 days
prior to the discontinuation of the coverage.
(2) Small employer health care service plan contracts subject to
this chapter shall not be canceled for 180 days after the date of the
notice required under paragraph (1) and for that business of a plan
which remains in force, any plan that ceases to offer for sale new
small employer health care service plan contracts shall continue to
be governed by this article with respect to business conducted under
this article.
(3) Except as authorized under subdivision (d) of Section 1357.09
and Section 1357.10, a plan that ceases to write new small employer
business in this state after the effective date of this article shall
be prohibited from offering for sale new small employer health care
service plan contracts in this state for a period of five years from
the date of notice to the director.
(e) When the plan withdraws a health care service plan contract
from the small employer market; provided, the plan notifies all
affected contractholders or small employers and the director at least
90 days prior to the discontinuation of those contracts, and the
plan makes available to the small employer all plan contracts that it
makes available to new small employer business; and provided, that
the premium for the new plan contract complies with the renewal
increase requirements set forth in Section 1357.12.
SEC. 2. Section 1357.53 of the Health
and Safety Code is repealed.
1357.53. All group health benefit plans shall be renewable with
respect to the contractholder or employer except as follows:
(a) For nonpayment of the required premiums by the contractholder
or employer.
(b) For fraud or other intentional misrepresentation of material
fact by the contractholder or employer.
(c) For noncompliance with a material plan contract provision.
(d) If the plan ceases to provide or arrange for the provision of
health care services for new health benefit plans in the state;
provided, however, that the following conditions are satisfied:
(1) Notice of the decision to cease new or existing group health
benefit plans in the state shall be provided to the director and to
either the contractholder or employer at least 180 days prior to
discontinuation of this coverage.
(2) Group 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 group health benefit plans shall continue to be
governed by this section with respect to business conducted under
this section.
(3) Except as authorized under subdivision (d) of Section 1357.09
and Section 1357.10, a plan that ceases to write new group health
benefit plans in this state after the effective date of this section
shall be prohibited from offering for sale group 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 a group health benefit plan from the
market; provided, that the plan notifies all affected contractholders
or employers and the director at least 90 days prior to the
discontinuation of these plans, and that the plan makes available to
the employer all health benefit plans that it makes available to new
employer business without regard to the claims experience or
health-related factors of enrollees.
SEC. 3. Section 1357.54 of the Health
and Safety Code is repealed.
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.
SEC. 4. Section 1365 of the Health and
Safety Code is amended to read:
1365. (a) An enrollment or a subscription may
shall not be canceled or not renewed except for the
following reasons :
(1) Failure to pay the charge for such coverage
For nonpayment of the required premiums by the individual or
group subscriber 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.
(2) The plan demonstrates fraud or an intentional
misrepresentation of material fact under the terms of the health care
service plan contract by the individual or group subscriber.
(3) In the case of an individual health care service plan
contract, the individual subscriber no longer resides, lives, or
works in the plan's service area, but only if the coverage is
terminated uniformly without regard to any health status-related
factor of covered individuals.
(4) In the case of a group health care service plan contract,
violation of a material contract provision relating to employer
contribution or group participation rates by the subscriber. This
paragraph shall become operative on January 1, 2014.
(5) If the plan ceases to provide or arrange for the provision of
health care services for new health care service plan contracts in
the individual or group market, or all markets, in this state,
provided, however, that the following conditions are satisfied:
(A) Notice of the decision to cease new or existing health care
service plan contracts in the state is provided to the director and
to the individual or group subscriber, and the enrollees covered
under those contracts, at least 180 days prior to discontinuation of
those contracts.
(B) Health care service 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 plan that remains in force, any plan that
ceases to offer for sale new health care service plan contracts
shall continue to be governed by this section with respect to
business conducted under this section.
(C) Except as authorized under subdivision (b) of Section 1357.09
and Section 1357.10, a plan that ceases to write new health care
service plan contracts in the individual or group market, or all
markets, in this state shall be prohibited from offering for sale
health care service plan contracts in that market or markets in this
state for a period of five years from the date of the discontinuation
of the last coverage not so renewed.
(6) If the plan withdraws a health care service plan contract from
the market, provided that all of the following conditions are
satisfied:
(A) The plan notifies all affected subscribers and enrollees and
the director at least 90 days prior to the discontinuation of those
contracts.
(B) The plan makes available to the individual or group subscriber
all health care service plan contracts that it makes available to
new individual or group business, respectively.
(C) In exercising the option to discontinue a health care service
plan contract under this paragraph and in offering the option of
coverage under subparagraph (B), the plan acts uniformly without
regard to the claims experience of the individual or group
subscriber, or any health-status related factor relating to enrollees
or potential enrollees.
(D) For small employer health care service plan contracts offered
under Article 3.1 (commencing with Section 1357), the premium for the
new plan contract complies with the renewal increase requirements
set forth in Section 1357.12.
(b) (1) An enrollee or subscriber who
alleges that an enrollment or subscription has been or will be
improperly canceled , rescinded, 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
(2) The director shall review a request
under paragraph (1) within seven days. If the director
determines that a proper complaint exists under the
provisions of this section , the director shall
immediately notify the plan and the enrollee or subscriber
who requested the review . Within 15 days after receipt of
such that notice, the plan shall either
request a hearing or reinstate the enrollee or subscriber.
If,
(3) If the plan requests a hearing under paragraph (2), the
director shall hold the hearing within 15 days of the request and
shall give the plan and the enrollee or subscriber sufficient notice
of the date and location of the hearing. The enrollee or subscriber
and his or her representative may attend and participate in the
hearing.
(4) If, after the
hearing under paragraph (3) , the director determines that
the cancellation , rescission, or failure to renew is
contrary to subdivision (a) existing law
, the director shall immediately order the plan to
reinstate the enrollee or subscriber. A
(5) A reinstatement pursuant to
this subdivision shall be immediate and retroactive to the
time of cancellation , rescission, 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 , rescission, or nonrenewal to and
including the date of reinstatement. The amount of expenses
incurred that the plan shall reimburse to the enrollee or subscriber
shall be determined by the director using reasonable documentation
submitted by the enrollee or subscriber.
(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 the
plan, except that each plan shall, if directed to do so by the
director, exercise its authority, if any, under any such
those preexisting contracts to conform them to
the provisions of subdivision (a) existing
law .
SEC. 5. Section 1367.15 of the Health
and Safety Code is amended to read:
1367.15. (a) This section shall apply to individual health care
service plan contracts and plan contracts sold to employer groups
with fewer than two eligible employees as defined in subdivision (b)
of Section 1357 covering hospital, medical, or surgical expenses,
which is issued, amended, delivered, or renewed on or after January
1, 1994.
(b) As used in this section, "block of business" means individual
plan contracts or plan contracts sold to employer groups with fewer
than two eligible employees as defined in subdivision (b) of Section
1357, with distinct benefits, services, and terms. A "closed block of
business" means a block of business for which a health care service
plan ceases to actively offer or sell new plan contracts.
(c) No block of business shall be closed by a health care service
plan unless (1) the plan permits an enrollee to receive health care
services from any block of business that is not closed and
which that provides comparable benefits,
services, and terms, with no additional underwriting requirement, or
(2) the plan pools the experience of the closed block of business
with all appropriate blocks of business that are not closed for the
purpose of determining the premium rate of any plan contract within
the closed block, with no rate penalty or surcharge beyond that which
reflects the experience of the combined pool.
(d) A block of business shall be presumed closed if either of the
following is applicable:
(1) There has been an overall reduction in that block of 12
percent in the number of in force plan contracts for a period of 12
months.
(2) That block has less than 1,000 enrollees in this state. This
presumption shall not apply to a block of business initiated within
the previous 24 months, but notification of that block shall be
provided to the director pursuant to subdivision (e).
The fact that a block of business does not meet one of the
presumptions set forth in this subdivision shall not preclude a
determination that it is closed as defined in subdivision (b).
(e) A health care service plan shall notify the director in
writing within 30 days of its decision to close a block of business
or, in the absence of an actual decision to close a block of
business, within 30 days of its determination that a block of
business is within the presumption set forth in subdivision (d). When
the plan decides to close a block, the written notice shall fully
disclose all information necessary to demonstrate compliance with the
requirements of subdivision (c). When the plan determines that a
block is within the presumption, the written notice shall fully
disclose all information necessary to demonstrate that the
presumption is applicable. In the case of either notice, the plan
shall provide additional information within 15 days after any request
of the director.
(f) A health care service plan shall preserve for a period of not
less than five years in an identified location and readily accessible
for review by the director all books and records relating to any
action taken by a plan pursuant to subdivision (c).
(g) No health care service plan shall offer or sell any contract,
or provide misleading information about the active or closed status
of a block of business, for the purpose of evading this section.
(h) A health care service plan shall bring any blocks of business
closed prior to the effective date of this section into compliance
with the terms of this section no later than December 31, 1994.
(i) This section shall not apply to health care service plan
contracts providing small employer health coverage to individuals or
employer groups with fewer than two eligible employees if that
coverage is provided pursuant to Article 3.1 (commencing with Section
1357) and, with specific reference to coverage for individuals or
employer groups with fewer than two eligible employees, is approved
by the director pursuant to Section 1357.15, provided a plan electing
to sell coverage pursuant to this subdivision shall do so until such
time as the plan ceases to market coverage to small employers and
complies with paragraph (5) of subdivision (c)
(a) of Section 1357.11
1365 .
(j) This section shall not apply to coverage of Medicare services
pursuant to contracts with the United States government, Medicare
supplement, dental, vision, or conversion coverage.
SEC. 6. Section 1389.21 of the Health
and Safety Code is amended to read:
1389.21. (a) A health care service plan shall not rescind a
plan contract, or limit any provisions of a plan contract, once an
enrollee is covered under the contract unless the plan can
demonstrate that the enrollee has performed an act or practice
constituting fraud or made an intentional misrepresentation of
material fact as prohibited by the terms of the contract.
(b) If a plan intends to rescind a plan contract pursuant to
subdivision (a), the plan shall send a notice to the enrollee or
subscriber via regular certified mail at least 30 days prior to the
effective date of the rescission explaining the reasons for the
intended rescission and notifying the enrollee or subscriber of his
or her right to appeal that decision to the director pursuant to
subdivision (b) of Section 1365.
(c) Notwithstanding subdivision (a),
Section 1365 or any other provision of law, after 24 months
following the issuance of an individual a
health care service plan contract, a plan shall not rescind the
plan contract for any reason, and shall not cancel the plan
contract, limit any of the provisions of the plan contract, or raise
premiums on the plan contract due to any omissions,
misrepresentations, or inaccuracies in the application form, whether
willful or not. Nothing in this section
subdivision shall be construed to alter existing law that
otherwise applies to a health care service plan within the first 24
months following the issuance of an individual
a health care service plan contract.
SEC. 7. Section 1389.3 of the Health
and Safety Code is amended to read:
1389.3. No health care service plan shall engage in the practice
of postclaims underwriting. For purposes of this section, "postclaims
underwriting" means the rescinding, canceling, or limiting of a plan
contract due to the plan's failure to complete medical underwriting
and resolve all reasonable questions arising from written information
submitted on or with an application before issuing the plan
contract. This section shall not limit a plan's remedies
upon a showing of willful misrepresentation described
in subdivision (a) of Section 1389.21 or paragraph (2) of subdivision
(a) of Section 1365 .
SEC. 8. Section 10176.10 of the
Insurance Code is amended to read:
10176.10. (a) On or after January 1, 1994, no disability insurer
issuing policies covering hospital, surgical, or medical expenses
delivered or renewed in this state or certificates of group
disability insurance delivered or renewed in this state pursuant to a
master group policy delivered or renewed in another state, to
individuals, or to employer groups with fewer than two eligible
employees, as defined in subdivision (g) of Section 10700, shall
close a block of business without complying with this section.
(b) As used in this section, "block of business" means individual,
group, or blanket disability insurance contracts covering hospital,
medical, or surgical expenses of a particular policy form that has
distinct benefits or marketing methods. "Closed block of business"
means a block of business for which an insurer ceases to actively
market and sell new contracts under a particular policy form in this
state.
(c) Notwithstanding subdivision (b), a block of business shall be
presumed closed if either of the following applies:
(1) There has been an overall reduction of 12 percent in the
number of in force policies of a particular form for a period of 12
months.
(2) The block has less than 2,000 insured nationally or 1,000
insureds in California. This presumption shall not apply to a block
of business initiated within the previous 24 months, but notification
of that block shall be provided to the commissioner. The
notification shall not be subject to the approval required by
subdivision (d).
An insurer may present evidence for consideration by the
commissioner that the presumption in the particular case is
incorrect. Should the determination be made that the block is closed,
the insurer shall be given those remedy options contained in
subdivision (d). The fact that a block of business does not meet one
of the presumptions set forth in this subdivision shall not preclude
a determination that it is closed as defined in subdivision (b).
(d) An insurer shall notify the commissioner within 30 days of its
decision to close a block or, in the absence of an actual decision
to close a block of business, within 30 days of its determination
that the block is within the presumptions set forth in subdivision
(c). The commissioner may notify an insurer that he or she has
determined that the presumptions contained in subdivision (c) apply
to a block. No insurer providing disability insurance covering
hospital, medical, or surgical expenses shall close a policy form or
group certificate without notification to the commissioner. That
notification shall include a plan to permit an insured to move to any
open block, providing comparable benefits with no additional
underwriting requirement or, alternatively, the insurer shall be
required to pool the closed block's experience with all appropriate
open forms for purposes of renewal rate determination, with no rate
penalty or surcharge, beyond that which reflects the experience of
the combined pool. When the insurer chooses to pool, the notice shall
include the insurer's plan for pooling the closed block's
experience. The insurer may implement the pooling plan if 30 days
expire after the submission is filed without written notice from the
commissioner specifying the reasons for his or her opinion that the
pooling plan does not comply with the requirements of this section,
or, prior to that time, if the commissioner provides the insurer
written notice that the pooling plan complies with the requirements
of this section.
The approval shall be based upon consideration of the accumulative
recent and expected future experience of the closed form and those
with which the closed form is to be combined.
(e) No insurer shall offer or sell any form nor provide misleading
information about the active or closed status of its business for
the purpose of evading this section.
(f) An insurer shall bring any blocks of business closed prior to
the effective date of this section into compliance with the terms of
this section no later than December 31, 1994.
(g) This section shall not apply to small employer carriers
providing small employer health insurance to individuals or employer
groups with fewer than two eligible employees if that coverage is
provided pursuant to Chapter 14 (commencing with Section 10700) of
Part 2 of Division 2, and with specific reference to coverage for
individuals or employer groups with fewer than two eligible
employees, is approved by the commissioner pursuant to Section 10705,
provided a carrier electing to sell coverage pursuant to this
subdivision shall continue to do so until such time as the carrier
ceases to market coverage to small employers and complies with
paragraph (5) of subdivision (c) (a)
of Section 10713
10273.4 .
(h) This section shall not apply to accident only coverage,
coverage of Medicare services pursuant to contracts with the United
States government, Medicare supplement coverage, long-term care
insurance, dental, vision, or conversion coverage, coverage issued as
a supplement to liability insurance, or automobile medical payment
insurance.
SEC. 9. Section 10273.4 of the
Insurance Code is repealed.
10273.4. All disability insurers writing, issuing, or
administering group health benefit plans shall make all of these
health benefit plans renewable with respect to the policyholder,
contractholder, or employer except in case of the following:
(a) Nonpayment of the required premiums by the policyholder,
contractholder, or employer.
(b) Fraud or other intentional misrepresentation by the
policyholder, contractholder, or employer.
(c) Noncompliance with a material health benefit plan contract
provision.
(d) The insurer ceases to provide or arrange for the provision of
health care services for new group health benefit plans in this
state, provided that the following conditions are satisfied:
(1) Notice of the decision to cease writing, issuing, or
administering new or existing group health benefit plans in this
state is provided to the commissioner and to either the policyholder,
contractholder, or employer at least 180 days prior to
discontinuation of that coverage.
(2) Group 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 disability insurer
that ceases to write, issue, or administer new group health benefit
plans shall continue to be governed by this section with respect to
business conducted under this section.
(3) Except as provided under subdivision (h) of Section 10705, or
unless the commissioner had made a determination pursuant to Section
10712, a disability insurer that ceases to write, issue, or
administer new group health benefit plans in this state after the
effective date of this section shall be prohibited from writing,
issuing, or administering new group health benefit plans to employers
in this state for a period of five years from the date of notice to
the commissioner.
(e) The disability insurer withdraws a group health benefit plan
from the market; provided, that the plan notifies all affected
contractholders, policyholders, or employers and the commissioner at
least 90 days prior to the discontinuation of the health benefit
plans, and that the insurer makes available to the contractholder,
policyholder, or employer all health benefit plans that it makes
available to new employer business without regard to the claims
experience of health-related factors of insureds or individuals who
may become eligible for the coverage.
(f) For the purposes of this section, "health benefit plan" shall
have the same meaning as in subdivision (a) of Section 10198.6 and
Section 10198.61.
(g) For the purposes of this section, "eligible employee" shall
have the same meaning as in Section 10700, except that it applies to
all health benefit plans issued to employer groups of two or more
employees.
SEC. 10. Section 10273.4 is added to the
Insurance Code , to read:
10273.4. (a) A health insurance policy shall not be canceled or
not renewed except for the following reasons:
(1) Nonpayment of the required premiums by the individual or group
policyholder if the policyholder has been duly notified and billed
for the charge and at least 15 days has elapsed since the date of
notification.
(2) The insurer demonstrates fraud or an intentional
misrepresentation of material fact under the terms of the health
insurance policy by the individual or group policyholder.
(3) In the case of an individual health insurance policy that
offers coverage through a network, the individual policyholder no
longer resides, lives, or works in the network service area, but only
if the coverage is terminated uniformly without regard to any health
status-related factor of covered individuals.
(4) In the case of a group health insurance policy, violation of a
material policy provision relating to employer contribution or group
participating rates by the policyholder. This paragraph shall become
operative on January 1, 2014.
(5) If the insurer ceases to provide new health insurance policies
in the individual or group market, or all markets, in this state,
provided, however, that the following conditions are satisfied:
(A) Notice of the decision to cease new or existing health
insurance policies in the state is provided to the commissioner and
to the individual or group policyholder, and the insureds covered
under those policies, at least 180 days prior to discontinuation of
those policies.
(B) 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 an insurer that remains in force, any insurer that
ceases to offer for sale new insurance policies shall continue to be
governed by this section with respect to business conducted under
this section.
(C) Except as authorized under subdivision (d) of Section 10711
and Section 10712, an insurer that ceases to write new health
insurance policies in the individual or group market, or all markets,
in this state shall be prohibited from offering for sale health
insurance policies in that market or markets in this state for a
period of five years from the date of the discontinuation of the last
coverage not so renewed.
(6) If the insurer withdraws a health insurance policy from the
market, provided that all of the following conditions are satisfied:
(A) The insurer notifies all affected policyholders and insureds
and the commissioner at least 90 days prior to the discontinuation of
those policies.
(B) The insurer makes available to the individual or group
policyholder all health insurance policies that it makes available to
new individual or group business, respectively.
(C) In exercising the option to discontinue a health insurance
policy under this paragraph and in offering the option of coverage
under subparagraph (B), the insurer acts uniformly without regard to
the claims experience of the individual or group policyholder, or any
health-status related factor relating to insureds or potential
insureds.
(D) For small employer health insurance policies offered under
Chapter 8 (commencing with Section 10700), the premium for the new
insurance policies complies with the renewal increase requirements
set forth in Section 10714.
(b) (1) A policyholder or insured who alleges that a policy has
been or will be improperly canceled, rescinded, or not renewed may
request a review by the commissioner.
(2) The commissioner shall review a request under paragraph (1)
within seven days. If the commissioner determines that a proper
complaint exists, the commissioner shall immediately notify the
insurer and the policyholder or insured who requested the review.
Within 15 days after receipt of that notice, the insurer shall either
request a hearing or reinstate the policyholder or insured.
(3) If the insurer requests a hearing under paragraph (2), the
commissioner shall hold the hearing within 15 days of the request and
shall give the insurer and the policyholder or insured sufficient
notice of the date and location of the hearing. The policyholder or
insured and his or her representative may attend and participate in
the hearing.
(4) If, after the hearing under paragraph (3), the commissioner
determines that the cancellation, rescission, or failure to renew is
contrary to existing law, the commissioner shall immediately order
the insurer to reinstate the policyholder or insured.
(5) A reinstatement pursuant to this subdivision shall be
immediate and retroactive to the time of cancellation, rescission, or
failure to renew and the insurer shall be liable for the expenses
incurred by the policyholder or insured for covered health care
services from the date of cancellation, rescission, or nonrenewal to
and including the date of reinstatement. The amount of expenses
incurred that the insurer shall reimburse to the policyholder or
insured shall be determined by the commissioner using reasonable
documentation submitted by the policyholder or insured.
(c) This section shall not abrogate any preexisting policies
entered into prior to the effective date of this part between a
policyholder or insured and a health insurer including, but not
limited to, the financial liability of the insurer, except that each
insurer shall, if directed to do so by the commissioner, exercise its
authority, if any, under those preexisting policies to conform them
to the provisions of existing law.
SEC. 11. Section 10273.5 of the
Insurance Code is amended to read:
10273.5. No person shall cause or permit to be issued, circulated
or used any representation that a policy defined
described in Section 10273.3 is "non-can," noncancelable
(not cancelable) or noncancelable and guaranteed renewable.
No person shall cause or permit to be issued, circulated or used
any representation concerning the right to continue a policy such as
is defined in Section 10273.3 unless such representation contains a
declaration of the terms under which the insurer has reserved the
right to change the premium in a manner which shall not minimize or
obscure the same.
Any person knowingly violating any provision of this section shall
be subject to the penalties provided for misrepresentation by this
code.
SEC. 12. Section 10273.6 of the
Insurance Code is repealed.
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.
SEC. 13. Section 10384 of the Insurance
Code is amended to read:
10384. No insurer issuing or providing any policy of disability
insurance covering hospital, medical, or surgical expenses shall
engage in the practice of postclaims underwriting. For purposes of
this section, "postclaims underwriting" means the rescinding,
canceling, or limiting of a policy or certificate due to the insurer'
s failure to complete medical underwriting and resolve all reasonable
questions arising from written information submitted on or with an
application before issuing the policy or certificate. This
section shall not limit an insurer's remedies described in
subdivision (a) of Section 10384.17 or paragraph (2) of subdivision
(b) of Section 10273.4.
SEC. 14. Section 10384.17 of the
Insurance Code is amended to read:
10384.17. (a) A health insurer shall not rescind a health
insurance policy, or limit any provisions of a health insurance
policy, once an insured is covered under the policy unless the
insurer can demonstrate that the insured has performed an act or
practice constituting fraud or made an intentional misrepresentation
of material fact as prohibited by the terms of the policy.
(b) If a health insurer intends to rescind a health insurance
policy pursuant to subdivision (a), the insurer shall send a notice
to the policyholder or insured via regular certified mail at least 30
days prior to the effective date of the rescission explaining the
reasons for the intended rescission and notifying the policyholder or
insured of his or her right to appeal that decision to the
commissioner pursuant to subdivision (b) of Section 10273.4.
(c) Notwithstanding subdivision (a) of
Section 10273.4 or any other provision of law, after 24 months
following the issuance of an individual a
health insurance policy, a health insurer shall not rescind the
policy for any reason, and shall not cancel the policy, limit any of
the provisions of the policy, or raise premiums on the policy due to
any omissions, misrepresentations, or inaccuracies in the
application form, whether willful or not. Nothing in this
section subdivision shall be construed to alter
existing law that otherwise applies to a health insurer within the
first 24 months following the issuance of an individual
a health insurance policy.
SEC. 15. Section 10713 of the Insurance
Code is repealed.
10713. All health benefit plans written, issued, or administered
by carriers on or after the effective date of this chapter, and all
health benefit plans in force on or after the effective date of this
chapter shall be renewable with respect to all eligible employees or
dependents at the option of the policyholder, contractholder, or
small employer except as follows:
(a) For nonpayment of the required premiums by the policyholder,
contractholder, or small employer.
(b) For fraud or misrepresentation by the policyholder,
contractholder, or small employer or, with respect to coverage of
individual enrollees, the enrollees or their representative.
(c) For noncompliance with a carrier's participation or employer
contribution requirements at the time of renewal.
(d) When the carrier ceases to write, issue, or administer new
small employer health benefit plans in this state, provided, however,
that the following conditions are satisfied:
(1) Notice of the decision to cease writing, issuing, or
administering new or existing small employer health benefits plans in
this state is provided to the commissioner, and to either the
policyholder, contractholder, or small employer at least 180 days
prior to the discontinuation of the coverage.
(2) Small employer health benefit plans subject to this chapter
shall not be canceled for 180 days after the date of the notice
required under paragraph (1). For that business of a carrier that
remains in force, any carrier that ceases to write, issue, or
administer new health benefit plans shall continue to be governed by
this chapter.
(3) Except in the case where a certification has been approved
pursuant to subdivision (h) of Section 10705 or the commissioner has
made a determination pursuant to subdivision (a) of Section 10712, a
carrier that ceases to write, issue, or administer new health benefit
plans to small employers in this state after the passage of this
chapter shall be prohibited from writing, issuing, or administering
new health benefit plans to small employers in this state for a
period of five years from the date of notice to the commissioner.
(e) When a carrier withdraws a benefit plan design from the small
employer market, provided that the carrier notifies all affected
policyholders, contractholders, or small employers and the
commissioner at least 90 days prior to the discontinuation of those
contracts, and that the carrier makes available to the small employer
all small employer benefit plan designs which it markets and
satisfies the requirements of paragraph (3) of subdivision (b) of
Section 10714.
SEC. 16. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution. All matter omitted in this version of
the bill appears in the bill as amended in the Senate, June 16, 2010.
(JR11)