BILL NUMBER: SB 57	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Aanestad

                        JANUARY 20, 2009

   An act to amend Sections 1399.805 and 1399.811 of, and to add and
repeal Sections 1356.2 and 1357.55 of, the Health and Safety Code, to
amend Sections 10901.3, 10901.9, 12718, 12725, 12727, and 12739 of,
to add Sections 12712.5 and 12715.5 to, to add and repeal Sections
10127.19, 10198.11, 12719, 12721.5, 12724, and 12737.5 of, and to add
and repeal Chapter 7.5 (commencing with Section 12738.1) of Part 6.5
of Division 2 of, the Insurance Code, relating to health care
coverage, and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 57, as introduced, Aanestad. California Major Risk Medical
Insurance Program: health care service plans: individual health care
coverage.
   (1) Existing law establishes the California Major Risk Medical
Insurance Program (MRMIP) that is administered by the Managed Risk
Medical Insurance Board (MRMIB) to provide major risk medical
coverage to residents, as defined, who, among other matters, have
been rejected for coverage by at least one private health plan.
Existing law authorizes MRMIB to provide that coverage through
participating health plans, including health insurers and health care
service plans, and authorizes MRMIB to provide or purchase stop-loss
coverage under which MRMIP and participating health plans share the
risk for health plan expenses that exceed plan rates.
   This bill would require that a person either be rejected for
coverage by at least 3 different health plans or have a qualified
medically uninsurable condition, as specified, in order to be
eligible for MRMIP and would also revise the definition of the term
"resident" for purposes of MRMIP eligibility, as specified. The bill
would require MRMIB to offer at least 4 different options for major
risk medical coverage, including at least one Health Savings
Account-compatible option, and would authorize MRMIB to subsidize the
Health Savings Account-compatible option, as specified. The bill
would also authorize MRMIB, until a specified date and if sufficient
funds are available, to participate in deductible and out-of-pocket
maximum reinsurance using specified products. The bill would require
MRMIB to release all program actuarial data for 2004 to 2007,
inclusive, to the Legislative Analyst's Office, as requested by that
office.
   Existing law specifies the minimum scope of benefits offered by
participating health plans in MRMIP and requires the exclusion of
benefits that exceed $75,000 in a calendar year or $750,000 in a
lifetime, as specified. Existing law requires MRMIB to establish
program contribution amounts for each category of risk for each
participating health plan. Under existing law, the risk categories
are based on age and geographic region.
   This bill would, until January 1, 2015, increase the annual
benefit limit to $150,000 and the lifetime benefit limit to
$1,000,000, and would require the board to adopt regulations
eliminating the annual benefit limit if sufficient funds are
available, as specified. The bill would authorize MRMIB, by
regulation, to develop additional risk categories based on morbid
obesity and tobacco use, as specified, and would also require MRMIB
to adopt regulations that allow participating health plans to
incorporate wellness programs, case management services, and disease
management services, and offer enrollee rewards based on health risk
reduction. The bill would require that those regulations remain in
effect until January 1, 2015.
   Existing law creates the Major Risk Medical Insurance Fund,
continuously appropriates the fund to MRMIB for purposes of MRMIP,
and requires specified moneys to be deposited annually in the fund
from the Cigarette and Tobacco Products Surtax Fund.
   This bill would increase the moneys to be deposited into the fund
from the Cigarette and Tobacco Products Surtax Fund by a specified
amount, thereby making an appropriation.
   (2) Existing law, the Knox-Keene Health Care Service Plan Act of
1975 (the Knox-Keene Act), provides for the licensure and regulation
of health care service plans by the Department of Managed Health Care
and makes a willful violation of the Knox-Keene Act a crime.
Existing law also provides for the regulation of health insurers by
the Department of Insurance.
   This bill would, commencing July 1, 2010, require each health care
service plan and health insurer to add a surcharge to each life
covered by an individual health plan contract or individual health
insurance policy, as specified, and would require the deposit of
those revenues in the Major Risk Medical Insurance Fund, a
continuously appropriated fund, thereby making an appropriation. The
bill would require the suspension of the assessment if state funds
appropriated to MRMIP are less than a certain amount. The bill would
require health care service plans and health insurers to report to
the Department of Managed Health Care or the Department of Insurance,
and MRMIB, the number of lives covered by the plan's or insurer's
individual health care service plan contracts or individual health
insurance policies annually, as specified. The bill would repeal
these provisions on January 1, 2015.
   Because a willful violation of these requirements by a health care
service plan would be a crime, the bill would impose a
state-mandated local program.
   Existing law prohibits health care service plan contracts and
health insurance policies from excluding coverage on the basis of a
preexisting condition provision for more than a specified period of
time.
   This bill would authorize MRMIB to create a rider pool consisting
of applicants with no more than 2 health conditions that made them
uninsurable in the private market, as specified. The bill would
authorize an individual health care service plan contract or
individual health insurance policy issued to one of the rider pool
members to temporarily or permanently exclude coverage for those
conditions. The bill would repeal these provisions on January 1,
2015.
   Existing law requires a health care service plan or a health
insurer offering individual plan contracts or individual insurance
policies to fairly and affirmatively offer, market, and sell certain
individual contracts and policies to all federally eligible defined
individuals, as defined, in each service area in which the plan or
insurer provides or arranges for the provision of health care
services. For those contracts and policies that offer services
through a preferred provider arrangement, existing law requires that
the premium not exceed the average premium paid by a similar
subscriber of MRMIP, as specified. For all other contracts and
policies, existing law requires that the premium not exceed 170% of
the standard premium charged to a similar individual, as specified.
   This bill would require that the premium for all contracts and
policies not exceed 170% of the standard premium charged to a similar
individual, as specified, regardless of whether services are offered
through a preferred provider arrangement, and would make related
changes.
   Because a willful violation of these requirements by a health care
service plan would be a crime, the bill would impose a
state-mandated local program.
   (3) This bill would result in a change in state taxes for the
purpose of increasing state revenues within the meaning of Section 3
of Article XIII A of the California Constitution, and thus would
require for passage the approval of 2/3 of the membership of each
house of the Legislature.
   (4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.


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

  SECTION 1.  Section 1356.2 is added to the Health and Safety Code,
to read:
   1356.2.  (a) A health care service plan providing coverage for
hospital, medical, or surgical benefits under an individual health
care service plan contract shall add a surcharge to each life covered
by an individual health care service plan contract pursuant to the
following schedule:
   (1) Beginning July 1, 2010, through June 30, 2011, the surcharge
shall be thirty-five cents ($0.35) per life, per month.
   (2) Beginning July 1, 2011, through June 30, 2012, the surcharge
shall be fifty cents ($0.50) per life, per month.
   (3) Beginning July 1, 2012, through June 30, 2013, the surcharge
shall be seventy cents ($0.70) per life, per month.
   (4) Beginning July 1, 2013, through June 30, 2014, the surcharge
shall be eighty-five cents ($0.85) per life, per month.
   (5) Beginning July 1, 2014, and thereafter, the surcharge shall be
one dollar ($1) per life, per month.
   (b) Any increase in the surcharge added pursuant to subdivision
(a) shall only be enacted by a statute passed by a two-thirds vote of
each house of the Legislature.
   (c) The surcharge added pursuant to subdivision (a) shall be
deposited in the Major Risk Medical Insurance Fund, created pursuant
to Section 12739 of the Insurance Code. Revenues derived from the
surcharge added pursuant to this section shall not be considered to
be state General Fund proceeds of taxes within the meaning of Article
XVI of the Constitution, as they are being held by the state in the
Major Risk Medical Insurance Fund as a trustee for the benefit of
individuals who are uninsurable on the health insurance market.
   (d) On or before May 15 of each year, beginning May 15, 2010, each
health care service plan shall report to the department and the
Managed Risk Medical Insurance Board the number of lives covered by
the plan's individual health care service plan contracts as of March
31 of that year. The surcharge provided for in this section may be
paid in two installments. The first installment shall be paid on or
before August 1 of each year, and the second installment shall be
paid on or before December 15 of each year.
   (e) If state funds appropriated to the Major Risk Medical
Insurance Program are less than forty million dollars ($40,000,000)
for any fiscal year, the surcharge described in subdivision (a) shall
be suspended for the subsequent fiscal year.
   (f) The surcharge described in subdivision (a) shall be excluded
from the computation of a plan's administrative expenses pursuant to
Section 1378 or regulations adopted in that regard.
   (g) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 2.  Section 1357.55 is added to the Health and Safety Code, to
read:
   1357.55.  (a) Notwithstanding Section 1357.51, an individual
health care service plan contract issued to a member of the rider
pool created pursuant to Section 12738.1 of the Insurance Code may
permanently or temporarily exclude coverage for the member's
qualifying condition or conditions, as identified in the
documentation described in subdivision (b) of Section 12738.1 of the
Insurance Code.
   (b) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 3.  Section 1399.805 of the Health and Safety Code is amended
to read:
   1399.805.  (a) (1) After the federally eligible defined individual
submits a completed application form for a plan contract, the plan
shall, within 30 days, notify the individual of the individual's
actual premium charges for that plan contract, unless the plan has
provided notice of the premium charge prior to the application being
filed. In no case shall the premium charged for any health care
service plan contract identified in subdivision (d) of Section
1366.35 exceed  the following amounts:  
   (A)  For health care service plan contracts that offer services
through a preferred provider arrangement, the average premium paid by
a subscriber of the Major Risk Medical Insurance Program who is of
the same age and resides in the same geographic area as the federally
eligible defined individual. However, for federally qualified
individuals who are between the ages of 60 and 64, inclusive, the
premium shall not exceed the average premium paid by a subscriber of
the Major Risk Medical Insurance Program who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual. 
    (B)     For health care
service plan contracts identified in subdivision (d) of Section
1366.35 that do not offer services through a preferred provider
arrangement,  170 percent of the standard premium charged to
an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual.
However, for federally qualified individuals who are between the ages
of 60 and 64, inclusive, the premium shall not exceed 170 percent of
the standard premium charged to an individual who is 59 years of age
and resides in the same geographic area as the federally eligible
defined individual. The individual shall have 30 days in which to
exercise the right to buy coverage at the quoted premium rates.
   (2) A plan may adjust the premium based on family size, not to
exceed  the following amounts:  
   (A)  For health care service plans that offer services through a
preferred provider arrangement, the average of the Major Risk Medical
Insurance Program rate for families of the same size that reside in
the same geographic area as the federally eligible defined
individual. 
    (B)     For health care
service plans identified in subdivision (d) of Section 1366.35 that
do not offer services through a preferred provider arrangement,
 170 percent of the standard premium charged to a family
that is of the same size and resides in the same geographic area as
the federally eligible defined individual.
   (b) When a federally eligible defined 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 shall begin no later than the first
day of the following month. When that payment is neither delivered or
postmarked until 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.
   (c) During the first 30 days after the effective date of the plan
contract, the individual shall have the option of changing coverage
to a different plan contract offered by the same health care service
plan. If the individual notified the plan of the change within the
first 15 days of a month, coverage under the new plan contract shall
become effective no later than the first day of the following month.
If an enrolled individual notified the plan of the change after the
15th day of a month, coverage under the new plan contract shall
become effective no later than the first day of the second month
following notification.
  SEC. 4.  Section 1399.811 of the Health and Safety Code is amended
to read:
   1399.811.  Premiums for contracts offered, delivered, amended, or
renewed by plans  on or after January 1, 2001, 
shall be subject to the following requirements:
   (a) The premium for new business for a federally eligible defined
individual shall not exceed  the following amounts: 

   (1) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that offer services through a
preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual. However, for federally qualified
individuals who are between the ages of 60 to 64 years, inclusive,
the premium shall not exceed the average premium paid by a subscriber
of the Major Risk Medical Insurance Program who is 59 years of age
and resides in the same geographic area as the federally eligible
defined individual. 
    (2)     For health care
service plan contracts identified in subdivision (d) of Section
1366.35 that do not offer services through a preferred provider
arrangement,  170 percent of the standard premium charged to
an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual.
However, for federally qualified individuals who are between the ages
of 60 to 64 years, inclusive, the premium shall not exceed 170
percent of the standard premium charged to an individual who is 59
years of age and resides in the same geographic area as the federally
eligible defined individual.
   (b) The premium for in force business for a federally eligible
defined individual shall not exceed  the following amounts:
 
   (1) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that offer services through a
preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual. However, for federally qualified
individuals who are between the ages of 60 and 64 years, inclusive,
the premium shall not exceed the average premium paid by a subscriber
of the Major Risk Medical Insurance Program who is 59 years of age
and resides in the same geographic area as the federally eligible
defined individual. 
    (2)     For health care
service plan contracts identified in subdivision (d) of Section
1366.35 that do not offer services through a preferred provider
arrangement,  170 percent of the standard premium charged to
an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual.
However, for federally qualified individuals who are between the ages
of 60 and 64 years, inclusive, the premium shall not exceed 170
percent of the standard premium charged to an individual who is 59
years of age and resides in the same geographic area as the federally
eligible defined individual.  The premium effective on
January 1, 2001, shall apply to in force business at the earlier of
either the time of renewal or July 1, 2001. 
   (c) The premium applied to a federally eligible defined individual
may not increase by more than the following amounts: 
   (1) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that offer services through a
preferred provider arrangement, the average increase in the premiums
charged to a subscriber of the Major Risk Medical Insurance Program
who is of the same age and resides in the same geographic area as the
federally eligible defined individual.  
   (2) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services through
a preferred provider arrangement, 
    (1)     Except as provided in paragraph
(2),  the increase in premiums charged to a nonfederally
qualified individual who is of the same age and resides in the same
geographic area as the federally defined eligible individual. The
premium for an eligible individual may not be modified more
frequently than every 12 months. 
   (3) 
    (2)  For a contract that a plan has discontinued
offering, the premium applied to the first rating period of the new
contract that the federally eligible defined individual elects to
purchase shall be no greater than the premium applied in the prior
rating period to the discontinued contract.
  SEC. 5.  Section 10127.19 is added to the Insurance Code, to read:
   10127.19.  (a) A health insurer providing coverage for hospital,
medical, or surgical benefits under an individual health insurance
policy shall add a surcharge to each life covered under an individual
health insurance policy pursuant to the following schedule:
   (1) Beginning July 1, 2010, through June 30, 2011, the surcharge
shall be thirty-five cents ($0.35) per life, per month.
   (2) Beginning July 1, 2011, through June 30, 2012, the surcharge
shall be fifty cents ($0.50) per life, per month.
   (3) Beginning July 1, 2012, through June 30, 2013, the surcharge
shall be seventy cents ($0.70) per life, per month.
   (4) Beginning July 1, 2013, through June 30, 2014, the surcharge
shall be eighty-five cents ($0.85) per life, per month.
   (5) Beginning July 1, 2014, and thereafter, the surcharge shall be
one dollar ($1) per life, per month.
   (b) Any increase in the surcharge added pursuant to subdivision
(a) shall only be enacted by a statute passed by a two-thirds vote of
each house of the Legislature.
   (c) The surcharge shall be deposited in the Major Risk Medical
Insurance Fund, created pursuant to Section 12739. Revenues derived
from the surcharge added pursuant to this section shall not be
considered to be state General Fund proceeds of taxes within the
meaning of Article XVI of the Constitution, as they are being held by
the state in the Major Risk Medical Insurance Fund as a trustee for
the benefit of individuals who are uninsurable on the health
insurance market.
   (d) On or before May 15 of each year, beginning May 15, 2010, each
insurer covered under this section shall report to the department
and the Managed Risk Medical Insurance Board the number of lives
covered by the insurer's individual health insurance policies as of
March 31 of that year. The surcharge provided for in this section may
be paid in two installments. The first installment shall be paid on
or before August 1 of each year, and the second installment shall be
paid on or before December 15 of each year.
   (e) If state funds appropriated to the Major Risk Medical
Insurance Program are less than forty million dollars ($40,000,000)
for any fiscal year, the surcharge described in subdivision (a) shall
be suspended for the subsequent fiscal year.
   (f) The surcharge described in subdivision (a) shall be excluded
from the computation of an insurer's administrative expenses.
   (g) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 6.  Section 10198.11 is added to the Insurance Code, to read:
   10198.11.  (a) Notwithstanding Section 10198.7, an individual
health insurance policy issued to a member of the rider pool created
pursuant to Section 12738.1 may permanently or temporarily exclude
coverage for the member's qualifying condition or conditions, as
identified in the documentation described in subdivision (b) of
Section 12738.1.
   (b) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 7.  Section 10901.3 of the Insurance Code is amended to read:
   10901.3.  (a) (1) After the federally eligible defined individual
submits a completed application form for a health benefit plan, the
carrier shall, within 30 days, notify the individual of the
individual's actual premium charges for that health benefit plan
design. In no case shall the premium charged for any health benefit
plan identified in subdivision (d) of Section 10785 exceed 
the following amounts:  
   (A) For health benefit plans that offer services through a
preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual. However, for federally qualified
individuals who are between the ages of 60 and 64, inclusive, the
premium shall not exceed the average premium paid by a subscriber of
the Major Risk Medical Insurance Program who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual. 
    (B)     For health
benefit plans identified in subdivision (d) of Section 10785 that do
not offer services through a preferred provider arrangement,
 170 percent of the standard premium charged to an
individual who is of the same age and resides in the same geographic
area as the federally eligible defined individual. However, for
federally qualified individuals who are between the ages of 60 and
64, inclusive, the premium shall not exceed 170 percent of the
standard premium charged to an individual who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual. The individual shall have 30 days in which to exercise
the right to buy coverage at the quoted premium rates.
   (2) A carrier may adjust the premium based on family size, not to
exceed  the following amounts:  
   (A) For health benefit plans that offer services through a
preferred provider arrangement, the average of the Major Risk Medical
Insurance Program rate for families of the same size that reside in
the same geographic area as the federally eligible defined
individual. 
    (B)     For health
benefit plans identified in subdivision (d) of Section 10785 that do
not offer services through a preferred provider arrangement,
 170 percent of the standard premium charged to a family
that is of the same size and resides in the same geographic area as
the federally eligible defined individual.
   (b) When a federally eligible defined 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 shall begin no later than the first
day of the following month. When that payment is neither delivered or
postmarked until 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.
   (c) During the first 30 days after the effective date of the
health benefit plan, the individual shall have the option of changing
coverage to a different health benefit plan design offered by the
same carrier. If the individual notified the plan of the change
within the first 15 days of a month, coverage under the new health
benefit plan shall become effective no later than the first day of
the following month. If an enrolled individual notified the carrier
of the change after the 15th day of a month, coverage under the
health benefit plan shall become effective no later than the first
day of the second month following notification.
  SEC. 8.  Section 10901.9 of the Insurance Code is amended to read:
   10901.9.   Commencing January 1, 2001, premiums 
 Premiums  for health benefit plans offered, delivered,
amended, or renewed by carriers shall be subject to the following
requirements:
   (a) The premium for new business for a federally eligible defined
individual shall not exceed  the following amounts: 

   (1) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average premium paid by a subscriber of the Major
Risk Medical Insurance Program who is of the same age and resides in
the same geographic area as the federally eligible defined
individual. However, for federally qualified individuals who are
between the ages of 60 to 64, inclusive, the premium shall not exceed
the average premium paid by a subscriber of the Major Risk Medical
Insurance Program who is 59 years of age and resides in the same
geographic area as the federally eligible defined individual.

    (2)     For health
benefit plans identified in subdivision (d) of Section 10785 that do
not offer services through a preferred provider arrangement,
 170 percent of the standard premium charged to an
individual who is of the same age and resides in the same geographic
area as the federally eligible defined individual. However, for
federally qualified individuals who are between the ages of 60 to 64,
inclusive, the premium shall not exceed 170 percent of the standard
premium charged to an individual who is 59 years of age and resides
in the same geographic area as the federally eligible defined
individual.
   (b) The premium for in force business for a federally eligible
defined individual shall not exceed  the following amounts:
 
   (1) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average premium paid by a subscriber of the Major
Risk Medical Insurance Program who is of the same age and resides in
the same geographic area as the federally eligible defined
individual. However, for federally qualified individuals who are
between the ages of 60 and 64, inclusive, the premium shall not
exceed the average premium paid by a subscriber of the Major Risk
Medical Insurance Program who is 59 years of age and resides in the
same geographic area as the federally eligible defined individual.

    (2)     For health
benefit plans identified in subdivision (d) of Section 10785 that do
not offer services through a preferred provider arrangement,
 170 percent of the standard premium charged to an
individual who is of the same age and resides in the same geographic
area as the federally eligible defined individual. However, for
federally qualified individuals who are between the ages of 60 and
64, inclusive, the premium shall not exceed 170 percent of the
standard premium charged to an individual who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual.  The premium effective on January 1, 2001, shall
apply to in force business at the earlier of either the time of
renewal or July 1, 2001. 
   (c) The premium applied to a federally eligible defined individual
may not increase by more than the following amounts: 
   (1) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average increase in the premiums charged to a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual.  
   (2) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred provider
arrangement, 
    (1)     Except as provided in paragraph
(2),  the increase in premiums charged to a nonfederally
qualified individual who is of the same age and resides in the same
geographic area as the federally defined eligible individual. The
premium for an eligible individual may not be modified more
frequently than every 12 months.
   (2) For a contract that a carrier has discontinued offering, the
premium applied to the first rating period of the new contract that
the federally eligible defined individual elects to purchase shall be
no greater than the premium applied in the prior rating period to
the discontinued contract.
  SEC. 9.  Section 12712.5 is added to the Insurance Code, to read:
   12712.5.  The board shall release to the Legislative Analyst's
Office all program actuarial data for 2004 to 2007, inclusive, as
requested by that office.
  SEC. 10.  Section 12715.5 is added to the Insurance Code, to read:
   12715.5.  (a) The board shall offer at least four different
options for major risk medical coverage pursuant to this part,
including at least one Health Savings Account-compatible option.
These options shall provide for both of the following:
   (1) Varying deductibles ranging from five hundred dollars ($500)
to two thousand five hundred dollars ($2,500) per individual and one
thousand dollars ($1,000) to four thousand dollars ($4,000) per
family.
   (2) Varying out-of-pocket maximums ranging from two thousand five
hundred dollars ($2,500) to five thousand dollars ($5,000) per
individual and four thousand dollars ($4,000) to seven thousand five
hundred dollars ($7,500) per family.
   (b) Beginning January 1, 2010, if the board determines that
sufficient program funding is available, the board may subsidize the
Health Savings Account-compatible option offered pursuant to
subdivision (a) on a sliding scale based on income.
  SEC. 11.  Section 12718 of the Insurance Code is amended to read:
   12718.  Benefits under this chapter or Chapter 5 (commencing with
Section 12720) shall be subject to required subscriber copayments and
deductibles as the board may authorize. Any authorized copayments
shall not exceed 25 percent  and any authorized deductible
shall not exceed an annual household deductible amount of five
hundred dollars ($500)  . However, health plans not
utilizing a deductible may be authorized to charge an office visit
copayment of up to twenty-five dollars ($25). If the board contracts
with participating health plans pursuant to Chapter 5 (commencing
with Section 12720), copayments or deductibles shall be authorized in
a manner consistent with the basic method of operation of the
participating health plans.  The aggregate amount of
deductible and copayments payable annually under this section shall
not exceed two thousand five hundred dollars ($2,500) for an
individual and four thousand dollars ($4,000) for a family. 

  SEC. 12.  Section 12719 is added to the Insurance Code, to read:

12719.  (a) Major risk medical coverage in the program shall have an
annual limit on total coverage or benefits for each subscriber of one
hundred fifty thousand dollars ($150,000). However, if the board
determines that sufficient program funds are available, the board
shall adopt regulations that become effective on or before January 1,
2011, that eliminate this limit.
   (b) Major risk medical coverage in the program shall have a limit
on covered benefits over the lifetime of each subscriber of one
million dollars ($1,000,000).
   (c) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 13.  Section 12721.5 is added to the Insurance Code, to read:
   12721.5.  (a) If the board determines there are sufficient funds
available, it may participate, on a sliding scale based on income, in
deductible and out-of-pocket maximum reinsurance using products
including, but not limited to, health reimbursement arrangements,
critical insurance policies, and accident insurance policies.
   (b) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 14.  Section 12724 is added to the Insurance Code, to read:
   12724.  (a) The board shall adopt regulations that allow
participating health plans to incorporate wellness programs, case
management services, and disease management services, and offer
enrollee rewards based on health risk reduction. The regulations
adopted by the board pursuant to this section shall remain in effect
only until January 1, 2015.
   (b) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 15.  Section 12725 of the Insurance Code is amended to read:
   12725.  (a) Each resident of the state meeting the eligibility
criteria of this section and who is unable to secure adequate private
health coverage is eligible to apply for major risk medical coverage
through the program.  For these purposes, "resident"
includes a member of a federally recognized California Indian tribe.

   (b) To be eligible for enrollment in the program, an applicant
shall have been rejected for health care coverage by at least
 one   three different  private health
 plan   plans or shall provide proof that he or
she has a qualified medically uninsurable condition, as documented by
a physician and surgeon. The board shall determine, by regulation,
which conditions are qualified for purposes of this section  .
An applicant shall be deemed to have been rejected if the only
private health coverage that the applicant could secure would do one
of the following:
   (1) Impose substantial waivers that the program determines would
leave a subscriber without adequate coverage for medically necessary
services.
   (2) Afford limited coverage that the program determines would
leave the subscriber without adequate coverage for medically
necessary services.
   (3) Afford coverage only at an excessive price, which the board
determines is significantly above standard average individual
coverage rates.
   (c) Rejection for policies or certificates of specified disease or
policies or certificates of hospital confinement indemnity, as
described in Section 10198.61, shall not be deemed to be rejection
for the purposes of eligibility for enrollment.
   (d) The board may permit dependents of eligible subscribers to
enroll in major risk medical coverage through the program if the
board determines the enrollment can be carried out in an actuarially
and administratively sound manner.
   (e) Notwithstanding the provisions of this section, the board
shall by regulation prescribe a period of time during which a
resident is ineligible to apply for major risk medical coverage
through the program if the resident either voluntarily disenrolls
from, or was terminated for nonpayment of the premium from, a private
health plan after enrolling in that private health plan pursuant to
either Section 10127.15 or Section 1373.62 of the Health and Safety
Code.
   (f) For the period commencing September 1, 2003, to December 31,
2007, inclusive, subscribers and their dependents receiving major
risk coverage through the program may receive that coverage for no
more than 36 consecutive months. Ninety days before a subscriber or
dependent's eligibility ceases pursuant to this subdivision, the
board shall provide the subscriber and any dependents with written
notice of the termination date and written information concerning the
right to purchase a standard benefit plan from any health care
service plan or health insurer participating in the individual
insurance market pursuant to Section 10127.15 or Section 1373.62 of
the Health and Safety Code. This subdivision shall become inoperative
on December 31, 2007. 
   (g) (1) For purposes of this section, "resident" means a person
who meets one of the following requirements:  
   (A) Has resided continuously in the State of California for at
least six months immediately prior to applying to the program. 

   (B) Is present in the State of California and provides
documentation of recent participation in a high-risk health insurance
program in another state.  
   (2) "Resident" includes a member of a federally recognized
California Indian tribe who meets the requirements of subparagraph
(A) or (B) of paragraph (1). 
  SEC. 16.  Section 12727 of the Insurance Code is amended to read:
   12727.   Where more than one participating health plan is
offered, the   The  program shall make available to
applicants eligible to enroll in the program sufficient information
to make an informed choice among the  various types of
participating health plans   options provided pursuant
to Section 12715.5  . Each applicant shall be issued an
appropriate document setting forth or summarizing the services to
which an enrollee is entitled, procedures for obtaining major risk
medical coverage, a list of contracting health plans and providers,
and a summary of grievance procedures.
  SEC. 17.  Section 12737.5 is added to the Insurance Code, to read:
   12737.5.  (a) In addition to the risk categories described in
Section 2698.400 of Title 10 of the California Code of Regulations,
the board may, by regulation, develop risk categories based on morbid
obesity and tobacco use. The risk categories developed pursuant to
this section shall set objectives for the reduction of morbid obesity
and tobacco use and shall allow for rate reductions if those
objectives are achieved.
   (b) The regulations adopted by the board pursuant to this section
shall remain in effect only until January 1, 2015.
   (c) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 18.  Chapter 7.5 (commencing with Section 12738.1) is added to
Part 6.5 of Division 2 of the Insurance Code, to read:
      CHAPTER 7.5.  RIDER POOL


   12738.1.  (a) The board may create a rider pool consisting of
applicants with no more than two qualifying conditions.
   (b) The board shall issue documentation of membership to each
member of the rider pool. This documentation shall identify the
member's qualifying condition or conditions.
   (c) For purposes of this section, "qualifying condition" means a
health condition that made the individual uninsurable in the private
market, as determined by the board, and that the board determines, by
regulation, is eligible for purposes of this section. "Qualifying
condition" shall not include a condition likely to require chronic,
ongoing care.
   12738.2.  This chapter shall remain in effect only until January
1, 2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 19.  Section 12739 of the Insurance Code is amended to read:
   12739.  (a) There is hereby created in the State Treasury a
special fund known as the Major Risk Medical Insurance Fund that is,
notwithstanding Section 13340 of the Government Code, continuously
appropriated to the board for the purposes specified in 
Sections 10127.15 and   Section  12739.1 
and Section 1373.62 of the Health and Safety Code  .
   (b) After June 30,  1991   2010  , the
following amounts shall be deposited annually in the Major Risk
Medical Insurance Fund:
   (1)  Eighteen   Twenty-three  million
dollars  ($18,000,000)   ($23,000,000) 
from the Hospital Services Account in the Cigarette and Tobacco
Products Surtax Fund.
   (2)  (A)     Eleven
  Sixteen    million dollars 
($11,000,000)   ($16,000,000)  from the Physician
Services Account in the Cigarette and Tobacco Products Surtax Fund.

   (B) Notwithstanding subparagraph (A), for the 2007-08 fiscal year
only, the Controller shall reduce the amount deposited into the Major
Risk Medical Insurance Fund from the Physician Services Account in
the Cigarette and Tobacco Products Surtax Fund to one million dollars
($1,000,000). 
   (3) One million dollars ($1,000,000) from the Unallocated Account
in the Cigarette and Tobacco Products Surtax Fund.
  SEC. 20.  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.