BILL NUMBER: SB 227	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Alquist

                        FEBRUARY 23, 2009

   An act to add Sections 1356.2, 1373.623, 1373.63, and 1399.807 to
the Health and Safety Code, and to amend Sections 12700, 12705,
12711, 12712, 12718, 12725, 12726, and 12739 of, to add Sections
1827.86, 10127.165, 10127.19, 10903, 12711.3, 12714.1, 12714.5, and
12738.5 to, to add Chapter 9 (commencing with Section 12739.5) to
Part 6.5 of Division 2 of, and to repeal and add Sections 12723 and
12737 of, the Insurance Code, relating to health care coverage, and
making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 227, as introduced, Alquist. Health care coverage.
   (1) Existing law establishes the California Major Risk Medical
Insurance Program (MRMIP) that is administered by the Managed Risk
Medical Insurance Board (MRMIB) to provide major risk medical
coverage to persons who, among other matters, have been rejected for
coverage by at least one private health plan. Existing law, the
Knox-Keene Health Care Service Plan Act of 1975, provides for the
licensure and regulation of health care service plans by the
Department of Managed Health Care and makes a willful violation of
the act a crime. Existing law also provides for the regulation of
health insurers by the Department of Insurance. Existing law requires
a health care service plan and a health insurer to continue to
provide coverage to certain individuals who were members of a pilot
program that ended on December 31, 2007, and requires MRMIB to make
payments from the Major Risk Medical Insurance Fund, a continuously
appropriated fund, to health care service plans and insurers for the
provision of health services to those individuals.
   This bill would require a health care service plan and a health
insurer to elect to either accept for coverage at rates set by MRMIB
and under specified conditions persons eligible for MRMIP that have
been assigned to the plan or insurer by MRMIB regardless of health
status or previous health care claims experience, or to alternatively
pay a fee set by MRMIB based on its market share and medical loss
ratio, as specified. Because the fee would be deposited in the fund,
the bill would make an appropriation by increasing the amount of
revenue in a continuously appropriated fund. The bill would authorize
MRMIB, with the approval of the Department of Finance, to obtain
loans from the General Fund for expenses related to administration of
the fund.
   The bill would require MRMIB to establish a voluntary reenrollment
program for persons enrolled in the former pilot program, would
implement benefit changes for MRMIP, and would establish limits on
MRMIP subscriber contribution amounts, as specified. The bill would
require MRMIB to appoint a panel to advise it on MRMIP, would
authorize MRMIB to apply for federal funding and take other actions,
as specified, and would require MRMIB to report to the Legislature on
or before July 1, 2012, as specified. The bill would require MRMIB
to report and make recommendations to the Legislature by September 1,
2010, regarding the status of benefits and premiums provided to
federally eligible defined individuals, based on data provided by
plans and insurers, as specified. The bill would enact other related
provisions. By imposing new requirements on health care service
plans, the willful violation of which would be a crime, the bill
would impose a state-mandated local program.
   (2) Existing law requires specified amounts to be deposited in the
fund from the Cigarette and Tobacco Products Surtax Fund.
   This bill would increase those amounts, thereby making an
appropriation. The bill would also specify that any money in the fund
attributable to monetary penalties imposed under MRMIP shall not be
continuously appropriated.
   The bill would, until January 1, 2012, exempt MRMIB, the
Department of Managed Health Care, and the Department of Insurance
from certain procedural requirements necessary to adopt rules and
regulations.
   (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. 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) In addition to the other fees and reimbursements
required to be paid under this chapter, each licensed health care
service plan, except for a specialized health care service plan,
electing to pay the fee under Chapter 9 (commencing with Section
12739.5) of Part 6.5 of Division 2 of the Insurance Code, shall pay
the fee to the director in the amount as determined by the Managed
Risk Medical Insurance Board. The timely payment of the fee and the
timely submission of information pursuant to Section 12739.7 of the
Insurance Code shall be deemed to be among the prerequisites for
obtaining and retaining a license as a health care service plan. The
director shall transmit fees collected pursuant to this section to
the Managed Risk Medical Insurance Board, in a manner determined by
that board, within 30 days after the date on which the director
receives those fees. The director shall permit health care service
plans subject to the fee to remit payment on a quarterly basis.
   (b) A health care service plan that has elected not to pay the fee
under Chapter 9 (commencing with Section 12739.5) of Part 6.5 of
Division 2 of the Insurance Code shall demonstrate to the
satisfaction of the director that it is in compliance with
subdivision (a) of Section 1373.63.
   (c) The fees paid pursuant to this section and Section 12739.7 of
the Insurance Code shall not be considered administrative costs for
the purposes of Section 1300.78 of Title 28 of the California Code of
Regulations or for purposes of calculating any medical loss ratio
imposed on health plans by statute or regulation.
  SEC. 2.  Section 1373.623 is added to the Health and Safety Code,
to read:
   1373.623.  (a) Commencing January 1, 2010, at least annually
thereafter, and at such other times as the Managed Risk Medical
Insurance Board shall request, health care service plans providing
continuation coverage pursuant to Section 1373.622 shall report to
the Managed Risk Medical Insurance Board the number of covered lives
remaining in the continuation coverage and such related information
as the board may require to implement subdivision (f) of Section
12725 of the Insurance Code.
   (b) Health care service plans providing continuation coverage
shall provide to enrollees in continuation coverage the notice
developed by the Managed Risk Medical Insurance Board pursuant to
subdivision (f) of Section 12725 of the Insurance Code.
  SEC. 3.  Section 1373.63 is added to the Health and Safety Code, to
read:
   1373.63.  (a) On and after January 1, 2010, except as provided in
subdivision (e), every health care service plan, except for a
specialized health care service plan or a Medicare-only or
Medicare-supplement-only health care service plan, licensed in
California, that provides individual or group coverage, shall accept
for coverage persons eligible pursuant to Section 12725 of the
Insurance Code for the Major Risk Medical Insurance Program,
according to the assignment of eligible persons by the Managed Risk
Medical Insurance Board pursuant to Section 12712 of the Insurance
Code, regardless of the individual's health status or previous health
care claims experience. As used in this section, "board" means the
Managed Risk Medical Insurance Board.
   (b) Health care service plans subject to this section shall
provide coverage to persons assigned by the board with the same level
of benefits as the Major Risk Medical Insurance Program, as
determined by the board, and shall charge those persons premium rates
determined by the board.
   (c) For persons assigned for coverage to the health care service
plan, the health care service plan may impose only those coverage
exclusions or waiting periods as provided by the board in regulation
and pursuant to Section 12726 of the Insurance Code.
   (d) Health plan contracts issued pursuant to this section shall be
guaranteed renewable.
   (e) A health care service plan shall not be subject to the
requirements of this section if it instead elects to pay the fee
under Chapter 9 (commencing with Section 12739.5) of Part 6.5 of
Division 2 of the Insurance Code.
   (f) The director may take all action authorized under this
chapter, including, but not limited to, the imposition of fines or
penalties against a health care service plan that does not comply
with this section or Section 1356.2.
  SEC. 4.  Section 1399.807 is added to the Health and Safety Code,
to read:
   1399.807.  On or before March 1, 2010, health care service plans
that offer, issue, or renew individual coverage pursuant to this
article shall provide to the department such data and information as
the department determines, in consultation with the Managed Risk
Medical Insurance Board and the Insurance Commissioner, are necessary
to be provided to the Managed Risk Medical Insurance Board for
purposes of the study required under Section 12714.5 of the Insurance
Code.
  SEC. 5.  Section 1827.86 is added to the Insurance Code, to read:
   1827.86.  (a) Every admitted health insurer that provides health
insurance and that elects to pay the fee under Chapter 9 (commencing
with Section 12739.5) of Part 6.5 shall pay the fee to the
commissioner in the amount as determined by the Managed Risk Medical
Insurance Board. The commissioner shall permit health insurers
subject to the fee to remit payment on a quarterly basis. The timely
payment of the fee and the timely submission of information pursuant
to Section 12739.7 shall be deemed to be among the prerequisites for
obtaining and retaining a certificate of authority or license issued
by the commissioner and, in addition, deficiencies with respect to
the timely payment or submission of information shall be grounds for
the imposition of sanctions or the institution of disciplinary
proceedings by the commissioner. The commissioner shall transmit fees
collected pursuant to this section to the Managed Risk Medical
Insurance Board, in a manner determined by that board, within 30 days
after the date on which the commissioner receives those fees.
   (b) A health insurer that has elected not to pay the fee under
Chapter 9 (commencing with Section 12739.5) of Part 6.5, shall
demonstrate to the satisfaction of the commissioner that it is in
compliance with subdivision (a) of Section 10127.19.
   (c) The requirements of this section shall not apply to Medicare
supplement, specialized health, or CHAMPUS supplement insurance, or
to hospital indemnity, hospital-only, accident-only, or specified
disease insurance that does not pay benefits on a fixed benefit, cash
payment only basis, or to short-term limited duration health
insurance.
   (d) The fees paid pursuant to this section and Section 12739.7
shall not be considered administrative costs for the purposes of
Section 1300.78 of Title 28 of the California Code of Regulations or
for purposes of calculating any medical loss ratio imposed on health
insurers by statute or regulation.
  SEC. 6.  Section 10127.165 is added to the Insurance Code, to read:

   10127.165.  (a) Commencing January 1, 2010, at least annually
thereafter, and at such other times as the Managed Risk Medical
Insurance Board shall request, health insurers providing continuation
coverage pursuant to Section 10127.16 shall report to the Managed
Risk Medical Insurance Board the number of covered lives remaining in
the continuation coverage and such related information as the board
may require to implement subdivision (f) of Section 12725.
   (b) Health insurers providing continuation coverage shall provide
to insureds in continuation coverage the notice developed by the
Managed Risk Medical Insurance Board pursuant to subdivision (f) of
Section 12725.
  SEC. 7.  Section 10127.19 is added to the Insurance Code, to read:
   10127.19.  (a) On and after January 1, 2010, except as provided in
subdivision (e), every health insurer that provides individual or
group health insurance, as defined in Section 106, to residents of
this state shall accept for coverage persons eligible pursuant to
Section 12725 for the Major Risk Medical Insurance Program, according
to the assignment of eligible persons by the Managed Risk Medical
Insurance Board, pursuant to Section 12712, regardless of the
individual's health status or previous health care claims experience.
As used in this section, "board" means the Managed Risk Medical
Insurance Board.
   (b) Health insurers subject to this section shall provide coverage
to persons assigned by the board with the same level of benefits as
the Major Risk Medical Insurance Program, as determined by the board,
and shall charge those persons premium rates determined by the
board.
   (c) For persons assigned for coverage to the insurer, the insurer
may impose only those coverage exclusions or waiting periods as
provided by the board in regulation and pursuant to Section 12726.
   (d) Health insurance policies issued pursuant to this section
shall be guaranteed renewable.
   (e) A health insurer shall not be subject to the requirements of
this section if it instead elects to pay the fee under Chapter 9
(commencing with Section 12739.5) of Part 6.5.
   (f) The commissioner may take all action authorized under this
chapter, including, but not limited to, the imposition of fines or
penalties against a health insurer that does not comply with this
section or Section 1827.86.
   (g) The requirements of this section shall not apply to Medicare
supplement, specialized health, or CHAMPUS supplement insurance, or
to hospital indemnity, hospital-only, accident-only, or specified
disease insurance that does not pay benefits on a fixed benefit, cash
payment only basis, or to short-term limited duration health
insurance.
  SEC. 8.  Section 10903 is added to the Insurance Code, to read:
   10903.  On or before March 1, 2010, health insurers that offer,
issue, or renew individual coverage pursuant to this chapter shall
provide to the commissioner such data and information as the
commissioner determines, in consultation with the Managed Risk
Medical Insurance Board and the Department of Managed Health Care,
are necessary to be provided to the Managed Risk Medical Insurance
Board for purposes of the study required under Section 12714.5.
  SEC. 9.  Section 12700 of the Insurance Code is amended to read:
   12700.  The Legislature finds and declares all of the following:
   (a) That many Californians  ,  do not have
employer-sponsored group health  care  coverage and are
unable to secure adequate health  care  coverage for
themselves and their dependents because of preexisting medical
conditions, and a number of  employer sponsored 
 employer-sponsored  groups have difficulty obtaining or
maintaining their health  care  coverage because some
members of the group either have  ,  or are viewed as being
at risk for having  ,  high medical costs.
   (b) That, even where uninsured persons with preexisting conditions
are able to secure coverage, the cost of coverage is prohibitively
high or is secured only by waiving coverage for the preexisting
conditions for which they are most likely to need care.
   (c) That adverse selection precludes private health plans
regulated by the State of California from enrolling medically
uninsurable persons in the face of the escalating health care costs
 ,  and a highly competitive market.
   (d) That  ,  left to face the cost of major
medical care without health  care  coverage, all but the
extremely affluent uninsured persons must ultimately look to publicly
funded programs including  the  Medi-Cal  program 
or  MISP   the Medically Indigent Services
Program  in the event of severe illness or injury.
   (e) That  a   one  prudent means of
making  comprehensive  major medical coverage available to
individuals  presently   who are  unable to
purchase  it, is to subsidize their purchase of private
health coverage from participating health plans  
private health care coverage when they are denied that coverage
because of their health risk, health history, or health status, is to
arrange for, and subsidize, private coverage using a combination of
public and private funding  .
   (f) That  a prudent means of making major medical coverage
available to groups presently unable to purchase or having
difficulty maintaining major medical coverage is to facilitate
purchase of private health coverage from participating health plans
  enrollment in affordable, comprehensive health care
coverage products compatible with their medical needs should be
available for purchase by all Californians, including those who are,
or are viewed by carriers as being, at high risk because of
preexisting medical conditions, and that information about these
coverage options should be readily available to consumers  .
    (g) That the structure of coverage for medically uninsurable
persons should encourage broad participation of private health care
service plans and health insurers in providing that coverage and
should, at a minimum, not create a disincentive for health care
service plans and health insurers to participate in the state's
program for high-risk and uninsurable persons. 
    (h) That on and after January 1, 2010, sufficient funding
from a combination of public and private sources shall be available
so that the program can provide health care coverage to eligible
persons willing to pay premiums and without the need for waiting
lists. 
  SEC. 10.  Section 12705 of the Insurance Code is amended to read:
   12705.   For   The following definitions
apply for  the purposes of this  part, the following
terms have the following meanings   part  :
   (a) "Applicant" means an individual who applies for major risk
medical coverage through the program.
   (b) "Board" means the Managed Risk Medical Insurance Board.
   (c) "Fund" means the Major Risk Medical Insurance Fund, from which
the program may authorize expenditures to pay for medically
necessary services  which   that  exceed
subscribers' contributions, and for administration of the program.
   (d) "Major risk medical coverage" means the payment for 
comprehensive,  medically necessary services  compatible
with the medical needs of medically uninsurable persons, 
provided by institutional and professional providers  and
structured in a manner that does not provide a disincentive for
accessing needed health care  .
   (e) "Participating health plan" means a  private 
 health  insurer  (1)  holding a valid
outstanding certificate of authority from the Insurance Commissioner
 , a nonprofit hospital service plan qualifying under Chapter
11A (commencing with Section 11491) of Part 2 of Division 2, a
nonprofit membership corporation lawfully operating under the
Nonprofit Corporation Law (Division 2 (commencing with Section 5000)
of the Corporations Code),  or a health care service plan as
defined under subdivision (f) of Section 1345 of the Health and
Safety Code,  which is lawfully engaged in providing,
arranging, paying for, or reimbursing the cost of personal health
care services under insurance policies or contracts, medical and
hospital service agreements, or membership contracts, in
consideration of premiums or other periodic charges payable to it,
and (2) which   that  contracts with the 
program   board to administer major risk medical
coverage to program subscribers  and, pursuant to the terms of
its contract with the board, provides, arranges, pays for, or
reimburses the costs of health care services  . 
   (f) "Payer" means an entity described in Section 1373.63 of the
Health and Safety Code or Section 10127.19 that elects to pay the
fee, as described in Chapter 9 (commencing with Section 12739.5).
 
   (f) 
    (g)  "Plan rates" means the total monthly amount charged
by a participating health plan for a category of risk. 
   (g) 
    (h)  "Program" means the California Major Risk Medical
Insurance Program. 
   (i) "Program costs" means the anticipated costs of operating the
program for the year, including, but not limited to, the cost of
providing covered benefits to all prospective eligible subscribers;
administrative costs, including the costs of staff and overhead
operations for the program; and a reasonable amount to establish and
maintain a prudent reserve for the program. For purposes of this
section, administrative costs for the program may not be expended to
support any other program administered by the board.  
   (h) 
    (j)  "Subscriber" means an individual who is eligible
for and receives major risk medical coverage through the program, and
includes a member of a federally recognized California Indian tribe.

   (i) 
    (k)  "Subscriber contribution" means the portion of
participating health plan rates paid by the subscriber, or paid on
behalf of the subscriber by a federally recognized California Indian
tribal government. If a federally recognized California Indian tribal
government makes a contribution on behalf of a member of the tribe,
the tribal government shall ensure that the subscriber is made aware
of all the health plan options available in the county where the
member resides.
  SEC. 11.  Section 12711 of the Insurance Code is amended to read:
   12711.  The board shall have the  following  authority:
   (a) To determine the eligibility of applicants.
   (b) To determine the major risk medical coverage to be provided
 to  program subscribers.  The major risk medical
coverage shall comply with the provisions of Section 12718. 
   (c) To research and assess the needs of persons not adequately
covered by existing private and public health care delivery systems
and promote means of  assuring   ensuring 
the availability of adequate health care services.
   (d) To approve subscriber contributions ,  and
plan rates, and  to  establish program contribution amounts
 and the types of covered lives that shall be reported by plans
and insurers, and to administer fees imposed pursuant to Chapter 9
(commencing with Section 12739.5)  .
   (e) To provide major risk medical coverage for subscribers or to
contract with a participating health plan or plans to provide or
administer major risk medical coverage for subscribers.
   (f) To authorize expenditures from the fund to pay program
expenses which exceed subscriber contributions.
   (g) To contract for administration of the program or any portion
thereof with any public agency, including any agency of state
government, or with any private entity.
   (h) To issue rules and regulations to carry out the purposes of
this part.
   (i) To authorize expenditures from the fund or from other moneys
appropriated in the annual Budget Act for purposes relating to
Section 10127.15 of this code or Section 1373.62 of the Health and
Safety Code. 
   (j) To apply for any federal funding the board determines to be
cost effective, and to negotiate with the federal Centers for
Medicare and Medicaid Services to secure the federal funding.
   (k) To contract with a reinsurer to obtain reinsurance or
stop-loss coverage for the program.
   (l) To establish reasonable participation requirements for
subscribers.
   (m) To assign persons eligible for the program pursuant to Section
12725 among health plans subject to Section 1373.63 of the Health
and Safety Code and health insurers subject to Section 10127.19,
except for plans and insurers that have elected instead to pay the
fee pursuant to those sections.  
   (j) 
    (n)  To exercise all powers reasonably necessary to
carry out the powers and responsibilities expressly granted or
imposed upon it under this part.
  SEC. 12.  Section 12711.3 is added to the Insurance Code, to read:
   12711.3.  The board, subject to the approval of the Department of
Finance, may obtain loans from the General Fund for all necessary and
reasonable expenses related to the administration of the fund. The
board shall repay principal and interest, using the pooled money
investment account rate of interest, to the General Fund no later
than January 1, 2017.
  SEC. 13.  Section 12712 of the Insurance Code is amended to read:
   12712.  The board shall  , pursuant to the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code), adopt all necessary
rules and regulations to carry out this part, including the
following   perform the following functions  :
   (a)  Establishing   Establish  the scope
and content of adequate major medical coverage  to be offered by
the program, including guidelines, as appropriate, for disease
management, case management, care management or other cost management
strategies to ensure cost-effective, high-quality health care
services for subscribers  .
   (b)  Determining   Determine  reasonable
minimum standards for participating health plans.
   (c)  Determining   Determine  the time,
manner, method, and procedures for withdrawing program approval from
a plan  or limiting subscriber enrollment in a participating
health plan  .
   (d)  Researching   Research  and
 assessing   assess  the needs of persons
without adequate health coverage, and  promoting 
 promote  means of  assuring   ensuring
 the availability of adequate health care services.
   (e)  Administering   Administer  the
program so as to ensure that the program subsidy amount does not
exceed amounts transferred to the fund pursuant to Chapter 8
(commencing with Section 12739).
   (f)  Issuing   Issue  appropriate rules
and regulations for  any other  matters it may be
authorized or required to provide for by this part. In adopting these
rules and regulations, the board shall be guided by the needs and
welfare of persons unable to secure adequate health coverage for
themselves and their dependents, and prevailing practices among
private health plans.
    (g) Implement strategies to ensure program integrity and to
ensure that the program serves the target population of uninsurable
individuals. Strategies may include, but are not limited to, ensuring
that applicants have provided adequate evidence of their inability
to obtain health care coverage and requiring subscribers to attest
that they do not have health care coverage that meets their medical
needs at a lower cost than coverage available in the program. 
    (h) Administer the program in a manner to maximize the
program's eligibility for any federal funds available for high-risk
health insurance pools consistent with the purposes of this part. The
board shall apply for or otherwise seek any available federal funds
consistent with the purposes of this part. 
    (i) In order to reduce or eliminate any waiting list for
coverage in the program, and to ensure the availability of a coverage
option for persons who have been denied private individual health
coverage, develop a process for and implement assignment of persons
eligible for the program to obtain their health coverage from health
care service plans subject to Section 1373.63 of the Health and
Safety Code and health insurers subject to Section 10127.19. The
board shall determine the benefit design that shall be provided by
health care service plans and health insurers to eligible persons
assigned to them by the board, consistent with the benefits provided
to subscribers. In developing the assignment process, the board shall
take into account the geographic service area of health plans and
health insurers who are available for assignment and the geographic
area where potential enrollees and insureds reside. To the greatest
extent possible, the board shall provide eligible persons with a
choice of health plan or health insurer. The board shall not assign
any eligible persons to health plans or health insurers that have
elected instead to pay the fee pursuant to Section 1373.63 of the
Health and Safety Code or Section 10127.19. The board shall determine
how many eligible persons it shall assign to each health care
service plan subject to Section 1373.63 of the Health and Safety Code
and each health insurer subject to Section 10127.19, consistent with
the purposes of this part, taking into consideration the costs of
providing coverage in the program and the fees paid by health care
service plans and health insurers who elect to pay the fee pursuant
to Section 1373.63 of the Health and Safety Code or Section 10127.19.

  SEC. 14.  Section 12714.1 is added to the Insurance Code, to read:
   12714.1.  (a) The board shall appoint an 11-member panel to advise
the board on the program. Appointments to the panel shall be
completed, and the panel shall be prepared to perform its duties,
prior to February 1, 2010.
   (b) The membership of the panel shall be composed of all of the
following persons:
   (1) Four representatives of health care service plans and health
insurers that provide health coverage in the individual health
insurance market, at least three of which shall be health plans
participating in the program.
   (2) Two program subscribers.
   (3) Two health care providers with expertise in the care and
treatment of chronic diseases, at least one of which shall be a
physician and surgeon.
   (4) Three representatives of organizations representing the
interests of health care consumers and medically uninsurable persons.

   (c) The Director of the Department of Managed Health Care, or his
or her designee, and the commissioner, or his or her designee, shall
participate in the panel as nonvoting members.
   (d) The panel members shall have demonstrated expertise in the
provision of health-related services to medically uninsurable
individuals.
   (e) The initial term of the panel members shall be staggered, with
six members being appointed for a two-year term and five members
being                                           appointed for a
four-year term. Upon the expiration of the initial term, all panel
members shall be appointed for a four-year term.
   (f) The panel shall elect, from among its members, its chair who
shall regularly report to the board, during the board's public
meetings, on behalf of the panel.
   (g) The panel shall do all of the following:
   (1) Make recommendations to improve the quality of health care
provided to subscribers in the program.
   (2) Advise the board on policies and program operations.
   (3) Make recommendations to ensure the affordability of coverage
for subscribers, especially low-income subscribers.
   (4) Make recommendations to ensure the cost-effectiveness of
health care provided to subscribers in the program.
   (5) Meet at least quarterly, unless deemed unnecessary by the
chair.
   (h) The board shall consider all written recommendations of the
panel and respond to the panel in writing when the board rejects a
written recommendation made by the panel.
   (i) All members of the advisory panel shall serve without
compensation. Members of the panel shall be reimbursed for all
necessary travel expenses associated with the activities of the
panel. Consumer representatives on the panel may receive per diem
compensation if they are otherwise economically unable to attend and
participate in panel activities.
  SEC. 15.  Section 12714.5 is added to the Insurance Code, to read:
   12714.5.  (a) On or before September 1, 2010, the board shall
report and make recommendations to the appropriate fiscal and policy
committees of the Legislature regarding the status of benefits and
premiums provided to federally eligible defined individuals under
Article 11.5 (commencing with Section 1399.801) of Chapter 2.2 of
Division 2 of the Health and Safety Code, and Chapter 9.5 (commencing
with Section 10900) of Part 2 of this division. The board shall
consult with the advisory panel established pursuant to Section
12714.1, the Department of Managed Health Care, and the Department of
Insurance in the preparation of this report.
   (b) The board shall assess the products provided to federally
eligible defined individuals, and the premiums charged, in comparison
to coverage and subscriber contributions within the program, and
shall analyze the impact that any changes to benefits and subscriber
contributions in the program have had on coverage and premiums for
federally eligible defined individuals. The board shall obtain an
actuarial analysis and comparison between benefits and premiums in
the program and those in the individual market for federally eligible
defined individuals. The board shall make recommendations as to the
need for policy changes related to the premiums that health plans and
health insurers are required to charge for coverage to federally
eligible defined individuals, in relationship to the contributions of
subscribers in the program, and shall discuss the impact of any
changes in the program on premium rates and coverage for federally
eligible defined individuals.
  SEC. 16.  Section 12718 of the Insurance Code is amended to read:
   12718.   (a)    Benefits under this chapter or
Chapter 5 (commencing with Section 12720) shall be subject to
required subscriber copayments and deductibles as the board may
authorize.  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).
  Benefits in the program shall provide  
comprehensive coverage, including, effective January 1, 2011, lower
subscriber cost sharing for primary and preventive health care
services and the medications necessary and appropriate for the
treatment and management of chronic health conditions. Benefits,
subscriber cost sharing, and out-of-pocket costs shall be appropriate
for a program serving high-risk and medically uninsurable persons.
To the greatest extent possible, the board shall establish benefits
that are compatible with comprehensive coverage products available in
the individual health insurance market, but in no event shall the
benefits for the program be less than the minimum benefits required
to be offered by health plans licensed under the Knox-Keene Health
Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section
1340) of Division 2 of the Health and Safety Code) plus coverage for
prescription drugs. The board may offer more than one benefit design
option with different subscriber cost sharing in the form of
copayments,   deductibles, and annual out-of-pocket costs.
 If the board contracts with participating health plans pursuant
to Chapter 5 (commencing with Section 12720), copayments or
deductibles shall be authorized in a manner consistent with the basic
method of operation of the participating health plans. The aggregate
amount of deductible and copayments payable annually under this
section shall not exceed two thousand five hundred dollars ($2,500)
for an individual and four thousand dollars ($4,000) for a family.

   (b) Major risk medical coverage in the program shall have no
annual limits on total coverage or benefits and shall not have a
limit on covered benefits over the lifetime of each subscriber of
less than one million dollars ($1,000,000). 
  SEC. 17.  Section 12723 of the Insurance Code is repealed. 

   12723.  The participating health plans with which the program
shall contract, if available, shall include:
   (a) One or more statewide service benefit plans under which
payment is made by a carrier under contracts with physicians,
hospitals, or other providers of health services rendered to
subscribers.
   (b) One or more statewide indemnity benefit plans under which a
carrier agrees to pay certain sums of money, not in excess of actual
expenses incurred, for health services.
   (c) Comprehensive group-practice prepayment plans which offer
benefits, in whole or in substantial part, on a prepaid basis, with
professional services thereunder provided by physicians or other
providers of health services practicing as a group in a common center
or centers. This group shall include physicians representing at
least three major medical specialties who receive all or a
substantial part of their professional income from the prepaid funds.

   (d) Individual practice prepayment plans which offer health
services in whole or in part on a prepaid basis, with professional
services thereunder provided by individual physicians or other
providers of health services who agree, under such conditions as may
be prescribed by the board, to accept the payments provided by the
plans as full payment for covered services rendered by them.
   (e) Cost containment and cost reduction incentive programs which
involve the subscriber as an active participant, along with the
health plan and providers, in a joint effort toward containing and
reducing the cost of providing medical and hospital health care
services. 
  SEC. 18.  Section 12723 is added to the Insurance Code, to read:
   12723.  If the board contracts with participating health plans or
insurers to provide or administer major risk coverage, the board
shall contract with either health insurers holding valid, outstanding
certificates of authority from the commissioner, or health care
service plans licensed under the Knox-Keene Health Care Service Plan
Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2
of the Health and Safety Code).
  SEC. 19.  Section 12725 of the Insurance Code is amended to read:
   12725.  (a) Each resident of the state meeting the eligibility
criteria of this section and who is unable to secure adequate private
health coverage is eligible to apply for major risk medical coverage
through the program. For these purposes, "resident" includes a
member of a federally recognized California Indian tribe.
   (b) To be eligible for enrollment in the program, an applicant
shall have been rejected for health care coverage by at least one
private health plan. 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   may  by regulation prescribe a
period of time during which  a resident   an
individual  is ineligible to apply for major risk medical
coverage through the program if the  resident  
individual  either voluntarily disenrolls from  ,
  a participating health plan  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
  unless the board determines that an individual
applying for the program had good cause for disenrolling from a
participating health plan and reapplying for coverage in the program
 . 
   (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.  
   (f) Notwithstanding the provisions of this section, the board
shall by regulation establish a process of eligibility and voluntary
reenrollment in the program for persons enrolled in guaranteed
coverage under the guaranteed issue pilot project established by
Chapter 794 of the Statutes of 2002. Individuals shall be voluntarily
enrolled in the program providing all of the following conditions
are met:
   (1) There are currently no individuals on a waiting list for the
program because of insufficient funds available for the program.
   (2) Persons are made eligible by the board under this subdivision
as funds allow, based on the date they were disenrolled from the
program pursuant to the pilot project, with those disenrolled first
made eligible first, and on a first-come-first-served basis.
   (3) The program determines the maximum number of individuals who
may voluntarily reenroll from each health plan providing pilot
project coverage consistent with the proportion of pilot project
enrollees enrolled in each health plan as reported by the health
plans and health insurers pursuant to Section 1373.623 of the Health
and Safety Code and Section 10127.165 of this code.
   (4) The board develops a notice that carriers participating in the
pilot project must provide to persons enrolled in the guaranteed
issue pilot program notifying the individuals of potential
eligibility for the program and option to be reenrolled. 
  SEC. 20.  Section 12726 of the Insurance Code is amended to read:
   12726.  The board may permit the exclusion of coverage or benefits
for charges or expenses incurred by a subscriber during the first
six months of enrollment in the program for any condition for which,
during the six months immediately preceding enrollment in the program
medical advice, diagnosis, care, or treatment was recommended or
received as to the condition during that period.
   However, the exclusion from coverage of this section shall be
waived to the extent to which the subscriber was covered under any
creditable coverage, as defined in Section 10900, that was
terminated, provided the subscriber has applied for enrollment in the
program not later than 63 days following termination of the prior
coverage, or within 180 days of termination of coverage if the
subscriber lost his or her previous creditable coverage because the
subscriber's employment ended, the availability of health coverage
offered through employment or sponsored by an employer terminated, or
an employer's contribution toward health coverage terminated. The
exclusion from coverage of this section shall also be waived as to
any condition of a subscriber previously receiving coverage under a
plan of another state similar to the program established by this part
if the subscriber was eligible for benefits under that other-state
coverage for the condition. The board may  establish
alternative mechanisms applicable to enrollment in health plans
described in subdivision (c) or (d) of Section 12723. These
mechanisms may include, but are not limited to, a postenrollment
waiting period   allow a participating health plan that
does not utilize a   preexisting condition provision to
impose a waiting or affiliation period, not to exceed 90 days, before
the coverage issued becomes effective. During the waiting or
affiliation period a subscriber shall not be required to make the
contribution for program coverage  .
  SEC. 21.  Section 12737 of the Insurance Code is repealed. 

   12737.  (a) The board shall establish program contribution amounts
for each category of risk for each participating health plan. The
program contribution amounts shall be based on the average amount of
subsidy funds required for the program as a whole. To determine the
average amount of subsidy funds required, the board shall calculate a
loss ratio, including all medical costs, administration fees, and
risk payments, for the program in the prior calendar year. The loss
ratio shall be calculated using 125 percent of the standard average
individual rates for comparable coverage as the denominator, and all
medical costs, administration fees, and risk payments as the
numerator. The average amount of subsidy funds required is calculated
by subtracting 100 percent from the program loss ratio. For purposes
of calculating the program loss ratio, no participating health plan'
s loss ratio shall be less than 100 percent and participating health
plans with fewer than 1,000 program members shall be excluded from
the calculation.
   Subscriber contributions shall be established to encourage members
to select those health plans requiring subsidy funds at or below the
program average subsidy. Subscriber contribution amounts shall be
established so that no subscriber receives a subsidy greater than the
program average subsidy, except that:
   (1) In all areas of the state, at least one plan shall be
available to program participants at an average subscriber
contribution of 125 percent of the standard average individual rates
for comparable coverage.
   (2) No subscriber contribution shall be increased by more than 10
percent above 125 percent of the standard average individual rates
for comparable coverage.
   (3) Subscriber contributions for participating health plans
joining the program after January 1, 1997, shall be established at
125 percent of the standard average individual rates for comparable
coverage for the first two benefit years the plan participates in the
program.
   (b) The program shall pay program contribution amounts to
participating health plans from the Major Risk Medical Insurance
Fund. 
  SEC. 22.  Section 12737 is added to the Insurance Code, to read:
   12737.  (a) The board shall establish program contribution amounts
for coverage provided by each participating health plan.
   (b) Subscriber contributions shall be established at no more than
200 percent of the standard average individual rate for comparable
coverage, as determined by the board. The board shall establish a
sliding scale with lower contribution requirements for subscribers at
or below 300 percent of the federal poverty level, but in no case
shall the subscriber contribution be lower than 110 percent of the
standard average individual rate for comparable individual coverage,
unless federal funds are received, pursuant to subdivision (j) of
Section 12711. Upon receipt of federal funds, the board shall lower
subscriber contributions for subscribers at or below 300 percent of
the federal poverty level to six percent of income, and may
additionally lower subscriber contributions for subscribers over 300
but less than 500 percent of the federal poverty level with any
remaining federal funds.
  SEC. 23.  Section 12738.5 is added to the Insurance Code, to read:
   12738.5.  (a) On or before July 1, 2012, the board shall report to
the Legislature on the implementation of this chapter, including the
number and type of persons enrolled in the program, program costs
and revenues, average per capita costs for program subscribers, and
annual increases in the costs of coverage provided to program
subscribers as a reflection of rate changes in the individual market.

   (b) The board shall also include in the report an implementation
and transition plan for an alternative approach to ensuring quality
coverage for high risk, potentially high cost individuals, other than
a segregated high risk pool, that may include a reinsurance
mechanism or a risk adjustment mechanism, or both. The transition
plan shall outline the steps the board will need to take in order to
replace the program with an alternative mechanism by January 1, 2014,
and shall take into account changes in costs and coverage in the
individual market. The plan developed by the board shall also take
into account any subsequent state or federal program that provides
broad-based or universal coverage and that includes guaranteed
coverage for high-risk or medically uninsurable persons.
  SEC. 24.  Section 12739 of the Insurance Code is amended to read:
   12739.  (a) There is hereby created in the State Treasury a
special fund known as the Major Risk Medical Insurance Fund that is,
notwithstanding Section 13340 of the Government Code, continuously
appropriated to the board for the purposes specified in Sections
10127.15 and 12739.1  , and Chapter 9 (commencing with Section
12739.5),  and Section 1373.62 of the Health and Safety Code.
   (b)  After June 30, 1991, the   The 
following amounts shall be deposited annually in the Major Risk
Medical Insurance Fund:
   (1)  Eighteen million dollars ($18,000,000)  
Twenty-four million three hundred ninety-three thousand dollars
($24,393,000)  from the Hospital Services Account in the
Cigarette and Tobacco Products Surtax Fund.
   (2)  (A)     Eleven
million dollars ($11,000,000)   Fourteen million six
hundred seven thousand dollars ($14,607,000)  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. 
   (4) Funds received as a result of the collection of the fees
imposed pursuant to Chapter 9 (commencing with Section 12739.5).
 
   (c) Notwithstanding any other provision of law, any money in the
fund that is attributable to monetary penalties imposed pursuant to
this part shall not be continuously appropriated and shall be
available for expenditure as provided in this chapter only upon
appropriation by the Legislature. 
  SEC. 25.  Chapter 9 (commencing with Section 12739.5) is added to
Part 6.5 of Division 2 of the Insurance Code, to read:
      CHAPTER 9.  CONTRIBUTION REQUIREMENTS


   12739.5.  No later than February 1 of each year, commencing
February 1, 2010, each health care service plan subject to Section
1373.63 of the Health and Safety Code and each health insurer subject
to Section 10127.19 shall notify the board of its election to either
accept for coverage all eligible persons assigned to the health plan
or health insurer by the board in compliance with the limitations of
Section 1373.63 of the Health and Safety Code or Section 10127.19,
as applicable, or to be a payer. The board shall notify the Director
of the Department of Managed Health Care and the commissioner of the
entities that have elected to be a payer and, no later than May 1 of
each year, the amount of the fee each entity is required to pay.
   12739.6.  The board shall establish a quartile ranking of all
health plans and health insurers, based on their reported medical
loss ratio, for the purposes of applying a graduated fee schedule to
health plans and health insurers that elect to be payers pursuant to
Section 1373.63 of the Health and Safety Code and Section 10127.19.
The board shall establish fees to be paid by health plans and health
insurers who have elected to be payers on a per covered life per
month basis, adjusted by the ranking of the plan's or insurer's
reported medical loss ratio. Each health plan and each health insurer
shall annually pay the fee determined by the board based on the plan'
s or insurer's relative number of covered lives and the ranking of
the plan's or insurer's reported medical loss ratio. The fee charged
by the board shall not exceed one dollar ($1) per covered life per
month for plans and insurers in the bottom quartile of the reported
medical loss ratio.
   12739.7.  (a) On or before March 1 of each year, beginning in
2010, each health care service plan subject to Section 1373.63 of the
Health and Safety Code and each health insurer subject to Section
10127.19 shall report to the board the following information:
   (1) The total number of covered lives as of the preceding December
31, as determined by the board.
   For purposes of this chapter, "covered lives" shall mean
individuals who receive health care coverage provided or indemnified
through an individual or group health care service plan contract or
individual or group health insurance policy. Each named enrollee,
insured, or covered person, including primary subscribers or
policyholders, covered spouses, domestic partners, and each covered
dependent shall count separately as a covered life. Covered lives
shall not include persons covered under the Medi-Cal program,
Medicare, the Healthy Families Program (Part 6.2 (commencing with
Section 12693)), this program, continuation coverage related to the
pilot program established by Chapter 794 of the Statutes of 2002 that
sunsetted on December 31, 2007, the Access for Infants and Mothers
Program (Part 6.3 (commencing with Section 12695)), the California
Children and Families Act of 1998 (Division 108 (commencing with
Section 130100) of the Health and Safety Code), accident-only,
specified disease, long-term care, CHAMPUS supplement, hospital
indemnity, Medicare supplement, dental-only, or vision-only insurance
policies or specified disease insurance that does not pay benefits
on a fixed benefit, cash payment only basis or short-term limited
duration health insurance, or by a local, nonprofit program or county
serving children whose annual household income is below 400 percent
of the federal poverty level who are under the age of 18 years and
who are not eligible for the Medi-Cal program, the Access for Infants
and Mothers Program, or the Healthy Families Program.
   (2) The medical loss ratio of the plan or insurer, which reflects
the amount spent on health care benefits compared to the aggregate
dues, fees, premiums, and other periodic payments received by the
plan or insurer.
   (A) For purposes of this paragraph, "health care benefits" shall
include, but shall not be limited to, all of the following:
   (i) Health care services that are either provided or reimbursed by
the plan or insurer or its contracted providers as covered benefits
to its enrollees and subscribers or insureds and policy holders.
   (ii) The costs of programs or activities, including training and
the provision of informational materials that are determined, as part
of the regulations under subdivision (e), to improve the provision
of quality care, improve health care outcomes, or encourage the use
of evidence-based medicine.
   (iii) Disease management expenses using cost-effective
evidence-based guidelines.
   (iv) Payments to providers as risk pool payments of
pay-for-performance initiatives.

            (v) Plan medical advice by telephone.
   (vi) Prescription drug management programs.
   (B) For purposes of this paragraph, a health care service plan
may, in its medical loss ratio reporting, average its total costs
across both of the following:
   (i) All health care service plan contracts issued, amended, or
renewed by the plan, or by its affiliated plans, in California,
except Medicare supplement plan contracts, administrative
services-only contracts, or other similar administrative
arrangements, or coverage offered by specialized health care service
plans, including, but not limited to, ambulance, dental, vision,
behavioral health, chiropractic, and naturopathic coverage.
   (ii) All health insurance policies issued, amended, or renewed in
California by the plan's affiliated health insurers with a valid
California certificate of authority, except those policies listed in
clause (i) of subparagraph (C).
   (C) For purposes of this paragraph, a health insurer may, in its
medical loss ratio reporting, average its total costs across both of
the following:
   (i) All health insurance policies issued, amended, or renewed by
the insurer in California, except Medicare supplement policies,
administrative services-only policies, or other similar
administrative arrangements, short-term limited duration health
insurance policies, vision-only, dental-only, behavioral health-only,
or pharmacy-only policies, CHAMPUS-supplement or TRICARE-supplement
insurance policies, or hospital indemnity, hospital only, accident
only, or specified disease insurance policies that do not pay
benefits on a fixed benefit, cash payment only basis.
   (ii) All health care service plan contracts issued, amended, or
renewed in California by the insurer's affiliated health care service
plans licensed to operate in California, except those contracts
described in clause (i) of subparagraph (B).
   (3) Other related information as the board, in consultation with
the advisory panel established by Section 12714.1, may require to
implement and administer this chapter. The board may specify form,
format, and other requirements for this report, in consultation with
the advisory panel established pursuant to Section 12714.1. The
absence of these specifications by the board does not relieve a
health care service plan or health insurer from reporting the
information in a timely fashion.
   (b) The board may determine, at its discretion, an amount of
program costs to be covered by a health care service plan or health
insurer subject to this section that fails to report to the board by
March 1 of any year, the number of covered lives as required by this
section.
   12739.8.  No later than May 1 of each year, the board shall
produce a schedule showing the total fee due and payable for each
plan and insurer based on the fee level set by the board and the
number of covered lives reported by the health plan or health insurer
to the board. Each health plan and health insurer shall have the
affirmative duty to obtain that schedule from the board.
   12739.9.  (a) A health care service plan and a health insurer
shall either accept for coverage all persons eligible for the program
and assigned to the health plan or health insurer by the board as
required in Section 1373.63 of the Health and Safety Code or Section
10127.19 or be a payer, as elected pursuant to Section 12739.5.
   (b) A health care service plan that is a payer and a health
insurer that is a payer shall pay the fee no later than June 1 of
each year. A health care service plan shall make its payment to the
Director of the Department of Managed Health Care, and a health
insurer shall make its payment to the commissioner.
   12739.12.  Each payer's fee imposed by the board pursuant to this
chapter shall constitute a fee payable in accordance with Section
1356.2 of the Health and Safety Code, for payers licensed by the
Department of Managed Health Care, or Section 1827.86, for payers
having a certificate of authority or license issued by the
commissioner.
   12739.13.  If revenues collected pursuant to this chapter exceed
the amount actually required for the operation of the program for any
fiscal year, the excess shall be retained in the fund and shall be
used by the board to reduce the fee paid by health care service plans
and health insurers in the subsequent fiscal year.
  SEC. 26.  Until January 1, 2012, the adoption and readoption of any
rules and regulations issued by the Managed Risk Medical Insurance
Board, the Department of Managed Health Care, or the Department of
Insurance to implement this act shall be deemed to be an emergency
and necessary for the immediate preservation of the public peace,
health and safety, or general welfare for purposes of Sections
11346.1 and 11349.6 of the Government Code, and the Managed Risk
Medical Insurance Board, the Department of Managed Health Care, and
the Department of Insurance are hereby exempted from the requirements
to describe specific facts showing the need for immediate action and
from review by the Office of Administrative Law.
  SEC. 27.  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.