BILL NUMBER: SB 316	AMENDED
	BILL TEXT

	AMENDED IN SENATE  DECEMBER 17, 2009
	AMENDED IN SENATE  MAY 28, 2009

INTRODUCED BY   Senator Alquist

                        FEBRUARY 25, 2009

   An act to  add Section 1378.1 to   amend
Section 1363 of  the Health and Safety Code, and to  add
Section 10113.11 to   amend Section 10607 of  the
Insurance Code, relating to health care coverage.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 316, as amended, Alquist. Health care coverage: 
benefits.   disclosures. 
   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.  Under existing law, a health
care service plan is prohibited from expending for administrative
costs, as defined, an excessive amount of the payments it receives
for providing health care services to its subscribers and enrollees.
 Existing law also provides for the regulation of 
health   disability  insurers by the Department of
Insurance.  Under existing law, the Insurance Commissioner is
required to withdraw approval of an individual or mass-marketed
policy of disability insurance if the commissioner finds that the
benefits provided under the policy are unreasonable in relation to
the premium charged, as specified.   Existing law
requires health care service plans and disability insurers, and their
employees or agents, when presenting a p   lan contract or
policy for examination or sale to an individual purchaser or to the
representative of a group consisting of 25 or fewer individuals, to
make a written disclosure of the ratio of premium costs to health
services paid, in the case of health care service plans, or of
incurred claims to earned premiums, in the case of disability
insurers, for the preceding year, as specified.  
   This bill would instead require that this disclosure be made when
presenting a plan contract or policy for examination or sale to an
individual purchaser or to the representative of a group consisting
of 50 or fewer individuals. The bill would make other technical,
nonsubstantive changes.  
   This bill would require full service health care service plans and
health insurers to expend on health care benefits no less than 85%
of the aggregate dues, fees, premiums, and other periodic payments
they receive with respect to plan contracts or policies issued,
amended, or renewed on or after January 1, 2013, as specified. The
bill would authorize those plans and insurers to assess compliance
with this requirement by averaging their total costs across all plan
contracts or insurance policies issued, amended, or renewed by them
and their affiliated plans and insurers in California, except as
specified. The bill would require those plans and insurers to
annually, commencing January 1, 2013, provide written affirmation of
compliance with the bill's requirements to the Department of Managed
Health Care or the Department of Insurance, and would also require
those plans and insurers to annually, commencing January 1, 2013,
report to the Director of the Department of Managed Health Care or
the Insurance Commissioner the medical loss ratio of each individual
and small group health care service plan product and health insurance
policy form issued, amended, or renewed in California and to report
the ratio when presenting a plan for examination or sale to any
individual or group consisting of 50 or fewer individuals. The bill
would authorize the Department of Managed Health Care to assess
health care service plan compliance with these provisions in
specified medical surveys, and would also authorize the director of
that department and the Insurance Commissioner to take specified
actions if the director or commissioner determines that a plan or
insurer has failed to comply with these provisions, except as
specified. The bill would require the departments to jointly adopt
and amend regulations to implement these provisions, as specified.

   Because a willful violation of the bill's requirements with
respect to health care service plans would be a crime, the bill would
impose a state-mandated local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


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

   SECTION 1.    Section 1363 of the   Health
and Safety Code   is amended to read: 
   1363.  (a) The director shall require the use by each plan of
disclosure forms or materials containing information regarding the
benefits, services, and terms of the plan contract as the director
may require, so as to afford the public, subscribers, and enrollees
with a full and fair disclosure of the provisions of the plan 
contract  in readily understood language and in a clearly
organized manner. The director may require that the materials be
presented in a reasonably uniform manner so as to facilitate
comparisons between plan contracts of the same or other types of
plans. Nothing contained in this chapter shall preclude the director
from permitting the disclosure form to be included with the evidence
of coverage or plan contract.
   The disclosure form shall provide for at least the following
information, in concise and specific terms, relative to the plan,
together with additional information as may be required by the
director, in connection with the plan or plan contract:
   (1) The principal benefits and coverage of the plan  contract
 , including coverage for acute care and subacute care.
   (2) The exceptions, reductions, and limitations that apply to the
plan  contract  .
   (3) The full premium cost of the plan  contract  .
   (4) Any copayment, coinsurance, or deductible requirements that
may be incurred by the member or the member's family in obtaining
coverage under the plan  contract  .
   (5) The terms under which the plan  contract  may be
renewed by the plan member, including any reservation by the plan of
any right to change premiums.
   (6) A statement that the disclosure form is a summary only, and
that the plan contract itself should be consulted to determine
governing contractual provisions. The first page of the disclosure
form shall contain a notice that conforms with all of the following
conditions:
   (A) (i) States that the evidence of coverage discloses the terms
and conditions of coverage.
   (ii) States, with respect to individual plan contracts, small
group plan contracts, and any other group plan contracts for which
health care services are not negotiated, that the applicant has a
right to view the evidence of coverage prior to enrollment, and, if
the evidence of coverage is not combined with the disclosure form,
the notice shall specify where the evidence of coverage can be
obtained prior to enrollment.
   (B) Includes a statement that the disclosure and the evidence of
coverage should be read completely and carefully and that individuals
with special health care needs should read carefully those sections
that apply to them.
   (C) Includes the plan's telephone number or numbers that may be
used by an applicant to receive additional information about the
benefits of the plan  contract  or a statement where the
telephone number or numbers are located in the disclosure form.
   (D) For individual contracts, and small group plan contracts as
defined in Article 3.1 (commencing with Section 1357), the disclosure
form shall state where the health plan benefits and coverage matrix
is located.
   (E) Is printed in type no smaller than that used for the remainder
of the disclosure form and is displayed prominently on the page.
   (7) A statement as to when benefits shall cease in the event of
nonpayment of the prepaid or periodic charge and the effect of
nonpayment upon an enrollee who is hospitalized or undergoing
treatment for an ongoing condition.
   (8) To the extent that the plan permits a free choice of provider
to its subscribers and enrollees, the statement shall disclose the
nature and extent of choice permitted and the financial liability
that is, or may be, incurred by the subscriber, enrollee, or a third
party by reason of the exercise of that choice.
   (9) A summary of the provisions required by subdivision (g) of
Section 1373, if applicable.
   (10) If the plan utilizes arbitration to settle disputes, a
statement of that fact.
   (11) A summary of, and a notice of the availability of, the
process the plan uses to authorize, modify, or deny health care
services under the benefits provided by the plan, pursuant to
Sections 1363.5 and 1367.01.
   (12) A description of any limitations on the patient's choice of
primary care physician, specialty care physician, or nonphysician
health care practitioner, based on service area and limitations on
the patient's choice of acute care hospital care, subacute or
transitional inpatient care, or skilled nursing facility.
   (13) General authorization requirements for referral by a primary
care physician to a specialty care physician or a nonphysician health
care practitioner.
   (14) Conditions and procedures for disenrollment.
   (15) A description as to how an enrollee may request continuity of
care as required by Section 1373.96 and request a second opinion
pursuant to Section 1383.15.
   (16) Information concerning the right of an enrollee to request an
independent review in accordance with Article 5.55 (commencing with
Section 1374.30).
   (17) A notice as required by Section 1364.5.
   (b) (1) As of July 1, 1999, the director shall require each plan
offering a contract to an individual or small group to provide with
the disclosure form for individual and small group plan contracts a
uniform health plan benefits and coverage matrix containing the
 plan's   plan contract's  major provisions
in order to facilitate comparisons between plan contracts. The
uniform matrix shall include the following category descriptions
together with the corresponding copayments and limitations in the
following sequence:
   (A) Deductibles.
   (B) Lifetime maximums.
   (C) Professional services.
   (D) Outpatient services.
   (E) Hospitalization services.
   (F) Emergency health coverage.
   (G) Ambulance services.
   (H) Prescription drug coverage.
   (I) Durable medical equipment.
   (J) Mental health services.
   (K) Chemical dependency services.
   (L) Home health services.
   (M) Other.
   (2) The following statement shall be placed at the top of the
matrix in all capital letters in at least 10-point boldface type:

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

   (c) Nothing in this section shall prevent a plan from using
appropriate footnotes or disclaimers to reasonably and fairly
describe coverage arrangements in order to clarify any part of the
matrix that may be unclear.
   (d) All plans, solicitors, and representatives of a plan shall,
when presenting  any   a  plan contract for
examination or sale to an individual prospective plan member,
provide the individual with a properly completed disclosure form, as
prescribed by the director pursuant to this section for each plan
 contract  so examined or sold.
   (e) In the case of group contracts, the completed disclosure form
and evidence of coverage shall be presented to the contractholder
upon delivery of the completed health care service plan agreement.
   (f) Group contractholders shall disseminate copies of the
completed disclosure form to all persons eligible to be a subscriber
under the group contract at the time those persons are offered the
plan  contract  . If the individual group members are
offered a choice of  plans  plan contracts 
, separate disclosure forms shall be supplied for each plan 
contract  available. Each group contractholder shall also
disseminate or cause to be disseminated copies of the evidence of
coverage to all applicants, upon request, prior to enrollment and to
all subscribers enrolled under the group contract.
   (g) In the case of conflicts between the group contract and the
evidence of coverage, the provisions of the evidence of coverage
shall be binding upon the plan notwithstanding any provisions in the
group contract that may be less favorable to subscribers or
enrollees.
   (h) In addition to the other disclosures required by this section,
every health care service plan and any agent or employee of the plan
shall, when presenting a plan  contract  for examination or
sale to any individual purchaser or the representative of a group
consisting of  25   50  or fewer
individuals, disclose in writing the ratio of premium costs to health
services paid for plan contracts with individuals and with groups of
the same or similar size for the plan's preceding fiscal year. A
plan may report that information by geographic area, provided the
plan identifies the geographic area and reports information
applicable to that geographic area.
   (i) Subdivision (b) shall not apply to any coverage provided by a
plan for the Medi-Cal program or the Medicare program pursuant to
Title XVIII and Title XIX of the Social Security Act.
   SEC. 2.    Section 10607 of the   Insurance
Code   is amended to read: 
   10607.  In addition to the other disclosures required by this
chapter, every insurer and their employees or agents shall, when
presenting a  plan   policy  for
examination or sale to any individual or the representative of a
group consisting of  25   50  or fewer
individuals, disclose in writing the ratio of incurred claims to
earned premiums (loss-ratio) for the insurer's preceding calendar
year.  This section shall become operative on March 1, 1991,
in order to allow insurers time to comply with its provisions.
 
  SECTION 1.    Section 1378.1 is added to the
Health and Safety Code, to read:
   1378.1.  (a) Notwithstanding any other provision of law, on and
after January 1, 2013, a full service health care service plan shall
expend in the form of health care benefits no less than 85 percent of
the aggregate dues, fees, premiums, and other periodic payments
received by the plan. For purposes of this section, a full service
health care service plan may deduct from the aggregate dues, fees,
premiums, or other periodic payments received by the plan the amount
of income taxes or other taxes that the plan expensed.
   (b) For purposes of this section, "health care benefits" shall
include, but shall not be limited to, all of the following:
   (1) Health care services that are either provided or reimbursed by
the plan or its contracted providers as covered benefits to its
enrollees and subscribers.
   (2) 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.
   (3) Disease management expenses using cost-effective
evidence-based guidelines.
   (4) Payments to providers as risk pool payments of
pay-for-performance initiatives.
   (5) Plan medical advice by telephone.
   (6) Prescription drug management programs.
   (c) For purposes of this section, "health care benefits" shall not
include administrative costs listed in Section 1300.78 of Title 28
of the California Code of Regulations in effect on January 1, 2007,
agent and broker commission and solicitation costs associated with
the issuance of individual and group health care service plan
contracts, dividends, profits, stock options, assessments or fines
levied by the department, or administrative costs associated with
existing or new regulatory requirements.
   (d) To assess compliance with this section, a health care service
plan may average its total costs across both of the following:
   (1) All health care service plan contracts issued, amended, or
renewed by the plan, or by its affiliated plans, in California,
except those contracts described in subdivision (l).
   (2) 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
subdivision (l) of Section 10113.11 of the Insurance Code.
   (e) The department and the Department of Insurance shall jointly
adopt and amend regulations to implement this section and Section
10113.11 of the Insurance Code to establish uniform reporting by
health care service plans and health insurers of the information
necessary to determine compliance with this section and Section
10113.11 of the Insurance Code. These regulations may include
additional elements in the definition of "health care benefits" not
identified in subdivision (b) in order to consistently operationalize
the requirements of this section among health care service plans and
health insurers, but these regulatory additions shall be consistent
with the legislative intent that a health care service plan expend at
least 85 percent of the aggregate payments received by the plan, as
provided in subdivision (a), on health care benefits.
   (f) The department may exclude from the determination of
compliance with the requirement of subdivision (a) any new health
care service plan contracts for up to the first two years that these
contracts are offered for sale in California, provided that the
director determines that the new contracts are substantially
different from the existing contracts being issued, amended, or
renewed by the plan seeking the exclusion.
   (g) Commencing January 1, 2013, and annually thereafter, a full
service health care service plan licensed to operate in California
shall provide written affirmation to the department that it meets the
requirements of this section.
   (h) Commencing January 1, 2013, a health care service plan subject
to this section shall annually report to the director the medical
loss ratio of each individual and small group health care service
plan product issued, amended, or renewed by the plan in California.
Every health care service plan and its employees or agents shall
disclose this information when presenting a plan for examination or
sale to any individual or the representative of a group consisting of
50 or fewer individuals.
   (i) (1) The department may assess compliance with this section in
its periodic onsite medical survey conducted pursuant to Section 1380
or in nonroutine medical surveys, as appropriate.
    (2) The department shall not make an assessment of any health
care service plan within the 12-month period after the date a plan
has complied with the reporting requirements specified in
subdivisions (g) and (h), unless the plan certifies that it failed to
meet its medical loss ratio, or the department believes the plan's
certification of its medical loss ratio is incorrect.
   (j) The director may disapprove a health care service plan's use
of a plan contract, issue a fine or assessment against a health care
service plan, suspend or revoke the license issued to a health care
service plan under this chapter, or take any other action the
director deems appropriate if the director determines that the plan
has failed to comply with this section.
   (k) Except as provided in subdivision (l), this section shall
apply to all health care service plan contracts issued, amended, or
renewed in California by a full service health care service plan on
or after January 1, 2013.
   (l) This section shall not apply to Medicare supplement plan
contracts, administrative services-only contracts, or other similar
administrative arrangements, or to coverage offered by specialized
health care service plans, including, but not limited to, ambulance,
dental, vision, behavioral health, chiropractic, and naturopathic
coverage.  
  SEC. 2.    Section 10113.11 is added to the
Insurance Code, to read:
   10113.11.  (a) Notwithstanding any other provision of law, on and
after January 1, 2013, a health insurer shall expend in the form of
health care benefits no less than 85 percent of the aggregate dues,
fees, premiums, and other periodic payments received by the insurer.
For purposes of this section, a health insurer may deduct from the
aggregate dues, fees, premiums, or other periodic payments received
by the insurer the amount of income taxes or other taxes that the
insurer expensed.
   (b) For purposes of this section, "health care benefits" shall
include, but shall not be limited to, all of the following:
   (1) Health care services that are either provided or reimbursed by
the insurer or its contracted providers as covered benefits to its
policyholders and insureds.
   (2) 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.
   (3) Disease management expenses using cost-effective
evidence-based guidelines.
   (4) Payments to providers as risk pool payments of
pay-for-performance initiatives.
   (5) Plan medical advice by telephone.
   (6) Prescription drug management programs.
   (c) For purposes of this section, "health care benefits" shall not
include administrative costs listed in Section 1300.78 of Title 28
of the California Code of Regulations in effect on January 1, 2007,
agent and broker commission and solicitation costs associated with
the issuance of individual and group health insurance policies,
dividends, profits, stock options, assessments or fines levied by the
department, or administrative costs associated with existing or new
regulatory requirements.
   (d) To assess compliance with this section, a health insurer may
average its total costs across both of the following:
   (1) All health insurance policies issued, amended, or renewed by
the insurer in California, except those policies listed in
subdivision (l).
   (2) 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 subdivision (l) of Section 1378.1 of the Health and
Safety Code.
   (e) The department and the Department of Managed Health Care shall
jointly adopt and amend regulations to implement this section and
Section 1378.1 of the Health and Safety Code to establish uniform
reporting by health care service plans and health insurers of the
information necessary to determine compliance with this section and
Section 1378.1 of the Health and Safety Code. These regulations may
include additional elements in the definition of "health care
benefits" not identified in subdivision (b) in order to consistently
operationalize the requirements of this section among health care
service plans and health insurers, but these regulatory additions
shall be consistent with the legislative intent that a health insurer
expend at least 85 percent of the aggregate payments received by the
insurer, as provided in subdivision (a), on health care benefits.
   (f) The department may exclude from the determination of
compliance with the requirement of subdivision (a) any new health
insurance policies for up to the first two years that these policies
are offered for sale in California, provided that the commissioner
determines that the new policies are substantially different from the
existing policies being issued, amended, or renewed by the insurer
seeking the exclusion.
   (g) Commencing January 1, 2013, and annually thereafter, a health
insurer holding a certificate of authority to do business in
California shall provide written affirmation to the department that
it meets the requirements of this section.
   (h) Commencing January 1, 2013, a health insurer subject to this
section shall annually report to the commissioner the medical loss
ratio of each individual and small group health insurance policy form
issued, amended, or renewed by the insurer in California. Every
insurer and its employees or agents shall disclose the information
when presenting a policy for examination or sale to any individual or
the representative of a group consisting of 50 or fewer individuals.

   (i) The department shall not make an assessment of any health
insurer within the 12-month period after the date an insurer has
complied with the reporting requirements specified in subdivisions
(g) and (h), unless the insurer certifies that it failed to meet its
medical loss ratio, or the department believes the insurer's
certification of its medical loss ratio is incorrect.
   (j) The commissioner may disapprove a health insurer's use of a
health insurance policy, revoke or suspend the certificate of
authority of a health insurer, issue a fine or assessment against a
health insurer, or take any other action the commissioner deems
appropriate if the commissioner determines that the health insurer
has failed to comply with this section.
   (k) Except as provided in subdivision (l), this section shall
apply to all health insurance policies issued, amended, or renewed in
California on or after January 1, 2013.
   (l) This section shall not apply to 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,
ambulance-only, chiropractic-only, naturopathic-only, or
pharmacy-only policies, CHAMPUS-supplement or TRICARE-supplement
insurance policies, or to hospital indemnity, hospital only, accident
only, or specified disease insurance policies that do not pay
benefits on a fixed benefit, cash payment only basis. 
  SEC. 3.  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.