BILL NUMBER: SB 796	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Alquist and Pavley

                        FEBRUARY 27, 2009

   An act to amend Sections 1366.35 and 1399.801 of, and to repeal
Section 1399.818 of, the Health and Safety Code, and to amend
Sections 10785 and 10900 of, and to repeal Section 10902.6 of, the
Insurance Code, relating to health care coverage.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 796, as introduced, Alquist. Health care coverage: continuation
coverage.
   Existing law provides for licensing and regulation of health care
service plans by the Department of Managed Health Care. Existing law
provides for licensing and regulation of health insurers by the
Insurance Commissioner. A willful violation of provisions governing
health care service plans is a crime.
   Existing law requires health care service plans and health
insurers to offer continuation of group coverage for a specified
period of time to persons who become ineligible for the group
coverage, otherwise known as COBRA or Cal-COBRA. Existing law allows
persons qualifying as "federally eligible defined individuals" for
purposes of the federal Health Insurance Portability and
Accountability Act of 1996 (HIPAA) to enroll in individual health
care coverage offered by plans and insurers without preexisting
condition exclusions, providing they meet certain requirements,
including the election and exhaustion of COBRA or Cal-COBRA coverage
available to them.
   This bill would delete the requirement that a person must elect
and exhaust COBRA or Cal-COBRA coverage in order to qualify for
access to individual health care coverage as a federally eligible
defined individual under HIPAA. By modifying the requirements
applicable to health care service plans, the bill would change the
definition of a crime and would thereby 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 1366.35 of the Health and Safety Code is
amended to read:
   1366.35.  (a)  A health care service plan providing coverage for
hospital, medical, or surgical benefits under an individual health
care service plan contract may not, with respect to a federally
eligible defined individual desiring to enroll in individual health
insurance coverage, decline to offer coverage to, or deny enrollment
of, the individual or impose any preexisting condition exclusion with
respect to the coverage.
   (b)  For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
   (1)  Has had 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002).
   (2)  Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.
   (3)  Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud. 
   (4)  If offered continuation coverage under COBRA or Cal-COBRA,
has elected and exhausted that coverage. 
   (c)  Every health care service plan shall comply with applicable
federal statutes and regulations regarding the provision of coverage
to federally eligible defined individuals, including any relevant
application periods.
   (d)  A health care service plan shall offer the following health
benefit plan contracts under this section that are designed for, made
generally available to, are actively marketed to, and enroll,
individuals: (1) either the two most popular products as defined in
Section 300gg-41(c)(2) of Title 42 of the United States Code and
Section 148.120(c)(2) of Title 45 of the Code of Federal Regulations
or (2) the two most representative products as defined in Section
300gg-41(c)(3) of the United States Code and Section 148.120(c)(3) of
Title 45 of the Code of Federal Regulations, as determined by the
plan in compliance with federal law. A health care service plan that
offers only one health benefit plan contract to individuals,
excluding health benefit plans offered to Medi-Cal or Medicare
beneficiaries, shall be deemed to be in compliance with this article
if it offers that health benefit plan contract to federally eligible
defined individuals in a manner consistent with this article.
   (e)  (1)  In the case of a health care service plan that offers
health insurance coverage in the individual market through a network
plan, the plan may do both of the following:
   (A)  Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
   (B)  Within the service area of the plan, deny coverage to
individuals if the plan has demonstrated to the director that the
plan will not have the capacity to deliver services adequately to
additional individual enrollees because of its obligations to
existing group contractholders and enrollees and individual
enrollees, and that the plan is applying this paragraph uniformly to
individuals without regard to any health status related factor of the
individuals and without regard to whether the individuals are
federally eligible defined individuals.
   (2)  A health care service plan, upon denying health insurance
coverage in any service area in accordance with subparagraph (B) of
paragraph (1), may not offer coverage in the individual market within
that service area for a period of 180 days after the coverage is
denied.
   (f)  (1)  A health care service plan may deny health insurance
coverage in the individual market to a federally eligible defined
individual if the plan has demonstrated to the director both of the
following:
   (A)  The plan does not have the financial reserves necessary to
underwrite additional coverage.
   (B)  The plan is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible individuals.
   (2)  A health care service plan, upon denying individual health
insurance coverage in any service area in accordance with paragraph
(1), may not offer that coverage in the individual market within that
service area for a period of 180 days after the date the coverage is
denied or until the issuer has demonstrated to the director that the
plan has sufficient financial reserves to underwrite additional
coverage, whichever is later.
   (g)  The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health insurance
coverage offered by a health care service plan in the individual
market in the same manner as it applies to a health care service plan
in connection with a group health benefit plan.
   (h)  A health care service plan shall compensate a life agent or
fire and casualty broker-agent whose activities result in the
enrollment of federally eligible defined individuals in the same
manner and consistent with the renewal commission amounts as the plan
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan contract.
   (i)  Every health care service plan shall disclose as part of its
COBRA or Cal-COBRA disclosure and enrollment documents, an
explanation of the availability of guaranteed access to coverage
under the Health Insurance Portability and Accountability Act of 1996
 , including the necessity to enroll in and exhaust COBRA or
Cal-COBRA benefits  in order to become a federally eligible
defined individual.
   (j)  No health care service plan may request documentation as to
whether or not a person is a federally eligible defined individual
other than is permitted under applicable federal law or regulations.
   (k)  This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code. 
   ( )  This section shall apply to health care service plan
contracts offered, delivered, amended, or renewed on or after January
1, 2001. 
  SEC. 2.  Section 1399.801 of the Health and Safety Code is amended
to read:
   1399.801.  As used in this article:
   (a)  "Creditable coverage" means:
   (1)  Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other plans. The term includes continuation or conversion
coverage but does not include accident only, credit, disability
income, Medicare supplement, long-term care, dental, vision, coverage
issued as a supplement to liability insurance, insurance arising out
of a workers' compensation or similar law, automobile medical
payment insurance, or insurance under which benefits are payable with
or without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
   (2)  The federal Medicare program pursuant to Title XVIII of the
Social Security Act.
   (3)  The medicaid program pursuant to Title XIX of the Social
Security Act.
   (4)  Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5)  10 U.S.C.A. Chapter 55 (commencing with Section 1071)
(CHAMPUS).
   (6)  A medical care program of the Indian Health Service or of a
tribal organization.
   (7)  A state health benefits risk pool.
   (8)  A health plan offered under 5 U.S.C.A. Chapter 89 (commencing
with Section 8901) (FEHBP).
   (9)  A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)( ) of the Public Health Service Act,
as amended by Public Law 104-191, the Health Insurance Portability
and Accountability Act of 1996.
   (10)  A health benefit plan under 22 U.S.C.A. 2504(e) of the Peace
Corps Act.
   (b)  "Dependent" means the spouse or child of an eligible
individual or other individual applying for coverage, subject to
applicable terms of the health care plan contract covering the
eligible person.
   (c)  "Federally eligible defined individual" means an individual
who as of the date on which the individual seeks coverage under this
part, (1) has 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002), (2) is
not eligible for coverage under a group health plan, Medicare, or
Medi-Cal, and has no other health insurance coverage,  and 
(3) was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud  , and (4) if
offered continuation coverage under COBRA or Cal-COBRA, had elected
and exhausted this coverage  .
   (d)  "In force business" means an existing health benefit plan
contract issued by the plan to a federally eligible defined
individual.
   (e)  "New business" means a health care service plan contract
issued to an eligible individual that is not the plan's in force
business.
   (f)  "Preexisting condition provision" means a contract provision
that excludes coverage for charges and expenses incurred during a
specified period following the eligible individual's effective date,
as to a condition for which medical advice, diagnosis, and care of
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
  SEC. 3.  Section 1399.818 of the Health and Safety Code is
repealed. 
   1399.818.  This article shall apply to health care service plan
contracts offered, delivered, amended, or renewed on or after January
1, 2001. 
  SEC. 4.  Section 10785 of the Insurance Code is amended to read:
   10785.  (a) A disability insurer that covers hospital, medical, or
surgical expenses under an individual health benefit plan as defined
in subdivision (a) of Section 10198.6 may not, with respect to a
federally eligible defined individual desiring to enroll in
individual health insurance coverage, decline to offer coverage to,
or deny enrollment of, the individual or impose any preexisting
condition exclusion with respect to the coverage.
   (b) For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
   (1) Has had 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002).
   (2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.
   (3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud. 
   (4) If offered continuation coverage under COBRA or Cal-COBRA, has
elected and exhausted that coverage. 
   (c) Every disability insurer that covers hospital, medical, or
surgical expenses shall comply with applicable federal statutes and
regulations regarding the provision of coverage to federally eligible
defined individuals, including any relevant application periods.
   (d) A disability insurer shall offer the following health benefit
plans under this section that are designed for, made generally
available to, are actively marketed to, and enroll, individuals: (1)
either the two most popular products as defined in Section 300gg-41
(c)(2) of Title 42 of the United States Code and Section 148.120(c)
(2) of Title 45 of the Code of Federal Regulations or (2) the two
most representative products as defined in Section 300gg-41(c)(3) of
the United States Code and Section 148.120(c)(3) of Title 45 of the
Code of Federal Regulations, as determined by the insurer in
compliance with federal law. An insurer that offers only one health
benefit plan to individuals, excluding health benefit plans offered
to Medi-Cal or Medicare beneficiaries, shall be deemed to be in
compliance with this chapter if it offers that health benefit plan
contract to federally eligible defined individuals in a manner
consistent with this chapter.
   (e) (1) In the case of a disability insurer that offers health
benefit plans in the individual market through a network plan, the
insurer may do both of the following:
   (A) Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
   (B) Within the service area covered by the health benefit plan,
deny coverage to individuals if the insurer has demonstrated to the
commissioner that the insured will not have the capacity to deliver
services adequately to additional individual insureds because of its
obligations to existing group policyholders, group contractholders
and insureds, and individual insureds, and that the insurer is
applying this paragraph uniformly to individuals without regard to
any health status-related factor of the individuals and without
regard to whether the individuals are federally eligible defined
individuals.
   (2) A disability insurer, upon denying health insurance coverage
in any service area in accordance with subparagraph (B) of paragraph
(1), may not offer health benefit plans through a network in the
individual market within that service area for a period of 180 days
after the coverage is denied.
   (f) (1) A disability insurer may deny health insurance coverage in
the individual market to a federally eligible defined individual if
the insurer has demonstrated to the commissioner both of the
following:
   (A) The insurer does not have the financial reserves necessary to
underwrite additional coverage.
   (B) The insurer is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible defined individuals.
   (2) A disability insurer, upon denying individual health insurance
coverage in any service area in accordance with paragraph (1), may
not offer that coverage in the individual market within that service
area for a period of 180 days after the date the coverage is denied
or until the insurer has demonstrated to the commissioner that the
insurer has sufficient financial reserves to underwrite additional
coverage, whichever is later.
   (g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health benefits
plans offered by a disability insurer in the individual market in the
same manner as it applies to an insurer in connection with a group
health benefit plan policy or group health benefit plan contract.
   (h) A disability insurer shall compensate a life agent or fire and
casualty broker-agent whose activities result in the enrollment of
federally eligible defined individuals in the same manner and
consistent with the renewal commission amounts as the insurer
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan.
   (i) Every disability insurer shall disclose as part of its COBRA
or Cal-COBRA disclosure and enrollment documents, an explanation of
the availability of guaranteed access to coverage under the Health
Insurance Portability and Accountability Act of 1996  ,
including the necessity to enroll in and exhaust COBRA or Cal-COBRA
benefits in order to become a federally eligible defined individual
 .
   (j) No disability insurer may request documentation as to whether
or not a person is a federally eligible defined individual other than
is permitted under applicable federal law or regulations.
   (k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code. 
   () This section shall apply to policies or contracts offered,
delivered, amended, or renewed on or after January 1, 2001. 

  SEC. 5.  Section 10900 of the Insurance Code is amended to read:
   10900.  As used in this chapter:
   (a) "Benefit plan design" means a specific health coverage policy
issued by a carrier to individuals, to trustees of associations that
cover individuals. It includes services covered and the levels of
copayment and deductibles, and it may include the professional
providers who are to provide those services and the sites where those
services are to be provided. A benefit plan design may also be an
integrated system for the financing and delivery of quality health
services that has significant incentives for the covered individuals
to use the system.
   (b) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans, as
defined in subdivision (a) of Section 10198.6, that cover
individuals, regardless of the situs of the contract or master
policyholder.
   (c) "Creditable coverage" means:
   (1) Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other plans. The term includes continuation or conversion
coverage but does not include accident only, credit, disability
income, Champus supplement, Medicare supplement, long-term care,
dental, vision, coverage issued as a supplement to liability
insurance, insurance arising out of a workers' compensation or
similar law, automobile medical payment insurance, or insurance under
which benefits are payable with or without regard to fault and that
is statutorily required to be contained in any liability insurance
policy or equivalent self-insurance.
   (2) The federal Medicare program pursuant to Title XVIII of the
Social Security Act.
   (3) The medicaid program pursuant to Title XIX of the Social
Security Act.
   (4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5) 10 U.S.C.A. Chapter 55 (commencing with Section 1071)
(CHAMPUS).
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A state health benefits risk pool.
   (8) A health plan offered under 5 U.S.C.A. Chapter 89 (commencing
with Section 8901) (FEHBP).
   (9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)() of the Public Health Service Act,
as amended by Public Law 104-191.
   (10) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C.A. 2504(e)).
   (d) "Dependent" means the spouse or child of an eligible
individual or other individual applying for coverage, subject to
applicable terms of the health benefit plan covering the eligible
person.
   (e) "Federally eligible defined individual" means an individual
who as of the date on which the individual seeks coverage under this
part, (1) has 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002), (2) is
not eligible for coverage under an employer-sponsored health benefit
plan, Medicare, or Medi-Cal, and has no other health insurance
coverage,  and  (3) was not terminated from his or her most
recent creditable coverage due to nonpayment of premiums or fraud
 , and (4) if offered continuation coverage under COBRA or
Cal-COBRA, had elected and exhausted such coverage  .
   (f) "In force business" means an existing health benefit plan
issued by a carrier to a federally eligible defined individual.
   (g) "New business" means a health benefit plan issued to an
eligible individual that is not the carrier's in force business.
   (h) "Preexisting condition provision" means a policy provision
that excludes coverage for charges and expenses incurred during a
specified period following the eligible individual's effective date,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
  SEC. 6.  Section 10902.6 of the Insurance Code is repealed.

   10902.6.  This chapter shall apply to policies or contracts
offered, delivered, amended, or renewed on or after January 1, 2001.

  SEC. 7.  The changes made by Sections 1, 2, 4, and 5 of this act
shall apply to plan contracts, or policies or contracts, as the case
may be, that are offered, delivered, amended, or renewed on or after
January 1, 2010.
  SEC. 8.  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.