BILL NUMBER: SB 890 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 16, 2010
AMENDED IN ASSEMBLY AUGUST 2, 2010
AMENDED IN ASSEMBLY JUNE 15, 2010
AMENDED IN SENATE MAY 20, 2010
AMENDED IN SENATE APRIL 27, 2010
AMENDED IN SENATE APRIL 13, 2010
AMENDED IN SENATE APRIL 6, 2010
INTRODUCED BY Senators Alquist and Steinberg
(Coauthors: Assembly Members De La Torre, Feuer, and Jones)
JANUARY 21, 2010
An act to amend Sections 1363 and 1389.25 of, to add
Section 1367.001 to, and to add Article 4.1 (commencing with Section
1366.10) to Chapter 2.2 of Division 2 of, the Health and Safety Code,
and to amend Sections 10113.9, 10603, and 10604 of, to add Sections
10112.56, 10112.57, and 10604.2 to, and to add Chapter 9.6
(commencing with Section 10960) to Part 2 of Division 2 of, the
An act to amend Section 1389.5 of, and to add Sections
1366.5 and 1367.001 to, the Health and Safety Code, and
to amend Section 10119.1 of, to add Sections 10112.56, 10112.57, and
10112.58 to, the Insurance Code, relating to health care
coverage.
LEGISLATIVE COUNSEL'S DIGEST
SB 890, as amended, Alquist. Health care coverage.
Existing law, the federal Patient Protection and Affordable Care
Act, on and after January 1, 2014, requires a health insurance issuer
offering health insurance coverage in the individual or group market
to accept every employer and individual in the state that applies
for that coverage, as specified, and requires issuers in the
individual and small group markets to ensure that the coverage
includes a specified essential benefits package. Among other
things, the act allows premiums for that individual or small group
coverage to vary only by rating area, age, tobacco use, and whether
the coverage is for an individual or family, as specified.
The act requires an essential health benefits package to provide
coverage in one of 5 levels based on actuarial value, as specified.
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 provides for the
regulation of health insurers by the Department of Insurance.
Existing law imposes various requirements with respect to
individual contracts and policies issued by health care service plans
and health insurers. Existing law requires a health care service
plan to permit, at least once each year, an individual who has been
covered for at least 18 months under an individual plan contract
issued by the health care service plan to transfer, without medical
underwriting, as defined, to another individual plan contract offered
by the health care service plan having equal or lesser benefits, as
specified. Existing law imposes a parallel requirement with respect
to individual policies issued by health insurers.
This bill would, commencing July 1, 2011, require plans and
insurers issuing individual coverage to make certain standard benefit
plan designs available to individuals, would require that these
designs be offered in 6 different coverage choice categories, as
specified, and would require a plan or insurer to market one standard
benefit plan design in each category. The bill would require plans
to, on and after July 1, 2011, discontinue offering and selling
benefit plan designs other than the standard benefit plan designs,
but would require plans and insurers to renew benefit plan designs
issued prior to that date. The bill would, commencing July 1, 2011,
allow a subscriber or policyholder of an individual contract or
policy, on the annual renewal date of that contract or policy, to
transfer on a guarantee issue basis to another benefit plan design
issued by his or her plan or insurer or a benefit plan design issued
by another plan or insurer, provided that the new plan design is in
the same or a lower coverage choice category or has an equal or lower
actuarial value, as specified. The bill would require plans and
insurers to provide notice of these transfer rights in their evidence
of coverage and in notices regarding changes to premiums or
coverage.
The bill would, commencing July 1, 2011, create the Individual
Insurance Market Reform Commission, which would consist of 9 voting
members, appointed by the Legislature and the Governor, as specified,
and 3 specified nonvoting members. The bill would require the
commission to review and suggest changes to the standard benefit plan
designs described above and would require the Department of Managed
Health Care and the Department of Insurance to jointly adopt
regulations based on those suggestions. The bill would require the
commission to develop a standardized enrollment questionnaire to be
used by all plans and insurers when offering and selling individual
coverage, but would prohibit plans and insurers from requesting or
obtaining health information from applicants eligible for guaranteed
issuance of coverage on and after January 1, 2014. The bill would
also require the commission to establish a methodology for the
graduation of risk into 3 specified categories and would require
plans and insurers in the individual market to set rates consistent
with this methodology. The bill would place limits on the annualized
premium rate increase for a contract and the variation between the
highest standard premium rate and the lowest standard premium rate
and would enact other related provisions.
This bill would eliminate the 18-month requirement and would
require plans and insurers to allow an individual to transfer to
another individual contract or policy without medical underwriting on
the annual renewal date of his or her contract or policy. Commencing
July 1, 2011, the bill would require plans and insurers to
categorize all products offered in the individual market into 5 tiers
according to actuarial value, as specified, and would require plans
and insurers to disclose this value and other information in certain
disclosure forms.
Existing law requires health care service plan contracts and
health insurance policies to provide coverage for certain benefits.
Under existing law, health care service plan contracts are required,
subject to certain exemptions, to provide basic health care services,
as defined, among other benefits.
This bill would require health insurance policies issued, amended,
or renewed on or after July 1, 2011, to provide coverage for
medically necessary basic health care services, as defined.
Existing law prohibits a health care service plan from expending
for administrative costs, as defined, an excessive amount of the
payments the plan receives for providing health care services to its
subscribers and enrollees. 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.
The federal Patient Protection and Affordable Care Act prohibits a
health insurance issuer issuing health insurance coverage from
establishing lifetime limits or unreasonable annual limits on the
dollar value of benefits for any participant or beneficiary, as
specified. The act also requires a health insurance issuer issuing
health insurance coverage to provide an annual rebate to each
enrollee if the ratio of the amount of the revenue expended by the
issuer on costs to the total amount of premium revenue is less than a
certain percentage, as specified.
This bill would require health care service plans and health
insurers to comply with the applicable
requirements imposed under those provisions to the extent
required under federal law .
Existing law requires health care service plans and health
insurers to use disclosure forms containing certain information in
order to provide a full and fair disclosure of the provisions of a
contract or policy, as specified.
This bill would require that this disclosure be made available on
the plan's or insurer's Internet Web site. With respect to individual
plan contracts or policies, the bill would require the form to
include provisions relating to an individual's right to apply for any
benefit plan design issued by the plan or insurer at the time of
application for a new contract or policy and at the time of renewal
of a contract or policy and information concerning the availability
of a listing of all the contracts or policies and benefit designs
offered to individuals by the plan or insurer, as specified. The bill
would make these provisions apply as of July 1, 2011.
Existing law requires each health care service plan offering a
contract to an individual or small group to provide a uniform health
plan benefits and coverage matrix containing the plan's major
provisions, as specified.
This bill would, commencing July 1, 2011, also impose that
requirement on health insurers offering policies to individual or
small groups and would, with respect to both plans and insurers,
require that the matrix be made available on the plan's or insurer's
Internet Web site.
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 1366.5 is added to the
Health and Safety Code , to read:
1366.5. (a) Effective July 1, 2011, a health care service plan
shall categorize all products offered or renewed in the individual
market in accordance with this section.
(b) From July 1, 2011, to December 31, 2013, inclusive, each
product offered or renewed in the individual market shall be
categorized on the basis of actuarial value into one of the following
tiers:
(1) Bronze level for products with an actuarial value of 60 to 69
percent, inclusive.
(2) Silver level for products with an actuarial value of 70 to 79
percent, inclusive.
(3) Gold level for products with an actuarial value of 80 to 89
percent, inclusive.
(4) Platinum level for products with an actuarial value of 90
percent or greater.
(5) Catastrophic coverage for products with an actuarial value
less than 60 percent.
(c) On and after January 1, 2014, each product offered or renewed
in the individual market shall be categorized on the basis of
actuarial value into one of the following tiers:
(1) Bronze level for products with an actuarial value equal to 60
percent.
(2) Silver level for products with an actuarial value equal to 70
percent.
(3) Gold level for products with an actuarial value equal to 80
percent.
(4) Platinum level for products with an actuarial value equal to
90 percent.
(5) Catastrophic coverage for products with an actuarial value
less than 60 percent.
(d) In establishing the actuarial value of products for purposes
of this section, a health care service plan shall use the method of
calculating actuarial value contained in subdivision (d) of Section
1302 of the federal Patient Protection and Affordable Care Act
(Public Law 111-148) and the regulations adopted under that section.
The plan shall also use a qualified actuary to certify the accuracy
of the required categorization.
(e) The department may review the categorization of any product
under this section for accuracy, including, but not limited to, the
methodology used by the plan to establish actuarial value.
(f) As part of the disclosure form required by Section 1363 for an
individual plan contract, a health care service plan shall include
the actuarial value of the particular product reflected in the
contract, as determined under this section, along with an explanation
of actuarial value in easily understood language expressed as a
percentage of expenses paid by insurance versus out-of-pocket. In
addition, the disclosure shall include an estimate of the annual
out-of-pocket expenses of an individual in average health who is
enrolled in the product, and the total annual cost (the sum of the
premium plus out-of-pocket costs) of an individual of average health
who is enrolled in the product. The disclosure shall also state that
an individual's share of cost may be more or less depending on his or
her illness or health condition. The disclosure shall also include
the following statement:
"Please examine the other features of this product carefully,
including prescription drug coverage, exclusion of specific
conditions, and other costs such as copayments and deductibles."
(g) This section shall not apply to Medicare supplement contracts
or to specialized health care service plan contracts.
SEC. 2. Section 1367.001 is added to the
Health and Safety Code , to read:
1367.001. (a) To the extent required by federal law, every health
care service plan that issues, sells, renews, or offers contracts
for health care coverage in this state shall comply with the
requirements of Section 2711 of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-11) and any rules or regulations issued under
that section, in addition to any state laws or regulations that do
not prevent the application of those requirements.
(b) To the extent required by federal law, every health care
service plan that issues, sells, renews, or offers contracts for
health care coverage in this state shall comply with the requirements
of Section 2718 of the federal Public Health Service Act (42 U.S.C.
Sec. 300gg-18) and any rules or regulations issued under that
section.
SEC. 3. Section 1389.5 of the Health
and Safety Code is amended to read:
1389.5. (a) This section shall apply to a health care service
plan that provides coverage under an individual plan contract that is
issued, amended, delivered, or renewed on or after January 1,
2007 2011 .
(b) At least once each year, Upon the
annual renewal date of an individual health care service plan
contract, the health care service plan shall permit an
individual who has been covered for at
least 18 months under an individual plan under the
contract to transfer, without medical underwriting, to any
other individual plan contract offered by that same health care
service plan that provides equal or lesser benefits, as determined by
the plan.
"Without medical underwriting" means that the health care service
plan shall not decline to offer coverage to, or deny enrollment of,
the individual or impose any preexisting condition exclusion on the
individual who transfers to another individual plan contract pursuant
to this section.
(c) The plan shall establish, for the purposes of subdivision (b),
a ranking of the individual plan contracts it offers to individual
purchasers and post the ranking on its Internet Web site or make the
ranking available upon request. The plan shall update the ranking
whenever a new benefit design for individual purchasers is approved.
(d) The plan shall notify in writing all enrollees of the right to
transfer to another individual plan contract pursuant to this
section, at a minimum, when the plan changes the enrollee's premium
rate. Posting this information on the plan's Internet Web site shall
not constitute notice for purposes of this subdivision. The notice
shall adequately inform enrollees of the transfer rights provided
under this section, including information on the process to obtain
details about the individual plan contracts available to that
enrollee and advising that the enrollee may be unable to return to
his or her current individual plan contract if the enrollee transfers
to another individual plan contract.
(e) The requirements of this section shall not apply to the
following:
(1) A federally eligible defined individual, as defined in
subdivision (c) of Section 1399.801, who is enrolled in an individual
health benefit plan contract offered pursuant to Section 1366.35.
(2) An individual offered conversion coverage pursuant to Section
1373.6.
(3) Individual coverage under a specialized health care service
plan contract.
(4) An individual enrolled in the Medi-Cal program pursuant to
Chapter 7 (commencing with Section 14000) of Division 9 of Part 3 of
the Welfare and Institutions Code.
(5) An individual enrolled in the Access for Infants and Mothers
Program pursuant to Part 6.3 (commencing with Section 12695) of
Division 2 of the Insurance Code.
(6) An individual enrolled in the Healthy Families Program
pursuant to Part 6.2 (commencing with Section 12693) of Division 2 of
the Insurance Code.
(f) It is the intent of the Legislature that individuals shall
have more choice in their health coverage when health care service
plans guarantee the right of an individual to transfer to another
product based on the plan's own ranking system. The
Legislature does not intend for the department to review or verify
the plan's ranking for actuarial or other purposes.
SEC. 4. Section 10112.56 is added to the
Insurance Code , to read:
10112.56. (a) For purposes of this section, "basic health care
services" has the same meaning as that set forth in Section 1345 of
the Health and Safety Code and in Section 1300.67 of Title 28 of the
California Code of Regulations.
(b) A health insurance policy issued, amended, or renewed on or
after July 1, 2011, shall provide coverage for medically necessary
basic health care services.
(c) Nothing in this section shall prohibit a health insurer from
charging policyholders or insureds a copayment or a deductible for a
basic health care service or from setting forth, by contract,
limitations on maximum coverage of basic health care services,
provided that the copayments, deductibles, or limitations are
reported to, and held unobjectionable by, the commissioner and set
forth to the policyholder or insured pursuant to the disclosure
provisions of Section 10604.
(d) This section shall not apply to specialized health insurance
policies, Medicare supplement policies, CHAMPUS-supplement insurance
policies, TRICARE supplement insurance policies, accident-only
insurance policies, or insurance policies excluded from the
definition of "health insurance" under subdivision (b) of Section
106.
SEC. 5. Section 10112.57 is added to the
Insurance Code , to read:
10112.57. (a) To the extent required by federal law, every health
insurer that issues, sells, renews, or offers policies for health
care coverage in this state shall comply with the requirements of
Section 2711 of the federal Public Health Service Act (42 U.S.C. Sec.
300gg-11) and any rules or regulations issued under that section, in
addition to any state laws or regulations that do not prevent the
application of those requirements.
(b) To the extent required by federal law, every health insurer
that issues, sells, renews, or offers policies for health care
coverage in this state shall comply with the requirements of Section
2718 of the federal Public Health Service Act (42 U.S.C. Sec.
300gg-18) and any rules or regulations issued under that section.
SEC. 6. Section 10112.58 is added to the
Health and Safety Code , to read:
10112.58. (a) Effective July 1, 2011, a health insurer shall
categorize all products offered or renewed in the individual market
in accordance with this section.
(b) From July 1, 2011, to December 31, 2013, inclusive, each
product offered or renewed in the individual market shall be
categorized on the basis of actuarial value into one of the following
tiers:
(1) Bronze level for products with an actuarial value of 60 to 69
percent, inclusive.
(2) Silver level for products an actuarial value of 70 to 79
percent, inclusive.
(3) Gold level for products with an actuarial value of 80 to 89
percent, inclusive.
(4) Platinum level for products with an actuarial value of 90
percent or greater.
(5) Catastrophic coverage for products with an actuarial value
less than 60 percent.
(c) On and after January 1, 2014, each product offered or renewed
in the individual market shall be categorized on the basis of
actuarial value into one of the following tiers:
(1) Bronze level for products with an actuarial value equal to 60
percent.
(2) Silver level for products with an actuarial value equal to 70
percent.
(3) Gold level for products with an actuarial value equal to 80
percent.
(4) Platinum level for products with an actuarial value equal to
90 percent.
(5) Catastrophic coverage for products with an actuarial value
less than 60 percent.
(d) In establishing the actuarial value of products for purposes
of this section, a health insurer shall use the method of calculating
actuarial value contained in subdivision (d) of Section 1302 of the
federal Patient Protection and Affordable Care Act (Public Law
111-148) and any regulations adopted under that section. The insurer
shall also use a qualified actuary to certify the accuracy of the
required categorization.
(e) The department may review the categorization of any product
under this section for accuracy, including, but not limited to, the
methodology used by the insurer to establish actuarial value.
(f) As part of the disclosure form required by Section 10603 for
an individual health insurance policy, a health insurer shall include
the actuarial value of the particular product reflected in the
policy, as determined under this section, along with an explanation
of actuarial value in easily understood language expressed as a
percentage of expenses paid by insurance versus out-of-pocket. In
addition, the disclosure shall include an estimate of the annual
out-of-pocket expenses of an individual in average health who is
enrolled in the product, and the total annual cost (the sum of the
premium plus out-of-pocket costs) of an individual of average health
who is enrolled in the product. The disclosure shall also state that
an individual's share of cost may be more or less depending on his or
her illness or health condition. The disclosure shall also include
the following statement:
"Please examine the other features of this product carefully,
including prescription drug coverage, exclusion of specific
conditions, and other costs such as copayments and deductibles."
(g) This section shall not apply to Medicare supplement policies
or to specialized health insurance.
SEC. 7. Section 10119.1 of the
Insurance Code is amended to read:
10119.1. (a) This section shall apply to a health insurer that
covers hospital, medical, or surgical expenses under an individual
health benefit plan, as defined in subdivision (a) of Section
10198.6, that is issued, amended, renewed, or delivered on or after
January 1, 2007 2011 .
(b) At least once each year, Upon the
annual renewal date of an individual health benefit plan, a
health insurer shall permit an individual who has been
covered for at least 18 months under an individual
under the health benefit plan to transfer,
without medical underwriting, to any other individual health benefit
plan offered by that same health insurer that provides equal or
lesser benefits as determined by the insurer.
"Without medical underwriting" means that the health insurer shall
not decline to offer coverage to, or deny enrollment of, the
individual or impose any preexisting condition exclusion on the
individual who transfers to another individual health benefit plan
pursuant to this section.
(c) The insurer shall establish, for the purposes of subdivision
(b), a ranking of the individual health benefit plans it offers to
individual purchasers and post the ranking on its Internet Web site
or make the ranking available upon request. The insurer shall update
the ranking whenever a new benefit design for individual purchasers
is approved.
(d) The insurer shall notify in writing all insureds of the right
to transfer to another individual health benefit plan pursuant to
this section, at a minimum, when the insurer changes the insured's
premium rate. Posting this information on the insurer's Internet Web
site shall not constitute notice for purposes of this subdivision.
The notice shall adequately inform insureds of the transfer rights
provided under this section including information on the process to
obtain details about the individual health benefit plans available to
that insured and advising that the insured may be unable to return
to his or her current individual health benefit plan if the insured
transfers to another individual health benefit plan.
(e) The requirements of this section shall not apply to the
following:
(1) A federally eligible defined individual, as defined in
subdivision (e) of Section 10900, who purchases individual coverage
pursuant to Section 10785.
(2) An individual offered conversion coverage pursuant to Sections
12672 and 12682.1.
(3) An individual enrolled in the Medi-Cal program pursuant to
Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of
the Welfare and Institutions Code.
(4) An individual enrolled in the Access for Infants and Mothers
Program, pursuant to Part 6.3 (commencing with Section 12695).
(5) An individual enrolled in the Healthy Families Program
pursuant to Part 6.2 (commencing with Section 12693).
(f) It is the intent of the Legislature that individuals shall
have more choice in their health care coverage when health insurers
guarantee the right of an individual to transfer to another product
based on the insurer's own ranking system. The Legislature
does not intend for the department to review or verify the insurer's
ranking for actuarial or other purposes.
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. All matter omitted in this version of
the bill appears in the bill as amended in the Assembly, August 2,
2010. (JR11)