BILL NUMBER: SB 890	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 31, 2010
	PASSED THE ASSEMBLY  AUGUST 30, 2010
	AMENDED IN ASSEMBLY  AUGUST 25, 2010
	AMENDED IN ASSEMBLY  AUGUST 24, 2010
	AMENDED IN ASSEMBLY  AUGUST 20, 2010
	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 Section 1389.5 of, and to add Sections 1366.5,
1367.001, and 1367.003 to, the Health and Safety Code, and to amend
Section 10119.1 of, and to add Sections 10112.1, 10112.3, and
10112.58 to, the Insurance Code, relating to health care coverage.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 890, 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. 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 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 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 requirements imposed under those
provisions to the extent required under federal law.
   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.


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 55 to 64
percent, inclusive.
   (2) Silver level for products with an actuarial value of 65 to 74
percent, inclusive.
   (3) Gold level for products with an actuarial value of 75 to 84
percent, inclusive.
   (4) Platinum level for products with an actuarial value of 85
percent or greater.
   (5) Catastrophic coverage for products with an actuarial value
less than 55 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 categorizing the actuarial value of products for purposes
of subdivision (c), a health care service plan may have a de minimis
variation from the actuarial values set forth in that subdivision.
   (e) (1) By July 1, 2011, the department shall, jointly with the
Department of Insurance, adopt a common actuarial model, which shall
be used by health care service plans to categorize products in the
individual market within one year of the date the model is adopted.
The model shall be updated at least every three years and shall
reflect the applicable method of calculating actuarial value
described in subdivision (f). The adoption and update of the model
shall be exempt from the rulemaking provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code.
   (2) In lieu of establishing a common actuarial model under
paragraph (1), the department may instead require health care service
plans to categorize their products for purposes of this section
using a qualified actuary and the applicable method of calculating
actuarial value described in subdivision (f). A plan shall submit to
the department a copy of the actuarial value calculations, as well as
a certification signed by the qualified actuary, in a manner and
format specified by the department.
   (f) Until January 1, 2014, the benefits required to be covered
under this chapter shall be used to determine the denominator of the
actuarial value calculation using a standard population. On and after
January 1, 2014, actuarial value shall be calculated using the
method contained in subdivision (d) of Section 1302 of the federal
Patient Protection and Affordable Care Act (Public Law 111-148) and
the regulations adopted thereunder.
   (g) A plan shall use a qualified actuary to certify the accuracy
of its calculations under this section. After the implementation of
the common actuarial model under paragraph (1) of subdivision (e),
the plan shall use a qualified actuary to also certify that its
categorization meets the requirements established in the actuarial
model.
   (h) (1) 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.
   (2) The department may require the submission of any information
needed to categorize products pursuant to this section.
   (i) 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 the plan 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 age, 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."
   (j) This section shall not apply to Medicare supplement contracts
or to specialized health care service plan contracts.
   (k) For purposes of this section, "qualified actuary" means an
actuary who is a member of the American Academy of Actuaries, who is
qualified to perform such work, and who meets the Qualification
Standards for Actuaries Issuing Statements of Actuarial Opinion in
the United States as promulgated by the American Academy of
Actuaries.
  SEC. 2.  Section 1367.001 is added to the Health and Safety Code,
to read:
   1367.001.  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.
  SEC. 3.  Section 1367.003 is added to the Health and Safety Code,
to read:
   1367.003.  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. 4.  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, 2011.
   (b) Upon the annual renewal date of an individual health care
service plan contract, the health care service plan shall permit an
individual covered 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.
  SEC. 5.  Section 10112.1 is added to the Insurance Code, to read:
   10112.1.  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.
  SEC. 6.  Section 10112.3 is added to the Insurance Code, to read:
   10112.3.  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. 7.  Section 10112.58 is added to the Insurance 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 55 to 64
percent, inclusive.
   (2) Silver level for products with an actuarial value of 65 to 74
percent, inclusive.
   (3) Gold level for products with an actuarial value of 75 to 84
percent, inclusive.
   (4) Platinum level for products with an actuarial value of 85
percent or greater.
   (5) Catastrophic coverage for products with an actuarial value
less than 55 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 categorizing the actuarial value of products for purposes
of subdivision (c), a health insurer may have a de minimis variation
from the actuarial values set forth in that subdivision.
   (e) (1) By July 1, 2011, the department shall, jointly with the
Department of Managed Health Care, adopt a common actuarial model,
which shall be used by health insurers to categorize products in the
individual market within one year of the date the model is adopted.
The model shall be updated at least every three years and shall
reflect the applicable method of calculating actuarial value
described in subdivision (f). The adoption and update of the model
shall be exempt from the rulemaking provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code.
   (2) In lieu of establishing a common actuarial model under
paragraph (1), the department may instead require health insurers to
categorize their products for purposes of this section using a
qualified actuary and the applicable method of calculating actuarial
value described in subdivision (f). An insurer shall submit to the
department a copy of the actuarial value calculations, as well as a
certification signed by the qualified actuary, in a manner and format
specified by the department.
   (f) Until January 1, 2014, the benefits required to be covered
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) shall be used to determine the denominator of the
actuarial value calculation using a standard population. Nothing in
this subdivision shall be construed to require an insurer to provide
the benefits required under the Knox-Keene Health Care Service Plan
Act of 1975. On and after January 1, 2014, actuarial value shall be
calculated using the method contained in subdivision (d) of Section
1302 of the federal Patient Protection and Affordable Care Act
(Public Law 111-148) and the regulations adopted thereunder.
   (g) An insurer shall use a qualified actuary to certify the
accuracy of its calculations under this section. After the
implementation of the common actuarial model under paragraph (1) of
subdivision (e), the insurer shall use a qualified actuary to also
certify that its categorization meets the requirements established in
the actuarial model.
   (h) (1) 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.

   (2) The department may require the submission of any information
needed to categorize products pursuant to this section.
   (i) 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 age, 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."
   (j) This section shall not apply to Medicare supplement,
CHAMPUS-supplement, specified disease, TRICARE supplement, or
accident-only insurance policies, to specialized health insurance
policies, or to insurance policies excluded from the definition of
"health insurance" under subdivision (b) of Section 106.
   (k) For purposes of this section, "qualified actuary" means an
actuary who is a member of the American Academy of Actuaries, who is
qualified to perform such work, and who meets the Qualification
Standards for Actuaries Issuing Statements of Actuarial Opinion in
the United States as promulgated by the American Academy of
Actuaries.
  SEC. 8.  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, 2011.
   (b) Upon the annual renewal date of an individual health benefit
plan, a health insurer shall permit an individual covered 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.
  SEC. 9.  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.