BILL NUMBER: SB 1163	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 5, 2010

INTRODUCED BY   Senator Leno

                        FEBRUARY 18, 2010

   An act to amend Sections 1389.25 and 1389.4 of, and to add
Sections 1389.26 and 1389.45 to, the Health and Safety Code, and to
amend Sections 10113.9 and 10113.95 of, and to add Sections 10113.91
and 10113.96 to, the Insurance Code, relating to health care
coverage.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1163, as amended, Leno. Health care coverage: denials: premium
rates.
   Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and regulation of health care service
plans by the Department of Managed Health Care and makes a willful
violation of the act a crime. Existing law also provides for the
regulation of health insurers by the Department of Insurance.
   Existing law requires a health care service plan that offers
health care coverage in the individual market to provide an
individual to whom it denies coverage or enrollment or offers
coverage at a rate higher than the standard rate with the specific
reason or reasons for that decision in writing. Existing law also
prohibits a health care service plan or a health insurer offering
coverage in the individual market from changing the premium rate or
coverage without providing specified notice  at least 30 days
prior to the   effective date of the change  .
   This bill would require a health insurer that offers health care
coverage in the individual market to provide an individual to whom it
denies coverage or enrollment or offers coverage at a rate higher
than the standard rate with the specific reason or reasons for that
decision in writing. With respect to both health insurers and health
care service plans issuing individual policies or contracts, the bill
would require that the reasons for a denial or a higher than
standard rate be stated in clear, easily understandable language.
 The bill would require notice of a change to the premium rate of
coverage to be provided at least 180 days prior to the effective
date of the change. 
   The bill would also require a health care service plan or health
insurer that offers health care coverage in the large group market to
provide a group to which it denies coverage or enrollment or to
which it offers coverage at a higher than standard rate, with the
specific reason or reasons for that decision in writing in clear,
easily understandable language.
    Existing law requires a health care service plan and a health
insurer to annually file with the Department of Managed Health Care
or the Department of Insurance a general description of the criteria,
policies, procedures, or guidelines the plan or insurer uses for
rating and underwriting decisions related to individual contracts and
policies.
   This bill would require a plan or insurer to annually disclose to
the Department of Managed Health Care or the Department of Insurance
the standards, processes, and criteria used by the plan or insurer to
deny issuance of a large group contract or policy. The bill would
also require a plan or insurer issuing coverage in the individual or
large group market to annually disclose to the Department of Managed
Health Care or the Department of Insurance the number and proportion
of individual or group applicants denied coverage during the
preceding year, and the reasons therefor, the number and proportion
of enrollees, insureds, or groups that paid a premium rate 
other   that was higher  than the standard rate,
and the reasons therefor, and the standards, processes, and criteria
used by the plan or insurer for adjusting premiums applicable to
individual or large group contracts or policies based on health
status or any other risk factor, as specified.  For large groups,
the bill would also require reporting of the number and proportion
of those groups   that paid a premium rate lower than the
standard rate, and the reasons therefor.  The bill would require
the departments to disclose this information, and the information
obtained from plans and insurers from the annual filing described
above, to the public, the Managed Risk Medical Insurance Board, and
the relevant policy and budget committees of the Legislature, as
specified.
   Because a willful violation of the bill's requirements relative 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 1389.25 of the Health and Safety Code is
amended to read:
   1389.25.  (a) (1) This section shall apply only to a full service
health care service plan offering health coverage in the individual
market in California and shall not apply to a specialized health care
service plan, a health care service plan contract in the Medi-Cal
program (Chapter 7 (commencing with Section 14000) of Part 3 of
Division 9 of the Welfare and Institutions Code), a health care
service plan conversion contract offered pursuant to Section 1373.6,
a health care service plan contract in the Healthy Families Program
(Part 6.2 (commencing with Section 12693) of Division 2 of the
Insurance Code), or a health care service plan contract offered to a
federally eligible defined individual under Article 4.6 (commencing
with Section 1366.35).
   (2) A local initiative, as defined in subdivision (v) of Section
53810 of Title 22 of the California Code of Regulations, that is
awarded a contract by the State Department of Health Care Services
pursuant to subdivision (b) of Section 53800 of Title 22 of the
California Code of Regulations, shall not be subject to this section
unless the plan offers coverage in the individual market to persons
not covered by Medi-Cal or the Healthy Families Program.
   (b) (1) A health care service plan that declines to offer coverage
or denies enrollment for an individual or his or her dependents
applying for individual coverage or that offers individual coverage
at a rate that is higher than the standard rate, shall, at the time
of the denial or offer of coverage, provide the individual applicant
with the specific reason or reasons for the decision in writing, in
clear, easily understandable language.
   (2)  No change in the premium rate or coverage for an individual
plan contract shall become effective unless the plan has delivered a
written notice of the change at least  30   180
 days prior to the effective date of the contract renewal or the
date on which the rate or coverage changes. A notice of an increase
in the premium rate shall include the reasons for the rate increase.
   (3) The written notice required pursuant to paragraph (2) shall be
delivered to the individual contractholder at his or her last
address known to the plan, at least  30   180
 days prior to the effective date of the change. The notice
shall state in italics either the actual dollar amount of the premium
rate increase or the specific percentage by which the current
premium will be increased. The notice shall describe in plain,
understandable English any changes in the plan design or any changes
in benefits, including a reduction in benefits or changes to waivers,
exclusions, or conditions, and highlight this information by
printing it in italics. The notice shall specify in a minimum of
10-point bold typeface, the reason for a premium rate change or a
change to the plan design or benefits.
   (4) If a plan rejects an applicant or the dependents of an
applicant for coverage or offers individual coverage at a rate that
is higher than the standard rate, the plan shall inform the applicant
about the state's high-risk health insurance pool, the California
Major Risk Medical Insurance Program (Part 6.5 (commencing with
Section 12700) of Division 2 of the Insurance Code). The information
provided to the applicant by the plan shall specifically include the
program's toll-free telephone number and its Internet Web site
address. The requirement to notify applicants of the availability of
the California Major Risk Medical Insurance Program shall not apply
when a health plan rejects an applicant for Medicare supplement
coverage.
   (c) A notice provided pursuant to this section is a private and
confidential communication and at the time of application, the plan
shall give the individual applicant the opportunity to designate the
address for receipt of the written notice in order to protect the
confidentiality of any personal or privileged information.
  SEC. 2.  Section 1389.26 is added to the Health and Safety Code, to
read:
   1389.26.  (a) (1) This section shall apply only to a full service
health care service plan offering large group health plan contracts
in California and shall not apply to a specialized health care
service plan, a health care service plan contract in the Medi-Cal
program (Chapter 7 (commencing with Section 14000) of Part 3 of
Division 9 of the Welfare and Institutions Code), a health care
service plan conversion contract offered pursuant to Section 1373.6,
a health care service plan contract in the Healthy Families Program
(Part 6.2 (commencing with Section 12693) of Division 2 of the
Insurance Code), or a health care service plan contract offered to a
federally eligible defined individual under Article 4.6 (commencing
with Section 1366.35).
   (2) A local initiative, as defined in subdivision (v) of Section
53810 of Title 22 of the California Code of Regulations, that is
awarded a contract by the State Department of Health Care Services
pursuant to subdivision (b) of Section 53800 of Title 22 of the
California Code of Regulations, shall not be subject to this section
unless the plan offers large group health plan contracts to persons
not covered by Medi-Cal or the Healthy Families Program.
   (b) A health care service plan that declines to offer coverage to
or denies enrollment of a large group or that offers large group
coverage at a rate that is higher than the standard rate, shall, at
the time of the denial or offer of coverage, provide the group
applicant with the specific reason or reasons for the decision in
writing, in clear, easily understandable language.
   (c) A notice provided pursuant to this section is a private and
confidential communication, and at the time of application, the plan
shall give the group applicant the opportunity to designate the
address for receipt of the written notice in order to protect the
confidentiality of any personal or privileged information.
   (d) For purposes of this subdivision, "large group health plan
contract" or "large group coverage" means a group health care service
plan contract other than a contract issued to a small employer, as
defined in Section 1357.
  SEC. 3.  Section 1389.4 of the Health and Safety Code is amended to
read:
   1389.4.  (a) A full service health care service plan that issues,
renews, or amends individual health plan contracts shall be subject
to this section.
   (b) A health care service plan subject to this section shall have
written policies, procedures, or underwriting guidelines establishing
the criteria and process whereby the plan makes its decision to
provide or to deny coverage to individuals applying for coverage and
sets the rate for that coverage. These guidelines, policies, or
procedures shall assure that the plan rating and underwriting
criteria comply with Sections 1365.5 and 1389.1 and all other
applicable provisions of state and federal law.
   (c) (1) On or before June 1, 2006, and annually thereafter, every
health care service plan shall file with the department a general
description of the criteria, policies, procedures, or guidelines the
plan uses for rating and underwriting decisions related to individual
health plan contracts, which means automatic declinable health
conditions, health conditions that may lead to a coverage decline,
height and weight standards, health history, health care utilization,
lifestyle, or behavior that might result in a decline for coverage
or severely limit the plan products for which they would be eligible.
A plan may comply with this paragraph by submitting to the
department underwriting materials or resource guides provided to plan
solicitors or solicitor firms, provided that those materials include
the information required to be submitted by this section.
   (2) Commencing January 1, 2011, a plan shall include all of the
following in the annual filing required under paragraph (1):
   (A) The number and proportion of applicants denied individual
coverage during the preceding year  and the reasons for those
denials   , including the age, gender, race or
ethnicity, occupation, and geographic region of the applicants denied
 . 
   (B) The reasons for the denial of coverage by the demographic
characteristics in subparagraph (A).  
   (B) 
    (C)  The standards, processes, and criteria used by the
plan for  determining and  adjusting premiums applicable to
individual plan contracts based on health status or any other risk
factor  , including the actuarial basis for determining premiums
for individual plan contracts  . 
   (C) 
    (D)     (i   )  The number
and proportion of individual plan contract enrollees who paid a
premium rate  other   that was higher  than
the standard rate and the reasons for  that nonstandard
rate.   the higher rate as well as the number and
proportion of individual plan contract enrollees who paid a premium
rate that was lower than the standard rate and the reasons for the
lower rate.  
   (ii) Demographic information on the number and proportion of
individual plan contract enrollees charged a higher rate than the
standard rate, including age, gender, occupation, race or ethnicity,
and geographic location.  
   (iii) Demographic information on the number and proportion of
individual plan contract enrollees charged a lower rate than the
standard rate, including age, gender, occupation, race or ethnicity,
and geographic location. 
   (d) The department shall disclose the information obtained
pursuant to subdivision (c) to the Managed Risk Medical Insurance
Board and the relevant policy and budget committees of the
Legislature. The department shall also disclose this information to
the public by posting the information on its Internet Web site in a
manner accessible and understandable to consumers. The information
disclosed pursuant to this subdivision shall be company specific.
   (e)  Commencing September 1, 2006, in   In
   addition to the disclosure required under
subdivision (d), the director shall post on the department's Internet
Web site, in a manner accessible and understandable to consumers,
general, noncompany specific information about rating and
underwriting criteria and practices in the individual market and
information about the Major Risk Medical Insurance Program. The
director shall develop the information for the  Internet 
Web site in consultation with the Department of Insurance to enhance
the consistency of information provided to consumers. Information
about individual health coverage shall also include the following
notification:
   "Please examine your options carefully before declining group
coverage or continuation coverage, such as COBRA, that may be
available to you. You should be aware that companies selling
individual health insurance typically require a review of your
medical history that could result in a higher premium or you could be
denied coverage entirely."
   (f) This section shall not apply to a closed block of business, as
defined in Section 1367.15.
  SEC. 4.  Section 1389.45 is added to the Health and Safety Code, to
read:
   1389.45.  (a) A full service health care service plan that issues,
renews, or amends large group health plan contracts shall be subject
to this section.
   (b) On or before June 1, 2011, and annually thereafter, a plan
shall disclose to the department all of the following:
   (1) The standards, processes, and criteria used by the plan to
deny issuance of a large group plan contract.
   (2) The number and proportion of groups denied issuance of a large
group plan contract during the preceding year and the reasons for
those denials.
   (3) The standards, processes, and criteria used by the plan for
adjusting premiums applicable to large group plan contracts based on
health status or any other risk factor  , including the actuarial
basis for the rate  .
   (4) The number and proportion of large groups that paid a premium
rate  other   higher  than the standard
rate and the reasons for that  nonstandard  
higher  rate. 
   (5) The number and proportion of large groups that paid a premium
rate lower than the standard rate and the reasons for that lower
rate. 
   (c) The department shall disclose the information obtained
pursuant to subdivision (b) to the Managed Risk Medical Insurance
Board and the relevant policy and budget committees of the
Legislature. The department shall also disclose this information to
the public by posting the information on its Internet Web site in a
manner accessible and understandable to consumers. The information
disclosed pursuant to this section shall be company specific.
   (d) For purposes of this subdivision, "large group health plan
contract" means a group health care service plan contract other than
a contract issued to a small employer as defined in Section 1357.
   (e) This section shall not apply to a closed block of business, as
defined in Section 1367.15.
  SEC. 5.  Section 10113.9 of the Insurance Code is amended to read:
   10113.9.  (a) This section shall not apply to short-term limited
duration health insurance, vision-only, dental-only, or 
Champus-supplement   CHAMPUS-supplement  insurance,
or to hospital indemnity, hospital-only, accident-only, or specified
disease insurance that does not pay benefits on a fixed benefit,
cash payment only basis.
   (b) (1) A health insurer that declines to offer coverage or denies
enrollment for an individual or his or her dependents applying for
individual coverage or that offers individual coverage at a rate that
is higher than the standard rate shall, at the time of the denial or
offer of coverage, provide the individual applicant with the
specific reason or reasons for the decision in writing, in clear,
easily understandable language.
   (2) No change in the premium rate or coverage for an individual
health insurance policy shall become effective unless the insurer has
delivered a written notice of the change at least  30
  180  days prior to the effective date of the
policy renewal or the date on which the rate or coverage changes. A
notice of an increase in the premium rate shall include the reasons
for the rate increase.
   (3) The written notice required pursuant to paragraph (2) shall be
delivered to the individual policyholder at his or her last address
known to the insurer, at least  30   180 
days prior to the effective date of the change. The notice shall
state in italics either the actual dollar amount of the premium
increase or the specific percentage by which the current premium will
be increased. The notice shall describe in plain, understandable
English any changes in the policy or any changes in benefits,
including a reduction in benefits or changes to waivers, exclusions,
or conditions, and highlight this information by printing it in
italics. The notice shall specify in a minimum of 10-point bold
typeface, the reason for a premium rate change or a change in
coverage or benefits.
   (4) If an insurer rejects an applicant or the dependents of an
applicant for coverage or offers individual coverage at a rate that
is higher than the standard rate, the insurer shall inform the
applicant about the state's high-risk health insurance pool, the
California Major Risk Medical Insurance Program (Part 6.5 (commencing
with Section  12700)   12700)) . The
information provided to the applicant by the insurer shall
specifically include the program's toll-free telephone number and its
Internet Web site address. The requirement to notify applicants of
the availability of the California Major Risk Medical Insurance
Program shall not apply when a health plan rejects an applicant for
Medicare supplement coverage.
   (c) A notice provided pursuant to this section is a private and
confidential communication and, at the time of application, the
insurer shall give the individual applicant the opportunity to
designate the address for receipt of the written notice in order to
protect the confidentiality of any personal or privileged
information.
  SEC. 6.  Section 10113.91 is added to the Insurance Code, to read:
   10113.91.  (a) This section shall apply only to a health insurer
offering large group health insurance policies in California. This
section shall not apply to short-term limited duration health
insurance, vision-only, dental-only, or  Champus-supplement
  CHAMPUS-supplement  insurance, or to hospital
indemnity, hospital-only, accident-only, or specified disease
insurance that does not pay benefits on a fixed benefit, cash payment
only basis.
   (b) A health insurer that declines to offer coverage to or denies
enrollment of a large group or that offers large group coverage at a
rate that is higher than the standard rate shall, at the time of the
denial or offer of coverage, provide the group applicant with the
specific reason or reasons for the decision in writing, in clear,
easily understandable language.
   (c) A notice provided pursuant to this section is a private and
confidential communication and at the time of application, the
insurer shall give the group applicant the opportunity to designate
the address for receipt of the written notice in order to protect the
confidentiality of any personal or privileged information.
   (d) For purposes of this subdivision, "large group policy" or
"large group coverage" means a group health insurance policy other
than a policy issued to a small employer, as defined in Section
10700.
  SEC. 7.  Section 10113.95 of the Insurance Code is amended to read:

   10113.95.  (a) A health insurer that issues, renews, or amends
individual health insurance policies shall be subject to this
section.
   (b) An insurer subject to this section shall have written
policies, procedures, or underwriting guidelines establishing the
criteria and process whereby the insurer makes its decision to
provide or to deny coverage to individuals applying for coverage and
sets the rate for that coverage. These guidelines, policies, or
procedures shall assure that the plan rating and underwriting
criteria comply with Sections 10140 and 10291.5 and all other
applicable provisions.
   (c) (1) On or before June 1, 2006, and annually thereafter, every
insurer shall file with the commissioner a general description of the
criteria, policies, procedures, or guidelines that the insurer uses
for rating and underwriting decisions related to individual health
insurance policies, which means automatic declinable health
conditions, health conditions that may lead to a coverage decline,
height and weight standards, health history, health care utilization,
lifestyle, or behavior that might result in a decline for coverage
or severely limit the health insurance products for which they would
be eligible. An insurer may comply with this paragraph by submitting
to the department underwriting materials or resource guides provided
to agents and brokers, provided that those materials include the
information required to be submitted by this section.
   (2) Commencing January 1, 2011, an insurer shall include all of
the following in the annual filing required under paragraph (1):
   (A) The number and proportion of applicants denied individual
coverage during the preceding year  and the reasons for those
denials   , including the age, gender, race or
ethnicity, occupation, and geographic region of the applicants denied
 . 
   (B) The reasons for the denial of coverage by the demographic
characteristics in subparagraph (A).  
   (B) 
    (C)  The standards, processes, and criteria used by the
insurer for  determining and  adjusting premiums applicable
to individual policies based on health status or any other risk
factor  , including the actuarial basis for determining premiums
for individual policies  . 
   (C) 
    (D)     (i   )  The number
and proportion of insureds under an individual policy who paid a
premium rate  other   that was higher  than
the standard rate and the reasons for  that nonstandard
rate.   the higher rate as well as the number and
proportion of individual policyholders who paid a premium rate that
was lower than the standard rate and the reasons for the lower rate.
 
   (ii) Demographic information on the number and proportion of
individual policyholders charged a higher rate than the standard
rate, including age, gender, occupation, race or ethnicity, and
geographic location.  
   (iii) Demographic information on the number and proportion of
individual policyholders charged a lower rate than the standard rate,
including age, gender, occupation, race or ethnicity, and geographic
location. 
   (d) The commissioner shall disclose the information obtained
pursuant to subdivision (c) to the Managed Risk Medical Insurance
Board and the relevant policy and budget committees of the
Legislature. The department shall also disclose this information to
the public by posting the information on its Internet Web site in a
manner accessible and understandable to consumers. The information
disclosed pursuant to this subdivision shall be company specific.
   (e)  Commencing September 1, 2006, in   In
 addition to the disclosure required under subdivision (d), the
commissioner shall post on the department's Internet Web site, in a
manner accessible and understandable to consumers, general,
noncompany specific information about rating and underwriting
criteria and practices in the individual market and information about
the Major Risk Medical Insurance Program. The commissioner shall
develop the information for the  Internet  Web site in
consultation with the Department of Managed Health Care to enhance
the consistency of information provided to consumers. Information
about individual health insurance shall also include the following
notification:
   "Please examine your options carefully before declining group
coverage or continuation coverage, such as COBRA, that may be
available to you. You should be aware that companies selling
individual health insurance typically require a review of your
medical history that could result in a higher premium or you could be
denied coverage entirely."
   (f) This section shall not apply to a closed block of business, as
defined in Section 10176.10.
  SEC. 8.  Section 10113.96 is added to the Insurance Code, to read:
   10113.96.  (a) A health insurer that issues, renews, or amends
large group health insurance policies shall be subject to this
section.
   (b) On or before June 1, 2011, and annually thereafter, an insurer
shall disclose to the commissioner all of the following:
   (1) The standards, processes, and criteria used by the insurer to
deny issuance of a large group health insurance policy.
   (2) The number and proportion of groups denied issuance of a large
group health insurance policy during the preceding year and the
reasons for those denials.
   (3) The standards, processes, and criteria used by the insurer for
adjusting premiums applicable to large group health insurance
policies based on health status or any other risk factor  ,
including the actuarial basis for the rate  .
   (4) The number and proportion of large groups that paid a premium
rate  other   higher  than the standard
rate and the reasons for that  nonstandard  
higher  rate. 
   (5) The number and proportion of large groups that paid a premium
rate lower than the standard rate and the reasons for that lower
rate. 
   (c) The commissioner shall disclose the information obtained
pursuant to subdivision (b) to the Managed Risk Medical Insurance
Board and the relevant policy and budget committees of the
Legislature. The commissioner shall also disclose this information to
the public by posting the information on the department's Internet
Web site in a manner accessible and understandable to consumers. The
information disclosed pursuant to this section shall be company
specific.
   (d) For purposes of this subdivision, "large group health
insurance policy" means a group health insurance policy other than a
policy issued to a small employer, as defined in Section 10700.
   (e) This section shall not apply to a closed block of business, as
defined in Section 10176.10.
  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.
      ____ CORRECTIONS  Text--Pages 6, 7, 11 and 12.
                                             ____