BILL NUMBER: SB 1163	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 28, 2010
	AMENDED IN SENATE  APRIL 19, 2010
	AMENDED IN SENATE  APRIL 5, 2010

INTRODUCED BY   Senator Leno
   (Coauthor: Senator Pavley)

                        FEBRUARY 18, 2010

   An act to amend Section 1389.25 of, to add Sections 1389.45 and
1389.46 to, and to add and repeal Section 1389.26 of, the Health and
Safety Code, and to amend Section 10113.9 of, to add Sections
10113.96 and 10113.97 to, and to add and repeal Section 10113.91 of,
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 care service plan and a health
insurer that offers health care coverage in the individual or group
market to provide an individual or group 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 or group 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 declines to offer coverage to, or denies enrollment of,
any individual or large group to report quarterly, until January 1,
2014, to the Department of Managed Health Care or the Department of
Insurance, the Managed Risk Medical Insurance Board, and the public,
on the number of applicants that are denied coverage and various
related matters. The bill would require the departments to post
certain information in that regard on the Internet.  The bill
would require that reports to the public maintain patient privacy.

    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 health insurer to annually
disclose to the Department of Managed Health Care or the Department
of Insurance written policies, procedures, or underwriting guidelines
under which the plan or insurer makes its decision to determine the
standard rate and to issue a contract or policy at a rate higher or
lower than the standard rate. The bill would also require, among
other things, disclosure of the various rates for each product in the
individual and small group markets, and the number and proportion of
contract holders and policyholders in each rate category for the
individual, small group, and large group markets. The bill would
require the departments to post summary information in that regard on
the Internet and to provide access to the full information on
request. The bill would also require plans and insurers to annually
disclose certain information relating to rate increases for each
product.
   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
or group 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 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 or a
group applying for coverage or that offers coverage at a rate that
is higher than the standard rate, shall, at the time of the denial or
offer of coverage, provide the 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 a plan contract
shall become effective unless the plan has delivered a written
notice of the change at least 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 contractholder at his or her last address known to
the plan, at least 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 individual applicant or the dependents of
an individual applicant for  individual  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 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)    A health care service plan
subject to Section 1389.25 that declines to offer coverage to or
denies enrollment of any individual shall quarterly provide to the
department, the Managed Risk Medical Insurance Board, and the public
all of the following: 
   (1) 
    (A)  The number and proportion of applicants for
individual coverage that were denied coverage for each product
offered by the plan. 
   (2)
    (B)  The health status and risk factors for each
applicant denied coverage, by product. 
   (3) 
    (C)  Demographic information about applicants denied
coverage, including age, gender, language spoken, occupation, and
geographic region of the applicant, by product. 
   (4) 
    (D)  The written policies, procedures, or underwriting
guidelines whereby the plan makes its decision to provide or to deny
coverage to applicants. 
   (2) Public reporting shall be done in a manner consistent with
maintaining patient privacy. Academic institutions and other
entities, including those eligible for the Consumer Participation
Program, as defined in Section 1348.9, and that have the capacity to
maintain patient privacy, shall be able to obtain patient-specific
data without patient name or identifier. 
   (b)  (1) A health care service plan subject to Section
1389.25 that declines to offer coverage to or denies enrollment of
any large group shall quarterly provide to the department, the
Managed Risk Medical Insurance Board, and the public all of the
following: 
   (1) 
    (A)  The number and proportion of applicants for large
group coverage that were denied coverage for each product offered by
the plan. 
   (2) 
    (B)  The health status and risk factors for each
applicant denied coverage, by product. 
   (3) 
    (C)  Demographic information about applicants denied
coverage, including age, gender, language spoken, occupation, and
geographic region of the applicant, by product. 
   (4) 
    (D)  The written policies, procedures, or underwriting
guidelines whereby the plan makes its decision to provide or to deny
coverage to applicants. 
   (2) Public reporting shall be done in a manner consistent with
maintaining patient privacy. Academic institutions and other
entities, including those eligible for the Consumer Participation
Program, as defined in Section 1348.9, and that have the capacity to
maintain patient privacy, shall be able to obtain patient-specific
data without patient name or identifier. 
   (c) The department shall post on its Internet Web site the
following information for each product offered by a health care
service plan and for all products offered by the plan:
   (1) The number and proportion of applicants for individual
coverage denied coverage as well as aggregate information about
health status and demographics of those denied coverage.
   (2) The number and proportion of applicants for large group
coverage denied coverage as well as aggregate information about
health status and demographics of the employees of those large groups
denied coverage.
   (3) The written policies, procedures, or underwriting guidelines
whereby the plan makes its decision to provide or to deny coverage to
applicants.
   (d) For purposes of this section, "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.
   (e) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
  SEC. 3.  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 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 written policies, procedures, or underwriting guidelines
whereby the plan makes its decision to determine the standard rate
and to issue a plan contract at a rate higher or lower than the
standard rate.
   (2) For each product in the individual or small group market, the
rates charged, including the standard rate, rates that are higher
than the standard rate, and rates that are lower than the standard
rate.
   (3) For the individual, small group, and large group markets, the
number and proportion of subscribers in each category charged a
standard rate, a rate that is higher than the standard rate, or a
rate that is lower than the standard rate. For each of these
categories, demographic information shall be provided, including age,
gender, language spoken, and geographic region.
   (c) The department shall disclose the information provided
pursuant to this section to the public, both in summary fashion on
the department's Internet Web site and in full, on request.
   (d) This section shall not apply to a closed block of business, as
defined in Section 1367.15.
  SEC. 4.  Section 1389.46 is added to the Health and Safety Code, to
read:
   1389.46.  (a) A full service health care service plan that issues,
renews, or amends health plan contracts shall be subject to this
section.
   (b) On or before June 1, 2011, and no less than annually
thereafter, a plan shall disclose to the department all of the
following with respect to rate increases for each product:
   (1) Any change in rate.
   (2) Any change in cost sharing.
   (3) Any change in covered benefits.
   (c) On or before June 1, 2011, and no less than annually
thereafter, a plan shall also disclose to the department all of the
following with respect to rate increases for each product:
   (1) Actuarial memorandum.
   (2) Assumptions on trends in medical inflation, including
justification.
   (3) Specific worksheets or exhibits documenting increases in
costs.
   (4) Enrollee population characteristics that increase or decrease
costs.
   (5) Utilization increases.
   (6) Provider prices.
   (7) Administrative costs.
   (8) Medical loss ratios.
   (9) Reserves and surplus levels, including tangible net equity and
reserves in excess of tangible net equity.
   (10) Changes in cost sharing.
  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 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 or a group
applying for coverage or that offers coverage at a rate that is
higher than the standard rate shall, at the time of the denial or
offer of coverage, provide the 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 a health
insurance policy shall become effective unless the insurer has
delivered a written notice of the change at least 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 policyholder at his or her last address known to
the insurer, at least 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 individual applicant or the
dependents of an individual applicant for  individual 
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)).
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 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)  (1)    A health insurer subject
to Section 10113.9 that declines to offer coverage to or denies
enrollment of any individual shall quarterly provide to the
commissioner, the Managed Risk Medical Insurance Board, and the
public all of the following: 
   (1) 
    (A)  The number and proportion of applicants for
individual coverage that were denied coverage for each product
offered by the insurer. 
   (2) 
    (B)  The health status and risk factors for each
applicant denied coverage, by product. 
   (3) 
    (C)  Demographic information about applicants denied
coverage, including age, gender, language spoken, occupation, and
geographic region of the applicant, by product. 
   (4) 
    (D)  The written policies, procedures, or underwriting
guidelines whereby the insurer makes its decision to provide or to
deny coverage to applicants. 
   (2) Public reporting shall be done in a manner consistent with
maintaining patient privacy. Academic institutions and other
entities, including those eligible for the Consumer Participation
Program, as defined in Section 1348.9 of the Health and Safety Code,
and that have the capacity to maintain patient privacy, shall be able
to obtain patient-specific data without patient name or identifier.

   (b)  (1)    A health insurer subject to Section
10113.9 that declines to offer coverage to or denies enrollment of
any large group shall quarterly provide to the commissioner, the
Managed Risk Medical Insurance Board, and the public all of the
following: 
   (1) 
    (A)  The number and proportion of applicants for large
group coverage that were denied coverage for each product offered by
the insurer. 
   (2) 
    (B)  The health status and risk factors for each
applicant denied coverage, by product. 
   (3) 
    (C)  Demographic information about applicants denied
coverage, including age, gender, language spoken, occupation, and
geographic region of the applicant, by product. 
   (4) 
    (D)  The written policies, procedures, or underwriting
guidelines whereby the insurer makes its decision to provide or to
deny coverage to applicants. 
   (2) Public reporting shall be done in a manner consistent with
maintaining patient privacy. Academic institutions and other
entities, including those eligible for the Consumer Participation
Program, as defined in Section 1348.9 of the Health and Safety Code,
and that have the capacity to maintain patient privacy, shall be able
to obtain patient-specific data without patient name or identifier.

   (c) The commissioner shall post on the department's Internet Web
site the following information for each product offered by a health
insurer and for all products offered by the insurer:
   (1) The number and proportion of applicants for individual
coverage denied coverage as well as aggregate information about
health status and demographics of those denied coverage.
   (2) The number and proportion of applicants for large group
coverage denied coverage as well as aggregate information about
health status and demographics of the employees of those denied
coverage.
   (3) The written policies, procedures, or underwriting guidelines
whereby the insurer makes its decision to provide or to deny coverage
to applicants.
   (d) For purposes of this section, "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.
   (e) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
  SEC. 7.  Section 10113.96 is added to the Insurance Code, to read:
   10113.96.  (a) A health insurer that issues, renews, or amends
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 written policies, procedures, or underwriting guidelines
whereby the insurer makes its decision to determine the standard rate
and to issue a policy at a rate higher or lower than the standard
rate.
   (2) For each product in the individual or small group market, the
rates charged, including the standard rate, rates that are higher
than the standard rate, and rates that are lower than the standard
rate.
   (3) For the individual, small group, and large group markets, the
number and proportion of policyholders in each category charged a
standard rate, a rate that is higher than the standard rate, or a
rate that is lower than the standard rate. For each of these
categories, demographic information shall be provided, including age,
gender, language spoken, and geographic region.
   (c) The commissioner shall disclose the information provided
pursuant to this section to the public, both in summary fashion on
the department's Internet Web site and in full, on request.
   (d) This section shall not apply to a closed block of business, as
defined in Section 10176.10.
  SEC. 8.  Section 10113.97 is added to the Insurance Code, to read:
   10113.97.  (a) A health insurer that issues, renews, or amends
health insurance policies shall be subject to this section.
   (b) On or before June 1, 2011, and no less than annually
thereafter, an insurer shall disclose to the commissioner all of the
following with respect to rate increases for each product:
   (1) Any change in rate.
   (2) Any change in cost sharing.
   (3) Any change in covered benefits.
   (c) On or before June 1, 2011, and no less than annually
thereafter, an insurer shall also disclose to the commissioner all of
the following with respect to rate increases for each product:
   (1) Actuarial memorandum.
   (2) Assumptions on trends in medical inflation, including
justification.
   (3) Specific worksheets or exhibits documenting increases in
costs.
   (4) Insured population characteristics that increase or decrease
costs.
   (5) Utilization increases.
   (6) Provider prices.
   (7) Administrative costs.
   (8) Medical loss ratios.
   (9) Reserves and surplus levels, including tangible net equity and
reserves in excess of tangible net equity.
   (10) Changes in cost sharing.
  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.
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