BILL NUMBER: SB 1163	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  AUGUST 25, 2010
	AMENDED IN ASSEMBLY  AUGUST 18, 2010
	AMENDED IN ASSEMBLY  JUNE 23, 2010
	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 Sections  1357.03,  1374.21, 1374.22, and
1389.25 of, and to add Article 6.2 (commencing with Section 1385.01)
to Chapter 2.2 of Division 2 of, the Health and Safety Code, and to
amend Sections 10113.9, 10199.1,  and 10199.2  
10199.2, and 10705  of, and to add Article 4.5 (commencing with
Section 10181) to Chapter 1 of Part 2 of Division 2 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 or group market from changing the premium
rate or coverage without providing specified notice to the
policyholder or subscriber at least 30 days prior to the effective
date of the change.
   This bill would require a health care service plan that offers
coverage in the group market and a health insurer that offers health
care coverage in the individual or group market to provide an
applicant to whom it denies coverage or enrollment  , as
specified,  or offers coverage at a rate higher than the
standard rate  or standard employee risk 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 60 days prior to the effective date of the change.
   Existing law, the federal Patient Protection and Affordable Care
Act, requires the United States Secretary of Health and Human
Services to establish a process for the annual review of unreasonable
increases in premiums for health insurance coverage in which health
insurance issuers submit to the secretary and the relevant state a
justification for an unreasonable premium increase prior to
implementation of the increase. The act requires the secretary to
carry out a program to award grants to states during the 5-year
period beginning with fiscal year 2010 to assist states in carrying
out this process, as specified.
   This bill would require a health care service plan or health
insurer  in the individual, small group, or large group markets
 to file rate information with the Department of Managed Health
Care or the Department of Insurance, as specified, and would require
that the information be  certified by an independent actuary, as
specified, and  made publicly available,  except  as
specified. The bill would  would  authorize the
departments to review these filings  and issue guidance regarding
compliance, require the departments to consult with each other
regarding specified actions,  and  conduct a public
hearing under specified circumstances and would  require the
departments to post certain findings on their Internet Web sites.
The bill would enact other related provisions. 
   Existing law, the federal Patient Protection and Affordable Care
Act (PPACA), specifies that grandfathered health plans, as defined,
are subject only to certain provisions of the act, and specifies that
policies sold in the group and individual markets to new entities or
individuals on or after March 23, 2010, are not grandfathered plans
even if the products sold to those subscribers were offered in the
group or individual market before March 23, 2010.  
   Existing law requires a plan or insurer to fairly and
affirmatively offer, market, and sell all of the plan's contracts or
the insurer's benefit plan designs that are sold to small employers
to all small employers in each service area in which the plan or
insurer provides or arranges for the provision of health care
services.  
   This bill would deem a plan or insurer to be in compliance with
that requirement with respect to a plan contract or benefit plan
design that qualifies as a grandfathered health plan under PPACA if
certain requirements are met. 
   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 1357.03 of the  
Health and Safety Code   is amended to read: 
   1357.03.  (a)  (1)    Upon the effective date of
this article, a plan shall fairly and affirmatively offer, market,
and sell all of the plan's health care service plan contracts that
are sold to small employers or to associations that include small
employers to all small employers in each service area in which the
plan provides or arranges for the provision of health care services.
 A plan contracting to participate in the voluntary
purchasing pool for small employers provided for under Article 4
(commencing with Section 10730) of Chapter 8 of Part 2 of Division 2
of the Insurance Code shall be deemed in compliance with this
requirement for a contract offered through the voluntary purchasing
pool established under Article 4 (commencing with Section 10730) of
Chapter 8 of Part 2 of Division 2 of the Insurance Code in those
geographic regions in which plans participate in the pool, if the
contract is offered exclusively through the pool. Each 
    (2)     Each  plan shall make
available to each small employer all small employer health care
service plan contracts that the plan offers and sells to small
employers or to associations that include small employers in this
state.  No 
    (3)     No  plan or solicitor shall
induce or otherwise encourage a small employer to separate or
otherwise exclude an eligible employee from a health care service
plan contract that is provided in connection with the employee's
employment or membership in a guaranteed association. 
   (4) A plan contracting to participate in the voluntary purchasing
pool for small employers provided for under Article 4 (commencing
with Section 10730) of Chapter 8 of Part 2 of Division 2 of the
Insurance Code shall be deemed in compliance with the requirements of
paragraph (1) for a contract offered through the voluntary
purchasing pool established under Article 4 (commencing with Section
10730) of Chapter 8 of Part 2 of Division 2 of the Insurance Code in
those geographic regions in which plans participate in the pool, if
the contract is offered exclusively through the pool.  
   (5) (A) A plan shall be deemed to meet the requirements of
paragraphs (1) and (2) with respect to a plan contract that qualifies
as a grandfathered health plan under Section 1251 of PPACA if all of
the following requirements are met:  
   (i) The plan offers to renew the plan contract, unless the plan
withdraws the plan contract from the small employer market pursuant
to subdivision (e) of Section 1357.11.  
   (ii) The plan provides appropriate notice of the grandfathered
status of the contract in any materials provided to an enrollee of
the contract describing the benefits provided under the contract, as
required under PPACA.  
   (iii) The plan makes no changes to the benefits covered under the
plan contract other than those required by a state or federal law,
regulation, rule, or guidance and those permitted to be made to a
grandfathered health plan under PPACA.  
   (B) For purposes of this paragraph, "PPACA" means the federal
Patient Protection and Affordable Care Act (Public Law 111-148), as
amended by the federal Health Care and Education Reconciliation Act
of 2010 (Public Law 111-152), and any rules, regulations, or guidance
issued thereunder. For purposes of this paragraph, a "grandfathered
health plan" shall have the meaning set forth in Section 1251 of
PPACA. 
   (b) Every plan shall file with the director the reasonable
employee participation requirements and employer contribution
requirements that will be applied in offering its plan contracts.
Participation requirements shall be applied uniformly among all small
employer groups, except that a plan may vary application of minimum
employee participation requirements by the size of the small employer
group and whether the employer contributes 100 percent of the
eligible employee's premium. Employer contribution requirements shall
not vary by employer size. A health care service plan shall not
establish a participation requirement that (1) requires a person who
meets the definition of a dependent in subdivision (a) of Section
1357 to enroll as a dependent if he or she is otherwise eligible for
coverage and wishes to enroll as an eligible employee and (2) allows
a plan to reject an otherwise eligible small employer because of the
number of persons that waive coverage due to coverage through another
employer. Members of an association eligible for health coverage
under subdivision (o) of Section 1357, but not electing any health
coverage through the association, shall not be counted as eligible
employees for purposes of determining whether the guaranteed
association meets a plan's reasonable participation standards.
   (c) The plan shall not reject an application from a small employer
for a health care service plan contract if all of the following are
met:
   (1) The small employer, as defined by paragraph (1) of subdivision
(  l  ) of Section 1357, offers health benefits to 100
percent of its eligible employees, as defined by paragraph (1) of
subdivision (b) of Section 1357. Employees who waive coverage on the
grounds that they have other group coverage shall not be counted as
eligible employees.
   (2) The small employer agrees to make the required premium
payments.
   (3) The small employer agrees to inform the small employers'
employees of the availability of coverage and the provision that
those not electing coverage must wait one year to obtain coverage
through the group if they later decide they would like to have
coverage.
   (4) The employees and their dependents who are to be covered by
the plan contract work or reside in the service area in which the
plan provides or otherwise arranges for the provision of health care
services.
   (d) No plan or solicitor shall, directly or indirectly, engage in
the following activities:
   (1) Encourage or direct small employers to refrain from filing an
application for coverage with a plan because of the health status,
claims experience, industry, occupation of the small employer, or
geographic location provided that it is within the plan's approved
service area.
   (2) Encourage or direct small employers to seek coverage from
another plan or the voluntary purchasing pool established under
Article 4 (commencing with Section 10730) of Chapter 8 of Part 2 of
Division 2 of the Insurance Code because of the health status, claims
experience, industry, occupation of the small employer, or
geographic location provided that it is within the plan's approved
service area.
   (e) A plan shall not, directly or indirectly, enter into any
contract, agreement, or arrangement with a solicitor that provides
for or results in the compensation paid to a solicitor for the sale
of a health care service plan contract to be varied because of the
health status, claims experience, industry, occupation, or geographic
location of the small employer. This subdivision does not apply to a
compensation arrangement that provides compensation to a solicitor
on the basis of percentage of premium, provided that the percentage
shall not vary because of the health status, claims experience,
industry, occupation, or geographic area of the small employer.
   (f) A policy or contract that covers two or more employees shall
not establish rules for eligibility, including continued eligibility,
of an individual, or dependent of an individual, to enroll under the
terms of the plan based on any of the following health
status-related factors:
   (1) Health status.
   (2) Medical condition, including physical and mental illnesses.
   (3) Claims experience.
   (4) Receipt of health care.
   (5) Medical history.
   (6) Genetic information.
   (7) Evidence of insurability, including conditions arising out of
acts of domestic violence.
   (8) Disability.
   (g) A plan shall comply with the requirements of Section 1374.3.
   SECTION 1.   SEC. 2.   Section 1374.21
of the Health and Safety Code is amended to read:
   1374.21.  (a) No change in premium rates or changes in coverage
stated in a group health care service plan contract shall become
effective unless the plan has delivered in writing a notice
indicating the change or changes at least 60 days prior to the
contract renewal effective date.
   (b) A health care service plan that declines to offer coverage to
or denies enrollment for a  large  group applying for
coverage or that offers  small  group coverage at a rate
that is higher than the standard  employee risk  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.
   SEC. 2.   SEC. 3.   Section 1374.22 of
the Health and Safety Code is amended to read:
   1374.22.  (a) The written notice described in subdivision (a) of
Section 1374.21 shall be delivered by mail at the last known address
at least 60 days prior to the renewal effective date to the group
contract holder.
   (b) The written notice shall state in italics and in 12-point type
the actual dollar amount and the specific percentage of the premium
rate increase. Further, the notice shall describe in plain
understandable English and highlighted in italics any changes in the
plan design or change in benefits with reduction in benefits,
waivers, exclusions, or conditions.
   (c) The written notice shall specify in a minimum of 10-point bold
typeface the reason or reasons for premium rate changes, plan
design, or plan benefit changes.
   SEC. 3.   SEC. 4.   Article 6.2
(commencing with Section 1385.01) is added to Chapter 2.2 of Division
2 of the Health and Safety Code, to read:

      Article 6.2.  Review of Rate Increases


   1385.01.  For purposes of this article, the following definitions
shall apply:
   (a) "Large group health care service plan contract" means a group
health care service plan contract other than a contract issued to a
small employer, as defined in Section 1357.
   (b) "Small group health care service plan contract" means a group
health care service plan contract issued to a small employer, as
defined in Section 1357.
   (c) "PPACA" means Section 2794 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-14), as amended by the federal
Patient Protection and Affordable Care Act (P. L. 111-48), and any
subsequent rules  or regulations   ,
regulations, or guidance  issued under that section.
   (d) "Unreasonable rate increase" has the same meaning as that term
is defined in PPACA.
   1385.02.  This article shall apply to health care service plan
contracts offered in the individual or group market in California.
However, this article shall not apply to a specialized health care
service plan contract; a Medicare supplement contract subject to
Article 3.5 (commencing with Section 1358.1); a health care service
plan contract offered 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 contract offered in
the Healthy Families Program (Part 6.2 (commencing with Section
12693) of Division 2 of the Insurance Code), the Access for Infants
and Mothers Program (Part 6.3 (commencing with Section 12695) of
Division 2 of the Insurance Code), the California Major Risk Medical
Insurance Program (Part 6.5 (commencing with Section 12700) of
Division 2 of the Insurance Code), or the Federal Temporary High Risk
Pool (Part 6.6 (commencing with Section 12739.5) of Division 2 of
the Insurance Code); a health care service plan conversion contract
offered pursuant to Section 1373.6; or a health care service plan
contract offered to a federally eligible defined individual under
Article 4.6 (commencing with Section 1366.35) or Article 10.5
(commencing with Section 1399.801).
    1385.04.   1385.03.   (a) (1) All
health care service plans shall file with the department all required
rate information for individual and small group health care service
plan contracts at least 60 days prior to implementing any rate
change. 
   (2) For large group health care service plan contracts, all health
plans shall file with the department all required rate information
for unreasonable rate increases prior to implementing any such rate
change.  
   (2) For individual health care service plan contracts, the filing
shall be concurrent with the notice required under Section 1389.25.
 
   (3) For small group health care service plan contracts, the filing
shall be concurrent with the notice required under subdivision (a)
of Section 1374.21. 
   (b) A plan shall disclose to the department all of the following
for each  individual and small group  rate filing:
   (1) Company name and contact information.
   (2) Number of plan contract forms covered by the filing.
   (3) Plan contract form numbers covered by the filing.
   (4) Product type  , such as a preferred provider organization
or health maintenance organization  .
   (5) Segment type.
   (6) Type of plan involved, such as for profit or not for profit.
   (7) Whether the products are opened or closed.
   (8) Enrollment in each plan contract and rating form.
   (9) Enrollee months in each plan contract form.
   (10) Annual rate.
   (11) Total earned premiums in each plan contract form.
   (12) Total incurred claims in each plan contract form.
   (13) Average rate increase initially requested.
   (14) Review category: initial filing for new product, filing for
existing product, or resubmission.
   (15) Average rate of increase.
   (16) Effective date of rate increase.
   (17) Number of subscribers or enrollees affected by each plan
contract form.
   (18) The plan's overall annual medical trend factor assumptions in
each rate filing for all benefits and  disaggregated by
  by aggregate  benefit category, including
hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services,  laboratory,
and radiology. A plan shall provide additional data that
demonstrates year-to-year cost increases in specific benefit
categories. A health plan shall also provide information on aggregate
annual cost increases for specific hospitals and for specific
medical groups within a plan network.   laboratory, and
radiology. A plan may provide aggregated additional data that
demonstrates or reasonably estimates year-to-year cost increases in
specific benefit categories in major geographic regions of the state.
For purposes of this paragraph,   "major geographic region"
shall be defined by the department and shall include no more than
nine regions. A health   plan that exclusively contracts
with no more than two medical groups in the state to provide or
arrange for professional medical services for the enrollees of the
plan shall instead disclose the amount of its actual trend experience
for the prior contract year by aggregate benefit category, using
benefit categories that are, to the maximum extent possible, the same
or similar to those used by other plans. 
   (19) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual plan contract
trends by aggregate benefit category, such as hospital inpatient,
hospital outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology.  A health plan
that exclusively contracts with no more than two medical groups in
the state to provide or arrange for   professional medical
services for the enrollees of the plan shall instead disclose the
amount of its actual trend experience for the prior contract year by
aggregate benefit category, using benefit categories that are, to the
maximum extent possible, the same or similar to those used by other
plans. 
   (20) A comparison of claims cost and rate of changes over time.
   (21) Any changes in enrollee cost-sharing over the prior year
associated with the submitted rate filing.
   (22) Any changes in enrollee benefits over the prior year
associated with the submitted rate filing. 
   (23) The number of consumer inquiries and complaints related to
the plan's rates that have been received by the plan during the
preceding two plan years. The plan shall also summarize the nature of
those inquiries and complaints.  
   (24) 
    (23)  The certification described in subdivision
 (c)   (b)  of Section 1385.06. 
   (24) Any changes in administrative costs.  
   (25) Any other information required for rate review under PPACA.

   (c) A health care service plan subject to subdivision (a) shall
also disclose the following aggregate data for all rate filings 
submitted under this section  in the individual  , small
group, and large   and small  group health plan
markets:
   (1) Number and percentage of rate filings reviewed by the
following:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (D) Number of subscribers.
   (E) Number of covered lives affected.
   (2) The plan's average rate increase by the following categories:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (3) Any cost containment and quality improvement efforts since the
plan's last rate filing for the same category of health benefit
plan.  The   To the extent possible, the 
plan shall describe any significant new health care cost containment
and quality improvement efforts and provide an estimate of potential
savings together with an estimated cost or savings for the projection
period.
   (d) The department may require all health care service plans to
submit all rate filings to the National Association of Insurance
Commissioners' System for Electronic Rate and Form Filing (SERFF).
Submission of the required rate filings to SERFF shall be deemed to
be filing with the department for purposes of compliance with this
section.
   (e) A plan shall submit any other information required  under
PPACA. A plan shall also submit any other information required
pursuant to any regulation adopted  by the department to comply
with this article. 
   1385.06.  (a) A filing submitted under this article shall be
consistent with applicable state and federal laws, rules, and
regulations, including, but not limited to, the applicable provisions
of law governing health care service plan contracts, medical loss
ratios, rating rules, health benefit designs, and health benefit
standards.  
   1385.04.  (a) For large group health care service plan contracts,
all health plans shall file with the department at least 60 days
prior to implementing any rate change all required rate information
for unreasonable rate increases. This filing shall be concurrent with
the written notice described in subdivision (a) of Section 1374.21.
   (b) For large group rate filings, health plans shall submit all
information that is required by PPACA. A plan shall also submit any
other information required pursuant to any regulation adopted by the
department to comply with this article.
   (c) A health care service plan subject to subdivision (a) shall
also disclose the following aggregate data for all rate filings
submitted under this section in the large group health plan market:
   (1) Number and percentage of rate filings reviewed by the
following:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (D) Number of subscribers.
   (E) Number of covered lives affected.
   (2) The plan's average rate increase by the following categories:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (3) Any cost containment and quality improvement efforts since the
plan's last rate filing for the same category of health benefit
plan. To the extent possible, the plan shall describe any significant
new health care cost containment and quality improvement efforts and
provide an estimate of potential savings together with an estimated
cost or savings for the projection period.
   (d) The department may require all health care service plans to
submit all rate filings to the National Association of Insurance
Commissioners' System for Electronic Rate and Form Filing (SERFF).
Submission of the required rate filings to SERFF shall be deemed to
be filing with the department for purposes of compliance with this
section. 
    1385.05.   Notwithstanding any provision in a
contract between a health care service plan and a provider, the
department may request from a health care service plan any
information required under this article or PPACA.  
   (b) 
    1385.06.   (a)    A filing submitted
under this article shall be actuarially sound. 
   (b) (1) The plan shall contract with an independent actuary or
actuaries consistent with this section.  
   (c) (1) 
    (2)    A filing submitted under this article
shall include a certification by an independent actuary or actuarial
firm that the rate increase is reasonable or unreasonable and, if
unreasonable, that the justification for the increase is based on
accurate and sound actuarial assumptions  and methodologies.
Unless PPACA requires a certification of actuarial soundness for each
large group contract, a filing submitted under Section 1385.04 shall
include a certification by an independent actuary, as described in
this section, that the aggregate or average rate increase is based on
accurate and sound actuarial assumptions and methodologies  .

   (2) 
    (3)  The actuary or actuarial firm acting under
paragraph  (1)   (2)  shall not be an
affiliate or a subsidiary of, nor in any way owned or controlled by,
a health care service plan or a trade association of health care
service plans. A board member, director, officer, or employee of the
actuary or actuarial firm shall not serve as a board member,
director, or employee of a health care service plan. A board member,
director, or officer of a health care service plan or a trade
association of health care service plans shall not serve as a board
member, director, officer, or employee of the actuary or actuarial
firm. 
   (d) Nothing in this section shall be construed to preclude the
department from reviewing a proposed rate increase for actuarial
soundness or consistency with applicable state or federal laws,
rules, or regulations.  
   (c) Nothing in this article shall be construed to permit the
director to establish the rates charged subscribers and enrollees for
covered health care services. 
   1385.07.  (a) Notwithstanding Chapter 3.5 (commencing with Section
6250) of Division 7 of Title 1 of the Government Code, all
information submitted under this article shall be made publicly
available  by the department  except as provided in
subdivision (b). 
   (b) The contracted rates between a health care service plan and an
individual provider, including, but not limited to, a health
professional, medical group, hospital, or hospital system, shall be
deemed confidential information that shall not be divulged by the
department.  
   (b) The contracted rates between a health care service plan and a
provider shall be deemed confidential information that shall not be
made public by the department and are exempt from disclosure under
the California Public Records Act (Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code). The
contracted rates between a health care service plan and a large group
shall be deemed confidential information that shall not be made
public by the department and are exempt from disclosure under the
California Public Records Act (Chapter 3.5 (commencing with Section
6250) of Division 7 of Title 1 of the Government Code). 
   (c) All information submitted to the department under this article
shall be submitted electronically in order to facilitate review by
the department and the public. 
   (d) In addition, the health care service plan shall file the
following information in a manner and format specified by the
department. The information shall be in plain language and shall be
made readily available to the public on the Internet Web site of the
department and the plan, except as provided in subdivision 
    (d)     In addition, the department and the
health care service plan shall, at a minimum, make the following
information readily available to the public on their Internet Web
sites, in plain language and in a manner and format specified by the
department, except as provided in subdivision  (b). The
information shall be made public for 60 days prior to the
implementation of the rate increase.  This period may be
extended by the department if needed to complete its review
consistent with this article.  The information shall
include:
   (1) Justifications for any unreasonable rate increases, including
all information and supporting documentation as to why the rate
increase is justified.
   (2) A plan's overall annual medical trend factor assumptions in
each rate filing for all benefits.
   (3) A health plan's actual costs,  disaggregated
by aggregate benefit category to include hospital inpatient, hospital
outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology.
   (4) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual plan contract
trends by aggregate benefit category,
              such as hospital inpatient, hospital outpatient,
physician services, prescription drugs and other ancillary services,
laboratory, and radiology.  A health plan tha   t
exclusively contracts with no more than two medical groups in the
state to provide or arrange for professional medical services for the
enrollees of the plan shall instead disclose the amount of its
actual trend experience for the prior contract year by aggregate
benefit category, using benefit categories that are, to the maximum
extent possible, the same or similar to those used by other plans.

   1385.08.  (a) On or before July 1,  2011  
2012  , the director may issue guidance to health care service
plans regarding compliance with this article. This guidance shall not
be subject to the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code). 
   (b) The department may adopt regulations to implement this article
in accordance with Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code. 

   (c) 
    (b)  The department shall consult with the Department of
Insurance in issuing guidance under subdivision (a), in adopting
 regulations under subdivision (b)   necessary
regulations  , in posting information on its Internet Web site
under this article, and in taking any other action for the purpose of
implementing this article.
   1385.11.  (a) Whenever it appears to the department that any
person has engaged, or is about to engage, in any act or practice
constituting a violation of this article, including the filing of
inaccurate or unjustified rates or inaccurate or unjustified rate
information, the department may review the rate filing to ensure
compliance with the law. 
   (b) The department shall, at a minimum, review for consistency
with Section 1385.06 any unreasonable rate increase. 

   (c) The department shall also review a proposed rate increase if
the plan proposing the increase is found by the department to have a
pattern of filing inaccurate, unjustified, or unreasonable rate
increases.  
   (d) 
    (b)  The department may review other filings. 
   (e) 
    (c)  The department shall  consider 
 accept and post to its Internet Web site  any public
comment on a rate increase submitted to the department during the
60-day period described in subdivision (d) of Section 1385.07.

   (f) 
    (d)  The department shall report to the Legislature at
least  quarterly on all rate filings that are unreasonable,
not actuarially sound, or otherwise not consistent with applicable
state or federal laws or regulations, including, but not limited to,
those governing health care service plan contracts, medical loss
ratio, rating rules, benefit designs, and benefit standards.
  quarterly on all unreasonable rate filings. 

   (g) After conducting a review under this section, the department

    (e)     The department  shall post on
its Internet Web site any changes  submitted by the plan  to
the proposed rate increase, including any documentation 
submitted by the plan  supporting those changes. 
   (h) 
    (f)  If the department finds that an unreasonable rate
increase is not justified or that a rate filing contains inaccurate
information, the department shall post its finding on its Internet
Web site. 
   (i) 
    (g)  Nothing in this article shall be construed to
impair or impede the department's authority to administer or enforce
any other provision of this chapter.
   1385.13.  The department shall do all of the following in a manner
consistent with applicable federal laws, rules, and regulations:
   (a) Provide data to the United States Secretary of Health and
Human Services on health care service plan rate trends in premium
rating areas. 
   (b) Provide to the United States Secretary of Health and Human
Services the number of, and a summary of the nature of, inquiries and
complaints related to health care service plan rates that have been
received for the past two plan years.  
   (c) 
    (b)  Commencing with the creation of the Exchange,
provide to the Exchange such information as may be necessary to allow
compliance with federal law, rules, regulations, and guidance.
 The director shall develop an interagency agreement with the
Exchange to facilitate the reporting of information regarding rate
filings that is consistent with the responsibilities of the Exchange.
As used in this subdivision, the "Exchange" means the American
Health Benefit Exchange established in California pursuant to Section
1311 of the federal Patient Protection and Affordable Care Act
(Public Law 111-148). 
   SEC. 4.   SEC. 5.   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 60 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 60 days prior to the effective
date of the change. The notice shall state in italics and in 12-point
type the actual dollar amount of the premium rate increase and 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 (MRMIP) (Part 6.5 (commencing
with Section 12700) of Division 2 of the Insurance Code), and the
federal temporary high risk pool established pursuant to Part 6.6
(commencing with Section 12739.5) of Division 2 of the Insurance
Code. The information provided to the applicant by the plan shall be
in accordance with standards developed by the department, in
consultation with the Managed Risk Medical Insurance Board, and shall
specifically include the toll-free telephone number and Internet Web
site address for MRMIP and the federal temporary high risk pool. The
requirement to notify applicants of the availability of MRMIP and
the federal temporary high risk pool 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. 5.   SEC. 6.   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 to 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 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 60 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 60 days prior to the effective date of
the change. The notice shall state in italics and in 12-point type
the actual dollar amount of the premium increase and 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 (MRMIP) (Part 6.5
(commencing with Section 12700)), and the federal temporary high risk
pool established pursuant to Part 6.6 (commencing with Section
12739.5). The information provided to the applicant by the insurer
shall be in accordance with standards developed by the department, in
consultation with the Managed Risk Medical Insurance Board, and
shall specifically include the toll-free telephone number and
Internet Web site address for MRMIP and the federal temporary high
risk pool. The requirement to notify applicants of the availability
of MRMIP and the federal temporary high risk pool 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.   SEC. 7.   Article 4.5
(commencing with Section 10181) is added to Chapter 1 of Part 2 of
Division 2 of the Insurance Code, to read:

      Article 4.5.  Review of Rate Increases


   10181.  For purposes of this article, the following definitions
shall apply:
   (a) "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.
   (b) "Small group health insurance policy" means a group health
insurance policy issued to a small employer, as defined in Section
10700.
   (c) "PPACA" means Section 2794 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-14), as amended by the federal
Patient Protection and Affordable Care Act (P. L. 111-48), and any
subsequent rules  or regulations   ,  
regulations, or guidance  issued pursuant to that law.
   (d) "Unreasonable rate increase" has the same meaning as that term
is defined in PPACA.
   10181.2.  This article shall apply to health insurance policies
offered in the individual or group market in California. However,
this article shall not apply to a specialized health insurance
policy; a Medicare supplement policy subject to Article 6 (commencing
with Section 10192.05); a health insurance policy offered 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
insurance policy offered in the Healthy Families Program (Part 6.2
(commencing with Section 12693)), the Access for Infants and Mothers
Program (Part 6.3 (commencing with Section 12695)), the California
Major Risk Medical Insurance Program (Part 6.5 (commencing with
Section 12700)), or the Federal Temporary High Risk Pool (Part 6.6
(commencing with Section 12739.5)); a health insurance conversion
policy offered pursuant to Section 12682.1; or a health insurance
policy offered to a federally eligible defined individual under
Chapter 9.5 (commencing with Section 10900).
    10181.4.  10181.3.   (a) (1)  All
health insurers shall file with the department all required rate
information for individual and small group health insurance policies
at least 60 days prior to implementing any rate change. 
   (2) For large group health insurance policies, all health insurers
shall file with the department all required rate information for
unreasonable rate increases prior to implementing any such rate
change.  
   (2) For individual health insurance policies, the filing shall be
concurrent with the notice required under Section 10113.9.  

   (3) For small group health insurance policies, the filing shall be
concurrent with the notice required under Section 10199.1. 
   (b) An insurer shall disclose to the department all of the
following for each  individual and small gr   oup 
rate filing:
   (1) Company name and contact information.
   (2) Number of policy forms covered by the filing.
   (3) Policy form numbers covered by the filing.
   (4) Product type  , such as indemnity or preferred provider
organization  .
   (5) Segment type.
   (6) Type of insurer involved, such as for profit or not for
profit.
   (7) Whether the products are opened or closed.
   (8) Enrollment in each policy and rating form.
   (9) Insured months in each policy form.
   (10) Annual rate.
   (11) Total earned premiums in each policy form.
   (12) Total incurred claims in each policy form.
   (13) Average rate increase initially requested.
   (14) Review category: initial filing for new product, filing for
existing product, or resubmission.
   (15) Average rate of increase.
   (16) Effective date of rate increase.
   (17) Number of policyholders or insureds affected by each policy
form.
   (18) The insurer's overall annual medical trend factor assumptions
in each rate filing for all benefits and  disaggregated by
  by aggregate  benefit category, including
hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology. An insurer  shall provide additional data that
demonstrates year-to-year cost increases in specific benefit
categories. An insurer shall also provide information on aggregate
annual cost increases for specific hospitals and for specific medical
groups within a network.   may provide aggregated
additional data that demonstrates or reasonably estimates
year-to-year cost increases in specific benefit categories in major
geographic regions of the state. For purposes of this paragraph,
"major geographic region" shall be defined by the department and
shall include no more than nine regions. 
   (19) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual policy trends
by aggregate benefit category, such as hospital inpatient, hospital
outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology.
   (20) A comparison of claims cost and rate of changes over time.
   (21) Any changes in insured cost-sharing over the prior year
associated with the submitted rate filing.
   (22) Any changes in insured benefits over the prior year
associated with the submitted rate filing. 
   (23) The number of consumer inquiries and complaints related to
the insurer's rates that have been received by the insurer during the
preceding two plan years. The insurer shall also summarize the
nature of those inquiries and complaints.  
   (24) 
    (23)  The certification described in subdivision
 (c)   (b)  of Section 10181.6. 
   (24) Any changes in administrative costs.  
   (25) Any other information required for rate review under PPACA.

   (c) An insurer subject to subdivision (a) shall also disclose the
following aggregate data for all rate filings  submitted under
this section  in the individual  , small group, and
large   and small  group health insurance markets:
   (1) Number and percentage of rate filings reviewed by the
following:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (D) Number of policyholders
   (E) Number of covered lives affected.
   (2) The insurer's average rate increase by the following
categories:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (3) Any cost containment and quality improvement efforts since the
insurer's last rate filing for the same category of health benefit
plan.  The  To the extent possible, the 
insurer shall describe any significant new health care cost
containment and quality improvement efforts and provide an estimate
of potential savings together with an estimated cost or savings for
the projection period.
   (d) The department may require all health insurers to submit all
rate filings to the National Association of Insurance Commissioners'
System for Electronic Rate and Form Filing (SERFF). Submission of the
required rate filings to SERFF shall be deemed to be filing with the
department for purposes of compliance with this section.
   (e) A health insurer shall submit any other information required
 under PPACA. A health insurer shall also submit any other
information required pursuant to any regulation adopted  by the
department to comply with this article. 
   10181.6.  (a) A filing submitted under this article shall be
consistent with applicable state and federal laws, rules, and
regulations, including, but not limited to, the provisions of law
governing health insurance policies, medical loss ratios, rating
rules, health benefit designs, and health benefit standards.
 
   10181.4.  (a) For large group health insurance policies, all
health insurers shall file with the department at least 60 days prior
to implementing any rate change all required rate information for
unreasonable rate increases. This filing shall be concurrent with the
written notice described in Section 10199.1.
   (b) For large group rate filings, health insurers shall submit all
information that is required by PPACA. A health insurer shall also
submit any other information required pursuant to any regulation
adopted by the department to comply with this article.
   (c) A health insurer subject to subdivision (a) shall also
disclose the following aggregate data for all rate filings submitted
under this section in the large group health insurance market:
   (1) Number and percentage of rate filings reviewed by the
following:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (D) Number of insureds.
   (E) Number of covered lives affected
   (2) The insurer's average rate increase by the following
categories:
   (A) Plan year.
   (B) Segment type.
   (C) Product type.
   (3) Any cost containment and quality improvement efforts since the
health insurer's last rate filing for the same category of health
insurance policy. To the extent possible, the health insurer shall
describe any significant new health care cost containment and quality
improvement efforts and provide an estimate of potential savings
together with an estimated cost or savings for the projection period.

   (d) The department may require all health insurers to submit all
rate filings to the National Association of Insurance Commissioners'
System for Electronic Rate and Form Filing (SERFF). Submission of the
required rate filings to SERFF shall be deemed to be filing with the
department for purposes of compliance with this section. 
    10181.5.   Notwithstanding any provision in a
contract between a health insurer and a provider, the department may
request from a health insurer any information required under this
article or PPACA.  
   (b) 
    10181.6.   (a)    A filing submitted
under this article shall be actuarially sound. 
   (b) (1) The health insurer shall contract with an independent
actuary or actuaries consistent with this section.  
   (c) (1) 
    (2)    A filing submitted under this article
shall include a certification by an independent actuary or actuarial
firm that the rate increase is reasonable or unreasonable and, if
unreasonable, that the justification for the increase is based on
accurate and sound actuarial assumptions  and methodologies.
Unless PPACA requires a certification of actuarial soundness for each
large group health insurance policy, a filing submitted under
Section 10181.4 shall include a certification by an independent
actuary, as described in this section, that the aggregate or average
rate increase is based on accurate and sound actuarial assumptions
and methodologies  . 
   (2) 
    (3) The actuary or actuarial firm acting under paragraph
 (1)   (2)  shall not be an affiliate or a
subsidiary of, nor in any way owned or controlled by, a health
insurer or a trade association of health insurers. A board member,
director, officer, or employee of the actuary or actuarial firm shall
not serve as a board member, director, or employee of a health
insurer. A board member, director, or officer of a health insurer or
a trade association of health insurers shall not serve as a board
member, director, officer, or employee of the actuary or actuarial
firm. 
   (d) Nothing in this section shall be construed to preclude the
department from reviewing a proposed rate increase for actuarial
soundness or consistency with applicable state or federal laws,
rules, or regulations.  
   (c) Nothing in this article shall be construed to permit the
commissioner to establish the rates charged insureds and
policyholders for covered health care services. 
   10181.7.  (a) Notwithstanding Chapter 3.5 (commencing with Section
6250) of Division 7 of Title 1 of the Government Code, all
information submitted under this article shall be made publicly
available  by the department  except as provided in
subdivision (b). 
   (b) The contracted rates between a health insurer and an
individual provider, including, but not limited to, a health
professional, medical group, hospital, or hospital system, shall be
deemed confidential information that shall not be divulged by the
department.  
   (b) Any contracted rates between a health insurer and a provider
shall be deemed confidential information that shall not be made
public by the department and are exempt from disclosure under the
California Public Records Act (Chapter 3.5 (commencing with Section
6250) of Division 7 of Title 1 of the Government Code). The
contracted rates between a health insurer and a large group shall be
deemed confidential information that shall not be made public by the
department and are exempt from disclosure under the California Public
Records Act (Chapter 3.5 (commencing with Section 6250) of Division
7 of Title 1 of the Government Code). 
   (c) All information submitted to the department under this article
shall be submitted electronically in order to facilitate review by
the department and the public. 
   (d) In addition, the health insurer shall file the following
information in a manner and format specified by the department. The
information shall be in plain language and shall be made readily
available to the public on the Internet Web site of the department
and the insurer, except as provided in subdivision (b). 
    (d)     In addition, the department and the
health insurer shall, at a minimum, make the following information
readily available to   the public on their
                                 Internet Web sites, in plain
language and in a manner and format specified by the department,
except as provided in subdivision (b).  The information shall be
made public for 60 days prior to the implementation of the rate
increase.  This period may be extended by the department if
needed to complete its review consistent with this article. 
The information shall include:
   (1) Justifications for any unreasonable rate increases, including
all information and supporting documentation as to why the rate
increase is justified.
   (2) An insurer's overall annual medical trend factor assumptions
in each rate filing for all benefits.
   (3) An insurer's actual costs,  disaggregated  by
aggregate benefit category to include, hospital inpatient, hospital
outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology.
   (4) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual policy trends
by aggregate benefit category, such as hospital inpatient, hospital
outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology.
   10181.9.  (a) On or before July 1,  2011  
2012  , the commissioner may issue guidance to health insurers
regarding compliance with this article. This guidance shall not be
subject to the Administrative Procedure Act (Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code). 
   (b) The department may adopt regulations to implement this article
in accordance with Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code. 

   (c) 
    (b)  The department shall consult with the Department of
Managed Health Care in issuing guidance under subdivision (a), in
adopting  regulations under subdivision (b)  
necessary regulations  , in posting information on its Internet
Web site under this article, and in taking any other action for the
purpose of implementing this article.
   10181.11.  (a) Whenever it appears to the department that any
person has engaged, or is about to engage, in any act or practice
constituting a violation of this article, including the filing of
inaccurate or unjustified rates or inaccurate or unjustified rate
information, the department may review rate filing to ensure
compliance with the law. 
   (b) The department shall, at a minimum, review for consistency
with Section 10181.6 any unreasonable rate increase. 

   (c) The department shall also review a rate increase if the
insurer proposing the increase is found by the department to have a
pattern of filing inaccurate, unjustified, or unreasonable rate
increases.  
   (d) 
    (b)  The department may review other filings. 
   (e) 
    (c)  The department shall  consider 
 accept and post to its Internet Web site  any public
comment on a rate increase submitted to the department during the
60-day period described in subdivision (d) of Section 10181.7.

   (f) 
    (d)  The department shall report to the Legislature at
least  quarterly on all rate filings that are unreasonable,
not actuarially sound, or otherwise not consistent with applicable
state or federal laws or regulations, including, but not limited to,
those governing health insurance policies, medical loss ratio, rating
rules, benefit designs, and benefit standards.  
quarterly on all unreasonable rate filings.  
   (g) After conducting a review under this section, the department

    (e)     The department  shall post on
its Internet Web site any changes  submitted by the insurer 
to the proposed rate increase, including any documentation 
submitted by the insurer  supporting those changes. 
   (h) 
    (f)  If the department finds that an unreasonable rate
increase is not justified or that a rate filing contains inaccurate
information, the department shall post its finding on its Internet
Web site. 
   (i) 
    (g)  Nothing in this article shall be construed to
impair or impede the department's authority to administer or enforce
any other provision of this code.
   10181.13.  The department shall do all of the following in a
manner consistent with applicable federal laws, rules, and
regulations:
   (a) Provide data to the United States Secretary of Health and
Human Services on health insurer rate trends in premium rating areas.

   (b) Provide to the United States Secretary of Health and Human
Services the number of, and a summary of the nature of, inquiries and
complaints related to health insurer rates that have been received
for the past two plan years.  
   (c) 
    (b)  Commencing with the creation of the Exchange,
provide to the Exchange such information as may be necessary to allow
compliance with federal law, rules, regulations, and guidance.
 The director shall develop an interagency agreement with the
Exchange to facilitate the reporting of information regarding rate
filings that is consistent with the responsibilities of the Exchange.
As used in this subdivision, the "Exchange" means the American
Health Benefit Exchange established in California pursuant to Section
1311 of the federal Patient Protection and Affordable Care Act
(Public Law 111-148). 
   SEC. 7.   SEC. 8.   Section 10199.1 of
the Insurance Code is amended to read:
   10199.1.  (a) No insurer or nonprofit hospital service plan or
administrator acting on its behalf shall terminate a group master
policy or contract providing hospital, medical, or surgical benefits,
increase premiums or charges therefor, reduce or eliminate benefits
thereunder, or restrict eligibility for coverage thereunder without
providing prior notice of that action. No such action shall become
effective unless written notice of the action was delivered by mail
to the last known address of the appropriate insurance producer and
the appropriate administrator, if any, at least 45 days prior to the
effective date of the action and to the last known address of the
group policyholder or group contractholder at least 60 days prior to
the effective date of the action. If nonemployee certificate holders
or employees of more than one employer are covered under the policy
or contract, written notice shall also be delivered by mail to the
last known address of each nonemployee certificate holder or affected
employer or, if the action does not affect all employees and
dependents of one or more employers, to the last known address of
each affected employee certificate holder, at least 60 days prior to
the effective date of the action.
   (b) No holder of a master group policy or a master group nonprofit
hospital service plan contract or administrator acting on its behalf
shall terminate the coverage of, increase premiums or charges for,
or reduce or eliminate benefits available to, or restrict eligibility
for coverage of a covered person, employer unit, or class of
certificate holders covered under the policy or contract for
hospital, medical, or surgical benefits without first providing prior
notice of the action. No such action shall become effective unless
written notice was delivered by mail to the last known address of
each affected nonemployee certificate holder or employer, or if the
action does not affect all employees and dependents of one or more
employers, to the last known address of each affected employee
certificate holder, at least 60 days prior to the effective date of
the action.
   (c) A health insurer that declines to offer coverage to or denies
enrollment for a  large  group applying for coverage or that
offers  small  group coverage at a rate that is higher than
the standard  employee risk  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.
   SEC. 8.   SEC. 9.   Section 10199.2 of
the Insurance Code is amended to read:
   10199.2.  (a)  The written notice described in subdivisions (a)
and (b) of Section 10199.1 shall state in italics and in 12-point
type the actual dollar amount and the specific percentage of the
premium rate increase. Further, the notice shall describe in plain
understandable English and highlighted in italics any changes in the
plan design or change in benefits with reduction in benefits,
waivers, exclusions, or conditions.
   (b) The written notice shall specify in a minimum of 10-point bold
typeface the reason or reasons for premium rate changes, plan
design, or plan benefit changes.
   SEC. 10.    Section 10705 of the   Insurance
Code   is amended to read: 
   10705.  Upon the effective date of this act:
   (a) No group or individual policy or contract or certificate of
group insurance or statement of group coverage providing benefits to
employees of small employers as defined in this chapter shall be
issued or delivered by a carrier subject to the jurisdiction of the
commissioner regardless of the situs of the contract or master
policyholder or of the domicile of the carrier nor, except as
otherwise provided in Sections 10270.91 and 10270.92, shall a carrier
provide coverage subject to this chapter until a copy of the form of
the policy, contract, certificate, or statement of coverage is filed
with and approved by the commissioner in accordance with Sections
10290 and 10291, and the carrier has complied with the requirements
of Section 10717.
   (b)  (1)    Each carrier, except a self-funded
employer, shall fairly and affirmatively offer, market, and sell all
of the carrier's benefit plan designs that are sold to, offered
through, or sponsored by, small employers or associations that
include small employers to all small employers in each geographic
region in which the carrier makes coverage available or provides
benefits.  A 
    (2)     A  carrier contracting to
participate in the Voluntary Alliance Uniting Employers Purchasing
Program shall be deemed to be in compliance with  this
requirement   paragraph (1)  for a benefit plan
design offered through the program in those geographic regions in
which the carrier participates in the program and the benefit plan
design is offered exclusively through the program. 
   (3) (A) A carrier shall be deemed to meet the requirements of
paragraph (1) and subdivision (c) with respect to a benefit plan
design that qualifies as a grandfathered health plan under Section
1251 of PPACA if all of the following requirements are met: 

   (i) The carrier offers to renew the benefit plan design, unless
the carrier withdraws the benefit plan design from the small employer
market pursuant to subdivision (e) of Section 10713.  
   (ii) The carrier provides appropriate notice of the grandfathered
status of the benefit plan design in any materials provided to an
insured of the design describing the benefits provided under the
design, as required under PPACA.  
   (iii) The carrier makes no changes to the benefits covered under
the benefit plan design other than those required by a state or
federal law, regulation, rule, or guidance and those permitted to be
made to a grandfathered health plan under PPACA.  
   (B) For purposes of this paragraph, "PPACA" means the federal
Patient Protection and Affordable Care Act (Public Law 111-148), as
amended by the federal Health Care and Education Reconciliation Act
of 2010 (Public Law 111-152), and any rules, regulations, or guidance
issued thereunder For purposes of this paragraph, a "grandfathered
health plan" shall have the meaning set forth in Section 1251 of
PPACA.  
   (1) 
    (4)  Nothing in this section shall be construed to
require an association, or a trust established and maintained by an
association to receive a master insurance policy issued by an
admitted insurer and to administer the benefits thereof solely for
association members, to offer, market or sell a benefit plan design
to those who are not members of the association. However, if the
association markets, offers or sells a benefit plan design to those
who are not members of the association it is subject to the
requirements of this section. This shall apply to an association that
otherwise meets the requirements of paragraph  (5) 
 (8)  formed by merger of two or more associations after
January 1, 1992, if the predecessor organizations had been in active
existence on January 1, 1992, and for at least five years prior to
that date and met the requirements of paragraph (5). 
   (2) 
    (5)  A carrier which (A) effective January 1, 1992, and
at least 20 years prior to that date, markets, offers, or sells
benefit plan designs only to all members of one association and (B)
does not market, offer or sell any other individual, selected group,
or group policy or contract providing medical, hospital and surgical
benefits shall not be required to market, offer, or sell to those who
are not members of the association. However, if the carrier markets,
offers or sells any benefit plan design or any other individual,
selected group, or group policy or contract providing medical,
hospital and surgical benefits to those who are not members of the
association it is subject to the requirements of this section.

   (3) 
    (6)  Each carrier that sells health benefit plans to
members of one association pursuant to paragraph  (2)
  (5)  shall submit an annual statement to the
commissioner which states that the carrier is selling health benefit
plans pursuant to paragraph  (2)   (5)  and
which, for the one association, lists all the information required
by paragraph  (4)   (7)  . 
   (4) 
    (7)  Each carrier that sells health benefit plans to
members of any association shall submit an annual statement to the
commissioner which lists each association to which the carrier sells
health benefit plans, the industry or profession which is served by
the association, the association's membership criteria, a list of
officers, the state in which the association is organized, and the
site of its principal office. 
   (5) 
    (8)  For purposes of paragraphs  (1) and (2)
  (4) and (5)  , an association is a nonprofit
organization comprised of a group of individuals or employers who
associate based solely on participation in a specified profession or
industry, accepting for membership any individual or small employer
meeting its membership criteria, which do not condition membership
directly or indirectly on the health or claims history of any person,
which uses membership dues solely for and in consideration of the
membership and membership benefits, except that the amount of the
dues shall not depend on whether the member applies for or purchases
insurance offered by the association, which is organized and
maintained in good faith for purposes unrelated to insurance, which
has been in active existence on January 1, 1992, and at least five
years prior to that date, which has a constitution and bylaws, or
other analogous governing documents which provide for election of the
governing board of the association by its members, which has
contracted with one or more carriers to offer one or more health
benefit plans to all individual members and small employer members in
this state.
   (c) Each carrier shall make available to each small employer all
benefit plan designs that the carrier offers or sells to small
employers or to associations that include small employers.
Notwithstanding subdivision (d) of Section 10700, for purposes of
this subdivision, companies that are affiliated companies or that are
eligible to file a consolidated income tax return shall be treated
as one carrier.
   (d) Each carrier shall do all of the following:
   (1) Prepare a brochure that summarizes all of its benefit plan
designs and make this summary available to small employers, agents
and brokers upon request. The summary shall include for each benefit
plan design information on benefits provided, a generic description
of the manner in which services are provided, such as how access to
providers is limited, benefit limitations, required copayments and
deductibles, standard employee risk rates, an explanation of how
creditable coverage is calculated if a preexisting condition or
affiliation period is imposed, and a telephone number that can be
called for more detailed benefit information. Carriers are required
to keep the information contained in the brochure accurate and up to
date, and, upon updating the brochure, send copies to agents and
brokers representing the carrier. Any entity that provides
administrative services only with regard to a benefit plan design
written or issued by another carrier shall not be required to prepare
a summary brochure which includes that benefit plan design.
   (2) For each benefit plan design, prepare a more detailed evidence
of coverage and make it available to small employers, agents and
brokers upon request. The evidence of coverage shall contain all
information that a prudent buyer would need to be aware of in making
selections of benefit plan designs. An entity that provides
administrative services only with regard to a benefit plan design
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that benefit plan design.
   (3) Provide to small employers, agents, and brokers, upon request,
for any given small employer the sum of the standard employee risk
rates and the sum of the risk adjusted standard employee risk rates.
When requesting this information, small employers, agents and brokers
shall provide the carrier with the information the carrier needs to
determine the small employer's risk adjusted employee risk rate.
   (4) Provide copies of the current summary brochure to all agents
or brokers who represent the carrier and, upon updating the brochure,
send copies of the updated brochure to agents and brokers
representing the carrier for the purpose of selling health benefit
plans.
   (5) Notwithstanding subdivision (d) of Section 10700, for purposes
of this subdivision, companies that are affiliated companies or that
are eligible to file a consolidated income tax return shall be
treated as one carrier.
   (e) Every agent or broker representing one or more carriers for
the purpose of selling health benefit plans to small employers shall
do all of the following:
   (1) When providing information on a health benefit plan to a small
employer but making no specific recommendations on particular
benefit plan designs:
   (A) Advise the small employer of the carrier's obligation to sell
to any small employer any of the benefit plan designs it offers to
small employers and provide them, upon request, with the actual rates
that would be charged to that employer for a given benefit plan
design.
   (B) Notify the small employer that the agent or broker will
procure rate and benefit information for the small employer on any
benefit plan design offered by a carrier for whom the agent or broker
sells health benefit plans.
   (C) Notify the small employer that, upon request, the agent or
broker will provide the small employer with the summary brochure
required in paragraph (1) of subdivision (d) for any benefit plan
design offered by a carrier whom the agent or broker represents.
   (2) When recommending a particular benefit plan design or designs,
advise the small employer that, upon request, the agent will provide
the small employer with the brochure required by paragraph (1) of
subdivision (d) containing the benefit plan design or designs being
recommended by the agent or broker.
   (3) Prior to filing an application for a small employer for a
particular health benefit plan:
   (A) For each of the benefit plan designs offered by the carrier
whose benefit plan design the agent or broker is presenting, provide
the small employer with the benefit summary required in paragraph (1)
of subdivision (d) and the sum of the standard employee risk rates
for that particular employer.
   (B) Notify the small employer that, upon request, the agent or
broker will provide the small employer with an evidence of coverage
brochure for each benefit plan design the carrier offers.
   (C) Notify the small employer that, from July 1, 1993  . 
to July 1, 1996, actual rates may be 20 percent higher or lower than
the sum of the standard employee risk rates, and from July 1, 1996,
and thereafter, actual rates may be 10 percent higher or lower than
the sum of the standard employee risk rates depending on how the
carrier assesses the risk of the small employer's group.
   (D) Notify the small employer that, upon request, the agent or
broker will submit information to the carrier to ascertain the small
employer's sum of the risk adjusted standard employee risk rate for
any benefit plan design the carrier offers.
   (E) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by  this  paragraph  (3) of subdivision (e)
 and  by  Section 10716.
   (f) No carrier, agent, or broker shall induce or otherwise
encourage a small employer to separate or otherwise exclude an
eligible employee from a health benefit plan which, in the case of an
eligible employee meeting the definition in paragraph (1) of
subdivision (f) of Section 10700, is provided in connection with the
employee's employment or which, in the case of an eligible employee
as defined in paragraph (2) of subdivision (f) of Section 17000, is
provided in connection with a guaranteed association.
   (g) No carrier shall reject an application from a small employer
for a benefit plan design provided:
   (1) The small employer as defined by paragraph (1) of subdivision
(w) of Section 10700 offers health benefits to 100 percent of its
eligible employees as defined in paragraph (1) of subdivision (f) of
Section 10700. Employees who waive coverage on the grounds that they
have other group coverage shall not be counted as eligible employees.

   (2) The small employer agrees to make the required premium
payments.
   (h) No carrier or agent or broker shall, directly or indirectly,
engage in the following activities:
   (1) Encourage or direct small employers to refrain from filing an
application for coverage with a carrier because of the health status,
claims experience, industry, occupation, or geographic location
within the carrier's approved service area of the small employer or
the small employer's employees.
   (2) Encourage or direct small employers to seek coverage from
another carrier or the program because of the health status, claims
experience, industry, occupation, or geographic location within the
carrier's approved service area of the small employer or the small
employer's employees.
   (i) No carrier shall, directly or indirectly, enter into any
contract, agreement, or arrangement with an agent or broker that
provides for or results in the compensation paid to an agent or
broker for a health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the small employer or the small employer's employees.
This subdivision shall not apply with respect to a compensation
arrangement that provides compensation to an agent or broker on the
basis of percentage of premium, provided that the percentage shall
not vary because of the health status, claims experience, industry,
occupation, or geographic area of the small employer.
   (j) Except in the case of a late insured, or for satisfaction of a
preexisting condition clause in the case of initial coverage of an
eligible employee, a disability insurer may not exclude any eligible
employee or dependent who would otherwise be entitled to health care
services on the basis of any of the following: the health status, the
medical condition, including both physical and mental illnesses, the
claims experience, the medical history, the genetic information, or
the disability or evidence of insurability, including conditions
arising out of acts of domestic violence of that employee or
dependent. No health benefit plan may limit or exclude coverage for a
specific eligible employee or dependent by type of illness,
treatment, medical condition, or accident, except for preexisting
conditions as permitted by Section 10198.7 or 10708.
   (k) If a carrier enters into a contract, agreement, or other
arrangement with a third-party administrator or other entity to
provide administrative, marketing, or other services related to the
offering of health benefit plans to small employers in this state,
the third-party administrator shall be subject to this chapter.
   (  l  ) (1) With respect to the obligation to provide
coverage newly issued under subdivision (d), the carrier may cease
enrolling new small employer groups and new eligible employees as
defined by paragraph (2) of subdivision (f) of Section 10700 if it
certifies to the commissioner that the number of eligible employees
and dependents, of the employers newly enrolled or insured during the
current calendar year by the carrier equals or exceeds: (A) in the
case of a carrier that administers any self-funded health benefits
arrangement in California, 10 percent of the total number of eligible
employees, or eligible employees and dependents, respectively,
enrolled or insured in California by that carrier as of December 31
of the preceding year, or (B) in the case of a carrier that does not
administer any self-funded health benefit arrangements in California,
8 percent of the total number of eligible employees, or eligible
employees and dependents, respectively, enrolled or insured by the
carrier in California as of December 31 of the preceding year.
   (2) Certification shall be deemed approved if not disapproved
within 45 days after submission to the commissioner. If that
certification is approved, the small employer carrier shall not offer
coverage to any small employers under any health benefit plans
during the remainder of the current year. If the certification is not
approved, the carrier shall continue to issue coverage as required
by subdivision (d) and be subject to administrative penalties as
established in Section 10718.
   SEC. 9.   SEC. 11.   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.