BILL NUMBER: SB 51	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 5, 2011

INTRODUCED BY   Senator Alquist

                        DECEMBER 15, 2010

   An act to add Sections 1367.001 and 1367.003 to the Health and
Safety Code, and to add Sections 10112.1 and 10112.25 to the
Insurance Code, relating to health care coverage.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 51, as amended, Alquist. Health care coverage.
   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 prohibits a health care
service plan from expending for administrative costs, as defined, an
excessive amount of the payments the plan receives for providing
health care services to its subscribers and enrollees.
   Existing law provides for the regulation of health insurers by the
Department of Insurance. The Insurance Commissioner is required to
withdraw approval of an individual or mass-marketed  policy
of disability   health  insurance  policy 
if the commissioner finds that the benefits provided under the
policy are unreasonable in relation to the premium charged, as
specified.
   The federal Patient Protection and Affordable Care Act prohibits a
health insurance issuer issuing health insurance coverage from
establishing lifetime limits or unreasonable annual limits on the
dollar value of benefits for any participant or beneficiary, as
specified. The act also requires a health insurance issuer issuing
health insurance coverage to  comply with minimum medical loss
ratios and to  provide an annual rebate to each 
enrollee   insured  if the  medical loss 
ratio of the amount of the revenue expended by the issuer on costs to
the total amount of premium revenue is less than a certain
percentage, as specified.
   This bill would require health care service plans and health
insurers to comply with the requirements imposed under those 
federal  provisions  to the extent required under
federal law   , as specified. The bill would authorize
the Director of the Department of Managed Health Care and the
Insurance Commissioner to issue guidance and promulgate regulations
to implement   requirements   relating to medical
loss ratios, as specified  .
   Because a willful violation of those requirements with respect to
health care service plans would be a crime, the bill would impose a
state-mandated local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 1367.001 is added to the Health and Safety
Code, to read:
   1367.001.  To the extent required by federal law, every health
care service plan that issues, sells, renews, or offers contracts for
health care coverage in this state shall comply with the
requirements of Section 2711 of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-11) and any rules or regulations issued under
that section, in addition to any state laws or regulations that do
not prevent the application of those requirements. 
  SEC. 2.    Section 1367.003 is added to the Health
and Safety Code, to read:
   1367.003.  To the extent required by federal law, every health
care service plan that issues, sells, renews, or offers contracts for
health care coverage in this state shall comply with the
requirements of Section 2718 of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-18) and any rules or regulations issued under
that section. 
   SEC. 2.    Section 1367.003 is added to the 
 Health and Safety Code   , to read:  
   1367.003.  (a) Every health care service plan that issues, sells,
renews, or offers health care service plan contracts for health care
coverage in this state, including a grandfathered health plan, shall
provide an annual rebate to each enrollee under such coverage, on a
pro rata basis, if the ratio of the amount of premium revenue
expended by the health care service plan on the costs for
reimbursement for clinical services provided to enrollees under such
coverage and for activities that improve health care quality to the
total amount of premium revenue, excluding federal and state taxes
and licensing or regulatory fees and after accounting for payments or
receipts for risk adjustment, risk corridors, and reinsurance, is
less than the following:
   (1) With respect to a health care service plan offering coverage
in the large group market, 85 percent.
   (2) With respect to a health care service plan offering coverage
in the small group market or in the individual market, 80 percent.
   (b) Every health care service plan that issues, sells, renews, or
offers health care service plan contracts for health care coverage in
this state, including a grandfathered health plan, shall comply with
the following minimum medical loss ratios:
   (1) With respect to a health care service plan offering coverage
in the large group market, 85 percent.
   (2) With respect to a health care service plan offering coverage
in the small group market or in the individual market, 80 percent.
   (c) Every health care service plan shall submit its rates to the
director pursuant to the requirements imposed under Section 1385.03
or 1385.04. If the director notifies a health care service plan that
a filed rate does not comply with the requirements of law, it shall
be unlawful for the health care service plan to implement that rate.

   (d) (1) The total amount of an annual rebate required under this
section shall be calculated in an amount equal to the product of the
following:
   (A) The amount by which the percentage described in paragraph (1)
or (2) of subdivision (a) exceeds the ratio described in paragraph
(1) or (2) of subdivision (a).
   (B) The total amount of premium revenue, excluding federal and
state taxes and licensing or regulatory fees and after accounting for
payments or receipts for risk adjustment, risk corridors, and
reinsurance.
   (2) A health care service plan shall provide any rebate owing to
an enrollee no later than August 1 of the year following the year in
which the rate was in effect.
   (e) (1) On or before July 1, 2013, the director may issue guidance
to health care service plans regarding compliance with this section.
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). The director may also
promulgate regulations regarding compliance with this section.
   (2) The department shall consult with the Department of Insurance
in issuing guidance under paragraph (1), in adopting necessary
regulations, and in taking any other action for the purpose of
implementing this section. 
  SEC. 3.  Section 10112.1 is added to the Insurance Code, to read:
   10112.1.  To the extent required by federal law, every health
insurer that issues, sells, renews, or offers policies for health
care coverage in this state shall comply with the requirements of
Section 2711 of the federal Public Health Service Act (42 U.S.C. Sec.
300gg-11) and any rules or regulations issued under that section, in
addition to any state laws or regulations that do not prevent the
application of those requirements. 
  SEC. 4.    Section 10112.25 is added to the
Insurance Code, to read:
   10112.25.  To the extent required by federal law, every health
insurer that issues, sells, renews, or offers policies for health
care coverage in this state shall comply with the requirements of
Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec.
300gg-18) and any rules or regulations issued under that section.

   SEC. 4.    Section 10112.25 is added to the 
 Insurance Code   , to read:  
   10112.25.  (a) Every health insurer that issues, sells, renews, or
offers health insurance policies for health care coverage in this
state, including a grandfathered health plan, shall provide an annual
rebate to each insured under such coverage, on a pro rata basis, if
the ratio of the amount of premium revenue expended by the health
insurer on the costs for reimbursement for clinical services provided
to insureds under such coverage and for activities that improve
health care quality to the total amount of premium revenue, excluding
federal and state taxes and licensing or regulatory fees and after
accounting for payments or receipts for risk adjustment, risk
corridors, and reinsurance, is less than the following:
   (1) With respect to a health insurer offering coverage in the
large group market, 85 percent.
   (2) With respect to a health insurer offering coverage in the
small group market or in the individual market, 80 percent.
   (b) Every health insurer that issues, sells, renews, or offers
health insurance policies for health care coverage in this state,
including a grandfathered health plan, shall comply with the
following minimum medical loss ratios:
   (1) With respect to a health insurer offering coverage in the
large group market, 85 percent.
   (2) With respect to a health insurer offering coverage in the
small group market or in the individual market, 80 percent.
   (c) Every health insurer shall submit its rates to the
commissioner pursuant to the requirements imposed under Section
10181.3, 10181.4, or 10290. If the commissioner notifies a health
insurer that a filed rate does not comply with the requirements of
law, it shall be unlawful for the health insurer to implement that
rate.
   (d) (1) The total amount of an annual rebate required under this
section shall be calculated in an amount equal to the product of the
following:
   (A) The amount by which the percentage described in paragraph (1)
or (2) of subdivision (a) exceeds the ratio described in paragraph
(1) or (2) of subdivision (a).
   (B) The total amount of premium revenue, excluding federal and
state taxes and licensing or regulatory fees and after accounting for
payments or receipts for risk adjustment, risk corridors, and
reinsurance.
   (2) A health insurer shall provide any rebate owing to an insured
no later than August 1 of the year following the year in which the
rate was in effect.
   (e) (1) On or before July 1, 2013, the commissioner may issue
guidance to health insurers regarding compliance with this section.
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). The commissioner may
also promulgate regulations regarding compliance with this section.
   (2) The department shall consult with the Department of Managed
Health Care in issuing guidance under paragraph (1), in adopting
necessary regulations, and in taking any other action for the purpose
of implementing this section. 
  SEC. 5.  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.