BILL NUMBER: SB 1431 INTRODUCED
BILL TEXT
INTRODUCED BY Senator De León
FEBRUARY 24, 2012
An act to amend Section 10705 of the Insurance Code, relating to
health insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 1431, as introduced, De León. Health insurance.
Existing law provides for licensing and regulation of health
insurers by the Insurance Commissioner. Existing law, with respect to
health insurance for small employers, requires a health insurer to
file a copy of the form of the health insurance policy, contract,
certificate, or statement of coverage with the commissioner for
approval prior to issuance or delivery to the purchaser.
This bill would require the filing to be done electronically.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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
electronically 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.
(2) A carrier contracting to participate in the Voluntary Alliance
Uniting Employers Purchasing Program shall be deemed to be in
compliance with 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.
(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 (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).
(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.
(6) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (5) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (5) and which, for
the one association, lists all the information required by paragraph
(7).
(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.
(8) For purposes of paragraphs (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 and 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.