BILL NUMBER: SB 1431 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 21, 2012
AMENDED IN ASSEMBLY AUGUST 7, 2012
AMENDED IN ASSEMBLY JUNE 27, 2012
AMENDED IN SENATE MAY 29, 2012
AMENDED IN SENATE MAY 1, 2012
AMENDED IN SENATE APRIL 9, 2012
INTRODUCED BY Senator De León
FEBRUARY 24, 2012
An act to add Chapter 8.1 (commencing with Section 10750) to Part
2 of Division 2 of the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 1431, as amended, De León. Stop-loss insurance coverage.
Existing law prohibits a person from transacting any class of
insurance business, including health insurance, in this state without
first being an admitted insurer. Under existing law, admission is
secured by procuring a certificate of authority from the Insurance
Commissioner. Existing law prohibits a health insurance policy from
being issued or delivered to any person in this state unless
specified requirements have been met, including that a copy of the
form and premium rates are filed with the commissioner. Under
existing law, if the commissioner notifies the health insurer that
the filed form does not comply with specified requirements, it is
unlawful for that health insurer to issue any health insurance policy
in that form.
Existing law, with respect to small employer health insurance,
requires a carrier providing aggregate or specific stop-loss coverage
or any other assumption of risk with reference to a health benefit
plan, as defined, to provide that the plan meets specified
requirements concerning preexisting condition provisions, waiting or
affiliation periods, and late enrollees.
Existing law, the federal Patient Protection and Affordable Care
Act (PPACA), commencing January 1, 2014, prohibits a group health
plan and a health insurance issuer offering group or individual
health insurance coverage from imposing any preexisting condition
exclusion with respect to the plan or coverage.
Existing law provides for self-funded or partially self-funded
multiple employer welfare arrangements (MEWAs) and allows for MEWAs
to apply for a certificate of compliance to do business in the state.
This bill would require a stop-loss carrier
insurer , as defined, to offer coverage for all employees
and dependents of a small employer to which it issues a stop-loss
insurance policy and would prohibit the carrier
insurer from excluding any employee or dependent on the
basis of actual or expected health status-related factors, as
specified. Except as specified, the bill would require a stop-loss
carrier insurer to renew, at the option
of the small employer, all stop-loss insurance policies. The bill
would prohibit a stop-loss insurance policy issued on or after
January 1, 2012, to a small employer from containing specified
individual or aggregate attachment points, as defined, for a policy
year or providing direct coverage, as defined, of an employee's
health claims. The bill would make a stop-loss carrier
insurer in violation of these provisions subject
to administrative penalties and would direct those fine and penalty
moneys received to the General Fund to be available upon
appropriation by the Legislature. The bill would, in addition, exempt
the ongoing operation of MEWAs, as specified, and a stop-loss
insurance policy issued to a small employer prior to January 1, 2012,
or a policy that is subsequently renewed without decrease in the
attachment point or other substantial amendments from the operation
of these provisions.
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. Chapter 8.1 (commencing with Section 10750) is added to
Part 2 of Division 2 of the Insurance Code, to read:
CHAPTER 8.1. STOP-LOSS INSURANCE
10750. As used in this chapter, the following definitions shall
apply:
(a) "Attachment point" means the total amount of health claims
incurred by a small employer in a policy year for its employees and
their dependents , and covered by a stop-loss insurance policy,
above which the stop-loss carrier
insurer incurs a liability for payment.
(1) "Individual attachment point" means the total amount of health
claims incurred by a small employer in a policy year for an
individual employee or dependent of an employee , and covered by
a stop-loss insurance policy, above which the stop-loss
carrier insurer incurs a liability for
payment under individual stop-loss coverage . For purposes
of this chapter, "specific attachment point" shall have the same
meaning as "individual attachment point."
(2) "Aggregate attachment point" means the total amount of health
claims incurred by a small employer in a policy year for all covered
employees and their dependents , and covered by a stop-loss
insurance policy, above which the stop-loss carrier
insurer incurs a liability for payment
under aggregate stop-loss coverage .
(b) "Dependent" means the spouse, registered domestic partner as
described in Section 297 of the Family Code, or child of an employee.
(c) "Direct coverage" means that an insurance company assumes a
direct obligation to an employee under an insurance policy to pay or
indemnify the employee for health claims incurred by the employee or
the employee's dependents.
(d) "Expected claims" means, for the purposes of aggregate
stop-loss coverage, the total amount of health claims that, in the
absence of a stop-loss insurance policy or other insurance, are
projected to be incurred by a small employer for its employees and
their dependents in a policy year.
(e) "Policy year" means the 12-month period that is designated as
the policy year or policy period for the stop-loss
insurance policy. If the stop-loss insurance policy does not
designate a policy year, the policy year is the year in which the
total amount of health claims incurred by a small employer for an
individual employee or dependent of an employee, or the aggregate
amount for all covered employees and their dependents, are added
together for the purposes of determining whether the claims have
exceeded the attachment point.
(f) "Small employer" has the same meaning as defined in
subdivision (w) of Section 10700.
(g) "Stop-loss carrier" insurer"
means an insurance company or other entity
providing individual or aggregate stop-loss insurance coverage, or
both individual and aggregate stop-loss insurance coverage, or any
other assumption of risk, to a small employer for the health claims
of its employees and their dependents.
(h) "Stop-loss insurance policy" means a policy, contract,
certificate, or statement of coverage between a stop-loss
carrier insurer and small employer providing
individual or aggregate stop-loss insurance coverage, or both
individual and aggregate stop-loss insurance coverage, or any other
assumption of risk, to a small employer for the health claims of its
employees and their dependents.
10750.1. A stop-loss carrier insurer
shall offer coverage for all employees and dependents of
employees of a small employer to which it issues a stop-loss
insurance policy and shall not exclude any employee or dependent on
the basis of an actual or expected health status-related factor.
Health status-related factors include, but are not limited to, any of
the following: health status; medical condition, including both
physical and mental illnesses; claims experience; medical history;
receipt of health care; genetic information; disability; evidence of
insurability, including conditions arising out of acts of domestic
violence of the employee or dependent; or any other health
status-related factor as determined by the department.
10750.2. A stop-loss carrier insurer
shall renew, at the option of the small employer, all stop-loss
insurance policies written, issued, administered, or renewed on or
after the effective date of this chapter, and all stop-loss insurance
policies in force on or after the effective date of this chapter,
except as follows:
(a) (1) For nonpayment of the required premiums by the small
employer, if the small employer has been duly notified and billed for
the charge and at least a 30-day grace period has elapsed since the
date of notification or, if longer, the period of time required for
notice and any other requirements pursuant to Section 2703, 2712, or
2742 of the federal Public Health Service Act (42 U.S.C. Sec.
300gg-2, 300gg-12, or 300gg-42) and any subsequent rules or
regulations has elapsed.
(2) A stop-loss carrier insurer
shall continue to provide coverage as required by the small employer'
s policy during the grace period described in paragraph (1). Nothing
in this section shall be construed to affect or impair the small
employer's or carrier's insurer's other
rights and responsibilities pursuant to the policy.
(b) Where the stop-loss carrier insurer
demonstrates fraud or an intentional misrepresentation of
material fact by the small employer under the terms of the stop-loss
insurance policy.
(c) Where the stop-loss carrier insurer
has been determined by the commissioner to be financially
impaired.
(d) Where the stop-loss carrier insurer
ceases to write, issue, or administer new stop-loss insurance
policies in this state; provided, however, that the following
conditions are satisfied:
(1) Notice of the decision to cease writing, issuing, or
administering new or existing stop-loss insurance policies in this
state is provided to the commissioner, and to the small employer, at
least 180 days prior to the discontinuation of the coverage.
(2) Stop-loss insurance policies subject to this chapter shall not
be canceled until 180 days after the date of the notice required
under paragraph (1). During that time, the stop-loss carrier
insurer shall continue to comply with this
chapter.
10750.3. No stop-loss insurance policy issued on or after January
1, 2012, to a small employer shall contain any of the following
provisions:
(a) An individual attachment point for a policy year that is lower
than sixty forty-five thousand dollars
($60,000) ($45,000) .
(b) An aggregate attachment point for a policy year that is lower
than the greater of one of the following:
(1) Fifteen thousand dollars ($15,000) times the total number of
covered employees and dependents.
(2) One hundred thirty percent of expected claims.
(3) Sixty thousand dollars ($60,000).
(c) A provision for direct coverage of an employee's health
claims.
(d) A stop-loss insurance policy issued to a small employer prior
to January 1, 2012, or that is subsequently renewed without decrease
in the attachment point or other substantial amendments, is exempt
from this chapter.
10750.4. The commissioner may adopt regulations as may be
necessary to carry out the purposes of this chapter. In adopting
regulations, the commissioner shall comply with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code.
10750.5. A stop-loss carrier insurer
that violates the provisions of this chapter shall be subject
to the remedies and administrative penalties pertaining to carriers
in Sections 10718 and 10718.5. All fine and penalty moneys received
pursuant to this section shall be deposited in the General Fund and
shall be available for expenditure by the commissioner upon
appropriation by the Legislature.
10750.6. Nothing in this chapter shall affect the ongoing
operations of multiple employer welfare arrangements regulated
pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1
of Part 2 of Division 1 that provide health care benefits to their
members on a self-funded or partially self-funded basis and that
comply with small group health reforms.
10750.7. The provisions of this chapter are severable. If any
provision of this chapter or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.