Amended in Assembly May 24, 2013

Amended in Assembly April 16, 2013

Amended in Assembly March 19, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 18

Introduced by Assembly Member Pan

December 3, 2012

An act to amend Sections begin delete 1367.003, 1367.005, end delete begin insert 1367.005 end insert and 1385.02 of, and to add begin delete Section 1367.013 end delete begin insert Sections 1367.013 and 1367.37 end insert to, the Health and Safety Code, and to amend Sections begin delete 10112.25, 10112.27, end delete begin insert 10112.27 end insert and 10181.2 of, and to add begin delete Section 10112.35 end delete begin insert Sections 10112.35 and 10123.56 end insert to, the Insurance Code, relating to health care coverage, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

AB 18, as amended, Pan. Health care coverage: pediatric oral care.

Existing law, the federal Patient Protection and Affordable Care Act (PPACA), requires a health insurance issuer that offers coverage in the small group or individual market to ensure that such coverage, with respect to plan years on or after January 1, 2014, includes the essential health benefits package, which is defined to include pediatric oral care benefits. PPACA requires each state to, by January 1, 2014, establish an American Health Benefit Exchange that facilitates the purchase of qualified health plans by qualified individuals and qualified small employers, as specified, and requires an exchange to allow an issuer to offer stand-alone dental plans in the exchange, provided that the plans cover the pediatric oral care benefits required under the essential health benefits package.

Existing law establishes the California Health Benefit Exchange (Exchange) to facilitate the purchase of qualified health plans through the Exchange by qualified individuals and qualified small employers by January 1, 2014. Existing law requires carriers participating in the Exchange that sell products outside the Exchange to offer, market, and sell all products made available to individuals and small employers through the Exchange to individuals and small employers purchasing coverage outside the Exchange. begin insert Existing law requires the board of the Exchange to establish the Small Business Health Options Program (SHOP) to assist qualified small employers in facilitating the enrollment of their employees in qualified health plans offered through the Exchange. end insert 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 an individual or small group health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2014, to cover essential health benefits and defines those benefits to include the pediatric oral care benefits provided under a specified dental plan available to subscribers of the Healthy Families Program.

This bill would exempt a plan contract or policy offered begin delete through the Exchange end delete begin insert , marketed, or sold through end insert begin insert the end insert begin insert SHOP end insert begin insert or the small group market outside the Exchange end insert from covering those pediatric oral care benefits if the begin delete Exchange end delete begin insert SHOP or the small group market outside the Exchange end insert offers a stand-alone dental plan as described in PPACA and would require stand-alone dental plans offered through the begin delete Exchange end delete begin insert SHOP or the small group market outside the Exchange end insert to include coverage of those pediatric oral care benefits. begin delete The bill would also require cost sharing that is imposed as a result of a specialized health care service plan contract or policy that covers pediatric oral care benefits to be coordinated with the cost sharing associated with a qualified health plan that is offered, marketed, or sold through the Exchange. end delete begin insert The bill would also require a plan contract or policy covering pediatric oral care to waive the applicable dental out-of-pocket maximum upon notification from a qualified health plan that the applicable out-of-pocket maximum under the qualified health plan has been satisfied, and would require qualified health plans to develop a method for coordinating and tracking progress toward satisfying the out-of-pocket maximum. end insert The bill would also prohibit those specialized plan contracts or policies from being regarded as providing excepted benefits, as specified.

Existing law requires a health care service plan and a health insurer to comply with minimum medical loss ratios and to provide an annual rebate to each insured if the medical loss ratio is less than a certain percentage, as specified.

This bill would require a specialized health care service plan contract and specialized health insurance policy that provides pediatric oral care benefits begin delete through the Exchange end delete begin insert in the small group market through the SHOP or the small group market outside the Exchange, whether or not it is bundled with a qualified health plan or standing alone, end insert to also comply with minimum medical loss ratios and provide an annual rebate, as specified.

Existing law requires the Department of Managed Health Care and the Department of Insurance to promulgate regulations applicable to health care service plans and specified health insurers, respectively, to ensure that enrollees and insureds have the opportunity to access needed health care services in a timely manner, and to ensure adequacy of numbers of professional providers and institutional providers. Existing law requires health care service plans and health insurance policies to file specified rate information with the Department of Managed Health Care and the Department of Insurance, respectively, at least 60 days before implementing a rate change.

This bill would specify that those provisions would also apply to specialized health care service plans and specialized health insurance policies that provide pediatric oral care benefits through the begin delete Exchange end delete begin insert SHOP or the small group market outside the Exchange, whether or not it is bundled with a qualified health plan or standing alone end insert . Because a willful violation of the bill’s provisions by a health care service plan would be a crime, this 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.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

begin delete

SECTION 1.  

Section 1367.003 of the Health and Safety Code
is amended 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, but
not including specialized health care service plan contracts, 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 specialized health care service plan contract described
in Section 1311(d)(2)(B)(ii) of PPACA, as defined in Section
1367.005, (42 U.S.C. Sec. 18031(d)(2)(B)(ii)) providing pediatric
oral care benefits in the small group or individual market through
the Exchange, shall provide an annual rebate to each enrollee under
that coverage, on a pro rata basis, if the ratio of the amount of
premium revenue expended by the specialized health care service
plan on the costs for reimbursement for services provided to
enrollees under that coverage and for activities that improve dental
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 75 percent.

(d) Every specialized health care service plan contract described
in subdivision (c) shall maintain a minimum medical loss ratio of
75 percent.

(e) (1) The total amount of an annual rebate required under
subdivision (a) 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 calendar year following
the year for which the ratio described in subdivision (a) was
calculated.

(f) (1) The director may adopt regulations in accordance with
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) that are necessary to implement the medical loss ratio as
described under Section 2718 of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg-18), and any federal rules or regulations
issued under that section.

(2) The director may also adopt emergency regulations in
accordance with the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) when it is necessary to implement the
applicable provisions of this section and to address specific
conflicts between state and federal law that prevent implementation
of federal law and guidance pursuant to Section 2718 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-18). The initial
adoption of the emergency regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the
public peace, health, safety, or general welfare.

(g) The department shall consult with the Department of
Insurance in adopting necessary regulations, and in taking any
other action for the purpose of implementing this section.

(h) This section shall be implemented to the extent required by
federal law and shall comply with, and not exceed, the scope of
Section 2791 of the federal Public Health Service Act (42 U.S.C.
Sec. 300gg-91) and 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 those sections.

(i) Nothing in this section shall be construed to apply to
provisions of this chapter pertaining to financial statements, assets,
liabilities, and other accounting items to which subdivision (s) of
Section 1345 applies.

(j) Nothing in this section shall be construed to apply to a health
care service plan contract or insurance policy issued, sold, renewed,
or offered for health care services or coverage provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), 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 Insurance Pool (Part 6.6 (commencing with
Section 12739.5) of Division 2 of the Insurance Code), to the extent
consistent with the federal Patient Protection and Affordable Care
Act (Public Law 111-148).

end delete

begin delete SEC. 2. end delete
begin insert SECTION 1. end insert   

Section 1367.005 of the Health and Safety Code
is amended to read:

1367.005.  

(a) An individual or small group health care service
plan contract issued, amended, or renewed on or after January 1,
2014, shall, at a minimum, include coverage for essential health
benefits pursuant to PPACA and as outlined in this section. For
purposes of this section, “essential health benefits” means all of
the following:

(1) Health benefits within the categories identified in Section
1302(b) of PPACA: ambulatory patient services, emergency
services, hospitalization, maternity and newborn care, mental health
and substance use disorder services, including behavioral health
treatment, prescription drugs, rehabilitative and habilitative services
and devices, laboratory services, preventive and wellness services
and chronic disease management, and pediatric services, including
oral and vision care.

(2) (A) The health benefits covered by the Kaiser Foundation
Health Plan Small Group HMO 30 plan (federal health product
identification number 40513CA035) as this plan was offered during
the first quarter of 2012, as follows, regardless of whether the
benefits are specifically referenced in the evidence of coverage or
plan contract for that plan:

(i) Medically necessary basic health care services, as defined
in subdivision (b) of Section 1345 and in Section 1300.67 of Title
28 of the California Code of Regulations.

(ii) The health benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in the following sections: Sections 1367.002, 1367.06,
and 1367.35 (preventive services for children); Section 1367.25
(prescription drug coverage for contraceptives); Section 1367.45
(AIDS vaccine); Section 1367.46 (HIV testing); Section 1367.51
(diabetes); Section 1367.54 (alpha feto protein testing); Section
1367.6 (breast cancer screening); Section 1367.61 (prosthetics for
laryngectomy); Section 1367.62 (maternity hospital stay); Section
1367.63 (reconstructive surgery); Section 1367.635 (mastectomies);
Section 1367.64 (prostate cancer); Section 1367.65
(mammography); Section 1367.66 (cervical cancer); Section
1367.665 (cancer screening tests); Section 1367.67 (osteoporosis);
Section 1367.68 (surgical procedures for jaw bones); Section
1367.71 (anesthesia for dental); Section 1367.9 (conditions
attributable to diethylstilbestrol); Section 1368.2 (hospice care);
Section 1370.6 (cancer clinical trials); Section 1371.5 (emergency
response ambulance or ambulance transport services); subdivision
(b) of Section 1373 (sterilization operations or procedures); Section
1373.4 (inpatient hospital and ambulatory maternity); Section
1374.56 (phenylketonuria); Section 1374.17 (organ transplants for
HIV); Section 1374.72 (mental health parity); and Section 1374.73
(autism/behavioral health treatment).

(iii) Any other benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in those statutes.

(iv) The health benefits covered by the plan that are not
otherwise required to be covered under this chapter, to the extent
required pursuant to Sections 1367.18, 1367.21, 1367.215, 1367.22,
1367.24, and 1367.25, and Section 1300.67.24 of Title 28 of the
California Code of Regulations.

(v) Any other health benefits covered by the plan that are not
otherwise required to be covered under this chapter.

(B) Where there are any conflicts or omissions in the plan
identified in subparagraph (A) as compared with the requirements
for health benefits under this chapter that were enacted prior to
December 31, 2011, the requirements of this chapter shall be
controlling, except as otherwise specified in this section.

(C) Notwithstanding subparagraph (B) or any other provision
of this section, the home health services benefits covered under
the plan identified in subparagraph (A) shall be deemed to not be
in conflict with this chapter.

(D) For purposes of this section, the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008
(Public Law 110-343) shall apply to a contract subject to this
section. Coverage of mental health and substance use disorder
services pursuant to this paragraph, along with any scope and
duration limits imposed on the benefits, shall be in compliance
with the Paul Wellstone and Pete Domenici Mental Health Parity
and Addiction Equity Act of 2008 (Public Law 110-343), and all
rules, regulations, or guidance issued pursuant to Section 2726 of
the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26).

(3) With respect to habilitative services, in addition to any
habilitative services identified in paragraph (2), coverage shall
also be provided as required by federal rules, regulations, and
guidance issued pursuant to Section 1302(b) of PPACA.
Habilitative services shall be covered under the same terms and
conditions applied to rehabilitative services under the plan contract.

(4) With respect to pediatric vision care, the same health benefits
for pediatric vision care covered under the Federal Employees
Dental and Vision Insurance Program vision plan with the largest
national enrollment as of the first quarter of 2012. The pediatric
vision care benefits covered pursuant to this paragraph shall be in
addition to, and shall not replace, any vision services covered under
the plan identified in paragraph (2).

(5) (A) With respect to pediatric oral care, the same health
benefits for pediatric oral care covered under the dental plan
available to subscribers of the Healthy Families Program in
2011-12, including the provision of medically necessary
orthodontic care provided pursuant to the federal Children’s Health
Insurance Program Reauthorization Act of 2009. This subparagraph
shall not apply to a health care service plan contract that is a
qualified health plan, as defined in Section 100501 of the
Government Code, that is offered, marketed, or sold through the
begin insert Small Business Health Options Program (SHOP), pursuant to
subdivision (m) of Section 100502 of the Government Code, or the
small group market outside the end insert Exchange if a specialized health
care service plan contract described in subdivision (c) is offered,
marketed, or sold through the begin delete Exchange. Notwithstanding
subdivision (f) of Section 100503 of the Government Code, a
qualified health plan that excludes coverage of the benefits
described in Section 1311(d)(2)(B)(ii) of PPACA shall not be
offered, marketed, or sold outside of the Exchange. end delete begin insert SHOP or the
small group market outside the Exchange. end insert

(B) The pediatric oral care benefits covered pursuant to this
paragraph shall be in addition to, and shall not replace, any dental
or orthodontic services covered under the plan identified in
paragraph (2). begin delete end delete

begin delete

(C) Cost sharing that is imposed as a result of a specialized
health care service plan contract described in subdivision (c) shall
be coordinated with that cost sharing which is associated with the
qualified health plan identified in subparagraph (A), so that the
total cost sharing for a combined qualified health plan and
specialized health care service plan pursuant to this paragraph does
not exceed the total cost sharing for a qualified health plan that
includes coverage of the benefits described in Section
1311(d)(2)(B)(ii) of the PPACA (42 U.S.C. Sec.
18031(d)(2)(B)(ii)). The plans shall develop a method for
coordinating and tracking cost sharing that limits the burden on
the subscriber.

end delete begin insert

(C) Notwithstanding subparagraph (A), it is the intent of the
Legislature that all of the benefits described in Section 1302(b) of
PPACA be included as essential health benefits whether obtained
through a qualified health plan, or through a combination of a
qualified health plan and a specialized health care service plan
as described in subdivision (c). It is the intent of the Legislature
that pediatric essential health benefits purchased separately are
only essential health benefits for pediatric enrollees, to the extent
permitted by PPACA.

end insert

(b) Subdivision (a) shall not apply to any of the following:

(1) A specialized health care service plan contract.

(2) A Medicare supplement plan contract.

(3) A plan contract that qualifies as a grandfathered health plan
under Section 1251 of PPACA or any rules, regulations, or
guidance issued pursuant to that section.

(c) (1) A specialized health care service plan contract described
in Section 1311(d)(2)(B)(ii) of PPACA (42 U.S.C. Sec.
18031(d)(2)(B)(ii)) that is offered through the begin delete Exchange end delete begin insert SHOP
pursuant to Section 100502 of the Government Code or the small
group market outside the Exchange, whether or not it is bundled
with a qualified health plan or standing alone, end insert shall, at a minimum,
include coverage of the health benefits described in subparagraph
(A) of paragraph (5) of subdivision (a).

(2)  begin delete A end delete begin insert Beginning on January 1, 2015, a end insert specialized health care
service plan contract described in paragraph (1) shall not be
regarded as providing excepted benefits under either the Public
Health Service Act or PPACA, for the purpose of determining the
applicability of Sections 2701 to 2706, inclusive, and begin delete Sections
2708 and 2711 end delete begin insert Section 2708 end insert of the Public Health Service Act,
added by Section 1201 of PPACA, relating to the following:

(A) The prohibition of preexisting condition exclusions or other
discrimination based on health status.

(B) Fair health insurance premiums.

(C) Guaranteed availability of coverage.

(D) Guaranteed renewability of coverage.

(E) Prohibition against discrimination against individual
participants and beneficiaries on the basis of health status.

(F) Nondiscrimination in health care.

(G) Prohibition of excessive waiting periods begin delete , annual limits, and
lifetime limits end delete .

begin insert

(3) Beginning on January 1, 2014, a specialized health care
service plan contract described in paragraph (1) shall not be
regarded as providing excepted benefits under either the Public
Health Service Act or PPACA, for the purpose of determining the
applicability of Section 2711 of the Public Health Service Act,
added by Section 1201 of PPACA.

end insert begin insert

(4) A specialized health care service plan contract described
in paragraph (1) shall waive the applicable dental out-of-pocket
maximum upon notification from a qualified health plan on behalf
of an enrollee that the applicable out-of-pocket maximum under
the qualified health plan has been satisfied. Beginning on January
1, 2015, the combined out-of-pocket maximums for dental and
qualified health plans shall not exceed those limits established in
Section 1302(c) of PPACA. The plans shall develop a method for
coordinating and tracking progress toward satisfying the
out-of-pocket maximum limitation that limits the burden on
subscribers and enrollees. This paragraph shall be implemented
only to the extent permitted by PPACA.

end insert

(d) Pediatric vision and oral care benefits described in
paragraphs (4) and (5) of subdivision (a) shall be provided for
individuals up to begin delete 26 end delete begin insert 22 end insert years of age, to the extent permitted under
PPACA. Treatment limitations imposed on health benefits
described in this section shall be no greater than the treatment
limitations imposed by the corresponding plans identified in
subdivision (a), subject to the requirements set forth in paragraph
(2) of subdivision (a).

(e) Except as provided in subdivision (f), nothing in this section
shall be construed to permit a health care service plan to make
substitutions for the benefits required to be covered under this
section, regardless of whether those substitutions are actuarially
equivalent.

(f) To the extent permitted under Section 1302 of PPACA and
any rules, regulations, or guidance issued pursuant to that section,
and to the extent that substitution would not create an obligation
for the state to defray costs for any individual, a plan may substitute
its prescription drug formulary for the formulary provided under
the plan identified in subdivision (a) as long as the coverage for
prescription drugs complies with the sections referenced in clauses
(ii) and (iv) of subparagraph (A) of paragraph (2) of subdivision
(a) that apply to prescription drugs.

(g) No health care service plan, or its agent, solicitor, or
representative, shall issue, deliver, renew, offer, market, represent,
or sell any product, contract, or discount arrangement as compliant
with the essential health benefits requirement in federal law, unless
it includes coverage of the health benefits described in subdivision
(a), including the benefits described in subparagraph (A) of
paragraph (5) of subdivision (a), and meets the requirements of
subdivisions (d), (e), and (f).

(h) Except as otherwise provided in this section, this section
shall apply regardless of whether the plan contract is offered inside
or outside the Exchange.

(i) Nothing in this section shall be construed to exempt a plan
or a plan contract from meeting other applicable requirements of
law.

(j) This section shall not be construed to prohibit a plan contract
from covering additional benefits, including, but not limited to,
spiritual care services that are tax deductible under Section 213 of
the Internal Revenue Code.

(k) Nothing in this section shall be implemented in a manner
that conflicts with a requirement of PPACA.

(l) This section shall be implemented only to the extent essential
health benefits are required pursuant to PPACA.

(m) An essential health benefit is required to be provided under
this section only to the extent that federal law does not require the
state to defray the costs of the benefit.

(n) Nothing in this section shall obligate the state to incur costs
for the coverage of benefits that are not essential health benefits
as defined in this section.

(o) A plan is not required to cover, under this section, changes
to health benefits that are the result of statutes enacted on or after
December 31, 2011.

(p) (1) The department may adopt emergency regulations
implementing this section. The department may, on a one-time
basis, readopt any emergency regulation authorized by this section
that is the same as, or substantially equivalent to, an emergency
regulation previously adopted under this section.

(2) The initial adoption of emergency regulations implementing
this section and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

(3) The director shall consult with the Insurance Commissioner
to ensure consistency and uniformity in the development of
regulations under this subdivision.

(4) This subdivision shall become inoperative on March 1, 2016.

(q) For purposes of this section, the following definitions shall
apply:

(1) “Exchange” means the California Health Benefit Exchange
created by Section 100500 of the Government Code.

(2) “Habilitative services” means medically necessary health
care services and health care devices that assist an individual in
partially or fully acquiring or improving skills and functioning and
that are necessary to address a health condition, to the maximum
extent practical. These services address the skills and abilities
needed for functioning in interaction with an individual’s
environment. Examples of health care services that are not
habilitative services include, but are not limited to, respite care,
day care, recreational care, residential treatment, social services,
custodial care, or education services of any kind, including, but
not limited to, vocational training. Habilitative services shall be
covered under the same terms and conditions applied to
rehabilitative services under the plan contract.

(3) (A) “Health benefits,” unless otherwise required to be
defined pursuant to federal rules, regulations, or guidance issued
pursuant to Section 1302(b) of PPACA, means health care items
or services for the diagnosis, cure, mitigation, treatment, or
prevention of illness, injury, disease, or a health condition,
including a behavioral health condition.

(B) “Health benefits” does not mean any cost-sharing
requirements such as copayments, coinsurance, or deductibles.

(4) “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.

begin insert

(5) “SHOP” means the Small Business Health Options Business
established pursuant to subdivision (m) of Section 100502 of the
Government Code.

end insert begin delete

(5)

end delete

begin insert (6) end insert  “Small group health care service plan contract” means a
group health care service plan contract issued to a small employer,
as defined in Section 1357.500.

begin delete SEC. 3. end delete
begin insert SEC. 2. end insert   

Section 1367.013 is added to the Health and Safety
Code, to read:

1367.013.  

begin delete A end delete begin insert (a) end insert begin insert   end insert begin insert Beginning on January 1, 2014, a end insert specialized
health care service plan contract described in Section
1311(d)(2)(B)(ii) of PPACA (42 U.S.C. Sec. 18031(d)(2)(B)(ii))
that provides pediatric oral care benefits through the begin delete Exchange end delete
begin insert Small Business Health Options Program (SHOP), pursuant to
subdivision (m) of Section 100502 of the Government Code, or the
small group market outside the Exchange, whether or not it is
bundled with a qualified health plan or standing alone, end insert shall be
subject to Sections 1367, 1367.03, and begin delete 1342, and Article 6.2
(commencing with Section 1385.01) end delete begin insert 1342 end insert .

begin insert

(b) Beginning on January 1, 2015, a specialized health care
service plan contract described in Section 1311(d)(2)(B)(ii) of
PPACA (42 U.S.C. Sec. 18031(d)(2)(B)(ii)) that provides pediatric
oral care benefits through the SHOP or the small group market
outside the Exchange, whether or not it is bundled with a qualified
health plan or standing alone, shall be subject to Article 6.2
(commencing with Section 1385.01).

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 1367.37 is added to the end insert begin insert Health and Safety
Code end insert begin insert , to read: end insert

begin insert

begin insert 1367.37. end insert   

(a) (1) Notwithstanding Section 1367.003, beginning
on January 1, 2015, every specialized health care service plan
contract described in Section 1311(d)(2)(B)(ii) of PPACA (42
U.S.C. Sec. 18031(d)(2)(B)(ii)), as defined in Section 1367.005,
providing pediatric oral care benefits in the small group market
through the Small Business Health Options Program (SHOP),
pursuant to subdivision (m) of Section 100502 of the Government
Code, or the small group market outside the Exchange, whether
or not it is bundled with a qualified health plan or standing alone,
shall provide an annual rebate to each enrollee under that
coverage, on a pro rata basis, if the ratio of the amount of premium
revenue expended by the specialized health care service plan on
the costs for reimbursement for services provided to enrollees
under that coverage and for activities that improve dental 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 75 percent.

(2) Every specialized health care service plan contract described
in this subdivision shall maintain a minimum medical loss ratio
of 75 percent.

(b) (1) The director may adopt regulations in accordance with
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) that are necessary to implement the medical loss ratio as
described under Section 2718 of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg-18), and any federal rules or regulations
issued under that section.

(2) The director may also adopt emergency regulations in
accordance with the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) when it is necessary to implement the
applicable provisions of this section and to address specific
conflicts between state and federal law that prevent implementation
of federal law and guidance pursuant to Section 2718 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-18). The initial
adoption of the emergency regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the
public peace, health, safety, or general welfare.

(c) The department shall consult with the Department of
Insurance in adopting necessary regulations, and in taking any
other action for the purpose of implementing this section.

end insert

SEC. 4.  

Section 1385.02 of the Health and Safety Code is
amended to read:

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, other than one providing pediatric oral care
benefits through the begin delete Exchange, end delete begin insert Small Business Health Options
Program, pursuant to subdivision (m) of Section 100502 of the
Government Code, or the small group market outside the
Exchange, whether or not it is bundled with a qualified health plan
or standing alone, end insert as described in Section 1367.013; 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 begin delete 10.5 end delete begin insert 11.5 end insert (commencing with Section 1399.801).

begin delete

SEC. 5.  

Section 10112.25 of the Insurance Code is amended
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, but not including
specialized health insurance policies, 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 specialized health insurance policy described in
Section 1311(d)(2)(B)(ii) of PPACA, as defined in Section
10112.27, (42 U.S.C. Sec. 18031(d)(2)(B)(ii)) providing pediatric
oral care benefits in the small group or individual market through
the Exchange, shall provide an annual rebate to each insured under
that 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 services provided to insureds under that
coverage and for activities that improve dental 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 75 percent.

(d) Every specialized health insurance policy described in
subdivision (c) shall maintain a minimum medical loss ratio of 75
percent.

(e) (1) The total amount of an annual rebate required under
subdivision (a) 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 calendar year following the year for
which the ratio described in subdivision (a) was calculated.

(f) (1) The commissioner may adopt regulations in accordance
with the Administrative Procedure Act (Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code) that are necessary to implement the medical
loss ratio as described under Section 2718 of the federal Public
Health Service Act (42 U.S.C. Sec. 300gg-18), and any federal
rules or regulations issued under that section.

(2) The commissioner may also adopt emergency regulations
in accordance with the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) when it is necessary to implement the
applicable provisions of this section and to address specific
conflicts between state and federal law that prevent implementation
of federal law and guidance pursuant to Section 2718 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-18). The initial
adoption of the emergency regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the
public peace, health, safety, or general welfare.

(g) The department shall consult with the Department of
Managed Health Care in adopting necessary regulations, and in
taking any other action for the purpose of implementing this
section.

(h) This section shall be implemented to the extent required by
federal law and shall comply with, and not exceed, the scope of
Section 2791 of the federal Public Health Service Act (42 U.S.C.
Sec. 300gg-91) and 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 those sections.

(i) Nothing in this section shall be construed to apply to a health
care service plan contract or insurance policy issued, sold, renewed,
or offered for health care services or coverage provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), 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 Insurance Pool (Part
6.6 (commencing with Section 12739.5)), to the extent consistent
with the federal Patient Protection and Affordable Care Act (Public
Law 111-148).

end delete

begin delete SEC. 6. end delete
begin insert SEC. 5. end insert   

Section 10112.27 of the Insurance Code is amended
to read:

10112.27.  

(a) An individual or small group health insurance
policy issued, amended, or renewed on or after January 1, 2014,
shall, at a minimum, include coverage for essential health benefits
pursuant to PPACA and as outlined in this section. This section
shall exclusively govern what benefits a health insurer must cover
as essential health benefits. For purposes of this section, “essential
health benefits” means all of the following:

(1) Health benefits within the categories identified in Section
1302(b) of PPACA: ambulatory patient services, emergency
services, hospitalization, maternity and newborn care, mental health
and substance use disorder services, including behavioral health
treatment, prescription drugs, rehabilitative and habilitative services
and devices, laboratory services, preventive and wellness services
and chronic disease management, and pediatric services, including
oral and vision care.

(2) (A) The health benefits covered by the Kaiser Foundation
Health Plan Small Group HMO 30 plan (federal health product
identification number 40513CA035) as this plan was offered during
the first quarter of 2012, as follows, regardless of whether the
benefits are specifically referenced in the plan contract or evidence
of coverage for that plan:

(i) Medically necessary basic health care services, as defined
in subdivision (b) of Section 1345 of the Health and Safety Code
and in Section 1300.67 of Title 28 of the California Code of
Regulations.

(ii) The health benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in the following sections of the Health and Safety Code:
Sections 1367.002, 1367.06, and 1367.35 (preventive services for
children); Section 1367.25 (prescription drug coverage for
contraceptives); Section 1367.45 (AIDS vaccine); Section 1367.46
(HIV testing); Section 1367.51 (diabetes); Section 1367.54 (alpha
feto protein testing); Section 1367.6 (breast cancer screening);
Section 1367.61 (prosthetics for laryngectomy); Section 1367.62
(maternity hospital stay); Section 1367.63 (reconstructive surgery);
Section 1367.635 (mastectomies); Section 1367.64 (prostate
cancer); Section 1367.65 (mammography); Section 1367.66
(cervical cancer); Section 1367.665 (cancer screening tests);
Section 1367.67 (osteoporosis); Section 1367.68 (surgical
procedures for jaw bones); Section 1367.71 (anesthesia for dental);
Section 1367.9 (conditions attributable to diethylstilbestrol);
Section 1368.2 (hospice care); Section 1370.6 (cancer clinical
trials); Section 1371.5 (emergency response ambulance or
ambulance transport services); subdivision (b) of Section 1373
(sterilization operations or procedures); Section 1373.4 (inpatient
hospital and ambulatory maternity); Section 1374.56
(phenylketonuria); Section 1374.17 (organ transplants for HIV);
Section 1374.72 (mental health parity); and Section 1374.73
(autism/behavioral health treatment).

(iii) Any other health benefits mandated to be covered by the
plan pursuant to statutes enacted before December 31, 2011, as
described in those statutes.

(iv) The health benefits covered by the plan that are not
otherwise required to be covered under Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code,
to the extent otherwise required pursuant to Sections 1367.18,
1367.21, 1367.215, 1367.22, 1367.24, and 1367.25 of the Health
and Safety Code, and Section 1300.67.24 of Title 28 of the
California Code of Regulations.

(v) Any other health benefits covered by the plan that are not
otherwise required to be covered under Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code.

(B) Where there are any conflicts or omissions in the plan
identified in subparagraph (A) as compared with the requirements
for health benefits under Chapter 2.2 (commencing with Section
1340) of Division 2 of the Health and Safety Code that were
enacted prior to December 31, 2011, the requirements of Chapter
2.2 (commencing with Section 1340) of Division 2 of the Health
and Safety Code shall be controlling, except as otherwise specified
in this section.

(C) Notwithstanding subparagraph (B) or any other provision
of this section, the home health services benefits covered under
the plan identified in subparagraph (A) shall be deemed to not be
in conflict with Chapter 2.2 (commencing with Section 1340) of
Division 2 of the Health and Safety Code.

(D) For purposes of this section, the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008
(Public Law 110-343) shall apply to a policy subject to this section.
Coverage of mental health and substance use disorder services
pursuant to this paragraph, along with any scope and duration
limits imposed on the benefits, shall be in compliance with the
Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (Public Law 110-343), and all rules,
regulations, and guidance issued pursuant to Section 2726 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-26).

(3) With respect to habilitative services, in addition to any
habilitative services identified in paragraph (2), coverage shall
also be provided as required by federal rules, regulations, or
guidance issued pursuant to Section 1302(b) of PPACA.
Habilitative services shall be covered under the same terms and
conditions applied to rehabilitative services under the policy.

(4) With respect to pediatric vision care, the same health benefits
for pediatric vision care covered under the Federal Employees
Dental and Vision Insurance Program vision plan with the largest
national enrollment as of the first quarter of 2012. The pediatric
vision care services covered pursuant to this paragraph shall be in
addition to, and shall not replace, any vision services covered under
the plan identified in paragraph (2).

(5) (A) With respect to pediatric oral care, the same health
benefits for pediatric oral care covered under the dental plan
available to subscribers of the Healthy Families Program in
2011-12, including the provision of medically necessary
orthodontic care provided pursuant to the federal Children’s Health
Insurance Program Reauthorization Act of 2009. This subparagraph
shall not apply to a health insurance policy that is a qualified health
plan, as defined in Section 100501 of the Government Code, that
is offered, marketed, or sold through the begin insert Small Business Health
Options Program (SHOP), pursuant to subdivision (m) of Section
100502 of the Government Code, or the small group market outside
the end insert Exchange if a specialized health insurance policy described
in subdivision (c) is offered, marketed, or sold through the begin delete Exchange. Notwithstanding subdivision (f) of Section 100503 of
the Government Code, a qualified health plan that excludes
coverage of the benefits described in Section 1311(d)(2)(B)(ii) of
PPACA (42 U.S.C. Sec. 18031(d)(2)(B)(ii)) shall not be offered,
marketed, or sold outside of the Exchange. end delete begin insert end insert begin insert SHOP or the small
group market outside the Exchange. end insert

(B) The pediatric oral care benefits covered pursuant to this
paragraph shall be in addition to, and shall not replace, any dental
or orthodontic services covered under the plan identified in
paragraph (2). begin delete end delete

begin delete

(C) Cost sharing that is imposed as a result of a specialized
health insurance policy described in subdivision (c) shall be
coordinated with that cost sharing which is associated with the
qualified health plan identified in subparagraph (A), so that the
total cost sharing for a combined qualified health plan and
specialized health insurance policy pursuant to this paragraph does
not exceed the total cost sharing for a qualified health plan that
includes coverage of the benefits described in Section
1311(d)(2)(B)(ii) of PPACA. The insurer and qualified health plan
shall develop a method for coordinating and tracking cost-sharing
that limits the burden on the policyholder.

end delete begin insert

(C) Notwithstanding subparagraph (A), it is the intent of the
Legislature that all of the benefits described in Section 1302(b) of
PPACA be included as essential health benefits whether obtained
through a qualified health plan, or a combination of a qualified
health plan and a specialized health insurance policy as described
in subdivision (c). It is the intent of the Legislature that pediatric
essential health benefits purchased separately are only essential
for pediatric insureds, to the extent permitted by PPACA.

end insert

(b) Subdivision (a) shall not apply to any of the following: begin delete end delete

(1) A policy that provides excepted benefits as described in
Sections 2722 and 2791 of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-21; 42 U.S.C. Sec. 300gg-91). begin delete end delete

(2) A policy that qualifies as a grandfathered health plan under
Section 1251 of PPACA or any binding rules, regulations, or
guidance issued pursuant to that section. begin delete end delete

(c) (1) A specialized health insurance policy described in
Section 1311(d)(2)(B)(ii) of PPACA (42 U.S.C. Sec.
18031(d)(2)(B)(ii)) that is offered through the begin delete Exchange end delete begin insert SHOP
or the small group market outside the Exchange, whether or not
it is bundled with a qualified health plan or standing alone, end insert shall,
at a minimum, include coverage of the health benefits described
in subparagraph (A) of paragraph (5) of subdivision (a). begin delete end delete

(2)  begin delete A end delete begin insert Beginning on January 1, 2015, a end insert specialized health
insurance policy described in paragraph (1) providing pediatric
oral care benefits shall not be regarded as providing excepted
benefits under either the Public Health Service Act or PPACA, for
the purpose of determining the applicability of Sections 2701 to
2706, inclusive, and begin delete Sections 2708 and 2711 end delete begin insert Section 2708 end insert of the
Public Health Service Act, added by Section 1201 of PPACA,
relating to the following:

(A) The prohibition of preexisting condition exclusions or other
discrimination based on health status.

(B) Fair health insurance premiums.

(C) Guaranteed availability of coverage.

(D) Guaranteed renewability of coverage.

(E) Prohibition against discrimination against individual
participants and beneficiaries on the basis of health status.

(F) Nondiscrimination in health care.

(G) Prohibition of excessive waiting periods begin delete , annual limits, and
lifetime limits end delete .

begin insert

(3) Beginning on January 1, 2014, a specialized health
insurance policy described in paragraph (1) providing pediatric
oral care benefits shall not be regarded as providing excepted
benefits under either the Public Health Service Act or PPACA, for
the purpose of determining the applicability of Section 2711 of the
Public Health Service Act, added by Section 1201 of PPACA.

end insert begin insert

(4) A specialized health insurance policy described in paragraph
(1) shall waive the applicable dental out-of-pocket maximum upon
notification from a qualified health plan on behalf of an insured
that the applicable out-of-pocket maximum under the qualified
health plan has been satisfied. Beginning on January 1, 2015, the
combined out-of-pocket maximums for dental and qualified health
plans shall not exceed those limits established in Section 1302(c)
of PPACA. Insurers shall develop a method for coordinating and
tracking progress toward satisfying the out-of-pocket maximum
limitation that limits the burden on policyholders and insureds.
This paragraph shall only be implemented to the extent permitted
by PPACA.

end insert

(d) Pediatric vision and oral care benefits described in
paragraphs (4) and (5) of subdivision (a) shall be provided for
individuals up to begin delete 26 end delete begin insert 22 end insert years of age, to the extent permitted under
PPACA. Treatment limitations imposed on health benefits
described in this section shall be no greater than the treatment
limitations imposed by the corresponding plans identified in
subdivision (a), subject to the requirements set forth in paragraph
(2) of subdivision (a).

(e) Except as provided in subdivision (f), nothing in this section
shall be construed to permit a health insurer to make substitutions
for the benefits required to be covered under this section, regardless
of whether those substitutions are actuarially equivalent.

(f) To the extent permitted under Section 1302 of PPACA and
any rules, regulations, or guidance issued pursuant to that section,
and to the extent that substitution would not create an obligation
for the state to defray costs for any individual, an insurer may
substitute its prescription drug formulary for the formulary
provided under the plan identified in subdivision (a) as long as the
coverage for prescription drugs complies with the sections
referenced in clauses (ii) and (iv) of subparagraph (A) of paragraph
(2) of subdivision (a) that apply to prescription drugs.

(g) No health insurer, or its agent, producer, or representative,
shall issue, deliver, renew, offer, market, represent, or sell any
product, policy, or discount arrangement as compliant with the
essential health benefits requirement in federal law, unless it
includes coverage of the health benefits described in subdivision
(a), including the benefits described in subparagraph (A) of
paragraph (5) of subdivision (a), and meets the requirements of
subdivisions (d), (e), and (f). This subdivision shall be enforced
in the same manner as Section 790.03, including through the means
specified in Sections 790.035 and 790.05.

(h) Except as otherwise provided in this section, this section
shall apply regardless of whether the policy is offered inside or
outside the Exchange.

(i) Nothing in this section shall be construed to exempt a health
insurer or a health insurance policy from meeting other applicable
requirements of law.

(j) This section shall not be construed to prohibit a policy from
covering additional benefits, including, but not limited to, spiritual
care services that are tax deductible under Section 213 of the
Internal Revenue Code.

(k) Nothing in this section shall be implemented in a manner
that conflicts with a requirement of PPACA.

(l) This section shall be implemented only to the extent essential
health benefits are required pursuant to PPACA.

(m) An essential health benefit is required to be provided under
this section only to the extent that federal law does not require the
state to defray the costs of the benefit.

(n) Nothing in this section shall obligate the state to incur costs
for the coverage of benefits that are not essential health benefits
as defined in this section.

(o) An insurer is not required to cover, under this section,
changes to health benefits that are the result of statutes enacted on
or after December 31, 2011.

(p) (1) The commissioner may adopt emergency regulations
implementing this section. The commissioner may, on a one-time
basis, readopt any emergency regulation authorized by this section
that is the same as, or substantially equivalent to, an emergency
regulation previously adopted under this section.

(2) The initial adoption of emergency regulations implementing
this section and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

(3) The commissioner shall consult with the Director of the
Department of Managed Health Care to ensure consistency and
uniformity in the development of regulations under this
subdivision.

(4) This subdivision shall become inoperative on March 1, 2016.

(q) Nothing in this section shall impose on health insurance
policies the cost sharing or network limitations of the plans
identified in subdivision (a) except to the extent otherwise required
to comply with provisions of this code, including this section, and
as otherwise applicable to all health insurance policies offered to
individuals and small groups.

(r) For purposes of this section, the following definitions shall
apply:

(1) “Exchange” means the California Health Benefit Exchange
created by Section 100500 of the Government Code.

(2) “Habilitative services” means medically necessary health
care services and health care devices that assist an individual in
partially or fully acquiring or improving skills and functioning and
that are necessary to address a health condition, to the maximum
extent practical. These services address the skills and abilities
needed for functioning in interaction with an individual’s
environment. Examples of health care services that are not
habilitative services include, but are not limited to, respite care,
day care, recreational care, residential treatment, social services,
custodial care, or education services of any kind, including, but
not limited to, vocational training. Habilitative services shall be
covered under the same terms and conditions applied to
rehabilitative services under the policy.

(3) (A) “Health benefits,” unless otherwise required to be
defined pursuant to federal rules, regulations, or guidance issued
pursuant to Section 1302(b) of PPACA, means health care items
or services for the diagnosis, cure, mitigation, treatment, or
prevention of illness, injury, disease, or a health condition,
including a behavioral health condition.

(B) “Health benefits” does not mean any cost-sharing
requirements such as copayments, coinsurance, or deductibles.

(4) “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.

begin insert

(5) “SHOP” means the Small Business Health Options Program
established pursuant to subdivision (m) of Section 100502 of the
Government Code.

end insert begin delete

(5)

end delete

begin insert (6) end insert  “Small group health insurance policy” means a group health
care service insurance policy issued to a small employer, as defined
in Section 10753.

begin delete SEC. 7. end delete
begin insert SEC. 6. end insert   

Section 10112.35 is added to the Insurance Code, to
read:

10112.35.  

begin delete A end delete begin insert (a) end insert begin insert   end insert begin insert Beginning on January 1, 2014, a end insert specialized
health insurance policy described in Section 1311(d)(2)(B)(ii) of
PPACA (42 U.S.C. Sec. 18031(d)(2)(B)(ii)) that provides pediatric
oral care benefits through the begin delete Exchange end delete begin insert Small Business Health
Options Program (SHOP), pursuant to subdivision (m) of Section
100502 of the Government Code, or the small group market outside
the Exchange, whether or not it is bundled with a qualified health
plan or standing alone, end insert shall be subject to Section 10133.5 begin delete and
Article 4.5 (commencing with Section 10181.1) end delete .

begin insert

(b) Beginning on January 1, 2015, a specialized health
insurance policy described in Section 1311(d)(2)(B)(ii) of PPACA
(42 U.S.C. Sec. 18031(d)(2)(B)(ii)) that provides pediatric oral
care benefits through the SHOP or the small group market outside
the Exchange, whether or not it is bundled with a qualified health
plan or standing alone, shall be subject to Article 4.5 (commencing
with Section 10181).

end insert

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 10123.56 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 10123.56. end insert   

(a) (1) Notwithstanding Section 10112.25,
beginning on January 1, 2015, every specialized health insurance
policy described in Section 1311(d)(2)(B)(ii) of PPACA (42 U.S.C.
Sec. 18031(d)(2)(B)(ii)), as defined in Section 10112.27, providing
pediatric oral care benefits in the small group market through the
Small Business Health Options Program (SHOP), pursuant to
subdivision (m) of Section 100502 of the Government Code, or the
small group market outside the Exchange, whether or not it is
bundled with a qualified health plan or standing alone, shall
provide an annual rebate to each insured under that 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
services provided to insureds under that coverage and for activities
that improve dental 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 75
percent.

(2) Every specialized health insurance policy described in this
subdivision shall maintain a minimum medical loss ratio of 75
percent.

(b) (1) The commissioner may adopt regulations in accordance
with the Administrative Procedure Act (Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code) that are necessary to implement the medical
loss ratio as described under Section 2718 of the federal Public
Health Service Act (42 U.S.C. Sec. 300gg-18), and any federal
rules or regulations issued under that section.

(2) The commissioner may also adopt emergency regulations
in accordance with the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of
Title 2 of the Government Code) when it is necessary to implement
the applicable provisions of this section and to address specific
conflicts between state and federal law that prevent implementation
of federal law and guidance pursuant to Section 2718 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-18). The initial
adoption of the emergency regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the
public peace, health, safety, or general welfare.

(c) The department shall consult with the Department of
Managed Health Care in adopting necessary regulations, and in
taking any other action for the purpose of implementing this
section.

end insert

SEC. 8.  

Section 10181.2 of the Insurance Code is amended to
read:

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,
other than one providing pediatric oral care benefits through the
begin delete Exchange, end delete begin insert Small Business Health Options Program, pursuant to
subdivision (m) of Section 100502 of the Government Code, or the
small group market outside the Exchange, whether or not it is
bundled with a qualified health plan or standing alone, end insert as described
in Section 10112.35; 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).

SEC. 9.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.

SEC. 10.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to update state law consistent with federal requirements
at the earliest possible time, it is necessary that this bill take effect
immediately.